Pharma stocks up on US tariff exemptions but analyst flags a $46B import cost risk

Investing.com -- Pharmaceutical (TADAWUL:2070) stocks saw brief relief Thursday after U.S. President Donald Trump left drug products off the list of newly announced tariffs. However, industry leaders and analysts cautioned that the sector is not in the clear, as targeted levies may still be on the horizon.

Trump’s latest tariff package included a 10% duty on most U.S. imports and significantly higher rates on goods from various trading partners. Pharmaceuticals were among a handful of categories granted a temporary exemption—an outcome that favored key exporters like India, Japan, and Ireland.

U.S. drugmakers traded relatively flat in premarket trading, with Amgen (NASDAQ:AMGN) and Johnson & Johnson (NYSE:JNJ) edging slightly higher.

In contrast, Asian healthcare stocks rallied, led by Indian generic manufacturers, as investors welcomed the exemption.

European drugmakers also outperformed the broader market. Shares of GSK and AstraZeneca (NASDAQ:AZN) rose between 2% and 3%, while Novo Nordisk’s U.S.-listed shares gained as well, helped by optimism that pharmaceutical exports were spared—for now.

A U.S. official said the administration still plans to introduce a separate set of tariffs aimed specifically at the pharmaceutical industry.

Speaking from the White House Rose Garden, Trump repeated his push for more domestic manufacturing in the sector. He expects pharma companies to come “roaring back” to the U.S., he said, adding that if they don’t, “they got a big tax to pay.”

Bernstein analysts estimated that, based on the detailed country-by-country tariff breakdown, the pharmaceutical industry faces a potential ceiling of up to $46 billion in additional import cost risk.

“This ceiling reflects the additional costs that could be paid for pharmaceutical imports into the U.S., should the country-specific tariffs be applied,” analysts led by Courtney Breen wrote.

“However like many other industries, we would note that pharmaceutical companies also rely on imports for a number of other categories, which are likely to be immediately affected,” they added.

The analysts noted that a $46 billion increase in import costs would be “meaningful” for the pharmaceutical industry.

With top company revenues around $700 billion and operating margins as high as 40%, such costs could cut margins by at least 500 basis points. Still, the impact is expected to vary, with some companies facing considerably higher relative risk.

According to Wells Fargo (NYSE:WFC) analysts, companies with lower tax rates are typically those more exposed to tariffs, likely due to greater overseas manufacturing and intellectual property.

Pfizer (NYSE:PFE), Amgen Inc (NASDAQ:AMGN), Regeneron (NASDAQ:REGN), and Biogen (NASDAQ:BIIB) ranked highest on their list of potentially impacted names. These, along with AbbVie (NYSE:ABBV) and Merck (NSE:PROR) & Company Inc (NYSE:MRK), have drawn significant investor attention and could see some relief.

Among smaller and mid-cap names, Jazz Pharmaceuticals (NASDAQ:JAZZ) also came under pressure and may benefit from the temporary exemption.