On Monday morning, Express Scripts (ESRX) announced that it has chosen AbbVie’s (ABBV) hepatitis C drug over Gilead Sciences’ (GILD) option. Here’s what the news means for mutual fund investors.
Inside the News
Express Scripts, which is the largest U.S. prescription-drug benefits company has made AbbVie its exclusive drug provider for patients with hepatitis C. Although the insurance company attempted to negotiate pricing with Gilead, it chose AbbVie’s drug for the better price.
Turning Point for Biotech?
This decision by Express Scripts could mark a turning point in the biotech industry. The industry has been skyrocketing for the last couple of years, but today’s decision could be a long-term negative for GILD
and its peers.
Gilead shares are pulling back significantly on today’s news. The only argument that Gilead could have is that today’s announcement limits patients’ options for treatment.
This is a very important event for biotech investors to be aware of since there could be similar moves in the near future, which can impact other biotech companies. If Express Scripts is saving by choosing the cheaper option, its peers including CVS Health (CVS), Aetna (AET) and UnitedHealth (UNH) could follow suit.
It is hard to say if investors should head for the exits on today’s biotech-related headlines. Considering the sector has had consecutive 50% gains, some profit-taking is likely in the cards.
Mutual Funds to Watch
Investors seeking exposure to GILD could also consider a mutual fund investment as an alternative to investing directly in the stock. The funds below currently have the largest stakes in the company.
Vanguard Total Stock Mkt Idx
Vanguard 500 Index
The Bottom Line
The funds above are a great way for investors to gain exposure to GILD
while remaining diversified. Investors interested in GILD
may also be interested in Amgen (AMGN
) and Biogen Idec (BIIB
Shares of GILD are up 28% YTD.