This article was originally published on ETFTrends.com.
The Daily Pharmaceutical & Medical Bull 3X Shares (PILL) gained 1.35 percent on news that General Electric will sell its biopharmaceutical business to conglomerate company Danaher for $21.4 billion.
The sale comes as GE CEO Larry Culp is looking to take the company out of its worst slump in its 127-year history. GE has experienced an unceremonious fall from grace since its days when its market value was close to $600 billion in August 2000.
However, its value has nosedived, particularly after the financial crisis in 2009, but has come back to as much as $300 billion by December 2015. GE is struggling to recapture investor confidence since January 2017 when its shares were trading at about $31 per share.
Shares of GE surged 8 percent on Monday to $11 per share following news of the sale.
"Sale of biopharma a positive," Credit Suisse said in a note. "Under CEO Culp, GE has been accelerating its strategy to strengthen and deleverage the balance sheet."
PILL seeks 300% of the daily performance of the Dynamic Pharmaceutical Intellidex Index, which consists of common shares of companies that are principally engaged in research, development, manufacture, sale or distribution of pharmaceuticals and drugs of all types. In the year-to-date chart, PILL has made a move above its 50-day moving average since mid-May and the success of PI could largely depend on whether government intervenes to cut drug prices.
“This news meaningfully accelerates our deleveraging plan,†Culp said. “You can see the tide beginning to turn where we can really focus on a little less defense, a little more offense.â€
Related: July Could Be a Volatile Month for Pharma ETFs
The sale comes as U.S. President Donald Trump is already lambasting the pharmaceutical industry for the rising costs associated with prescription drugs, notably his criticism of pharmaceutical giant Pfizer. This could give pause to other drug companies when it comes to further price raising.
“By putting pressure on one particular company, I think all the companies are saying: We don’t want to be Pfizer,†said Sarissa Capital Management chief investment officer Alex Denner. “Even if they maybe raise prices in a different way – if they typically raise prices in a different way or do it on a different subset of products, they’re going to be thinking twice.â€
Nonetheless, industry experts feel that government pressure to lower the cost of prescription drugs is simply par for the course and that drug companies will simply move forward even if prices do eventually come down as a result of governmental regulation.
If history repeats itself and drug prices continue to rise in "business as usual" fashion, then PILL could stand to benefit--the difference being that it could benefit three times over with respect to its other pharma ETF peers--and that could rid any headaches investors are experiencing with their portfolios. PILL is up 16.39% year-to-date per Yahoo! Finance performance numbers.
For more market trends in pharma ETFs, click here.
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