Celltrion

Recently, U.S. President Trump signed an executive order imposing reciprocal tariff on all countries, leading to inquiries from some shareholders regarding whether tariffs will be applied to pharmaceuticals.

On January 30th, we informed shareholders of the company's response strategies under consideration via the notice [Response Strategy to the U.S. Trump Administration’s Tariff Policy on Pharmaceuticals].

Given our shareholders' concerns, we provide the following update on our review:

1. Outlook on the Trump Administration's Drug Tariff Policy 

• President Trump briefly mentioned imposing tariffs on foreign-produced pharmaceuticals, along with semiconductors and steel, during his inauguration speech last month. On February 13 (local time), he decided on reciprocal tariffs, which impose duties on foreign goods equivalent to the tariffs those countries apply to U.S. products. This has heightened market interest in the potential implementation of pharmaceutical tariffs.
• As previously mentioned, pharmaceutical tariffs that could lead to drug price increases are showing a policy direction that directly contradicts President Trump's earlier stance, which showed notable institutional efforts to lower drug prices. In addition, on the 12th of this month, Mike Johnson, the Speaker of the House of Representatives, said in an interview with Reuters that some items including pharmaceuticals could be excluded from the reciprocal tariffs, so whether drug tariffs will actually be implemented still requires careful observation. 

2. Company’s Response Strategy and Preparedness 

As explained in our initial notice last month, we have already established a response system for various scenarios regarding potential U.S. drug tariffs. This system can be summarized as follows:

Short-Term Response: Minimizing Tariff Impact for 2025 

• We have already completed pre-emptive measures to minimize the impact of potential tariffs for 2025. As of the end of January, we have transferred approximately nine months' worth of inventory for our products scheduled for U.S. sale in 2025. This ensures minimal impact on this year's U.S. sales, regardless of whether drug tariffs are imposed.
• Production through Contract Manufacturing Organization (CMO) is a common practice in the pharmaceutical industry. We have been producing finished Drug Products (DP) through local CMOs even before the emergence of tariff risks. Through negotiations with these manufacturers, we have already secured additional production capacity. This completes our response to minimize the impact of potential drug tariffs for 2025.

Mid- to Long-Term Response: Focus on Drug Substance Exports and Consideration of Local Production Facilities 

• We are already focusing on exporting Drug Substance (DS), which are subject to significantly lower tariffs than finished DPs in the event that tariffs are implemented. Additionally, we are in discussions with local CMOs with sufficient manufacturing capabilities to explore product production cooperation. 
• These efforts will allow us to respond to changing circumstances by expanding local finished DP manufacturing beyond current levels if necessary, depending on pharmaceutical tariff trends.
• Therefore, we have already established strategies to minimize the impact of tariffs even beyond 2026. However, we have been reviewing in detail the acquisition of a pharmaceutical raw material production facility in the United States since last year, and we plan to finalize the investment decision within the first half of this year. This will allow us to promptly develop more fundamental and sustainable countermeasures against protectionist trade risks.

We will respond swiftly and effectively to all situations to ensure that our shareholders do not have concerns regarding the direction of the Trump administration's tariff policies. We will continuously share updates on related progress, striving to maintain our shareholders' trust and support for the company. 

Thank you.