Pharma Sector Braces for Q3 Earnings with Mixed Outlook
India's pharmaceutical industry enters its December quarter earnings season this Friday. Analysts predict muted profit margins across the sector. The primary factor behind this expectation is the loss of patent protection for the blockbuster blood cancer drug Revlimid in the United States.
Revlimid's Expiry Creates a Revenue Void
The patent for Revlimid expired in January 2026. This event marks a significant shift. Major Indian drug manufacturers, including Dr Reddy's, Cipla, Zydus Lifesciences, and Sun Pharma, had previously secured settlements. These agreements allowed them to sell generic versions of Revlimid in limited quantities from 2022 up to the patent's expiry.
This drug generated colossal global sales exceeding $100 billion since its launch. It provided a substantial boost to the revenues and margins of these Indian companies. Throughout the current fiscal year, firms have been selling their remaining allocated quotas. Sales have been declining steadily as the patent cliff approached.
This quarter will likely feel the full impact of that loss. Tausif Shaikh, a healthcare and pharma analyst at BNP Paribas, commented on the situation. He noted in a January 13 report that he expects Ebitda margin declines for several key players. Dr Reddy's, Cipla, and Zydus Lifesciences are particularly vulnerable. The sharp price erosion in generic Revlimid, as companies rush to offload stocks, is the main driver.
Multiple Headwinds Squeeze Margins
The challenges extend beyond Revlimid. Analysts at Kotak Securities anticipate a year-on-year Ebitda margin decline of about 150 basis points for the sector. HDFC Securities highlighted additional pressures in a January 9 note.
Intense generic price competition in the US market continues to be a major factor. Rising research and development costs are another burden. Companies are also facing higher selling, general, and administrative expenses. Furthermore, the expansion of field forces in India, with the addition of new medical representatives, is increasing operational costs.
Kotak Securities analysts project a 4% quarter-on-quarter decline in overall US sales for their coverage universe. This forecast incorporates significantly lower generic Revlimid sales for Dr Reddy's, Cipla, Sun Pharma, and Aurobindo Pharma.
Domestic Market and Core Business Offer Solace
Despite the headwinds, there are positive signals. Steady growth in the domestic Indian market and resilience in the base business are expected to provide a counterbalance.
Kotak and HDFC Securities predict revenue growth for the sector at 8% and 11% respectively, excluding the Revlimid impact. Kotak described the quarter as likely "steady," driven by stable US generics pricing and decent domestic growth.
Excluding Revlimid, US generic sales could see a modest 2% sequential growth. This growth would come from volume increases in existing products and benefits from recent drug launches by some companies.
Company-specific performances will vary. For instance, Lupin may see continued traction from its kidney drug Tolvaptan and a full quarter's benefit from Glucagon. Sun Pharma's growth may be supported by innovative medicines like Leqselvi and Winlevi. Cipla could post higher sales for its cancer drug Abraxane.
India Business Shows Robust Momentum
The domestic market remains a bright spot. Sales for covered companies may outpace the overall Indian Pharmaceutical Market, which grew 10.1% in October-November 2025. Chronic therapies led this growth with a 15% increase.
HDFC Securities expects an 11% year-on-year growth in the India business for its coverage. This growth will be fueled by strong specialty portfolios from companies like Sun Pharma and Zydus, and chronic therapy sales from Sun and Torrent. However, muted growth in anti-infective segments for firms like Alkem and Mankind could temper the overall momentum.
Additionally, contract research and development organizations are forecast to see steady 6% sales growth with sustained margins as their operations mature.
The sector's earnings season begins with JB Chemicals & Pharmaceuticals announcing its Q3 results on Friday, setting the tone for the weeks to follow.
