After U.S. President Donald Trump said late on Thursday that his administration is imposing 100% tariffs on branded or patented drugs entering the U.S. from October 1, except for pharmaceutical companies building a manufacturing plant in the U.S., HSBC said in a research note on Friday that only Sun Pharma has significant exposure to the patented drugs market in the U.S., but impacts on its earnings might be limited.

According to HSBC, Sun Pharma reported global sales of $1.22 billion from patented products in FY25, of which the U.S. market accounted for about $1.1 billion (85-90% of global sales), amounting to about 17% of total revenue and 8-10% of consolidated EPS in FY25.

Currently, Sun’s patented products are manufactured mainly by global Contract Drug and Manufacturing Organisation (CDMO) partners, for example, for Ilumya, as HSBC states. Its largest product in the patented portfolio (56% of total patented product sales in FY25), the drug substance is produced by a CDMO partner based in South Korea, while a European CDMO manufactures the finished dose.

“While this tariff development is broadly negative for Sun Pharma, we think the tariff impact on earnings depends on multiple moving parts—spread of supply chain (from active ingredients to Fill-Finish), IP location of the brand, the use of third-party manufacturers, etc.,” reads the note from HSBC.

The worst-case scenario for Sun Pharma, according to the note, would be to shift manufacturing to CDMO partners with plants in the U.S. “Sun could also transfer patented products manufacturing to its three plants in the U.S. It could announce new capex or acquire a manufacturing plant in the US, as it has cash of over $3 billion as of June 2025 quarter”.

In any scenario, moving supply chains, tech transfer, plant repurposing, etc., would take considerable time—anywhere from six to 24 months—and resources for Sun Pharma, the note reads. According to HSBC, the expected FY26-28 EPS include an 8-10% contribution from patented products sales in the U.S. “So, depending on what risk mitigation Sun takes, we think 8-10% of FY26e and FY27e earnings are exposed to downside risks,” the note adds.

Generic drugs remain exempt from U.S. regulation to date, and further development is contingent upon the outcome of the U.S. Department of Commerce’s Section 232 investigation, initiated in April 2025, into whether pharmaceutical imports, including generics, pose a national security threat.

“In view of favourable US tariff treatment for generics in the US-EU and US-Japan trade deals, we think the tariff risk for the Indian generics is low,” HSBC adds. Generic drugs account for approximately 90% of the prescription volume in the U.S. pharmaceutical market, and Indian companies supply around 60% of the total generics volume. HSBC asserts that the supply of generic medicines from India to the U.S. helps lower costs for the U.S. healthcare system.