Now a pause in trading pending an announcement.

Hopefully an explanation of why SOFDRA won't be affected by Tumps plans

It’ll be interesting to read what they come up with.

SORDRA is the same chemical entity as ECCLOCK, but it is a different strength, 15%(US) vs 5%(Japan), with a different gel formulation, and its own separate clinical trials and approvals. So MAYBE they’ll argue it is not available in any other country, which would be true for that product in a strict sense.

I expect they’ll say there is no equivalent product available internationally to allow a price comparison. Probably a reasonable case. But the price difference is 10x!

Probably not a priority for anyone; as the priority drugs will have values of $billions in sales.

We need to see what the EO will say.

But yes, this is going to get caught up in the courts, and precedent from Trump 1.0 is that EO can’t do this without Congress.

But others here are right in that the cloud will result in SP haircut for the entire sector due to uncertainty.

This was always on the cards and has been well-signalled by Trump.

I have my full allocation, so won’t be buying more after the halt comes off.

Trump’s ability to identify the wrong answer to the right question is admirably consistent.

BOT's response to US Pharma pricing. https://investorpa.com/announcement-pdf/20250512/137033.pdf

@Noddy74 haha correct, i would add and too lazy/short attention span to execute well. i wish him well though...

Whenever the market responds in a way that makes no sense to me (up or down) it always creates a strange sensation. Because, of course, my initial reaction is always to think hard "what have I missed". In truth, I have over the years made some stunning oversights, or stubbournly failed to modify my view in the light of new information. However, today's Trump-induced price gyration on $BOT, has left me more bemused than anything.

Bottom line: before today I considered the company worth $1.10 ($0.80 - $1.40), significnatly above consensus (n=2) of $0.70. The Trump EO doesn't materially change that for me, even though none of us has read it yet..

First off, let's assume that the company's defence rationale (ASX Announcement) as to why they won't be affected is WRONG. It might or might not be, and we can't know until we see the EO and, even then, it will have to be tested in implementation.

Now, I have a large RL exposure to healthcare generally, and the US market in particular. And so one topic I have been obsessively studying ever since 1) it became likelyTrump would be elected and 2) he reiterated how he was going to stop drug companies ripping off US consumers, is the risk to that portfolio exposure.

So, I'll summarise here the reasons why I do not think that $BOT's value has changed significantly. I'm going to keep things very brief, as there is a lot of detail beneath this.

The basic idea is that while it is easy to write EO's, it is harder to implment them. Tariffs are probably Trumps favourite word, because that is one area where the Congress has delegated powers to the President to change tariffs overnight, particularly under conditions of National Emergency. So Trump loves tariffs because it is somewhere he can affect change quickly. (Remember, what Trump likes and dislikes is nothing about the economy, but it is about HIM.)

Setting prices is a bit harder.

Over the last 50 years, US Governments and Presidents of various stripes have all tried to take this on. Most recently in Trump 1.0. The Trump 1.0 changes, also implemented via EO, were totally ineffective. They were ultimately rescinded by Biden, who used aspects of the Inflation Reduction Act to implement reforms which are still being implemented today, to try to reduce the cost of medicinces to the US consumer, which are paid for via public programs.

You see, an EO can't actually change prices. It can mandate Federal agencies to act to apply price controls (i.e. like "most favored nation" status), which can impact prices through the Federal Programs including Medicare, Medicaid and Veterans Health. However, there is a fairly arduous process that the relevant agencies have to follow, which include consultation, review, and which are subject to legal challenge. These processes will take many months or even years to become effective.

Of course, it is possible that the Congress could pass new legislation that could completely change the playing field. Good luck there, as the GOP typically is against price controls, and many of the Republicans up for re-election at the mid-terms will be reliant on funding from Big Pharma - one of the most powerful and well-resourced lobbies on the Hill. The path to legistation is, in my view, unlikely to be fast, if it happens at all. And there are enough free-marketeers on the Hill that by the time it is legislated, its provisions will no doubt be watered down.

The next part of my argument is about just how administratively challenging implementation will be. There are some 20,000 current prescription drugs in the US. But just have a look at the value of global sales of the top 20. See the table at the bottom. (You could estimate the value of US sales by taking 30% to 40% of each number.)

Sales of drugs from ASX businesses like $BOT will not feature anywhere near the top of this list. I mean, we're talking of peak sales of SOFDRA of maybe $400m+ in 2-3 years time, maybe more if we're lucky.

Now think about all the appeals, all the lawyers fees, the court cases, the Appeals on Appeals, that will be marshalled not only by the industry as a whole, but by each of the companies in the TOP 20 alone that stand to lose $billions in any single adverse price decision. Without new legislation and a market redesign, the Supreme Court precedents are against price controls.

Many if not most of these drugs are available in the same dose and the same formulation globally. Only the packaging varies. So in addition to the overall industry defence, SOFDRA has some additional layers of defence, which is what their press release today was all about.

Of course, what I've written above applies to Public Programs (Federal and State), which covers 40%-50% of the US drugs bills. What about the 50%-60% that is private? Well, that's covered by contracts between pharma companies and payers. $BOT have indicated that most of their contracts are typically 3-year contracts. These are legally-binding contracts, which may or may not include a price-reopener if there is a change to publicly-funded drug costs. Again, that opens room for legal challenge, appeal and - more importantly - negotiation. Remember, the prices that have been struck are the result of negotiation between the payers and drugs companies in the first place.

So, while the EO will be issued in a few hours time, and no doubt the SP's of pharma companies are going to go into all kinds of gyrations. I believe the path to seeing the prices actually change is a long one.

In fact, in the case of $BOT, I think there's every chance that we'll see changes in the competitive landscape bring pricing pressures to bear before we see political or regulatory pressures come to bear. That's what we mean by the "S-curve". Sales will rise, they'll peak in about three years, and then they'll decline after some time on a plateau depending on the treatments available in 2028-29. The decline isn't that people have stopped suffering from PAH, but rather that the treatment landscape has evolved, and as part of trying to maximise remaining lifetime revenue, $BOT prices will likely evolve downwards over years 4-10+. But that's already in the share price!

For the record, I think the US customer/ taxpayer are being ripped off in healthcare, and pharma prices are just one component of that. And I fully expect elected officials to try and get after than, as they have over the last 50 years. The only thing I think is different, is that the lastest round has the particular MAGA Reality TV Flair about it. I'm not sure its going to be that different in substance.

After all. DOGE was going to deliver $2 Trillion of savings. But Musk has moved on after it's identified only about $0.16 Trillion, and meanwhile 2025 Federal spending is going up again and 2025 is on track to be another record high. (We'll look back in a few years and be unable to see Musks legacy, other than all the people dead as a result of stopping USAID!)

A lot of this MAGA Show is smoke and mirrors, to generate headlines, photo-ops for Trump, and to feed his insatiable narcissism. The uncertainty it is creating is no doubt causing a lot of real harms, and key relationships are being damaged. And, for sure, some companies will be devasted by the consequences in the short term, and others will rort away at the opportunities created.

But back to Pharma prices, I'm yet to be convinced. I've been involved in this industry for over 30 years. Every few years there is a new initiative to try and wrestle this particular beast. But the beast just gets bigger and bigger. Perhaps, one day, it might be tamed (not slain), but I don't think the tamer will be wearing a MAGA Hat.

So, until proven otherwise, I'm going to sit very happily with my c. 30% RL portfolio weighting to heathcare.

So, am I right, or is this my latest stunning oversight? I guess we'll find out over the next year or two.

(Disc: I hold in weight order - $BOT, $RMD, $TLX, $CU6, $OCC)

Top 20 Drugs Global Sales (by Chat GPT)

@mikebrisy Amen!

God I am so tired of Trump he is an utter tool box! What if big pharma just stopped! We will be driven back to the dark ages medicine wise. I get the nuance! Insulin and long established drugs should have price caps. Weight loss drugs should be monitored however more and more competitors are coming on line which creates competitive market forces to suppress drug prices.

However new or 1st in drug class types should be allowed windows of protection before generics. It cost companies literally high millions if not billions to get a drug through inception to successful phase 3 trials and then to approval. The system is designed to reward innovation and development via financial incentives which are protected for window periods before competitors are allowed.

The simple reality is no one will develop new drugs without financial incentives. We will cascade into the dark ages of medicine. The current system works via insurance rebates. If you want to make a change to the system and you want to make drugs more affordable then the government needs to provide that incentive via subsidies. This would be an alternative path. Governments can provide incentives to companies to continue their work. The money has to come from somewhere or guess what it will stop.

Trump’s comparative scheme is not economically viable. The simple truth is that drugs get to the developing world because the richer countries incentivize drug development. If this stops no one will get drugs. Market forces are meant to be the foundation of capitalism. I am genuinely just really f$&king sick of Trump and his uncontrolled nonsense. Make a real plan. Cost if out and bring it in slowly. Incentivize companies to bring development and manufacturing onshore. Otherwise we end up with the bubonic plague and iPhones that cost $10k.

Yours in perpetual rant

Annyck

And I quote the very stable genius:

“Our Country will finally be treated fairly, and our citizens Healthcare Costs will be reduced by numbers never even thought of before,” he wrote in his social media post.

Truth Social is an invaluable resource. I think his announcements are brilliant, thoughtful and well costed. He really looks into the details and has a grasp on the nitty gritty before his public announcements.

I certainly have never thought of a cost reduction for pharmaceuticals of 3c annually before. Could this number be his Truth Social epiphany? I also haven’t thought of the number $14.65 cents. I guess that could work too!

What a guy! America is great again. People of the world and Americans definitely won’t be suffering under this guy. This is not the droid you are looking for!

People voted for Trump hoping he's the saviour and will support the common people and look what happens. As the saying goes, you get what you wished for.

Honestly can't see how the US would actually go in implementing this sort of pricing.

Even after all this. SP is back up at 43cps (11.30am on the 13th). Not too far off the circa 46cps it was at on Friday’s close.

@thetjs unsurprising really. The EO has widely been interpreted and reported as being weaker than was expected. While HHS will write to companies and give them a price reduction target for public reimbursement (informed by international benchmarks), that will start the process of negotiation. And, inevitably, the negotiations will lead to some reductions, and some legal battles. The industry will drag its feet on this. It has been there before during Trump 1.0, the Inflation Reduction Act, and numerous Federal intiiatives over the decades.

Against this industry-wide backdrop, $BOT's defence per it's ASX release yesterday, is a further layer of defence. I don't think that will stop it getting "a target" because it would be easy enough to argue an estimated target based on some clinical equivalent estimates base off ECCLOCK. There is a lot of precedence for this in negotiations with regulators on drug pricing.

$BOT has the further advantage that ALL its deals with private payers have only been struck over the last 9-12 months. These probably can't be re-opened unless and until re-set prices have been negotiated for the public schemes.

We have to remember that drug prices nearly always involve complex and protracted negotiations. That's how the industry works. Prices based on health economics analysis, availablity and prices of alternatives, available prices in other jurisdictions, etc. Trump did not invent that. He's just turned it into a relaity TV show.

The point is, as I wrote yesterday, this is going to end up as a negotiation, and $BOT is way, way, way down the list of anyone's priorities to put effort into getting the price down. There are much, much bigger fish to fry.

Oh, and guess what, DOGE has just reduced staffing in Department of HSS from 82,000 to 62,000 (which includes 10,000 who are "retiring early"). So just at the time the Federal Government needs massive capacity to try and negotiate prices for 20,000 drugs, their capacity to do this has been slashed! Nice one Elon!!

So coming to $BOT's SP, whatever value reduction you might think is justified, if any, I think it is likely swamped by the market under-valuing the potential of this drug that the early sales indicate might be possible and that others have assessed here.

I see no change to my valuation, at this stage.

More generally, we saw overnight a rally in the US and global pharma sector yesterday. Ever since Trump was elected, the industry's SP's have been depressed as the industry waited for this shoe to drop. It's hardly game over, as this one will run and run and run.

Perhaps we might not see a full recovery in the $BOT SP, because this has focused investors on $BOT's unique, near 100% exposure to the US market and the Japanese benchmark potential. That is a very concentrated and specific risk expsoure. Investors should have known this - maybe some didn't.

But I think future news flow on revenue progress through the rest of the 2025 is going to eventually determine SP progression! I'm sleeping very well on this one.

Disc: Held

@mikebrisy , I just wanted to say a big thank you for your Pharma insights. In the chaotic day yesterday, they made complete sense and are invaluable to balance the unknowns!

I topped up on BOT yesterday and slept extremely well!

Discl: Held IRL and in SM

And just to add in to the mix, $BOT have emailed around the latest Euroz Hartley report.

Euroz Hartley Report

It basically says what we've been discussing here. No impact on valuation.

While I'm online with this (hopefully my last post until we get some real revenue news!) because of the mutli-stage process following the EO, $BOT has the added value of sitting back and seeing what happens.

Potentially, the Administration will choose some candiate(s) to make an example of first, and my view is these will be chosen carefully. Big ticket prizes, massive US-premium prices.

How those "first out of the blocks" decisions roll, and what happens in response (including all the way through the Court system) will inevitably condition the behaviour of the "followers" in the industry.

Imagine, it's a baseball game. The batters all sitting in the dug-out (each drug,.. 20,000 of them) are sitting at a very long bench, with RFK on the pitchers mound. Batter up!

@jcmleng! A pleasure, thanks.

It will be interesting reading back on them in a year or two, for sure.