The biopharmaceutical industry is bracing for potential disruptions from proposed tariffs aimed at encouraging companies to move manufacturing operations back to the US.
This week, President Donald Trump suggested that tariffs could be implemented on pharma products made outside the US, with a particular focus on Ireland, where many biopharma companies benefit from favorable tax conditions.
While the specifics of these tariffs remain uncertain, their potential impact could be significant for companies with international operations, analysts at Jefferies believe.
“We believe Trump has made clear that he wants to push companies with foreign manufacturing and tax shields outside the US to bring operations back to the US,” the analysts wrote.
“Additionally, it's not clear what if any focus Trump has on patents and IP domiciled in Ireland and on companies benefiting from patents there.”
The analysts are also keeping a close watch on proposed tariffs from the European Union, Canada, and China.
A recent survey by the Biotechnology Innovation Organization of 42 biotech companies revealed that 90% of US biotechs rely on imported components for at least half of their FDA-approved products, Jefferies noted.
Biopharma firms with foreign exposure
Jefferies analyzed the foreign exposure of major biopharmaceutical firms, focusing on their manufacturing operations and the tax benefits they derive from foreign activities.
Amgen Inc (NASDAQ:AMGN, ETR:AMG)’s operations place it at higher risk than its peers should the US administration impose tariffs targeting overseas manufacturing, the analysts believe.
Amgen operates manufacturing facilities in Ireland and Singapore, which provides a tax benefit, lowering its effective tax rate by approximately 6%.
Biogen Inc (NASDAQ:BIIB, ETR:IDP) also benefits from foreign tax structures, resulting in an 8% reduction in its effective tax rate. With significant manufacturing overseas, it is highly exposed to the potential tariff changes under consideration.
Companies with lower exposure include Vertex Pharmaceuticals Inc (NASDAQ:VRTX, ETR:VX1), which primarily manufactures in Boston, and Gilead Sciences Inc (NASDAQ:GILD, ETR:GIS), which carries out most of its manufacturing in California and its HIV treatments are primarily sold in the US.