Big pharmaceutical names whipsawed Wednesday after President Donald Trump said he would enact "major" tariffs on drug imports and then backed off his tariffs regime entirely — for 90 days.
After diving in early trades, shares of pharma giants recovered and headed into the green at the close. S&P 500 stocks Abbvie, Pfizer, Bristol Myers Squibb and Gilead Sciences jumped. On the Dow Jones Industrial Average, Johnson & Johnson, Merck and Amgen reversed early losses.
The first rounds of tariffs didn't include drug imports. But during a dinner for the National Republican Congressional Congress, Trump said late Tuesday, "We're going to be announcing very shortly a major tariff on pharmaceuticals," Politico reported.
Trump also said, "When they hear that, they will leave China" and other places, according to Politico. "Most of their product is sold here," he said, and added "they're going to be opening up plants all over the place."
On Wednesday, though, Trump posted on Truth Social that he would delay tariffs on more than 75 trading partners who called to discuss trade-barrier issues with the U.S., according to NBC News. The news helped downtrodden pharma stocks rise out of the red.
Trump Tariffs Briefly Shake Pharma Stocks
Companies and analysts have said opening drug and ingredient manufacturing in the U.S. is not a simple matter. Drugs and medical devices must be handled in specific types of clean rooms and labs. Moving operations stateside is "an expensive option," BTIG analyst Marie Thibault told Investor's Business Daily.
Big names like Eli Lilly, Pfizer and Merck have announced they would invest in U.S. manufacturing. But "moving manufacturing can take several years," Leerink Partners analyst David Risinger said in a recent report.
Even for Lilly — the biggest pharmaceutical company by market cap — that might not be enough. In an interview with BBC, Chief Executive David Ricks said tariffs will "be hard to come back from." While tariffs may encourage some companies to relocate their manufacturing, he doesn't expect it to create billions in additional revenue for the U.S.
In fact, Ricks expects innovation to take a major hit. Drug prices are capped in Europe and the U.S., he said. This means the impact of tariffs will be felt in other places.
"We can't breach those agreements so we have to eat the cost of the tariffs and make trade-offs within our own companies," he said. "Typically that will be in reduction of staff or research and development (R&D) and I predict R&D will come first. That's a disappointing outcome."
Dow Jones, S&P 500 Stocks Recover Early Losses
After falling on the drug imports threat, Pfizer, Merck and Amgen all recovered, closing up 3% to 4%. Johnson & Johnson ended the regular session with a fractional gain, while Bristol Myers rose 1.3% and AbbVie shares climbed 2.4%, reversing a 6.4% dive.
Other names took an early beating, including France-based Sanofi, Novartis in Switzerland and U.K.-based AstraZeneca. But all three bounded at the close, up a respective 2.7%, 1.9% and 2.9%.
Novo Nordisk, based in Denmark, popped 5.7% in relief. Israeli drugmaker Teva Pharmaceutical advanced 4.2%.
But, on the S&P Midcap 400, Neogen plummeted 28.7% after reporting an earnings miss, trimming its full-year revenue guidance and announcing that company President and Chief Executive John Adent would step down. The guidance cut comes "from worsening end-markets and tariff headwinds," William Blair analyst Brandon Vazquez said in a client note.
It's important to note that Neogen is a dollar stock.
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Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
