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Boxes of Novo Nordisk’s weight-loss drug Wegovy in Oslo, Norway, Nov. 21, 2023.
Pharmaceutical companies experienced a moment of relief following U.S. President Donald Trump’s announcement indicating they would not face reciprocal tariffs. However, this sense of security may be short-lived as the administration progresses with initiatives that could impact the pharmaceutical sector significantly.
The Trump administration is contemplating a 232 investigation into various industries, including pharmaceuticals, which may result in the imposition of import tariffs under the Trade Expansion Act. During a tariff announcement dubbed “Liberation Day,” Trump remarked, “The pharmaceutical companies are going to come roaring back… if they don’t, they got a big tax to pay.”
The White House’s national emergency declaration mentioned a “particularly acute” need to bolster domestic manufacturing in several sectors, including pharmaceuticals, automotive, and shipbuilding.
On Thursday, health care stocks initially opened higher, though the Stoxx Healthcare index subsequently decreased by 0.4% by mid-morning in London, reflecting investor apprehension over forthcoming uncertainties. Roche, a prominent Swiss company, led the declines with a 2.4% drop, while Novo Nordisk, the creator of Wegovy, saw a 0.7% decrease. Other regional firms, such as Novartis and AstraZeneca, experienced slight gains.
The pharmaceutical sector’s hopes for a broad exemption from tariffs diminished after Trump confirmed that further announcements were imminent. In light of this, drug companies have been advocating for a phased implementation, which would provide firms with the necessary time to shift their manufacturing operations back to the U.S.
Citi expressed in a note that “a whispered potential for a phase-in approach, if it materializes, could dampen immediate shocks across the industry.” However, the intricate nature of pharmaceutical supply chains suggests that any large-scale transitions would likely span multiple years, making any potential relief from tariffs appear transient.
Though Novo Nordisk opted not to comment on the evolving tariff situation, company chairman Helge Lund stated in an earlier interview that they were not speculating on potential levies and were focused on maintaining flexibility. Lund noted that Novo Nordisk already has a significant U.S. manufacturing footprint, which he described as “expanding,” though he did not disclose specific figures regarding U.S. sales from domestic plants or the tariffs’ potential impact on Wegovy pricing.
Similarly, Roche affirmed its extensive pharmaceutical and diagnostics operations in the U.S., employing 25,000 people, and mentioned that it was “considering additional U.S. investments” to better meet patient demands.
AstraZeneca, a British pharmaceutical company, refrained from commenting ahead of forthcoming sector-specific announcements.
Danish biotech company Novonesis, which also has a substantial presence in the U.S., expressed concerns on Tuesday about the uncertainty stemming from the tariff strategy potentially hindering investment and affecting consumer demand. A representative commented, “It drives uncertainty, and when you’re uncertain, you pause. You pause innovation, you pause launches, you pause investments.”
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