Sun Pharma may face tariff turbulence in US but HSBC sees limited earnings risk

The drug substance for Ilumya is produced in South Korea, while the finished dose is made in Europe. This fragmented supply chain could complicate tariff compliance.

Sun Pharma, India’s largest drugmaker, finds itself in the spotlight following US President Donald Trump’s announcement of a 100% import tariff on branded or patented pharmaceutical products, effective October 1, 2025.

While the move is expected to shake up global pharma supply chains, HSBC believes the earnings impact on Sun Pharma may be limited.

“Among Indian companies, only Sun Pharma has sizeable sales from patented products in the U.S.,” noted Damayanti Kerai, Analyst, India Healthcare at HSBC. “It reported global sales of $1.2 billion from patented products in FY25, of which the US market accounted for approximately $1.1 billion amounting to 17% of total revenue and 8–10% of consolidated EPS.”

Sun Pharma’s patented portfolio, led by its blockbuster psoriasis drug Ilumya, is largely manufactured by global CDMO partners outside US. The drug substance for Ilumya is produced in South Korea, while the finished dose is made in Europe. This fragmented supply chain could complicate tariff compliance.

“While this tariff development is broadly negative for Sun Pharma, we think the impact on earnings depends on multiple moving parts—spread of supply chain, IP location of the brand, and use of third-party manufacturers,” Kerai explained.

HSBC outlines several mitigation strategies for Sun Pharma, including shifting manufacturing to CDMO partners with US-based plants, leveraging its own three manufacturing facilities in the US, or even acquiring a new plant. With over $3 billion in cash reserves as of June 2025, Sun Pharma has the financial muscle to act.

However, HSBC cautions that “moving supply chains, tech-transfer, and plant re-purposing would take considerable time—anywhere from 6 to 24 months.”

In its base case, HSBC estimates an 8–10% downside risk to Sun Pharma’s FY26–27 earnings if mitigation measures are delayed or ineffective. Yet, the brokerage remains optimistic.

“We maintain our Buy rating and INR 1,850 target price, with no estimate changes,” Kerai affirmed.

As the industry awaits Sun Pharma’s official response, the company’s ability to navigate this geopolitical curveball will be closely watched—not just by investors, but by the broader Indian pharma sector.

An email sent to Sun Pharma seeking comment on possible impact of the Trump's tariff announcement is yet to elicit response at the time of publishing the story.