I am confused about this stock and have a tracking position.
Pros for investment:
- Zydus/Cadila is an Indian pharma firm, therefore devoid of any drama with the MNC pharma stocks that pay huge dividend/royalty to their MNC parents.
- Gujjubhai Patel run company. Patels know how to do good business and blessed with astounding business sense and are clean honest people. All good signs like 0 debt, 30X returns in 20 years and 3X returns in 10 years and sales is 3X in 10 years
- 37 Plants producing formulations, APIs, vaccines, animal health, biologics, research & development, contract manufacturing, wellness (food and cosmetics) etc.
- Who does not Glucon D, Nycil and Complan? Company is home to these brands as well as Nutralite. What the heck - they even produced a Covid-19 vaccine
- Spends close to 10% annually on R&D. Not a commodity player. This is seen by its launches in USA and Europe with 180-day exclusivity and Day-1 launches. Further it is only 55% into generics and rest is on new chemical entities, biologics and vaccines. Triggers for growth can be Saroglitazar and Desidustat, which are on sale in India
Cons:
- Very poor sales growth in the last 5 years in single digits at 8.23%
- P/E ratio is 25 which means poor margin of safety considering the stock traded at 10 P/E 2 eyars go
- Adverse observation on their plants
I think this is a good stock to load but not convinced on valuations still. I plan to increase my tracking position, when there is a trigger like poor adverse observation on plants and stock presents a -20% down from current price, offering margin of safety
Sales growth:-
- They sold their animal health portfolio in FY22 to focus on human health
- Indian pharma business was not growing much during those times, it has improved only recently, reason possibly is the shift in business strategy led by innovation and R&D to introduce new products with high margin which focus more on bottom-line that’s why the sales growth looks less historically. Going forward expect 15% topline and 20% bottom line growth in pharma business.
For Valuation:-
Median PE is 23 for last 5 and 10 years. So it is reasonably priced considering peers valuations which varies from 18 to 35.
Adverse observation:-
These get resolved eventually, nowadays even the price does not correct much on getting negative observations. In past such FDA observations caused significant price corrections for pharma stocks and allowing people to load up. It still might cause price correction for small players but larger player have multiple plants so one plant getting observation does not cause significant impact on product launches.
The unknown is the ongoing litigation in mirabegron and the eventual outcome. Any negative verdict may impact in short term, and might give an opportunity to accumulate.
This is just opinion. Please do your own research.
Great points. I think buying lower gives good margin of safety. At high P/E risk is too high like all the Marcellus stocks
Zydus Lifesciences has secured final approval from the United States Food and Drug Administration (USFDA) to manufacture Ibuprofen and Famotidine tablets (800 mg/26.6 mg) in the U.S. The approved product is a generic version of Duexis®, which recorded annual sales of USD 3.6 million in the United States (IQVIA MAT December 2024)
Hi Hardik,
I looked into the three drugs which are part of their NCE portfolio.
- Saroglitazar
The company is running two separate trials in the US for this drug. The following two diseases are being targeted:
1.1 PBC - Phase II(b)/III trials are on. Next update about these trials is expected by December 2025. Look at slide 10 in the Feb 2025 Investor Presentation.
1.2 MASH - For US, Phase II trials are on. This drug though is already approved in India. No specific timeline has been given by the management for the US Phase II trials.
- Desidustat
For this one, let’s look at what is happening in US and India/China.
2.1 US
This drug was under trial in the US for Chemotherapy Induced Anaemia (CIA) as per Page 23 of Annual Report FY21. But right now there is no further update on that. The last update was in November 24 earnings call transcript (check page 20). I quote "“On Desidustat, we are doing a trial in Sickle Cell Anaemia and we are also looking for something in the US in the defence space, so that is the other important milestone if we are able to achieve.”.
2.2 India/China
The drug has been selling in India since 2022 and the final approvals are now awaited for selling the drug in China. The approval from China is expected to come by next year.
- Usnoflast
In the February earnings call on Page 5, the management mentioned that FDA has given an approval for carrying out Phase II(b) trials. The specific disease being targeted is ALS. There is no communication on by when are the Phase II(b) trials going to start.
For this molecule, the Annual Report FY24 on Page 56 also talks about clinical trials being done for some other diseases such as Parkinson’s, CPAS, UC.
For Desidustat and Saroglitazar the management mentioned on Page 19 of November 2024 earnings call that they believe these two drugs can be the top 50 branded drugs in indian pharma industry though they did not provide any timelines.
For Usnoflast, the management talks about how many people suffer from the diseases which this molecule is targeting. See Page 55-56 of the Annual Report FY24.
- Parkinson’s has 90,000 new cases every year in the US.
- In 2023, it was estimated that 5 million people were suffering from UC
- About 1,30,000 people suffer from ALS across India, Europe and US.
Zydus Lifesciences -
Q4 and FY 25 results and concall highlights -
Q4 outcomes -
Revenues - 6527 vs 5533 cr, up 18 pc
Gross margins @ 74 vs 71 pc
EBITDA - 2125 vs 1630 cr, up 30 pc ( margins @ 32.6 vs 29.5 pc )
PAT - 1170 vs 1182 cr, down 1 pc ( due to an exceptional charge of 219 cr in Q4 FY 25 )
India branded formulations grew in double digits ( @ 11 pc ), outpacing IPM. Consumer wellness business also grew in double digits ( @ 13 pc )
Share of Chronic business in India @ 43 pc now vs 39 pc in FY 22 ( sharp uptick )
US business grew by 24 pc driven by volume growth and new product launches. Filed 27 ANDAs and received 24 approvals in FY 25. Launched 17 products in US in FY 25 which includes 3 brands of Sitagliptin 505(b)(2) - Zituvio, Zituvimet, Zituvimet XR
International business ( Ex - US ) grew by 12 pc in Q4. This business is slowly emerging as a strong third growth pillar for the company
FY 25 outcomes -
Revenues - 23241 vs 19547 cr, up 19 pc
Gross Margins @ 72.7 vs 68.1 pc
EBITDA - 7058 vs 5384 cr, up 31 pc ( margins @ 30.4 vs 27.5 pc )
PAT - 4525 vs 3859 cr, up 17 cr ( due exceptional charge in Q4 + lower share of profits from JV )
Breakdown of FY 25 sales -
India formulations - 5931 vs 5388 cr, up 10 pc
India consumer business - 2681 vs 2301 cr, up 16 pc
US generics - 11050 vs 8658 cr, up 27 pc
International business ( Ex-US ) - 2194 vs 1929 cr, up 14 pc
India formulations business brand report -
Sales > 100 cr @ 10 brands
Sales > 50 cr @ 20 brands
Sales > 25 cr @ 36 brands
Updates on speciality business -
Entered into an exclusive development, licensing, supply and commercialization agreement with Synthon BV of the Netherlands for a novel 505(B)(2) Oncology product. NDA for the product is likely to be filed in 2026
Entered into an exclusive licensing, supply and commercialization agreement with Zhuhai Beihai Biotech Co., Ltd for BEIZRAY, which is an Albumin Solubilized Docetaxel Injection, a 505(B)(2) product for the US market
Some updates from Q1 + Q2 + Q3 concalls -
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 ), 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
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
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
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
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 )
Asacol HD has seen entry of new players in Q3. Company expects entry of at least one more player in near future
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
Updates from Q4 concall -
Forayed into Medtech space by entering into a share purchase agreement to acquire a majority stake in Amplitude Surgical SA, France for 2400 cr. The proposed acquisition shall act as a platform to execute Zydus’s global MedTech strategy and a natural extension for the Company having a proven track record in life sciences and wellness segments. Amplitude Surgical holds leading position in the attractive orthopaedics marketwith global reach. With revenue of € 100 + and superior margin profile with continued initiatives to optimize business model, it should add significant value for Zydus life
Ambernath API facility received EIR in Q4 with no observations
The Sitagliptin franchise in US is doing better than their expectations. Should do well in FY 26 as well
QoQ uptick in revenues in Q4 vs Q3 despite no significant uptick from Revlimid in Q4
Company believes their US business should grow in single digits in FY 26 over FY 25
Next date of hearing on the Mirabegron litigation ( vs the innovator ) is scheduled in Feb 26. They r likely to keep selling Mirabegron till then
Likely to clock significant Revlimid sales in Q1, Q2 and Q3 next year. In Q4 ( early 2026 ), the exclusivity on Revlimid shall go away
Even without Mirabegron and Revlimid in FY 27, company is confident of sustaining their US business above $ 1 billion mark. With new launches in late FY 26, early FY 27, they hope to do better
Biosimilars + Saroglitazar + Desidustat are growing very well in the domestic mkt and helping the company outgrow the IPM
Guiding for a 300-400 bps drop in consolidated EBITDA margins for FY 26 - due to lower pricing seen in Revlimid, loss of exclusivity on Asacol + continued higher R&D spending
Quite upbeat on the Vaccines business ( tender business ) - both in India and International ( WHO + UNICEF + PAHO ) tenders. Their flu and rabies vaccines are already doing well in India in the non-tender markets. Their MMR vaccine in India also has very good business prospects
On a consolidated basis, should be able to grow revenues in double digits led by double digit growth in India and International ( ex - US ) business ( also led by vaccines in these geographies )
Company’s pipeline of peptide products comprise of Liraglutide, Semaglutide and Tirzepetide. Will be launching Semaglutide in India and EMs in FY 28
The exceptional charge taken in Q4 is because of impairment taken by the company on a product they had acquired from Teva Ltd
The acquisition of Amplitude Surgical should be earnings accretive in FY 26
Disc: holding, biased, not SEBI registered, not a buy/sell recommendation
Have you researched their NCE portfolio??? Any idea on the TAM of that pf?
US approval for both Saroglitazar and Unsoflast are expected in FY 28. If approved, both are expected to have large addressable markets
Zydus receives tentative approval from USFDA for Rifaximin which has a sales figure of ~$2.6B
Zydus Lifesciences acquired Agenus Inc.'s U.S.-based biologics manufacturing facilities
- Entry into high growth Biologics CDMO market (projected to grow at a CAGR of 15.7% to reach $84.9 billion by 2034)
- The acquisition facilities immediate access to advanced manufacturing capabilities in a global biotech hub, enhancing Zydus’s competitive edge and mitigating risks from potential U.S tarrifs
- Facilitates exclusive manufacturing rights for Agenus’s Phase-3 ready immuno-oncology products, Botensilimab (BOT) and Balstilimab (BAL) and exclusive rights to develop and commercialize BOT/BAL in India and Sri Lanka, with a 5% royalty payable to Agenus
- The acquisition aligns with Zydus’s broader strategy to diversify beyond generics
- However, the deal carries risks related to financial commitments, regulatory approvals, and execution in a competitive market.
Share your thoughts
Look into what they are planning and executing in the entireity.
Med Tech, Biologicals, NCE and Speciality generics both in India and US/EU.
Add this to picture
Next 2 years will be tough as they seek to replace blockbuster generics revenue from asacol and revlimid.
What are triggers post this period is the main factor to analyse.
Disc: Invested in family pf at higher price point. Have started averaging at current prices.