Navigating Tariff Risks in Pharmaceuticals: Insights from Courtney Breen, Bernstein Senior Analyst
In a recent appearance on CNBC’s ‘Money Movers,’ Courtney Breen, senior analyst at Bernstein, shed light on the complex issue of how to draw the line between tariff risks and company financials in the pharmaceutical sector. Breen, an expert in the industry, provided valuable insights into which companies are most at risk and the potential impact of tariffs on their bottom lines.
Tariffs: An Overview
Before delving into the specifics, it’s essential to understand the basics. Tariffs are taxes imposed on imported or exported goods. In the context of the ongoing US-China trade war, several rounds of tariffs have been implemented on a wide range of goods, including pharmaceuticals. These tariffs have led to increased costs for companies that import or export goods, potentially impacting their profitability.
Pharmaceutical Companies Most at Risk
According to Breen, some pharmaceutical companies are more exposed to tariff risks than others. These include:
- Adamas Pharmaceuticals: With over 70% of its revenue coming from products manufactured in China, Adamas Pharmaceuticals is particularly vulnerable to tariffs.
- AptarGroup: This company, which provides pharmaceutical packaging solutions, has reportedly seen increased costs due to tariffs.
- Celgene: With significant manufacturing operations in China, Celgene could face increased costs due to tariffs.
- Merck & Co: Merck’s Relovir hepatitis B treatment is manufactured in China, making it a potential target for tariff-related cost increases.
Strategies to Mitigate Tariff Risks
Breen also discussed strategies companies can employ to mitigate the risks of tariffs. These include:
- Supply Chain Diversification: Companies can look to diversify their supply chains by sourcing from alternative locations, reducing their reliance on any one country.
- Price Increases: Some companies may choose to pass on increased costs to consumers by raising prices.
- Negotiation: Companies can negotiate with suppliers to absorb some or all of the increased costs.
Impact on Consumers
The potential impact of tariffs on consumers is a significant concern. With pharmaceutical companies facing increased costs, there’s a risk that these costs could be passed on to consumers in the form of higher prices for medications. This could be particularly problematic for those with chronic conditions who rely on regular, expensive treatments.
Impact on the World
The global economy could also be impacted by tariffs on pharmaceuticals. With many pharmaceutical companies operating on a global scale, increased costs in one market could lead to reduced profits and potentially even job losses in other markets. Additionally, tariffs could discourage collaboration and innovation in the pharmaceutical sector, as companies may be less willing to invest in research and development when faced with increased costs.
Conclusion
The ongoing trade war and the resulting tariffs pose significant risks to the pharmaceutical sector. Companies with significant manufacturing operations in China, such as Adamas Pharmaceuticals, AptarGroup, Celgene, and Merck & Co, are particularly vulnerable. Strategies like supply chain diversification, price increases, and negotiation can help mitigate these risks. However, the potential impact on consumers and the global economy is a cause for concern. As the situation evolves, it will be essential for companies and policymakers to adapt and find ways to minimize the negative consequences of tariffs.
Stay informed and make informed decisions with the latest news and insights from CNBC. Join us for more in-depth discussions on the topics that matter most.
