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Investors might be underestimating the impact of tariffs on pharmaceutical products, according to one Wall Street firm. That could have negative implications for companies such as Bristol Myers Squibb , though overall market sentiment has been keeping the Club stock afloat. The news In a note to clients Sunday, analysts at Leerink Partners said President Donald Trump’s potential pharmaceutical tariffs may have more negative impacts than investors realize — depending on how, exactly, the administration’s import duties are structured. The global supply chain for pharmaceuticals and some of the accounting practices associated with it are complex. In any case, analysts said sustained tariffs will raise drug costs for American consumers because even if companies can relocate manufacturing to the U.S., it will take years to execute and ultimately costs more than manufacturing out of the country. “Although corporations can make adjustments to mitigate the negative impact of tariffs, it could take some time given the complexities of global tax strategies and supply chains and uncertainty related to the durability of tariffs (since President Trump can change his mind),” wrote the analysts, who have a buy-equivalent outperform rating on Bristol Myers stock. Get Your Ticket for the Annual Meeting! Secure your ticket today for the CNBC Investing Club’s upcoming 3rd Annual Meeting on May 2nd in Orlando, Florida! Big Picture Leerink’s warning comes a few days before Trump is set to announce a batch of “reciprocal tariffs” on Wednesday. Exact details aren’t yet known, but Trump said last week that he’ll be announcing tariffs on imported drugs at some point ” because we have to have pharmaceuticals.” Bristol Myers’ investor relations team responded to Leerink when the analysts asked about the company’s tariff risk. According to Leerink, the company said in part: “We have not commented on our specific exposure to the broad topic of tariffs, as this is a very fluid situation.” Bristol Myers told the analysts that its supply chain is not “overly reliant on any single country,” and that it has a broad global manufacturing footprint. In general, U.S. biopharma companies are more concerned about possible tariffs on the European Union and Ireland than the current Trump-imposed tariffs on China, Mexico, and Canada, according to Leerink, which reached out to 21 companies and summarized their responses. Ireland is a big hub for the pharmaceutical industry, something that Trump mentioned in recent weeks. Bristol Myers and fellow Club name Eli Lilly , for that matter, both have manufacturing presences in Ireland and other European countries, analysts at Jeffries pointed out in a separate note. Jefferies analysts wrote that Trump has made it clear that he wants biopharma companies “with foreign manufacturing and tax shields outside the US to bring operations” back stateside. Bottom Line Despite the looming uncertainties around the biopharma sector, the Club is still bullish on Bristol Myers Squibb. We’re very optimistic about Bristol’s new schizophrenia drug Cobenfy in the coming years. Plus, the stock has a cheap price-to-earnings multiple and pays a solid dividend, said Jeff Marks, director of portfolio analysis for the Club. However, he cautions that we would not buy in at current trading levels, which is in the $60’s. “There is a market rotation bidding up defensive stocks like Bristol Myers as they seek to hide out the market selloff,” Marks said. He was referencing that Bristol Myers is up more than 2.5% in the month of March, compared with a nearly 6% slide in the S & P 500. We’d prefer to add to our position when prices pull back. (Jim Cramer’s Charitable Trust is long BMY . See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.Igor Golovniov | Lightrocket | Getty Images
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