Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Zydus Lifesciences Ltd (BOM:532321, Financial) achieved the highest ever operating profit and margins during the quarter.
- India branded formulations business outperformed the market with 13% year-on-year growth.
- Consumer wellness business delivered double-digit growth, aided by improved demand and an extended summer season.
- US formulations business showed stellar performance with new launches and volume expansion, contributing to 51% of consolidated revenues.
- The company deleveraged its balance sheet by repaying the entire debt.
Negative Points
- Two of Zydus Lifesciences Ltd (BOM:532321)'s inject facilities were classified as 'official action indicated' by the US FDA, requiring corrective actions.
- Despite strong performance, the company faces ongoing political and economic challenges in some international markets.
- The specialty portfolio in the US is still in early stages and does not form a major part of overall revenue.
- There are significant one-off costs in the quarter, including legal costs and consultancy fees, which may not recur.
- The company faces capacity constraints and pricing issues with some products, impacting their scale-up.
Q & A Highlights
Q: Congratulations again on a great set of numbers. So I think this quarter, we've got 33% EBITDA margin, it's one of the highest companies ever seen in the history. So I just want to understand the sustainability of this margin going the next two quarters for the year.
A: So I think, obvious, this quarter has been an exceptionally good quarter on the margins front. And as we have stated earlier that on the last year, we ended on a high with a 27.5% margin. And with looking at the phasing of the coming year, we expect to see an improvement in the margin by 100 to 150 basis points from FY24 margins. - Sharvil Patel, Managing Director, Executive Director
Q: Okay. And so again, on the US business, so this year, we've grown 26% Y-on-Y. This is an excellent growth. How do you see the trajectory of the US formulations business during this year?
A: So we see healthy double-digit growth for the US business during the coming financial year -- this financial year, I mean. - Sharvil Patel, Managing Director, Executive Director
Q: So first question would be revenue guidance that we had provided for FY25, we had said now almost around high teens top line growth that we expected. Since the first quarter has been meaningfully above that, are we revising it or we are staying with the same cadence?
A: We continue to believe that we will deliver high teens growth this year. - Sharvil Patel, Managing Director, Executive Director
Q: And one on the specialty portfolio across two geographies, one is US wherein we have now few commercialized product, et cetera right? Zokinvy, et cetera. So would you be quantify the current contribution of our specialty portfolio in US?
A: I think it's still in the very early stages. As I said, the patent acquisition or the finding new patients is a slow process in the US. So once it becomes sizeable and meaningful, we will obviously talk about it differently. But right now, it's -- it doesn't form a major part of the overall revenue. - Sharvil Patel, Managing Director, Executive Director
Q: And last one on the India business. We have a portfolio of specialty products, which are in-house such as like saroglitazar and some of the (inaudible) in the market biosimilar launches, et cetera, right? So to that extent, we have also said that, that portfolio has grown very strongly. Could you quantify the current contribution of that portfolio for us?
A: I don't think -- our focus on India is not driven by dosage form. It's a therapy and disease focused, so -- and brand focused. So I don't think we do it that way. But as I said, they do form an integral part of the overall future innovative portfolio that we have, which is both, as you mentioned, the saroglitazar and the breast cancer and other oncology therapies that we're working on. So it's more a disease area where we look at it and how much share of that area we do have. - Sharvil Patel, Managing Director, Executive Director
Q: So given you're maintaining your revenue -- again, margin guidance of the 150 basis points margin expansion, is it fair to assume that the cost base that we have seen in this quarter, let's say, the R&D cost or the other operating cost, R&D would materially increase from here, the SG&A cost would remain at these levels? Because this was a seasonally strong quarter for the India business as well as US we did higher. So how should we think about the operating cost from a run rate perspective?
A: Excluding R&D, Neha, there has been increase in this particular quarter, but -- about INR125 crores in this quarter are of one-off nature. And therefore, I think INR1,200 crores to INR1,250 other cost, excluding R&D would be the right basis for you to project. - Nitin Parekh, Chief Financial Officer
Q: What is this INR125 crores related to, sir, the one-off that you're mentioning?
A: Some ERF related costs. There are some legal cost provisions. There are some project-related consultancy assignments, some professional fees. Many items within that, that are recur in nature. - Nitin Parekh, Chief Financial Officer
Q: And on the R&D, how do we look at the R&D given we have the patient recruitment completed for two of our NCE products?
A: So as I said, our expectation is that we will see around an 8% spend on R&D. And that's what we hope to maintain. - Sharvil Patel, Managing Director, Executive Director
Q: 8% of sales for a full year basis?
A: Yes, yes. - Sharvil Patel, Managing Director, Executive Director
Q: My second question is on the US business. Obviously, this quarter, we had the benefit of the REVLIMID as well as mirabegron. As we think about the subsequent -- first, in this quarter, was there any improvement in the base business besides REVLIMID in Mira? And was REVLIMID flattish quarter on quarter, higher quarter on quarter? Any qualitative color there?
A: So REVLIMID was obviously higher quarter on quarter, and there was a ramp-up to the base business also. - Sharvil Patel, Managing Director, Executive Director
Q: Okay. Understood. And as I think about the next three or four quarters other than Mira, can you give us some color on what launches we should be expecting? Any other meaningful launch that we should be seeing? Anything that you can provide us on the US for the base business?
A: As I said, we do expect a double-digit growth in the US, and that factors in, obviously, our current base business and new product launches. - Sharvil Patel, Managing Director, Executive Director
Q: Okay. So -- and how many launches should we be expecting this year, sir?
A: We -- for the full year, we expect 25, 25-plus launches. - <
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
