Pharma ETFs to Gain From Landmark UK-US Zero-Tariff Deal

Core Viewpoint - The UK and U.S. governments have signed a pharmaceuticals trade deal that aims to rebalance transatlantic commerce and secure access to innovative medicines, with the UK agreeing to pay more for U.S. drugs in exchange for tariff exemptions on UK-origin pharmaceuticals for at least three years [1][4]. Group 1: Deal Details - The agreement secures tariff-free access for over £5 billion annually in UK pharmaceutical exports to the U.S. [4]. - The UK government will raise the price threshold for new treatments by approximately 25% and increase NHS spending on innovative medicines, reversing a period of flat drug spending [5]. - The U.S. will exempt UK products from potential "Section 232" tariffs on pharmaceuticals, which could have been as high as 100% [6]. Group 2: Impact on Pharmaceutical Companies - U.S. pharmaceutical companies such as Eli Lilly, Johnson & Johnson, Pfizer, AbbVie, Merck & Co., and Bristol Myers Squibb are expected to benefit significantly due to their strong presence in the UK [2][7]. - The higher NHS spending commitment incentivizes large U.S. pharmaceutical companies to expand their market reach in the UK, leading to improved revenue and profit margins [7]. - Companies are likely to prioritize launching innovative medicines in the UK sooner, with Bristol Myers Squibb planning to invest over $500 million in the UK over the next five years [8]. Group 3: Market Sentiment and Investment Opportunities - Other pharmaceutical giants are expected to increase their investments in the UK market, reversing previous concerns about the investment climate [9]. - Investors may consider pharmaceutical exchange-traded funds (ETFs) that include major U.S. pharmaceutical companies to capitalize on this policy shift [10]. Group 4: ETF Recommendations - iShares U.S. Pharmaceuticals ETF (IHE): Exposes 43 U.S. companies, with top holdings including LLY (25.63%) and JNJ (21.99%), net assets of $805.9 million, and a year-to-date increase of 28.1% [12]. - VanEck Pharmaceutical ETF (PPH): Covers 26 companies, with top holdings including LLY (23.83%) and MRK (7.99%), net assets of $1.18 billion, and a year-to-date increase of 16.3% [13]. - Invesco Pharmaceuticals ETF (PJP): Includes 30 companies, with top holdings including PFE (5.21%) and MRK (5.01%), net asset value of $105.10 per share, and a year-to-date increase of 28.4% [14].