LIVE MARKETS-Trump's "liberation day" tariffs could blindside pharma investors

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TRUMP'S "LIBERATION DAY" TARIFFS COULD BLINDSIDE PHARMA GIANTS

Investors are under-appreciating the risks from U.S. President Donald Trump's possible tariffs on pharmaceutical imports, according to analysts at brokerage Leerink Partners.

Leerink Partners says the impact could be much larger to companies' profits if the tariffs are applied to "landing prices", which refer to the total cost of goods when they arrive at their destination, including shipping and handling, and not just production costs.

The financial impact will largely depend on how the administration calculates the "landing price" of imported drugs, with pharmaceutical companies typically assigning high values to drugs imported into the U.S. as part of tax minimization strategies.

Since President Trump announced on February 18 that sector tariffs on pharmaceuticals would start at "25% or higher," S&P 500 Healthcare .SPXHC has gained almost 0.4%.

Ireland, where the world's 10 largest drugmakers operate major facilities generating a 50 billion euro ($54.09 billion) U.S. trade surplus last year, appears specifically targeted by President Trump's expected April 2 "Liberation Day" tariff announcement.

Leerink says that even if companies were to shift manufacturing overseas, the process would likely take years and cost more than manufacturing outside the U.S.

Major drugmakers are already taking defensive positions. Pfizer PFE.N said it might shift production to existing U.S. facilities if necessary. Some companies are making substantial investments in domestic manufacturing. Eli Lilly LLY.N announced plans to invest at least $27 billion to build four new U.S. manufacturing plants over the next five years.

Similarly, Johnson & Johnson JNJ.N committed to investing over $55 billion in the next four years for U.S. manufacturing facilities and research infrastructure.

Most large-cap biopharma companies surveyed by Leerink expressed greater concern over potential EU and Ireland tariffs than existing ones on China, Mexico, and Canada, though they couldn't fully assess impacts without knowing specific details of Trump's plans.

(Kamal Choudhury)

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