Crédit Mutuel AM: Latent threats weigh on investor confidence in pharmaceutical sector
Since Donald Trump's return several months ago, the pharmaceutical sector has faced a series of headwinds. First, Robert F. Kennedy Jr., notoriously skeptical about vaccines, was appointed Secretary of Health. Then, Vinay Pasad, MD, MPH, seen as hostile to the pharmaceutical industry, took the lead at the US Food and Drug Administration’s (FDA) Center for Biologics Evaluation and Research (CBER).
Moreover, President Trump recently suggested potential price cuts of over 59% for drugs in the United States, in addition to the upcoming introduction of tariffs on pharmaceutical products to accelerate the relocation of production. This sector, traditionally considered a safe haven during periods of instability, is now in turmoil and clearly exposed to political risks. Indeed, until now, pharmaceutical products, and specifically drugs, have always been exempt from economic sanctions and protectionism. However times are changing, and these threats could affect short-term investor sentiment, which has been exacerbated by the falling dollar.
What Impacts for the European Pharmaceutical Industry?
Donald Trump’s policies will have cross-border repercussions. Potential changes in pricing, regulations and supply chains, coupled with increased competition, will force European companies to adapt in order to maintain their competitiveness despite US policies. Indeed, European pharmaceutical companies generate nearly 50% of their sales in the United States, but not all drugs sold are manufactured locally. With the rise of protectionism, the challenge will be to produce more locally, which is why many pharmaceutical companies have already announced massive investments in the United States (Roche, Sanofi, Novartis).
In the face of potential price cuts, there is still uncertainty about the extent and number of drugs that will be affected. However, it is highly likely that the profitability of pharmaceutical groups could erode by 2028, and funding for R&D, which is crucial for the sector, may be cut back.