Zydus Lifesciences -
Q3 FY 25 Results and Concall highlights -
Q3 financial outcomes -
Revenues - 5269 cr, up 17 pc YoY
Gross Margins @ 69.9 vs 67.4 pc
EBITDA - 1387 cr, up 26 pc YoY ( margins @ 26.3 vs 24.5 pc YoY )
PAT - 1023 cr, up 30 pc YoY
R&D expenses @ 503 vs 314 cr ( @ 9.5 pc of sales - very healthy levels )
Capex in last 3 Qtrs @ 290, 301, 302 cr
Cash on books @ 3091 cr
WC @ 6058 cr
Geography wise performance -
India Formulations - 1498 cr, up 5 pc YoY ( @ 29 pc of company sales ). YTD, India sales grew by 9 pc. Company gained mkt share in key therapies of Cardio, Respiratory, Anti-Infectives, Oncology and Nephrology
Contribution from Chronic portfolio now stands @ 43 pc vs 40 pc, 3 yrs back
No of Brands in India with sales > 100 cr @ 10
No of Brands in India with sales > 50 cr @ 20
No of Brands in India with sales > 25 cr @ 37
India FMCG - 448 vs 397 cr, up 13 pc ( @ 9 pc of company sales ). India FMCG business recorded volume growth of 13 pc ( rest of the growth came from price hikes taken by the company ). Acquired Naturell India ( a healthy Snacking company ) for a cash consideration of 390 cr in Q3
US formulations - 2409 vs 1842 cr, up 31 pc YoY ( @ 47 pc of company sales ). Filed 10 new ANDAs and received approvals for 3 new products. Launched 5 new products in Q3, including 3 brands of Sitagliptin { a 505(b)(2) } product. The 3 brands include - Zituvio, Zituvimet, Zituvimet XR. Sitagliptin will go generic in FY 27
RoW formulations - 570 vs 493 cr, up 16 pc YoY ( @ 11 pc of company sales )
Some Updates from Q2 concall -
Company has acquired 50 pc stake in Sterling Biotech for 550 cr. Currently setting up state of the art manufacturing facility to produce fermented animal free proteins Also acquired sterling Bio’s API business that manufactures fermentation based APIs like - Lovastatin, Daunorubicin, Doxorubicin and Epirubicin
Entered into an exclusive licensing and supply agreement with Viwit Pharma for 02 - Gadolinium based MRI - contrast agents - to be supplied in the US mkts. These are injectables - used to increase the visibility of organs during MRI procedures. This is a niche but valuable drug. There r no generics for this drug currently in the mkt
Opportunities like - Palbociclib ( breast cancer drug ) and Riociguat ( for treatment of pulmonary arterial hypertension ) and Cabizantinib ( used to treat thyroid cancer ) should help them offset the loss of exclusivity on Revlimid ( to a large extent ) wef Jan 26. Company is also looking to file and launch a few more 505(b)(2) opportunities immediately. On both - Palbociclib and Riociguat - company is expected to get exclusivity for meaningful time period
Hopeful of getting a WHO approval for their MR ( measles and rubella ) Vaccine as well. Both these vaccines ( MR + TCV ) should bring in sizeable business for the company as UNICEF buys them in bulk every year ( to the tune of 8-10 cr doses each ). Scale up should begin sometime in FY 26. Even if they get a fraction of this business - it can be very significant business for the company
Company has a healthy pipeline of Transdermal and complex Injectable products to be launched in US - these should help them sustain the business momentum in the US mkt
Key things to watch out for in the Indian innovative portfolio of the company for the near future should be their mkt share in products like - Saroglitazar, Desidustat and the Biologics that the company is launching. Company’s mkt share - both in volumes and value for Ujvira ( Trastuzunab - for treatment of breast cancer ) is now higher than the innovator. Company aspires to take Saroglitazar and Desidustat to among top 50 products in IPM
Updates from Q3 concall -
Growth in US business led by expansion in base business + slew of launches carried out over the last 1 yr
Sitagliptin 505(b)(2) opportunity is a serious success story for the company - likely to bring in good revenues for the company. With Sitagliptin, company now has 07 X 505(b)(2) commercial products in US. Clearly, company now has a substantial 505(b)(2) portfolio in US
Sentynl Therapeutics, Inc. (Sentynl), a U.S. based biopharmaceutical company wholly-owned by Zydus Lifesciences, Ltd. (Zydus Group),
announced the execution of an Assignment and Assumption Agreement with Cyprium Therapeutics, Inc in Dec 23. Under the agreement,
Cyprium completed the transfer of its worldwide proprietary rights and U.S. FDA documents pertaining to CUTX-101, the copper histidinate product candidate for the treatment of Menkes disease, to Sentynl. Sentynl now assumes full responsibility for the development and commercialization of CUTX-101. In 2021, Sentynl and Cyprium reported positive results from a safety and efficacy analysis of data integrated from two completed pivotal studies in patients with Menkes disease treated with CUTX-101. A rolling submission of the CUTX-101 New Drug Application (NDA) to the FDA is ongoing, with expected completion in 2024. This launch is now imminent in next 6 months and the company is making all preparations for the same
Company has not hedged its receivables - hence has incurred forex gains in Q3. Not hedging receivables has been a normal practice by the company for quite some time now ( IMHO - its a risk that needs monitoring )
Asacol HD has seen entry of new players in Q3. Company expects entry of at least one more player in near future
Most of Revlimid revenues from Q4 + Q1. FY 26 should the last year of exclusivity wrt Revlimid sales { it seems ( from management’s commentary ) , FY 26 Revlimid sales may be below FY 25 sales - although I m not sure about the same }
Overall, expecting high single digit growth in revenues from US business in FY 26 - on the back of new launches. Company believes, FY 27 should be another good year for the company on the back of exclusive launches ( despite loss of Revlimid sales )
EM business momentum is looking good. Same is likely to continue in near future. EM business is likely to start achieving 23 pc + kind of EBITDA margins in not so distant future
Should be launching Semaglutide in India in the first wave. Company shall be making its own API and formulation for Semaglutide. Additionally, company has tied up for a second source supply of APIs as well. Also plan to launch in various EMs
CUTX - 101 is going to be chronic drug ( lifelong treatment )
Will be launching 02 products from the LiqMeds portfolio ( acquired in Oct 23 ) in the US mkt in current CY
Should see Sentynl Therapeutics ( company’s subsidiary ) becoming profitable in FY 26 post the launch of CUTX 101
Company spends about 35 pc of its R&D dollars towards speciality portfolio comprising - Biologics, NCEs, Vaccines, Speciality generics
For FY 26, 27 , Capex intensity should be higher than FY 25 ( say 20-30 pc higher than FY 25 ) as company launches and scales up a number of speciality opportunities. Additionally, will continue to focus on acquiring commercially viable speciality products in US in order to utilise the cash on books
Confident of building a pipeline of another 2-3 NCEs to be launched in India in next 3-4 yrs ( after the successful launch of Desidustat and Saroglitazar )
Company’s animal health business in US has already turned profitable
Company’s Biologics business is currently focussed on India + EMs only. Not likely to venture into regulated mkt with Biologics ( in near future )
Disc: holding, biased, not a buy / sell recommendation, not SEBI registered