European Pharmaceuticals Brace for U.S. Tariffs, Innovation at Risk

As the hope for a tariff exemption for the entire pharmaceutical industry fades, European pharmaceutical companies are bracing for the potential impact of U.S. tariffs. The uncertainty surrounding these tariffs has already begun to have negative ripple effects, according to the CEO of the Danish biotechnology company Novonesis. The lack of clear information is causing companies to pause investments, delay product launches, and halt innovation.

The pharmaceutical industry has thus far been spared from trade tariffs, but President Donald Trump confirmed last week that tariffs on the sector are imminent. Companies in the industry are currently lobbying the president to implement a phased approach to tariffs on imported drugs, which could mitigate the immediate financial impact and allow businesses to relocate production to the U.S. However, some firms have warned that the absence of clear information is already causing negative repercussions.

Ester Baiget, the CEO of Novonesis, emphasized that the impact of tariffs extends beyond financial considerations. "When you impose tariffs, you create uncertainty, and when you're in a state of uncertainty, you pause actions, pause innovation, delay product launches, and pause investments," she stated. Approximately 30% of Novonesis' sales come from the U.S., and the company has been increasing its production capacity in the country.

Denmark, a major hub for pharmaceuticals and biotechnology in Europe, is home to companies like Novo Nordisk, the producer of Wegovy, and Bavarian Nordic, a vaccine manufacturer. Both companies have significant business operations in the U.S. Novo Nordisk's chairman, Helge Lund, stated that the company is focusing on maintaining flexibility rather than making speculative guesses about the tariffs. However, there are concerns about how the tariffs might affect the sales of Novo Nordisk's popular obesity and diabetes treatment drugs in the U.S., as well as the impact on its competitor, Eli Lilly, the producer of Zepbound.

The threat of tariffs has also heightened uncertainty in the investment sector. Emily Field, the head of European pharmaceutical research at Barclays, described tariffs as the "primary concern" for investors. Morten Bødskov, the Danish Minister for Industry, Business, and Financial Affairs, is in close communication with the country's pharmaceutical industry and broader business community about the potential impact of tariffs on this export-driven economy. However, it remains unclear whether the Trump administration will be persuaded to abandon its protectionist policies or make exceptions for certain industries.

For companies like Novonesis, the key is to closely monitor the situation and be prepared to take action when necessary. Baiget noted that the market is volatile and trends can change rapidly. "It's important for us to remain unaffected and also to learn how to buffer some of the impacts," she said. The pharmaceutical industry is now preparing for the potential financial and operational challenges that may arise from the implementation of U.S. tariffs, focusing on maintaining flexibility and innovation in the face of uncertainty.