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Biotech stocks toppled late Wednesday after President Donald Trump announced broad global tariffs, including a 20% tariff on goods from Europe.
But a fact sheet from the White House suggests pharmaceutical products could be exempt from the broad 10% tariff and additional reciprocal tariffs on many countries. RBC Capital Markets analyst Brian Abrahams says it could be premature to celebrate.
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“Pharmaceutical tariffs could still be implemented in the future — and indeed, we thought that many had expected an announcement specific to pharmaceutical tariffs to be announced later, and/or to be phased in rather than immediate,” he said in a client note. “The order calls out the need to maintain ‘robust and resilient domestic manufacturing’ in sectors like pharmaceuticals, suggesting this remains on the administration’s radar for the future.”
Still, in after-hours trading, biotech stocks slumped. The SPDR S&P Biotech exchange traded fund (XBI) lost 4.3 in extended trades. That wiped out a 3.1% gain during the regular session.
Biotech Stocks Slammed On Tariff Uncertainty
The reciprocal tariffs are the most recent push from the Trump administration to force companies to shift their manufacturing to the U.S. But biopharma companies and medical device makers need very specific types of clean rooms and laboratories, says Fictiv Chief Executive Dave Evans. Fictiv helps companies manage manufacturing challenges, including navigating the supply chain.
If the tariffs impact the pharma space, they will pose a challenge for drugmakers who rely on a global supply chain to make ingredients overseas. Moving their operations stateside is “an expensive option,” says Marie Thibault, a BTIG analyst.
Ahead of Trump’s announcement, Thibault said tariffs on goods from Europe remained “an open question.” Many medical companies have a presence in Ireland, she told Investor’s Business Daily. To that point, AbbVie (ABBV) and Merck (MRK) both have a large presence in Ireland.
The former says it has six Irish sites, including two offices in Dublin to “serve the needs of the company’s commercial, supply chain and operations activities.” Merck’s website lists seven sites in Ireland. The company says it has invested more than $6 billion in its Irish operations. Its annual sales make it one of Ireland’s top 20 companies.
RBC’s Abrahams noted the impact could also be greater on companies like Regeneron Pharmaceuticals (REGN) and Amgen (AMGN) which have intellectual property domiciled outside the U.S.
“We continue to monitor but see the ongoing developments at FDA as more material for the space than tariffs,” he said.
Tariffs Follow ‘Bloodbath,’ ‘Chaos’
The tariffs news follows mass job cuts across the Department of Health and Human Services earlier this week. One Food and Drug Administration employee described the move as a “bloodbath,” CNN reported. RBC Capital Markets analyst Brian Abrahams called the scene “chaos.”
IBD’s Medical-Biomed/Biotech industry group skidded 2.2% on Monday and 3.7% on Tuesday. Among the high-profile departures are Peter Marks, director of the Center for Biologics Evaluation and Research, and Peter Stein, who heads up the Center for Drug Evaluation and Research. Both are divisions under the FDA.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
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