Balancing Unpredictable Tariffs with Geographically Segregated Supply Chains

In this interview, Raj Puri, chief commercial officer at Argonaut Manufacturing, discusses the complex challenges and shifting strategies within the U.S. pharmaceutical supply chain. Argonaut, a contract manufacturing organization based in Carlsbad, California, operates specialized divisions for life science diagnostics and aseptic drug product filling. Puri identifies the unexpected 2025 White House tariffs on equipment and consumables as a significant disruption for mid-sized companies attempting to expand domestic infrastructure.

Puri highlights the financial strain these policies impose, noting that Argonaut itself was hit with a seven-figure tariff on critical equipment during the final phase of a three-year investment plan. This volatility complicates long-term planning for the industry. "The tariffs have a chilling effect on companies trying to make investments into US-based pharma manufacturing facilities is simply due to their unpredictable nature," Puri explains. However, he also observes a "positive" side effect, the tariffs have driven increased interest in U.S.-based CDMOs as firms seek proactive strategies to manage their COGS.

Beyond immediate trade policy, the Puri elaborates on the broader necessity of supply chain redundancy in the wake of COVID-19 and ongoing geopolitical shake ups. Puri notes a qualitative trend where biotech and pharmaceutical companies are no longer satisfied with simply having multiple sites under one provider. Instead, they are prioritizing geographical and economic segregation to mitigate risks. Regarding this strategic shift, Puri states: "They want completely economically and geographically segregated manufacturing sites".

Ultimately, the interview underscores a critical transition period for the industry. While tariffs present a unique hurdle that hinders domestic investment, they are simultaneously accelerating a movement toward more resilient, diversified, and U.S.-centered manufacturing models.

Transcript:

Editor's note: This transcript is a lightly edited rendering of the original audio/video content. It may contain errors, informal language, or omissions as spoken in the original recording.

Good morning. My name is Raj Purdy. I'm the Chief Commercial Officer at Argonaut manufacturing. Argonaut is a contract manufacturing company based in Carlsbad, California. We have two separate divisions within the company. One division is focused on the production of life science and diagnostic products, and then the second division is focused on aseptic filling of drug product. So again, pleasure to be here today.

In my opinion, the biggest and most unwelcome surprise of 2025 was the implementation of tariffs by the White House, like many other industries, pharma industry was negatively impacted by the Tariffs applied to the acquisition of new equipment and critical consumables from non-US manufacturers. Very specifically for Argonaut, we are in the final stages of implementing a three year investment plan to build a new drug product manufacturing site in Carlsbad, California. And with all the latest and greatest equipment, unexpectedly, we got hit with a seven figure tariff on one of the key pieces of equipment, which again, for a mid-sized company, is a significant challenge.

The tariffs have a chilling effect on companies trying to make investments into US-based pharma manufacturing facilities is simply due to their unpredictable nature. On the positive side though, I would say that the Tariffs applied to pharmaceutical products not made in the US have created additional interest in US based CDMOs as a potential strategy to keep down cogs. So I get I think it's being done somewhat proactively, as we don't have a lot of details on how products made by CDMOs will be treated from a tariff perspective, but we certainly are seeing increased interest as a result.

In my opinion, the issue of tariffs geopolitical shocks and global supply disruptions underscore what we already know about the importance of having redundancy and pharmaceutical supply chains, and I think covid taught us, taught that lesson as well in 2020.

While I don't have a lot of quantitative data, qualitatively, my experience has been that biotech and pharma companies are actively looking to establish secondary commercial manufacturing sites, which are both geographically and economically segregated from their primary. So we've seen that organizations are not necessarily looking to work with the same CDMO, even if they have multiple geographical sites, because if there is an issue with that organization, they're now in a difficult position. They want completely economically and geographically segregated manufacturing sites.