By Bill Alpert
President-elect Donald Trump's choice of Robert F. Kennedy Jr. to head the Department of Health and Human Services could spell trouble for medical research. That is because RFK Jr. -- a proponent of views in conflict with established science -- would oversee the National Institutes of Health and the $50 billion the agency spends on research.
While Kennedy's antivaccine stance has already scared investors in pharmaceutical stocks, his plans for cuts at NIH could also affect funding for the scientific tools sold by firms like Illumina and 10x Genomics, said Canaccord Genuity analyst Kyle Mikson in a Tuesday note.
"In our coverage universe of small/mid-cap tools companies, the average revenue mix from NIH-funded labs is generally 10-20%," wrote Mikson.
Trump has said he would let Kennedy " go wild on medicines." For his part, Kennedy has vowed to fire 600 out of 20,000 NIH employees, on his first day in office. He promised an antivaccine group in 2023 that he would seek an eight-year break in NIH research on infectious diseases. Half the NIH budget should be redirected to preventive, alternative and holistic medicine, Kennedy wrote in The Wall Street Journal in September.
Still, there is a restraint on those plans: Congress controls the federal budget. Mikson points out that Trump's first administration recommended cuts in federal research spending. But the NIH enjoys bipartisan support. Its budget actually increased 30% from the 2016 fiscal year to 2020.
"It is unlikely that RFK Jr. will significantly influence NIH funding," Mikson wrote, "as final decisions must pass through congressional appropriations committees."
The Canaccord analyst isn't the only one wondering if cuts in NIH grants could hurt funding for science tools such as Illumina's gene sequencers. At a healthcare conference hosted this week by Wolfe Research, Illumina's financial chief Ankur Dhingra was asked to address the issue.
"In the end, if NIH dollars get cut, there will be an impact to our business," said Dhingra. Some 25% of Illumina revenue comes from government-funded research, Dhingra said.
But the portion of sales that is directly funded by NIH grants is smaller, perhaps at a percentage in the low single digits, said the CFO.
At the Wolfe conference, 10X Genomics CEO Serge Saxonov was asked the same question. Spending at NIH government labs for the company's sequencing products contributes a low single-digit percentage of 10X revenue, Saxonov said. Spending at academic labs funded by NIH grants, however, might account for 20% to 25% of 10X revenue, he said.
Write to Bill Alpert at william.alpert@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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November 20, 2024 15:29 ET (20:29 GMT)
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