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Pharma stocks on the edge as tariff overhang looms large

ICICIdirect Research 26 Sep 2025 DISCLAIMER

U.S. President Donald Trump has revealed plans to impose a 100% tariff on branded/patented Pharmaceutical drugs starting from October while exempting companies building drug manufacturing plants in the U.S or even projects where construction has started.
As per India’s context, Indian pharma exports to the US stood at ~US$ 10 billion which is ~31% of the overall Pharma exports and majority of the exported drugs are generic in nature and are currently excluded, as they fall under a separate Section 232 Investigation by US Commerce Department.
We expect limited impact as the tariffs targets branded/patented drugs which are largely dominated by global innovators.
In Domestic Pharma, the news flow can be sentimentally negative for Sun Pharma where US specialty accounts for ~15-16% of total sales. But even Sun Pharma outsources some of its specialty products through CDMO companies across US/EU besides having manufacturing presence in US.
While the exact details of how this order will be implemented are still unclear, there remains considerable uncertainty about whether complex generics/ generics will eventually be included under the tariff restrictions, and whether companies that already have manufacturing operations in the U.S. will also be affected.
⁠Another area of concern is for CDMO (Contract Development and Manufacturing Organization) firms, as supplying branded or patented drugs to innovators could potentially be subject to tariffs. Over the longer term, this may even encourage large pharmaceutical to invest in building their own manufacturing facilities in the U.S. to sidestep these tariffs.

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