How pharma margins are likely to remain under pressure due to US slowdown

India’s pharmaceutical companies are expected to report a steady March quarter, with strong domestic demand helping offset weakness in the US generics business, analysts said in their preview reports.

Revenue for the sector is likely to grow in high single digits, but margins could remain under pressure due to lower contribution from key products and continued pricing challenges in the US market. “Healthy domestic business offsets Revlimid-led US slowdown,” said analysts at B&K Securities, who expect revenues for their coverage universe to grow 7.9% year-on-year to ₹884 billion in the March quarter.

Domestic formulations are expected to remain the key growth driver. “Healthy 13% YoY growth… can be attributed to pick-up in summer brands and therapies, new product launches, improved field force productivity and price hikes,” the report said.

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In contrast, the US business is expected to decline. “US to decline by 4.4%… due to waning contribution of gRevlimid along with lack of meaningful launches,” B&K said.

Other brokerages echoed similar concerns. BNP Paribas said while domestic formulations are likely to see double-digit growth, “US revenue [is] to remain under pressure due to loss of revenue from key products like Revlimid and Lanreotide,” which is expected to weigh on margins.

Systematix also flagged margin pressure across the sector. “EBITDA margins will materially correct… with net earnings likely witnessing a 14% decline,” it said, pointing to loss of exclusivity in key drugs and rising cost pressures.

The domestic market continues to show resilience, supported by chronic therapies, new launches and traction in newer segments. “GLP-1 space witnesses increasing traction… drugs like Mounjaro and Wegovy see sustained pick-up,” B&K noted.

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However, the US generics business remains under pressure, with pricing erosion, limited new launches and the fading impact of earlier exclusivity-driven gains continuing to weigh on growth. Systematix said “the primary driver” of earnings decline remains the loss of exclusivity in gRevlimid, with the impact most pronounced for companies such as Dr Reddy’s, Zydus, Cipla and Sun Pharma.

Margins are expected to remain under strain despite steady revenue growth. B&K estimates EBITDA margins for the sector at 24.6%, down 117 basis points year-on-year, citing continued investments in R&D, product filings and marketing.

Performance across companies is likely to vary, with some benefiting from product-specific launches and others facing pressure from US exposure and pricing challenges. Analysts expect the quarter to reflect a familiar pattern, with domestic growth providing support while the US business continues to weigh on overall performance.