Donald Trump's 'Tariff Soon' Remark Hits Pharma Stocks! How Are Dr Reddy's, Cipla, Others Bracing For Impact?

The United States President Donald Trump's recent remark on tariffs has sparked a downward movement in the pharma stocks, including Dr Reddy's, Ajanta Pharma, Laurus Labs, Cipla, etc. Nifty Pharma declined by nearly 1.89% during Tuesday's trading session.

Granules, Lupin, Natco Pharma, Laurus Labs, Aurobindo Pharma, Ajanta Pharma, Divis Laboratories, were among the top pharmaceutical laggards. Trump's latest remark is in continuation to his February 19 announcement that he intends to impose 25% or more tariffs on pharma imports.

Trump Tariff Remark

Donald Trump on Tuesday told reporters that the tariffs on pharmaceutical imports are coming 'very soon'. In April, Trump had hinted at imposing "major" tariffs on imported medicines to initiate a shift among drugmakers to relocate their manufacturing units to the US. The announcement was made by citing national security concerns under Section 232 powers.

"We don't make pharmaceuticals anymore... We'll be announcing pharmaceuticals at some point in the not-too-distant future," Trump said earlier.

Trump Tariff Remark Hits Pharma Stocks

Nifty Pharma has remained under pressure over the past few days. However, the thematic index suffered a major blow on Tuesday after Donald Trump's remark. Lupin shares were down 3.81%, whereas, Natco Pharma shared tumbled around 3.42%. Laurus Labs shares ended the session by sinking 3.12%. Abbot India emerged as the only exception after it ended the Tuesday's session with nominal gains.

What Cipla, Dr Reddy's, Ajanta Pharma, Aurobindo, Other Pharma Firms Have To Say on Trump Tariffs?

The latest remark has revived concerns among industry stakeholders about the possible impact of US tariffs on their business. Many pharmaceutical companies had addressed concerns around the risk due to US tariffs while announcing their March quarter result.

As the US tariff scenario is an evolving situation, Cipla hasn't been impacted by the existing tariffs, and the markets are unlikely to be very different in the future on that, according to Umang Vohra, Managing Director and Global CEO of Cipla Limited

"This is an evolving situation. We have to yet to see on what gets decided finally. But in our portfolio, we've not got impacted. And I think the most recent announcement doesn't really impact the generic players. In fact, it may just benefit. So we're yet to see this evolving situation," said Vohra during earning's call in May.

While the US is planning to impose tariffs on pharma imports, Vinita Gupta, CEO Lupin, in the company's earning call, highlighted Indian pharma sector's dominant position in the US. Gupta noted that 50% of the prescriptions in the US come from India, and expressed possibility that industry stakeholders would be "able to convince the stakeholders to have either zero tariff or limited tariff on drugs from India."

"I think a lot of analysts are saying this is more bark than bite. At this point, you know, a number of big pharma companies have made commitments to invest in the US and very likely will renegotiate or backtrack those commitments if the government is going to peg pricing to overseas markets," Gupta said.

"We are preparing ourselves for the scenarios, and we are, obviously, watching carefully the information as it will come. At this stage, the main effort is to ensure sustainability of supply. So the main activity, as we speak, is to work closely with our customers and see what is the need, in terms of future inventories as well as new product demand, identify products that may have supply disruption and try to help them to address it," said Erez Israeli Dr Reddy's CEO, adding that the company is not planning to build its manufacturing footprint in the US anytime soon.

Apart from these firms, Indian pharmaceutical companies in the generic medicine manufacturing and supplying indiustry, like Aurobindo Pharmaceuticals, Alkem, Ajanta Pharmaceuticals, may not be majorly affected by US tariffs, according to an ICICI Direct report.