Pharma Stocks In Focus: Donald Trump says 'major tariffs coming soon'

Indian Pharmaceutical companies, from Sun Pharma Ltd., to Lupin Ltd., Dr. Reddy's Laboratories Ltd., Aurobindo Pharma Ltd., Gland Pharma Ltd., will be reacting on Wednesday, April 9, after US President Donald Trump said that he will be announcing major tariffs on the Pharma sector soon.

Speaking at the Republican NRCC event, Trump said that major tariffs on Pharmaceuticals will be in place shortly.

"Pharma tariffs are going to come in at levels you haven't really seen before. We are looking at pharmaceuticals as a separate category. We will be announcing that sometime in the near future, and not too distant future. It's under review right now," Trump had said last week, triggering a sharp drop in shares of Indian Pharma stocks, that have a significant exposure to the US market.

Citi believes that pharma companies will aim to pass on the tariff hikes to payors. In case the costs are not passed on to the end patients, then the entire supply chain will have to partly absorb the increase. The brokerage also believes that a full pass-through of tariffs is tough.

Currently, India charges a 10% tariff on pharma imports from the US, while the US does not charge any tariff on imports of Pharma from India.

In case there happens to be a 50% pass through, Citi expects a one-time EBITDA impact between 1% to 7% for these drugmakers. You can read more on that here.