By Joshua E. Schimmer of Piper Jaffray

With global markets being roiled by the apparently xenophobic and nationalistic fueled UK Brexit ‘Leave’ vote and PM David Cameron announcing his resignation, we (and presumably many others) are scrambling to understand the backdrop and implications of this news. We have requests in to all our companies with global exposure to help quantify the impact, but have a few thoughts as we collate what this might mean to Biopharma. Keeping in mind that we are still consolidating some thoughts and are obviously not Brexit experts, it’s hard to ignore this update given futures markets indicating considerable weakness today.

  • Will take a while to sort out, but doesn’t look good for Britain: The Leave campaign seemed fueled around immigration concerns and overly inflated payments to the EU and perhaps hopes that an even better deal could be negotiated for Britain. We doubt citizens who voted to leave fully appreciated the consequences of their vote, but probably do now and will increasingly so over months and years to come. As a result there may be opportunity to bail out of leaving before too much damage is done. While some seem concerned this may lead to fracturing of the rest of the EU, we believe the market impact and implications will cause the EU to take a hard line with Britain in order to limit the damage. This may in fact strengthen unity amongst the remaining EU members who do not want to face the same fate. As well the UK may splinter as Scotland and Northern Ireland seek their own EU membership autonomously.
  • Currency may be biggest impact: With the pound taking a hit this morning it seems like investors may again shift to USD, creating additional headwinds for those with Fx exposure. ALXN, BMRN, GILD are exposed to a greater extent than BIIB and AMGN, with CELG in the middle. Beyond this, the implications to biotech companies are unclear. Countries will still need their drugs although shipping product in Europe may become more complex around new regulations- this would not be unique to the Biopharma industry. Over the longer term, whether GDP changes as a result of this and leads to a new set of IPAB calculations is an unknown.
  • Election impact? Trump championed Brexit and many may question his foreign policy given the market reaction. On the other hand Leave was fueled by similar nationalistic biases that are also behind Trump’s rise. Ultimately though either nominee has uncertain impact on Biopharma policy.
  • And the bright side: In addition to the obvious fact that Brexit doesn’t change people’s need for drugs, the market turmoil may make another Fed interest rate rise by YE less likely and could even lead to another round of quantitative easing as global currency wars to stimulate exports continue.


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