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3 Generic Drug Stocks to Watch as New Growth Drivers Emerge
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Generic medicines remain one of the most important pillars of global healthcare, but the industry's growth drivers are changing. While traditional small-molecule generics continue to account for substantial prescription volumes, intense competition and ongoing price erosion have reduced their ability to generate meaningful profit growth. As a result, success in the generic drug industry increasingly depends on product differentiation rather than scale alone.
Across the sector, manufacturers are investing in areas with higher barriers to entry, including biosimilars, complex generics, specialty injectables and other difficult-to-develop therapies. These categories offer longer growth runways, more durable competitive positions and stronger margin potential than conventional generics. At the same time, companies are streamlining operations, optimizing portfolios and allocating capital to products that can support sustainable growth beyond the traditional commodity-generic model.
Here, we highlight three generic drugmakers — Sandoz (SDZNY - Free Report) , Teva Pharmaceuticals (TEVA - Free Report) and Viatris (VTRS - Free Report) — that appear well-positioned to capitalize on this evolution within the industry.
Industry Description
The Medical - Generic Drugs industry comprises companies that develop and market chemically/biologically identical versions of a brand-name drug once the patents providing exclusivity to branded drugs expire. 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 the generic units of large pharma companies. Several smaller companies also develop generic versions of branded drugs, which are significantly cheaper than the originals. 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 Creates New Opportunities: Generic drugmakers depend on the loss of patent exclusivity of branded medicines to bring lower-cost alternatives to market. A company may launch an authorized generic version of a branded product, gaining exclusivity over competing generic versions for several months. Such opportunities can be particularly attractive in complex generics, which typically require greater development expertise and investment than traditional generics. Drugmakers also frequently engage in patent litigation to secure earlier entry into the market for generic products.
Beyond traditional generics, the industry's opportunity set is expanding as more blockbuster biologic drugs lose exclusivity. Recent high-profile launches included biosimilars of J&J’s Stelara, Amgen's Prolia/Xgeva and Regeneron's Eylea. Drugmakers are also advancing biosimilar candidates for Merck's blockbuster oncology drug Keytruda, which is expected to lose patent protection in 2028.
Competition Is Driving a Shift Beyond Traditional Generics: Competition remains intense across the generic drug market. Once a branded drug loses exclusivity, multiple manufacturers often enter the market, leading to price competition and margin pressure. To gain an advantage, drugmakers seek first-to-file (FTF) status, which can provide a period of exclusivity before additional generic competitors enter. Despite these opportunities, the generic market remains crowded, with numerous filings pending before the FDA and several generic and biosimilar launches expected over the next few years.
In response to persistent pricing pressure, companies are increasingly moving beyond commodity generics and investing in differentiated products such as complex generics, specialty injectables and biosimilars. These products typically require greater development expertise and investment, but face fewer competitors and offer stronger margins and more durable revenue opportunities than traditional generics.
Operational Efficiency & Portfolio Optimization Remain Key Priorities: With pricing pressure persisting across many generic drug categories, manufacturers are placing greater emphasis on operational efficiency and disciplined capital allocation. Companies are streamlining product portfolios, discontinuing lower-return programs and focusing resources on products and markets with stronger growth potential. Many drugmakers are also investing in manufacturing productivity, supply-chain optimization and cost-control initiatives to protect profitability. These efforts are helping companies offset pricing headwinds in mature generic markets while creating financial flexibility to invest in higher-growth areas such as biosimilars, complex generics and specialty medicines.
Zacks Industry Rank Indicates Gloomy Prospects
The Zacks Medical – Generic Drugs industry is a small 12-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 #174, placing it in the bottom 29% of the 246 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 us 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 in the past year.
The industry has surged about 44% over this period compared with the broader sector’s nearly 1% growth. Meanwhile, the S&P 500 has risen over 29%.
One-Year Price Performance
Image Source: Zacks Investment Research
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 15X compared with the S&P 500’s 21.99X and the Zacks Medical sector’s 19.49X.
Over the past five years, the industry has traded as high as 15.71X, as low as 6.51X and at the median of 9.66X, 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. During the first quarter of 2026, Sandoz achieved net sales of $2.76 billion, up 3% year over year (excluding Fx). Growth was primarily driven by its biosimilars business, which grew 18%, led by strong demand for Afqlir (biosimilar to Eylea), Pyzchiva (biosimilar to Stelara), Jubbonti (biosimilar to Amgen’s Prolia) and Wyost (biosimilar to Amgen’s Xgeva). Biosimilars now account for nearly one-third of the company's total revenues and remain Sandoz's primary growth driver.
Sandoz expects 2026 sales to grow at a mid- to high-single-digit rate, supported by recent product launches and continued expansion of its biosimilars portfolio. In March, the company expanded its partnership with Samsung Bioepis to develop up to five biosimilars, including a biosimilar version of Takeda's Entyvio (vedolizumab). The agreement further strengthens what management describes as an industry-leading biosimilars pipeline and positions the company to capitalize on a significant wave of upcoming biologic patent expirations.
In the past year, the stock has surged 51%. The consensus estimate for 2026 EPS has increased from $4.11 to $4.13 in the past 30 days.
Teva: This Israel-based company is the world’s largest generic drug company, in terms of both total and new prescriptions. Teva enjoys a leading position in the United States, the world’s largest generic market, where it commands a share of more than 6%. The company regularly pursues FTF and first-to-market opportunities and seeks approval for complex generics, which are likely to face less competition.
The company has a growing biosimilars pipeline, with some products being developed in partnership with Alvotech. These include Simlandi and Selarsdi, the first two biosimilars launched in the United States under the Teva-Alvotech strategic partnership, which includes seven biosimilar candidates. The company expects its biosimilars business to generate $800 million in revenues by 2027.
The company is also benefiting from continued growth in its branded medicines portfolio, which includes Austedo, Ajovy and Uzedy. These products support Teva's ongoing transformation into a more diversified biopharmaceutical company.
The consensus estimate for 2026 EPS has declined from $2.50 to $2.39 in the past 30 days. The stock has surged nearly 100% in the past year. Teva currently carries a Zacks Rank #3 (Hold).
Price & Consensus: TEVA
Image Source: Zacks Investment Research
Viatris: It offers a broad mix of generics, including oral solids, injectables and topicals. The company's generic business delivered strong performance in North America during the first quarter of 2026, supported by increased demand for estradiol, continued momentum from Breyna (generic version of Symbicort) and contributions from recently launched complex generic products. Viatris also benefited from new product launches, such as iron sucrose and octreotide, and expects additional growth from the planned U.S. launch of generic Abilify Maintena later this year.
Viatris’ branded business, which comprises two-thirds of its portfolio, also performed well. Key products such as Creon and Amitiza, along with other established brands, continued to support revenue growth.
The stock has surged 88% in the past year. The consensus estimate for 2026 EPS has increased from $2.44 to $2.47 in the past 30 days. Viatris carries a Zacks Rank #3 at present.
Price & Consensus: VTRS
Image Source: Zacks Investment Research
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3 Generic Drug Stocks to Watch as New Growth Drivers Emerge
Generic medicines remain one of the most important pillars of global healthcare, but the industry's growth drivers are changing. While traditional small-molecule generics continue to account for substantial prescription volumes, intense competition and ongoing price erosion have reduced their ability to generate meaningful profit growth. As a result, success in the generic drug industry increasingly depends on product differentiation rather than scale alone.
Across the sector, manufacturers are investing in areas with higher barriers to entry, including biosimilars, complex generics, specialty injectables and other difficult-to-develop therapies. These categories offer longer growth runways, more durable competitive positions and stronger margin potential than conventional generics. At the same time, companies are streamlining operations, optimizing portfolios and allocating capital to products that can support sustainable growth beyond the traditional commodity-generic model.
Here, we highlight three generic drugmakers — Sandoz (SDZNY - Free Report) , Teva Pharmaceuticals (TEVA - Free Report) and Viatris (VTRS - Free Report) — that appear well-positioned to capitalize on this evolution within the industry.
Industry Description
The Medical - Generic Drugs industry comprises companies that develop and market chemically/biologically identical versions of a brand-name drug once the patents providing exclusivity to branded drugs expire. 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 the generic units of large pharma companies. Several smaller companies also develop generic versions of branded drugs, which are significantly cheaper than the originals. 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 Creates New Opportunities: Generic drugmakers depend on the loss of patent exclusivity of branded medicines to bring lower-cost alternatives to market. A company may launch an authorized generic version of a branded product, gaining exclusivity over competing generic versions for several months. Such opportunities can be particularly attractive in complex generics, which typically require greater development expertise and investment than traditional generics. Drugmakers also frequently engage in patent litigation to secure earlier entry into the market for generic products.
Beyond traditional generics, the industry's opportunity set is expanding as more blockbuster biologic drugs lose exclusivity. Recent high-profile launches included biosimilars of J&J’s Stelara, Amgen's Prolia/Xgeva and Regeneron's Eylea. Drugmakers are also advancing biosimilar candidates for Merck's blockbuster oncology drug Keytruda, which is expected to lose patent protection in 2028.
Competition Is Driving a Shift Beyond Traditional Generics: Competition remains intense across the generic drug market. Once a branded drug loses exclusivity, multiple manufacturers often enter the market, leading to price competition and margin pressure. To gain an advantage, drugmakers seek first-to-file (FTF) status, which can provide a period of exclusivity before additional generic competitors enter. Despite these opportunities, the generic market remains crowded, with numerous filings pending before the FDA and several generic and biosimilar launches expected over the next few years.
In response to persistent pricing pressure, companies are increasingly moving beyond commodity generics and investing in differentiated products such as complex generics, specialty injectables and biosimilars. These products typically require greater development expertise and investment, but face fewer competitors and offer stronger margins and more durable revenue opportunities than traditional generics.
Operational Efficiency & Portfolio Optimization Remain Key Priorities: With pricing pressure persisting across many generic drug categories, manufacturers are placing greater emphasis on operational efficiency and disciplined capital allocation. Companies are streamlining product portfolios, discontinuing lower-return programs and focusing resources on products and markets with stronger growth potential. Many drugmakers are also investing in manufacturing productivity, supply-chain optimization and cost-control initiatives to protect profitability. These efforts are helping companies offset pricing headwinds in mature generic markets while creating financial flexibility to invest in higher-growth areas such as biosimilars, complex generics and specialty medicines.
Zacks Industry Rank Indicates Gloomy Prospects
The Zacks Medical – Generic Drugs industry is a small 12-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 #174, placing it in the bottom 29% of the 246 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 us 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 in the past year.
The industry has surged about 44% over this period compared with the broader sector’s nearly 1% growth. Meanwhile, the S&P 500 has risen over 29%.
One-Year Price Performance
Image Source: Zacks Investment Research
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 15X compared with the S&P 500’s 21.99X and the Zacks Medical sector’s 19.49X.
Over the past five years, the industry has traded as high as 15.71X, as low as 6.51X and at the median of 9.66X, 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. During the first quarter of 2026, Sandoz achieved net sales of $2.76 billion, up 3% year over year (excluding Fx). Growth was primarily driven by its biosimilars business, which grew 18%, led by strong demand for Afqlir (biosimilar to Eylea), Pyzchiva (biosimilar to Stelara), Jubbonti (biosimilar to Amgen’s Prolia) and Wyost (biosimilar to Amgen’s Xgeva). Biosimilars now account for nearly one-third of the company's total revenues and remain Sandoz's primary growth driver.
Sandoz expects 2026 sales to grow at a mid- to high-single-digit rate, supported by recent product launches and continued expansion of its biosimilars portfolio. In March, the company expanded its partnership with Samsung Bioepis to develop up to five biosimilars, including a biosimilar version of Takeda's Entyvio (vedolizumab). The agreement further strengthens what management describes as an industry-leading biosimilars pipeline and positions the company to capitalize on a significant wave of upcoming biologic patent expirations.
In the past year, the stock has surged 51%. The consensus estimate for 2026 EPS has increased from $4.11 to $4.13 in the past 30 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. Teva enjoys a leading position in the United States, the world’s largest generic market, where it commands a share of more than 6%. The company regularly pursues FTF and first-to-market opportunities and seeks approval for complex generics, which are likely to face less competition.
The company has a growing biosimilars pipeline, with some products being developed in partnership with Alvotech. These include Simlandi and Selarsdi, the first two biosimilars launched in the United States under the Teva-Alvotech strategic partnership, which includes seven biosimilar candidates. The company expects its biosimilars business to generate $800 million in revenues by 2027.
The company is also benefiting from continued growth in its branded medicines portfolio, which includes Austedo, Ajovy and Uzedy. These products support Teva's ongoing transformation into a more diversified biopharmaceutical company.
The consensus estimate for 2026 EPS has declined from $2.50 to $2.39 in the past 30 days. The stock has surged nearly 100% in the past year. Teva currently carries a Zacks Rank #3 (Hold).
Price & Consensus: TEVA
Image Source: Zacks Investment Research
Viatris: It offers a broad mix of generics, including oral solids, injectables and topicals. The company's generic business delivered strong performance in North America during the first quarter of 2026, supported by increased demand for estradiol, continued momentum from Breyna (generic version of Symbicort) and contributions from recently launched complex generic products. Viatris also benefited from new product launches, such as iron sucrose and octreotide, and expects additional growth from the planned U.S. launch of generic Abilify Maintena later this year.
Viatris’ branded business, which comprises two-thirds of its portfolio, also performed well. Key products such as Creon and Amitiza, along with other established brands, continued to support revenue growth.
The stock has surged 88% in the past year. The consensus estimate for 2026 EPS has increased from $2.44 to $2.47 in the past 30 days. Viatris carries a Zacks Rank #3 at present.
Price & Consensus: VTRS
Image Source: Zacks Investment Research