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SMH / The Age The Australian pharma giant on Trump’s tariff hit...

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Porkchop Boy

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10/07/25

18:16

Post #: 79751209
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Originally posted by Porkchop Boy: ↑

Some news articles I came across which may interest some.

AFR
Before Paul McKenzie became chief executive of CSL in March 2023, he spent almost four years as chief operating officer, a good chunk of which was spent helping the company navigate the supply chain problems created by the pandemic.
McKenzie adopted what might be called the traditional CSL approach to problem-solving: think long-term, and invest accordingly. And the $US3 billion that the company subsequently spent building redundancy and resiliency in its supply chain in the United States suddenly looks like money well spent, as President Donald Trump’s tariff policies upend global trade.
“When other people stopped investing, we continued to invest,” McKenzie tells Chanticleer on Monday. “It was important for me, when I came in as chief operating officer, to make sure that we had this redundancy around the world.”
It’s that redundancy that McKenzie now thinks can help CSL play both sides of the vicious trade war between the US and China, which escalated again on Sunday...
When it comes to Behring’s plasma-based products, which account for 66 per cent of CSL’s group revenue, McKenzie thinks CSL has a strong argument that what it sells in America is made in America – it collects plasma in the US, and it fractionates (medical jargon for separating plasma into components) in the US.
“That’s really consistent with the administration’s objectives,” McKenzie says. “So this really should preclude those products from being subject to any future potential tariffs, even when they institute them for the pharmaceutical sector, because the majority of the value is derived in the US.”
He makes a similar argument for the Seqirus business, which accounts for 18 per cent of group revenue; CSL produces more than 100 million doses of flu vaccine at its facility in North Carolina’s Holly Springs, which is enough to supply the vast majority of the US market.
“We live up to what the US administration is looking to do – large investments over the last several years and a large percentage of our employees there.”
....The threat posed by specific US tariffs for the pharmaceutical sector is still to play out, but McKenzie is confident there is an acknowledgement in the US of both the importance of CSL’s products and its supply chains. The needs of patients are not going away – the past flu season has been particularly nasty, with 550,000 hospitalisations and 170 pediatric deaths – and McKenzie is confident CSL can make the case to the Trump administration that it is a vital part of the American healthcare sector.
“Having medically relevant products is the key, and I think it’s really important for us to make sure people understand that,” he says. “It’s a really noisy period for lots of industries, and our industry specifically. But for me, working with multiple governments around the world year in and year out, it’s a matter of just making sure we keep those governments focused on how they get these critical medicines to patients."

News.com.au
Australian pharmaceutical major CSL is eyeing boosting manufacturing of its lifesaving plasma and vaccine products from its existing operations in the US as it looks to navigate the threat of US President Donald Trump turning his attention to the healthcare sector.
Chief executive Paul McKenzie believes there is enough “redundancy and resiliency” in CSL’s global supply chain to shift production and should bypass the prospect of tariffs across about 85 per cent of his US businesses.
Australian pharmaceutical major CSL is eyeing boosting manufacturing of its lifesaving plasma and vaccine products from its existing operations in the US as it looks to navigate the threat of US President Donald Trump turning his attention to the healthcare sector.
Chief executive Paul McKenzie believes there is enough “redundancy and resiliency” in CSL’s global supply chain to shift production and should bypass the prospect of tariffs across about 85 per cent of his US businesses.
The homegrown pharma makes blood plasma products, high-end vaccines and more recently has moved into dialysis and treatment of kidney diseases.
However, McKenzie conceded the final 10 per cent of his US sales are across advanced kidney treatment products that are mostly imported from CSL’s European businesses, and this will need to be worked through.
“For almost 85 per cent of the (US) business, the majority of what we do is generate its value in the US,” McKenzie told The Australian.
“Our footprint in the US is quite significant. We’ve invested multiple billions of dollars over the last couple of years. We can respond very well to these policy initiatives.
“We’ll see what happens with Section 232 (tariffs). We’ll participate in the process, but we feel for these reasons and the medical necessity of our products for people in public health, we should be in good stance.”
CSL is one of the world’s biggest influenza vaccine manufacturers with hi-tech plants in Victoria, North Carolina and the UK.
Its blood processing plants are also in Australia, the US and Europe.
The US is by far CSL’s biggest market and generates about 50 per cent of its sales there, mostly from its Behring blood products and collections business.
CSL is one of the world’s biggest suppliers of blood and derived products to governments, including US health authorities.
The comments by McKenzie, who has just returned to Melbourne after several weeks in the US, underscore the grey area in which many global pharmas now find themselves.
Trump initially spared the pharma industry and medicines from his “Liberation Day” tariff announcement, but last week he threatened that he planned to announce a “major” tariff on pharmaceutical imports shortly.
The sector has been bracing for Mr Trump to use the sector-specific Section 232 tariffs that he has slapped on steel imports and cars.
However, with the market turmoil prompting a 90-day pause on reciprocal tariffs, the pharmaceutical companies remain in the dark about when or how they could be targeted. CSL’s shares had been off nearly 10 per cent on the initial tariff uncertainty, although with the weekend exemption on high-end tech manufactured in China, the market is hopeful there is more wiggle room than thought.
CSL shares jumped 2.1 per cent on Monday.
The risk for Trump in slapping tariffs on pharma is creating supply shortages in lifesaving drugs and treatment. The supply chains are complex and often involve importing critical compounds that are finished in the US.
Even CSL has complex plasma-related products derived from blood collections in the US and are partially processed in Australia, before being returned to the US.
With a market value of more than $115bn, CSL is Australia’s biggest pharma, and it spends more than $1bn annually on research and development.
McKenzie said most of the processing is generated in the US, but where some plasma-derived proteins are collected in the US but processed outside the country, he expected that their critical role in saving lives should see them fall outside the tariff net.
The former CSL chief operating officer who took charge two years ago, McKenzie said one of the big lessons from the Covid-19 pandemic was to build “redundancy and resiliency in our supply chain”, which gives the company additional capacity to shift production around the world.
This is why all manufacturers are looking at their supply chains to ensure they can continue operations without disruption.
McKenzie also revealed that CSL is seeking to fast track approvals from Chinese authorities to supply albumin there from its new $900m plasma fractionation plant at Broadmeadows, in Melbourne’s north.
Currently CSL’s albumin sales from China are sourced from multiple plants in Europe or the US.
Albumin is used in emergencies to treat blood loss and restore rapidly falling blood pressure.
“We are planning to look to prevent disruptions in the normal supply chain. We have a brand new facility in Broadmeadows. This month we are about ready to file for approval in China. So this is a good example, I’m hoping, that we can work with the regulatory agencies in China and Australia that would certainly shore up the critical supply of albumin, but our ability to supply from multiple nodes,” McKenzie said.
“This is something that we do as a course of business.”
Even if the tariff wall goes up, McKenzie says this is unlikely to impact CSL’s $1.6bn-plus R&D budget. The company has had a long-term target of about 10 per cent of revenue invested in R&D, and much of this is spent in Australia. Although research also takes place in the US and Europe.
“For us, the world is our lab, and I think it’s really important to make sure you continue to access great innovation everywhere.
“We have a proud history of accessing innovation here in Australia, equally accessing it in Europe and the US, and we’ll continue to do that.
“However where CSL could start thinking differently over the longer term is how it is using its multiple manufacturing facilities.”
Before joining CSL in 2019, McKenzie worked with global names from Johnson & Johnson and Biogen.
He says it’s too early to tell what the disruption of tariffs is likely to represent for the pharma industry. Although the Covid pandemic represents the biggest disruption for the sector by far.
“Not only from a supply chain, but the redirecting of dollars towards trying to solve that problem,” he said.
“Our job is to continue to work with administrations around the world to deliver medicines. From a CSL viewpoint our 100-year history is about resiliency and making a difference for patients. I think we’re in good shape across the majority of our businesses.”

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SMH / The Age

The Australian pharma giant on Trump’s tariff hit list
Frances Howe
July 10, 2025 — 4.58pm

Australian pharmaceutical giant CSL is on tariff watch after US President Donald Trump threatened to slug pharmaceutical imports into the US with a 200 per cent impost, two months after asking the US government to carefully consider the consequences of the measure.
CSL is an $117 billion ASX giant and the nation’s biggest player in pharmaceuticals, a sector responsible for about $2.2 billion in exports to the US.
CSL has facilities across the US, including in Holly Springs in North Carolina.
While CSL is exposed to the hefty tariffs proposed by the Trump administration, analysts said the company was insured by its large overseas operations, including its facilities in the US, and the critical nature of the medicines it makes.
Founded in 1916 as a vaccine manufacturer for the Australian government, CSL makes vaccines (including COVID-19 vaccines), antivenom, and plasma-derived medicines. It still makes products in Australia and exports them, with Morningstar analyst Shane Ponraj saying on Thursday that while there are other healthcare stocks on the Australian sharemarket, the Trump tariffs “will only directly affect CSL.”
However despite the risk, Ponraj said that CSL’s ability to adjust its supply chain, shifting its reliance onto its US facilities, should allow the company to weather the storm if the US government follows through on the tariff threat.
“CSL processes some US products in Australia but has many facilities in the US and some flexibility to adjust supply chains,” Ponraj said.
“While increasing uncertainty near-term, we don’t expect CSL’s earnings are materially affected because tariffs this high are unlikely to persist, and CSL can adopt by onshoring manufacturing.”
In May, in response to the US government’s request for public comments on its investigation into pharmaceutical imports, CSL submitted a seven-page letter opposing the introduction of tariffs.
“Broadly imposing tariffs on the pharmaceutical sector would disrupt and limit US patients’ access to therapies, increase costs for patients and the healthcare system, raise manufacturing costs, and limit company resources that are available for biomedical innovation, capital investments, and jobs in the US,” it read.
The letter, first reported by The Australian Financial Review, asked the US government to consider case-by-case exemptions based on the severity of diseases, availability of treatment options and the impact tariffs would have on domestic prices.
“CSL understands the Administration’s concern that certain countries may ‘weaponise’ control over pharmaceutical supplies. Therefore, CSL encourages the US government to focus its investigation on these specific non-allied countries, rather than on all imports of pharmaceuticals.”
A significant part of CSL’s business is based in the US, where it employs 19,000 people in 44 states, making up more than 60 per cent of its total workforce. The company is reliant on its 330 plasma donation centres provided by Americans who are paid to give plasma – a practice that’s illegal in Australia. Its ads to entice new donors in the US offer a $700 monthly reward.
CSL included a longer catalogue of its US facilities in the letter to the US government, adding that it had invested more than $3.1 billion in capital expenditures and created 6450 new jobs in the country, “partially due to growth driven by President Trump’s Tax Cuts and Jobs Act”.
Hugh Dive, chief investment officer at Atlas Funds Management, which holds CSL shares, said the company’s resilience to Trump’s threats is dependent on the company’s presence in the US, which shouldn’t be downplayed.
“A lot of their stuff doesn’t really cross borders,” he said.
Dive added that CSL had another ace up its sleeve: its products are vital to ongoing treatment of patients instead of the consumer discretionary items manufactured by other pharmaceutical companies.
“So it’s not like a bottle of Penfolds wine or an electric vehicle. If you’re immunocompromised (you) need some of their immunotherapies to live … a lot of it is stuff you require to maintain life.”
A spokesperson for CSL said, “We are aware of recent remarks by President Trump about potential tariffs on pharmaceuticals. We will continue to monitor the situation closely.”

CSL shares closed the trading day 0.5 per cent weaker at $242.41.

Morningstar

ASX healthcare stocks shrug off new tariff threat
Trump’s announcement could directly affect CSL, but we expect the firm to respond accordingly.
Shane Ponraj, CFA
10 July 2025

Mentioned: CSL Ltd (CSL), Ansell Ltd (ANN), Polynovo Ltd (PNV), Telix Pharmaceuticals Ltd Ordinary Shares (TLX), Nanosonics Ltd (NAN), Fisher & Paykel Healthcare Corp Ltd (FPH)
While pharmaceuticals are still exempt from US tariffs, President Donald Trump has threatened a potential 200% tariff on these imports, perhaps from 2027. Reciprocal tariffs announced prior have also been delayed by a month to Aug. 1, 2025.
Australian healthcare stocks barely reacted. Trump’s stance on tariffs has changed often and there is little clarity whether this is simply posturing. The 200% rate is not set nor the timing with Trump maybe giving up to 18 months before it takes effect.
How might ASX companies be affected?
Out of 12 names in our ASX healthcare coverage with US revenue exposure, pharmaceutical tariffs will only directly affect CSL (CSL).
Telix (TLX) manufactures entirely in the US, while CSL processes some US products in Australia but has many facilities in the US and some flexibility to adjust supply chains.
If enacted, reciprocal tariffs will affect Ansell (ANN), Polynovo (PNV), Nanosonics (NAN), and Fisher & Paykel Healthcare (FPH). We expect Ansell bears the brunt as it produces most of its US volumes in Southeast Asia which is heavily affected.
However, we expect these firms to adapt and largely offset the negative impact long term.

Fair Value estimates untouched
We maintain our fair value estimates for all of the companies named above. We think Trump’s position on pharmaceutical tariffs are likely to evolve and expect CSL to respond accordingly.
While increasing uncertainty near-term, we don’t expect CSL’s earnings to be materially affected because tariffs this high are unlikely to persist and CSL can adapt by onshoring manufacturing.

CSL shares remain undervalued.
We think the market is less optimistic on long-term demand for plasma products despite improving diagnosis rates for existing and new indications. CSL also manufactures a significant amount of plasma and vaccine products in the US already.
While Telix is enviably exempt from all potential tariffs on pharmaceuticals, shares remain overvalued.
The firm announced reimbursement support for its slightly improved product, Gozellix, as we expected. However, we still forecast average selling prices to fall 9% by fiscal 2027 given Illuccix’s transitional pass-through payment status expired in June 2025, likely making it notably cheaper for most private pay customers.

CSL Price at posting: $242.41 Sentiment: Hold Disclosure: Held
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Last $265.50		Change 1.550(0.59%)		Mkt cap ! $128.5B

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