Tag Pharmaceuticals

Zydus Lifesciences Q2 Results: Net Profit Soars 14% YoY to Rs 911 Crore

Company Overview

Zydus Lifesciences Ltd. (formerly known as Cadila Healthcare Ltd.) is one of India’s leading pharmaceutical companies, known for its diverse portfolio in both generics and specialty medications. Established in 1952, Zydus has a strong presence across multiple therapeutic areas, including cardiovascular, gastroenterology, pain management, diabetes, oncology, and dermatology. The company is also a significant player in bio similar, vaccines, and novel therapies, catering to both domestic and international markets. Operates across 50+ countries, with a significant focus on the U.S. and Indian markets. It is among top 5 pharmaceutical companies in India, with a share of around 4-5% in the Indian pharma market. It operates 25+ manufacturing facilities worldwide, including U.S. FDA and WHO-GMP certified plants, ensuring compliance with international quality standards.

Industry Outlook

The Indian pharmaceutical industry is one of the largest globally, with India positioned as a major supplier of generic medicines worldwide. The industry, valued at approximately $50 billion in 2023, is expected to grow at a compound annual growth rate (CAGR) of around 10-12%, driven by increasing healthcare needs domestically and sustained demand for affordable generics in international markets. Healthcare expenditure is increasing, with the government aiming to raise public health spending to 2.5% of GDP by 2025, which will benefit the pharma sector. India is the largest provider of generic medicines, supplying around 20% of global generics. With over 3,000 pharma companies and 10,000+ manufacturing facilities, India continues to dominate in terms of affordable drug exports, particularly to the U.S., Europe, and other emerging markets. The Government of India has introduced the Production Linked Incentive (PLI) scheme. Increased competition from both Indian and global players is intensifying in generic and speciality segments. Mergers and acquisitions are common as companies seek to scale and expand product portfolios.

Financial Summary

INR Cr.	Q1 FY25	Q2 FY25	FY23	FY24
Revenue	6208	5237	17237	19547
EBITDA	2084	1461	3860	5384
OPM	34%	28%	22%	28%
PBT	1900	1271	2585	4832
Net Profit	1482	920	2092	3973
NPM	23.9%	17.5%	12.1%	20.3%
EPS	14.11	9.06	19.37	38.36
C&CE	1238	1594	573	1105

Business Segments:

• India Formulations: It is a branded prescription business in categories of therapies like Pain, Anti-infective, Respiratory, Oncology, and many other segments. It has 7 brands which were ranked among world’s top 300 brands. 37 brands had value between ₹25-₹50 crore, 21 brands between ₹50-₹100 crore and 10 were having yearly ₹100+ crore.
• Consumer Wellness: The Company has many successful brands in the consumer wellness segment like Glucon-D, nycil, Sugar-Free, Complan, etc. And a skincare brand called Everyuth naturals. It is in category of personal care and food and nutrition and has recently acquired Naturell Pvt Ltd. A leading player in the healthy snack category.
• US Formulations: The company predominantly operates in the generics and specialty segments of the market through its wholly-owned subsidiary, Zydus Pharmaceuticals USA Inc. In this quarter company had filed 8 ANDA and received approvals of 9 ANDAs. It has entered into an exclusive licensing and supply agreement with Viwit Pharmaceuticals for 2 Gadolinium-based Magnetic Resonance Imaging (MRI) injectable, contrast agents.
• International Market Formulations: In the emerging markets space, the Company predominantly operates in the branded generics segment with Cardiology, Diabetology, Neuro-Psychiatry and Pain Management being the focused therapeutic areas. The Company keeps on evaluating partnership opportunities with local players in select geographies as it looks to expand its footprint in different emerging market countries

Subsidiary Information:

• Zydus Wellness Ltd: The Company’s subsidiary spearheads the group’s operations in the wellness space. ZWL operates in two different segments viz. personal care segment and food and nutrition segment and has a portfolio of category-leading health and wellness products. Five out of the six brands of the Company continue to hold leadership positions in their respective categories
• Zydus Pharmaceuticals (USA) Inc.: It operates as Zydus’s main subsidiary in the United States, focusing on manufacturing and marketing generic formulations approved by the U.S. FDA. A significant contributor to Zydus’s international revenue, given the high demand for generics in the U.S. market.
• Zydus Healthcare Ltd: It manages Zydus’s branded formulations business in India, catering to a wide range of therapeutic areas such as cardiovascular, gastrointestinal, pain management, and oncology. A major revenue driver for Zydus in the Indian domestic market.
• Zydus Animal Health and Investments Ltd: It provides animal health products across livestock, poultry, and companion animals, including treatments, nutritional supplements, and anti-infectives. It expands Zydus’s reach into veterinary and animal health segments, which are growing markets in India and internationally.
• Zydus Biosimilars Ltd: A dedicated unit for biosimilars, developing and commercializing biosimilars for therapeutic areas like oncology, immunology, and nephrology. Positions Zydus as a key player in biosimilars, targeting high-growth opportunities in biologics.
• Simayla Pharmaceuticals (South Africa) Pty Ltd.: Operates in South Africa, focusing on providing affordable generic and branded pharmaceuticals across a range of therapeutic areas. Extends Zydus’s market presence in Africa, catering to regional healthcare needs with affordable solutions.

Q2 FY25 & Business Highlights

• Revenue of ₹5237 crore in Q2 FY25 up by 19.27% YoY from ₹4369 crore in Q2 FY24.
• EBITDA of ₹1461 crore in this quarter at a margin of 28% compared to 26% in Q2 FY24.
• Profit of ₹920 crore in this quarter compared to a ₹803 crore profit in Q2 FY24.
• India branded formulations business posted double-digit growth and outpaced the market growth both in the chronic and acute segments. Consumer Wellness business delivered robust double-digit growth aided by strong volume uptake.
• The US formulations business continued its upward journey with robust YoY growth driven by volume expansion and new product launches. International markets business grew in double-digit on the back of strong performance across key markets.
• Capex for this quarter has been done by internal accruals and cash from the company worth ₹302 crore, for acquisition and patents.
• India Formulations launched 12 new products (incl. line extensions) with 4 first-in-India launches. In the consumer wellness segment, growth was largely driven by strong 8.4% volume growth.
• In Biotech and Vaccine R&D the company has completed patient recruitment for Phase III clinical trials for one of the biosimilars and follow-up has been completed and completed Phase II clinical trials for Hepatitis E vaccine.
• Forayed into animal free fermentation-based protein business by forming a JV with Perfect Day Inc. through acquisition of 50% stake in Sterling Biotech Ltd (SBL).

SWOT Analysis:

Strengths:

1. Strong presence in the domestic market
2. Broad and diverse product portfolio
3. Advanced research and development capabilities
4. Significant global market footprint

Weaknesses:

1. Heavy reliance on the U.S. market
2. High expenditure on R&D
3. Exposure to patent litigation risks

Opportunities:

1. Expansion into biosimilars and specialty drugs
2. Government initiatives like the PLI scheme
3. Growth potential in the healthcare and wellness sectors

Threats:

1. Challenges in regulatory compliance and security
2. Pricing pressures in the market
3. Increasing competition from domestic and global players
4. Risk from foreign exchange fluctuations