Drugmakers Head Into Uneven Q4 as Margins Come Under Strain

India’s pharmaceutical sector is heading into a mixed March quarter, with drugmakers head into uneven Q4 as margins come under strain from US pricing pressure, loss of high-margin opportunities, and rising costs.

Analysts expect revenue growth in the low-to-mid single digits, but profitability is likely to decline across several companies as earlier windfall gains fade.

A key drag this quarter is the sharp fall in earnings from lenalidomide, once a major profit driver in the US generics market.

With increased competition, prices have dropped significantly, impacting companies that previously benefited from limited competition and higher realizations.

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Sun Pharmaceutical Industries

Sun Pharmaceutical Industries is expected to post steady growth, with revenue likely rising around 8–10 percent year-on-year. Its India business, which contributes over 30 percent of total sales, along with specialty drugs, continues to support margins. However, EBITDA margins may see a mild contraction of 50–100 basis points due to pricing pressure in the US.

Lupin

Lupin could see revenue growth of 10–12 percent, with net profit rising in the high single digits. Strong traction in the US and India markets is expected to drive performance. However, EBITDA margins may soften by around 100 basis points due to higher costs and ongoing investments.

Aurobindo Pharma

Aurobindo Pharma is likely to report flat-to-low single-digit revenue growth. Net profit could decline by 5–8 percent year-on-year as US generics pricing continues to weaken. Margins may contract by 100–150 basis points, reflecting ongoing pressure in its core business.

Dr. Reddy’s Laboratories

Dr. Reddy’s Laboratories is expected to see a sharp decline in earnings, with profit potentially falling 25–35 percent year-on-year. Revenue growth may remain muted at around 2–4 percent, as the decline in lenalidomide sales offsets gains elsewhere. EBITDA margins could drop by as much as 300 basis points.

Cipla

Cipla may report modest revenue growth of 5–7 percent, but net profit is expected to fall 10–15 percent. Weakness in North America and supply issues in key products are likely to weigh on margins, which could decline by 150–200 basis points.

Torrent Pharmaceuticals

Torrent Pharmaceuticals is expected to deliver steady performance, with revenue growth of 8–10 percent and stable margins. Its India-focused portfolio, contributing nearly 50 percent of revenue, helps shield it from US market volatility.

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Piramal Pharma

Piramal Pharma reported a net loss of Rs 8.8 crore in Q4, compared to a profit of Rs 154 crore a year earlier. Revenue remained flat at Rs 2,752 crore, while EBITDA declined around 18 percent year-on-year. Margins contracted sharply due to a one-time impairment charge of about Rs 175 crore.

Sector Snapshot (Q4 Trends)

Overall, drugmakers head into uneven Q4 as margins come under strain, with a clear divide emerging between diversified players and those dependent on a narrow set of high-margin products. The quarter highlights a transition phase where sustainable growth will rely more on portfolio diversification and less on one-off gains.