Pharmaceuticals – Domestic Drug Launches to Drive Sector Growth

Pharmaceuticals – India’s pharmaceutical industry is likely to witness stronger momentum in its domestic business over the next three years, helped by the introduction of new therapies, according to a recent study by Systematix Research. While the local market shows signs of expansion, revenue from the US generics segment is expected to remain largely stable, reflecting ongoing pricing and competition challenges.

Domestic Market Expected to Gain Pace

The research report indicates that India’s branded medicines segment could record improved growth, supported by the rollout of GLP-1 drugs. These therapies, increasingly used in the treatment of diabetes and obesity, are anticipated to lift demand in the local market.

Analysts project that growth in branded formulations may rise in the high single-digit range over the coming three years. This trend is expected to benefit pharmaceutical companies with a significant presence in India, providing them with a relatively stable earnings base compared to overseas markets.

The strengthening of domestic demand is seen as a key pillar for the broader expansion of the Indian pharmaceutical industry, especially as companies continue to diversify product portfolios and focus on specialty treatments.

US Generics Segment Faces Ongoing Pressure

In contrast, the outlook for the US generics business remains cautious. The report suggests that, for most Indian drugmakers, earnings from this segment are unlikely to grow meaningfully in the near term.

Intense competition and persistent price erosion in the United States continue to weigh on profitability. Although some relief was observed during the recent quarter, the overall environment remains challenging. As a result, companies heavily dependent on US generics may experience limited earnings expansion from that market.

Biosimilars Offer Opportunity with Caveats

The launch of biosimilar medicines in the US presents an additional avenue for growth. Indian pharmaceutical firms have increasingly invested in this space, targeting complex therapies with fewer competitors.

However, the report notes that the extent to which biosimilars translate into substantial profits remains uncertain. Competitive intensity and regulatory hurdles could affect margins, even if revenue opportunities expand.

Companies that focus on differentiated or less crowded pipelines in the biosimilar segment are likely to be better positioned. A strong balance sheet and disciplined capital allocation are also considered important factors in sustaining growth.

Stronger-Than-Expected Quarterly Performance

The Indian healthcare sector delivered performance in the third quarter of the financial year 2025-26 that was slightly ahead of expectations. While the overall trajectory aligned with earlier forecasts, certain areas showed encouraging signs.

Sales in the United States surprised positively, as price erosion in some high-value products was less severe than anticipated. Meanwhile, domestic growth in India improved modestly compared with earlier quarters, reflecting steady demand trends.

Emerging markets also contributed to the positive momentum. Favorable currency movements supported revenue growth in these regions, helping companies offset pressures in more competitive markets.

Raw Material Costs Remain a Concern

Despite the improving revenue outlook, pricing pressure on active pharmaceutical ingredients continues to be a concern. APIs, which form the core raw materials for drug manufacturing, have seen subdued pricing trends, affecting margins across the industry.

Manufacturers will need to balance cost management with investment in research, innovation, and market expansion to sustain profitability.

Long-Term Outlook Remains Constructive

Overall, the report outlines a mixed but cautiously optimistic scenario for India’s pharmaceutical sector. Domestic growth driven by new drug introductions, including GLP-1 therapies, is expected to provide stability. At the same time, biosimilars could open fresh opportunities in the US market, though competitive risks remain.

With disciplined investment strategies and a greater focus on branded and innovative products, Indian pharmaceutical companies appear positioned to navigate near-term headwinds while building a foundation for steady long-term growth.