In the evolving landscape of global trade barriers, small biotechnology companies are discovering unique pathways to navigate international tariff challenges. Leen Kawas, Managing General Partner at Propel Bio Partners, offers compelling insights into how these emerging innovators can leverage their inherent advantages to outmaneuver larger competitors in an increasingly complex economic environment.
According to Leen Kawas, the impact of recent tariff implementations has created significant disruptions across the biotech sector. Small biotech firms are especially susceptible to these changes due to their reliance on complex international supply networks for critical components, including active pharmaceutical ingredients (APIs), specialized equipment, and research materials. Recent data indicate that approximately 30% of essential raw materials used in pharmaceutical manufacturing originate from China, with additional supplies sourced from Canada, Mexico, and countries in the European Union. The implementation of tariffs ranging from 10% to 25% on imports from these regions has generated substantial challenges throughout biotech supply chains.
“Small biotech firms often demonstrate remarkable agility and innovation capacity,” explains Leen Kawas. “While tariffs create significant hurdles, these companies can leverage their inherent flexibility to adapt more quickly than larger pharmaceutical organizations, potentially transforming market challenges into competitive advantages.”
The distinctive challenges facing smaller biotechs require innovative solutions. Unlike major pharmaceutical corporations with extensive global operations and significant financial resources, emerging biotech innovators typically operate with limited financial flexibility. When tariffs unexpectedly escalate material costs by 10-25%, these smaller enterprises lack the resources to absorb such dramatic increases simply.
Despite these obstacles, Leen Kawas highlights several key advantages that small biotech firms can utilize when navigating tariff-related disruptions. The first significant advantage is operational agility and speed of decision-making. Small biotechs maintain a crucial edge in their capacity to make rapid decisions without navigating multiple layers of corporate bureaucracy. When tariff policies change, these companies can often implement mitigation strategies within days or weeks, while larger organizations might need months to adapt.
Innovation-driven problem solving represents another critical advantage. Research demonstrates that small biotechs generate a disproportionate share of breakthrough innovations in the pharmaceutical sector. Studies reveal that small biotechs were responsible for 46% of the first-in-class cancer drugs approved by the FDA between 2010 and 2020, while large pharmaceutical companies were responsible for only 14%. This innovation mindset translates directly into creative problem-solving when confronting supply chain challenges.
Strategic focus and specialization also provide substantial benefits. Unlike diversified pharmaceutical giants, small biotechs typically concentrate on targeted therapeutic areas or specific technologies. This focused approach allows smaller firms to implement more tailored supply chain solutions that precisely address their unique requirements rather than developing broad approaches.
Based on her extensive experience working with emerging biotech companies, Leen Kawas recommends several strategic approaches for navigating the current tariff environment. Supply chain diversification has become essential, not optional. Forward-thinking biotechs are establishing supplier relationships across multiple geographic regions to reduce dependency on any single tariff-affected area. This approach includes identifying and qualifying alternative suppliers, establishing secondary manufacturing capabilities, and developing contingency plans for rapid supplier switching when necessary.
Leveraging free trade agreements and foreign trade zones offers another strategic opportunity. Many emerging biotech companies are establishing operations within Foreign Trade Zones (FTZs), which enable them to defer, reduce, or eliminate tariffs on imported materials used in their production processes. These specialized zones provide small biotechs with opportunities to maintain cost competitiveness despite broader tariff implementations.
Strategic partnerships and collaborative networks have become increasingly valuable in the current tariff environment. Small biotechs that establish strong relationships with contract research organizations (CROs), contract development and manufacturing organizations (CDMOs), and academic institutions can often navigate supply chain disruptions more effectively. These partnerships enable resource sharing, risk distribution, and increased negotiating power that individual small companies might lack.
Technology-enabled supply chain visibility represents another critical strategy. Advanced analytics and digital supply chain tools have become increasingly accessible to smaller organizations. Implementing technology solutions that provide real-time visibility into supply chain vulnerabilities enables small companies to model various tariff scenarios, predict material availability issues, and develop proactive strategies for mitigation.
Reshoring and nearshoring critical operations constitute the most significant long-term strategy. Companies are increasingly evaluating the benefits of domestic or regionally based manufacturing against the risks associated with global supply chains that are vulnerable to tariffs and other trade disruptions. While this approach requires substantial investment, it can provide long-term protection against future tariff implementations and supply chain disruptions.
Leen Kawas points to several successful examples of emerging biotech companies implementing these strategies. One California-based biotech specializing in gene therapy development faced significant cost increases when tariffs were implemented on specialized research equipment from China. Rather than absorbing these costs, the company quickly established an equipment-sharing consortium with three other regional biotechs, allowing them to jointly purchase and use key instruments while sharing the tariff burden.
Looking ahead, Leen Kawas predicts that tariff pressures will drive significant structural changes in how small biotechs approach their operations and development strategies. This evolution leads to increased regional collaboration among small biotechs, with emerging innovation clusters developing shared infrastructure and supplier networks. These collaborative ecosystems strengthen collective resilience against tariff disruptions while preserving the individual agility that makes small biotechs effective.
Despite the significant challenges that tariffs present, Leen Kawas remains optimistic about small biotech companies’ ability to navigate this complex landscape successfully. Companies that view tariffs as opportunities to reimagine their operations, rather than merely as obstacles to overcome, are discovering new sources of competitive advantage. By leveraging their inherent agility, innovation capacity, and specialized focus, while implementing strategic approaches, small biotechs can not only survive but potentially thrive amid tariff uncertainties.
