Pharma Q3 preview: India growth, base business may offset US headwinds
Apart from the Revlimid loss, generic price competition in the US, and the addition of new medical representatives in the India business are likely to impact margins this quarter.
As India’s pharmaceutical sector kicks off its earnings season for the quarter ended December on Friday, analysts expect muted margins. A key reason for this is the loss of patent exclusivity for the blood cancer drug Revlimid in the US. While the Revlimid loss is expected to hit overall US sales, steady domestic growth and momentum in the base business may soften the impact.
Several Indian drugmakers, such as Dr Reddy’s, Cipla, Zydus Lifesciences, and Sun Pharma, inked settlements with Revlimid’s innovator, Mylan, to sell the drug in limited quantities from 2022 until its patent expiry in January 2026. The drug, clocking total global sales of over $100 billion since launch, has significantly boosted revenue and margins for Indian players.
Companies have been offloading their remaining quotas through this year, with declining sales throughout FY26. This quarter is expected to see similar pains.
“We expect Ebitda margin declines for Dr Reddy’s, Cipla and Zydus Lifesciences due to sharp erosion in gRevlimid (generic Revlimid) prices as players look to offload remaining quotas before patent expiry," said BNP Paribas healthcare and pharma analyst Tausif Shaikh in a note dated 13 January.
Kotak Securities analysts expect earnings before interest, taxes, depreciation, and amortization (Ebitda) margins to decline 150 bps year-on-year for the sector.
Apart from the Revlimid loss, generic price competition in the US, increased research & development (R&D), selling, general & administrative (SG&A) costs and addition of new medical representatives in the India business are likely to impact margins in Q3, HDFC Securities said in a 9 January note.
“We expect overall US sales for our coverage to decline 4% QoQ, as we bake in sequentially lower gRevlimid sales for Dr Reddy’s, Cipla, Sun Pharma and Aurobindo Pharma," said Kotak Securities analysts in a note on 6 January.
JB Chemicals & Pharmaceuticals is the first company in the sector to announce its Q3 earnings on Friday.
Ex-US growth steady
Kotak and HDFC expect revenue growth for the sector at 8% and 11%, respectively.
“Except for the expected sharp decline in gRevlimid sales, we expect 3QFY26 to be another steady quarter for our pharma coverage, led by continued stability in US generics pricing and decent domestic growth along with traction across most other markets," said Kotak Securities.
Excluding Revlimid, US generic sales will see 2% quarter-on-quarter growth, led by volume growth in existing products and continued benefit from new launches in the earlier quarters for a few firms, the brokerage said in its note.
“For Lupin, we expect continued traction in Tolvaptan (kidney function drug) and full-quarter benefit from Glucagon (used to treat hypoglycemia)," it said.
Sun Pharma is expected to see sequential growth on the back of its innovative medicines, such as Leqselvi, Cequa, Winlevi, and Odomzo, while Cipla may see higher quarter-on-quarter sales for its cancer drug, Abraxane.
Domestic sales may outpace the overall Indian pharma market, which saw steady growth of 10.1% in October-November 2025 led by the chronic segment which grew 15%. The acute segment saw 7% growth.
“We expect our coverage universe to see 11% YoY growth in India business on the back of traction in specialty portfolio (Sun Pharma, Zydus) and chronic (Sun, Torrent). On the other hand, muted growth in anti-infectives (Alkem, Mankind) could impact the overall growth momentum," noted HDFC Securities.
Contract research and development companies are expected to see 6% year-on-year sales growth, sustaining margins as capacities mature.
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