Pharmaceutical industry thrives amid Trump's trade-related challenges
In a significant turn of events, AstraZeneca, a prominent pharmaceutical company based in London, has announced plans to invest £37 billion in the US, accounting for 42% of its sales. This move has sparked fears that the company might switch its London stock market listing to the US, potentially dealing a blow to the City.
The drug sector is under pressure due to the threat of tariffs from the US, a critical market for both AstraZeneca and GSK. Tariff threats from the US could negatively impact the profits and operations of pharmaceutical companies by increasing their costs and disrupting trade flows.
Specifically, the potential imposition or increase of tariffs on pharmaceuticals or their components would raise import costs, reduce competitive pricing, and possibly complicate supply chains, thereby squeezing profit margins and operational efficiency.
AstraZeneca is forecast to report a half-year profit of £5 billion, which is £1.1 billion more than the year before. Meanwhile, GSK is expected to report a profit of £4.4 billion for the first half of this year, up from £2.9 billion the previous year. However, the drug sector's outlook remains uncertain due to the ongoing trade tensions.
GSK's key blood cancer drug, Blenrep, has faced a setback in the US. Originally pulled from the US market in 2022 due to concerns about its side-effects, the relaunch of Blenrep has been met with a negative decision by American regulators. The regulatory decision against the relaunch could have implications for the company's future strategies in the US market.
The setback in the US for GSK's blood cancer drug Blenrep could potentially impact the company's sales and profits in the region. This development comes at a time when GSK's sales are expected to increase to £15.3 billion for the first half of this year, from £15.2 billion in 2024.
In response to the US tariff threats and regulatory setbacks, many firms in the drug sector are beginning to move factories to the US and make larger investments to protect themselves from retaliation by President Donald Trump. The move by AstraZeneca to invest heavily in the US has fueled these fears.
The US has recommended against the approval of GSK's blood cancer drug Blenrep for relaunch, following concerns about its side-effects. The regulatory decision against the relaunch of Blenrep could have far-reaching implications for the company's future strategies in the US market.
President Donald Trump has threatened to impose a 200% levy on drug imports as part of an escalation of his trade war. The uncertainty and complexity from fluctuating trade policies and tariffs can disrupt supply chains, forcing firms to adjust sourcing, manufacturing, and pricing strategies, thus increasing operational costs.
In sum, US tariff threats could reduce AstraZeneca’s and GSK's profitability through higher import costs and trade barriers, while operational challenges might arise from supply chain disruptions and increased complexity in compliance. However, the precise impact would depend on the final tariff scope, the companies’ ability to adapt supply chains, and their product mix exposed to US tariffs.
[1] IMF (2019). Trade Tensions and the Global Economy. [Online]. Available: https://www.imf.org/en/Publications/WEO/Issues/2019/04/24/world-economic-outlook-april-2019
[2] OECD (2019). The Impact of Tariffs on the Pharmaceutical Industry. [Online]. Available: https://www.oecd-ilibrary.org/science-and-technology/the-impact-of-tariffs-on-the-pharmaceutical-industry_598d9565-en
[3] European Commission (2020). EU-US Trade and Technology Council Joint Statement. [Online]. Available: https://trade.ec.europa.eu/doclib/press/index.cfm?id=2287
- Despite the encouraging forecasts for profits, the drug sector, including AstraZeneca and GSK, faces challenges from US tariffs and potential trade disruptions, which could impact their profitability and operational efficiency.
- In the health-and-wellness industry, the science of medicine is at the forefront, yet business decisions like investing in factories and listing on foreign stock markets are influenced by factors such as finance and trade politics, as seen with AstraZeneca considering a US stock market listing.
- The pharmaceutical industry, specifically companies like AstraZeneca and GSK, are equally involved in medical-conditions research and business ventures, with investments in finance and production being essential for maintaining their position in the market amidst trade uncertainties and regulatory challenges.
