Zydus Lifesciences plans to raise R&D spend in FY24 with focus on innovative products

Zydus Lifesciences is planning to spend over 8% on research and development (R&D) in FY24 with its major expenses going towards innovative portfolio. The company, which already has a strong portfolio of existing products, is gearing up to launch product pipeline in the US and is betting for a strong performance in the long term. The R&D investments for the Q4FY23 stood at Rs 354.1 crore, translating into 7.1% of revenues.

Apart from 63 abbreviated new drug application (ANDA) approvals, a request to the US Food and Drug Administration (FDA) to manufacture and market a generic drug in the United States, Zydus has also launched 32 ANDAs in FY23. It also expects to launch 35 ANDAs in FY24.

“We are advancing our innovation efforts with an aim to serve the patients’ needs across markets. We are well poised to maintain growth momentum, with India geography likely to hold double-digit growth, the US business continuing to leverage our robust product pipeline and agile supply chain and scale-up of our emerging market business,” said Sharvil Patel, Managing Director, Zydus Lifesciences Ltd.

Zydus Lifesciences is working on robust pipeline of complex products including injectables, transdermals, new chemical entities (NCE), biosimilars and vaccines which are expected to materialize over next 2–3 years.

Pharma analysts are upbeat on the company’s performance in short and long term. Brokerage firm Motilal Oswal has raised its earnings estimates for FY24 and FY25 by 3% to 4% to factor in a robust launch pipeline in US generics, including limited competition products such as Vascepa, used for dyslipidemia , transdermals (skin-related drugs) and Risk Evaluation and Mitigation Strategy (REMS) products, increased competition in Trokendi (migrane drug) and higher R&D spending.

“Zydus is gearing up to launch key products in the US while a robust pipeline of NCE, biosimilars and ‘orphan’ drugs would help sustain strong performance in the long term. We raise our revenue estimates by around 2% to factor-in the healthy US growth in the near term,” said ICICI Direct in a report.

ICICI Direct said that Zydus has showcased remarkable improvement in its overall operating matrix as it is utilising windfall from US exclusivity to pare down debt with a 72% decline YoY and on R&D for development of NCEs and complex generic products, which would ensure long-term growth.

“In India, its NCE product portfolio is driving growth and helping it absorb the impact of mandated price cuts and grow ahead of the market. Strong traction in key geographies of the US and India will ensure 50-100bps improvement in margins in FY24E,” it said.

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