For early-stage biotech companies, tariffs and trade policies are often not a top priority compared to immediate concerns like funding, clinical milestones, and team building. However, experts warn that overlooking these factors can have significant long-term consequences.
The CEO of Mercury, a logistics partner for life sciences firms, highlighted the risks: "As the CEO of Mercury, a logistics partner to life sciences companies, I have seen companies working on pivotal research reach milestone moments—fundraising, partnership negotiations and even exits—only to be blindsided by inquiries about the impact of tariffs on their commercial product."
While tariffs may not affect research shipments due to their nominal value and special classification as “for research purposes only,” this protection does not extend into later stages. Once companies enter preclinical development and select manufacturing partners or locations, reversing those decisions becomes difficult if they later encounter high tariffs or customs challenges.
Shipping needs grow more complex during clinical development. Biological specimens may still qualify for tariff exemptions but investigational drug products usually require a declared commercial value. This creates compliance risks if values are understated or financial burdens if they are set higher. Temporary workarounds such as prototype designations exist but do not solve issues once products go commercial.
Strategic choices in manufacturing location can reduce exposure to tariffs and streamline logistics. For example, some startups manufacture drug products in the same country where trials occur to avoid extra costs and regulatory delays.
Tariffs become unavoidable once therapies are approved and priced. The CEO recounted: "A Mercury client experienced a 15% tariff when importing a multi-million-dollar shipment of a commercial drug product. When the shipment is valued that high, any tariff hurts, let alone one at 150% or higher as we’re seeing discussed as possible on some healthcare products." At this stage, supply chain resilience becomes critical for pricing strategy and investor confidence.
Early decisions about manufacturing partners and trial locations can have lasting effects on profitability and strategic options when entering commercial markets. The CEO advised: "The good news? If you plan for this early on, you can manage the risk."
Key strategies include selecting contract manufacturers within target markets or trial regions to minimize shipping costs; prioritizing local production where drugs will be sold; and understanding legal classifications such as foreign-trade zones or prototype exemptions during development phases.
In summary, industry leaders urge early-stage biotechs to consider tariffs as part of their broader business strategy rather than an afterthought: "Research-stage biotechs should embrace tariffs as a strategic lever and a part of their long-term success plan. When reviewed correctly, executives can position their companies to avoid unnecessary costs, maximize their valuations and attract potential buyers."
"Don’t let tariffs become your crisis of tomorrow," concluded the CEO.
