Copyright © HT Digital Streams Limited All rights reserved. Equitymaster 9 min read 21 Oct 2025, 12:30 IST India’s pharmaceutical sector is at an inflection point driven by rising healthcare demand, global generic dominance and growing R&D capabilities. (Image: Pixabay) Summary Zydus Lifesciences and Rubicon Research shape India’s pharmaceutical growth story. Which pharmaceutical stock offers better investment potential in 2025 and beyond? The pharmaceutical sector is witnessing strong investor focus, supported by rising global demand, resilient exports and strong domestic healthcare spending. India’s pharmaceutical exports crossed $30 billion (bn) in FY25, helped by US Food and Drug Administration (US FDA) approvals and expanding generic reach. However, pricing pressures in the US, regulatory scrutiny and raw material cost volatility continue to pose global headwinds. We break down the two pharmaceutical players and compare their business mix, profitability and growth strategies to determine which one is stronger in India’s evolving healthcare landscape. Business Overview Zydus Lifesciences Zydus Lifesciences Ltd. is an integrated, global life sciences company operating across the value chain in the research, manufacture and marketing of pharmaceutical and wellness products. Its core purpose is to empower people with the freedom to live healthier lives through science and groundbreaking discoveries. In Q1 FY26, the company showed excellent execution in US formulations and saw its branded India formulations business outpacing market growth, supported by strong profitability. Competitive advantages Strong innovation engine: The company invests 7-8% of annual revenue in R&D across NCEs, biologics, vaccines and specialty products. This strategy drives differentiation and ensures the availability of new solutions to address unmet medical needs. US Generic Scale: Zydus is the fifth largest generic company in the US by prescription volume. It holds a leadership position (Top 3) in more than 55% of product families, maintained by strong customer relationships, versatile manufacturing and resilient supply chain efforts. Market Performance India: The branded formulations business consistently outperforms Indian market growth, driven by pillar brands and strategic initiatives. The chronic segment continues to expand at a faster pace, increasing its contribution to 43.7% of the portfolio as of June 2025. Integrated Global Reach: The international markets formulation business acts as a reliable third pillar of growth, consistently delivering strong double-digit growth. The company is confident of maintaining high-teens to mid-twenties growth across key emerging markets and Europe. Robust Manufacturing Base: The company operates 39 state-of-the-art manufacturing facilities with capabilities across various dosage forms, including APIs and biologics. Recent USFDA Establishment Inspection Reports (EIR) for API facilities confirm quality and adherence to compliance. Growth Plans Scale Specialty Portfolio: The company is focusing on significantly scaling the specialty portfolio by FY27, with 25 products in the pipeline, of which 15 have been submitted. These products offer high profitability and are expected to deliver long-term differentiated value. Biologics CDMO Focus: Zydus entered the global biologics CDMO market by acquiring US facilities from Agenus Inc. It is a strategic investment that adds a sustainable growth driver for the future, with significant revenues expected within two-and-a-half to three years. Develop MedTech Pillar: Building a new growth pillar in MedTech (medical technology) by acquiring Amplitude Surgical (a company specializing in orthopedic implants and joint replacement surgery ie bones and joints) and organically building a dialyzer facility (a plant that makes dialysis machines used to clean the blood of kidney failure patients) for medicinal kidney therapy kidneys). This business segment is aiming for significant scale-up after three years. Accelerating US launches: The company plans 30+ product launches in FY26, focusing on differentiated generics and injectables to maintain single-digit growth despite expected price erosion and major product revenue challenges. Expand vaccine access: Attempt to penetrate high-volume public markets by obtaining public tenders for MR vaccine in India and achieving WHO pre-qualification for global tenders (UNICEF/PAHO). It draws on a growing and important portfolio. Rubicon Research Rubicon Research is an innovation-driven pharmaceutical formulation company specializing in specialty products and drug-device combinations. It maintains a complete focus on regulated markets, particularly the US. With the help of intensive R&D, the company had 72 active ANDAs (applications to sell generic drugs in the US) and 9 active NDAs (applications to sell new, originator drugs in the US) approved by the USFDA as of June 2025. Notably, it was the fastest growing Indian pharmaceutical formulation company among its assessed peers between FY2533. Competitive Advantages Fast Growth, US Focus: Rubicon is the fastest growing Indian pharmaceutical formulation company among its peers (FY23–FY25 CAGR of 75.89%). It is the only Indian player to focus entirely on highly regulated markets and derive 98.49% revenue from the US in FY25. Data-driven product selection: A rigorous, ROI-centric product selection framework targets complex medicines with low competition density, helping the company withstand market pricing pressure. This focus resulted in gross margins of 70.26% in FY25. Strong R&D investment: Rubicon invests significantly in R&D (10.54% of total revenue in FY25) allowing the pursuit of complex products, such as drug-device combination nasal spray. R&D is supported by 170 scientists and proprietary technologies backed by patents. Robust US Distribution: The company has established US distribution capabilities through AdvaGen Pharma for generic products and Validus for promoting branded specialty products to prescribers. This dual structure expands customer reach and market penetration. Compliance and Cost Effectiveness: Rubicon maintains a strong compliance record, with no US FDA “Official Action Indicated” (OAI) status since 2013. Manufacturing in India offers 30-40% lower costs than in the US, improving competitiveness. Growth Plans Growth Specialty Portfolio: A key strategy is the expansion of the portfolio of specialty products and drug-device combination nasal spray. This includes the commercialization of pipeline branded products in CNS and CVS therapy areas advanced by Validus. Achieve generic leadership: Rubicon aims to continuously develop cost-optimized generic formulations and seek market share leadership. It leverages scalable and efficient manufacturing along with established customer relationships to increase market share. Deepen US market presence: The company intends to increase marketing and sales efforts for branded products in the US through Validus. This involves using in-person visits and digital promotion to expand the base of prescribers for specialty products. Leverage global approvals: Plans include capitalizing on US approvals to accelerate entry into other regulated markets, such as the UK, Canada and Australia. Centralized manufacturing supports cost leadership and extends competitive advantage worldwide. Pursue strategic acquisitions: The company plans to opportunistically pursue inorganic growth opportunities, including unidentified acquisitions and strategic collaborations for external innovation. This improves manufacturing capacity and product pipeline strength. Zydus Lifesciences vs Rubicon Research Financial Performance Revenue Highlights Revenue (FY23-Q1FY26) Revenue (in ₹m) FY23 FY24 FY25 Q1FY26 Zydus Lifesciences 172,374 195,474 232,415 93,715 65,7137 Rubicon 8 538.89 12 842.72 3,524.94 Source: Company FY25 Report and RHP Filings Zydus Lifesciences reported 19% YoY revenue growth in FY25, led by strong performance across all segments. The US business crossed the $1 billion mark, driven by new launches and volume growth, while India Formulations and Consumer Wellness delivered strong double-digit growth. In Q1FY26, revenue rose 6% YoY, led by international markets (up 37%). Management targets double-digit growth from FY26, driven by India and global markets, with future focus on biologics, vaccines, MedTech and CDMO expansion. At the same time, Rubicon Research has recorded strong growth over the years, led by new product launches, volume expansion and higher prices in the US market. In FY24, revenue rose 117% YoY, followed by a 50.4% rise in FY25, supported by the addition of new generic and specialty products and the Validus Pharma acquisition. In Q1FY26, revenue grew 11.3% YoY, driven by improved product mix and higher margins. Management plans to maintain momentum through R&D-led portfolio expansion, specialty product growth and capacity upgrades for long-term scalability. Profitability Profitability (FY23-Q1FY26) EBITDA (in ₹m) FY23 FY24 FY25 Q1FY26 Zydus Life Sciences 38,599 53,843 70,585 20,885 Rubicon Research 439.72 9.72 9.92 9.72 9.92 9,797.44 net profit (in ₹m) FY23 FY24 FY25 Q1FY26 Zydus Lifesciences 25,691 38,507 47,451 14,668 Rubicon Research -168.88 910.12 1,343.61 433.01 EBITDA Margin (%) FY2Fydus3Y FY4Fydus Lifesciences 22.4% 27.5% 30.4% 31.8% Rubicon Research 10.49% 19.84% 20.67% 22.34% Net Profit Margin (%) FY23 FY24 FY25 Q1FY26 Zydus Lifesciences 14.9% 19.7% Research 23.4% 20. 10.43% 10.37% 12.13% Source: Company FY25 Report and RHP Filings Zydus Lifesciences’ profitability improved sharply from FY23 to FY25, achieving record Ebitda margins of 30.4% in FY25. Margin gains were driven by a better product mix, cost efficiencies and strong growth in India Formulations and Consumer Wellness. Net profit rose 23% YoY in FY25, supported by high-margin products such as Mirabegron and the Saroglitazar franchise. In Q1 FY26, margins remained strong at 31.8%. For FY26, management expects margins around 26%, amid pricing pressure, higher R&D spending and Revlimid competition. However, Rubicon Research turned profitable in FY24 after posting a net loss of ₹168.88 million in FY23, driven by 117% revenue growth and a shift to higher-margin specialty products. Net profit rose by 638.9% in FY24 and by 47.6% in FY25, supported by improved cost control, product mix and the Validus Pharma acquisition. By Q1FY26, profit was up 69% YoY with EBITDA margin at 22.3%, reflecting strong growth in specialty portfolio, better pricing power and increase in operational efficiency. Risks of Investing in Pharmaceutical Stocks Investing in pharmaceutical stocks can be exciting, especially when a single drug approval can move the stock overnight. But it’s also a high-risk, high-reward space, and there are risks every investor should know about: Regulatory and compliance hurdles: Pharma companies operate in one of the most regulated industries in the world. Even a minor compliance problem during a USFDA inspection can lead to product recalls, loss of sales or factory closures. Since drug approvals take years and cost millions, any regulatory delay can grow and quickly derail investor confidence. Heavy reliance on R&D success: A pharma company’s future depends on its pipeline of new drugs. But not every research project makes it to market, and failures can burn huge amounts of cash. If R&D disappoints, revenue growth and profitability can take a big hit. Pricing pressure and intense competition: Generic drug manufacturers face cutthroat competition, where price wars often eat into margins. Even for branded products, government price controls in key markets can limit profitability. When too many players launch similar drugs, it’s a race to the bottom on pricing, and that’s bad news for long-term investors. Patent Expiration and Legal Battles: Once a drug’s patent expires, cheaper generic versions flood the market, leading to a sharp drop in revenue (often called the “patent cliff”). Add to that frequent IP lawsuits and product liability cases, and investors face real risks that can drain profits and divert management’s attention from core growth areas. Global and operational risks: Pharma supply chains are global, meaning that any geopolitical tensions, raw material shortages or currency fluctuations can disrupt operations. Many firms also rely heavily on the US market, so any regulatory or trade change there could shake up earnings. Which of the pharmaceutical stocks is the best? India’s pharmaceutical sector is at an inflection point driven by rising healthcare demand, global generic dominance and growing R&D capabilities. With strong export potential and increasing focus on innovation, top Indian pharmaceutical companies are well positioned for long-term growth. However, investors should closely monitor regulatory actions, patent cycles and pricing pressures, as these factors can significantly affect earnings stability. A balanced approach that combines growth potential with careful risk assessment remains key to navigating India’s evolving pharmaceutical landscape. It is important to do thorough research on financial and corporate governance before making investment decisions, to ensure that they are consistent with your financial goals and risk tolerance. Happy investing. Disclaimer: This article is for informational purposes only. This is not a stock recommendation and should not be treated as such. This article is syndicated from Equitymaster.com Get all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. 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Top Pharmaceutical Stocks: Zydus Lifesciences vs Rubicon Research
