Analysts have had to throw out their assumptions for the biopharma industry’s recovery heading into the first quarter earnings period given the ongoing tariff drama.
Johnson & Johnson kicked off the first quarter earnings period on Tuesday, sending a slight sigh of relief across the industry. That’s because the company only reported modest impacts from the ongoing tariff uncertainty, which analysts have predicted will be the elephant in the room on the industry’s calls this quarter.
Indeed, although J&J executives spoke for 37 minutes before addressing tariffs, it was the first question out of the gate when the call pivoted to Q&A.
J&J reported about $400 million in impact from President Donald Trump’s tariffs so far but declined to provide full-year guidance as the situation is fluid. And despite the uncertainty, the company maintained its 2025 guidance of 2-3% adjusted operation sales.
One thing’s for sure, though, the pharma industry is facing a tumultuous year. In an earnings preview published last week, Truist Securities threw out its assumptions about recovery across biopharma. Instead of a second-half recovery for pharma, the firm’s assumptions have now pushed out to at least the first half of 2026. Biotech, meanwhile, won’t see much relief until the second half of this year, compared to a previous estimate of the second quarter of 2025.
“I can certainly say that with the amount of pain, suffering and destruction in biotech, it feels really difficult, and I feel like I’m in a complete construction zone as it relates to how much anger and frustration there is in the biotech investment community,” Michael Yee, equity analyst for Jefferies, said in a video posted Friday.
First quarter reports will be dramatic even though many companies headed into the year with strong earnings, William Blair said in a Monday note. The firm added that 17 of the large pharma companies it tracks, including Pfizer and Novartis, reported top-line revenue beats in the fourth quarter of 2024.
Yee similarly said that biotech, particularly larger companies, headed into April on a positive note. “We were on the hopes of biotech turning up,” he said.
But in just two week’s time, the markets have tumbled on Trump’s tariff threats. The S&P Biotech index has fallen more than 18%, according to William Blair.
“The regulatory uncertainty and potential for pharmaceutical-specific tariffs have removed large biopharma’s defensive positioning in times of broader macroeconomic headwinds, and investors likely need greater clarity into new key FDA appointments and any pharmaceutical-specific tariffs before the defensive positioning could return,” William Blair wrote. More than half of senior leaders at the FDA have left in the past six months, of their own accord or otherwise.
Arthur Wong, senior director of corporate ratings, healthcare, at S&P Global Ratings, told BioSpace ahead of earnings that pharmas are going to have to answer for how vulnerable their supply chains are and how fast they can switch up manufacturing.
Other issues that could come up on the season’s earnings calls are the drastic cuts at the Department of Health and Human Services, particularly the FDA, where thousands of people have been laid off. Biotechs have already been reporting regulatory impacts and delays.
“That may have more immediate, [and] even further down, longer term impact to the industry,” Wong said in an interview.
The Inflation Reduction Act, while currently absent from the news cycle, could resurface, putting even more pressure on drug pricing as pharmas figure out how to absorb the tariffs, Wong said.
“We expect this earnings cycle will feature significant discussion on global manufacturing footprints and the ability to navigate hypothetical tariffs, as well as potential risks to regulatory development plans, particularly for therapies hoping to use accelerated approval pathways,” William Blair wrote on Monday.
Jefferies predicted that Gilead and Vertex will have the least impact from tariffs, because neither have significant overseas manufacturing. Moderna is in the same boat, with manufacturing based in Boston.
“We believe investors are looking to own Vertex in a very volatile market: earnings risk this year should be low,” Jefferies said.
Gilead, meanwhile, is likely to duck any risks to its HIV portfolio that could come from HHS Secretary Robert F. Kennedy Jr., who has targeted HIV initiatives in his massive cuts to the health agencies. Gilead has a looming decision date for lenacapavir in June, but Jefferies says there’s “at least 75-80% chance it’s fine and stock should clear an overhang.”
Following J&J, Roche, Sanofi, Merck, Bristol Myers Squibb and Gilead will report on April 24.
