India’s pharmaceutical sector is expected to post moderate growth in the second quarter of the financial year 2025-26 (FY 26), with a mix of headwinds from domestic tax changes and pressure in US generics offset by a few new product launches and steady biosimilar sales.
Growth in the domestic pharma segment is projected at around 10% year-on-year, though companies may face a 50-200 basis point impact from lower primary sales following the goods and services tax (GST) rate revisions in September 2025. Chronic-focused firms such as Sun Pharma, Torrent Pharmaceuticals, and Zydus Lifesciences are expected to do better, while acute-heavy players like Alkem and Mankind could see softer growth.
In the US generics business, overall sales are expected to remain flat quarter-on-quarter, mainly due to lower contributions from anti-cancer drug gRevlimid across companies such as Dr Reddy’s Laboratories, Aurobindo Pharma, Cipla, and Zydus, along with continued price erosion in base products. However, this should be partly offset by traction in respiratory drug gSpiriva and kidney drug gJynarque (Lupin), as well as new launches like gEntresto (Alkem, Torrent, DRL) and gXarelto (Aurobindo, Lupin).
Cipla may see a quarter-on-quarter decline in the US due to flat Lanreotide and Albuterol sales, while Biocon could report about 14% growth in core biosimilar sales. Higher R&D and SG&A spending, coupled with US pricing pressure, are likely to keep EBITDA margins flat.
Investors will watch for updates on Sun Pharma’s specialty product pipeline, especially the Leqselvi launch, and commentary on tariffs affecting branded pharma. Other key triggers include Lupin’s outlook on gTolvaptan competition, Dr Reddy’s launch plans for semaglutide in Canada, and Aurobindo’s progress in reducing losses at its PENG unit.
In the API and CDMO segment, growth is expected to remain in the high single digits year-on-year, led by Divi’s Laboratories, Laurus Labs, and Sai Life Sciences, while Syngene and Piramal Pharma could post muted numbers amid inventory destocking.
The Head of India Equity Research at Nomura, described this as a “unique quarter” with several moving parts. “There’s just too much volatility and disturbances,” he said. “The slowdown in India because of the implementation of GST will likely be reflected in this quarter, but that should reverse in the next one.”
He also noted that the decline in Revlimid contributions would weigh on margins for some firms. “Revlimid is a high-margin product, and if that starts to decline, you could see that manifesting into lower margins,” he said.
On the CDMO theme, he said global innovators are seeking supply diversification away from China, which benefits India in the long run. “From a five-year perspective, this space provides a lot of opportunities,” he said. “But in the near term, given the run-up in stock prices and valuations, one may not expect a lot of return immediately.”
