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Zydus Lifesciences Ltd
Earnings Call Analysis
Q4-2024 Analysis
Zydus Lifesciences Ltd
This recent earnings call from Zydus Lifesciences revealed impressive financial results for FY 2024, with consolidated revenues up by 13% year-over-year, reaching INR 195.5 billion. The company's EBITDA margin improved significantly, standing at 27.5%, a notable increase of 510 basis points from the previous year, translating to a 40% growth in consolidated EBITDA to INR 53.8 billion. The net profit also saw a substantial jump, up 97% to INR 38.6 billion. Additionally, Zydus Lifesciences strengthened its balance sheet with a net cash position of INR 8.6 billion as of March 31, 2024, up from INR 5.5 billion the previous year.
In the fourth quarter of FY 2024, Zydus Lifesciences posted robust performance metrics with revenues of INR 55.3 billion, a 10% increase year-over-year and a 23% rise quarter-over-quarter. The EBITDA margin for the quarter hit a record high of 29.5%, improving by 440 basis points year-over-year and 500 basis points quarter-over-quarter. Net profit for the quarter surged by 299% year-over-year and 50% sequentially, reaching INR 11.8 billion.
The company's India market, including formulations and consumer wellness, made up 40% of total revenues in the fourth quarter, with an 8% year-over-year growth. The Branded Formulations business outpaced market growth, driven by key products and new launches, and achieved significant market share gains in dermatology and anti-infective therapies. Chronic portfolio contributions increased to 41.2%, up by 360 basis points over the last three years.
Zydus Lifesciences achieved a milestone in its U.S. Formulations business, surpassing USD 1 billion in revenue for the first time, aided by strong double-digit growth and consistent quarterly expansion. The international markets, encompassing emerging markets and Europe, also reported double-digit growth. In the U.S., significant new product launches and pipeline developments continue, with the company planning to launch 30-plus products in FY 2025.
Zydus Lifesciences maintains a robust innovation pipeline, with significant milestones achieved in FY 2024. The company is focusing on delivering novel healthcare solutions through its specialty space acquisitions, such as LiqMeds and the rare disease segment. The company plans to launch meaningful products across various markets and expects continued growth in its specialty and chronic segments in India.
For FY 2025, Zydus Lifesciences aims to retain its FY 2024 EBITDA margin of 27.5% even with anticipated competition for its product, Asacol. The company remains committed to improving these margins and ensuring sustainable profitability through cost-efficiency initiatives and a diversified product portfolio.
Looking ahead, Zydus Lifesciences is projecting double-digit revenue growth at an aggregate level, despite competitive pressures. R&D expenses are expected to hover around 7% to 8% of revenue. The company's strategic interventions, robust pipeline, and focus on high-value product launches are expected to sustain its growth trajectory and profitability in the coming years.
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And there will be an opportunity for you to ask questions after the opening remarks. 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 evening, ladies and gentlemen. Welcome to our post-results teleconference for the fourth quarter and the financial year ended March 31, 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 Directors office.
To begin with, let me give you an overview of the performance for the year. During the fiscal 2024, all our key businesses demonstrated strong performance through the year. Overall, we delivered a healthy double-digit growth during the year in line with our expectations along with improved profitability. I'm happy to inform you that we achieved the highest ever operating profit and margins during the year.
Our Branded Formulations business in India grew faster than the market and registered double-digit growth during the year, aided by healthy volume growth and new product launches. On the consumer wellness front, the FMCG sector witnessed gradual improvement in demand during the quarter with an uptick in demand, also in rural India. Most of our portfolio has seen demand recovery, which was further fueled by the demand of summer-led brands like Glucon-D and Nycil in anticipation of a good summer.
We achieved an important milestone in our U.S. Formulations business during the year. Revenues of the business crossed USD 1 billion for the first time on the back of double -- strong double-digit growth. The base business achieved a sequential growth every quarter through the year on the back of volume expansion and new product introductions.
International Markets business, which comprises of emerging markets and Europe, also delivered double-digit growth with all key markets contributing to growth during the year. In order to stay competitive and serve our customers in a cost-efficient manner, we continuously analyze the spend base and identify and implement various ideas across functions to improve efficiencies in our operations. We could improve our profitability in the range of 50 to 70 basis points in the past on account of such initiatives, and we expect similar improvement going forward as well. On the back of our diversified portfolio of products and focused execution efforts, we expect all our businesses to sustain healthy growth.
With that, let me take you through the financial numbers for the year gone by. We recorded consolidated revenues of INR 195.5 billion, up 13% on a year-on-year basis. The business delivered robust operating performance with an EBITDA margin of 27.5% which is an improvement of 510 basis points over the previous year. Consequently, the consolidated EBITDA for the year grew by 40% to INR 53.8 billion. Net profit for the year stood at INR 38.6 billion, up 97%. Our balance sheet strengthened further with a net cash position of INR 8.6 billion as at 31st March 2024, against the net cash of INR 5.5 billion as at 31st March 2023.
Coming to our quarterly performance. We ended the fiscal 2024 with a robust performance. The revenue stood at INR 55.3 billion during the quarter up 10% on a year-on-year and 23% on a quarter-on-quarter basis. We registered the highest-ever operating profitability during the quarter with an EBITDA margin of 29.5%, which is an improvement of 440 basis points on a year-on-year and 500 basis points on a quarter-on-quarter basis. EBITDA for the quarter stood at INR 16.3 billion, up 30% on a year-on-year and 48% on a sequential basis. Net profit for the quarter was INR 11.8 billion, up 299% on a year-on-year and 50% on a sequential basis.
Now let me take you through the operating highlights for the fourth quarter of FY '24 for our key business segments. Our India geography, which comprises our formulations and consumer wellness business accounted for 40% of the total revenues during the quarter and grew 8% year-on-year. Our Branded Formulations business in India grew faster than the market during the quarter as well with 8% year-on-year growth. Portfolio of key pillar brands and innovation products were the key growth drivers.
During the quarter, we gained market share in derma and the anti-infective therapies. On the super specialty front, we retained the leadership position in the nephrology segment, while in the oncology space, we remained amongst the fastest growing companies in India.
Contribution of the chronic portfolio has increased consistently over the years and stood at 41.2% as per IQVIA MAT March '24 an improvement of 360 basis points over the last 3 years. The consumer wellness business recorded revenues of INR 7.8 billion, up 10% on a year-on-year basis. The Personal Care segment, which comprises of Nycil and the EverYuth brands registered yet another quarter of strong growth.
Performance of the Food and Nutrition segment improved with mid-single-digit growth during the quarter. We continued to witness gross margin expansion with an improvement of 377 basis points on a year-on-year basis for the quarter, driven by calibrated price increase taken earlier and efficient hedging strategy for key commodities.
Now let me take you through the performance of our U.S. Formulations business. The business accounted for 47% of the consolidated revenues during the quarter with revenues of INR 25.2 billion and delivered a robust 37% growth sequentially. As mentioned earlier, the base business continued to expand sequentially during each quarter of the current fiscal on the back of volume expansion and new product launches.
We launched 5 new products and received approval for 12 ANDAs, including 4 tentative approvals during the quarter. We filed the 20 ANDAs, received approval for 46 new products, including -- inclusive of -- including 5 tentative approvals and launched 29 new products during the year. On the international markets front, growth momentum built over the last several quarters continued as the business delivered double-digit growth for yet another quarter with a healthy demand across key markets. Overall, the business posted revenues of INR 5 billion, up 13% year-on-year.
During the quarter, we received the EIR from the U.S. FDA for our API facility, which was inspected by the agency during the preceding quarter. Two of our injectable manufacturing facilities located at Ahmedabad SEZ Jarod near Vadodara were recently inspected by the U.S. FDA and were issued certain observations upon completion of inspection. We are closely working with the U.S. FDA to implement necessary corrective actions.
This concludes the business review. I would now request Dr. Sharvil Patel to take you through the key drivers across businesses as well as initiatives in our innovation program.
Thank you, Mr. Nayak, and good evening, 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 and the year. All our key businesses are focused and on enhancing the value proposition to their customers by fulfilling their diverse health care needs. We look forward to expanding our presence in existing therapies and markets and explore newer avenues to serve our customers better and generate greater value for all the stakeholders.
On the India formulations front, we continue to channelize our efforts and resources towards strengthening our position in focused therapy areas through multiple levers. Our innovation engine continues to offer novel solutions to our customers and satisfy their unmet health care needs. Various strategic interventions done in the past have helped our Branded Formulations business to deliver double-digit growth over the last couple of years, and we look forward to building on to this momentum. On the U.S. Formulations front, we have built a comprehensive portfolio spread across dosage forms by leveraging our in-house development capabilities as well as exploring partnership opportunities.
In the specialty space, acquisition of LiqMeds has augmented our capabilities to deliver novel solutions to the patients, while in the rare disease space, we have now a meaningful presence with 2 commercialized products and 1 product under filing stage. We expect our U.S. business to sustain the growth trajectory going forward. This will be driven by large product portfolio, strong customer relationships, a network of regulatory-complaint manufacturing facilities and agile supply chain and an efficient cost management.
On the international markets front, we are focusing on growing the business in chosen therapies, areas across key geographies by leveraging our global R&D portfolio of differentiated and niche generics as well as specialty products. In Europe, we are working towards strengthening our retail presence in France and Spain through portfolio expansion, improving cost proposition and increasing pharmacy coverage. We also commenced our UK operations during the year, where we wish to expand by leveraging our global R&D portfolio.
Our innovation pipeline across different areas progressed well and achieved important milestones during the year. Success of our innovation efforts is evident from the increase in number of patients over the years who benefited from the affordable and accessible treatment options delivered by our innovative innovation engine to fulfill their unmet health care needs.
With this, let me talk about some of the material developments on the innovation efforts during the quarter. On the NCE front, we completed the recruitment of patients for Phase IIb/III clinical trials for saroglitazar magnesium for PBC indication for the U.S. market. The trial study -- the trial will study the effects of a molecule relative to placebo over 52 weeks across 100 sites. The Phase IIb clinical trial of saroglitazar magnesium for NASH indication for the U.S. market is advancing as per the plan.
Recently, the National Medical Products Administration of China accepted the new drug application of desidustat made by China Medical Systems Holding Limited, CMS. Earlier in 2020, we granted an exclusive license for desidustat to CMS for China, Hong Kong, Macau and Taiwan markets. Phase III clinical trials in China have demonstrated positive results. The primary endpoint of the hemoglobin mean change from baseline to the period of week 7 to 9 has indicated that desidustat is more effective than placebo increasing hemoglobin levels.
Coming to a key development program, ZYIL-1, the WHO's International Nonproprietary Names, INN, recently approved usnoflast as the recommended name for the molecule. Usnoflast is under clinical development for 4 indications at present, amyotrophic lateral sclerosis, ALS, Parkinson’s disease, cryopyrin-associated periodic syndromes, CAPS, and ulcerative colitis.
For ALS indication, usnoflast is undergoing Phase II clinical trials, ALS affects approximately 31,000 people in the U.S. and an average 5,000 new patients are diagnosed every year with this disease in the U.S. Over 33,000 people are estimated to be living with ALS in Europe, while in India, approximately 75,000 people are living with ALS. People with ALS have a median survival of approximately 2 years from diagnosis.
The U.S. FDA granted the approval to initiate Phase II clinical trial of usnoflast in patients with Parkinson's disease. It is estimated that there are over 8.5 million people worldwide suffering from Parkinson's with 1 million suffering from the disease in the U.S. Each year, 90,000 new cases of Parkinson's disease are reported in the U.S.
On the CAPS front, we are the first company to establish Phase II proof-of-concept for usnoflast in CAPS patients. Results of the study were published in the clinical pharmacology drug development. Usnoflast holds an orphan drug designation from the U.S. FDA for CAPS indication. We have initiated Phase II proof-of-concept study of usnoflast patients with UC, ulcerative colitis. It is categorized by irregular chronic immune response that creates inflammation and ulcers in the mucosa of the large intestine or rectum.
In the year 2023, the prevalence of ulcerative colitis estimated to be 55 million cases worldwide. On the biotech R&D space, during the quarter, we initiated Phase III clinical trials for one product. We completed a preclinical tox study for one monoclonal antibody and submitted the report to RCGM.
On the specialty 505(b)(2) development front, Sentynl Therapeutics, our wholly owned subsidiary received marketing authorization from U.K. MHRA for new life for NULIBRY for the treatment of patients in Great Britain with molybdenum cofactor deficiency, MoCD Type A, an ultra-rare life-threatening genetic disorder. It is the first and only treatment in Great Britain for patients with genetic disorders. An early access program is in place for NULIBRY for enabling eligible patients who meet the specific criteria.
Through this program, health care professionals can request for the product if it is not commercially available in their country. Recently, Sentynl Therapeutics Incorporated acquired world proprietary rights to Zokinvy, from Eiger Biopharmaceuticals for the treatment of Hutchinson-Gilford Progeria Syndrome, an ultra-rare, fatal genetic premature aging disease that accelerate mortality in young patients. Zokinvy is the first and only treatment approved by the U.S. FDA for Progeria. The product is also approved in EU, Great Britain and Japan for the same indication.
Thank you, and we can now start the Q&A. Over to the coordinator.
[Operator Instructions]. The first question is from Kunal Dhamesha.
Congratulations on good set of numbers. Sir, can you highlight, I mean, what would be our broader outlook for FY '25 in terms of revenue growth? And also I think EBITDA margin earlier, we had suggested that we'll do EBITDA margin north of 27%, but 27% and something we have done in FY '24 itself. So do we expect to do higher EBITDA margin?
So we expect all our businesses to register good double-digit growths at the aggregate level, and we expect high teens growth. This is obviously after assuming competition in as Asacol in FY '25.
On the EBITDA margin front, I think assuming we have competition in Asacol, we expect to comfortably maintain FY '24 margins of 27.5% in the coming year, and we'll make our best efforts to continue to improve those margins. So yes, those are the two main observations I have on this. And plus, I would say, we still continue to have a robust pipeline of launches with 30-plus launches that we plan for FY '25.
Sure, sure. And in terms of R&D expenses, any outlook that we want to share now that we have enrolled patients for PBC trial. Does that mean that there would be a step jump in the R&D for FY '25? Or it would be more like business as usual?
I think with the revenue growth that we expect and also there will be growth in R&D, I think we are still giving guidance of around 7% to 8% for FY '25.
Sure. And the last one with your permission, sir. On the acquisition of Zokinvy, from here on whatever that product is doing what would be our strategy to grow that revenue? Would it be more on getting -- so is it that we are not able to reach -- the drug has not reached all the patients that are available? And is it more like geographic adding more geography in terms of launch and all? What would be their strategy with that product?
Yes. So I do think we believe that with our current capability that we have in the rare disease space, we believe that we will be able to find better ways of -- I mean, we'll do better execution on finding new patients first, obviously, in the U.S. But we also see the opportunity in other markets with the registrations and access programs being created for this to get more patients there. So we do definitely see an opportunity to grow this in FY '25 and FY '26.
The next question is from Neha.
Sir, on the U.S. pipeline, if I would, based on your commentary that you would launch about 30 products. If I look at the pending pipeline that we have, it seems like it's around the 50-odd -- 50-60 number. So should we assume as we go ahead, this -- the number of launches sort of moderate because we're doing more high-value launches? Or should we see the filing momentum materially pick up? What's the strategy to sort of augment this pipeline in the U.S.?
So we still expect to 25 to 30-plus ANDAs in FY '25. This year, we had filed 20, but we will see that uptick happen by at least 5 to 10 more. We are also actively were pursuing partnership opportunities by in-licensing important products in the U.S. And recently, we obviously announced one, but we are seeing success on that in terms of finding more opportunities. And going forward, as I said, we still hope to launch 35-plus products in the U.S. in FY '25.
So I think from that point of view, we still-- will continue to have a robust pipeline of products that we have filed, and to be filed. So I think we will still achieve 20, 25-plus launches consistently. But obviously, this year, we will see higher launches. I mean, coming year, we see higher launches.
Got it. And how many of these launches, a rough breakup of what you're planning in '25 would be injectable, non-injectable? And just trying to assess the risk given two of our facilities have been inspected. I know we don't know the outcome yet, and you're doing your best, but how much of this is injectable versus non-injectable? Any color there?
So currently, we believe 4, maybe 4 products that we may believe may get delayed. That's our current estimate.
Okay. Okay. Got it. Second is on the India business. Now we've started seeing some momentum pick up in the India business, particularly I'm talking about the formulation business this year, particularly in the last few quarters. Should we assume that the growth trajectory for India would be now at a higher level? Or what we saw last year is the momentum that we will maintain for the India business?
So as I said, we do expect double-digit growth, but definitely, we will like to grow ahead of market depending on how the market shapes up in FY '25. But currently, our expectation is to grow in double digits for the India business, which is mostly aided by obviously our proprietary and differentiated products, which are significantly adding value.
And also with the efforts that have been put on in certain specialty and chronic segments, we will see better momentum for our growth booster brands that we have allocated. So I think that [indiscernible] plus the proprietary and differentiated products that we have, we believe we can deliver double-digit growth.
Understood. And sorry, one other question on the U.S. market on Asacol you said the guidance includes competition in Asacol. So you're assuming that there will be competition this year, first half, second half? I mean, do you have any color on that? This is just being conservative.
The conservative side is always prudent to assume we will see competition. So that's what we always -- when we're giving the guidance as we are talking about guidance with competition on Asacol.
The next question is from Surya Patra.
Congrats for the strong set of numbers. Sir, my first question is on the margin improvement sequentially what we have seen. If I just adjust for the, let's say, some Revlimid kind of a number out of the total reported. It looks like that your base business has seen the gross margin, which is highest ever. And if this is the case, back to back, even third quarter gross margins were significantly better for the base business, adjusted for Revlimid. So what is driving this? Or it is largely to do it the consumer business doing better than expected.
So yes, one part of the region for the gross margins is we saw an improvement on the gross margins for the consumer business. But overall, also, we have seen improvement in gross margins with better efficiencies and inflationary pressures reduce the same. So I think both of them have aided.
And obviously, it's also to do with product mix as new product sales becomes a larger part of the overall business, the gross margin profiles are much better there. So I think all of that is the product mix, the wellness business seeing the inflationary pressure ease and better pricing realization. And obviously, the mix of markets that we have has led to that benefit of improved gross margins.
So in that case, so what are the sustainable -- I mean, say, whether this is a sustainable one or we can grow up on this? That is one.
And secondly, the spike in the other expense is also what we are witnessing in this quarter. Is it also largely led by the consumer business contributing significantly?
So gross margin without special products is sustainable. And with continuous efforts in terms of cost rationalization, normal price increases that we can take in consumer business. We are able to take care of inflation in terms of input cost.
So far as other expenses are concerned, for the quarter, the increase is partly because of one-off expenses to be estimated about INR 50 crores and largely because of the seasonality business of consumer wellness.
Okay. And this INR 50 crores is one-off?
Yes.
And what -- this is relating to what, sir?
There are different items.
Okay. My second question is about the U.S. business. So obviously, we have seen a kind of a strong sequential improvement, obviously, also led by special products. But on the base business front, how should one think about, and while you were talking about sustaining the momentum there in the U.S. market as well and all that. So what is the nature of the products? Or is while you are saying 30-odd products pipeline for this year, any special products or any kind of a key product opportunities that you're targeting? If you can highlight, select a few which will give some confidence about the sustenance of the double-digit kind of performance in the U.S. business.
So I think there are a couple of things. One is, obviously, the new launches will scale up, as I had spoken of, so both the new launches that we do and the last year's launches that are scaling up, including the products like in the transdermal space. The LiqMeds specialty U.S. business also is scaling up meaningfully.
There is also a contribution that will come in from the Animal Health business as well as the recent acquisition on Zokinvy, which will start getting realized a quarter from now. And if you say very meaningfully recent -- obviously, we have launched mirabegron, which is obviously a significant launch by the company.
And we have exclusivity or kind of thing in both the strength for mirabegron?
Yes. From our best knowledge right now on one strength, we have one more competitor, and on the larger strength, we are exclusive for now.
Okay. Okay. And Sir, the third question was about, let's say -- sorry, it is the continuation to the Revlimid point. So is it fair to believe sir, Revlimid is going to have a kind of improved contribution in the next FY '25?
Yes.
Okay. And in regards to business diversification, it seems that now having seen a kind of a sequential progress and improvising our positioning presence, growth, all that in the domestic side, which now along with the consumer account almost 40%, and U.S. more than 45%. So these are 2 growth drivers in the recent past.
But going ahead for your future progression and all that, are you really thinking about either business diversification in terms of geographically? Or you think that, okay, you can enhance the depth of the business in the existing areas only or existing market only, and hence, can possibly think about sustaining the growth going ahead? What is your plan going ahead?
So I think the two large markets, U.S. and India, I think we are strategically well placed to continue to grow then strongly. So that we are very confident on. Our developing market or emerging markets business is also scaled up meaningfully over the last 5 years with good growth and profitability.
And that business unit will continue to explore more market opportunities to enter into with the differential portfolio that now we have globally. So that we will see some expansion. But as I said, overall, we are well placed with the portfolio and the future pipeline to see meaningful opportunities in both U.S. and India, which are our largest markets.
Okay. If you permit me sir, one more question. So how to think about this China desidustat opportunity? And what is the kind of arrangement that would be? Because obviously, size-wise it is a much bigger and larger market. And if we get a kind of a preference in terms of getting the product introduced into their reimbursement list, then it can also kind of a meaningful opportunity.
And what is the kind of arrangement that you would be having in terms of revenue sharing, some sense and some visibility about this because it could potentially be a really positive surprise for our overall performance?
So China is a very, very large market. It's probably #2 in the world in terms of hip franchise. The current approved hip products in China are already stocking very significantly large value. So we believe that if everything goes well and we get approval from the Chinese regulatory authority and with a very strong commercial partner like CMS, we will see good benefit -- I mean, good significant traction for desidustat to become a very large global product for us.
And it's a royalty-based partnership that we have. So once everything happens, once we're able to commercialize we can definitely then speak more about it. But we're -- it looks -- it's a very positive sign. And if everything goes well, it would be only a 2-player market kind of thing, which will offer a great opportunity for desidustat.
So it's manufactured by them?
No, it's manufactured by Zydus.
The next question is from Saion Mukherjee.
Sir, just one clarification to start with. Your guidance for next year is consolidated high-teen growth or double-digit growth? I just missed that. And also on the margin you're expecting it to be flat with Asacol HD competition? Or you expect it to improve for next year?
So I think on a conservative side, if we see Asacol competition at the basic, we will definitely maintain FY '24 margins. But if we see a scale-up of our new critical launch that has happened right now and with other -- we will work towards improving it further.
In terms of growth, yes, again, I think critical launches will play an important role in the growth. So from double-digit to high teens will all depend on the successful launches one which we have done and few we hope to do. So if that all goes well, we do hope to see better growth.
And sir, this number that you mentioned is on a consolidated basis at an overall company level, double digit to high teen is what one can expect?
Saion, just to clarify, [indiscernible]. Yes, we -- all the businesses will register double-digit growth. And at aggregate level, we expect high teens growth.
Okay. Understood. And sir, the mirabegron launch, I mean, what's your expectation of competitive intensity going forward? Do you have a view there?
Our current best estimate is we do not expect in the near term any more competitive intensity. So it will be currently in one strength, 2 players and on the highest single player market.
Understood. And sir, finally, before I join back, on the specialty and innovation piece, there are a lot of moving parts as we see today. So from a next 3 years' perspective, can you just lay out what are the key milestones we should watch out for the meaningful ones? And also, how should we think about the cost structure here with respect to R&D spend, sales and marketing efforts on the cost side and investment side from a next 3-year perspective?
So for FY '25, our R&D spend, we believe will be around 7% to 8% is our current guidance.
On the key milestones, I think there are 2, 3 critical milestones. The first, which is for our lead candidate, saroglitazar. So we finished our recruitment for PBC indication. So 1 year from now, we will have a readout on the results. And if we see positive results, which we hope, then we will be filing it for -- filing it in the U.S. for NDA application. And probably 6 months to 1 year from then, we would see commercialization of that. If we are successful with good data FY '26, we will -- part of next -- by FY '26, we will see commercialization expenses get built in for the launch, and FY '27 more meaningfully.
Beyond that, as I said, desidustat will be the next milestone for approval in China and really taking that off.
Third will be our ZYCUBO, which is CUTX-101 going through a rolling NDA filing, and potentially quarter 4 of FY '25, potentially seeing an approval and launch.
And then there are obviously multiple product launches that we have planned for in India, day 1 launches, which will be meaningful. So I think all in all, these will be part of the plans for the, at least FY '25 journey.
And this sir, experience of desidustat in India? Is there any color? The numbers look a bit low? I mean what -- or how do you see that ramping up in India? And what are the issues that we are facing in India currently?
So in desi, in India, we have seen excellent results. So I think it is one of our best new launches. So we don't see any concern for it to become the INR 100 crore plus franchise soon, is definitely the goal. So there is, actually we're seeing very good traction on desi. We don't have any low growth issues in that market, in that product.
Okay. That's great. Sir, one last, if I can, sir, any color on vaccine. Any major uptick you see WHO approval or export opportunities over the next 3 years? And if you can give some granular details on time line there?
So I think FY '20 for the key milestone for vaccines will be first to get prequalification for MR, TCB and renew the rabies prequalification. That would be the most important part. If that goes through well, we will see immediately opportunity on rabies in a meaningful manner.
Post that, I think more it is a calendar year '26, '27 for MR and TCB, global public tender market opportunity, which will be very meaningful. And currently, I would say the immediate opportunity for MR will be the India vaccine tender opportunity that is coming up, which we would like to participate and see if we can succeed.
And our flu vaccine and other vaccines continue to scale up meaningfully. So I think all of that is going well. But as I always have said that more FY '26, '27 is the journey where you will see major scale-up of the vaccines business.
Also, we don't speak always because it's not really a vaccine, but our rabies immunoglobulin which is the -- we will monoclonal antibody also is getting registration across India and other places in terms of getting it in the case into the usage and that would also see some improvement over the next 2 to 3 years.
The next question is from [indiscernible].
Congrats on a great set of numbers. Just a couple of questions. Sharvil, by just following up on the previous question. [indiscernible] competition, what is preventing it? You said the patents that are still in force, which will run until 2030? Or is there some FDA-related exclusivity?
No, it's to do with litigation and IP.
Understood. Today morning you announced this distribution agreement with MSN, earlier, you have done one with Synthon as well.
Yes.
Just for our understanding, in this kind of distribution agreement, so what is the sort of profitability that we get? Is it logistic distribution margin around 10%? Or is it significantly better?
No, it's a profit share [indiscernible].
Okay. And -- so it's -- should be much better than a typical distribution agreement?
Yes, yes, it's an equal profit share.
Okay, understood. Have you launched the ZITUVIO, Zituvimet, already?
Sorry?
ZITUVIO, Zituvimet, the Januvia 505(b)(2), have you already launched it?
Yes, we have launched Zituvimet. And Zituvimet [ IR ] will be the next one, which is also going to approval in month. We have had good success. It's a tough launch in terms of making a branded launch in the U.S. market, but we are seeing a good traction on it, and we see over the next 5 years as being a meaningful product for Zydus.
Great. One last, if I may squeeze in. This year, '24, we saw that Revlimid was a bit episodic, more in 1Q and 4Q. Is it going to be similar even '25 as well?
Yes, Q1 will be higher than Q4.
The next question is from Nimish Mehta.
Just one question on the U.S. generics market. I mean, from the data that we have, we see that there has been some significant erosion, price erosion in the month of April. How do you see that? I mean, and what is the impact on our portfolio?
So I don't know, overall -- so we have had -- I mean, I think our base portfolio is stable. And as I said, they have been highly genericized. And I think overall, we have seen a good traction on the business. So I think, as I always say, the market has not changed. It is always going to be a large consolidated buying, which if hyper competition comes in, there will be price, the escalation. And depending on where the product is and competition is that will continue.
But with the products -- new products and certain capabilities that we have in supply chain resilience and how we have a strong customer insight as well as supply service levels. I think we are seeing good sticky business.
So -- but I think fundamentally, nothing has changed in the market. It's still hypercompetitive if there are more competitive. But as I said, our discipline has always been to not sell products without making margin and that is helping us.
Yes. Okay. But I mean, have you seen some fall in pricing on the base business, that's what I'm trying to understand? I understand. I mean, the new products and other strategy that we use for getting the business. Has the base business...
We don't have a heightened price erosion. It's normal price erosion that is there, but nothing different from the earlier quarters.
Understood. If I may, one question on the domestic business as well. I mean if I'm not wrong, most of the large company including our, been focusing now more on the generic -- trade generic business in the domestic business.
So can you let us know what is the trigger? And if that expands, will that also not require a lot of capacity, I mean, because it's a volume business, and it's not typically a value business. Just your thoughts on that.
So the generic, trade generics business is generally a little different trade channel that utilizes this opportunity. I think for us, we are more I would say, measured in our approach towards the trade generics business.
We are not -- the way we are launching the products is we only focus more on the branded side of our business. And with the portfolio that we already have in trade generics and some of the portfolio that we missed because we don't want to build it in the branded side, we have the trade generic offering. But by and large, I think we -- our focus is more towards the branded side. Trade generic is more opportunistic for us.
So you don't see a significant growth in that category, which I think other companies are looking at.
I think the category is showing growth. It is also going to be hyper competitive and price challenge, but there is growth, definitely there. But as I said, for us, our focus right now is more on the branded side and the specialty and the proprietary side of the business. This is more of an opportunistic business.
The next question is from [indiscernible].
Just two follow-up questions. One there are these two biotech products, one in Phase III, and one just completed Phase I. Are these biosimilars? And are these also being developed for the U.S. market?
So the biosimilars, currently, our strategy is only focused towards India and emerging markets. One of the Phase I molecule is our proprietary molecule that we have started -- we are starting a Phase I and II.
Understood. Second, there was a recent tentative approval you got for Prevymis, Letermovir. I believe there is a exclusivity, which is preventing a final approval. But that exclusivity gets over, I think, in November or so this year. If you -- is that a near-term launch?
So unfortunately, I'm not 100% clear when that launch will be, but we can come back to you separately if we have a clear view. Currently, it is not launched for sure.
The next question is from Harsh.
Two, three quick questions. I joined the call a little bit late, so maybe repetitive, but one on [ LiqMeds ], the small molecule portfolio. I think we had mentioned that a large growth driver would be the U.S. market.
So just from that perspective, anything for us to keep in mind in terms of important time lines? And would FY '25 see any catalysts just from that business per se, that segment per se, and any launches or partnered assets from that portfolio would get categorized under the number of launches that we already report for the U.S. market of 2 [indiscernible] LiqMeds?
Yes. So I think LiqMeds, the important thing is that we have today 6 marketing approvals for the specialty 505(b)(2) side of the business. In U.K., we have 13 products that have been supplied out of the 15 that we have approved.
A number of products that we still have of waiting approval, there are 2 more specialty products waiting for approval, and another 15 in U.K., which are waiting for approval. And we will see some of these approvals come through. We talk on approval comes through.
So -- and this is the more specialty side of the business, Europe, and the U.S. So it's not the scale up we'll definitely see in FY '25 also from the last year. And going forward, we are also seeing meaningful scale up because these are branded businesses, especially in the U.S. So once the scale up happens they'll be sticky with very good profit margins.
So should we assume like 3 to 5 approvals outcome launches in FY '25 just from this portfolio roughly.
More.
Okay. Okay. And in terms of the margin guidance that we had called out in case of Asacol competition, and on that part, we had mentioned that the important launch that we have done recently, the scale-up of that is also pretty important along with other launches. So should we assume another high-value launch in second half of FY '25, which is very similar to the profile of [indiscernible] to that extent?
So I think, as I said, I would say the significant scale launch right now has been mirabegron, but we have to see how do we succeed in that going forward. But yes, we have still a lot of products that will come for approval, which will add to the value growth for the organization. So yes, overall, FY '25, as I said, we should continue to believe that we'll see double-digit growth in spite of Asacol competition in the U.S.
Sure. And just from our understanding perspective, we have given the guidance in case of the Asacol competition. Directionally, if you were to call out a best case scenario, let's say, without Asacol competition, where should we think about the range of margins, per se, just very directionally.
So without Asacol competition, obviously, we will see very significantly much higher margins than what we have currently in during the last quarter. So -- that is the best estimate of this. I think there's so many moving parts. It's difficult to say. But last quarter, we did 29.5% margin, if Asacol competition is not there, it definitely potentially possible to achieve that across that.
Sure. That's helpful. And one last, if I may squeeze in. I might have missed this. But have we launched VASCEPA in fourth quarter?
We have launched VASCEPA, but not in, I would think, recently, but we don't have scale manufacturing capacity yet. So once the -- which we do to third parties, so once we are able to scale up our manufacturing, which will require at least 2 more quarters, then we would see more capability of us to take any meaningful business. But right now, we don't have capacity.
But this is not to do anything with the API supply issue per se, right? So you're just getting it manufactured through a third party.
Yes.
The next question is from Saion Mukherjee.
Sir, just one question on acquisitions. The cash balance is rising and with very high value launches that we have seen, and we continue to see, I think that's going up. You have done some buyback, but still, I think the cash balance will keep rising. So when you think about acquisition prospects, we haven't seen Zydus doing much in India unlike many of your peers. And then you're investing in specialty.
So, and do you have some size in mind or what exactly you would be looking at? Are you okay doing $500 million, $600 million acquisition? If you can give some color what's available, what you're willing to invest, how you're thinking about inorganic opportunities in general?
So I think our first priority will be to diversify our business in the health care space. So it's to do, more to do with the market entry in different geographies if we get an opportunity. But large part of what we want to focus on is specialty.
So one is our own pipeline, and then potentially see an opportunity. If we are successful with our own pipeline to come into approval to find opportunities to acquire and scale that up meaningfully. So that will be, I think, our first wish list to buy some -- to build our orphan disease business.
The second, obviously, which we have already committed to is our rare portfolio of businesses. So we acquired Zokinvy and [indiscernible] we can continue on both our internal pipeline, but more importantly, we continue to find opportunities in the rare disease space for acquisition. We do hope to enter more markets which are meaningful, either directly or potentially, again, with the differentiated pipeline like LiqMeds that we have.
So those will be the first priority of products. In India, we are looking -- we will look for brand, more brand businesses -- brands that can be -- which can help us overall in terms of it being accretive to the current business that we do. Again, something that is differentiated, it would be nice.
We do like the OTC space also. So we will look to see what we can do with that both in wellness or in pharma. So I think those are some of the areas that we are looking at.
So I would say the ticket size will not be the constraint that we look at. But depending on the market and the opportunity, we want to make a profitable business in those places. So in the U.S., our first expectation is how do we quickly scale up and become profitable on the specialty front, provided our current assets see the light of day. And if that happens, then that will be the focus for the company.
And, sir, different geographies you mentioned, which geography you would be interested in?
So I think Europe is something that we need to figure out, right, and whether it is the -- some part building a rare disease or specialty part of the business in Europe, beyond the trade generics that we do. Also look at certain niche therapy areas and see if we can look at some opportunities to do something there. And lastly, also look at the hospital franchise that is there in Europe.
So those will be some areas that we continue to look at. And overall, as I said, our mission now is to make sure that we build the patient-centric businesses. So medicines is one part of being patient-centric, but also how do we build businesses that are beyond just medicine and making sure that we are looking at companion diagnostics care and other areas that are important for treating chronic diseases. So those are some of the areas that we want to continue to pursue.
So in the oncology segment, we already built a strong companion diagnostics business with our current book, book of business with both Guardant and the other onco's product that we have for diagnosis for breast cancer. So we're looking to scale those kind of opportunities further and build a meaningful -- meaningfully different business, I would say.
Great, sir. And just one last, if I can ask on the GLP-1 opportunity. How you see Zydus' position there. You have made filings in the U.S. So what are your expectations? And if you can talk about the capabilities that Zydus has developed here? And when can we see any meaningful contribution from this portfolio going forward?
Yes. I think the meaningful capability is to obviously develop a peptide mass capability to obviously characterize the peptide capability to create a drug device combination and have the capability of both, obviously, the drug part and also the device part. I think those are the capabilities that we have now built.
On the commercialization part, I think we will prepare for launch of the GLP-1s whenever the patents are over, and we are preparing for market-by-market launch depending on the patent expiry.
The next question is from Nitin Agarwal.
Sharvil, given the way the commentary for you has been F '25 and also F '26 look to be very, very strong years for us, given the -- we'll continue to have tailwinds from Revlimid possibly Asacol as well as even mirabegron for now.
How should we look about the year after that post FY '26 onwards, are we looking at potentially a larger clip coming in the earnings as some of these big ticket opportunities begin to fade away? Or -- do you think there's enough in the pipeline to take care of -- to sort of substitute some of these high-growth opportunities as they fade?
So specific to the U.S., I think, as I said beyond this, I mean, we at least have 2 to 3 other products where we believe we have sole exclusive launches available in the coming -- in the years after '26. So we do still see a very healthy opportunity for the company to be able to launch meaningful launches with differentiation or sole exclusivity.
So we should not be -- we should not look at a situation potentially that we have a largish clip coming through for the business on the high peak that we do in FY '25 and FY '26?
Yes. Currently, I think, obviously, it all depends on IP landscape and other things, but we have secured some 180-day exclusive launches. Beyond the ones that we have spoken about.
The next question is from [indiscernible]
My next question is on our peptides portfolio. So if you can talk about how many products have we filed till today?
Sorry, we didn't get your question.
Peptide. Peptide portfolio.
Peptide portfolio. So we have -- currently, we have I think 2 peptides that are in advanced stage filed and to be filed and then we continue to have a portfolio on other 2 product that we hope to file. So I would say that is the current portfolio that we have.
Sure. And when are you expecting the first approval for these core products?
FY '26.
Okay. So no contribution from -- for FY '25 at least?
No.
And sir, these are for U.S. markets or even for other markets?
We would like to commercialize them in other markets also. But what the guidance I was giving you is obviously the U.S. market.
Okay. Okay. So can we assume that other markets might come sooner than FY '26 timeline?
There's a patent landscape to many of the peptides. So post patent, yes, they will be launched.
Sure. And my final question, do you think these 4 products will be a small contributor to us or a meaningful contributor in say FY '26 or '27?
I think it's a little too early to say this, but important markets are opening up like India, like Brazil, and more. So we'll have to see how do we do fair there. So we hope they will be important. There will be important launches from the way the attention has been given by the organization, R&D manufacturing on. We hope they will be commercially successful in these markets.
And sorry, do we have any SKF filings on any of the dosages for the same?
Yes. And on sema, we are first to file.
Sema, we are first to file. One particular dose? Or is it all the 4 doses?
On the diabetes indication.
Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Thank you very much, and look forward to interacting with you during our next investor and analyst conference. Thank you, and good night.
On behalf of Zydus Lifesciences Limited, that concludes this conference. Thank you for joining, and you may now disconnect your line and exit the webinar. Thank you.