Global pharma shares plunge as Trump doubles down on tariff threat

Global drugmakers' stocks dropped across the board after US President Donald Trump reiterated plans for a "major" tariff on pharmaceutical imports, threatening an interwoven global supply chain, and as his country-specific reciprocal tariffs took effect, leading to more pain in global markets.

Pharmaceutical imports were initially exempt from Trump's first set of reciprocal tariffs last week, but his administration has since indicated that levies on the sector, which in the past has been excluded from such actions, are coming.

The US president has said the tariffs will incentivise drug companies to move operations to the US. However, analysts and companies have raised concerns about the difficulty of setting up manufacturing in the country.

Shares of major US drugmakers Amgen, AbbVie, Pfizer, Merck and Eli Lilly fell between 3 per cent and 6 per cent in premarket trading.

In Europe, a basket of healthcare stocks fell 5 per cent to its lowest since October 2022, leading losses among sectoral indexes on the region-wide STOXX 600, which was down 3.3 per cent at 10.13am (GMT). The index was heading for its biggest one-day drop since March 2020.

Trump also threatened duties on Friday after his first set of "reciprocal" tariffs exempted pharmaceutical products. Trump has not said when and by how much he plans to raise levies on pharmaceutical imports.

"While the details are scant, we are strongly opposed to tariffs on any pharmaceuticals - these will likely do little to shift manufacturing back to the US," said BMO Capital Markets analyst Evan Seigerman.

"Given the complexity of the pharma supply chain, we do not expect the industry to make any major changes. These current tariffs are being pursued under emergency powers, which at worse will last until the end of the current administration and could end sooner with an act of Congress."

Seigerman also pointed to concerns over recent layoffs at the US Food and Drug Administration, saying the worries were now compounded by the "real talk" of pharma tariffs.

ADDITIONAL COSTS, LONG WAIT FOR PRODUCTION

Europe and the US have interconnected supply chains for medicines. The United States depends on medicines partly produced in Europe that bring in hundreds of billions of dollars in revenue.

Bernstein analyst Courtney Breen wrote in a note that her worst-case scenario assumes tariffs could be steep, leading to about US$53 billion in additional costs paid for pharmaceutical imports.

If companies did choose to bring new manufacturing to the United States, Breen expects additional spend of US$2 billion for each new "green field" site and a five-year runway to production.

EU medical and pharmaceutical product exports to the U.S. totaled about 90 billion euros (US$97 billion) in 2023, according to latest Eurostat data.

Shares of AstraZeneca, GSK , Roche, Sanofi and Novartis fell between 5 per cent and 6.5 per cent in Europe. Meanwhile, Indian pharmaceutical stocks closed nearly 2 per cent lower, dragging down the benchmark Nifty 50 by 0.6 per cent.

IPCA Laboratories, Glenmark Pharma and Biocon BION.NS were the top losers by percentage on the pharma index in Mumbai, ending the trading session between 4 per cent and 5.5 per cent lower.

India's pharma exports to the US mostly comprise generics, or cheaper versions of popular drugs. The United States accounts for a third of India's overall pharma exports.