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FDA Chief Resigns. Ramifications to your Portfolio

medical money
Dave D'Amico, CFA

Dave D'Amico, CFA

Dave is COO and Portfolio Manager at Argent Wealth Management, LLC

Last week, Food and Drug Administration (FDA) Commissioner Scott Gottlieb announced he was resigning in March to spend more time with his family. Most financial market participants and government officials perceive this to be a difficult loss. This change was not a complete surprise as rumors were floating in January of this year that he may step down. His tenure of just two years is not uncommon as evidenced in the chart below – it must be a stressful role! In his short tenure, he earned the respect of many in the pharmaceutical industry for being tough but still progressive in the FDA’s willingness to approve new medications. At the same time, he was a champion of addressing the opioid crisis and most recently seeking to curtail the growth of e-cigarettes and vaping in youth.

The importance of this role and the FDA is critical to the health of our citizens, but also poses significant investment ramifications across industry sectors including healthcare, pharmaceuticals, biotechnology, tobacco, the burgeoning marijuana industry and general public health overall. A progressive commissioner can help set the tone to bring new and exciting drugs to market for cancer, heart health etc. This can be beneficial to the population and patients, but can also be very important to stock appreciation. Conversely, a commissioner that is too tough on drug prices or too stringent on new drug approvals can cast a wide cloud over the industry and share prices. This potential overhang can be very challenging for investors. Tobacco companies clearly are directly impacted by the tone of the FDA commissioner as is marijuana. How do you think leadership at Altria feels after recently spending $12.8 billion for a 35% stake in e-cigarette leader Juul? E-cigarettes, vaping, hemp and CBD oil have all been in the headlines of late and represent growth areas of this industry. Will new leadership take a hard stance on marijuana, hemp and CBD oil? Will tobacco continue to be in the cross hairs, or will their lobbyists politically maneuver for a lenient commissioner? 

The Drug and Opioid Crisis

The drug crisis in America continues to grow as evidenced by the below charts of drug overdose rates and specifically for the opioid category. We have a major and growing problem and it is a very scary situation. This drug issue should be the National Emergency as it is destroying lives and our youth! Let’s hope the next FDA commissioner continues to focus his or her efforts on this critical issue facing our country.

Dr. Ned Sharpless Is Announced as Interim FDA Commissioner

Dr. Sharpless currently heads the National Institute of Health’s cancer division and directs billions for cancer research. At first blush, this could be viewed as good news for biotechnology and pharma in general, but it is too early to know as he is just the interim director. He has also been known to have a tough stance on tobacco in general and underage vaping which is consistent to Dr. Gottlieb. He doesn’t seem to represent much of a change over Commissioner Gottlieb, so the market, in the short term, seems to be comfortable. This remains a developing situation but one that is important for many of the industry sectors listed above. Investors should be aware of these changes and factor in this uncertainty, along with the risks and the potential opportunities, when making investment and portfolio decisions. 

DISCLOSURE: Past performance is no guarantee of future results. Charts presented in this article are not indicative of the past or future performance of any Argent Wealth Management strategy. This article has been distributed for informational purposes only and is not a recommendation or offer of any particular security or investment strategy. Information contained herein has been obtained from sources believed to be reliable. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Argent Wealth Management. 

Argent Wealth Management is registered with the Securities and Exchange Commission (SEC) as a Registered Investment Advisor © 2018 Argent Wealth Management, LLC. All rights reserved.

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