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How To Trade The FDA Modernization

|Includes: AMGN, Arena Pharmaceuticals, Inc. (ARNA), BIIB, GE, IBB

By Jonathan Chen

According to the Financial Times, President Barack Obama has said that the FDA could be a candidate for reform, as it'sill-equipped to handle biotechnology and advances in medicine. This could be potentially beneficial for biotech names going forward.

“I've gotten a lot of commentary about the fact that ... essentially their model was designed for the kind of medical devices you see in museums,” the president said yesterday during a panel discussing jobs and competitiveness.

“So that would be an area where [we should be] getting a group to think strategically about how ... [we design] these regulatory bodies so that they are up to speed and more responsive to a dynamic economy,” he said.

Jeffrey Immelt, chairman of the panel and CEO of General Electric (NYSE:GE) echoed these sentiments. “We've got some appetite for that around the table,” he said.

The Obama administration wants to increase the FDA's 2012 budget by 33% to approximately $4.3 billion to better compete globally for job creation.

PhRma, which is the pharmaceutical industry's lobby group, supported this, saying that biopharmaceutical exports rose 60% from 2005-2009.

This is in response to Obama's State of the Union address, in which he said that the U.S. needs to innovate and lead in the 21st century on innovation, which includes the drug industry.

This could potentially be profitable for names like Amgen (NASDAQ:AMGN), Biogen Idec (NASDAQ:BIIB), iShares NASDAQ Biotechnology Index ETF (NASDAQ:IBB) and smaller biotechs such as Arena Pharmaceuticals (NASDAQ:ARNA).

Disclosure: No position