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ZYDUSLIF reported a robust EBITDAM of 26.2% despite no gRevlimid contribution. The company’s near-term launch pipeline remains attractive with a few niche launches, two transdermal launches, one REMS, gVascepa (3Q) and the Sitagliptin franchise. It plans to launch ~30 products annually with one exclusivity product in each of FY25/26/27. The LiqMeds acquisition is attractive as it provides access to specialty assets in UK/ US and is also EPS accretive. These initiatives will cumulatively offset base erosion (mid-single digit) and Asacol competition. ZYDUSLIF reaffirmed its double-digit growth guidance for the US in FY24. The management alluded to annual increase in gRevlimid share, which, along with new launches, will continue to drive US growth. India growth was weak due to delayed acute season but we expect it to grow in line with or higher than IPM growth. We believe US launches, domestic growth and margin sustenance places ZYDUSLIF on a sustainable growth path. We maintain BUY with a Sep’24 TP of INR 720 (including gRevlimid NPV of INR 30)

* No gRevlimid contribution in 2Q; outlook remains robust: US revenue grew 9%YoY (11% miss) to USD 225mn driven by new launches and improvement in base business albeit growth was lower QoQ due to no gRevlimid contribution (~USD 70mn). Near-term launch prospects are encouraging with a few meaningful launches, one REMS product (in 4Q/ 1Q25), two transdermal products (limited competition with long-term visibility), gVascepa (3Q launch), Sitagliptin franchise and higher gRevlimid contribution in 4Q. This will offset base erosion and loss of share from Asacol HD competition (competition from 2H24). The company will launch the Sitagliptin franchise in FY25 and aspires to gain 8-10% share via retail channels and formularies. The management affirmed double-digit growth guidance for FY24 and will continue to grow thereafter. The company aims to launch ~30 products annually including one exclusivity product in each of FY25, FY26 and FY27. The specialty efforts continue with PBC filing expected CY25-end. The company has two under development and plans to acquire 2-3 assets via M&A. It aspires to achieve USD 100mn over the next 3-5 years from its specialty portfolio.

* LiqMeds – a strategic acquisition: Zydus acquired LiqMeds Group for GBP 68mn. LiqMeds Group has capabilities and specialisation in development, manufacturing and supply of oral liquid products for global markets. The company has licensing agreements with Rosemont UK and three big specialty players in the US. The acquisition is EPS accretive. LiqMeds has 16 approved products in the UK, few 505(b)(2) opportunities in the US, mostly specialty products and a large pipeline which can be outlicensed. The management alluded to clear revenue visibility over the next 3 years.

* Domestic miss, EM & Europe report healthy growth: Domestic formulations grew 5% YoY (5% miss) due to delay in acute season (Oct looks strong). Consumer Wellness franchise grew 3% YoY (6% miss) and pressure on gross margins eased on account of moderation in commodity prices and calibrated price increases. The company aims to grow in line or higher than the IPM. EM & EU formulations revenue grew 17% YoY with all major geographies delivering healthy growth. API revenue grew 26% YoY (9% beat).

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CIN Number : L67120MH1986PLC038784