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3 Generic Drug Stocks to Watch Amid Changing U.S. Landscape
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Generic drugmakers continue to navigate a challenging U.S. market defined by persistent price erosion, intense competition and structurally thin margins. While demand for generics remains steady, profitability has come under pressure as commoditized products face rapid price declines and limited differentiation.
As a result, most generic manufacturers are leaning heavily on complex generics, injectables and biosimilars. These categories offer higher margins and, in many cases, limited-competition or exclusivity windows that allow companies to defend pricing longer than in traditional generics. At the same time, these companies are also sharpening cost controls, pruning weaker portfolios and investing in manufacturing upgrades to protect profitability.
In this regard, we highlight three generic drugmakers — Sandoz (SDZNY - Free Report) , Teva Pharmaceuticals (TEVA - Free Report) and Dr. Reddy’s Laboratories (RDY - Free Report) — which appear well-positioned to navigate the evolving landscape.
Industry Description
The Medical - Generic Drugs industry comprises companies that develop and market chemically/biologically identical versions of a brand-name drug once patents expire, providing exclusivity to branded drugs. These drugs can be divided into generic and biosimilar categories based on their composition. The generic segment is controlled by a few large drugmakers and generic units of large pharma companies. Several smaller companies also develop generic versions of branded drugs, significantly cheaper than the original ones. Competition in this segment is stiff, resulting in thin margins for manufacturing companies. A few companies in this industry have some branded drugs in their portfolio, helping them tap a higher-margin market.
3 Trends Shaping the Future of the Generic Drugs Industry
Loss of Patent Exclusivity of Branded Drugs:Generic drugmakers mainly rely on the loss of patent exclusivity of branded drugs. They file with the FDA to market generic versions of drugs that have lost patent protection. A company may launch an authorized generic version of a branded product, gaining exclusivity over other generic versions of the same drug for several months. This is advantageous to generic players, especially in the case of complex generics, which require significant R&D investments and expertise compared to traditional generics. These generic drugmakers even face litigation to market the generic version of the branded drugs.
Key generic launches this year include that of Stelara biosimilars by generic drugmakers like Amgen and Teva. Several biosimilar versions of blockbuster drugs like Amgen’s Prolia/Xgeva and Regeneron’s Eylea have been launched earlier this year. Some generic drugmakers, like Dr. Reddy’s, have already started developing biosimilar versions of Merck’s blockbuster oncology drug Keytruda, which is set to go off-patent in 2028.
Stiff Competition:The generic drug industry competes with original branded drugs. When a branded drug loses exclusivity, generic competition intensifies as rivals undercut prices. As a result, drugmakers aim to achieve the medicines' first-to-file (FTF) status. The current generic market is already crowded, with many drugmakers having several generic filings pending before the FDA. With several generic/biosimilar drugs set for launch over the next couple of years, these firms’ revenues are likely to improve.
Patent Settlements: The successful resolution of patent challenges continues to be an essential catalyst for the growth of generic drugmakers. The settlement of these challenges accelerates the availability of low-cost generic products and removes uncertainties associated with litigation. However, pursuing these challenges often requires costly litigation, thereby increasing costs.
Zacks Industry Rank Indicates Sunny Prospects
The Zacks Medical – Generic Drugs industry is a small 11-stock group housed within the broader Zacks Medical sector.
The group’s Zacks Industry Rank is the average of the Zacks Rank of all the member stocks. The Zacks Medical – Generic Drugs industry currently carries a Zacks Industry Rank #86, placing it in the top 36% of the 243 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Against this backdrop, we will present a few noteworthy stocks. But before that, let’s look at the industry’s stock market performance and current valuation.
Industry Versus Sector & S&P 500
The Zacks Medical – Generic Drugs industry has outperformed both the broader Zacks Medical and the S&P 500 Index year to date.
The industry has grown more than 28% over this period compared with the broader sector’s 6% growth. Meanwhile, the S&P 500 has risen over 19%.
YTD Price Performance
Image Source: Zacks Investment Research
The Industry's Current Valuation
Based on the forward 12-month price-to-earnings (P/E F12M), a commonly used multiple for valuing generic companies, the industry is currently trading at 14.37X compared with the S&P 500’s 23.61X and the Zacks Medical sector’s 21.09X.
Over the past five years, the industry has traded as high as 14.37X, as low as 6.51X, and at the median of 9.57X, as the charts below show.
P/E F12M Ratio
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
3 Generic Drug Stocks to Keep an Eye On
Sandoz: This Swiss-based generic drugmaker was spun off from Novartis in 2023. In the first nine months of 2025, Sandoz achieved net sales of $8.06 billion, up 5% (excluding Fx). This growth was mainly driven by double-digit gains in its biosimilars business, led by strong demand for Humira-biosimilar Hyrimoz, Stelara-biosimilar Pyzchiva. The recently launched Jubbonti (biosimilar to Amgen’s Prolia) and Wyost (biosimilar to Amgen’s Xgeva) have also contributed to the company’s top line.
Looking ahead, we expect continued momentum in Sandoz’s biosimilar business in the upcoming quarters, driven by new product launches. Recently, the company launched Eylea-biosimilar Afqlir in Europe. To expand its in-house development and manufacturing capabilities for biosimilars, SDZNY acquired a manufacturing and development site in France from Evotec.
The stock has risen 77% so far this year. The consensus estimate for 2026 EPS has increased from $3.87 to $3.91 in the past 60 days.
Teva: This Israel-based company is the world’s largest generic drug company, in terms of both total and new prescriptions. It enjoys a leading position in the United States, the world’s largest generic market, as well as Europe, where the company is also seeing continued growth. Teva regularly pursues FTF and first-to-market opportunities and seeks approval for complex generics, which are likely to face less competition.
In the past few quarters, the company has successfully launched several biosimilars and other high-value complex generics, including liraglutide injection (the first generic version of Novo Nordisk’s Saxenda), Simlandi (a biosimilar to AbbVie’s Humira), Truxima and Herzuma (biosimilars of Roche’s cancer drugs Rituxan and Herceptin, respectively), and Selarsdi (J&J’s Stelara). Teva has a significant manufacturing footprint in the United States that positions it well against Trump’s tariffs.
Teva’s U.S. generics/biosimilars business looks stable now, much more than it has been in years. The company expects its global generics business to improve going forward, with several complex generic and biosimilar launches in the coming quarters. Teva aims to double its global biosimilars sales by 2027.
The consensus estimate for 2026 EPS has remained consistent at $2.73 in the past 60 days. Year to date, the stock has gained 29%. TEVA currently carries a Zacks Rank #3 (Hold).
Price & Consensus: TEVA
Image Source: Zacks Investment Research
Dr. Reddy's Laboratories: The India-based company enjoys a strong position in the U.S. generics market. Dr. Reddy’s also markets its products in countries like the U.K., Germany, Russia, Venezuela, Romania and South Africa. To ensure steady growth in these markets, the company is focused on accelerating the development of its complex generics portfolio. RDY is also making efforts to ensure timely approvals through effective risk management and proactive measures to address potential deficiencies.
As of Sept. 30, 2025, a total of 75 generic filings were pending approval from the FDA, comprising 73 abbreviated New Drug Applications (ANDAs) and two new drug applications.
The stock has lost 10% so far this year. The consensus estimate for fiscal 2027 (year ending March 2027) EPS has remained consistent at 61 cents in the past 60 days. RDY stock carries a Zacks Rank #3 at present.
Price & Consensus: RDY
Image Source: Zacks Investment Research
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3 Generic Drug Stocks to Watch Amid Changing U.S. Landscape
Generic drugmakers continue to navigate a challenging U.S. market defined by persistent price erosion, intense competition and structurally thin margins. While demand for generics remains steady, profitability has come under pressure as commoditized products face rapid price declines and limited differentiation.
As a result, most generic manufacturers are leaning heavily on complex generics, injectables and biosimilars. These categories offer higher margins and, in many cases, limited-competition or exclusivity windows that allow companies to defend pricing longer than in traditional generics. At the same time, these companies are also sharpening cost controls, pruning weaker portfolios and investing in manufacturing upgrades to protect profitability.
In this regard, we highlight three generic drugmakers — Sandoz (SDZNY - Free Report) , Teva Pharmaceuticals (TEVA - Free Report) and Dr. Reddy’s Laboratories (RDY - Free Report) — which appear well-positioned to navigate the evolving landscape.
Industry Description
The Medical - Generic Drugs industry comprises companies that develop and market chemically/biologically identical versions of a brand-name drug once patents expire, providing exclusivity to branded drugs. These drugs can be divided into generic and biosimilar categories based on their composition. The generic segment is controlled by a few large drugmakers and generic units of large pharma companies. Several smaller companies also develop generic versions of branded drugs, significantly cheaper than the original ones. Competition in this segment is stiff, resulting in thin margins for manufacturing companies. A few companies in this industry have some branded drugs in their portfolio, helping them tap a higher-margin market.
3 Trends Shaping the Future of the Generic Drugs Industry
Loss of Patent Exclusivity of Branded Drugs:Generic drugmakers mainly rely on the loss of patent exclusivity of branded drugs. They file with the FDA to market generic versions of drugs that have lost patent protection. A company may launch an authorized generic version of a branded product, gaining exclusivity over other generic versions of the same drug for several months. This is advantageous to generic players, especially in the case of complex generics, which require significant R&D investments and expertise compared to traditional generics. These generic drugmakers even face litigation to market the generic version of the branded drugs.
Key generic launches this year include that of Stelara biosimilars by generic drugmakers like Amgen and Teva. Several biosimilar versions of blockbuster drugs like Amgen’s Prolia/Xgeva and Regeneron’s Eylea have been launched earlier this year. Some generic drugmakers, like Dr. Reddy’s, have already started developing biosimilar versions of Merck’s blockbuster oncology drug Keytruda, which is set to go off-patent in 2028.
Stiff Competition:The generic drug industry competes with original branded drugs. When a branded drug loses exclusivity, generic competition intensifies as rivals undercut prices. As a result, drugmakers aim to achieve the medicines' first-to-file (FTF) status. The current generic market is already crowded, with many drugmakers having several generic filings pending before the FDA. With several generic/biosimilar drugs set for launch over the next couple of years, these firms’ revenues are likely to improve.
Patent Settlements: The successful resolution of patent challenges continues to be an essential catalyst for the growth of generic drugmakers. The settlement of these challenges accelerates the availability of low-cost generic products and removes uncertainties associated with litigation. However, pursuing these challenges often requires costly litigation, thereby increasing costs.
Zacks Industry Rank Indicates Sunny Prospects
The Zacks Medical – Generic Drugs industry is a small 11-stock group housed within the broader Zacks Medical sector.
The group’s Zacks Industry Rank is the average of the Zacks Rank of all the member stocks. The Zacks Medical – Generic Drugs industry currently carries a Zacks Industry Rank #86, placing it in the top 36% of the 243 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Against this backdrop, we will present a few noteworthy stocks. But before that, let’s look at the industry’s stock market performance and current valuation.
Industry Versus Sector & S&P 500
The Zacks Medical – Generic Drugs industry has outperformed both the broader Zacks Medical and the S&P 500 Index year to date.
The industry has grown more than 28% over this period compared with the broader sector’s 6% growth. Meanwhile, the S&P 500 has risen over 19%.
YTD Price Performance
Image Source: Zacks Investment Research
The Industry's Current Valuation
Based on the forward 12-month price-to-earnings (P/E F12M), a commonly used multiple for valuing generic companies, the industry is currently trading at 14.37X compared with the S&P 500’s 23.61X and the Zacks Medical sector’s 21.09X.
Over the past five years, the industry has traded as high as 14.37X, as low as 6.51X, and at the median of 9.57X, as the charts below show.
P/E F12M Ratio
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
3 Generic Drug Stocks to Keep an Eye On
Sandoz: This Swiss-based generic drugmaker was spun off from Novartis in 2023. In the first nine months of 2025, Sandoz achieved net sales of $8.06 billion, up 5% (excluding Fx). This growth was mainly driven by double-digit gains in its biosimilars business, led by strong demand for Humira-biosimilar Hyrimoz, Stelara-biosimilar Pyzchiva. The recently launched Jubbonti (biosimilar to Amgen’s Prolia) and Wyost (biosimilar to Amgen’s Xgeva) have also contributed to the company’s top line.
Looking ahead, we expect continued momentum in Sandoz’s biosimilar business in the upcoming quarters, driven by new product launches. Recently, the company launched Eylea-biosimilar Afqlir in Europe. To expand its in-house development and manufacturing capabilities for biosimilars, SDZNY acquired a manufacturing and development site in France from Evotec.
The stock has risen 77% so far this year. The consensus estimate for 2026 EPS has increased from $3.87 to $3.91 in the past 60 days.
Sandoz carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price & Consensus: SDZNY
Image Source: Zacks Investment Research
Teva: This Israel-based company is the world’s largest generic drug company, in terms of both total and new prescriptions. It enjoys a leading position in the United States, the world’s largest generic market, as well as Europe, where the company is also seeing continued growth. Teva regularly pursues FTF and first-to-market opportunities and seeks approval for complex generics, which are likely to face less competition.
In the past few quarters, the company has successfully launched several biosimilars and other high-value complex generics, including liraglutide injection (the first generic version of Novo Nordisk’s Saxenda), Simlandi (a biosimilar to AbbVie’s Humira), Truxima and Herzuma (biosimilars of Roche’s cancer drugs Rituxan and Herceptin, respectively), and Selarsdi (J&J’s Stelara). Teva has a significant manufacturing footprint in the United States that positions it well against Trump’s tariffs.
Teva’s U.S. generics/biosimilars business looks stable now, much more than it has been in years. The company expects its global generics business to improve going forward, with several complex generic and biosimilar launches in the coming quarters. Teva aims to double its global biosimilars sales by 2027.
The consensus estimate for 2026 EPS has remained consistent at $2.73 in the past 60 days. Year to date, the stock has gained 29%. TEVA currently carries a Zacks Rank #3 (Hold).
Price & Consensus: TEVA
Image Source: Zacks Investment Research
Dr. Reddy's Laboratories: The India-based company enjoys a strong position in the U.S. generics market. Dr. Reddy’s also markets its products in countries like the U.K., Germany, Russia, Venezuela, Romania and South Africa. To ensure steady growth in these markets, the company is focused on accelerating the development of its complex generics portfolio. RDY is also making efforts to ensure timely approvals through effective risk management and proactive measures to address potential deficiencies.
As of Sept. 30, 2025, a total of 75 generic filings were pending approval from the FDA, comprising 73 abbreviated New Drug Applications (ANDAs) and two new drug applications.
The stock has lost 10% so far this year. The consensus estimate for fiscal 2027 (year ending March 2027) EPS has remained consistent at 61 cents in the past 60 days. RDY stock carries a Zacks Rank #3 at present.
Price & Consensus: RDY
Image Source: Zacks Investment Research