Analyst Concall
Zydus Life open to partnership, make in US on tariff threat
This story was originally published at 19:38 IST on 20 May 2025
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--Zydus Life: Hope to keep improving margin by 50-70 bps
--CONTEXT: Zydus Life management's comments in post-earnings analyst concall
--Zydus Life: Expect US business to grow in low single digit
--Zydus Life: Hope to comfortably exceed 26% EBITDA margin in FY26
--Zydus Life: Revlimid sales may have peaked during FY25 in US
--Zydus Life: Revlimid has begun seeing price erosion in US market
--Zydus Life: See India business growing in double digits FY26
--Zydus Life: Asacol business loss, Revlimid prices drag on FY26 margins
--Zydus Life: Non-tender, tender business to see vaccine sales rise in FY26
--Zydus Life: To continue to launch 20-25 products every year
--Zydus Life: Looking at opportunity where we see value to make in US
--Zydus Life:Any US tariffs will hit, but difficult to know exact impact now
--Zydus Life: Have committed fair amount of investment in US in specialty
By Sunil Raghu and Shreya Shetty
MUMBAI/AHMEDABAD – Zydus Lifesciences Ltd. is exploring opportunities to co-develop at a third-party location in both Europe and the US to negate any impact arising out of the proposed tariffs on pharmaceutical products announced by US President Donald Trump's administration, the company's management said in a post-earnings analyst call on Tuesday.
The company said that while any kind of tariff will definitely have an impact on earnings from the US markets, it is too early to be able to analyse the impact due to "lot of moving parts". They said it is not possible to set up a manufacturing unit on their own at such short notice. The company also said it has already committed to a fair amount of investment in the US, with its foray into specialty segment and other areas.
The company's US sales in the March quarter stood at INR 31.31 billion, up from INR 25.24 billion a year ago. US formulation sales accounted for 50% of the company's overall sales in the March quarter as it grew sequentially in all four quarters throughout the year driven by volume growth and new product launches, it said. The revenue from its US formulations business rose 24% on year and 30% on quarter to INR 31.31 billion.
Going forward, the company's management sees its US business growing in single digits. The company attributes the low growth to the price erosion of Revlimid, one of its key products, in the US markets. Sales of the drug might have peaked in 2024-25 (Apr-Mar) itself, the company said. Lenalidomide, sold under the brand name Revlimid amongst others, is a medication used to treat multiple myeloma, smoldering myeloma, and myelodysplastic syndromes.
The company's India business is on track to achieve better-than-market growth rates for the rest of the current financial year. The drugmaker sees its domestic business growing in double digits in FY26. The company expects this growth to come from its new product launches in FY26. India formulations sales for Jan-Mar grew 11% on year to INR 15.39 billion driven by high uptick in pillar brands and innovation products.
The company will continue to launch upwards of 20-25 products every year, with many exclusive products planned for launch in the coming years. In the long term, particularly in FY27, the company expects to launch around 14-15 "critical" products.
Zydus Lifesciences expects its earnings before interest, tax, depreciation, and amortisation margin to fall to 26% in FY26 from 30.4% in FY25. This sharp on-year fall in margin is attributed to the price erosion of Revlimid, the loss of Asacol, challenges in pricing, competition, research and development expenses, the management said. Asacol or Mesalazine, also known as mesalamine or 5-aminosalicylic acid (5-ASA), is a medication used to treat inflammatory bowel disease, including ulcerative colitis and Crohn's disease.
The company is upbeat on outlook for the vaccine business in FY26. The drugmaker sees itself as a critical contender in the public tenders for the vaccines to treat measles and rubella in the coming year. The company will also be able to participate in some of the United Nations International Children's Emergency Fund's and Pan American Health Organization's tenders for vaccines, the management said.
Similarly, the company's non-tender vaccine sales are doing well, with good sales of flu vaccines and rabies vaccines, it said. The drugmaker will add two more vaccines in its portfolio in the coming quarters. The company is also registering its vaccine products in countries such as Egypt. With access to both the Indian public and World Health Organization pre-qualified public markets, the company sees a good trejectory for a scale-up in vaccines business.
The company has implemented a number of digitisation and efficiency enhancement measures in its operations, the management said. These measures have improved its profitability in the range of 50-70 basis points, and it expects similar improvement in margins going forward as well. End
US$1 = INR 85.64
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Tanima Banerjee
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