JPMorgan analysts downplayed concerns over drug pricing that triggered a broad healthcare and pharmaceutical sector sell-off, calling it "overdone election noise."
"Pricing has always been a popular issue to comment on but tough to follow through, also more complicated with the Inflation Reduction Act (IRA) now," the bank stated.
Analysts believe the comments by President Joe Biden and Senator Bernie Sanders in an op-ed published Tuesday demanding price cuts on GLP-1 drugs lack substance, especially considering the complexities introduced by the IRA.
JPMorgan sees the weakness in companies like Eli Lilly & Co. (NYSE:LLY) and Regeneron Regeneron (NASDAQ:REGN) as an "overdone" reaction driven by positioning, particularly among long options and hedge funds. They see this as an opportunity for investors looking to buy the dip.
For LLY specifically, JPMorgan expects Mounjaro's price to decline gradually over time, with a projected decrease of around one-third by 2030. Additionally, analysts believe Mounjaro wouldn't be impacted by the IRA negotiations until much later, potentially around 2031-2032.
"The headline seems to be election noise at best," JPMorgan concluded, echoing a similar sentiment regarding Novo Nordisk (NYSE:NVO). JPMorgan analysis projects price reductions for Ozempic and Wegovy, but not as drastic as recent concerns suggest.