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Why Mayne Pharma Group Ltd shares are slumping on Donald Trump’s comments

Comments overnight from President-elect Donald Trump about his determination to bring down pharmaceutical drug pricing in the U.S. have sent shares in Mayne Pharma Group Ltd (ASX: MYX) down 3% to $1.28 in morning trade today.

Speaking at his first news conference since his election the bombastic Mr. Trump claimed the pharmaceutical industry was “getting away with murder” in reference to the prices it charges the U.S. government and citizens under the Medicare health insurance scheme and elsewhere.

Mr Trump claimed under his administration the U.S. government would save “billions of dollars” over an unspecified period of time, which spells bad news for companies like Mayne Pharma as it has recently taken a huge bet on the U.S. drugs market by paying US$652 million for a portfolio of North American generic drug products.

Under the U.S. Medicare scheme the government will meet part of the costs for prescription or ordinary drugs required for citizens that could have coverage as, among others, seniors, military veterans, the disabled, or as ordinary subscribers to plans provided by insurance companies.

In response to Trump’s comments U.S. biotech stocks dropped around 3% and although Mayne Pharma has the most exposure to pharmaceutical drug pricing in the U.S. it’s not the only business that could suffer if the Trump administration reins in its spending on healthcare reimbursements.

Elsewhere, Australia’s leading biotechnology business CSL Limited (ASX: CSL) has dropped 1.3% today, while early-stage regenerative medicine business Mesoblast limited (ASX: MSB) has lost 4.3%. If Mesoblast were to ever bring any of its products to market in the U.S. then reimbursement rates would likely have to be negotiated with the government.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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