BMO Analyst: Pharma Tariffs Have More Bark Than Bite Due to U.S. Production

Impact of New Pharma Tariffs

• 🎯 President Trump's new tariffs on the pharma sector are largely seen as having "more bark than bite" due to existing bilateral trade agreements and carve-outs.
• 💡 A 100% tariff does not apply if a pharmaceutical manufacturer has U.S. production or has broken ground in the United States, which covers virtually every company the analyst covers.
• ⚠️ Even if tariffs were applied to imported APIs (Active Pharmaceutical Ingredients), it would only represent a small portion of the overall cost due to the high gross margins (85-90%+) in pharmaceutical products.

Analyst's Primary Concerns

• 📌 The main focus for the analyst is not the tariffs, but upcoming IRA negotiated price lists and potential drug pricing negotiations that peg U.S. prices to those outside the country.
• 📈 These potential drug pricing negotiations are a more significant concern than the current tariff announcement.

Top Pharma Stock Picks

• 🚀 Gilead is highlighted as a top pick due to the successful launch of their long-acting prep.
• ✅ Other favored names include Vert.Ex and Fizer, with Fizer showing signs of emerging from a recent slump after a favorable deal.
• 🔑 While Willie is still liked, it is not considered the top pick by the analyst.
• 💬 Continued execution is noted as a key factor for companies like Fizer to sustain their positive momentum.