Celltrion updates strategy for potential Trump reciprocal tariffs on pharmaceuticals
In a notice to shareholders last week, Celltrion said it has updated its response strategy should U.S. President Donald Trump move forward and implement threatened reciprocal tariffs on pharmaceuticals.
The South Korean manufacturer and exporter of biosimilars noted that Trump on Feb. 13 “decided on reciprocal tariffs, which impose duties on foreign goods equivalent to the tariffs those countries apply to U.S. products,” which has “heightened market interest in the potential implementation of pharmaceutical tariffs.”
Celltrion in its latest strategy update said it has completed “pre-emptive measures” to minimize the impact of potential tariffs and as a short-term response has “transferred approximately nine months’ worth of inventory for our products scheduled for U.S. sale in 2025,” as of the end of last month.
The company contends that this action will ensure “minimal impact on this year’s U.S. sales, regardless of whether drug tariffs are imposed.”
Celltrion’s other short-term response is to increase production through contract manufacturing organization (CMOs). “We have been producing finished Drug Products (DP) through local CMOs even before the emergence of tariff risks,” the company said. “Through negotiations with these manufacturers, we have already secured additional production capacity.”
As part of its mid- to long-term response, Celltrion said it is focusing on exporting Drug Substances (DS), which are subject to significantly lower tariffs than finished DPs, should tariffs be implemented by Trump.
“We are in discussions with local CMOs with sufficient manufacturing capabilities to explore product production cooperation,” according to Celltrion. “These efforts will allow us to respond to changing circumstances by expanding local finished DP manufacturing beyond current levels if necessary, depending on pharmaceutical tariff trends.”
Since last year, Celltrion said it has been “reviewing in detail” the potential acquisition of a U.S. pharmaceutical raw material production facility, and the company plans to finalize its investment decision within the first half of 2025. “This will allow us to promptly develop more fundamental and sustainable countermeasures against protectionist trade risks.”
On Jan. 30, Celltrion previously announced a proactive plan to get ahead of any potential Trump tariffs that might impact the company. At the time, it conducted an analysis of different scenarios and put in place a “system capable of responding immediately, regardless of how the policy is implemented.”
Trump last month levied a 10% tariff on all imports from China and has threatened to slap 25% tariffs on products from Canada and Mexico, which for the time being have been paused for 30 days.
Celltrion warned last week that pharmaceutical tariffs could lead to drug price increases and represent a change in policy that “directly contradicts President Trump’s earlier stance, which showed notable institutional efforts to lower drug prices.”
Pfizer CEO Albert Bourla in an interview with CNBC last week said his company’s manufacturing operations in Europe could be negatively impacted if the Trump administration imposes import tariffs on pharmaceuticals from the European Union. At the same time, Bourla noted that Trump’s recently imposed tariffs on China and the paused but looming tariffs on Canada and Mexico are not likely to impact Pfizer.
Last week, Eli Lilly warned in its annual report about the potential ramifications of rising geopolitical tensions between the U.S. and China.
“In February 2025, the U.S. presidential administration imposed new tariffs on China and China responded with tariffs on select U.S. goods,” the company said. “If new legislation or additional trade restrictions are adopted or geopolitical tensions were to increase and disrupt our operations in, or related to, China, such disruption could significantly impact our business and results of operations.”
Bloomberg reported that Trump last week warned a group of major drugmaker executives in a meeting at the White House, including Bourla and Lilly CEO David Ricks, that his administration is set to impose tariffs on pharmaceuticals and they should start moving their manufacturing businesses to the U.S.