 "drugs, pharma")
The Indian pharmaceutical industry is set to report a muted earnings performance for the first quarter of the financial year 2026 (Q1FY26), largely due to sliding sales of blockbuster generic cancer drug Revlimid coupled with moderated growth in the domestic formulations sales.
Analysts estimate year-on-year (Y-o-Y) revenue growth of 9 per cent with a profit after tax (PAT) growth in the range of 3-4 per cent.
Stable pricing scenario in the US generics market and rupee depreciation is expected to drive double digit revenue growth.
Nuvama analysts said that the US sales will post a modest 1 per cent Y-o-Y growth affected by generic Revlimid price erosion.
Some players like Lupin will see their US growth being driven by sustained market shares in products like generic Spiriva (respiratory drug) and the Tolvaptan (kidney disorder drug) launch. Aggregate margins for the pharma companies in the Nuvama universe is estimated to be around 26 per cent (down 32 bps Y-o-Y) weighed down by generic Revlimid price erosion.
This ongoing price erosion in this key drug is likely to hurt US sales for Aurobindo, Dr Reddy’s Laboratories (DRL), Cipla and Zydus Lifesciences in the quarter under review.
Phillip Capital pointed out that DRL will continue to lead the Revlimid sales with $180 million followed by Cipla ($80 mn) and Zydus ($70 mn).
“While we expect 1 per cent Y-o-Y growth in US sales for our coverage universe, Zydus may post 4 per cent Y-o-Y growth due to incremental contribution from generic Myrbetriq, which can partially offset generic Revlimid price erosion. Lupin’s US business is likely to grow 17 per cent Y-o-Y to $265mn due to the recent launch of Tolvaptan and stable market share in generic Spiriva,” Nuvama analysts said.
Material new launches in the US remain limited.
Phillip Capital said that while Indian drug companies will continue to see benefits from opportunities like generic Spiriva, Myrbetriq, Ustekinumab etc. in the US and Rupee depreciation, their US generics business is expected to see flat performance (2 per cent growth Y-o-Y) due to weaker generic Revlimid supplies and limited new launches.
Sun Pharma’s global specialty business is likely to post a robust showing in the first quarter while Cipla’s US revenues are likely to remain flat sequentially at $220 million. Its market share in Lanreotide (for neuroendocrine tumours) has come down to 15 per cent, versus 20 per cent in Q1FY25, Nuvama said.
Home turf
On the domestic front, Torrent Pharmaceuticals, Sun Pharma and DRL tend to outperform in the first two months of Q1. The domestic pharma market has posted a 7 per cent steady growth with the cardiac, respiratory and neurological growth by 11.4 per cent, 9.5 per cent and 9.3 per cent Y-o-Y respectively. Oncology and cardiology are the two therapies that have registered double digit Y-o-Y growth.
Nuvama estimated their coverage universe to report 10 per cent Y-o-Y domestic sales growth led by Torrent and Sun Pharma.
Axis Securities Equity Research pointed out that on a sequential basis, however, the India business will see muted growth driven by sluggish performance in chronic therapies and a recovery in acute therapies.
Axis expects some margin improvement (around 30 bps Y-o-Y) for most companies in its coverage, led by new launches, stable freight costs and decline in active pharmaceutical ingredients (API) prices, lower input costs and a better product mix towards niche launches.
Healthcare segment
In the healthcare segment, average revenue per occupied bed (ARPOB) is estimated to grow by 7-8 per cent Y-o-Y leading to revenue growth of 14-19 per cent Y-o-Y and 5-6 per cent quarter-on-quarter (Q-o-Q). Occupancies are also likely to improve by 100bps.
Nuvama said that hospitals are on a steady footing in a seasonally soft quarter, barring Apollo Hospitals, which would see lower occupancy (down 300bps Y-o-Y) due to Bangladesh patients’ impact.
JM Financial said that despite Q1 being historically soft for the hospital sector, Q1FY26 is anticipated to demonstrate robust performance. “The coverage universe is projected to achieve over 15 per cent Y-o-Y revenue growth and 21 per cent Ebitda growth. This strong performance is primarily driven by organic bed additions and improvement in ARPOB, further bolstered by the integration of new hospital facilities, notably by Max Healthcare and KIMS.”
Meanwhile, Nuvama estimates Apollo revenue growth at 11 per cent, Fortis at 15 per cent, Jupiter 16 per cent.
Analysts expect growth to recover strongly to 15 per cent Y-o-Y post-slowdown seen in last quarter.
Vijaya remains one of the fastest growing (17 per cent Y-o-Y); Metropolis is likely to turn in a good recovery (13 per cent Y-o-Y organic). Dr Lal Pathlabs (up 11 per cent Y-o-Y) to report steady numbers while Agilus (5 per cent Y-o-Y) would remain soft. The sector margin to stay largely steady at around 28 per cent, said analysts.
