Pharma stocks tumble over Trump’s relief funding freeze | Stock Market News

Stocks of Indian pharma companies supplying antiretroviral (ARV) medicines used to treat HIV to African countries tumbled on Monday after a US government order halted all foreign aid funding, including its AIDS relief program.

On January 25, the US State Department put into action an executive order from President Donald Trump halting all US foreign assistance, barring to Israel and Egypt, for at least 90 days to review all the programs. This includes the President’s Emergency Plan for AIDS Relief (PEPFAR), which provides ARVs to people in about 50 countries, of which half are in Africa. HIV spending made up 44% of total US global health funding in FY24, according to US think tank Brookings.

“All Africa sales will not get impacted …only the part that is dependent on funding from the US government is vulnerable,” Prashant Nair, lead pharma and healthcare analyst at Ambit Capital, told Mint. “This includes HIV drugs – a large part of spending for treatment of HIV, malaria, tuberculosis, etc for these markets is driven by funds received from donors including the US and other governments.”

Shares of Laurus Labs on Monday fell nearly 15%, hitting an over-two month low, even though it posted better-than-expected Q3 results last week. The company’s ARV sales make up about 46% of its total revenue. Of this, 20% of its ARV sales come from PEPFAR funding, making up around ₹500 crore, which is 9% of the company’s consolidated sales, Motilal Oswal said in a note on Monday.

Shares of other Indian companies with ARV sales in the region, including Strides Pharma Ltd, Aurobindo Pharma Ltd and Cipla Ltd, also tumbled on Monday. The Nifty Pharma index closed 2.65% lower.

Laurus Labs allays fears

Laurus Labs supplies ARV drugs to low and middle-income African countries where reliance on funding is high. However, the company said in an exchange filing on Monday that it does not expect a significant impact of the 90-day freeze on the business.

“The overall ARV medicine market size is about US$ 1.5bn, which represent 10% of the total HIV financing budget annually. Overall AIDS funding is from the respective country governments, PEPFAR, and the global fund. Global agencies have worked well so far and controlled pandemic disease of AIDS. If at all there may be funding challenge, the Company reasonably believes it will not affect the procurement of medications,” it said.

For Cipla and Aurobindo Pharma, RSV sales don’t make up a large chunk of business, accounting for a mid-single-digit share of revenues, according to analyst estimates.

ARV sales made up 3% of Aurobindo Pharma’s overall revenue in FY24, bringing in ₹868 crore, according to the company’s annual report.

“This was a big business for Cipla in the past. But they have shifted priorities and reduced exposure significantly over the last few years,” Nair said.

Laurus Labs, Aurobindo Pharma, Cipla and Strides Pharma didn’t respond to Mint‘s emailed queries.

Trump’s WHO withdrawal

While the US government makes up a significant chunk of overall HIV funding, it is not the only source of funding. Companies with ARV sales that are tied to PEPFAR would be impacted.

“The impact also depends on how [the order] eventually pans out as it is a temporary freeze currently,” Bino Pathiparampil, head of research at Elara Capital, told Mint.

Concerns about a potential a funding crunch for Indian pharma companies have been circling since President Trump announced that the US was pulling out of the World Health Organisation (WHO) last week. The US accounts for about 20% of WHO funding and for Indian companies supplying drugs to mid- and low-income African countries, that could have some impact.

“Larger pharma companies such as Cipla, Aurobindo, Sun, etc have deprioritized this business but the likes of Laurus, Ipca and many other mid/small size players have exposure,” Nair said.