Whalesbook
Jefferies has sounded a warning for the pharmaceutical sector, predicting a weak first half of the calendar year 2026 for companies with significant exposure to the generic Revlimid drug.
Key Concerns Identified
The brokerage firm noted that Dr. Reddy's Laboratories, Zydus Lifesciences, and Cipla are expected to be the most impacted. Sun Pharmaceutical Industries, however, is anticipated to be the least affected among the prominent players.
Domestic growth for the sector is projected to remain in the high single digits, consistent with historical trends. Jefferies also anticipates intense competition during the upcoming launch wave of semaglutide, which is tentatively scheduled between March and April of 2026.
Top Stock Picks and Upgrades
Despite the cautionary outlook, Jefferies highlighted several top picks within the pharmaceutical space, projecting significant upside potential. These include Mankind Pharma, Ajanta Pharma, Sun Pharma, and Zydus Lifesciences, with potential gains ranging from 23% to 32%.
The brokerage also revised its stance on Entero Healthcare Solutions, upgrading its rating to "buy" from "hold." The firm set a new price target of ₹1,320 per share for Entero Healthcare, indicating an expected upside of 19%.
Negative Stance on Dr. Reddy's
Conversely, Jefferies maintained a negative outlook on Dr. Reddy's Laboratories, signaling continued caution on the stock. This contrasts with its more optimistic view on its selected top picks, suggesting a bifurcated market outlook within the sector.