Pharma Q2FY26 Preview: Sector Faces a Transition Quarter as gRevlimid Declines and GST Impact Weigh on Growth

Brokerages expect soft growth in Q2FY26 for pharma companies as waning gRevlimid sales, a weak acute season in India, and GST-related de-stocking weigh on growth.

Revenue growth is projected between 7–10% YoY, while earnings may rise only 4–5%, reflecting margin pressure.

1. Fading gRevlimid Opportunity: Lower US sales of gRevlimid are a major drag for Dr. Reddy’s, Zydus, Aurobindo, and Cipla.

2. GST Impact in India: Channel de-stocking in September 2025 post-GST revision hit billing for 15–20 days.

3. Weak Acute Season: Slower demand for acute therapies further curbed growth.

4. Margin Pressure: JM Financial expects low 20% EBITDA margins; ICICI Securities projects 25% margin for coverage companies.

JM Financial

• Sector revenue growth expected at 7% YoY, earnings up 4%.

• Lupin to lead peers with 20% revenue and 35% EBITDA growth, driven by Tolvaptan launch and no Revlimid exposure.

• Zydus Lifesciences may grow 12% YoY, aided by strong US and export sales.

• Sun Pharma to grow 7% YoY; Aurobindo and Cipla at 3–5% YoY.

• Dr. Reddy’s impacted by Revlimid and Russia exposure.

• Domestic-focused firms (Torrent, JB, Emcure, IPCA) to see stable India growth but lower margins.

• CDMO players (Piramal, OneSource, Innova) to post softer numbers as stronger performance is expected in H2.

HSBC

Prefers Buy-rated Divi’s and Sun for long-term stability.

• Calls Q2FY26 a “transition quarter” with visible impact from gRevlimid decline and India destocking.

• Lupin to deliver strong results on US launches (Tolvaptan, gGlucagon) with USD 310mn in US sales.

• Dr. Reddy’s and Zydus Lifesciences to report sharp q-o-q declines in gRevlimid sales.

• Alkem and Torrent pharma to post solid quarters, aided by India and new US launches (gEntresto).

• Biocon to benefit from biosimilar growth, led by ustekinumab.

• Divi’s Lab, Sun Pharma, Aurobindo, Cipla expected to post steady performance.

• Glenmark Pharma continues to face India challenges but may see minor US recovery.

Jefferies

• Domestic formulations to grow 8% YoY, similar to Q1.

• Leaders in India growth: Torrent, Dr. Reddy’s, Ajanta, Sun (+11.5–12% YoY); followed by Emcure (+11%).

• Moderate growers: Cipla, Lupin, Alkem (~8% YoY).

• Lagging: Zydus Lifesciences, Mankind (~7.5% YoY).

• GST impact: 2–3 weeks of slowdown; Mankind hit most due to high OTC mix.

• US growth drivers: 1. Lupin – scaling up gTolvaptan 2. Cipla – gains in gAbraxane, Albuterol 3. Alkem – leads in gEntresto

• gRevlimid continues to face price erosion before settlement expiry in Jan-26.

CDMO Trends

• Divi’s Labs to post strong 16% revenue, 24% EBITDA, and 29% PAT growth, led by custom synthesis.

• Piramal Pharma may see revenue/EBITDA decline of 7%/36%.

• Cohance lifesciences to face 5% revenue and 42–57% profit decline due to supply constraints.

• Gland Pharma and Cenexi to show mild improvement (4–15% YoY growth).

• OneSource may see 7% revenue and 28% EBITDA QoQ jump, with Semaglutide sales starting Q3FY26.

Brokerages agree that Q2FY26 will be a soft quarter, marking a transition phase for the sector.
Key positives: Lupin’s US launches, Divi’s strong CDMO traction, and resilient India growth for Sun and Torrent.
Key concerns: gRevlimid erosion, GST-led destocking, pricing pressure, and US tariff risks.