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Zydus Lifesciences Ltd
Earnings Call Analysis
Q3-2024 Analysis
Zydus Lifesciences Ltd
Zydus Lifesciences Limited reported a robust performance for the quarter ended December 31, 2023, with a notable 6% year-on-year growth in consolidated revenues, hitting INR 45.1 billion. The Indian formulations business was a standout, delivering strong double-digit growth thanks to volume increases and new product introductions. Similarly, double-digit growth was seen in both emerging markets and Europe based on the same drivers. On the profitability front, the EBITDA rose by 15% year-on-year at 11 billion INR, translating into a healthy EBITDA margin expansion of 200 basis points to reach 24.5%. This margin improvement is part of a continuing trend, with the first nine months of the fiscal year seeing a 550 basis point boost in EBITDA margin over the prior year.
Zydus continues to fortify its market positioning by growing its geographical presence, launching new products, and investing in various patient support programs, especially in areas with unmet healthcare needs. Innovation remains at the core of Zydus' strategy, with several milestones achieved in the development of new chemical entities (NCEs), biotech R&D, and the specialty segment. The company is engaged in rolling out a New Drug Application (NDA) for CUTX-101, a treatment for Menkes Disease, and is initiating Phase II trials for ZYIL1 in the U.S..
Zydus exhibits financial rigor leading to a strong balance sheet with a net cash position. This financial stability is cemented by a net profit for the quarter standing at 7.9 billion INR, which is a considerable 27% increase year-on-year. This performance indicates both operational efficiency and the effective execution of growth strategies.
The company anticipates that the growth witnessed in India is sustainable and plans to expand the salesforce to further fuel this momentum. These expansions are set to take full effect from the first quarter of the next financial year, ensuring that the growth trajectory in India remains upward.
The acquisition of LiqMeds is expected to immediately contribute to earnings, with the U.K. and the U.S. marked as key markets for its liquid oral products. Although currently small in terms of revenue, the business plan for LiqMeds is robust and expected to generate profit from this year onward.
While certain products continue to enjoy exclusivity in the U.S. market, Zydus expects an improvement in numbers in the subsequent quarter, potentially owing to REVLIMID. New launches and a focus on better gross margins drive the U.S. business forward. The profitability is underpinned by a strong product mix and selective launches that command higher gross margins.
The consumer wellness segment has also witnessed growth, with leading brands gaining market share despite market challenges. Zydus is committed to delivering double-digit growth and aims to leverage new launches and distribution expansions to achieve this goal.
Zydus projects good growth momentum in the U.S. while continuing to expect robust launches for the next three years that could sustain growth. As for international markets, the focus remains sharp on key geographies and therapies, particularly expecting continued momentum from emerging markets.
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Welcome to Zydus Lifesciences Limited Q3 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Ganesh Nayak Executive Director of Zydus Lifesciences. Thank you, and over to you, sir.
Good afternoon, ladies and gentlemen. Welcome to our post results teleconference for the quarter ended December 31, 2023. For the 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. We are happy to end the calendar year with a strong performance and expect to sustain the growth momentum going ahead. The quarter gone by was an encouraging one for our India formulations business. The business delivered strong double-digit growth during the quarter on the back of healthy volume growth and new product launches.
In the consumer wellness space, our category-leading brands like Glucon-D, EverYuth Scrub & Peel off and Nycil gained market share during the quarter despite the challenging demand scenario. Our U.S.-based business registered improvement in profitability, driven by sustained volume expansion and new product introductions made over the last 12 months.
On the emerging markets and Europe formulations front, robust growth momentum built over the last several quarters, sustained, with the business delivering healthy double-digit growth for yet another quarter. With that, let me take you through the financial numbers for the quarter gone by.
We registered consolidated revenues of INR 45.1 billion, up 6% on a year-on-year basis. For the first 9 months of the current fiscal, the growth was 15%, driven by healthy double-digit growth registered in all our key markets. EBITDA for the quarter was INR 11 billion with a growth of 15% on a year-on-year basis.
EBITDA margin for the quarter stood at 24.5%, which is an improvement of 200 basis points on a year-on-year basis. The business delivered robust operating performance during the current fiscal as the EBITDA margin for the first 9 months of FY'24 was 26.8%, up 550 basis points over the corresponding period of the previous financial year.
Net profit for the quarter stood at INR 7.9 billion, up 27% year-on-year. Our balance sheet continued to strengthen with a net cash position of INR 15.2 billion as at 31st December, 2023, as against the net cash of INR 5.5 billion as at 31st March, 2023.
Now let me take you through the operating highlights for the third quarter of FY'24 for our key business segments. Our India geography, which comprises of the Formulations and Consumer Wellness business, accounted for 42% of the total revenues during the quarter and grew 11% year-on-year. As mentioned earlier, our formulations business in India delivered a strong double-digit growth during the quarter with a growth of 16% year-on-year.
The branded portfolio grew faster with a growth of 17% year-on-year. Portfolio of key pillar brands and innovation products registered strong volume growth, driving overall growth during the quarter. During the quarter, we gained ranking in the cardiac and anti-infective therapies and registered improvement in market share in the antidiabetic and anti-infective therapies.
On the super speciality front, we retained leadership position in the nephrology segment while in the oncology space, we remained the fastest growing company in the IPM. As per IQVIA MAT December 2023, our chronic portfolio grew faster than the market with a growth of 12% against the IPM growth of 11%. Our share of chronic portfolio has gone up by 136 basis points in CY'23 to 41%.
Consumer Wellness business recorded revenues of INR 4 billion, down 3% on a year-on-year basis. The sector continues to witness subdued demand, similar to the previous quarter, as the expected buoyancy in rural demand continues to lag. The personal care segment, which comprises of Nycil and EverYuth brands, registered yet another quarter of strong growth. Gross margins continued its upward journey with an improvement both on a sequential and year-on-year basis.
Now let me take you through the performance of our U.S. Formulations business. The base business displayed robust momentum during the quarter with sustained volume expansion on a sequential basis, well supported by new product launches, including some differentiated launches, which helped profitability improvement.
Overall, the business posted revenues of INR 18.4 billion during the quarter. We launched 11 new products during the quarter. New launches for the quarter include launch of our first 505(b)(2) product, ZITUVIO and 2 transdermal products. We filed 12 additional ANDAs and received final approval for 6 ANDAs during the quarter. As mentioned during the last earnings call, we also received final approval for 2 NDAs, namely sitagliptin tablets, which is ZITUVIO, and sitagliptin and metformin IR tablets, which is ZITUVIMET during this quarter.
On the international markets front, which comprises of Emerging Markets & Europe Formulations business, all major markets of Asia Pacific region and Africa registered robust double-digit growth during the quarter. Demand scenario remained strong in Europe, while in Mexico, the business continued to grow in double digits. Overall, the business posted revenues of INR 4.9 billion, up 31% year-on-year.
On the operations front, we have built a network of regulatory compliant manufacturing facilities and a resilient supply chain, which serves as the backbone of our business globally. We remain committed to extend our robust compliance record by maintaining the high standards of quality and in turn, ensure uninterrupted supply to our customers across the globe.
This concludes the business review. I would now request Dr. Sharvil Patel to take you through the key drivers across the businesses as well as initiatives in our innovation program.
Thank you, Mr. Nayak, and good afternoon, ladies and gentlemen. It is a pleasure to have you all here on the call today. Our performance during the current fiscal has been very encouraging so far, and we are confident of meeting and possibly exceeding our growth aspirations for the year. All our key markets delivered healthy growth with significant improvement in profitability.
We remain committed to expand our presence across markets through expansion of our offerings to satisfy diverse health care needs of patients and, in turn, generate greater value for all the stakeholders. On the India Formulations front, our endeavor is to strengthen the position across focused therapies through multiple levers.
We continue to work towards expanding our geographical reach, leverage multiple distribution channels, exploring different partnership opportunities, launching new products and leveraging our innovation portfolio to offer novel solutions to the patients.
We have been conducting various patient support programs and activities to create greater awareness amongst patients, particularly in the areas of their unmet health care needs. On the U.S. Formulations business, it continued to exhibit resilience on the back of volume expansion in base portfolio and new launches.
Comprehensive portfolio of generics and proprietary products developed in-house as well as through partnerships, strong customer relationships, our network of regulatory compliant manufacturing facilities and an agile supply chain will ensure sustained growth for our U.S. business going forward.
We have a strategic focus to scale up our operations in U.K., which is part of our International Markets business. We will leverage our global R&D portfolio of differentiated and niche generics as well as specialty products and build a strong growth path for the U.S. -- U.K. market going ahead.
Integration of LiqMeds following the transaction completion during the quarter remains on track. We are excited about the potential of differentiated pipeline of liquid orals of LiqMeds. U.S. and U.K. are the key markets for us for the portfolio of oral liquids. Going forward, we shall expand our offerings of liquid orals to other countries of the international markets as well.
Our innovation pipeline across different areas continues to flourish, which is evident from the achievement of the different milestones. Our innovation engine has enabled affordable treatment options what are made accessible to the patients and, in turn, have delivered strong volume growth consistently for the company.
With this, let me talk about some material developments on our innovation efforts during the quarter. On the NCE research front, during the quarter, we expect to complete the patient recruitment for our Phase IIb/III clinical trials of saroglitazar magnesium for the PBC indication for the U.S. market.
We also completed the hepatic impairment study of the molecule in cirrhotic cholestatic patients and published the results of the same in CPDD. The Phase IIb clinical trials of saroglitazar magnesium for NASH indication for the U.S. market is also progressing as per plan.
We have received permission from the U.S. FDA to initiate Phase II clinical trial of ZYIL1, an NLRP3 inhibitor in patients with Parkinson's disease. The study will evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of the molecule in patients with Parkinson's disease.
The U.S. FDA has granted an orphan drug designation to the molecule to treat patients with CAPS, a rare auto-inflammatory disease. ZYIL1 is also undergoing a Phase II clinical trial in India in patients with Amyotrophic Lateral Sclerosis, the disease called as ALS.
ALS is a rare progressive and fatal neurodegenerative disease with an average life expectancy of 3 to 5 years from the time of symptom onset. We completed the Phase II clinical trial of ZY19489, a potential single dose anti-malarial drug, and submitted the protocol to DCGI to initiate the Phase III clinical trials.
In the biotech R&D space, our pipeline of biological products continue to advance further with 2 monoclonal antibodies awaiting marketing approvals in India. Two other products, including 1 mAb, are undergoing Phase III clinical trial in India.
On the specialty and the 505(b)(2) development front, we completed asset transfer of CUTX-101, a copper histidinate product candidate for the treatment of Menkes Disease from Cyprium Therapeutics. Under the agreement, we received worldwide proprietary rights and the U.S. FDA documents pertaining to CUTX-101. The rolling NDA submission of CUTX-101 is going on at present, which is expected to be over during the current calendar year.
Thank you, and now we can start the Q&A session. Over to the coordinator for the Q&A.
[Operator Instructions] The first question is from Neha Manpuria.
My first question is on the India growth that we have seen in the quarter. I know you've talked about India starting to see double-digit growth over time, but was there anything specific in the quarter? How sustainable is this trend as we look at the next year?
So that's the first part of the question on India. And second is also, to maintain this growth momentum, do we think we need to add MRs or continue to invest in the India business to support this double-digit growth?
So as I said, the continued effort -- persistent effort on India business for our key molecules and therapies continue. So there is no one-off in this. It's all driven by volume growth and new product launches, which has led to this growth. And we do believe we will continue to look at expansion in terms of number of reps in India market, which we have started to do. And I think the full effect of it, you will get to see from quarter 1 of the next financial year.
How many reps are we adding, sir? What's our current strength and how much are we adding?
We will be adding around 700.
Got it. And are these in specific therapy areas, market penetration? What's the thought process when we are looking at this rep addition?
So yes, it's a mixture of both, both reach as well as because of a larger portfolio, better coverage of the portfolio.
Understood. My second question is on the LiqMeds acquisition that we announced last quarter. How should I think about monetization of the portfolio as we go ahead? I think from what you had announced, they have a facility in U.K. So how should we think about this business contributing to the growth in the U.S., ROW, and therefore, to earnings?
So I think on the earnings front, LiqMeds will start contributing immediately because it is a profitable business. And as I said, the business is currently based on 505(b)(2) products, which are both partnered and some of it in the future, which will be launched by Zydus also.
And also with our expansion in U.K. and other markets using this portfolio, we would start seeing revenues but much later. But its current business plan itself is very good for it to deliver its desired expectations that are there. And as I said, it will be profitable from this year onwards.
And what's the revenue -- current revenue base from this business that we have?
It's right now very small, so it's just in the scale of commercialization phase. So maybe in the next financial year, I can give you a better input once we see it, but it is doing well right now.
The next question is from Kunal Dhamesha.
Hello, can you hear me?
Yes.
So first one on the U.S. business. Q-o-Q revenue seems to be flattish despite launching 11 products. So any particular product where we face a lot of price erosion because I believe the overall price erosion remains benign in the market, right? So what has caused this? And I believe that REVLIMID was also not a factor last quarter and probably not this quarter as well. So what has caused this revenue to remain flat?
So I think we are on track as per expectations for this quarter. This is the last quarter where distributors also look at their inventories and looking at restocking or destocking. So I think it is in line with what we expected. And the quarter 4 onwards, you'll, again, see the uptick. But I think we are happy with the progress that we achieved same numbers as last quarter.
With respect to a lot of new launches in the last few months, it's -- you have to understand very little sales happen for new products in December. So we hardly get any few months to sell. So the more major impact will be in the next financial year.
Okay. And any comments on price erosion, what you have seen, what you are expecting for the next couple of quarters?
Always difficult to predict, but I think on our base portfolio, we don't see any major price erosion. But -- so it's negligible right now, but we cannot predict what will happen going forward.
Sure, sure. And second one on the PBC trial that we are currently doing. So now that we are done with the patient enrollment, what is the internal estimate about when we reach the primary endpoint? Any timelines you would like to share there?
So it's a 52-week follow-up. So by next year, our expectation is by quarter 4 of FY'25, we would look for major data as well as submission.
So there are no event-related data in this, right? It's just follow-up and measuring certain chemical...
Yes.
Okay. Perfect. And one for the India business on specialty, I believe we have set up a decent portfolio in India as well. Would you be able to help with what is the contribution of NCE products within our India Formulations revenue for the 9 months FY'24?
So as I said, we are not giving individual product sales and -- but we have 2 -- 3 NCEs that we commercialized. One is Lipaglyn under -- sorry, : saroglitazar under 2 brand names, Lipaglyn and Bilypsa. We have our Desidustat which is Oxemia. We have our Rabimabs, which is a monoclonal antibody for treatment -- post treatment of dog bite which is just starting to commercialize, and some differentiated ADCs, which are not proprietary, but which is Ujvira, which continues to do very well.
So -- but I would -- I definitely can say for all of the products, the growth is significant, and they are significantly scaling up. And we do believe that, first, Lipaglyn will become the largest brand for the company very soon. And going forward, these are large opportunities for the company.
The next question is from Bino.
I hope you can hear me?
Yes.
Just beginning with REVLIMID just to recap what you have said earlier. So the REVLIMID will come back in 4Q and then again be there in 1Q. Is that the same pattern that will continue?
Yes.
Okay. And second on this ZITUVIO, ZITUVIMET product. What's the early signs you are seeing in the market in terms of pick up? What's your strategy there? And what sort of target market share you're looking at?
So I think this is going to be a slow scale up. I don't think we will see significant traction immediately because we have to look at prescriptions for this molecule. We are currently with -- our initial discussions with both the PBMs, buyers and others look interesting in terms of what we can do with this 505(b)(2).
So I would think more color I can give in after the first half of the year, but it will be a slow buildup, but I think as one of the important launches, for sure, this will be for FY '25 an important value driver.
Okay. And this product, Mirabegron or Myrbetriq, one of your competitors has kind of guided to a launch -- potential launch in Q1 FY'25, depending on certain legal outcomes. What is your status there?
So we have a final approval. We have an approval for this. And I think once -- I think it's still too early to talk about it. But at the appropriate time, we will do the proper disclosures on this.
Okay. Great. And last, the usual question on Asacol HD competition, any further updates?
No. We continue to enjoy exclusivity.
The next question is from Surya Patra.
Congrats for the great set of numbers. My first question is on the gross margin front. So while we know that the elevated number of -- gross margin number that we have seen in the recent quarters, it was, obviously, initially aided by the launch of REVLIMID. But in the last 2 quarters, without REVLIMID, we have been almost maintaining the similar kind of gross margin.
So here what is driving this? And it looks like that without REVLIMID, if you're maintaining this, then subsequent quarter, with REVLIMID, we can see an even improved number and whether this kind of run rate is sustainable?
So I thank you for the good wishes and for the performance. But yes, I would say that the gross margins are driven by many ways. One is obviously the product mix, which is helping us in terms of the gross margin with the right focus, both on the India business. And what one has to also see is that we have had important launches in the U.S. where the gross margins are better than, obviously, the average gross margin. So new products are helping in improving the gross margins.
Also, I think scaling up of our other businesses is also leading to healthy improvements also with good launches in the international markets also. So I would say, there's an overall improvement across the businesses on the gross margin front, which has led to this. And going forward, obviously, with REVLIMID, they would see a higher uptick on gross margins, but we do believe these are sustainable gross margins that we are showing.
Okay. Sir, just an extended one. Even for the current year, you have guided that EBITDA margin would be around 27%. So I think this is a kind of a great number that we are achieving after a gap. So given the kind of a potential annual volume ramp-up that you will see in REVLIMID in the subsequent financial year and again, product mix, both in the U.S. as well as in the India market seeing a kind of improvement. So are you kind of guiding more than 27% kind of margin run rate for next year?
So I think it's little early to talk about next year, but if we don't see competition on Asacol, we would obviously definitely continue comfortably and probably exceed because of the new launches.
Okay. My second -- the next question is on the domestic formulation side. So in fact, obviously, we have outperformed the industry in this quarter and in the recent period. But going ahead, although you have also kind of indicated about [Audio Gap] and all that. But see, practically about your -- the chronic therapies performance going ahead, your growth contribution coming from the innovative molecule, biosimilars, differentiated product offerings from your basket. So considering all that, what is the practical kind of a progression that one should expect from the domestic formulation business next year and going ahead?
So our intention is definitely to outperform the industry growth driven by many of the points that you raised, both on the chronic as well as on the new portfolio and the proprietary medicine. So that is our endeavor going forward. I think we are happy with the last few quarters' performance and especially the last quarter, and we hope to continue to build this momentum into the coming quarters.
Okay. Just last one, sir, besides -- the U.S. business, if you see we have consistently been maintaining more than 200 kind of quarterly run rate. So going ahead, what is the kind of a trend? And what is the kind of this thing that we should anticipate?
Because you have talked about multiple licensing product opportunities. We have seen some of the announcement relating to those in the recent months, but if you can just collaboratively -- means combining both these 2 points of the base business continuing the way it is and with the potential benefit flowing from the in-licensed product opportunities. So over the next 2-year period, what run rate that we can potentially achieve going ahead, for this 2 period -- 2-year period?
So I think from the immediate point of view, I think, as we said, for this FY'24, we will end the year with a good double-digit growth. And our endeavor is to continue to launch more products into the U.S. market. We do have almost every year, 1 to 2 very large opportunities, both by our own development and in-licensing. So until 2027, 2028, we have a very good pipeline of Day-1 launches and exclusive launches.
So we are quite excited about the kind of products that we hope to launch in the U.S., which could be revenue-wise sizable and profit-wise. But as I said, the U.S. is a moving parts business. There are a lot of things we have to achieve. Obviously, approvals you have to achieve, IP success and then obviously launch. So hoping all of that goes through as we expect, we are seeing good progress on the U.S. business.
The next question is from [ Sanath ].
Can you hear me?
Yes.
So first of all, congratulations for the good set of numbers. I have 2 questions. One is related to your Consumer Wellness business. So if the trajectory, there is no improvement quarter-on-quarter on this front. So what is going to be your strategy to improve the situation here?
Secondly, which category, and I'm talking about not the drug, but which 2 categories in India and U.S. will propel your growth coming in the future from near to medium term?
So I think on the consumer side of the business, we have 2 portfolios. One is the skin care side and the other is the food side. On the personal care side, we have done very well with a strong double-digit growth, both for the year and the quarter. However, on the nutrition and food side, we have found it challenging with the -- both the inflationary issues that have happened, and more importantly, rural demand not picking up, which is a normal trend that we have seen recently in the last 2 quarters in the market.
Going forward, both -- from quarter 4 onwards, and more importantly, in the next financial year, we believe that with the normalized season, we would see better traction for our summer-skewed products in the quarter 4 and quarter 1. And with the important new launches, some distribution expansion and also the line extensions that we are doing, we believe that -- we aspire to at least make sure we grew in double digits.
Also on the gross margin front, we have seen quarter-on-quarter improvement and further improvement on the gross margins, we would see which would help in terms of profitability. So I think it's still early days. We need to wait to see how do we do in the quarter 4 and quarter 1, but we have taken steps to make sure that we can find growth, but we also need help with in terms of the market growing for us to grow.
The good thing for the wellness business is that in most of the brands, it has gained market share. And in Complan, it has just managed to retain its market share. So overall, in the difficult market also, the brands have continued to gain market share. So that's in terms of relative performance.
With specifics to the other question that you asked. So on the U.S. business, and as I said, it's a mixture of all our portfolios of businesses of complex, orals, injectables and a whole portfolio that is aiding to the growth. So I would say going forward, both complex launches in the oral side as well as injectable side will aid further growth in the U.S. market.
Good compliance on manufacturing and supply chain is also helping us garner more business. And we do continue to see good amount of launches continuing over the next 3 years, which will help us sustain the U.S. growth. Of course, we still have to wait and see when we see Asacol competition, but not seeing that, obviously, we have a much better trajectory right now.
With respect to India, I think as I said, multiple things, focus on the pillar brands and chronic portfolio and the pillar brands; driving penetration through better marketing practices; and also the new launches, Day-1 launches, as well as important areas like oncology and other areas scaling up will all lead to better growth. And obviously, our proprietary medicines have continued momentum, which is helping overall growth as well.
Basically in U.S., so when I said category, I meant whether it is going to be antivirals or anti-malarial ones or...
U.S. is a generics business, it's not a branded business. So it's not a category-wise business.
Okay. And India?
India, we are present in about 6, 7 important therapies, and we continue to pursue them.
The next question is from Nitin Agarwal.
Sharvil-bhai, there has been a very strong growth in the emerging market business for the last 3, 4 quarters. Anything particularly which has changed in this business? And what is the outlook for this segment as we go forward?
So I think, yes, the international business is -- we are very happy with the -- both -- not only the revenue growth, but also their improvements on profits and their thrust on improving profitability. So I think over the last 5 years, we have seen good growths on -- double-digit growths and also profitability improving. And with the pipeline of products and the focus on key geographies, we continue to see that.
Also, I think going forward with the better -- with the ability to leverage our complex dosage forms filed in the regulated markets in many of the international markets, we will see a much better upside also. So I think we are very excited that in spite of geographical challenges, country challenges, and related to different issues, we still see a good momentum for the international business. And going forward also, it should continue.
And which all would be our key markets in this -- in emerging markets?
So we have a Latin American focus, South Asia. We have Philippines, Sri Lanka, Myanmar...
South Africa.
And also through partners, some other markets, including Vietnam. And then in Africa, we have Uganda and South Africa, which are the critical markets. And now we also started to register products in Australia, also other markets in Europe -- sorry, U.K., France, Spain and other markets. So I would say, yes, it's a more focused strategy and not a very -- it's not many markets, it's focus markets.
And is it fair to say that if you take a next 2-, 3-year view, this probably could be the fastest-growing business for you in the entire -- in the consolidated revenues?
Yes. Currently, the scale-up is good, but as I said, there are potentials on also our home markets, which is U.S. and India showing good growth. So I won't be 100% able to say this will be the fastest, but definitely, consistency-wise, it will be a fast-growing market.
And on the U.S., for the last 2 quarters, we did about $225 million of revenue, which is ex-REVLIMID basis. Now this obviously has a fair chunk of Asacol HD, I presume, in this base. Now assuming there is a risk -- assuming the competition for Asacol HD does materialize, I mean, do we have enough launches to offset this over the next couple of years?
Yes, more than enough.
Okay. That's good. And on REVLIMID, what should be a base assumption? Similar sort of revenues which you've done in '24? Or we should see a scale up in revenues as we go through the next couple of years?
I think we may -- we would -- current -- our immediate expectation is some scale up on revenues. For the year later, we'll still wait and talk about it later. But on immediate basis, we would see some scale up.
And that should reflect in Q4 and Q1?
Yes.
Okay. And lastly, you've talked about, the point that you mentioned about, there is enough opportunity for you to offset a possible Asacol HD genericization, I mean, if there is a way for you to sort of indicate over the next 2 years how many $25 million, $30 million plus launches that we can potentially have in our basket?
So I think, exactly I won't be able to give you the number right now. But definitely, in the next 2 years, we have important launches, which will overall scale up the overall U.S. generics business. But as I said, even considering FY'26, '27, '28, we have very large, important launches. So we have a good pipeline of products, which -- where we will see limited or exclusive launches.
The next question is from Kunal Dhamesha.
So there's 1 to 2 very large opportunity per year this 2027, '28 that we have said. In terms of risk mitigation, would this 8 to 10 products be filed from multiple plants of ours? Or they are currently a single plant filings?
No, this is all diversified both from plant, dosage form and partnered-in products. So it's not anything related to a specific plant.
And so in case...
Majority of the products I'm talking about are already filed. For to be filed products, obviously, I don't want to give an early indication without filing them.
So we have done the risk mitigation for this key large opportunity is the way to understand it, right? Not a single plant would -- so every key product will have 2 plants as the manufacturing site?
No, that is never possible. All products will not have 2 plants, but all products are not from 1 plant.
Okay. Okay. Perfect. And in terms of, let's say, if I have to bucket these 8 to 10 products based on what they are contingent on from the launch: a, one is settlement; b, court litigation; and c, probably the development front. How would you bucket these 10 -- 8 to 10 products that how many would have been settled which we are just waiting for that deadline to hit as we can launch and how many are the under court litigation right now?
So majority of what I have just spoken off are all settled products. To be settled products and to be filed products, still we are waiting. I mean we're not talking about those right now.
The next question is from Nitin Agarwal.
Sharvil-bhai, on ZITUVIO, what is the kind of fair share of market share that you can target over a period of -- over the next 2 years, I guess, is when the exclusivity lasts for us?
So I said it's still early days. And I think I can give a better picture maybe 2 quarters down because both negotiations with PBMs, the right channel, the prescription, all is required. So I don't think it's a quick buildup. So generally, success on 505(b)(2)s has been limited.
So we are still very -- we are -- from whatever early traction we are seeing, we're seeing -- we see good -- we are seeing some good opportunity, but it still has to play out. So I would say still early days, but definitely, it will -- from whatever we are seeing currently, our best estimate is that this will be a valuable -- these first 2 products will be a valuable launch.
The next question is from Harith Ahamed.
I hope I'm audible.
Yes.
So my first question is on the other operating income for the quarter. There is roughly INR 50 crores quarter-on-quarter delta there. So can you give some color on that?
Other income?
Other operating income.
Yes. So I think Arvind can give you that.
Yes. So Harith, it's largely driven by incremental export incentive and processing income and small portion of license fees for a couple of out-licensing deals that we had. But it's consistent with export incentive and processing income largely.
Okay. So on the injectables business in the U.S., a few quarters back, we had talked about $150 million to $200 million kind of target from that portfolio. So how has the ramp-up been? Any update that you can provide on that front?
So the business is tracking better than what we had planned. So I think it's going on the right direction right now. And we're seeing good opportunities with shortages as well as the complexity of regulatory approvals and as well as the quality. So I think the opportunity seems to be good, and we are doing better than our plans.
Okay. And last one on the transdermal side, a couple of launches that you have done during the quarter. So when I think of FY'25, how material can transdermals be for us? Can it be a $50 million-plus revenue stream from all the launches in transdermal?
So yes, the potential definitely for our portfolio is about $50 million to $60 million. It won't be in FY'25. But in the next 1 to 2 years, yes, it can be a $50 million to $60 million opportunity.
The next question is from [ Devang ].
Sir, can we -- sir, when we are planning to partner for respiratory therapy in the U.S. market, will we see this in FY'25?
No, it's a little longer term. So it is still under the development stage. So we have to wait a couple of years before we can talk about it.
Okay. And my next question is, could we see double-digit revenue growth for FY'25 and beyond?
I think once we finish this year, we can talk a little bit more about the next year. But as I said, coming -- going forward in the next quarter 4, we are seeing good traction driven by U.S. and good base business, and we continue to hope to build that momentum.
[Operator Instructions] The next question is from [ Unnathi ].
I just had 1 question specifically for the U.S. market. Why has there been a decline on a year-on-year and quarter-on-quarter basis in this quarter for the U.S. sales?
Could you repeat what you just asked? We couldn't hear you well.
Well, I just wanted to understand why there has been a decline in the U.S. sales in this quarter, 4.3% on a year-on-year basis and 1.2% on a quarter-on-quarter basis?
So I think the U.S. business, the right way to look at it is quarter-on-quarter versus year-on-year. Last year, we had REVLIMID sales, which is not there this year. But I think the right metric is to look quarter-on-quarter. And quarter-on-quarter, we're almost flat. And as I said, the last quarter is always where the distributors normally destock or at least manage their inventories. So we don't see any concern with this. This is as per expectations of quarter 4 -- sorry, quarter 3.
Okay. So there was absolutely no sales of REVLIMID in Q3 of '24?
Yes.
Okay. But then do you believe that it will continue to be the case for the coming quarters? Or will it kind of resurge again?
It will resurge again next quarter.
As there are no further questions from the participants, I now hand the conference over to management for the closing comments.
Thank you very much, and look forward to interacting with you again in the month of May for the last quarter results of FY'24. Thank you, and good night.
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. Thank you so much.