Biotech stocks: Who wins and who loses if RFK, Jr. goes

RBC Capital projects that the potential departure of HHS Secretary Robert F. Kennedy Jr. would largely benefit the biotech sector, reducing unpredictability and potentially reversing policies such as expert exclusion from advisory panels. While vaccine makers like Moderna and neuropsychiatric firms are seen as beneficiaries, CAR-T and antiviral companies could face increased policy scrutiny, and a replacement might intensify focus on drug approval and pricing. The analysis notes the XBI biotech index dropped 8% post-Kennedy's nomination, reflecting investor concern, and his exit could also boost federal research funding, making healthcare more investable.

Analysis

According to an RBC Capital note, the potential departure of HHS Secretary Robert F. Kennedy Jr. is viewed as a net positive event for the biotech sector, primarily by reducing policy unpredictability that has weighed on investor sentiment. The market's concern was quantified following his nomination, when the XBI biotech index fell 8% over two days. His exit could specifically benefit vaccine manufacturers such as Moderna, HIV-focused firms like Gilead, and neuropsychiatric companies including Axsome, Biohaven, and Alkermes. The rationale is that a leadership change may reduce the risk of FDA reorganization and reverse policies like the exclusion of experts from advisory panels. However, the outlook is mixed, as CAR-T and antiviral companies could face increased policy scrutiny. A significant offsetting risk remains, as a replacement could introduce a greater focus on drug approval processes and pricing scrutiny, which could temper the sector's overall relief.

Key Decisions for Investors

• Consider the potential HHS leadership change as a catalyst to re-evaluate exposure to the biotech sector (XBI), as the removal of a perceived political overhang could improve its investability.
• It may be prudent to assess overweighting positions in specific sub-sectors identified as direct beneficiaries, such as vaccine makers (MRNA), HIV treatment leaders (GILD), and neuropsychiatric firms (AXSM, BHVN, ALKS).
• Closely monitor the political succession, as a replacement secretary with a strong focus on drug pricing represents the primary risk that could introduce new headwinds for the entire industry.
• Investors should review holdings in the CAR-T and antiviral sub-sectors, which RBC identifies as potentially facing increased policy scrutiny regardless of the leadership change.