00:00 Spokesman a
A recent report saying that US pharmaceutical tariffs will increase drug costs by $ 51 billion a year. This is according to Reuters. This report is bound by pharmaceutical companies such as AMGEN, Eli Lilly and Pfizer and this can affect the stocks passing in the second half of the year. We navigate how to play the pharmaceutical sector with Yahoo Finance Playbook. Joining us now is Tim Anderson, Senior Farmer and Biotechnology Analyzer at BVA Securities, and our Senior Health Reporter at Anjali Kamlani, Yahoo Finance is still with us. Tim, thank you for being here. So we just talked about this equation of the costs of those companies that are trying to calm down, but obviously it will take time. So let’s take a short picture of what is happening right now, given the tariff landscape. What do you think will be the hit of your covered companies and how do they move?
01:18 Tim Anderson
Yes, so, uh, companies have not yet determined this. Oh, when we make some back of the mathematics of the sheath, I think if the tariffs pass and you really had, things like a 25% tariff or 20% tariff, out of Europe, where you usually produce in countries like Ireland, you probably look at the profit you would be, you know, maybe somewhere in a digital rate. Oh, no company has determined it at all. It is not, surprisingly, because we have no hard specifics about the policy coming out of the administration. Oh, so as long as you don’t have them, everything you can do is really, you know, a rough back of the math of the envelope. This is the topic, you know, number one that appears on profit calls and despite the continuous questions, you just don’t get many answers.
02:57 Spokesman a
This is definitely true, Tim. Angela, here. I know, uh, about Johnson & Johnson specifically, they talked about the impact of Medtech. I know it is something like a carved or something like a different sub -sector for some of these companies with large caps. I am curious, you know, they were talking about working with the administration, potentially carved. Can this kind of reign in some of, uh, do you know, the guidelines we see, and some of the hits we see on this sub -sector?
03:49 Anji Kamlii
Uh, yes. Well, you know, I do not cover the space of Medtech or the space of medical devices, so it is really only on the part of the pharmaceutical. With regard to that, you know, be specifically exhausted for pharmaceutical pharma, or, you know, drug -producing companies really think that at this stage everything is potentially negotiable. If you are listening to what, uh, Trump, the administration says, you know when they talk about national security problems, this is really a reference to China. Obviously not for countries like Ireland. So I just don’t know honestly what to expect that it will actually become a firm policy. And then you will need to see how the companies adjust. Hmm, and along the way, uh, you know how they can negotiate more favorable conditions. So, as you probably know, you know, the government has started this investigation 232. There is some time that will expire on request for months.
05:18 Anji Kamlii
Probably this time goes faster with Trump. Uh, but during this window I would not be surprised if the industries, uh, you know, in the corridors try to negotiate the possible result.
05:41 Speaker b
Tim, I had a question for you. It seems that every five to seven years in Pharma we get a new hot mechanism of action or a class of medicines. Before GLP1, these were immunotherapy and cars. Where in your mind are we in that phase of trend with GLP1? Do we put the risk of being overwhelmed, as we saw with Merck’s Keytruda, where there was, to call it 2000 combined trials, or are we still in the early growth and GLP1 capabilities?
06:23 Tim Anderson
Yes, so, you know, obesity is certainly the hot big category. Probably in the end is the biggest category so far. Oh, now, two companies, Eli Lily and a new Nordisk are now dominated. And these companies will have such a moat around them that it will be very difficult for the late participants of companies to take much more than a simple market share. So you really don’t look at anyone else to come mostly to something like 2028, and then there will be a flood of products, but they really won’t change the market. So where are Lily and new right now? I would say, use the analogy of baseball. Still in the first Innning, perhaps the most second Innning. Uh, so you have many innovations that are still ahead with regard to new drugs that are being introduced. Although we are still early in the deployment of current products, uh, both companies are already on third -generation products,
07:56 Tim Anderson
Both injectable and lips, so it will be some steady stream of innovation, which again I think these two operating companies will dominate. Uh, so commercial, we are unfolding. The United States is the most recent market so far on this front. Even there is early, and then internationally, we are barely scratching on the surface.
08:35 Spokesman a
And, and Tim, I believe that Eli Lily is one of the stocks you have as a purchase assessment. This is the piece of obesity, the main impetus behind it. Uh, by the way we will hear from the company reporting next week. May 1 comes out with its numbers. Or do you look more like something like a well -rounded game?
09:08 Tim Anderson
I would say, you know, Lily, absolutely the driver is obesity, right? This will dominate P&L, will dominate history. This will surely dominate the news flow through Biopharma in 2025. And so I think this gives a measure of investor comfort. And in their other areas where they play, such as oncology, they have a good, you know, a stable growing business artist. But, you know, don’t be fooled. Obesity is really what drives the bus. And that, you know, the good thing about Lily is that they really provide them not only a high level of growth, but also permanently, uh, P&L for a decade, really. And the industry, one of the problems that the industry is facing, is that you enter at the end of the 2020s, there are so many patent leaks that begin to pierce large holes in income, and Lily simply sails during this period of obesity growth that is ahead of them. So it is not only a high level of growth, but it is a lasting level of growth. And for the reasons I talked about earlier, uh, he is quite isolated from competitors.
10:55 Spokesman a
And I know we also see if it becomes the first healthcare company for the trillion dollars. We’ll see. We’ll see about it. Tim, um, a question for you in terms of healthcare as a sector. He is inclined to be, uh, I thought so safe during, you know, recession periods or during market variability. And we no longer see this, partly because of the pressure of drug prices in the last year, as well as from the side of biotechnology, you know, funding, uh, different levels of interest that diminished by investors. So I’m curious, how do we think about healthcare now? And it moves away from being something like a safe sector?
11:50 Tim Anderson
I think it was away from being a safe sector 15 years ago, 20 years ago. Oh, it is highly regulated. There is so much risk of binary events, uh, with these names. Do you know that usually what people are excited about drug stocks is a phase of three tests that will report or a new medicine that will make it on the market. And that just embarks on the risk, right? Most of the time, these medicines will do it, but you are still left with something like 30% of the medicines in the Phase Three, which does not ultimately do it. So such things create a lot of instability in the sector. And politically, you know, you were under attack for drug pricing. So, uh, we see that in the current administration and many previous administrations were this. So it still works defensive. You know, you don’t have to look back more than two months ago, three months ago, when the markets began to melt away, and this type of money flooding came to the pharmaceutical. Hmm, but you know, then Trump begins to talk about drug pricing and rates for Pharma. Hmm, and I think it reminds investors that it’s not the safe sector, that it’s been before.
13:34 Tim Anderson
So I think it changed a little.
13:40 Spokesman a
Tim, really interesting and say, thank you a lot and thank Anger.