US Tariff Impact on Indian Pharma Stocks: A Comprehensive Analysis
The Indian pharma sector was under pressure on Friday after US President Donald Trump announced a 100% tariff on the sector, with an exception for companies that have manufacturing capacity in the United States. The Nifty Pharma index declined 2.67% intraday, with major pharma stocks like Cipla, Biocon, and Lupin experiencing significant losses.
Impact on Indian Pharma Stocks
Specific details of the tariff are yet to be shared, but preliminary details suggest that the US tariffs mainly target branded and patented drugs. This has raised concerns about the potential impact on Indian pharma companies that export to the US. Stocks of Sun Pharmaceutical Industries Ltd., Cipla Ltd., Dr Reddy’s Laboratories Ltd., Lupin Ltd., and Biocon Ltd. declined on Friday, with Sun Pharmaceutical Industries Ltd. declining nearly 5%.
Cipla Ltd. declined 2.29%, Biocon Ltd. declined 2.78%, Dr Reddy’s Lab declined 2.27% intraday to trade at Rs 1,246.20 apiece, and Lupin Ltd. declined 2.47% intraday to trade at Rs 1,915 apiece. The decline in these stocks was largely due to concerns about the potential impact of the US tariff on their exports to the US.
US Tariff: Key Details
The US tariffs mainly target branded and patented drugs, a market dominated by multinational companies like Pfizer Inc. and Novo Nordisk Inc. Indian pharma companies like Sun Pharmaceutical Industries Ltd. and Biocon Ltd. are also key players in the US branded drug market. However, it is unclear whether complex generics and specialty drugs from India could also face scrutiny.
Bengaluru-based Biocon, through its wholly owned subsidiary Biocon Generics Inc., commissioned its US manufacturing facility earlier this month in Cranbury, New Jersey. Biocon acquired the Oral Solid Dosage (OSD) facility from Eywa Pharma Inc. in 2023 and has since invested over $30 million to establish a state-of-the-art plant with an annual production capacity of two billion tablets.
Impact on Sun Pharma and Biocon
Sun Pharmaceutical Industries Ltd. may have some impact until it announces its US capex plans. The company exports specialty drugs like ILUMYA, CEQUA, WINLEVI, and ODOMZO, which contribute 19% to its overall revenue. In FY25, Global Specialty sales rose by 17.1%, reaching $1,216 million. Additionally, Specialty R&D accounted for 36% of the company’s total R&D spend in Q4FY25.
Biocon Ltd. has already established a manufacturing presence in the US, which could help the company mitigate the impact of the US tariff. The company’s US manufacturing facility has an annual production capacity of two billion tablets, which could help Biocon increase its exports to the US.
Way Forward for Indian Pharma Stocks
The US tariff on the pharma sector is a significant development that could have a major impact on Indian pharma stocks. While the details of the tariff are yet to be shared, it is clear that Indian pharma companies will need to adapt to the new reality. Companies like Sun Pharmaceutical Industries Ltd. and Biocon Ltd. will need to announce their US capex plans to mitigate the impact of the tariff.
Investors will need to keep a close eye on the developments in the US and the impact on Indian pharma stocks. The Nifty Pharma index is likely to remain volatile in the short term, and investors should exercise caution when investing in pharma stocks. However, the long-term outlook for the Indian pharma sector remains positive, driven by the growing demand for generic and specialty drugs.
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