Advertising, drugmaker stocks in spotlight as Trump moves to regulate pharma ads

Shares of several pharmaceutical makers as well as those of major advertising agencies are in the spotlight on Tuesday after President Trump signed a memorandum mandating pharma ads provide more information on risks. The move could potentially disrupt billions of dollars in ad spending, which in turn could affect major advertising agencies like Omnicom (OMC), Interpublic (IPG) and WPP (WPP). Wells Fargo believes the order will likely impact ad spend negatively, with DoubleVerify (DV) and Reddit (RDDT) having high-single-digit exposure.

MEMORANDUM: President Donald Trump has signed a memorandum mandating that pharmaceutical advertisements increase the amount of information regarding risks of the drug in question. “My Administration will ensure that the current regulatory framework for drug advertising results in fair, balanced, and complete information for American consumers,” the memorandum reads.

“The Secretary of Health and Human Services shall therefore take appropriate action to ensure transparency and accuracy in direct-to-consumer prescription drug advertising, including by increasing the amount of information regarding any risks associated with the use of any such prescription drug required to be provided in prescription drug advertisements, to the extent permitted by applicable law. The Commissioner of Food and Drugs shall take appropriate action to enforce the Federal Food, Drug, and Cosmetic Act’s prescription drug advertising provisions, and otherwise ensure truthful and non-misleading information in direct-to-consumer prescription drug advertisements. 

This memorandum is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.” Publicly traded drugmakers include AstraZeneca (AZN), Bristol Myers (BMY), Eli Lilly (LLY), GSK (GSK), Johnson & Johnson (JNJ), Merck (MRK), Novartis (NVS), Pfizer (PFE), Roche (RHHBY) and Sanofi (SNY).

IMPACT: Shares of Omnicom, Interpublic and WPP were under pressure after the news as the move could potentially disrupt billions of dollars in ad spending, which in turn could affect major advertising agencies.  

Discussing the memorandum, Wells Fargo told investors that it sees relatively limited exposure to digital advertising companies outside of DoubleVerify and Reddit from President Trump’s executive order increasing disclosure requirements for pharma advertising. The order will likely impact ad spend negatively, with DoubleVerify and Reddit having high-single-digit exposure, the firm said. Wells believes both companies have over 5% exposure to the pharmaceutical category. The firm’s industry checks suggest Meta Platforms (META) enforced new rules on its health and wellness category advertisers in early 2025, which will likely limiting any impact to the company from Trump’s order.

DIRECT-TO-CONSUMER: BofA analyst Allen Lutz notes that yesterday, the U.S. Food and Drug Administration announced reforms to direct-to-consumer advertisements. The FDA will now require drug companies to include full safety warnings during DTC ads and will expand regulatory oversight to include social media promotional activities. The FDA will now require advertisers to present all of this information within an advertisement – which could make TV advertisements longer, clunkier, and less appealing for drug manufacturers and online pharmacies.

At a minimum, this will make DTC advertisements on social media platforms like Facebook or Instagram less appealing to consumers. Given the significant competitive pressures taking place across sexual health, hair loss, and weight loss, these industry changes are likely to make new customer conversions more challenging, the firm argues. Overall, Hims & Hers (HIMS) should be able to navigate this environment given its strong brand equity and first-mover advantage, but BofA would expect continued volatility in the near term. The firm keeps an Underperform rating on Hims & Hers with a price target of $28 on the shares.

PRICE ACTION: In afternoon trading, shares of Omnicom and Interpublic have dropped about 2% apiece and WPP’s stock has slipped 1%. On the flip side, Hims & Hers shares have gained about 5%.