Pharma tariff: Aurobindo, Lupin, DRL, Sun, Zydus, Biocon in focus after 100% Trump tariff

Shares of pharma exporters such as Aurobindo Pharma, Dr Reddy’s Laboratories, Lupin, Sun Pharma and Zydus Lifesciences are in focus on Friday morning after the US President Donald Trump in a social media post said a 100 per cent tariff will be imposed on any braded or patented pharma product, unless a company is building its pharma manufacturing plant in the US. This, the US President said, will include under construction and/or breaking ground. 

"There will be no tariff on these pharmaceutical products if construction has started," he said.

Pharmaceuticals were earlier exempted under Section 232 investigations. Aurobindo Pharma exports account for 89 per cent of its sales. Out of these exports, exports to the US stood at 49 per cent. Similarly, US exports as percentage of Biocon's sales stands at 46 per cent. Cipla (29 per cent), Dr Reddy's Labs (46 p cent), Lupin (36 per cent), Sun Pharma (33 per cent), Zydus Lifesciences (48 per cent) and Piramal Pharma (39 per cent) are some of the pharma majors exporting significantly to the US, as per JM Financial note last month. 

"Investor attention will squarely be on the domestic pharma sector after the Trump Administration announced a 100% tariff on imports of branded or patented pharmaceutical products effective Oct 1. This move poses a direct risk to over $3.6 billion worth of annual Indian pharma exports to the US, raising concerns for companies with significant US exposure. This tariff action comes close on the heels of the steep hike in U.S. H-1B visa fees, which has already triggered heavy selling in IT sector stocks over the past few sessions," said Ponmudi R, CEO at Enrich Money.

Indian drugmakers, already operating on thin margins in the US generics market, may find it difficult to absorb higher costs without passing them on to consumers or insurers, raising risks of further margin compression, analysts had warned earlier.

Shifting production to the US is seen as unviable due to high operating costs and long lead times. Setting up and operationalising a new facility could take three to five years, including regulatory approvals. Nomura, in an April report, projected Sun Pharma’s US sales at $2.1 billion in FY26 and $2.3 billion in FY27. It pegged Dr. Reddy’s revenues at $1.5 billion in FY26, declining to $1.1 billion in FY27. Cipla’s US revenues were forecast at $900–950 million in both FY26 and FY27. For Lupin, estimates stood at $1.1 billion in FY26 and $960 million in FY27.

Nomura projected Sun Pharma’s US sales at $2.1 billion in FY26 and $2.3 billion in FY27, with specialty brands accounting for 55–57 per cent of revenues. Only about 10 per cent of specialty revenues are formulated in the US—largely Levulan—while the remaining 90 per cent are produced outside the country.

Dr Reddy’s US revenues are estimated at $1.5 billion in FY26 and $1.1 billion in FY27. Nomura expects products manufactured in the US to contribute less than 15 per cent of FY27 revenues, with gSuboxone among the few formulated domestically.

Cipla’s US sales are projected at $900–950 million in both FY26 and FY27. Its Invagen facilities in the US are likely to contribute 25–30 per cent of revenues. The company is also expanding its US manufacturing base following regulatory setbacks at Indian plants.

Lupin’s US revenues are pegged at $1.1 billion in FY26 and $960 million in FY27. Its US manufacturing sites generate around $70–80 million, translating to 6–7 per cent of total US revenues.

For Zydus, Nomura sees US revenues of $1.3 billion in FY26 and $1.2 billion in FY27, with minimal US production. Given its heavy reliance on the US, Nomura cautions that earnings could be significantly affected if the company absorbs potential tariff costs.

Aurobindo Pharma is currently the largest Indian generic player in the US, with $1.6 billion sales in CY2024. It operates three US manufacturing sites, though contributions remain limited. One site focuses on niche formulations such as dermatology, transdermal, and respiratory products, with potential to scale up. The company also plans to ramp up oral dosage production to 12–15 billion units, which could eventually cover a third of its US sales.