Sun Pharma investors await clarity on US tariff after weak Q2
Sun Pharmaceutical Industries Ltd’s consolidated earnings before interest, tax, depreciation and amortization (Ebitda), adjusted for forex translation, rose a modest 8% year-on-year in the September quarter (Q2FY26) to ₹4,100 crore, weighed down by a decline in US sales and higher raw material costs. Consequently, Ebitda growth for the half year ended September (H1FY26) stood at 9.4%, lower than the 14.7% clocked in FY25.
Revenue in Q2FY26 rose 9% to ₹14,500 crore, with all major geographies offsetting the weakness in the US market. The rest of world (RoW) and emerging markets (EM) recorded robust growth of 23% and 16%, respectively, driven by broad-based gains across both generics and innovative businesses. Together, RoW and EM now account for 34% of total revenue, up 300 basis points from a year earlier. The India business, which contributes 33% of overall revenue, grew 11% on the back of higher volumes.
The US, Sun Pharma’s key market outside India and contributor of 30% to Q2 revenue, declined 4% in dollar terms (flat in rupee terms due to currency depreciation) amid rising competition in some crucial products.
The US market also faces significant uncertainty due to the threat of tariff imposition and the possibility of exemptions for domestic manufacturers. President Donald Trump had announced 100% tariff on branded pharma imports in late September, but subsequently put it on hold. Sun Pharma already has a manufacturing footprint in the US and is open to expand its presence further, management stated during their Q2 earnings call.
The company’s innovative or specialty products business, a key focus area, grew 21% in Q2, outpacing the 6.2% growth in the rest of the portfolio. The specialty segment accounted for 20% of total sales and 38% of overall R&D expenses during the quarter.
“New launches and better traction in existing products (Ilumya, Odomzo, Winlevi etc.) should help its specialty portfolio post a ~20% CAGR over FY25–28E,” said a 6 November ICICI Securities report.
US risks linger
Sun Pharma launched nine new products in Q2, including Leqselvi in the US for treating severe alopecia areata (hair loss). However, competition could intensify, with another application filed in the same category.
“The alopecia areata market can turn competitive with AbbVie seeking approval for Rinvoq with strong efficacy data,” noted Nuvama Institutional Equities, which has maintained a cautious stance on Sun Pharma given rising competition in alopecia areata and plaque psoriasis, as well as potential US policy risks.
Sun Pharma plans to launch Unloxcyt in H2FY26 and Ilumya for psoriatic indications in FY27. Ilumya’s phase 3 clinical trial concluded last quarter, with regulatory filing expected by end of 2025. The company has a portfolio of 548 products for the US market, while 117 abbreviated new drug applications (ANDAs) are awaiting approval from the US Food and Drug Administration, according to ICICI Securities.
Amid the uncertainty surrounding the US market, Sun Pharma’s shares have fallen about 11% so far in 2025. The stock currently trades at 35 times FY26 estimated earnings, according to Bloomberg data. Clarity on the US tariff structure will be crucial for determining its trajectory ahead.
