Sun Pharma shares fall despite White House pricing deal winning two-year tariff reprieve

Shares of India's largest drugmaker, Sun Pharmaceuticals Ltd. fell as much as 2% on Tuesday, September 1, after the company, and its subsidiary Teva, joined a group of nine drugmakers at the White House to announce agreements with the Trump Administration to prioritise access to affordable medicine to US patients.

As part of the agreement, Sun Pharma's investment in the US market over the years will result in a delay of Section 232 tariffs on innovative pharmaceutical products for a two-year period, the company said in an exchange filing on Monday night.

Sun Pharma also highlighted that it will be extending the Most Favored Nation (MFN) pricing to state Medicaid programs. It has also committed to MFN pricing for future innovative medicine launches.

The Most Favored Nation pricing policy is designed to link the cost of prescription medicine in the US to the lowest price paid for the same drug in other developed countries, thereby preventing the US citizens to pay for higher drug prices locally.

Sun Pharma did not disclose further terms of the agreement, terming them as "confidential."

"The United States is a key area of investment and expansion for Sun Pharma across clinical development, sales and marketing, and both API and finished products manufacturing. We are proud to play our part in delivering the medicines that millions of American patients count on every day," Sun Pharma's North America CEO Rick Ascroft was quoted as saying.

How Significant Is Sun Pharma's US Business?

Sun Pharma's US business began through the generics route before transitioning to an increased emphasis on innovative and specialty medicines.

Currently, Sun Pharma ranks second by prescriptions in the US dermatology segment and the expansion in the country is continuing across dermatology, immunology, cutaneous oncology and ophthalmology.

The US is also Sun Pharma's largest market for innovative medicines. As of the June quarter, 27% of the overall company topline came from the US market.

Recently, Sun Pharma doubled down on its expansion plans in the US with the announcement of a definitive agreement to acquire Organon & Co. at an enterprise value of $11.75 billion.

According to a White House fact sheet, the nine companies that signed the pricing deal on Monday, have committed to invest $19.6 billion in US manufacturing over the near-term.

Sun Pharma is also part of the list of companies which have agreed to donate Active Pharmaceutical Ingredients for key products to the government's strategic reserves of those ingredients, which aims to reduce dependence on imports.

Shares of Sun Pharma are down 2% in early trading on Tuesday at ₹1,946.8. The stock is still up 13% so far this year.