Big Pharma’s tariff win leaves lingering aches

Big Pharma is proving the mantra that prevention is better than cure. Late on Thursday, President Donald Trump announced 100 percent tariffs on imports of branded drugs into the US but also carved out exemptions for companies who are building big factories stateside. The likes of Roche, Novartis and AstraZeneca were right to take Trump's threats seriously by promising big investments. But their valuations don't exactly radiate confidence they can ward off tariff sickness forever.

Since Trump's "Liberation Day" global drugmakers have been at pains to show they are moving jobs and factories to the US In April, Swiss pharma group Roche announced a $50 billion investment plan, which was matched by Britain's AstraZeneca in July. Earlier this month, fellow UK drugmaker GSK said it would invest $30 billion over the next five years.

Drugmakers have been hammering the local manufacturing mantra home to an almost comical degree. Biogen, a $20 billion US drugmaker specialising in new treatments for neurological diseases, released a video on its social media page this week showing shovel-toting executives literally digging up dirt for a new headquarters in Massachusetts. Not to be outdone Mike Doustdar, CEO of Danish group Novo Nordisk, recently declared that "right now, cranes are rising" at the Ozempic-maker's site in North Carolina.

These announcements and performances had their desired effect. Thanks to Trump's exemptions, the majority of pharma groups will only be subject to the specific tariffs of the country in which they make drugs and ship to the US In such a scenario, French drugmaker Sanofi would only get a 15 percent charge as part of the European tariff agreement with the US, and Britain's GSK receives a 10 percent tariff as agreed by Prime Minister Keir Starmer.

Yet Trump's tariff announcement hasn't exactly sparked a relief rally. Most of the main pharma stocks have been trading at lower valuations since the threat of pharma-specific thwacks was first mooted in April.

AstraZeneca, the perennial bellwether of European pharma growth, was trading at over 12 times its expected EBITDA in April but now only manages 11 times. On Friday, the $228 billion pharma group's shares were flat.

Part of that may be pricing in the impact from wider national tariffs, as opposed to pharma-specific ones. But it may also reflect lingering concern that the sector could yet get hit in other ways – perhaps via some sort of pain for makers of generic drugs, which are yet to be targeted. It's too early for bosses to lay down their shovels.

President Donald Trump on September 25 unveiled 100 percent duties on branded pharmaceuticals, which will come into force October 1.

Trump's announcement on Truth Social did not mention whether the new levies would stack on top of existing national tariffs. But recently struck trade deals with Japan, the EU, and the United Kingdom include provisions that cap tariffs for specific products like pharmaceuticals.

The new 100 percent tariff on any branded or patented pharmaceutical product will apply to all imports unless the company has already broken ground on building a manufacturing plant in the United States, Trump said.

Shares in large listed pharmaceutical companies in Europe barely reacted to the news. By 0839 GMT shares in Roche and Novo Nordisk shares were down 0.1 percent and 1.2 percent respectively. Meanwhile, shares in AstraZeneca, Novartis and GSK were up 0.1 percent, 0.3 percent and 0.7 percent, respectively.