Sun Pharma Q3FY26 Preview: Innovative Portfolio and India Market to Drive Growth
Sun Pharmaceutical Industries Ltd., India's largest pharmaceutical company, is poised to announce its financial results for the third quarter of fiscal year 2026 this Saturday. Analysts and investors are keenly awaiting the report, with expectations of steady growth propelled by the company's innovative drug lineup and robust performance in the domestic market.
Sales Growth and US Business Dynamics
According to projections from Kotak Institutional Equities in a note dated January 6, Sun Pharma's overall sales are forecasted to increase by 5% year-on-year. However, this represents a slight sequential decline of 1%. The US market, a critical segment for the company, is expected to see sales dip by 4% sequentially to approximately $478 million. This downturn is primarily attributed to reduced sales of the blood cancer medication Revlimid.
Sun Pharma is part of a consortium of Indian drug manufacturers that entered into an agreement with Mylan, the innovator behind Revlimid, to distribute the drug in limited volumes from 2022 until its patent expiration in January 2026. The anticipated decrease in Revlimid sales is likely to impact the earnings of several US-centric pharmaceutical firms this quarter as they work through remaining inventories.
Innovative Drug Portfolio as a Growth Cushion
Despite challenges in the US market, Sun Pharma's innovative drug portfolio is positioned to mitigate potential declines. In the previous quarter, the company achieved a milestone where its innovative drug sales in the US surpassed generic sales for the first time. Key drivers include the alopecia areata treatment Leqselvi, launched in the US in June 2025, along with sustained growth from other specialty drugs such as Cequa, Winlevi, and Odomzo. These products are expected to bolster US formulations and global specialty sales, providing a significant growth cushion.
Strong Domestic Market Performance
On the home front, Sun Pharma is projected to deliver robust growth. Brokerages including Kotak, BNP Paribas, and HDFC Securities estimate that the company will achieve steady domestic growth of 11-13%. This performance is set to outpace the overall Indian pharmaceutical market, which recorded a growth rate of 10.1% during October-November 2025, as per data from IQVIA. The company's ability to exceed market averages underscores its strong positioning and execution in India.
Margin Pressures and Strategic Investments
While sales growth appears promising, Sun Pharma's EBITDA margins may face headwinds. Analysts anticipate that margins could remain flat or experience a slight contraction due to escalated marketing expenditures. In fiscal year 2026, the management has committed to an investment of $100 million to promote its new specialty drugs, Leqselvi and Unloxyt. This strategic spending is aimed at capturing market share and driving long-term growth, albeit with short-term impacts on profitability.
Regulatory and Market Developments in Focus
Key areas of interest for analysts include the potential implications of the US government's Most Favored Nation (MFN) pricing norms. These regulations, part of efforts to reduce healthcare costs, require drug manufacturers to align prices with the lowest rates offered in other developed countries. Sun Pharma's significant exposure to the US innovative market means it could be affected by these measures, particularly with recent initiatives by the Centers for Medicare & Medicaid Services to integrate MFN pricing into Medicare programs.
Additionally, Sun Pharma received regulatory approval earlier this month to market semaglutide as a weight-loss drug in India, pending patent expiration in March. This development opens new avenues for growth in the burgeoning weight management segment, and management's plans for this launch will be closely scrutinized.
Previous Quarter Performance and Outlook
In the second quarter of FY26, Sun Pharma exceeded market expectations with a net profit of ₹3,117.95 crore, marking a 2.6% year-on-year increase. Revenue from operations rose by 8.6% to ₹14,405.2 crore, supported by steady growth across most markets. While generic sales declined, this was offset by the strong performance of the innovative portfolio. EBITDA for the quarter stood at ₹4,527 crore, up 14.9%, with margins improving to 31.3% from 29.6% a year earlier.
As Sun Pharma prepares to unveil its Q3 results, the focus remains on how its innovative strategies and domestic strength will navigate global challenges and regulatory landscapes to sustain growth momentum.
