How do US tariffs affect the pharmaceutical industry? Many companies state that the "impact is limited" and brokers are optimistic about the zone's risk resistance ability.

On April 8, the Science and Technology Innovation Board Daily reported that the United States recently issued so-called "reciprocal tariffs." Most of China's pharmaceuticals (including various chemical drugs, vaccines, bioproducts, etc.) are on the exemption list, and raw materials such as vitamins, amino acids, hormones, antibiotics, and anti-infection drugs have also been included in the exemption list, while medical devices are not on the exemption list.

Data shows that in 2024, the trade volume of pharmaceutical products in my country will reach 199.376 billion USD, a year-on-year increase of 2.13%. Among them, the import volume is 91.412 billion USD, a year-on-year decrease of 2%, while the export volume is 107.964 billion USD, a year-on-year increase of 5.9%. Regarding the U.S. market, in 2024, our imports will be 15.057 billion USD, a year-on-year decrease of 4.6%; the export volume will be 19.047 billion USD, a year-on-year increase of 11.75%.

The United States has a high reliance on imported generic drugs and raw materials. According to a report by the Alliance for Biotechnology Industry, Policy, and Academic Leaders "Active Pharmaceutical Ingredient Innovation Center" (APIIC), 90% of antiviral and antibiotic drugs consumed daily by Americans rely on active pharmaceutical ingredients imported from abroad, and about 83% of the top 100 prescription generics depend on imports; in 2024, the import value of generics is estimated to be around $70-80 billion, with India and China being the largest suppliers, contributing nearly 50%-60% of the import volume. Additionally, according to FDA reports, only 20% of raw materials are produced domestically in the U.S., while 80% come from overseas.

According to the research reports of multiple brokerage firms, overall, the pharmaceutical sector possesses strong resistance to tariff risk.

Ping An Securities pointed out that in the pharmaceutical sector, segments such as drugs and raw materials are less affected by tariffs, while other domestic demand-related sectors such as traditional Chinese medicine, medical services, and pharmaceutical commerce are not impacted by this policy.

Zhongshan Securities stated that the pharmaceutical industry is mainly driven by domestic demand, and most sub-industries are less affected by tariffs (such as medical services/consumer healthcare, domestic innovative drugs, traditional Chinese medicine, pharmacies/distribution, etc.), making the sector a good hedge against risks. In addition, blood products with a high proportion of imports, certain equipment consumables and key components, IVDs, etc., have good potential for domestic substitution and opportunities, and are expected to benefit marginally.

From the perspective of specific sub-sectors, in terms of pharmaceuticals, China Merchants Securities believes that currently, most relevant domestic pharmaceutical companies' APIs and formulations are not in the United States, which has a limited impact; the gross profit of pharmaceuticals imported from China to the United States is relatively high, and due to the influence of medical insurance, it is difficult to change the terminal price, resulting in limited impact on the industry; if MNC pharmaceuticals are produced locally, the impact on the industrial chain is even smaller.

China Merchants Jinling International Securities stated that, firstly, when a BD transaction is reached, it usually only involves the transfer of rights related to the drug's IP, development, and commercialization in the relevant regions. Therefore, even if tariffs on the drug are implemented, there is no direct impact on BD transactions that have already occurred or are yet to occur. Secondly, for a mature commercialized innovative drug, production costs only account for a small part of it, and the impact of additional tariffs on the gross profit margin of innovative drug sales should be at a low single-digit percentage level.

In terms of raw pharmaceuticals, China Post Securities believes that about 30% of pharmaceutical raw materials in the U.S. rely on imports from China. If tariffs are maintained, it could lead to increased costs for U.S. pharmaceutical companies, prompting them to seek alternative sources (like India). However, India relies on China for 70% of its raw pharmaceuticals, making it difficult to replace in the short term, and China still holds bargaining power.

In the field of medical devices, analysts pointed out that the domestic countermeasure of an additional 34% tariff could benefit certain medical device industries due to accelerated localization, such as the glove industry, IVD consumables industry, electrophysiology industry, hemostatic gauze industry, aortic industry, surgical robot industry, and large equipment-related industries.

Everbright Securities also recommends increasing allocation to the medical device sector. The additional tariffs on U.S. imports are expected to accelerate the localization of high-end medical devices and upstream core components. It is suggested to pay attention to the rapid development in subfields such as high-end imaging equipment, surgical robots, sequencers, and electrophysiology, where leading companies with strong R&D reserves and high brand recognition are likely to benefit. It is advisable to focus on enterprises that possess competitive advantages in product competitiveness, as these companies are expected to become the next batch of leaders, and some may also have opportunities to generate overseas revenue.

It is worth noting that when asked about the impact of tariffs, many companies in the A-share pharmaceutical sector have responded that "the impact is limited:"

Hengrui Medicine stated that the proportion of the company's overseas sales business in its operating income is very small. According to the 2024 annual report data, the proportion of overseas sales business is only 2.56%, and the impact of the U.S. tariffs on the company's business is very limited. The company will continue to closely monitor changes in the international environment and respond flexibly to the complex and changing external environment to ensure the long-term stable development of the company.

Nuotai Biotech stated that based on the interpretation of the policy content announced by the U.S. government, the phased exemption of the drug's additional tariffs has little impact on the company. The company will continue to monitor the progress of the tariff policy implementation and assess its impact.

Haier Bio stated that the company's overseas business is widely distributed in regions such as Africa, Europe, Asia-Pacific, and America. In 2024, Haier Bio's revenue from the U.S. market accounts for less than 2% of the company's total revenue. Additionally, prior to the recent tariff increases, the company had already prepared advance stock based on the local system in the U.S. Therefore, the impact of tariffs on the company's business is limited. The company will continue to accelerate its localization efforts based on its network system covering over 800 locations in more than 150 countries and regions.

Aier Eye Hospital stated that the contract prices for imported products are settled at the price in RMB (after tax), so the short-term impact on the company is limited. The company has alternative European and domestic products for equipment and consumables originally sourced from the United States, so the long-term impact on the company is also limited.

Source: Science and Technology Innovation Board Daily

Author: Ke Chuang Ban Daily