The US administration's move to impose Section 232 tariffs of up to 100% on patented pharmaceuticals has triggered fresh debate on the outlook for Indian pharma companies. However, brokerages largely agree that the headline risk masks a more nuanced reality-one where the sector impact remains contained, and in some cases, even supportive.
A key relief comes from the exemption of generics and biosimilars, which form the backbone of India's pharma exports to the US. This, analysts say, limits the downside for most Indian companies and could help reverse the recent underperformance seen in pharma stocks. Macquarie notes that the tariff move is "largely inconsequential" for the sector, citing the low likelihood of generics being taxed even after the proposed review period.
Sun Pharma: Highest Exposure, Manageable Impact
Within the sector, Sun Pharmaceutical Industries has emerged as the most exposed name, given its relatively higher dependence on specialty and innovative products.
Kotak Institutional Equities estimates a 1-2% impact on earnings, assuming companies are unable to pass on tariff costs. Jefferies takes a slightly more cautious stance, pencilling in a mid-single digit downside in a worst-case scenario, while Nuvama pegs the EBITDA impact at 1.2-2.1%.
That said, analysts highlight that the actual impact is cushioned by Sun Pharma's diversified manufacturing footprint. Its key drug, Ilumya, is produced in South Korea, which falls under a preferential tariff bracket of around 15%, significantly below the maximum rates. Parts of its production are also US-based, which remain exempt.
The tariff framework introduces a tiered structure that favours companies with US manufacturing presence or most-favoured-nation (MFN) agreements, while penalising imports from less-aligned geographies.
This is expected to push global pharma companies toward onshoring production, renegotiating supply chains, and forming strategic partnerships. Kotak notes that the structure could "fundamentally pressure" companies to realign manufacturing bases over time.
CDMOs: Risk in Pockets, Opportunities Emerging
For contract development and manufacturing organisations (CDMOs), the outlook is more mixed. While some exposure exists to US-bound patented drugs, the near-term impact is expected to be limited, as several large global pharma clients are exempt from the tariffs. Macquarie expects "business as usual" for much of the segment.
However, Jefferies flags Sai Life Sciences as relatively more exposed due to its linkage with US innovator supply chains.
At the same time, the evolving landscape could create opportunities for players with US-facing capabilities. Analysts highlight companies such as Piramal Pharma, Syngene, Aurobindo Pharma, Alkem Laboratories, Jubilant Pharmova, and Zydus Lifesciences as potential beneficiaries of a shift toward domestic manufacturing and outsourcing.
With India supplying nearly half of US drug volumes and retaining a dominant position in generics, the sector's earnings profile remains intact. In fact, higher costs for patented drugs could indirectly benefit generics through improved pricing dynamics and market share gains.
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