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Zydus Lifesciences Ltd
Earnings Call Analysis
Q1-2025 Analysis
Zydus Lifesciences Ltd
Zydus Lifesciences commenced fiscal 2025 on a strong note, achieving record-high operating profits and margins. The company delivered a robust double-digit growth across various segments, leading to consolidated revenues of INR 62.1 billion, up 21% year-on-year and 12% quarter-on-quarter. The EBITDA stood at INR 20.8 billion, marking a 38% increase year-on-year, with an EBITDA margin of 33.6%. Net profits rose to INR 14.2 billion, representing a 31% year-on-year and 20% quarter-on-quarter gain. Furthermore, the company successfully deleveraged its balance sheet by repaying all its debt.
The India Branded Formulations business experienced a 13% year-on-year growth, outperforming the market in both chronic and acute segments. This performance was bolstered by the launch of 10 new products and innovation in key therapies such as cardiology, gynecology, dermatology, respiratory, anti-infectives, oncology, and nephrology. The Consumer Wellness segment also delivered a strong performance, with a 21% year-on-year growth driven by a 17% volume increase and robust demand in the personal care segment.
The U.S. Formulations segment accounted for 51% of Zydus's consolidated revenues, with sales amounting to INR 30.9 billion—a 23% sequential growth. Seven new products were launched, including Zituvimet and Mirabegron ER tablets. Additionally, five new ANDAs were filed, and six received approvals. Despite some regulatory challenges with the U.S. FDA, the company remains optimistic about sustained growth in the U.S. market.
Despite ongoing political and economic challenges in key markets, the international business posted revenues of INR 5.3 billion, up 9% year-on-year. The focus remains on expanding presence in selective therapies across emerging markets by leveraging a robust global R&D portfolio of generics and specialty products.
Zydus's innovation pipeline continued to progress with significant milestones. The company completed patient recruitment for Phase IIb/III clinical trials of saroglitazar magnesium for primary biliary cholangitis and initiated a Phase IIb clinical trial for metabolic dysfunction-associated steatohepatitis (MASH). Additionally, progress was made in the biotech space with the submission of a market authorization application for a monoclonal antibody and the initiation of a Phase I clinical trial for an anti-properdin molecule.
Zydus maintains a positive outlook for fiscal 2025, with expectations of healthy double-digit growth in the U.S. Formulations business and high-teens growth for the overall company. The EBITDA margin is projected to improve by 100 to 150 basis points compared to fiscal 2024, aiming for around 29%. The company plans to launch 25+ new products in the U.S. market, alongside strategic investments in scaling up its specialty business and expanding its presence in key segments in India and internationally.
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Good afternoon, everyone. Welcome to Zydus Lifesciences Limited Quarter 1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
And I now hand over the conference to Mr. Ganesh Nayak, Executive Director of Zydus Lifesciences. Thank you, and over to you.
Good afternoon, ladies and gentlemen. Welcome to our Post-results Teleconference for the quarter ended June 30, 2024. For today's call, we have with us Dr. Sharvil Patel, Managing Director; Mr. Nitin Parekh, Chief Financial Officer; Mr. Arvind Bothra, Senior Vice President, Investor Relations; and Mr. Alok Garg, Senior Vice President from the Managing Director's office.
Let me now give you a broad overview of the developments during the quarter. It's my pleasure to share that we commenced fiscal 2025 on a strong note, sustaining the growth momentum across the businesses during the quarter. Overall, we delivered a strong double-digit growth during the quarter. This, coupled with sustained profitability improvement, has helped us achieve the highest ever operating profit and margins during the quarter.
Our India Branded Formulations business outperformed the market growth with 13% year-on-year growth. The Consumer Wellness business delivered an industry-leading double-digit growth during the quarter, aided by improved demand scenario and an extended summer season.
Our U.S. Formulations business delivered a stellar performance, both on a sequential and year-on-year basis, driven by new launches and volume expansion in the base portfolio. Our international business continued its growth trajectory during the quarter.
With that, let me take you through the financial numbers for the quarter gone by. We registered consolidated revenues of INR 62.1 billion, up 21% on a year-on-year basis and 12% on a quarter-on-quarter basis. EBITDA for the quarter was INR 20.8 billion, a growth of 38% on a year-on-year and 28% on a quarter-on-quarter basis.
EBITDA margin for the quarter stood at 33.6%, which is an improvement of 430 basis points on a year-on-year and 410 basis points on a quarter-on-quarter basis. Net profit for the quarter stood at INR 14.2 billion, up 31% on a year-on-year and 20% on a quarter-on-quarter basis. We deleveraged our balance sheet during the quarter by repaying the entire debt.
Now let me take you through the operating highlights for the first quarter of FY '25 for our key business segments. Our India geography, which comprises of the Formulations and Consumer Wellness business, accounted for 37% of the total revenues during the quarter and grew 15% year-on-year.
As mentioned earlier, our Branded Formulations business in India grew faster than the market during the quarter, with 13% year-on-year growth. The business outpaced the market growth, both in the chronic and acute segments. Portfolio of key pillar brands and innovation products registered strong volume growth, driving the overall performance during the quarter.
We launched 10 new products, including line extensions, with three first in India launches. We retained our leadership position in the nephrology and remain -- in nephrology and remain the fastest-growing Indian company in oncology in the IPM. The business faster than the market in key therapies of cardiology, gynecology, derma, respiratory, anti-infectives and super speciality therapies of oncology and nephrology.
Contribution of chronic portfolio has increased consistently over the last several years and stood at 41.3% as per IQVIA MAT June 2024, which is an improvement of 430 basis points over the last 3 years.
Our Consumer Wellness business recorded revenues of INR 8.4 billion, up 21% on a year-on-year basis. The growth was broad-based and largely driven by 17% volume growth. The personal care segment, which comprises of Nycil and the EverYuth brands, continued to deliver robust performance with yet another quarter of strong double-digit growth.
Food & Nutrition segment witnessed a recovery during the quarter and posted double-digit growth as well. Gross margin continued to improve, both sequentially and on a year-on-year basis.
Now let me take you through the performance of our U.S. Formulations business. The business accounted for 51% of the consolidated revenues during the quarter, with revenues of INR 30.9 billion, up 23% on a sequential basis.
We launched seven new products during the quarter. New launches for the quarter include the launch of our second 505(b)(2) product, namely, Zituvimet in the area of metabolic disorder management; and Mirabegron ER tablets. We filed 5 additional ANDAs and received approval for 6 ANDAs, including 2 tentative approvals during the quarter.
On the international markets front, the demand scenario remains strong across key markets, despite ongoing political and economic challenges in some of the countries. Overall, the business posted revenues of INR 5.3 billion, up 9% year-on-year.
On the operations front, the U.S. FDA has classified 2 of our inject facilities located in the Ahmedabad SEZ and at Jarod near Baroda, as official action indicated, which is OAI. We are working closely with the U.S. FDA to implement the necessary corrective actions as required.
Now this concludes the business review. I would now request Dr. Sharvil Patel to take you through the drivers across businesses as well as initiatives in our innovation program. Thank you.
Thank you, Mr. Nayak, and good afternoon ladies and gentlemen. It is a pleasure to have you all here on the call today. We are pleased with our performance during the quarter. All our businesses continued their robust growth journey from the previous fiscal and performed on expected lines, with a focus on fulfilling diverse healthcare needs of the customers across the market. We remain committed to strengthen our core business and explore newer avenues to generate better outcomes for our patients.
On the India Formulations front, our efforts are directed towards expanding the presence across focused therapies, and, in turn, serve a larger set of customers. We have successfully leveraged our rich and diverse portfolio of innovation products to offer novel solutions to the patients to satisfy their unmet healthcare needs. We have been conducting various patient support programs and activities to create greater awareness amongst patients, particularly in area of the unmet healthcare needs.
In the U.S., multiple building blocks, such as a comprehensive portfolio of generics across dosage forms, capability to deliver novel solutions to patients through the LiqMeds acquisition in the speciality space and investments in rare disease space are now in place.
This will greatly enhance our ability to address diverse patient needs. This coupled with strong customer relationships. Our network regulatory-compliant manufacturing facilities and an agile supply chain, will ensure sustained growth trajectory for the U.S. business going forward.
On the international market front, our focus remains on expanding the presence in selective therapies across key emerging markets by leveraging our global R&D portfolio of generics and speciality products. Our innovation pipeline across different areas continues to make progress and achieve the desired milestones. With this, let me share some material developments on our innovation efforts during the quarter.
On the NCE research front, during the quarter, we completed patient recruitment for the Phase IIb/III clinical trials of saroglitazar magnesium for primarily biliary cholangitis indication, and initiated -- and the Phase IIb clinical trial of saroglitazar magnesium for metabolic dysfunction-associated steatohepatitis, which is known as MASH, indications for the U.S.
We also completed patient recruitment for Phase II clinical of Usnoflast, earlier known as ZYIL1, for amyotrophic lateral sclerosis, which is known as ALS, indication during the quarter.
In the biotech space, we submitted a market authorization application for one of the monoclonal antibodies to the Indian regulator. On the novel biologics front, we initiated a Phase I clinical trial in India for an anti-properdin molecule during the quarter.
Recently, in the month of July, we received marketing approvals from the Mexican authorities -- regulatory authorities, for 2 products, Bhava, which is the biosimilar of bevacizumab; and the brand name Mamitra for the biosimilar of trastuzumab.
On the speciality 505(b)(2) development front, recently in the month of July, we received final approval for a third NDA, Zituvimet XR, which is the sitagliptin metformin extended release tablets in the area of metabolic disorder management. With this approval, we now have all 3 NDAs of sitagliptin and combination franchise approved through the 505(b)(2). All the NDAs have received first-cycle approvals.
Thank you. And now we can start with the Q&A session. Over to the coordinator for the Q&A.
[Operator Instructions] The first question is from Yash Gandhi.
Congralutions again on a great set of numbers. So I think this quarter, we've got 33% EBITDA margin, its one of the highest companies ever seen in the history. So I just want to understand the sustainability of this sort of margin going the next 2 quarters for the year.
So I think, obvious, this quarter has been an exceptionally good quarter on the margins front. And as we have stated earlier that on the last year, we ended on a high with a 27.5% margin. And with looking at the phasing of the coming year, we expect to see an improvement in the margin by 100 to 150 basis points from FY '24 margins.
Okay. Okay. And so again, on the U.S. business, so this year, we've grown 26% Y-on-Y. This is an excellent growth. How do you see the trajectory of the U.S. Formulations business during this year?
So we see healthy double-digit growth for the U.S. business during the coming financial year -- this financial year, I mean.
The next question is from Kunal.
So first question would be revenue guidance that we had provided for FY '25, we had said now almost around high teens kind of top line growth that we expected. Since the first quarter has been meaningfully above that, are we revising it or we are staying with the same cadence?
We continue to believe that we will deliver high teens growth this year.
And one on the speciality portfolio across two geographies, one is U.S. wherein we have now few commercialized product, et cetera right? Zokinvy, et cetera. So would you be quantify the current contribution of our speciality portfolio in U.S.?
I think it's still in the very early stages. As I said, the patent acquisition or the finding new patients is a slow process in the U.S. So once it becomes sizeable and meaningful, we will obviously talk about it differently. But right now, it's -- it doesn't form a major part of the overall revenue.
And last one on the India business. We have a portfolio of speciality products, which are in-house such as like saroglitazar and some of the [indiscernible] in the market biosimilar launches, et cetera, right? So to that extent, we have also said that, that portfolio has grown very strongly. Could you quantify the current contribution of that portfolio for us?
I don't think -- our focus on India is not driven by dosage form. It's a therapy and disease focused, so -- and brand focused. So I don't think we do it that way. But as I said, they do form an integral part of the overall future innovative portfolio that we have, which is both, as you mentioned, the saroglitazar and the breast cancer and other oncology therapies that we're working on. So it's more a disease area where we look at it and how much share of that area we do have.
And as we alluded, like in oncology, we are now the largest and the fastest-growing organization, and similarly in nephrology and other segments. Obviously, only led by both the proprietary products that we have, but also the products that are required beyond just the couple of new drugs that we have.
Is it fair to say that there will be more growth just coming, right? Hence, this portfolio will keep getting bigger and bigger, which is high growth [indiscernible]?
Yes, that is the right statement. We do expect these products to become the largest brands for the organization, which will obviously mean that they will form a larger part of the overall portfolio.
Can the coordinator ensure that all others are on mute, because there's some noise coming from other people talking.
The next question is from Neha.
So, given you're maintaining your revenue -- again, margin guidance of the 150 basis points margin expansion, is it fair to assume that the cost base that we have seen in this quarter, let's say, the R&D cost or the other operating cost, R&D would materially increase from here, the SG&A cost would remain at these levels? Because this was a seasonally strong quarter for the India business as well as U.S. we did higher. So how should we think about the operating cost from a run rate perspective?
Excluding R&D, Neha, there has been increase in this particular quarter, but -- about INR 125 crores in this quarter are of one-off nature. And therefore, I think INR 1,200 crores to INR 1,250 other cost, excluding R&D would be the right basis for you to project.
What is this INR 125 crores related to, sir, the one-off that you're mentioning?
Some ERF related costs. There are some legal cost provisions. There are some project-related consultancy assignments, some professional fees. Many items within that, that are recur in nature.
Okay. And on the R&D, how do we look at the R&D given we have the patient recruitment completed for 2 of our NCE products?
So as I said, our expectation is that we will see around an 8% kind of spend on R&D. And that's what we hope to maintain.
8% of sales for a full year basis?
Yes, yes.
Understood. Understood. My second question is on the U.S. business. Obviously, this quarter, we had the benefit of the REVLIMID as well as mirabegron. As we think about the subsequent -- first, in this quarter, was there any improvement in the base business besides REVLIMID in Mira? And was REVLIMID flattish quarter-on-quarter, higher quarter-on-quarter? Any qualitative color there?
So REVLIMID was obviously higher quarter-on-quarter, and there was a ramp-up to the base business also.
Okay. Understood. And as I think about the next 3 or 4 quarters other than Mira, can you give us some color on what sort of launches we should be expecting? Any other meaningful launch that we should be seeing? Anything that you can provide us on the U.S. for the base business?
As I said, we do expect a double-digit growth in the U.S., and that factors in, obviously, our current base business and new product launches.
Okay. So -- and how many launches should we be expecting this year, sir?
We -- for the full year, we expect 25, 25-plus launches.
Okay. Understood. And my last question, one, given we have an ample amount of net cash that we are sitting on -- sorry, given the ample amount of cash generation, how should we look at capital allocation strategy for future growth? What would be 2 or 3 key areas that you will be focusing on for inorganic growth opportunities? And any ticket size that you're thinking would be -- is something that you'd be comfortable with?
Yes. So I think, as I had also tried to speak about in the last quarter, I think our key focus will be scaling up our speciality business in the U.S. and, for that, obviously, we will look to see how do we deploy efficiently our capital to not only scale up the business, but also have a diversified large business on the speciality front.
The second area is India. India, we are very -- we have done well. We understand the business well. We will continue to see if there are opportunities to -- in India, both from the brand side or some other adjacencies.
And recently, with the last 5 years, good scale-up of our International business, and also good profitability that we are seeing. I do -- we do believe there can be specific opportunities in the International businesses that we would look to do.
Beyond that, I think as I said, we have transformed on just being, call it, being a pharmaceutical business to more of a life sciences organization. And that would mean that how do we create the right solutions for the patients in different areas will become important.
So going beyond the pill becomes very critical for us. So whether it is companion diagnostic, med devices or medical devices, or direct-to-patient services, we will be looking at many of these opportunities to scale up our business further.
The next question is from Bino.
I have a few questions. To start with on Mirabegron. Sharvil bhai, how do you look at it?
Bino, your voice is not audible. Can you speak a little louder?
is it better now?
Yes.
Okay. Great. How do you look at the time lines on Mirabegron? It's difficult because integration is going on. But would you think this can be a few quarters opportunity? Or will it last till the next patent expiry? How do you look at it?
I think you answered it saying it's difficult to answer that question. But at least, I think short term, at least for the next couple of quarters, it is what it is today. But a little longer term, it's still very difficult to answer.
Okay. Second, on this product Opsumit or macitentan, I believe you have an FTF impact. Is that still valid? Because I saw somebody got an approval to my thought was not an FTF.
So I won't have a direct answer on this. So I mean better my team gets back to you on it specifically. So that I don't give it -- but I do remember that we did have some first 2 file status. But I'll request my team to give you more specific details on that.
And regarding Cabometyx, which we recently in-licensed, I believe there was court verdict expected some time around this time. Is it -- has it come yet?
I'm sorry, could you repeat the molecule, which one did you say?
Cabometyx, which we in-licensed recently.
[indiscernible] yes, from MSN, right?
Yes. Yes.
So I think that's under still litigation. So as and when we have any outcome on that, we will -- we can discuss that. But obviously, there are some -- it seems to be a good product for the future.
And finally, on saroglitazar PBC indication, when do you expect the readout? Any time line?
It will be in the next financial year. Hopefully, in the end of -- I mean, second quarter of next financial year.
Okay. So FY '26. So filing would be -- filing next year. So it could be an FY '27 opportunity, if everything goes well?
Yes.
The next question is from Harsh?
My question is pretty broad based on the U.S. industry. So after COVID, we had a couple of years of -- not for the company, but overall at the industry level, we had some sort of headwind in terms of price erosion and lower demand. So just wanted to get a macro view over the next 2, 3 years. What kind of environment are we seeing in terms of FDA approvals and the pricing of the base generic formulations.
So I think on the approval side, FDA continues to deliver on a good number of approvals. So I think fundamentally, that's remained constant. I think also, I don't think the nature of business has changed in the U.S. It is a highly competitive, price-sensitive market.
And so whether it was COVID or earlier or now, I don't -- we don't see any fundamentally different ways of behaving in the market. I think what succeeds in the market is portfolio, your service levels and how fast are you able to deliver your products, and what kind of service levels you are able to maintain with your customers. And strong focus on profitability helps you make right decisions, I think. So fundamentally, all those things remain the same for that market, whether it was in the past or for the future.
And in terms of demand scenario, do you feel anything is different for next 2, 3 years compared to what it was there after COVID between 2021 to '23? And in comparison, do you feel the demand scenario changing materially over the next 2, 3 years?
No. I think it -- at least when we look at our generics business, it all depends on large molecules going off patent. And as you can see till the next 5 years, there are significant amount of products that will still go off patent. So the pipeline of future generic portfolio remains attractive.
Sure. And for the International business, the rest of the world business, so we see a lot of pharma companies are focusing on that pie of the market. So how does it sit in your overall strategy? And what kind of growth do you foresee over the next 3 to 5 years kind of a horizon?
So I think for us, the International businesses have delivered a consistent double-digit CAGR over the last 5 years and also have shown significant improvement in profitability. And so we believe, going forward, the business will definitely scale up meaningfully with strong double-digit growth and also will continue on the improvement on profitability. So we are quite bullish on the International market, and that's why we said we will also continue to look at adding more products and geographies to expand it.
The next question is from Saion.
Dr. Sharvil, I mean, your comments suggest that scaling up U.S. specialties, one of the things that you will be pursuing. I'm wondering if you can provide some aspiration that you carry with respect to the U.S. businesses, how you wanted to do this? We have mixed experience, it seems to be a tough one.
I just wanted to understand what capabilities you would need to sort of develop to address that opportunity in a way that -- and what kind of risk and size of acquisitions that you're looking at?
Because I would understand that it probably would require an acquisition for you to meaningfully scale up U.S. specialty. So if you can give some color. I mean we are aware of some of the products that you are developing the rare disease, the liver disease. It would be great if you can give some clarity as to how you are thinking about this business and what are the steps we should expect?
Sure. So I think there are two areas that we are focusing on when it comes to the U.S. speciality side. One is the rare disease business through our business unit of Sentynl Therapeutics. So today, we have two commercialized products, one which we just recently acquired and one which we had done a few years ago, a year ago.
And we have a third molecule, which is the CUTX-101, which is in the NDA stage of filing. So currently, it's a 3 asset business. And the way we look at it is that slowly build that business up over the next 2 years, mostly through small inorganic opportunities to scale that up.
And build a niche rare disease business. Now in the rare disease business, the focus has to be obviously, persist to have our product to market because again the disease of area, but then as to find new patients, which means a lot of work that needs to get done in education and getting early diagnosis and getting to the right diagnosis and treatment, because these are life-saving drugs. So our effort is on treating a larger access for some of these drugs, and finding the patients at the right time so that we can make them available.
With respect to the orphan disease business that we hope to build. Today, we have one asset, which is saro. If everything goes well, its a calendar year '27 kind of opportunity to commercialize. I do agree that our aspiration is to be in more than one product and not just a single product. Those saro on its own has a good business profile that we can build on.
But we will look at an inorganic opportunity over the next 2 years to have a commercially ready footprint in the U.S. when saro comes up for launch. And that is what we hope to do in the next 2 years, is to find commercial asset that we can either partner or we could acquire, and build a front-end commercial asset in the U.S., which can also takes saro with it.
Even if it doesn't, we do already have an organic plan to build our own commercial team in the U.S., but we will keep both options open for us for the speciality side of it -- I mean, the orphan side of it in the U.S. So these are the two areas we hope to build. We definitely don't want to be a one product company.
So saro is very important right now, but we will hope to build onto it either through licensing or inorganic opportunity. And if you look at the time line, obviously, '27 is saro, but our future molecules are 2030 and beyond. So we do, in the next 5 years, require some more options beyond just saro. So that's what we will focus on.
Great. The second question I had was on biosimilars. So you have done quite well in India, plus some emerging market approvals have also come through. But unlike many of the peers who have global development targeting U.S. and Europe, you have generally avoided that space. So why you are pursuing a different strategy here? And is there any change in thought process with evolving regulation or the competitive dynamics? Anything that you can share given the capabilities that you've already built for India and emerging markets?
Yes. I think we are quite aligned in terms of what we need to do for India and U.S., both in terms of the offerings that we can give, in terms of a large pipeline of biosimilars and also the annual capacity that we have built for, which is quite large and a total [indiscernible] capacity of almost 350 [indiscernible]. I think what -- why we decided not to enter the developed markets for 2 reasons. One is both from the investment point of view, the investments were be pretty large and sizable for doing a generic version of a biologic. And the second was, obviously, access to the market, looking at the high rebates that exists in different markets. So I think we found it very difficult to justify the investment from our point of view.
I think 2 reasons will make us think again about it. One is, obviously, if the investment thesis comes down, which is when -- if we can go towards more a generic strategy, which is PK/PD strategy, then we can look at taking up some of the developed markets. And second, which is we seem to think it is happening is the interchangeability of biosimilars that may come to effect. So if both those triggers happen, we would look to take development for the developed markets also.
But currently, we are limited on that aspect. And again, it's also to do with our allocation of -- asset allocation in terms of resources. We do have enough opportunities on the novel side, which is still higher risk, but obviously greater opportunity. So we are focusing our efforts more on that side. But as I said, if any of these 2 -- both of these changes do happen, we will potentially look to see if we want to take it up for the developed market.
The next question is from Kunal.
So one on the product that was approved today INGREZZA. Is that a near-term opportunity that we should build either in FY '25 or '26?
No.
So it's more of a longer-term opportunity?
Yes. It is longer-term.
Okay. Okay. So we have settlement, I guess, right? And so it should be in line with that settlement, is a good way to put it?
Yes. It's definitely not a near-term opportunity. And as I said, we do have exclusivity and sole exclusivity as we have stated. So whenever that market formations happen, that will be the opportunity.
Sure. And another one on the R&D expense, I'm not sure if this question was asked earlier, but we had said, it would be between 7% to 8%. So do we maintain that guidance even in the, let's say, this year in the medium term?
Yes. So FY '25, we maintain that guidance.
Sure. And beyond FY '25, do you think that some of the trials maybe for NASH, et cetera, it would be large clinical trials and we might need to accelerate the R&D?
So earlier, we had guided that our R&D year-on-year may range between 7% to 9%, with average for 3 years around 8%. So we continue with that guidance even today.
[Operator Instructions] The next question is from Saion.
Yes. On sitagliptin and other approvals that you have, sitagliptin and combination approvals for the U.S. How are you thinking about it based on the experience so far? I think you talked about possibly mid-high single-digit market share there. What are your latest expectations around that product?
Yes. So I think it's been a good learning for us on trying to see how do we get a 505(b)(2) market and successful. So I think what we can say comfortably is that because of this opportunity and what we've been able to do, it's definitely not a 1-year opportunity, but at least a 3- to 5-year opportunity. So we will see consistent revenue on this business from this franchise, which is very meaningful and good for the organization and learning. So as I said, it's not a 1-year opportunity, but will continue for a longer period of time.
The second is we continue to see how do we get more access to the overall gliptin franchise, and we hope to build more market share from what we have done today. And we're seeing some good opportunities. So only time will tell whether if we can take up further opportunities for the coming year. But overall, it will be a meaningfully good product for us over the next 3 to 5 years.
Right. Sir, will sitagliptin go generic before that? I mean I'm just wondering whether you would have a window of 5 years to scale this up.
It will go generic before. But we have a long-term contract, which will not get renewed [indiscernible].
Okay. Okay. Understood. And then the second one, I wanted to check on vaccines. I mean it seems -- you talked about it FY '27, '28 time frame. Any update on that, especially on the export side you have, you can share?
Yes. So I think we are on track for that period of time. There are 3 aspects that are important for our success. One is prequalification of the facility for the 3 vaccines. The second is the clinical trial completion at different stages. And for post prequalification, to make sure that we can achieve that in that time frame.
And once we are able to achieve those 2, then obviously to participate in the public tenders that come up in '27. So we are on track to do that. And no immediate hiccups and -- at least on the PQ and other things, we're going on a positive direction now.
So sir, this is fiscal '27 or calendar '27, where the tenders come up?
Ideally, it will be more fiscal '28 calendar, but calendar '27, fiscal '28.
[Operator Instructions] The next question is from Kunal Dhamesha.
Sir, one on the ALS, for which we are doing the clinical trial for ZYIL1. If you could provide some color on the disease landscape in terms of number of patients, potentially current treatment lines and where are we planning to differentiate?
So I think more detail, I would request Arvind to give you specifically. But on broader side, today, there are no critically approved treatments for ALS. ALS is one of the classified orphan rare diseases that exists. So there is a sizable population of patients, both in India, if you look at it from a home market point of view, or at obviously, U.S. and other countries.
So a highly unmet need exist for patients with ALS. As you know, the lifespan is only meaningfully only 2 to 3 years or less, or around that period. So it is a very debilitating disease. And as I said, with no currently class of treatment that is very effective, we see a good opportunity for Usnoflast in this area.
Our Phase II trial recruitment is over. And if everything goes well, if you see good data and good blood barrier penetration, this will move into a rapid Phase IIb or Phase III directly from a global program point of view. So we are quite excited.
I think the time line for this trial would be shorter because of the need and the end points. So it looks good in terms of a speedy development time line for this drug if everything -- if we are able to meet the critical endpoints and the safety margins that we are required to do so.
And as I said, it is -- this therapy class has a broader opportunity in any motor neuron disorder. So ALS is our first target. We will continue to explore Parkinson's as the other indication. And then there are some other opportunities beyond that. But currently, we are focused on these 2 indications.
Got it. And one on the saroglitazar, I think we had got some FDA voucher of, I think, fast-track designation or conduct designation. If you could remind us what that is and how that helps us in terms of development time line or the exclusivity?
So we do have both those status. I think we don't have a voucher, voucher you achieve when you will get full approval. And then if you still maintain both of those things, then you do get a voucher. But -- so I think voucher is not something that we are building for right now.
But we do get expedited review depending on the competition at that point in time and how many drugs are approved. So I think coming next calendar -- financial year, we can give you more update once we file the NDA to suggest whether we are still in -- we are definitely in the orphan space, where we are also in the fast-track space or not.
Got it, sir. And any update on recent compliance issues at Jarod facility? How are we planning to tackle it? Have we submitted more detailed [indiscernible]? Or have we kind of onboarded some consultant to resolve those observations?
Yes. I think we're taking it very seriously to make sure that we address the concerns. So as a first step, we have obviously done the response to the FDA in terms of the remediation that we have done and continue to do.
The second aspect is to request the FDA for a meeting to talk about our long-term plan with both -- with these sites, which we hope to do over the next quarter. And post that, we can keep you more updated to see how do we tackle the observations at the site. But we are working very closely to do so, and we'll keep you updated if you have any more updates on that.
And are there any compliance-related expenses already baked into the quarter 1 number?
So right now, we don't have an external -- we are not using any external faculty. So currently, we don't have any external expenses, but whatever has to be built in has already been built in.
The next question is from Nitin.
Sharvil bhai, on the U.S. business, this year, obviously, because of with REVLIMID as well as Mirabegron playing out the way it's playing out. And next year, we still have a meaningful REVLIMID tailwinds for us. Now I mean when you look at your U.S. business '27 onwards, I mean, do we have enough drivers in the business to really grow on the top of the high base that you'll end up creating in '25 and '26?
Yes, I think we do still have a good amount of pipeline of products to come through. Second, as I said, we do have some settlements, which allow us sole exclusive launches in the years to come, which are meaningful. And so I think between the portfolio and exclusive launches, we do see an opportunity to continue to do well. And as I said, on the base business, we continue to grow. So we hope to continue to do that with the new launches.
And secondly, in the past, you've talked a bit about your plans for a injectables into transdermals. So if you can just give us a little more update on where we are on our complex injectable plants and on the transdermal launches?
So I think it's -- transdermals, I think we are still a couple of years away from full scale up. So I think that business will continue to get built. On the injectables front, again, I think most of our drug device kind of products are a few years out.
So nothing in the medium term that we -- short term that we see. So I mean many of these are more a couple of years down the line plans. Transdermals is more nearer, but injectables is still a couple of years out.
Okay. And secondly, on the India business, we've had a good growth in this quarter. I mean we have seen a meaningful pickup have coming through in this business and improvement in momentum over the last few quarters now as you've been highlighting. I mean over this period of time, has there been a proportionate or a meaningful increase in the domestic business profitability also qualitatively?
Yes. I think with the double-digit growth that we have delivered, we have seen also good improvement in profitability also. And as I said, our sort of critical growth booster brands and key launches are now more than 45-plus percent of our business and growing very fast. So once that business becomes 60%, 65% of our overall growth driver, we will continue to see this strong momentum on growth.
So when you look at the next 2 years of the domestic business, what kind of market outperformance should we look forward to?
We do expect to do better than market and register double-digit growth.
The next question is from Alok.
Hello?
Alok, you can speak up.
Am I audible?
Yes.
Yes. Okay. So just a question which is pending on a Asacol HD. Any update on that? Anything on the competition side?
Yes. I think we still build for competition in this financial year. We were assuming there was some competition coming, but we haven't seen it yet.
And as per your intelligence, what is keeping the competition away?
I think it's a difficult product to develop. So its -- we took quite a while to do it. I guess people are also struggling.
Okay. And for the U.S. for this year, how many new product launches are being planned?
25 plus.
The next question is from Tushar.
Am I audible?
Yes.
Sir, just firstly, on generic [indiscernible]. How has been the scale up in this product? Are we now to the run rate where we expect to be? Or we are yet to reach that stable on that?
No, we are far away. We will require -- I mean, right now, it's not at the run rate that we expected because of the capacities, that we were not able to get from our partner. But meaningfully, I don't think anything in this calendar year can happen.
Understood. So is it the capacity constraint is on account of the regulatory issue at the partner side? Or the capacity buildup itself is going to take much longer?
The capacity build-up. And pricing is [indiscernible] also -- we don't want to do it at this pricing.
Understood. Sir, secondly, just a clarification on EBITDA margin guidance of 20%, 29%. We are already at 29%, but this quarter was heavy both in terms of, let's say, REVLIMID and Consumer Wellness compared to, say, the 4 quarters of FY '25. And subsequently, it is going to be again the fourth quarter to be of such kind of phenomenon. So still 20%, 29% guidance -- so if possible to call out other niche products in FY '25 which can help sustain such kind of profitability?
Last year, as I said, we achieved 27.5%, and we -- our current guideline -- guidance update for this year is about 100 to 150 basis points, better than FY '24.
Understood. And this is considering -- as earlier participant was asking, this is considering Asacol HD competition? So if that doesn't come through, we have a scope to further improve the margins?
Yes.
As there are no further questions from the participants, on behalf of Zydus Lifesciences Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines and exit the webinar.