Canadian biopharma Theratechnologies is caught in the crossfire of a US-Canada trade war
As trade tensions escalate between the United States and Canada, a Montreal-based biopharma company with deep ties to the U.S. market is feeling vulnerable to the potential tariff threats from President Donald Trump and the Canadian government’s retaliatory tariffs on American exports.
With its reliance on contract manufacturers on both sides of the border for its most important product, Theratechnologies finds itself caught in the crossfire of an intensifying trade war.
The company’s injectable EGRIFTA SV, approved in the U.S. for the reduction of excess abdominal fat in HIV-infected adult patients with lipodystrophy, is in a potentially precarious position when it comes to tariffs imposed by both countries. The product’s various components often cross the border as part of normal commerce.
EGRIFTA SV’s active ingredient is manufactured by a chemical plant in the U.S. Then, it crosses the border as powder and is put into vials in Canada as part of a complex manufacturing process by a contract manufacturer, with those vials shipped back to the U.S. for final assembly of additional components such as syringes. However, what crosses the border is never a finished product, according to Theratechnologies CEO Paul Lévesque.
“Every time that it crosses the border there’s an additional component that is added in the other country,” Lévesque told Pharma Manufacturing. “The implication is that it’s going to be taxed when it comes to Canada and when it goes back to the U.S.”
Starting on April 2, Trump has warned that the U.S. will impose reciprocal tariffs on countries charging higher duties on American imports — it’s the same date on which the pause of the 25% tariffs on Canada and Mexico is expected to be lifted. Trump’s chaotic back-and-forth trade drama is creating uncertainty for companies like Theratechnologies.
While there might be some products that are exempt, “we still need to have additional clarification on it,” Lévesque said. “The vast majority of the components or products would be facing tariffs at 25% … it will have dire implication.”
The company late last month in its fourth quarter and full-year fiscal year 2024 announcement argued that while it’s too early to determine whether Trump’s tariffs will apply to pharmaceutical products, they could potentially have an “adverse effect” on Theratechnologies’ financial results.
Who ultimately pays for the tariffs?
When it comes to tariffs, companies oftentimes pass on these fees to consumers by raising prices. However, Lévesque contends that in Theratechnologies’ case the company will not have that option for a good chunk of the U.S. market that it serves.
“In the U.S., if 30% of the market is the government — Medicare and Medicaid — we will not be able to pass that on,” Lévesque said. “For the other proportion, we might be able to pass it on. What’s going to be the reaction of insurers? I don’t know but they will be facing a significant increase … At the end of the day, I don’t see how this could be good for patients.”
Asked if Theratechnologies has considered changing its supply chain to mitigate the effects of tariffs, such as manufacturing EGRIFTA SV entirely in the U.S., Lévesque insists that “there are no shortcuts here that can be quick fixes to this situation.”
Lévesque describes the biopharma industry as a highly regulated industry with time-consuming regulatory requirements. Switching the company’s contract manufacturers could take more than a year and — worst-case scenario — as much as two years, he said.
“Just to qualify a plant, takes a very long time,” according to Lévesque. “I could make the decision now, but I would probably not reap the benefits of that before the end of 2026, beginning of 2027.”
Time is of the essence for Theratechnologies, which is looking to strike while the iron is hot. In 2024, EGRIFTA SV — the only drug approved in the U.S. to treat lipodystrophy in HIV patients — saw unprecedented demand, resulting in 12% growth year-over-year. In the meantime, the company is working on a new formulation with a different supply chain, which could be fortuitous given the current trade war challenges.
A solution on the horizon?
If approved by the FDA, Theratechnologies’ new F8 formulation is intended to replace the F4 formulation, which is sold in the U.S. as EGRIFTA SV. The regulatory agency has set a Prescription Drug User Fee Act (PDUFA) action date of March 25, 2025.
Should that new formulation be approved by the FDA, Lévesque said the company will launch the product later this year and transition to a new contract development and manufacturing organization (CDMO), which is based in the U.S.
“In that case, we wouldn’t have any components crossing the border anymore for this product specifically,” Lévesque noted, acknowledging that the timing of the PDUFA is a “pure fluke” and has nothing to do with the current U.S.-Canada trade tensions.
Using a phase-out, phase-in approach, Theratechnologies will continue to manufacture additional batches of EGRIFTA SV until the anticipated transition to the new F8 formulation, which will be manufactured entirely in the U.S.
“We’re not going to be dealing with this problem anymore,” Lévesque concluded. However, he cautioned that uncertainty remains for now, as Trump’s April 2 deadline for the tariffs looms.
