Pharmaceutical stocks initially fell worldwide after President Donald Trump said he plans to sign an executive order to lower U.S. prescription drug prices by matching them with the lowest prices in other countries. Unsurprisingly, this led to worries about future profits. European drugmakers like Novo Nordisk (NVO), AstraZeneca (AZN), and Roche (RHHBY) dropped earlier in the day, as did U.S. drugmakers such as Eli Lilly (LLY), Pfizer (PFE), Bristol-Myers Squibb (BMY), and Merck (MRK). However, these stocks have since recovered and are now trading higher.
Confident Investing Starts Here:
- Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions
- Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter
Trump’s announcement didn’t include full details, but analysts believe that the move will target government programs like Medicare and Medicaid. Interestingly, some say that the order could face legal challenges, similar to Trump’s earlier plan during his first term, which was blocked in court. Nevertheless, analysts warn that if successful, the new plan could have a big financial impact, since Medicare and Medicaid account for around 40% of all drug sales in the U.S. Some firms, especially those with a large share of revenue coming from the U.S., could be more exposed.
For example, European and Japanese drugmakers that rely heavily on U.S. sales could be most affected. Still, analysts say that the order likely only applies to the drugs already under price negotiations through the Inflation Reduction Act and that the government still doesn’t have the power to regulate prices in the private market.
Which Pharma Stock Is the Best Buy?
Turning to Wall Street, out of the stocks mentioned above, analysts think that NVO stock has the most room to run. In fact, NVO’s average price target of $92.15 per share implies more than 38% upside potential. On the other hand, analysts expect the least from Roche stock, as its average price target of $44 equates to a gain of 13.4%.
Looking for a trading platform? Check out TipRanks' Best Online Brokers , and find the ideal broker for your trades.
Report an Issue