Given the uncertainty surrounding our tariffs on pharmaceuticals, the Kodak institutional stocks (most likely for companies and investors) pointed out in a recent report is that high tariffs (10% above) are not feasible because they are not feasible. However, in the worst case involving a large number of tariffs, companies may have to simplify their U.S. operations (possibly exit completely), such as exploring other options such as passing on increased costs to U.S. consumers.
Maintaining its basic case, Kotak reiterates optimism about the industry, with their preferred companies including Sun Pharmaceuticals, Cipla, Lupine, JB Chemicals and Pharmaceuticals, and Emcure Pharmaceuticals.
The broker’s report shows that about 45% of the generic drug supply in the United States accounts for India, and 10-15% of its biosimilar supply is calculated by quantity. According to a white paper published by the Center for API Innovation, 83 of the top 100 general drugs stipulated in the United States have no domestic API source. Over the past decade, U.S. API production has dropped by 61%, but API manufacturing capabilities have increased in India and China.
“We emphasize the value, the size of the US generic drug market is less than 10% of the overall US pharmaceutical market in total. Therefore, the value of Indian generic drugs on the US pharmaceutical market is very low.
We stress that the Indian government has taken steps to prove reciprocity. For example, in the recent union budget, the Indian government has completely exempted basic tariffs on 36 life-saving drugs.
In addition, customs duties on six other drugs have been reduced to 5%. In addition, 37 other drugs will be completely exempt from tariffs under the Patient Assistance Program. ”
Generics and biosimilars
The report notes that the U.S. EBITDA contributes 45-50% in its formulation and biosimilar coverage, Aurobindo Pharma and Biocon Lead. Unlike generic drugs, the United States does not rely heavily on Indian biosimilars, which makes it more difficult to raise tariffs on U.S. patients.
Sun Pharmaceuticals’ specialized product portfolio may face greater challenges compared to U.S. generics, as the existing higher prices may hinder the ability to transfer additional costs. However, the availability of alternatives to Sun Pharmaceuticals’ specialty products is limited and may provide some protection. In our API/CRDMO coverage, glands contribute the highest direct contribution to the U.S. EBITDA.
“Nevertheless, given the B2B nature of the business, API/CRDMO companies will directly avoid tariffs and have a higher ability to pass tariffs to their customers. However, these companies also have indirect exposure to U.S. tariffs,” the broker added.
Disclaimer: The above views and suggestions are those of individual analysts, experts and brokerage firms, not mint. We recommend that investors contact certified experts before making any investment decisions.
