Key Takeaways
- The Trump administration will impose a 100% tariff on branded pharmaceutical imports not tied to US manufacturing.
- The move is intended to pressure drugmakers to lower US prices and shift production onshore.
- Pharma stocks held steady, signaling markets had largely priced in the tariff risk.
Most major European pharmaceutical stocks showed a muted reaction on Friday following the Trump administration’s announcement of a 100% tariff on branded drug imports not linked to US manufacturing.
Novo Nordisk NOVO B, the Danish drugmaker behind weight-loss drugs Ozempic and Wegovy, fell the most, while AstraZeneca AZN, Novartis NOVN, Sanofi SAN and GSK GSK traded marginally lower and in some cases higher than Thursday’s closing level. The modest moves indicated that markets had braced for tariffs on pharmaceutical products while analysts see the overall impact on valuations as limited.
Before the announcement by President Donald Trump on Sept. 25, most European pharmaceutical stocks under Morningstar analyst coverage were trading as undervalued, including GSK, Novo Nordisk, and Sanofi. Shares in Denmark’s Novo Nordisk are already sharply lower this year, with the latest move triggered by a profit warning in the summer.
The tariffs, set to take effect on Oct. 1, 2025, apply to patented or branded drugs unless the producer has already begun construction of a manufacturing facility within the United States.
“If exemptions apply broadly to companies with US production sites, all major US pharmaceutical companies and some European ones would likely be exempt,” said Wolf von Rotberg, equity strategist at J. Safra Sarasin Sustainable Asset Management.
He adds that recent spending commitments by large-cap pharmaceutical companies may be deemed sufficient for exemptions, potentially limiting the tariff’s scope.
European Drugmakers Ramp Up US Investment Plans
This year, in anticipation of potential tariffs on pharmaceutical imports, both US and European biopharma firms have already announced sizable investment plans in US manufacturing and research facilities.
“We think the European companies’ investment plans have been significantly affected by the threat of tariffs. AstraZeneca, GSK, Sanofi, and Novartis have all announced plans to invest tens of billions of dollars into the US by 2030,″ says Karen Andersen, director of equity research at Morningstar.
She estimates that the book value of each of these companies’ US-based property, plant, and equipment is only a few billion dollars each, and the commitments announced this year are a significant increase compared with their historical US investment rates.
“Because US companies already have large existing US manufacturing footprints, we believe that they will be able to relocate manufacturing to the US more quickly than European companies, which may have to spend more time and money building greenfield facilities,” Andersen adds.
Novo Nordisk and Eli Lilly are ‘Special Cases’
Novo Nordisk and Eli Lilly LLY are special cases according to Andersen, since they both had existing plans to invest heavily in US capacity, driven by their massive and rapidly growing sales of obesity drugs in the US.
“They already had plans to invest in US manufacturing even before 2025, and it is not clear to us how much their plans have changed due to the anticipation of the Trump administration’s tariffs,” says Andersen.
For her basket of European names, she think that AstraZeneca and Sanofi rely on below-average imports, while Novartis and GSK rely on above-average imports. For her basket of US names, she think that Amgen AMGN relies on below-average imports while Eli Lilly relies on above-average imports.
