5 Small Drug Stocks to Buy Amid Trump's New Tariff Threats

Industry Overview - The uncertainty surrounding tariffs and trade measures has impacted economic growth, with President Trump threatening to impose tariffs as high as 200% on pharmaceutical imports to encourage domestic production [1] - Despite these threats, the biotech sector has remained stable, with many global pharmaceutical companies already investing in domestic manufacturing [1] Current Trends - The Zacks Medical-Drugs industry is showing promising trends due to positive pipeline and regulatory developments [2] - Key areas of innovation include rare diseases, next-generation oncology treatments, obesity, immunology, and neuroscience, attracting significant investor interest [3] M&A Activity - M&A activity in the sector remains healthy, indicating growth potential for companies like Catalyst Pharmaceuticals, Zevra Therapeutics, Theravance Biopharma, Aldeyra Therapeutics, and Larimar Therapeutics [3] Industry Characteristics - The Zacks Medical-Drugs industry consists of small to medium-sized drug companies that produce medicines for human and veterinary use, often relying on collaboration payments for revenue [4] Factors Influencing Future Growth - The success of key pipeline candidates in clinical studies can significantly impact stock prices, with successful innovations acting as catalysts [5] - Strong collaboration with larger drugmakers is a positive indicator for small pharma companies, especially when equity investments are involved [6] - Investment in technology and personalized medicine is crucial for smaller companies to thrive in a changing healthcare landscape [7] Performance Metrics - The Zacks Medical-Drugs industry currently holds a Zacks Industry Rank of 96, placing it in the top 39% of 245 Zacks industries, indicating strong prospects [9] - Year-to-date, the industry has risen 5.6%, outperforming the Zacks Medical sector, which has decreased by 2.9%, while slightly underperforming the S&P 500, which has risen by 6.9% [11] Valuation - The industry is currently trading at a trailing 12-month price-to-sales ratio of 2.32, compared to the S&P 500's 5.66 and the Zacks Medical sector's 2.37 [12] Company Highlights - Catalyst Pharmaceuticals: Lead drug Firdapse shows strong demand; stock has risen 0.4% this year; earnings estimate for 2025 increased from $2.23 to $2.25 [16][17] - Theravance Biopharma: Strong sales from Yupelri; stock has risen 22.6% this year; earnings estimate for 2025 declined from 3 cents to 1 cent [20][21] - Larimar Therapeutics: Developing nomlabofusp for Friedreich's ataxia; stock has declined 18.3% this year; loss estimate for 2025 narrowed from $1.90 to $1.89 [24][25] - Zevra Therapeutics: Early adoption of Miplyffa exceeds expectations; stock has risen 53.4% this year; earnings estimate for 2025 increased from 31 cents to 76 cents [28][29] - Aldeyra Therapeutics: Focused on RASP modulators; stock has declined 0.4% this year; loss estimate for 2025 narrowed from $1.03 to 90 cents [31][32]