President Donald Trump’s renewed warning that he will impose tariffs on pharmaceutical imports sent the stocks of biopharmas and biopharma-focused electronic transfer funds (ETFs) back falling late this past week, after they briefly surged with the rest of the markets following his 90-day pause on his “reciprocal” tariffs for the world except China.
“We realized during COVID-19 that we don’t make our drugs and our pharmaceuticals in this country,” Trump said Wednesday during a Q-and-A session with reporters in the Oval Office after signing several executive orders unrelated to biopharma. “It was a big realization. We had to go to China to get drugs. We had to go to other places. I won’t even mention the names [of those countries], but we had to go to other places. We don’t make it and that’s because we let them leave.”
“We’re going to put tariffs on the pharmaceutical companies and they’re going to want to come back. They’re going to come back,” Trump predicted.
Trump’s remarks capped a week of historic losses for financial markets sparked by his Rose Garden address of April 2—which he trumpeted as “Liberation Day”—announcing a 10% minimum tariff rate on all imports from all countries, plus reciprocal tariffs set individually for more than 180 countries and territories with which the United States has run the largest trade deficits, including China and the European Union.
The reciprocal tariffs took effect Wednesday before being paused for all countries except China. Trump and Chinese leader Xi Jinping squared off in a trade showdown that saw U.S. tariff rates on Chinese imports escalate from 34% to 104%, then 145%—while China responded by raising its tariff rates on U.S. imports from 34% to 84% to 125%.
“Put on your life vest”
“Put on your life vest, as the waters are getting choppier,” BMO Capital Markets analyst Evan David Seigerman wrote in a research note, as reported by CNBC. Seigerman is a managing director and senior research analyst who covers both biotechnology (large and small- to mid-cap companies) as well as U.S.-based major pharma companies.
Trump warned of coming pharma tariffs following an historic roller-coaster day for stocks in which the 90-day pause sparked a nearly 8% gain for the Dow Jones Industrial Average, which finished the day up an eye-popping 2,962.86 points. Two other markets showed significant jumps: the S&P 500 (up 9%) and the Nasdaq Composite (up 12%).
But just hours after Wednesday’s closing bell, share prices for the top three pharmas and biotechs based on market capitalization (the product of the share price and the number of outstanding shares) and the top six ETFs (based on total assets according to VettaFi) gave up their gains in after-hours trading.
Those stocks all finished flat, then declined Thursday as markets resumed sharp selloffs due to investor concerns about rising trade tensions with China—then bounced back Friday after Susan M. Collins, president and CEO of the Federal Reserve Bank of Boston, told the Financial Times that the Federal Reserve System “would absolutely be prepared” to help stabilize financial markets if needed.
“For most of our careers, the primary goal of government policy has been to offset negative exogenous shocks and to stabilize excesses. This stabilization has been reversed completely with the recent negative surprise of the highest tariffs in almost a century. Policy has morphed into a destabilizing shock and a source of immense uncertainty,” ClearBridge Investments observed in a commentary by three portfolio managers, Reed Cassady, Sam Peters, and Jean Yu, PhD.
The largest ETF with $5.13 billion in total assets, iShares Biotechnology ETF (NASDAQ: IBB) rose 6% Wednesday to $118.63, before crossing into negative territory, finishing after hours down 0.3% at $118.28. The second largest ETF, SPDR S&P Biotech ETF (NYSE Arca: XBI), soared 7% to $74.88, only to see a 0.48% gain to $75.24 once after-hours trading ended. Third-largest biotech ETF First Trust NYSE Arca Biotechnology Index Fund (NYSE Arca: FBT) climbed 6.5% to $155.15, then skidded to a 0.74% loss at an even $154.
Among the next three ETFs:
- Fourth-largest ARK Genomic Revolution ETF (CBOE: ARKG) jumped 12% to $20.56, but only finished with an 83% gain after hours, with shares closing at $20.73.
- Fifth-largest Direxion Daily S&P Biotech Bull 3X Shares (NYSE Arca: LABU) showed the biggest increase, surging 21% to $45.72 during the trading day, but adding only 0.07% after hours, to $45.75.
- Sixth-largest VanEck Pharmaceutical ETF (NASDAQ: PPH), which consists of the shares of 25 pharma giants, rose 2.87% to $83.04, then added 0.07% after hours to $83.10.
Funds turn negative, then positive
On Thursday, however, all six funds closed lower, with declines ranging from a 3.3% drop by PPH to a 13% tumble by LABU. All six funds returned to positive territory Friday, finishing the roller-coaster week with gains ranging from low single digits (FBT, up 2.8%) to low double digits (LABU, up 11% to $44.14). In between, IBB rose 3.4% to $116.96; XBI increased 3.8% to $74.33; ARKG grew 8.63% to $21.03; and LABU jumped 11% to $44.14.
As for pharmas Wednesday, shares of Eli Lilly (NYSE: LLY) rose 4% to $753.71, then inched up 0.17% after-hours to an even $755. Johnson & Johnson (NYSE: JNJ) shares rose about 1% to $150.97, then blipped up just 0.36% after-hours to $151.52, while AbbVie (NYSE: ABBV) gained 2% during the trading day to $179.84, then increased 0.5% after-hours to $180.80.
By Thursday, however, the gains all turned into losses. Lilly fell 4.35% to $720.91, while AbbVie retreated 3.1% to $174.20. J&J fared better, dipping 1.5% to $148.69. The top pharmas ended Friday all gaining: Lilly rose 1.6% to $732.41; J&J was up 2% to $151.73; while AbbVie was all but flat, inching up 0.5% to $175.05.
Earlier Friday, AbbVie shares dipped as ClearBridge Investments sold off shares, concluding that as the drugmaker’s blockbuster drug Humira® loses exclusivity, AbbVie’s “increasing reliance on pipeline and new product execution to support share appreciation makes the risk/reward less attractive from here.”
Lilly chair and CEO David A. Ricks, who has publicly advocated renewal of Trump’s 2017 tax cuts—which are set to expire at year’s end—told the BBC he believed Trump’s original tariff represented “a pivot in U.S. policy, and it feels like it’ll be hard to come back from here.”
He cited regulation of drug prices in Europe and U.S. price agreements with payers ranging from Medicare to private insurers. “We can’t breach those agreements, so we have to eat the cost of the tariffs and make tradeoffs within our own companies,” Ricks warned. “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.”
However, David Risinger, a senior managing director and senior research analyst covering diversified biopharmaceuticals with Leerink Partners, commented in a research note: “Assuming tariffs are imposed, biopharma companies will have some leeway to mitigate the impact. First, companies could raise U.S. prices to some degree. Second, companies could attempt to minimize importation values by adjusting transfer pricing, shifting IP and sourcing, and utilizing preferred foreign trade zones.”
The impact of pharma tariffs could be limited if they are targeted toward low-tax jurisdictions with robust biopharma manufacturing activity “such as Ireland and Switzerland,” an unnamed pharmaceutical lobbyist key opinion leader or KOL with Leerink-affiliated MEDACorp opined in a Tuesday research note written by Risinger.
“[The lobbyist] described this as the most likely and operationally feasible path, and he suggested that broader or more sweeping tariffs on drugs globally is less likely due to the complexity of drug supply chains and the critical nature of drugs,” according to the note. “This reinforces the likelihood of narrower, targeted tariff measures that still carry meaningful financial implications for branded manufacturers.”
Top biotechs generally fared better than pharmas, led by Thermo Fisher Scientific (NYSE: TMO) climbing 8% to $453.55 during trading, but rising 0.54% after hours to an even $456. Amgen (NASDAQ: AMGN) rose 4% to $291.09, but the increase shrunk to a 1.3% increase after-hours, to $294.87. As for top biotech Novo Nordisk (Nasdaq Copenhagen: NOVOB), it scored a 3% gain Thursday, the first trading day after Trump’s tariff pause, rising to DKK 416.15 ($62.22) a share after finishing Wednesday down 7% to DKK 403.95 ($60.40) before Trump announced the tariff pause.
Like the top pharmas, two of the top three biotechs also saw their share prices fall Thursday. Thermo Fisher slid nearly 5.8% to $427.44, while Amgen dropped 3.3% to $281.41. However, Novo Nordisk inched up about 1.4% to DKK 409.55 ($61.96). On Friday, shares of all three rose, with Amgen rising 1.6% to $285.98, Thermo Fisher climbing 2.5% to $438.15, and Novo Nordisk up 2.6% to DKK 420.30 ($63.96).
RFK Jr. remarks send Novavax nosediving
Shares of Novavax (NASDAQ: NVAX) nosedived 20% Thursday after U.S. Secretary of Health and Human Services Robert F. Kennedy Jr. criticized the company’s approach to its COVID-19 vaccine in a TV interview Wednesday.
Speaking with CBS News chief medical correspondent Jon LaPook, MD, Kennedy sought to explain why the FDA had delayed granting full approval of Novavax’s COVID-19 vaccine, which won emergency use authorization (EUA) in 2022 from the agency that was last amended on August 30.
“It is a single antigen vaccine. And for respiratory illnesses, the single antigen vaccines have never worked,” Kennedy asserted in an interview published Wednesday.
Not so, several vaccine experts said publicly: “He’s wrong,” Paul A. Offit, MD, director of the Vaccine Education Center at Children’s Hospital of Philadelphia, told STAT News about Kennedy’s comments.
Novavax shares shrunk from $6.75 to $5.43 Thursday but bounced back 8% in Friday’s market rally to $5.86.
“As we have previously stated, we believe that our Biologics License Application (BLA) for our COVID-19 vaccine included robust Phase [III] clinical trial data that showed our vaccine is safe and effective for the prevention of COVID-19,” Novavax stated Thursday. We have not yet received an official response from the U.S. Food and Drug Administration regarding the status of our BLA.”
As for other COVID-19 vaccine developers, Moderna (NASDAQ: MRNA) shares dropped 8% from $26.67 to $24.50. Pfizer (NYSE: PFE) shares slipped 4% from $22.49 to $21.59 while its COVID-19 vaccine development partner BioNTech (NASDAQ: BNTX) shares dipped 1% from $94.14 to $93.12. By Friday, Moderna recovered, gaining about 7% to $26.20. while Pfizer inched up 1.5% to $21.91, and BioNTech rose 3.65% to $96.52.
Leaders and laggards
- Conduit Pharmaceuticals (NASDAQ: CDT) shares surged nearly 73% from 62 cents to $1.07 Monday after the company announced an expanded partnership with privately-held Sarborg to expand the scope of work on Conduit pipeline candidates licensed from AstraZeneca (London Stock Exchange: AZN), including AZD1656, a Phase II glucokinase activator being developed for lupus nephritis and ANCA vasculitis; AZD5658, a Phase I glucokinase activator for unspecified autoimmune disorders; and AZD5904, a Phase I myeloperoxidase inhibitor for idiopathic male infertility. Sarborg will apply its machine learning algorithms to analyze Conduit’s clinical and safety data for the candidates, with the aim of uncovering missed insights, identifying potential drug repurposing opportunities, and highlighting gaps in existing datasets. A key focus will be the re-evaluation of historical clinical trial data, including endpoints, to determine whether specific patient subgroups may have shown therapeutic benefits, Conduit said.
- Charles River Laboratories International (NYSE: CRL) shares tumbled 28% from $139.07 to $99.95 Thursday after the FDA announced a new effort to replace animal testing in the development of monoclonal antibody therapies and other drugs with methods deemed to be more effective and more relevant to humans. The FDA said its animal testing requirement “will be reduced, refined, or potentially replaced” using methods that include artificial intelligence (AI)-based computational models of toxicity and cell lines, and organoid toxicity testing in a laboratory setting (New Approach Methodologies or NAMs data). J.P. Morgan analyst Casey Woodring reported in a research note that Charles River’s Discovery and Safety Assessment (DSA) and Research Models and Services (RMS) segments predominantly use animal models in some capacity and account for an estimated ~80% of the company’s business. “We see the announcement as an overhang on the stock and remain Neutral following today’s pullback given the number of lingering questions that remain, namely how long implementation will take and CRL’s involvement in the industry shift toward non-animal models,” Woodring wrote.
