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Q2FY26 Pharma earnings trend- branded businesses overcome US generics slowdown

ICICIdirect Research 07 Nov 2025 DISCLAIMER

The trend emerging from Pharma Q2FY26 numbers indicates traction in the domestic formulations and other global branded generics even as US portfolio slowed down.
Sales of the sample group (Sun, DRL, Cipla, Lupin and Zydus LifeSciences) grew 12% YoY to ~₹43,526 crore, primarily driven by India formulations and other global branded businesses.    
India branded formulations grew ~9% YoY to ~₹13,100 crore, driven by volume growth and price hikes. Companies are bearing fruits of MR expansion undertaken few quarters back and a significant traction in trade generics which are pushing sales into Tier 2 to Tier 7 towns. These measures have helped them to comfortably outperform the baseline IPM growth rate.
US portfolio grew ~5% YoY to ₹ 15,100 crore where the price erosion was higher especially in the blockbuster cancer drug Revlimid. Traction was higher in specialty and complex products (specially in case of Zydus and Lupin).
Consolidated EBITDA for the sample grew ~9% YoY to ~₹12200 crore and the margins stood at 28.1%. The margins held firm YoY despite higher R&D and SG&A expenses due to favorable product mix with margin accretive businesses of India formulations and global branded generics performed better.
The companies are extensively focusing on India formulations being a stable growth / high margin low hanging fruit with higher capital allocation (Torrent JB deal). For the US, the companies are putting significant emphasis on specialty and complex products including biosimilars and the launches lined up from FY27 onwards.
With significant cash at their disposal, even after considering the future investments, we can expect small ticket M&A deals in the near future.
We have a BUY rating on Sun Pharma (Target ₹1965), Lupin (Target ₹2360), Cipla (Target ₹1745) and DRL (Target ₹1510).     

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