6 days ago
Indian Pharma Q1FY26: Strong domestic sales to cushion weakness in US markets
India's pharmaceutical companies are expected to deliver steady earnings growth in the June quarter, buoyed by robust domestic demand despite pricing pressure in the US on key products like Revlimid, said analysts.
Aggregate revenue for the sector is forecast to rise about 9% year-on-year in Q1FY26, with Ebitda and net profit expanding about 8% and 2–6%, respectively, according to estimates from brokerages Nuvama and BNP Paribas. However, Ebitda margins may contract by 30–50 basis points due to erosion in US pricing.
'We expect US sales to decline 1% q-q (quarter-on-quarter) and remain volatile as the gRevlimid LoE (loss of exclusivity) is expected in the next few quarters and companies may race to gain volume share," BNP Paribas healthcare analyst Tausif Shaikh said in a research note dated 22 July.
Indian drugmakers like Dr Reddy's, Cipla, Sun Pharma, Zydus Lifesciences, Natco Pharma and Aurobindo Pharma have been distributing generic versions of blood cancer drug Revlimid in restricted quantities in the US since March 2022, and will lose exclusivity in January 2026. This will open the market to unrestricted generic sales.
'...most companies are set to face challenges in FY26/FY27 once the benefits of gRevlimid subside and margins return to normalised levels. For 1QFY26, we expect domestic formulation revenue growth to remain strong, while US business performance to remain company specific," the note said.
US sales hit by price erosion
In the US, which accounts for 30–40% of revenue for several Indian drugmakers, sales are projected to stay flat or grow marginally in Q1FY26. Price erosion in key generics, especially gRevlimid, remains a major drag, prompting companies to front-load shipments before further adjustments in January 2026.
US sales of Aurobindo Pharma, Dr Reddy's, Cipla and Zydus Lifesciences are expected to be hit by price erosion in Revlimid, according to Nuvama. The brokerage expects 1% year-on-year growth in US sales for companies in its coverage.
However, Zydus may post 4% growth in the US due to the incremental contribution of Mybetriq (Mirabegron) that is used to treat an overactive bladder.
Sun Pharma's US revenue may grow 5% quarter-on-quarter, led by specialty products and higher Revlimid sales, but margins could narrow due to higher R&D and launch costs, Emkay Global analysts noted in a 15 July report.
Lupin's US business is expected to gain from the Jynarque (Tolvaptan), used to treat kidney function decline.
While Dr. Reddy's growth may be offset by margin pressure, BNP forecasts Cipla's US sales to remain flat, constrained by competition in Revlimid and Lanreotide. Lanreotide is used to treat acromegaly, where the body produces too much growth hormone and gastroenteropancreatic neuroendocrine tumors.
Dr Reddy's is the first in the pack to kickstart Q1FY26 earnings for the pharma sector on Wednesday.
Strong domestic sales
The Indian pharmaceutical market saw a late surge in June 2025, with growth during the quarter primarily driven by cardiac, respiratory, CNS, and anti-diabetic therapies, said Emkay Global analysts.
Indian branded formulations are expected to grow by 9–10% YoY, led by therapies such as cardiac, respiratory, CNS and anti-diabetics. BNP Paribas highlighted a strong uptick in IPM growth in June (11.5% YoY), lifting overall Q1 growth to 8.6%. Companies like Sun Pharma, Dr. Reddy's, Lupin and Cipla are forecast to outperform the industry average in India, with double-digit domestic revenue growth.
Sun Pharma is expected to post its eighth consecutive quarter of double-digit India growth, while Cipla's domestic momentum is aided by a low base and recovery in the trade generics segment.
The Nifty Pharma has declined 4.38% so far in 2025 against a 6.22% gain in the benchmark Nifty index.
