Indian Pharma Q3 Preview: Analysts See Domestic Formulations, US Shortage Driving Growth

The Indian pharmaceutical sector is anticipated to witness robust growth in the third quarter of the fiscal 2025, driven by a combination of factors. Among them is the depreciation in the Indian rupee, which is expected to help companies' US business.

Key drivers of growth include:

• Domestic Formulations: Strong growth is expected in key therapeutic areas like cardiac, gastrointestinal, and anti-diabetes.

• US Market: Niche launches, easing pricing pressures, and a favourable exchange rate (INR depreciation) are expected to boost US sales.

• Drug Shortages: Ongoing shortages in the US are expected to continue to support growth for certain companies.

Nuvama Research expects revenue, Ebitda, and profit after tax of their coverage universe to grow 8%, 10%, and 10% YoY, respectively.

While Axis Securities anticipates revenue growth of 8.1% YoY and 0.9% QoQ for the sector, driven by domestic formulations and niche launches in the US market.

Centrum Broking expects the pharma companies under its coverage to post sales growth of 10% YoY, led by steady growth in domestic formulations and stable pricing in the US.

Despite pricing pressures, the US market is projected to exhibit stable growth, supported by the launch of new niche products and ongoing drug shortages.

The US is likely to clock 5% YoY growth with price erosion in mid-single digits, according to Nuvama Research.

Axis Securities anticipates low single-digit growth in the US market, led by volume growth in existing products and the launch of new products.

Sun Pharmaceuticals Industries is expected to deliver strong growth in both the US and domestic markets, driven by its specialty portfolio, according to Centrum Broking.

Dr. Reddy's is anticipated to benefit from its strong domestic presence and the continued contribution of its gRevlimid sales, Axis Securities said.

Centrum sees Cipla facing challenges due to supply constraints in Lanreotide, but is expected to benefit from new launches in the US.

While, Lupin is expected to benefit from the launch of gMyrbetriq 50mg in the US, Nuvama Research said.

The brokerage expects Aurobindo to see YoY decline in its US business, due to lower gRevlimid and lower Unit-III contribution.

Divis Laboratories is expected to report revenue growth of 20% YoY with margins at 30.5%, Nuvama Research said.

While, it expects Torrent Pharmaceuticals to report margins at 32% due to a strong branded business.

Biocon is projected to report revenue growth of 15% YoY, but margins are expected to contract YoY/QoQ, Nuvama Research said.

• Pricing Pressures: Despite easing in the US, pricing pressures remain a concern for the sector.

• Competition: Intense competition from generic players and increasing regulatory scrutiny continue to pose challenges.

• Margins: While expected to remain relatively stable, margin pressure may be experienced by some companies, due to factors like increased R&D expenditure and competition.