With President Donald Trump expected to levy tariffs on pharmaceuticals manufactured outside the United States, with the goal of reshoring drug production by American biopharmas, industry leaders, market watchers, and others have begun assessing which companies will see the greatest impacts, as reflected in higher expenses and resulting stock price declines.
Not surprisingly, biopharmas with more of their manufacturing operations outside the United States will be impacted the most once pharma tariffs become effective. They were originally expected to be levied on April 2—the same day Washington is expected to impose “reciprocal” or eye-for-an-eye tariffs designed to resolve trade imbalances between the United States and other countries, an event the president is promoting as “Liberation Day.”
But this past week, Trump backed away from the April 2 date, instead only saying pharma tariffs would be among industry-specific tariffs set to take effect “in the very near future, not the long future.”
“We’ll be announcing pharmaceuticals at some point because we have to have pharmaceuticals,” Trump said at the March 24 meeting of his cabinet.
Specifics about the tariffs and how they will be implemented are still uncertain. But their impact is expected to be far-reaching if results from a membership survey announced Wednesday by the Biotechnology Innovation Organization (BIO) are any indication. Among the findings:
- Almost 90% of U.S. biotech companies surveyed said they rely on imported components for at least half of their FDA-approved products.
- Nearly all (94%) of biotech firms anticipated manufacturing costs would surge if tariffs were placed on imports from the European Union.
- Half (50%) of companies said EU tariffs would force them to scramble for new research and manufacturing partners, as well as to rework or potentially delay regulatory filings.
- 80% of biotech firms said they would require at least 12 months to find alternative suppliers, while 44% said they would need more than two years.
The survey was conducted in February and canvassed a variety of companies ranging from startups to giants with more than $1 billion in revenue, BIO said.
“We believe sustained tariffs would drive up US drug prices for consumers, because even if companies were to redomicile manufacturing, it will take years and cost more than ex-US manufacturing,” a team of five analysts from Leerink Partners concluded March 30 in a research note.
The analysts—David Risinger, CFA; Andrew Berens, MD; Marc Goodman, Daina M. Graybosch, PhD, and Jason Zhuang—explained that the immediate negative impact of tariffs can be material for certain drugs, as that biopharmas often assign high values to drugs imported into the U.S. (well above non-GAAP cost of goods sold) in order to minimize taxes paid.
“Tariffs could force biopharma companies to alter both transfer pricing strategies and global supply chain activities to reduce the US ‘landing price’ of imported product,” the analysts wrote. “The industry could be exposed to global trade agreement disruption and ex-US country countermeasures.”
All-American manufacturing
“We believe Trump has made clear that he wants to push co’s with foreign manufacturing and tax shields outside the U.S. to bring operations back to the U.S.,” Michael J. Yee, equity analyst with Jefferies, and five colleagues observed Wednesday in a research note.
A Jefferies research note issued Wednesday summarized information about the ex–U.S. manufacturing operations of 11 biopharma giants, and their tax benefits from foreign operations which according to the investment banking and capital markets firm might result in risk of, or exposure to, new tariffs from Washington.
Of those 11, the company believed to have the lowest potential exposure to tariffs is Vertex Pharmaceuticals (NASDAQ: VRTX), since all of its manufacturing occurs within the United States, specifically in Boston. There, the company operates its Vertex Manufacturing Center, a 31,150-square-foot facility where research compounds are scaled up and therapies are produced using FDA-approved 3-story continuous manufacturing technology.
That explains why Vertex’s effective tax rate guidance to investors for this year is higher than the other 10 companies examined, ranging from 20.5% to 21.5%. Vertex is the only company of the 11 studied that is expected to pay taxes at an effective rate of more than 20% this year.
Guiding investors to the next highest effective tax rate, at 20% (GAAP) and 19% (non-GAAP), is Gilead Sciences (NASDAQ: GILD), which carries out manufacturing at plants in California and Maryland, as well as in Ireland, Canada, and the Netherlands.
At the low end of effective tax rates is Regeneron Pharmaceuticals (NASDAQ: REGN), which has issued effective tax rate guidance for 2025 of 9% to 11%. With manufacturing split between Rensselaer, NY, and Limerick, Ireland, Regeneron enjoys a larger -4% benefit to its effective tax rate from foreign earnings, vs. -1% for Vertex and Gilead, both of which would be the least exposed to tariffs, according to Jefferies.
Gilead is among companies with low exposure to tariffs, Yee and colleagues wrote, because most of its manufacturing occurs in California, while its best-selling HIV drugs are predominantly sold in the United States. But last week, The Wall Street Journal reported that the U.S. Department of Health and Human Services was considering plans to drastically cut funding for domestic HIV prevention, a report based on unnamed sources.
Of the 11 biopharmas examined, Regeneron is one of nine that carry out manufacturing in Ireland, buoyed by the Emerald Isle’s low standard income tax rate (12.5%) and decades of efforts to build a skilled labor force for the industry.
“All of a sudden Ireland has our pharmaceutical companies. This beautiful island of five million people has got the entire U.S. pharmaceutical industry in its grasp,” Trump lamented during a meeting earlier this month with Ireland’s Taoiseach or prime minister Micheal Martin.
“We love Ireland”
Trump returned to the theme late Wednesday, saying: “Ireland was very smart. We love Ireland. But we’re going to have that [manufacturing activity].”
Ireland is also among a host of global locations (including the United States) where Eli Lilly (NYSE: LLY) and Pfizer (NYSE: PFE) conduct manufacturing. Late last month, Lilly announced plans to build four new U.S. manufacturing sites totaling $27 billion, at sites yet to be announced—three facilities to make active pharmaceutical ingredient facilities, and a fourth focused on injectables. The locations are expected to employ a combined more than 3,000 people and are being built, according to Lilly, to help the pharma meet demand for drugs that include two glucagon-like peptide 1 (GLP-1) products based on tirzepatide—the type 2 diabetes treatment Mounjaro® and obesity drug Zepbound®.
The effort follows a five-location, $23 billion U.S. manufacturing initiative stretching back to 2020.
“Lilly’s optimism about the potential of our pipeline across therapeutic areas—cardiometabolic health, oncology, immunology, and neuroscience—drives our unprecedented commitment to our domestic manufacturing build-out,” David A. Ricks, Lilly chair and CEO, said in a statement. “Our confidence positions us to help reinvigorate domestic manufacturing, which will benefit hard-working American families and increase exports of medicines made in the U.S.A.”
Ricks, a Trump ally, said a key priority for Lilly is renewal of the president’s 2017 tax cuts, which are set to expire this year—a renewal he calls crucial to expanding domestic manufacturing, thus avoiding tariffs.
“We need that corporate tax rate to be competitive with Europe and other jurisdictions to lure that investment back home. So that’s a key one for me,” Ricks told the Washington Reporter, a news outlet launched last year by conservative backers.
Lilly has guided investors to a 2025 effective tax rate of approximately 16%, and, according to Jefferies, enjoys a -5% benefit to its effective tax rate from foreign earnings. Pfizer’s effective tax rate for this year is projected to be approximately 15%, with the company realizing an -8% benefit from foreign earnings.
Pfizer Chairman and CEO Albert Bourla, DVM, PhD, said March 3 that his company could get around tariffs by carrying out additional drug production in the United States, where it operates 13 manufacturing sites.
“All the capabilities here”
“We have all the capabilities here, and the manufacturing sites are operating at—in good capacity right now. It’s not that they are not. But if something happens, we will try to mitigate by transferring from manufacturing sites outside to manufacturing sites here the things that can be transferred quickly,” Bourla said March 3 at the 45th Annual TD Cowen Healthcare Conference in Boston, according to a transcript posted by Pfizer on its website.
“If there are tariffs and there is a need for someone to transfer production in the United States to avoid, [it] will be better for someone that has already the network and he just needs to transfer than someone who doesn’t have a network and needs to build it,” Bourla added.
According to Jefferies, the two established biotech giants that would be most exposed to tariff impacts are Amgen (NASDAQ: AMGN) and Biogen (NASDAQ: BIIB). Amgen’s effective tax rate for this year is projected to range from 15% to 16%, with the company realizing a -6% benefit from foreign earnings. Biogen has guided investors to an effective tax rate this year of 15%, with a -8% benefit to its effective tax rate from foreign earnings.
Other companies studied by Jefferies:
- AbbVie (NYSE: ABBV): 2025 effective tax rate guidance of 15.6%; -4% benefit to its effective tax rate from foreign earnings.
- Bristol Myers Squibb (NYSE: BNY): 2025 effective tax rate guidance of 18%; -8% benefit to its effective tax rate from foreign earnings.
- Johnson & Johnson (NYSE: JNJ): 2025 effective tax rate guidance ranging from 16.5% to 17%; -5% benefit to its effective tax rate from foreign earnings.
- Merck & Co. (NYSE: MRK): 2025 effective tax rate guidance ranging from 16% to 17%; -7% benefit to its effective tax rate from foreign earnings.
During Merck’s Q4 earnings call February 4, Caroline Litchfield, chief financial officer and executive vice president, answered an analyst question by stating that the company had “very low levels” of manufacturing happening in China, Mexico, and Canada.
“We’d expect a very immaterial impact from tariffs [enacted February 1] for those countries,” Litchfield said
She added that Merck was continuing to assess tariffs enacted by Washington, “but remain confident in our supply chain and our ability to supply our medicines and vaccines around the world.”
BIO president and CEO John F. Crowley said in a statement that re-onshoring key parts of the biotechnology supply chain to the United States and its allies, plus strengthening the domestic manufacturing base “should be a high priority for both national and economic security.”
“It will take years, though, for this shift and we need to be mindful of the negative consequences of these proposed tariffs,” Crowley stated. “We look forward to working with the Administration and Congress to develop incentives and policies that drive private sector dollars to spur a renaissance of U.S. biotech manufacturing.”
Leaders and laggards
- Actinium Pharmaceuticals (NYSE American: ATNM) shares soared 27% between Tuesday and Thursday following investor presentations that included a virtual talk Monday and an in-person event Tuesday at President Donald Trump’s The Mar-a-Lago Club. Actinium detailed recent achievements and anticipated milestones from its clinical pipeline—including the unveiling of ATNM-400, Actinium’s new Actinium-225 (Ac-225) solid tumor program, a non-PSMA targeting, first-in-class radiotherapy for prostate cancer. Actinium plans to present initial preclinical data from ATNM-400 on April 27 at the American Association for Cancer Research (AACR) Annual Meeting in Chicago. Shares rose 6% from $1.49 to $1.58 Tuesday, jumped 18% to $1.87 Wednesday, then edged up 1% to $1.89 Thursday.
- Cassava Sciences (NASDAQ: SAVA) shares nosedived 32% from $2.80 to $1.90 Tuesday after the company said it will end development of its lead pipeline candidate, the Alzheimer’s disease drug simufilam, by the end of the second quarter. Cassava acted after sharing topline results from its Phase III REFOCUS-ALZ trial (NCT05026177) indicating that the study did not meet prespecified co-primary, secondary, and exploratory biomarker endpoints. Co-primary endpoints were change in cognition and function from baseline to week 76 vs. placebo. Measured by ADAS-COG12 (higher scores = greater dysfunction), simuflam scores rose by 4.97 (100 mg BID) and 5.26 points (50 mg BID), but only by 4.70 points among placebo patients. By ADCS-ADL (higher scores = greater functional ability), scores fell by 6.27 (100 mg BID) and by 6.43 points (50 mg BID), vs. a 5.32 point drop for placebo.
- Equillium (NASDAQ: EQ) shares tumbled 35% from 75 cents to 49 cents Thursday after the company acknowledged that its lead program, the CD6 inhibitor itolizumab in acute graft-vs.-host disease, missed the primary and key secondary endpoints of the Phase III EQUATOR trial (NCT05263999). Itolizumab failed to show significant improvement over placebo in the primary endpoint of complete response (CR) at Day 29. Instead, 38 placebo patients (48.1%) achieved CR, vs. 34 itolizumab patients (43%). In one key secondary endpoint, overall response rate (ORR) at Day 29, 49 itolizumab patients (62%) achieved ORR vs. 43 placebo patients (54.4%). Equillium said itolizumab showed statistically significant improvement or positive trends over placebo on several other secondary endpoints, including durable CR at Day 99, durable CR at Day 99 (of patients achieving CR at Day 29), CR at Day 99, duration of CR, failure-free survival, and overall survival.
- Mural Oncology (NASDAQ: MURA) shares plunged 62% from $3.83 to $1.47 Tuesday after the company announced it will cease development of its lead pipeline candidate nemvaleukin for platinum-resistant ovarian cancer (PROC). Mural said it based its decision on data from the Phase III ARTISTRY-7 trial (NCT05092360) assessing Nemvaleukin (nemvaleukin alfa) with Merck & Co.’s cancer immunotherapy blockbuster Keytruda® (pembrolizumab) vs. investigator’s choice chemotherapy in PROC. A pre-specified interim analysis by the trial’s independent data monitoring committee showed the Nemvaleukin-Keytruda combination did not achieve a statistically significant improvement in overall survival vs. investigator’s choice chemotherapy alone. “The company believes the study is highly unlikely to achieve success at the final analysis,” Mural stated. Median overall survival was 10.1 months for patients treated with Nemvaleukin plus Keytruda, compared with 9.8 months for patients treated with investigator’s choice chemotherapy.
