As predicted by many analysts, economists, and investors, the sweeping tariffs announced by the Trump administration on Wednesday decimated the stock market on Thursday. It had one of its worst trading days in years, and almost no sector of the economy was spared. Two areas that suffered relatively light damage, however, were pharmaceuticals and biotech.
Although few stocks in these fields thrived, some didn't fall as much as other titles. Compared to the S&P 500's (^GSPC +1.01%) 4.8% tumble, Catalyst Pharmaceuticals' (CPRX +0.21%) 1.5% drop was mild, as was Veeva Systems' (VEEV +3.74%) 2% slide. The rare stock actually landed in positive territory, specifically Amgen's (AMGN +0.00%) 1.5% rise and AstraZeneca's (AZN +0.00%) 2.4% bump.
NASDAQ: CPRX
Key Data Points
The calm before the storm?
The main reason for this is that, somewhat unexpectedly, the Trump administration didn't impose tariffs on manufacturers of pharmaceutical goods. Previously, the president stated rather emphatically that foreign pharma makers would be slapped with 25% duties on their wares. Yet, the sector was very notable for its absence on the long list of duties imposed by the government.
That doesn't mean it'll stay that way, as it's only been granted a temporary exemption. However, the duration of this opt-out is uncertain, so it's not like drugmakers and affiliated companies have entirely dodged the bullet. In fact, it seems that the administration is gearing up to roll out a set of tariffs specifically targeting pharmaceutical exports soon.
At this early stage, it's uncertain why the exemption happened. The pharma industry has powerful lobbyists, and in the run-up to Wednesday's tariff announcement at the White House, they were (naturally) pushing for a break. Speculation seemed to be that they were concentrating on levies being phased in, as opposed to the full 25% -- or whatever the final figure -- being implemented right away.
Those lobbyists, not to mention interested parties in the biotech and pharma fields, plus ordinary citizens worried about the prices of their medicines, have also been quick to mention the potential effect of higher costs for the inputs that go into the production of drugs. Pharma manufacturing is a complex process, drawing from products made all over the world, so heavy tariffs will be unavoidably painful.
The president seems to be aware of this. Following the announcement, Trump said he still aimed to bolster domestic manufacturing by healthcare companies on our soil. They are expected to come "roaring back," and if that doesn't happen, "they got a big tax to pay." Trump provided few if any additional details.
Some news from the sector was actually encouraging
Despite this rather large threat hanging over its head, the industry continues to pump out good news here and there -- at least for now.
One of the more encouraging items hitting the headlines on Thursday came from Amgen. The U.S. Food and Drug Administration (FDA) expanded its approval of its Uplizna drug to include immunoglobulin G4-related disease (IgG4-RD). This is a rare disorder where the immune system produces inflammation and scarring in the body's organs; Uplizna is now the first and only drug approved to treat it.
In its press release trumpeting the FDA's move, Amgen quoted its executive vice president of research and development Jay Bradner as saying it "marks a significant turning point for IgG4-RD patients and physicians who now have a proven treatment that targets a key driver of the disease, reducing the risk of flares and reliance on harmful long-term steroid use."
Even if and when those tariffs hit this sector, we can expect companies within it to continue doing their level best to earn regulatory approvals and develop promising medications. Unfortunately, we also need to accept that the costs to manufacture and develop these wares might rise precipitously, too.
