This Indian pharma company faces US tariffs on patented drugs
What's the story
The United States has announced a 100% tariff on branded and patented pharmaceutical products from October 1, which could affect imports of such drugs. Analysts say it won't have much impact on Indian drug makers. Among them, only Sun Pharma stands to be affected due to its significant sales of patented drugs in the US market.
Market share
Only Sun Pharma significantly exposed
According to a report by HSBC Global Investment Research, Sun Pharma is the only Indian company with a significant stake in patented drugs in the US. The firm's sales from these drugs are estimated at 17% of its revenue for fiscal year 2024-25. In FY25, Sun Pharma reported global sales of $1.217 billion from patented products, with the US market accounting for around $1.1 billion or 85-90% of its total sales.
Tariff implications
Limited impact on earnings
The new US tariff could have a limited impact on Sun Pharma's earnings, which accounts for 17% of its total revenue and 8-10% of its consolidated EPS in FY25. The company may be able to mitigate some of this impact by shifting manufacturing to its three plants in the US or by acquiring another manufacturing plant there.
Exemption details
Generic drugs exempt from tariffs
HSBC noted that generic (off-patent) drugs are exempt from US tariffs, which means other Indian companies won't be affected. Anuj Sethi of Crisil Ratings also said the new tariff "may not significantly hurt Indian drug makers," as exports to the US mainly consist of generic, off-patent medicines. He added some domestic formulation makers have a niche presence in branded and patented drugs but these contribute modestly to their revenue.
Facility advantage
Companies have manufacturing facilities in US
Sethi also highlighted that some domestic companies have manufacturing facilities in the US, making them exempt from the new levies. He said, "Given the largely non-discretionary nature of these products, the majority of the tariff cost is likely to be passed through."