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Informist, Friday, Feb. 21, 2025

MUMBAI – Worries about tariffs on pharmaceutical products, as threatened to be imposed by US President Donald Trump earlier this week, may continue to drag pharmaceutical stocks lower in the upcoming week, analysts said. If tariffs are brought into effect, companies engaged in the business of generic drugs, particularly those deriving a large chunk of their revenue from the US market, could experience pressure in the short- to medium-term, analysts said.

However, the pressure would be temporary, as companies will ultimately pass on the cost to the end-consumer, some analysts said. Amid this uncertainty around tariffs, brokerage Citi Research prefers to stick to Dr. Reddy's Laboratories, Sun Pharmaceutical Industries, and Torrent Pharma because these companies have less exposure to the US generic drugs market. It would be better to avoid Lupin and Aurobindo Pharma which have heavy generic drugs portfolios, various media houses reported Citi Research as saying.

The US could opt for imposing tariff on India's generic drugs and active pharmaceutical ingredients right away owing to the heavy dependence, Citi said. Companies may be forced to rationalise and exit the market, which will lead to massive shortage in the US markets resulting in price rise, Citi said.

Several major pharmaceutical stocks took a hit this week after Trump said he was considering tariffs of 25% or more on imports of pharmaceutical products. Tariffs will be "in the neighbourhood of 25%... and would go very substantially higher over the course of the year," Trump said Tuesday as per media reports. "There are no tariffs (on pharmaceutical products) right now, and straight away charging 25% will make Indian drugs quite expensive," a research analyst tracking the sector at domestic brokerage firm said.

Tariffs on pharmaceutical products gains significance because India accounts for over 60% of the volumes of generic drugs in the US. Further, pharmaceutical products along with electronics and textiles were a key factor for India's goods trade surplus with the US doubling over the last 10 years to $35 billion in 2023-24 (Apr-Mar), Nuvama Institutional Equities said in a report this week.

The story is not entirely bleak. Until some clarity emerges about US tariffs, investors may find some respite in the fact that several major drugmakers which delivered strong earnings in the December quarter may put up a similar show for the ongoing quarter. In fact, Nuvama expects Sun Pharma's lower expenditure on research and development along with seasonality to lead to a good performance in the March quarter. The brokerage also anticipates Sun Pharma, Aurobindo Pharma, and Zydus Lifesciences to repeat their healthy sales of the Revlimid generic. "We highlight the strong flu season in the US to be positive for large companies such as Lupin and Aurobindo in Q4FY25," it said.

TOP HEADLINES

* US FDA issues 2 observations to Cipla arm's Navi Mumbai unit
* Cipla gets final approval from US FDA for Nilotinib capsules
* Korean drug regulator completes inspection at Concord Biotech's Gujarat unit
* Eris Lifesciences issues INR 1.5-bln corporate guarantee in favour of arm
* US FDA tags Aurobindo Pharma US arm's unit as 'official action indicated'
* Equity Futures: Bears bet on Aurobindo Pharma as Trump threatens new tariffs
* Cipla completes INR 4.25 bln investment in South African arm Cipla Medpro
* US FDA issues 5 observations to Aurobindo Pharma arm's Andhra Pradesh unit
* US FDA issues 6 observations to Piramal Pharma's Turbhe unit post inspection
* Biocon arm gets approval from European Commission to market Yesintek in EU
* US FDA makes 5 observations on Glenmark Pharma's Madhya Pradesh mfg unit
* Akums Drugs gets patent from Indian govt for glaucoma treating formulation
* Glenmark posts INR 3.48 billion consol PAT in Oct-Dec vs loss year ago
* Alembic Pharma's Jarod unit gets voluntary action indicated tag from US FDA
* US FDA ends inspection at Zydus Life's Maharashtra unit with no observations
* Zydus Life arm signs licensing, supply pact with Zhuhai Beihai for Beizray
* GSK Pharma Oct-Dec PAT surges fivefold on year

Following are the resistance and support levels for the stocks for next week as per calculations by Informist based on their prices on the National Stock Exchange:

End

Reported by Alina Geogy

Edited by Deepshikha Bhardwaj

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