India’s leading pharmaceutical companies including Sun Pharma, Lupin and Dr Reddy’s are looking beyond the United States, their conventional growth market, and shifting focus away from commoditised generics to premium specialty and complex drugs. The shift began even before Washington’s tariff assault on imported drugs under the guise of an aggressive indigenisation policy, but it has indeed gained pace after it, an analysis of these companies’ results over recent quarters shows.
The Donald Trump administration imposed a 100% import tariff on “branded” and patented medicines in early April, in a bid to force all suppliers of high-value proprietary medicines to manufacture them locally. Recently, it issued another threat to extend the tariff assault to generic products effective August 2028, while reiterating the strategy to “reshore generic pharmaceutical production into America.”
The results for Q1FY27 reveal strong growth in domestic operations and emerging markets, while the US businesses continue to struggle. The diversification strategy is clearly two-fold. Companies are building a wider geographic base across Europe, Russia/CIS, Latin America, Africa and other emerging markets while allocating more resources to complex generics, biosimilars, specialty medicines and GLP-1 therapies to reduce dependence on mature, high-volume-low-value US generics.
Dr Reddy’s Laboratories’ North America revenue fell 35% year-on-year to Rs 2,205 crore in the first quarter, primarily due to lower sales of generic Revlimid (lenalidomide). Similarly, Sun Pharma’s US sales fell 9.7% to $427 million due to lenalidomide price erosion and additional generic competition. But the company’s global innovative medicines business grew 12.8% to $351 million helped by products such as Ilumya, Odomzo and Cequa.
Analysts at brokerages noted that the US generics business is facing a broader combination of price erosion, new competition and loss of exclusivity across mature products. Yet, the US market remains critical to the earnings. Q1 results indicate how the loss of individual products could affect overall growth.
Motilal Oswal said Lupin’s US growth in Q1 was driven by base-business volumes and new launches, but was “offset by increased competition & loss of exclusivity (LoE) impact on certain products,” with a mid-single-digit price decline due to additional competition in select products including Mirabegron. The brokerage expects Lupin’s US revenue growth to be limited to a 4% CAGR over FY26-28 as incremental launches and base portfolio growth are likely to be largely offset by continued price erosion, higher competition and product-specific LoE impacts.
In a similar vein, in its assessment of Dr Reddy’s, Axis Securities pointed to price erosion in North America and Europe generics with North American operations facing pricing pressure in key products, in addition to the gRevlimid cliff. The brokerage noted that the underlying base business, excluding lenalidomide, delivered double-digit growth across key geographies.
To counter the slowdown in the US market, companies are steadily moving into products where competition is less intense. Lupin’s results presentation, for example, shows that the company is targeting 20 complex product launches in regulated markets by 2028 covering inhalation, injectables and ophthalmics, besides five biosimilar filings. Its research and development strategy is being increasingly focused on complex generics and biosimilars. In the context of the pharma industry, regulated markets typically refer to the US, EU, UK, Japan, Canada and Australia where drug approvals and quality standards are more stringent.
Dr Reddy’s is following a similar path. ICICI Securities said the company has firm plans for GLP-1 opportunities, biosimilars and innovative products to be launched across more than 90 countries. The brokerage said the company’s ability to consistently launch complex products across geographies would be a key determinant of its future performance.
Experts said the prospect of steep US tariffs on imported pharma products has added another layer of pressure to a market already facing pricing and competitive headwinds. Despite the impending tariff threat on imported generics, companies are not necessarily looking to immediately shift production to the US. Dr Reddy’s CEO Erez Israeli recently said the company has two years before tariffs take effect and that it’s not practical to move any facility in that timeframe.
But some companies are already responding by diversifying their geographical presence. Dr Reddy’s, for example, recorded 13% growth in its Europe business in the first quarter while its emerging market business rose 31% to Rs 1,830 crore. Russia and other CIS markets also grew 24% to Rs 1,120 crore.
Axis Securities said Dr Reddy’s emerging market growth was supported by new product launches across other international markets, favourable forex movements, price increases in select brands and higher volumes. It said management remains confident that early double-digit growth in Russia was sustainable over the medium term. Aurobindo Pharma’s figures show a similar geographical shift. Europe grew 25.6% in Q1, while growth markets rose 37.7% compared with 8.1% growth in the US. The company is also expanding its biosimilar business in Europe while entering newer markets such as Mexico, Algeria and Uzbekistan.
Sun Pharma is taking the same approach with newer therapies. Its generic semaglutide has been launched in South Africa and is expected to be launched in Brazil through a partner, the company’s COO Aalok Shanghvi said in an analyst call last month. Meanwhile, Sun’s innovative medicines business is growing across US and non-US markets.
Besides this, the domestic market remains another important source of growth for large drugmakers. Sun’s formulations business grew 16% in first quarter. Its volume growth of 5.4% was ahead of the overall market’s 2% growth. At the same time, Dr Reddy’s domestic business grew 17% during the quarter.
In India, the GLP-1 therapies offer a major new opportunity. Though the first quarter results also underline the execution risks associated with more complex products. Dr Reddy’s had to halt commercial semaglutide supplies after an out-of-specification API issue leading to a provision of about Rs 240 crore.
“The first quarter earnings have positively surprised investors as India growth for most players has turned out to be strong and for some names it is at a level we haven’t seen in the last several years. There is more to this growth beyond GLP-1s. Cardiac, nephrology, oncology and diabetes are segments that seem to be doing well. Overall, the domestic pharma giants remain in pursuit to lower their dependence on US generics,” said Vishal Manchanda, Senior Vice President (Institutional Research), Systematix Group.
Sun Pharma, Cipla, Dr Reddy’s, Lupin, and Biocon and many other Indian companies already have manufacturing plants in the US, but they may still have to shift the entire production base for US supplies to that country to circumvent the tariffs.