Synopsis:
US tariffs put Sun Pharma in focus, but proactive measures and a diversified manufacturing strategy may help mitigate potential risks.
The recent US decision to impose tariffs on imported patented drugs has raised concerns over the impact on Indian pharmaceutical companies. While most Indian firms are likely to remain largely unaffected due to their reliance on generics, Sun Pharmaceutical Industries could face notable pressure given its significant exposure to innovative therapies in the US market. Investors are now evaluating how the new trade measures may influence earnings visibility and valuation multiples for the company.
Goldman Sachs On Sun Pharma
In its latest note, Goldman Sachs indicated that the new tariffs are unlikely to severely affect Indian pharma firms, as generics, which form the bulk of prescriptions in the US, remain exempt. The US continues to rely heavily on Indian manufacturers for generic medicines, which account for roughly 90 percent of prescriptions.
However, Sun Pharma could feel the impact because of its sizable presence in the US specialty drug segment. Goldman Sachs noted that while overall earnings impact across its coverage may be limited, Sun Pharma derives a substantial portion of revenue from specialty products, which contributed a “mid-to-high teens” share of FY25 revenue.
Many of these drugs are produced by contract manufacturing organisations (CDMOs) outside the US and could fall under the newly announced tariffs unless protected by bilateral trade agreements.
The brokerage added that the effect on CDMOs is likely to remain minimal, as exports of drug substances and intermediates represent a small part of total sales, and many CDMO shipments operate on a free-on-board basis, leaving the tariff burden with US importers. Nevertheless, Goldman Sachs cautioned that the tariff overhang may pressure valuation multiples due to reduced earnings clarity until further details are available.
HSBC On Sun Pharma
HSBC highlighted that the 100 percent tariff on imported patented drugs, effective from October 1, could pose challenges for Sun Pharma, the only major Indian company with significant exposure to innovative therapies in the US. The measure does not affect generics or firms establishing manufacturing units in the US.
Patented drugs represented about 17 percent of Sun Pharma’s revenue in FY25, translating to roughly $1,217 million of consolidated sales, with around 85-90 percent of that revenue generated from the US.
HSBC estimates that, in a worst-case scenario, the tariff could reduce Sun Pharma’s earnings by 8-10 percent in FY26 and FY27. While the tariff is expected to have minimal impact on generics-focused Indian companies, Sun Pharma’s growing dependence on its patented portfolio, projected to rise from 17 percent of revenue in FY25 to about 22 percent by FY28, makes it more vulnerable.
The company’s innovative portfolio, including Ilumya, Cequa, Winlevi, and Leqselvi, is a key growth driver, with US sales of patented products having grown at a compound annual rate of 19.2 percent between FY25 and FY28.
Sun Pharma relies heavily on global CDMOs to manufacture these products, with Ilumya accounting for 56 percent of patented sales, and is produced in South Korea and Europe.
To mitigate the tariff, the company could shift production to CDMOs with US operations, utilize its three existing US plants, or acquire a local facility. With over $3 billion in cash as of June 2025, Sun Pharma has the financial flexibility to implement these measures, though HSBC notes that relocating production or repurposing plants could take six to 24 months and involve significant costs.
Despite the tariff risk, the brokerage expects Sun Pharma’s revenue to continue growing steadily, driven by its innovative medicines, while noting that the impact on earnings could be contained depending on mitigation efforts.
Generic medicines, which make up 90 percent of US prescriptions, remain exempt, and HSBC considers the likelihood of similar duties being imposed on generics to be low due to their critical role in US healthcare and the dominant position of Indian suppliers.
Also Read: 1:5 Stock Split: Microcap stock jumps after company announces share split
Outlook
While the new US tariffs on imported patented drugs have sparked concerns for Sun Pharma, the overall outlook remains cautiously balanced. Indian pharmaceutical companies, driven primarily by generics, are expected to remain largely insulated from any immediate disruptions, as generics, which account for the majority of US prescriptions, are currently exempt from tariffs.
For Sun Pharma, exposure to innovative therapies in the US introduces certain risks, particularly in its patented drug portfolio. However, the company’s strong cash reserves, diversified global manufacturing network, and potential mitigation strategies, including shifting production to US-based CDMOs or its own US plants, provide a buffer against severe earnings impact.
Both Goldman Sachs and HSBC suggest that while valuation multiples may face short-term pressure and some earnings could be affected, the long-term revenue trajectory of Sun Pharma, especially from its innovative portfolio, remains supported.
In essence, the tariff is a headline risk rather than an existential threat, and Sun Pharma’s proactive measures, along with the exemption of generics, indicate that the company is well-positioned to navigate these regulatory changes without fundamentally undermining its growth prospects.
Written By Manan Gangwar
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
