Pharmaceutical Industry Braces for Tariff Impact as Q1 Earnings Begin

The pharmaceutical industry is facing a tumultuous year as companies begin reporting their first-quarter earnings amidst ongoing tariff uncertainty and regulatory challenges. Johnson & Johnson's recent earnings report has set the tone for what analysts expect to be a dramatic earnings season, with companies grappling to maintain their financial outlooks in the face of potential tariffs and industry-wide disruptions.

Tariff Uncertainty Reshapes Industry Outlook

Johnson & Johnson kicked off the Q1 earnings period on Tuesday, reporting a modest $400 million impact from President Donald Trump's tariffs thus far. Despite this, the company maintained its 2025 guidance of 2-3% adjusted operational sales growth. However, J&J declined to provide full-year guidance due to the fluid nature of the tariff situation.

The ongoing tariff drama has forced analysts to revise their recovery predictions for the biopharma industry. Truist Securities now projects that pharma's recovery will be delayed until at least the first half of 2026, while biotech may not see relief until the second half of this year. This represents a significant shift from previous estimates, which had anticipated a more rapid industry rebound.

Regulatory Uncertainty and FDA Challenges

Adding to the industry's woes is the exodus of senior leaders from the FDA, with more than half departing in the past six months. This turnover, coupled with thousands of layoffs at the Department of Health and Human Services, has already resulted in regulatory impacts and delays for biotech companies.

Arthur Wong, senior director of corporate ratings, healthcare, at S&P Global Ratings, emphasized that pharmaceutical companies will need to address their supply chain vulnerabilities and manufacturing flexibility during earnings calls. The industry is also bracing for potential discussions on global manufacturing footprints and the ability to navigate hypothetical tariffs, as well as risks to regulatory development plans, particularly for therapies seeking accelerated approval pathways.

Company-Specific Impacts and Strategies

Analysts predict varying degrees of tariff impact across the industry. Gilead and Vertex are expected to face minimal disruption due to their limited overseas manufacturing presence. Moderna, with its Boston-based manufacturing, is similarly positioned to weather the storm.

Gilead, in particular, may avoid risks to its HIV portfolio that could arise from HHS Secretary Robert F. Kennedy Jr.'s targeted cuts to HIV initiatives. The company has a looming decision date for lenacapavir in June, with Jefferies estimating "at least 75-80% chance it's fine and stock should clear an overhang."

As the earnings season progresses, investors and industry observers will be closely watching how companies navigate these challenges and maintain their financial health in an increasingly uncertain landscape. Following J&J's report, other major players including Roche, Sanofi, Merck, Bristol Myers Squibb, and Gilead are set to report their earnings on April 24, providing further insight into the industry's trajectory for the year ahead.