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Zydus Lifesciences shares reached an eight-month high after a series of US regulatory approvals for its drugs. The stock hit Rs 426 on the National Stock Exchange on October 7, a level last seen on January 17.
Since August 31, the company has received final and temporary approvals from the US Food and Drug Administration for eight of its abbreviated new drug applications (ANDAs). It now has 326 approvals from 428 ANDAs filed since June 30, 2022.
The stock gained 10 percent over the past five sessions after getting four US FDA approvals in a week. Over the past month, it has advanced 12 percent, outperforming Cipla, Dr Reddy’s Laboratories and Sun Pharmaceutical Industries. However, the Zydus Lifesciences stock has still lost 11 percent in 2022.
Key approvals
The US accounts for 40 percent of the company’s revenue, which is why each FDA approval is positive. Here are some of the recent approvals:
September 12: Final approval and 180-day shared exclusivity for Cariprazine capsules. It has annual sales of $ 2.39 billion in the US and is used in the treatment of schizophrenia.
September 13: Final approval to market Lenalidomide capsules, used to treat various types of cancers. It had annual sales of $ 2.86 billion in the US.
September 16: Tentative approval for Sugammadex injection. It had annual sales of $ 772 million in the US. It is used for the reversal of neuromuscular blockade in adults undergoing surgery.
October 3: Final approval and 180-day shared exclusivity for Mirabegron extended-release tablets, used to treat overactive bladders. It has annual sales of $ 2.42 billion in the US.
October 6: Final approval and 180-day shared exclusivity for Brivaracetam tablets, which have annual sales of $ 412 million in the US and is used to treat partial-onset seizures in children aged 4 and above.
Game changers
Investors are currently bullish on the opportunity emerging from Revlimid, a generic version of a cancer drug. Revlimid is the brand/trade name for Lenalidomide, which Zydus launched on September 20, a week after getting final approval.
The drug works by slowing or stopping the growth of cancer cells.
“This underscores our mission to offer quality healthcare solutions that impact lives as we continue to explore opportunities to grow our US business,” said Sharvil Patel, managing director of Zydus Lifesciences.
According to Param Desai, a research analyst at Prabhudas Lilladher, “Cipla, Zydus, and Dr Reddy’s have all launched their generic Revlimid product in September, and for Q2 of FY23 earnings estimate, we have factored in $ 25-40 million of sales from this across companies. We see sequential growth of 10 percent in US sales for Zydus.”
Aarti Rao, a research analyst at Anand Rathi Shares and Stock Brokers, said she sees significant opportunity in the Mirabegron approval.
“One of the most meaningful approvals is for generic Myrbetriq (a brand name for Mirabegron), where Zydus has 180-day shared exclusivity (with Lupin). This can be a big opportunity for the next two quarters until new entrants kick in,” according to Rao.
Risks
Desai said the management’s commentary on the domestic market and the competitive scenario in key products are crucial for the stock. Moreover, pricing pressure and regulatory scrutiny in the US generics market still persists.
The other factor is the company’s Moraiya unit, which Zydus said in a regulatory filing dated August 5 received four observations from the US FDA and will be addressed “within the stipulated timeline.”
Rao said any escalation of the Moraiya plant warning will be a key risk for the company. The unit has been under the FDA scanner since 2019.
Anand Rathi has a ‘hold’ rating on the stock with a target price of Rs 440, while Prabhudas Lilladher has a ‘buy’ rating with a target of Rs 425.
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