With Donald Trump’s inauguration as the 47th president of the United States, stakeholders and analysts are saying his second term in the Oval Office could be a net positive for the biopharma industry at large and contract development and manufacturing organizations (CDMOs) in particular.
Thermo Fisher Scientific CEO Marc Casper in a presentation last week at the J.P. Morgan Healthcare Conference in San Francisco was asked about the potential policy implications of the new Trump administration. Casper said he expects a “better business environment” including less stringent regulatory oversight of mergers and acquisitions (M&As) and a “pro-growth environment from a taxation perspective.”
Max Smock, equity research analyst at William Blair, in a Wednesday report on the pharmaceutical outsourcing and services sector similarly concluded that based on a more “pro-business” stance expected in a second Trump term — compared to the Biden administration — and a “more amenable” Federal Trade Commission, investors appear to be anticipating a “step-up” in M&A activity in 2025.
“In our view, a significant rebound in M&A activity this year would be a welcome tailwind for sentiment around the large pharma space, particularly if these transactions help offset declining revenue from key products due to loss of exclusivity over the next few years,” Smock wrote. “In addition to potentially providing larger innovators with more flexibility to spend on R&D, we believe it could also help end the biotech slump that weighed on demand for pharmaceutical outsourcing and services companies in 2024.”
Greg Behar, CEO of global CDMO Recipharm with 17 facilities in 10 countries around the world, told Pharma Manufacturing that he sees the business environment further improving in 2025. “The price point for drugs in the U.S. and Europe might not go up, but access will increase which is actually a good thing for us because we can drive more volumes — and that drives more efficiency and it has a positive impact on our margin,” Behar said.
Vaccines in the crosshairs?
Among the major factors expected to weigh on the outlook for the large pharma space in 2025, according to Smock, is Robert F. Kennedy Jr.’s potential confirmation as secretary of the Department of Health and Human Services (HHS), overseeing several agencies including the Centers for Medicare and Medicaid Services, the Food and Drug Administration (FDA), and the National Institutes of Health.
Smock notes that while Kennedy has stated he does not intend to take away vaccines, his appointment “has the potential to lead to future policies that negatively impact uptake of approved vaccines or result in a higher bar for future vaccine approvals,” which at worst would be a “minor headwind to large pharma’s top line, as the 15 companies featured in this report only generated $45.1 billion of revenue from vaccines in 2024 (6.7% of total revenue).”
The bigger risk related to Kennedy’s appointment “is if he follows through on his promise to fire staffers at the FDA or there is a mass exodus of seasoned FDA staffers who leave the agency if he is confirmed,” Smock warned. “These cuts and/or departures could lead to longer review timelines for new drug approvals, ultimately creating a more challenging environment for the large pharma companies included in this report, as well as for the pharma space as a whole.”
One of Trump’s first executive orders this week was to start the process of withdrawing the U.S. from the World Health Organization (WHO), which could impact U.S. vaccine makers who rely on WHO’s pathogen data. The executive order stated the withdrawal from the international body was “due to the organization’s mishandling of the COVID-19 pandemic that arose out of Wuhan, China, and other global health crises, its failure to adopt urgently needed reforms, and its inability to demonstrate independence from the inappropriate political influence of WHO member states.”
Tariffs take center stage
Trump this week warned that he could impose a 10% tariff on imports from China starting Feb. 1, as well as 25% tariffs on both Canada and Mexico — countries that together account for more than a third of U.S. trade — though he has not yet signed such executive actions.
In terms of tariffs on China and other countries, Casper at the JPM25 conference said “which ever tariffs happen, we will be well-positioned — given our global footprint — to navigate that as effectively or more effectively than anybody.”
The U.S. relies heavily on China for everything from raw materials to active pharmaceutical ingredients (APIs) to biologics.
China, a critical market for the biopharma industry, is Thermo Fisher’s second largest market, accounting for 8% of the company’s revenue, according to Casper. “We’re the largest player in China but we actually have half the exposure of the industry,” he said.
With locations in Europe, India, Israel, and the U.S., Behar said that Recipharm is “not exposed in China.”
When it comes Trump’s intention to impose tariffs on Canadian products, Geoff Evans, president of Eurofins CDMO Alphora in Mississauga, Ontario, Canada, told Pharma Manufacturing he’s not “overly concerned” about the potential impact on his company. “There are always these disruptions that occur but if you look at the arc of time and relationships, I think this will sort itself out,” Evans commented. “I think we’ll be fine.”
At the same time, Evans said the threat of U.S. tariffs on Canada “creates a bit of short-term uncertainty, which is never great, but there’s a natural rhythm to the North American market that is robust and has been in place for decades.”
BIOSECURE Act looms
While the BIOSECURE Act — which prevents U.S. federal funds from supporting certain Chinese contract manufacturers — has stalled in Congress, the proposed legislation could threaten an already strained U.S. biopharma supply chain if it secures congressional passage and is signed into law by Trump.
“The COVID pandemic woke us up to the fragility of supply chains within the pharmaceutical sector and in general,” Evans said. “When something like the BIOSECURE Act happens, and the fact that it’s even being discussed, it just starts to put a pin in it for some people.”
Evans contends that some companies are re-evaluating their supply chain strategies in light of the BIOSECURE Act as it relates to Chinese suppliers and are looking for alternate geographies — a potential net positive for CDMOs in countries outside of China, according to Evans, who said Eurofins CDMO Alphora is seeing a tendency toward reshoring.
“As business leaders, the question is: are you getting ahead of it or behind it?” Evans said. “If you go back 10 years ago, companies were working hard to figure out how they could do more in Asia, whereas now they’re probably working hard figuring out how they can do more in North America or the West. It’s a bit of a pivot.”
Although the BIOSECURE Act was not passed by Congress at the end of 2024, Behar said the “damage has been done” by the proposed legislation. “For new projects, it’s very hard for anybody to really work with Chinese entities,” he added. “There’s too much risk and this issue will not go away.”
Paul Josephs, CEO of Minnesota-based CDMO Lifecore Biomedical, told Pharma Manufacturing that the potential impact of the BIOSECURE Act on the industry is “overstated” in the short term and “understated” in the long term.
“If you have a program already under development in Asia or something that’s been commercially manufactured in China, you’re going to wait until your agreement comes up for renewal before you move it,” Josephs said, noting a grandfather clause that would allow existing contracts with the five Chinese CDMOs named in the BIOSECURE Act as U.S. national security threats to be maintained until January 2032.
At the same time, Josephs added: “If you have a new program that you’re going to put under development, because you know that law is coming, why would you start development in China?” He said that even without the BIOSECURE Act, the Trump administration “has been very clear” about the need to bolster U.S. domestic manufacturing.
Building in America
Lars Petersen, CEO of Fujifilm Diosynth Biotechnologies, told Pharma Manufacturing that his company is building a new production facility in Holly Springs, North Carolina. In April 2024, the company announced an investment of $1.2 billion in its large-scale cell culture CDMO business to further expand the planned Fujifilm Diosynth Biotechnologies end-to-end biomanufacturing site in Holly Springs, bringing the total investment in the facility to more than $3.2 billion.
“Big Pharma companies sometimes shift priorities from one location to another one and I would expect to see a lot of that this year with a new [Trump] administration in this country, and new discussions going on about where they might want manufacturing,” Petersen said. “We do expect increased interest in the U.S.”
With four sites in the U.S., including the expansion of its cell therapy manufacturing facility in Thousand Oaks, California, Petersen contends that Fujifilm Diosynth Biotechnologies is well positioned with clients “who get nervous about supply chain and markets that are not open anymore.” He argues that it’s not just the Trump administration that is looking to reshore manufacturing. “The entire world is closing down,” Petersen said. “There’s almost like a business-wide Cold War going on.”
Petersen expects the BIOSECURE Act to be passed by the Republican-controlled House and Senate and signed into law by Trump, with Fujifilm Diosynth Biotechnologies standing to benefit.
“The more the talk about it, the more customers come to us because we are clearly one of the options,” he said. “U.S. citizens may not necessarily see the economy as being as good as it is, but it’s better than ever from a business point of view.”
