Pharma revenue seen steady in December quarter, but profits may lag

Indian pharmaceutical companies are expected to report steady revenue growth in the October-December quarter of 2025 (Q3FY26), led by domestic formulations, even as earnings remain under pressure due to intense competition in the US generics market and rising cost challenges.

Sector revenues are seen growing at around 8–9% year-on-year, supported by stable demand in India and improving traction in select speciality portfolios. However, earnings before interest, taxes, depreciation and amortisation (EBITDA) growth is expected to remain muted, as price erosion in the US and regulatory-linked costs continue to weigh on profitability.

The US generics market has largely remained stable, with the flu season providing some support to volumes. That said, a high base for certain blockbuster oncology drugs is expected to cap growth this quarter, limiting upside from the US business for several players. The Street is factoring in a decline in US sales for companies such as Dr Reddy’s Laboratories and Cipla in Q3.

Lupin, however, is expected to outperform peers, driven by traction in key products and relatively limited competitive intensity in some of its molecules. Analysts also point to the company’s strong positioning in chronic therapies in India, which could provide further earnings support.

Back home, domestic growth is being supported by strong performance in chronic therapies and speciality portfolios. Some companies’ speciality portfolios are expected to drive growth in the US, while others benefit from an improving product mix in the Indian market. However, margins may come under pressure due to the implementation of the Labour Code and rising operating costs, tempering earnings growth despite stable revenues.

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Among individual names, Ajanta Pharma and Eris Lifesciences are expected to lead with double-digit growth, reflecting strong domestic execution and portfolio expansion. Meanwhile, Glenmark Pharmaceuticals and Alkem Laboratories are estimated to post mid-to-high single-digit growth, with particular traction seen in the contract development and manufacturing (CDMO) space.

Among global innovators, Divi’s Laboratories and Laurus Labs are expected to deliver around 15% growth, supported by recovery in export demand and new contracts. Investors will also closely track Piramal Pharma’s margins, which are expected to improve sequentially after a weak phase.

Key monitorables for the sector this quarter include developments around obesity and GLP-1 drug opportunities, continued US pricing pressure, onshoring of manufacturing in the US, the impact of the Biosecure Act, and progress on key product launches.

In valuation terms, most pharma stocks — including Sun Pharma, Dr Reddy’s and Cipla — are trading close to where they were six months to a year ago, reflecting cautious investor sentiment amid mixed earnings visibility and structural shifts in the global pharmaceutical landscape.

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Commenting on Dr Reddy’s outlook, Kunal Dhamesha, Pharma & Healthcare Research Analyst at Macquarie Capital, said, “It’s definitely going to be lower sales in the US on a sequential basis. Though I still believe that there’ll be some tail-end revenue coming from lenalidomide in this quarter.”

He added that strength in other segments should offer support, stating, “The domestic business remains strong, double-digit growth that we are expecting in quarter three.”

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