Barclays on Thursday downgraded the contract research organizations IQVIA Holdings (NYSE:IQV), ICON PLC (NASDAQ:ICLR), and Fortrea Holdings (NASDAQ:FTRE), arguing that the Trump administration’s potential pharma-specific tariffs can lead to biopharma reorganization, hurting CROs’ top topline.

Analyst Luke Sergott downgraded IQVIA (NYSE:IQV) and ICON (NASDAQ:ICLR) to Equal Weight from Overweight, taking their price targets to $170 and $165 from $235 and $240 per share, respectively. Meanwhile, their smaller rival Fortrea (NASDAQ:FTRE) was cut to Underweight from Equal Weight, with its price target set to $6 from the prior target of $12 per share.

According to Barclays, pharma companies will find it difficult to pass potential tariffs to consumers, as the Inflation Reduction Act restricts them from raising Part B and Part D drug prices faster than the rate of inflation.

While they can pass higher prices elsewhere, the companies will face a potential expansion of drugs subject to Medicare price negotiations given the negative headlines, the analyst added.

“This would ultimately likely lead to more reorgs/rationalizations and another year of choppy bookings, lost growth, and potential margin contraction from increased pricing pressure, which again, is the crux of the bear argument on the space,” Sergott wrote.

Noting a lack of clarity over President Trump’s pharma-specific tariff threats, the analyst moves to the sidelines regarding IQVIA (NYSE:IQV) and ICON (NASDAQ:ICLR).

“Despite seeing outsized upside on valuation unlocking, our visibility/confidence that we are not going to see further restructurings/pipeline rationalizations has diminished in the shadow of pharma-specific tariffs,” he wrote.

However, the analyst downgraded Fortrea (NASDAQ:FTRE) to Underweight, noting that the company is likely to underperform its late-stage rivals as its operations are mostly tilted towards biotech, where there are funding pressures.

Meanwhile, noting that the tool sector’s defensiveness has diminished amid the threat of pharma tariffs, Barclays upgraded life sciences company Danaher (NYSE:DHR) to Overweight from Equal Weight due to the recent pullback in its shares.

“Valuation is still expensive, but not as offensive as it was 6 mos ago for the growth expected,” Luke Sergott wrote, adding that the momentum in the company’s bioprocessing business can offset any weakness in the life sciences segment. However, Barclays lowered Danaher’s (NYSE:DHR) price target to $205 from $240 per share.