3 Broken Breakers Worth Buying
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When are broken breakers worth buying? We break it down. You're listening to Motley Fool Money.
Welcome, Fools. I'm your host, Tim Byers. And with me, our longtime Rule Breakers teammates and old friends, Rick Benares and Carl Thiel. It's a Gen X Power Half Hour. Today, we're talking about our favorite broken breakers, innovators that have yet to convince the market of their long-term potential. Carl, Rick, we've got a lot to talk about. But first, Carl, since we've got you here, I'd love to take just a couple of minutes to talk about the federal layoffs and any potential consequences you see for the biotech industry. And for those who haven't been following along, this relates to federal cuts having to do with CDC and related health and human services agencies. Carl, what do you see in here and what should we pay attention to as biotech investors?
We're seeing things that have been affected both by budget cuts and then also by the government shutdown. I don't want to underplay any of this, because every agency that gets cut can have a big impact. But I would say the most important ones Near-term for investors is FDA. The good news there is that FDA is largely funded by user fees, so drug companies literally pay for their own reviews, which does mitigate the impact somewhat. The agency has said something like 86% of employees are still active, and that keeps them active even through the government shutdown. The bad news in that regard is that there are certain things that they cannot do during the government shutdown. One of them is, accept new NDAs or BLAs.
You cannot accept any new drug application that requires a user fee payment, because literally, there's nobody to operate the till. If you're trying to submit a new drug, you can't do it during the shutdown. This is one of those things that if the shutdown is a few weeks, hopefully that doesn't impact things too much. Obviously, the longer that drags out, the more serious that gets. Companies that already have pending applications for the most part should be okay. Companies that are looking at making new submissions a little further out, hopefully, will be back in business by then. But there is a little awkward period right now. I will say, there's some mitigation to that as well. If you're a company that's trying to submit a new drug application that is for something already approved, to pick a random example, Ionis has said this year that they're going to submit
an approval for a drug called Tringolza, which is for high triglycerides. It's already approved for a rare disease, and because this is therefore a supplemental application, it doesn't require a user fee, and they should be able to submit that on the normal schedule. So, that's the sort of good news and bad news on that. And then, I think the other biggest impact for the industry has been all the NIH budget cuts and grant issues. And again, that's sort of a good news, bad news story. The impact on it is really at the top of the funnel for research, which is that a tremendous number of ideas come from NIH research. And just to pick an example, you can come up with these stupid sounding studies that NIH is doing.
It's like, Why are we paying taxpayer money so somebody can study the diet habits of the Gila monster in the Southwest or something? That's, in fact, where GLP-1 drugs come from, is that early, early research. You're hurting the top of the funnel when you do that. The good news, such as it is, is that the current budget, which is not being passed because of the shutdown, but the current budget calls for basically both the House and Senate versions call for restoration of most of NIH funding. This is one area in which House and Senate Republicans, for the most part, kind of push back against funding. the White House, and they want to restore most of that funding. So, hopefully, the impact will ultimately be less than it could have been.
But it's still extremely disruptive and it's going to work through the funnel for years.
Just a quick follow-up on this, and then we'll move on.
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