By Ben Hirschler
LONDON (Reuters) - Pharmaceutical stocks leapt on Wednesday as Republican Donald Trump's U.S. presidential election win led investors to conclude the threat of tough action on drug pricing had receded.
News that a Californian proposal aimed at reining in rising prices for prescription drugs was headed for defeat in a state ballot also buoyed the mood.
Shares in European drugmakers were up around 3 percent by early afternoon, while U.S. pharmaceutical and biotechnology stocks also traded higher in pre-market dealings.
Trump's victory over Hillary Clinton, whose drug pricing criticisms have weighed on shares for more than a year, is not without risk, however. A Republican pledge to repeal Obamacare could have potentially chaotic consequences.
Zuercher Kantonalbank analyst Michael Nawrath said uncertainty over how Trump will make good on his promise to scrap the Affordable Care Act, widely known as Obamacare, could weigh in the months ahead.
"He'll clearly have advisers helping him. We're going to have to see which proposals emerge," he said.
Healthcare was the biggest sector gainer in Europe following Trump's win, with the Stoxx 600 healthcare index up 2.8 percent by 1330 GMT.
Shares in U.S. drugmaker Mylan, which has come under fire in recent months for hiking the price of its two-pack EpiPen allergy shot to more than $600, jumped 8 percent in Tel Aviv.
Danish insulin maker Novo Nordisk, whose prices have been under fire recently in the United States, said it was "unpredictable" what the Trump presidency meant for the industry, while adding it welcomed the California ballot news.
Throughout the campaign Clinton had been far more critical of drug industry pricing than Trump, famously sending drug stocks into a tailspin in September 2015 when she tweeted about specialty drug "price gouging".
'SIMPLISTIC VIEW'
"The market has fretted about the prospect of a Clinton presidency and what that may mean for drug pricing. Now the outcome is known, the prospect of drug pricing legislation is off the agenda," Neil Woodford of Woodford Investment Management wrote in a blog post.
Trump has said less on the topic but he has suggested support for importation of cheaper drugs, as well as advocating increased scrutiny over drug price increases and a bigger role for negotiating down the cost of medicines.
Marie Owens-Thomsen, chief economist at Indosuez Wealth Management, believes the idea that he is the good news candidate for the pharmaceuticals industry is "a bit of a simplistic view".
"He has made several statements that are also potentially harmful," she said.
Shares in big European drugmakers Roche, Novartis, Sanofi, AstraZeneca, GlaxoSmithKline and Novo Nordisk rose between 1 and 4 percent.
Pfizer and Merck gained 7 percent and 3 percent respectively in premarket U.S. trade.
Jefferies analysts said U.S. pricing pressure and political reform would remain a concern but Trump's win would be a relief for investors worried about a sea change in the U.S. system, where innovation is rewarded by high prices.
Switzerland's Roche, the world's biggest maker of cancer drugs, echoed the belief that the United States would remain a rewarding market.
"Roche is focused on developing innovative medications and diagnostic tests and we are convinced that the U.S. will continue to value and support innovation and medical progress," said a company spokesman.
(Additional reporting by John Miller in Zurich and Annabella Pultz Nielsen in Copenhagen; Editing by Pravin Char)
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