Indian pharmaceutical companies are navigating a complex landscape in the third quarter of fiscal year 2026, facing pricing pressures in the US generics market while simultaneously seeking to leverage the strength of domestic formulations. Analysts predict a mixed performance, with domestic sales and new specialty drug launches expected to drive growth for some companies, while others may experience softer US sales.
One significant factor impacting the sector is the loss of patent exclusivity for Revlimid, a blockbuster blood cancer drug, in the US. This is expected to negatively affect overall US sales for Indian drugmakers who previously had agreements to sell limited quantities of the drug. Analysts at Kotak Securities anticipate a sector-wide decline in EBITDA margins by 150 basis points year-on-year due to the sharp erosion in generic Revlimid prices as companies offload remaining quotas. BNP Paribas analyst Tausif Shaikh noted that Dr Reddy's, Cipla, and Zydus Lifesciences are expected to see EBITDA margin declines due to this factor.
Despite the challenges in the US market, the Indian pharmaceutical sector is expected to demonstrate resilience, with domestic growth and continued momentum in core businesses potentially cushioning the impact. Kotak and HDFC Securities project overall revenue growth of 8% and 11%, respectively. Excluding Revlimid sales, US generic sales are forecast to grow by 2% quarter-on-quarter, driven by volume expansion and recent launches. Lupin is expected to benefit from continued traction from Tolvaptan and a full quarter benefit from Glucagon, while Sun Pharma's innovative medicines portfolio, including Leqselvi and Cequa, is anticipated to drive sequential growth. Cipla may see higher sales for its cancer drug, Abraxane.
Domestic sales are projected to outpace the broader Indian pharmaceutical market's growth, with the chronic segment showing particular strength. Therapies for cardiac, dermatology, urology, and anti-diabetic conditions are expected to be key drivers. This domestic resilience is crucial as Indian companies increasingly focus on specialty medicines, including those targeting oncology, diabetes, obesity, autoimmune, and rare diseases, where pricing is less directly linked to volumes.
However, broader margin pressures exist beyond the Revlimid impact. Increased generic price competition in the US, higher research and development expenses, rising selling, general, and administrative costs, and the addition of new medical representatives to bolster domestic operations are also expected to weigh on third-quarter margins.
Several firms like Sun Pharma and Cipla delivered mid-single digit growth year-on-year (YoY) as well as quarter-on-quarter (QoQ) in the US generics business. This was on the back of a robust pace of launches.
Overall, the Indian pharmaceutical industry faces a mixed outlook for Q3 2026. While US pricing pressure and the loss of Revlimid exclusivity pose challenges, strong domestic formulations, niche US launches, and a focus on specialty drugs offer potential avenues for growth. Companies like Sun Pharma and Lupin are well-positioned to lead, while others, like Cipla and Dr. Reddy's, may face headwinds in the US market. It remains to be seen how effectively Indian drugmakers can leverage their domestic strengths to mitigate the impact of US pricing pressures and maintain profitability in the evolving global pharmaceutical landscape.
