Trump seems to understand the drug development space, says NextEdge’s Rahim

Donald Trump is known for his confrontational ways, but the conciliatory tone he took when meeting with U.S. drugmakers today could signal a long-term positive for the sector, says one Canadian portfolio manager.

Next Edge Capital’s Eden Rahim was on BNN by telephone this morning to talk about the new U.S. President’s morning meeting, which he credits with at least a temporary reversal in the fortunes of beleaguered drug stocks.

On Tuesday, Trump met with U.S. drugmakers at the White House, following up on his January 12 comments that the sector was “getting away with murder”.

“The pricing has been astronomical,” Trump told the crowd, which included Merck & Co. CEO Ken Frazier, Eli Lilly & Co. CEO Dave Ricks, Celgene Corp. Chairman Bob Hugin, today. “You folks have done a very great job over the years but we have to get the prices down.”

But the sector rallied on Trumps’s assertions that he would reduce red tape at the Food and Drug Administration.

“We’re going to streamline FDA; we have a fantastic person,” he said, before returning to his recurrent -some say isolationist- theme of “America First”.

“We have to get lower prices, we have to get even better innovation, and I want you to move your companies back to the United States,” he said. “I want you to manufacture in the United States.”

Rahim says it was no secret that Trump was going to hammer the CEOs on drug pricing, but he says what was surprising was how bullish the President was on the drug development space.

“For a sector that has been besieged by negative news over a long period of time this is probably the best news that we have heard for a very long period of time, and it really centered on the fact that he seemed to express an understanding of what the arduous, costly, lengthy path of developing a drug involves, said Rahim. “That was a critical thing.”

Rahim says one of the main ways the government can reduce the prohibitive cost of developing drugs is to to reduce the amount of time is takes to get them to market. He says this meeting was the first time the sector got a sense that Trump understood that quandary, which he thinks applies in particular to drugs that have been proven safe, but who’s efficacy may still be an unknown.

Disclosure: Cantech Letter Editor Nick Waddell is an investor in one of Next Edge Capital’s funds.

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