Sun Pharmaceutical says it won't expand US manufacturing base amid tariff concerns

Time of India

3 days ago

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India's largest drug maker Sun Pharmaceutical has no plans to further expand its manufacturing base in the US even as potential reciprocal tariff remains a significant unknown that could disrupt the sector that operates on thin margins.'We have a significant footprint in the United States and at this time we have no plans to move further manufacturing to the US,' Richard Ashcroft, CEO of Sun Pharma's North American business said over an investor call on Thursday.Dilip Shanghvi, chairman and MD, agreed the company's current manufacturing capacity in the US is good enough and there are no plans to add on there.Onshoring manufacturing or expanding existing base in the US is being seen as one of the options for the Indian generic drug makers to offset tariff impact if it is imposed. Sun Pharma already has its manufacturing facilities in North America.According to Shanghvi the pharma sector continues to be exempt from the US reciprocal tariff levy so far until the outcome of an ongoing investigation under Section 232 of the US Trade Expansion Act.'My understanding is that post 232 investigation report, the US government will decide on the next step. Till that time, I think pharma will continue to be exempt from basic tariff,' Shanghvi said.On Wednesday, the US announced a 25% general tariff on Indian imports from August 1. Though the exact contours of the levy is not yet clear, industry experts said drug formulations and APIs are as of now excluded . A framework announced by the US in April had explicitly exempted pharmaceuticals.Sun Pharma on Thursday reported a 20% decline in its Apr-Jun consolidated net profit to Rs 2,278 crore. However, its revenue from operations rose 10% to Rs 13,786 crore led by volume growth and new product launches.The decline in net profit was mainly on account of a one-time exceptional charge of Rs 818 crore.Its Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) for the first quarter stood at Rs 4,302 crore, up 19.2%, with the resulting EBITDA margin of 31.1% due to improvement in raw material cost, higher specialty sales and branded formulation business in product mix.The company's US formulation sales were at $473 million, accounting for over 29.3% of total consolidated sales during the quarter. Its formulation sales in India were at Rs 4,721 crore, up by 13.9%, accounting for 34.2% of total consolidated sales for the quarter."The overall growth reflects steady progress across all our markets. India continues to show strong momentum, contributing meaningfully to our performance,' said Shanghvi. 'The US launch of Leqselvi represents an important step forward. It augments our portfolio in dermatology and adds a growth engine," he added.In July, Sun launched its much-awaited novel alopecia or anti-baldness drug Leqselvi in the US following an out-of-court settlement of a patent dispute with US-based Incyte Corp.On plans in the weight-loss drug space, COO Aalok Shanghvi said the company will be in the first wave of GLP1 launch in India. 'We are working in that direction so that we come first to the market,' he said.