Despite Muted US Exports, Pharma co.s to Grow 10 PC

 Chennai: Despite a muted growth in exports to the US, pharma companies are expected to clock around 10 per cent growth as exports to the rest of the world, domestic formulations and CRAMS business have recorded double-digit growth rates.

The US market is likely to report a muted performance over the rest of the FY26 due to lower generic Revlimid sales. Revlimid used for certain cancers and multiple myeloma has seen stiff competition due to multiple entry of generic drugs in the US market. Natco Pharma, Dr. Reddy’s. Cipla and Lupin are some of the companies supplying Revlimid generics.

Nevertheless, pharma companies will sustain their growth and profitability during FY26 due to strong domestic formulations, favourable currency conditions, new launches, and a robust contract development and manufacturing organization (CDMO) business, finds India Ratings.

Pharma companies in India are expected to clock a revenue growth of 9-10 per cent in FY26. The domestic formulation business of companies rated by Ind-Ra continued to report strong growth of 9.5 per cent in Q1 FY26, while the US business reported a marginal dip of 0.9 per cent. Pharma exports to the rest of the world (RoW) grew by 14 per cent, Europe by 18.2 per cent, and contract research and manufacturing services (CRAMS) by 21 per cent in Q1.

EBITDA margins too remain high due to a favourable sales mix, valuable product contributions, cost optimisation, and softening of raw material prices. EBITDA margin of the rated companies remained robust at 25.4 per cent in Q1 FY26.

While Indian pharma benefits from a Section 232 US tariff exemption, any imposition could challenge cost pass-through, especially for companies with higher US exposure. Smaller companies may face more pressure due to capital expenditure demands. Tariffs above 25 per cent could hurt competitiveness and cause market exits. To counter these issues, companies are expanding in non-US markets, targeting high RoCE branded markets, focusing on complex products, and onshoring US manufacturing. While US drug tariffs would be a key concern for FY26, ICRA views the sector outlook as neutral, with larger players poised for inorganic growth due to strong balance sheets.