© IE Online Media Services Pvt Ltd
Tags:
Journalism of Courage
After a two-year cyclical rally from April 2023 to December 2024, Indian pharma stocks plateaued through 2025. Lupin and Zydus Lifesciences posted some of their best quarterly earnings in November, yet their stock prices moved in opposite directions. Lupin rose 4.3% while Zydus fell 4.3% in the first half of November. Both remain in the red year-to-date, with Lupin down 13% and Zydus down 4.3%.
What stalled the two-year rally? Has the growth cycle ended? What will drive the stock price if not the revenue and earnings?
India is often called the “pharmacy of the world” because it is a leading global supplier of generic medicines and vaccines. Lupin was one of the beneficiaries, becoming the third-largest generic company in the US by number of prescriptions, while Zydus ranked fifth. But the generic opportunity has become too competitive and largely priced in. With limited room for growth, the sector is now waiting for the next growth cycle.
Complex generics and biosimilars
The next leg of the rally is expected to come from complex generics and biosimilars.
Complex generics are harder-to-replicate versions of original drugs with intricate chemical structures, such as liraglutide for Type 2 diabetes, compared to simpler drugs like paracetamol. Biosimilars are near-identical versions of biologic drugs that have bacteria or animal cells, like vaccines and monoclonal antibodies, and face stricter regulatory scrutiny.
And that is what Indian pharma companies are tapping into. However, it still has a long way to go as it will require global partnerships, high-margin therapies, and innovation-driven growth. Over the next five years, USFDA approvals are expected to skew increasingly toward these categories.
In oncology alone, several pharma companies are forming global alliances around biosimilars:
IPCA Laboratories and BioSimilar Sciences (BSS) are jointly developing a monoclonal antibody biosimilar for cancer and autoimmune diseases, with product launch expected in 2027.
Glenmark Pharmaceuticals has secured an exclusive license from China’s Hengrui Pharma for cancer therapy Trastuzumab Rezetecan.
Sun Pharma and Dr Reddy’s Laboratories have reached a settlement with Japan’s Eisai Pharma to launch a generic version of Lenvima used for cancer treatment with annual American sales of $1.5 billion.
Where does Lupin stand in the new growth cycle?
Lupin is positioning itself aggressively with a strong pipeline of 80 new products. By 2028, it plans to launch 20 complex generics across inhalation, injectable, and ophthalmic categories; five biosimilars by FY30; and 10 novel complex products. It also plans to file over 10 complex generics in FY26.
Brokerages are bullish. Investec believes Lupin’s product pipeline and its focus on speciality products and brand-building could boost earnings in the US and India. Jefferies expects Lupin’s first-to-file and complex-generic launches in FY26 to drive healthy growth momentum in the coming quarters.
Lupin has already launched the Liraglutide injection in the US, with estimated annual sales of $350 million as per QVIA MAT August 2025 data. It has also introduced several bioequivalents, like Rivaroxaban for oral suspension, which have an estimated annual sales of $11 million, as per QVIA MAT July 2025 data. These figures highlight how much larger the biosimilar opportunity is compared to generic bioequivalents.
In 2025, Lupin secured multiple USFDA approvals. One of them is Loteprednol Etabonate Ophthalmic Gel, for which it has a 180-day exclusive first-to-file status. The exclusivity gives Lupin a 180-day window to maximise sales and profits before competition kicks in. In Q2FY26, Lupin’s revenue surged 24% year-over-year, and net profit surged 73% because it launched gMyrbetriq, gTolvaptan, and gSpiriva under exclusivity and controlled costs.
Yet, neither USFDA approvals nor record quarterly earnings could push Lupin’s stock to its 52-week high or lift its 2025 returns.
What’s keeping pharma stocks grounded?
The Indian pharma market depends heavily on US drug exports, which accounted for 34.6% of total pharma exports in FY25. Zydus earns 51% of its revenue and Lupin 40% of its revenue from the US. But the tariff dispute between the US and India and delays in securing a trade deal have made investors cautious.
Crisil expects the Indian pharmaceutical sector’s growth to moderate from 10% in FY25 to 7-9% in FY26. The reason is the slowdown in exports as the US made advanced purchases in the last fiscal year.
The uncertainty deepened after US President Donald Trump imposed a 100% tariff on branded and patented drug imports effective October 1, 2025, unless manufacturers build production facilities in the US. A government shutdown from the same day left ambiguity about whether the tariff applies to branded generics, a category where Lupin operates.
However, Lupin is taking precautionary steps. It has already transferred IP for high-value products to its US plants, passing on price increases where possible. It opened a new corporate office in New Jersey on October 28 and is planning a $250-million manufacturing facility in Florida.
Any upside in pharma stocks likely depends on clarity around the India-US trade deal. Meanwhile, brokerages view the dip as a buying opportunity given attractive valuations.
Is Lupin’s stock trading at an attractive valuation?
Pharma is a cyclical industry where a drug has a small window of profit-making before competition dilutes profits. Lupin saw a cyclical upturn in the last two years, where profit margins grew significantly. One reason was its shift to complex generics and exclusivity agreements.
In Q2FY26, Lupin’s operating margin increased to 33.2% from 23.6% in the same quarter a year earlier. The company expects to maintain a 25-26% margin in FY26, followed by a slowdown in earnings in FY27, and a pickup in FY28. The profit and sales growth have already started to slow.
Lupin stock is currently trading at 21.7x its price-to-earnings (P/E) ratio, below its 10-year median of 34x and lower than the industry median of 31.6x. It is an attractive valuation for investors willing to wait for the next growth cycle.
The 10-year P/E history of Lupin shows the effect of cyclicality. A 20-30x P/E ratio is normal in a period of low or negative earnings growth, and the ratio makes a sharp rally in an upturn. The current valuation seems favourable considering the product pipeline, which could start generating profits in FY28, especially from biosimilars.
Lupin’s growth plans
Lupin is looking to expand its speciality portfolio and diversify in international markets, both organically and through acquisitions and partnerships. It has acquired Netherlands-based VISUfarma for Rs 1,976 crore to expand in the ophthalmology segment in Europe. It has also partnered with Sandoz Group AG to commercialise its biosimilar ranibizumab across multiple global markets. Lupin will manufacture and manage manufacturing submissions, and Sandoz will manage marketing.
Like Lupin, many other Indian pharma companies are also venturing into speciality products, strategic launches, and operational efficiencies to drive growth.
Lupin remains a stock worth watching over the next five years, particularly to track how its product pipeline materialises, how many exclusivity opportunities it captures, and how it navigates the next growth cycle.
Note: We have relied on data from http://www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
Puja Tayal is a financial writer with over 17 years of experience in the field of fundamental research.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.
