After witnessing a strong two-year rally between April 2023 and December 2024, Indian pharmaceutical stocks have largely remained range-bound throughout 2025. Despite posting record quarterly earnings and securing multiple USFDA approvals, Lupin Limited, one of India's pharmaceutical giants, has seen its stock performance stagnate, leaving investors questioning whether the company represents an undervalued opportunity poised for its next growth phase.
The Current Market Conundrum
In a surprising market development during November 2025, Lupin and Zydus Lifesciences both reported some of their best quarterly performances, yet their stock prices moved in completely opposite directions. Lupin shares gained 4.3% while Zydus declined by 4.3% during the first half of November. Both companies remain in negative territory year-to-date, with Lupin down 13% and Zydus down 4.3%.
This performance comes despite Lupin achieving the remarkable distinction of becoming the third-largest generic company in the United States by prescription volume, while Zydus secured the fifth position. The generic pharmaceutical market, once a golden opportunity for Indian companies, has become increasingly competitive, and most of the growth potential appears to be already priced into current valuations.
The Next Growth Frontier: Complex Generics and Biosimilars
The pharmaceutical sector is now pivoting toward more sophisticated product categories to drive the next growth cycle. Complex generics and biosimilars represent the new frontier that could potentially reignite investor interest and stock performance.
Complex generics are difficult-to-replicate versions of original drugs featuring intricate chemical structures, such as liraglutide for Type 2 diabetes, contrasting with simpler medications like paracetamol. Biosimilars are near-identical versions of biologic drugs derived from living organisms, including vaccines and monoclonal antibodies, which face significantly stricter regulatory scrutiny.
Indian pharmaceutical companies are aggressively pursuing these advanced therapeutic categories, though the journey requires global partnerships, high-margin therapy focus, and innovation-driven growth strategies. Over the coming five years, USFDA approvals are expected to increasingly favor these complex categories.
The oncology segment alone has witnessed multiple global alliances forming around biosimilars. IPCA Laboratories partnered with BioSimilar Sciences to develop a monoclonal antibody biosimilar for cancer and autoimmune diseases, targeting a 2027 product launch. Glenmark Pharmaceuticals secured exclusive licensing rights from China's Hengrui Pharma for cancer therapy Trastuzumab Rezetecan. Sun Pharma and Dr Reddy's Laboratories reached a settlement with Japan's Eisai Pharma to launch a generic version of Lenvima, which boasts annual American sales of $1.5 billion.
Lupin's Strategic Positioning for Future Growth
Lupin is positioning itself aggressively within this evolving landscape with a robust pipeline of 80 new products. The company has outlined ambitious launch plans, including 20 complex generics across inhalation, injectable, and ophthalmic categories by 2028, five biosimilars by fiscal year 2030, and 10 novel complex products. Additionally, the company plans to file over 10 complex generics in FY26.
Financial brokerages maintain bullish outlooks on Lupin's prospects. Investec believes the company's product pipeline and focus on specialty products and brand-building could significantly boost earnings in both US and Indian markets. Jefferies anticipates that Lupin's first-to-file and complex-generic launches in FY26 will drive healthy growth momentum in coming quarters.
The company has already launched Liraglutide injection in the US market, with estimated annual sales of $350 million according to QVIA MAT August 2025 data. Several bioequivalents like Rivaroxaban for oral suspension have also been introduced, though with substantially lower estimated annual sales of $11 million based on QVIA MAT July 2025 data. These figures underscore the substantially larger opportunity presented by biosimilars compared to traditional generic bioequivalents.
Throughout 2025, Lupin secured multiple USFDA approvals, including Loteprednol Etabonate Ophthalmic Gel, for which the company enjoys 180-day exclusive first-to-file status. This exclusivity period provides Lupin with a six-month window to maximize sales and profits before competitors enter the market.
In Q2FY26, Lupin demonstrated impressive financial performance with revenue surging 24% year-over-year and net profit increasing by 73%. This robust growth was driven by the launch of gMyrbetriq, gTolvaptan, and gSpiriva under exclusivity agreements, coupled with effective cost control measures.
Challenges and Market Headwinds
Despite these strong fundamentals and regulatory successes, neither USFDA approvals nor record quarterly earnings have managed to push Lupin's stock to its 52-week high or improve its 2025 returns significantly. Several factors are contributing to this disconnect.
The Indian pharmaceutical market remains heavily dependent on US drug exports, which accounted for 34.6% of total pharma exports in FY25. Both Lupin and Zydus derive substantial revenue from the American market, with Zydus earning 51% and Lupin 40% of their revenue from US operations.
The ongoing tariff dispute between the US and India, coupled with delays in securing a comprehensive trade deal, has made investors cautious. The uncertainty intensified after US President Donald Trump imposed 100% tariffs on branded and patented drug imports effective October 1, 2025, unless manufacturers establish production facilities within the United States. A government shutdown beginning the same day created additional ambiguity about whether these tariffs apply to branded generics, the category where Lupin primarily operates.
Rating agency Crisil expects the Indian pharmaceutical sector's growth to moderate from 10% in FY25 to 7-9% in FY26, attributing this slowdown to reduced export demand as the US made advanced purchases in the previous fiscal year.
Lupin is implementing precautionary measures to navigate these challenges. The company has transferred intellectual property for high-value products to its US plants and is passing on price increases where feasible. The company opened a new corporate office in New Jersey on October 28 and is planning a $250-million manufacturing facility in Florida.
Valuation Analysis and Investment Perspective
The pharmaceutical industry operates cyclically, with drugs typically having limited windows of profit-making potential before competition erodes margins. Lupin experienced a cyclical upturn over the past two years, during which profit margins expanded significantly, partly due to its strategic shift toward complex generics and exclusivity agreements.
In Q2FY26, Lupin's operating margin expanded to 33.2% from 23.6% in the same quarter a year earlier. The company expects to maintain 25-26% margins in FY26, followed by an anticipated earnings slowdown in FY27 and subsequent recovery in FY28.
Lupin stock currently trades at 21.7x price-to-earnings ratio, notably below its 10-year median of 34x and lower than the industry median of 31.6x. This valuation appears attractive for investors willing to wait for the next growth cycle to materialize.
Analysis of Lupin's 10-year P/E history reveals the impact of industry cyclicality. A 20-30x P/E ratio typically represents normal valuation during periods of low or negative earnings growth, with the ratio experiencing sharp rallies during upturns. The current valuation seems favorable considering the company's product pipeline, which could begin generating substantial profits by FY28, particularly from biosimilars.
Strategic Expansion Initiatives
Lupin is actively expanding its specialty portfolio and diversifying across international markets through both organic growth and strategic acquisitions and partnerships. The company acquired Netherlands-based VISUfarma for Rs 1,976 crore to strengthen its ophthalmology segment presence in Europe.
Additionally, Lupin partnered with Sandoz Group AG to commercialize its biosimilar ranibizumab across multiple global markets. Under this arrangement, Lupin will handle manufacturing and regulatory submissions while Sandoz manages marketing activities.
Similar to Lupin, numerous other Indian pharmaceutical companies are venturing into specialty products, strategic launches, and operational efficiency improvements to drive future growth.
Lupin remains a stock worth monitoring closely over the next five years, particularly to track how its extensive product pipeline materializes, how many exclusivity opportunities it successfully captures, and how effectively it navigates the upcoming growth cycle in the evolving global pharmaceutical landscape.
