Pharma Sector Update : 1QFY26 Preview: gRevlimid pricing pressures + late IPM surge By Emkay Global Financial Services Ltd
1QFY26 Preview: gRevlimid pricing pressures + late IPM surge
We expect the 1QFY26E US performance for our coverage companies to be exposed to pricing pressures in gRevlimid, with all players rushing to book sales ahead of Jan-26 in a bid to avoid shelf price adjustments. On the domestic front, IPM saw a late surge in Jun-25, with growth during the quarter (8.6% YoY) primarily being driven by cardiac, respiratory, CNS, and anti-diabetic therapies. We believe that the 1Q performance of Sun Pharma (higher specialty and gRevlimid sales QoQ + sustained double-digit domestic growth) and Cipla (US sales flat QoQ, albeit domestic-aided margin defense) would largely meet Street expectations. Lupin’s YoY domestic growth could undershoot Street estimates owing to a high base (ex-branded business driven) with other operating income also likely to moderate, given that PLI benefits were booked upfront. Margin performance of Dr Reddy’s vs Street/our expectations will remain contingent on any potential gross margin weakness being offset by opex control. Going into 1QFY26, we uphold our preference for Sun Pharma and Lupin.
Sun Pharma
US sales are likely to see an uptick QoQ (USD488mn; up 5% QoQ), aided by a sequential increase in specialty sales (Emkay estimate at USD310mn vs USD295mn in 4Q) as well as higher gRevlimid sales (Emkay estimate of USD33mn in 1Q vs ~USD20mn in 4Q). Sun Pharma is expected to deliver healthy double-digit domestic growth for an eighth consecutive quarter (Emkay: 10.5% YoY; secondary sales growth at 11%). We expect ~60bps YoY decline in EBITDA margin (Emkay: 27.9%) owing to higher R&D as well as launch-linked investments (Leqselvi and Unloxcyt)
Lupin
US sales are expected to witness an increase QoQ to USD270mn with the contribution from gJynarque (launched toward the middle of the quarter; Emkay: USD50mn sales in 1Q) expected to more than offset the expected decline in gMyrbetriq and gProAir. We conservatively build in 7% domestic growth on a high base which also accounts for the impact of the expiry of patent protection for Empagliflozin.
Cipla
US sales are expected to be flat QoQ at USD220mn, with lower Albuterol sales expected to be offset by higher contribution from gRevlimid (Emkay estimate at USD55mn vs USD 45mn in 4Q). We expect 10.5% growth in the domestic business on a low base (estimated ~8% in the branded prescription business; secondary sales growth at ~7% in 1Q).
Dr Reddy’s
We factor in base US sales (ex-gRevlimid) of USD272mn (broadly flat QoQ) and gRevlimid sales of USD160mn (vs ~USD150mn in 4Q). We expect double-digit domestic growth (Emkay estimate of +11% YoY; in line with secondary sales growth).
Blue Jet Healthcare
We expect a marginal sequential decline in overall sales (3% QoQ), with the Bempedoic Acid intermediate as well as contrast media intermediate sales likely to be largely flat QoQ. EBITDA margin is expected to contract by ~330bps QoQ to 37.8%.
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