Sharekhan Recommends Buy on Zydus Lifesciences, Target Price Set at Rs 1268

• Zydus Lifesciences has partnered with the Central Drug Research Institute (CDRI) to develop an oral treatment for osteoporosis linked to chronic kidney disease (CKD) and postmenopausal conditions. They’re focusing on small-molecule inhibitors that target sclerostin, a protein that disrupts bone health.
• The company has started a Phase 1 trial for a malaria treatment, combining ZY19489 and Ferroquine, with 36 patients currently being recruited for testing. The trial will be completed by February 1, 2025.
• Zydus received tentative approval from the USFDA to produce Enzalutamide Tablets for prostate cancer, which have generated $1.42 billion in sales in the US as of July 2024.
• Zydus’s clinical pipeline includes a drug called ZYIL-1, currently in trials for ALS and ulcerative colitis.

Key Details:

Zydus Lifesciences has formed a partnership with CDRI to develop an oral treatment targeting osteoporosis associated with CKD and postmenopausal conditions. This collaboration is crucial, as CKD affects over 10% of the global population, and the goal is to create drugs that can reduce bone fractures and preserve kidney health.

In addition to this, Zydus is testing a new malaria treatment (ZY19489-Ferroquine) and has already started recruiting patients for a Phase 1 trial. The trial aims to test the safety and tolerability of the treatment, with completion expected in early 2025.

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Moreover, the company received a green light from the USFDA to produce prostate cancer drug Enzalutamide, which has shown strong market potential in the US with $1.42 billion in annual sales as of July 2024.

The clinical pipeline of Zydus also includes ZYIL-1, which is in trials for treating ALS and ulcerative colitis. The trial for ALS is expected to be completed by August 2024.

Investment Outlook:

Sharekhan has given Zydus a “Buy” rating with a target price of ₹1,268. The company is well-positioned for growth, thanks to its partnerships and active clinical programs. The collaboration with CDRI to develop an osteoporosis drug is particularly promising, given the large global CKD population. The Phase 1 trial for malaria treatment also demonstrates the company’s focus on innovation.

Zydus has also secured tentative USFDA approval for its prostate cancer drug, which has significant revenue potential. The company’s ongoing work in treating ALS and ulcerative colitis further strengthens its clinical pipeline. Overall, these initiatives are expected to boost the company’s valuation, making it a strong investment option.

Sector Outlook:

The pharmaceutical sector is in a good position for growth, with easing input costs and companies focusing on complex product launches. The US and Indian markets show promising long-term growth prospects, while price pressure in the short term may slow momentum. Zydus’s emphasis on injectables, along with key product launches in India, will drive future growth. Additionally, the company’s debt reduction efforts strengthen its financial position.

Key Risks:

Risks include regulatory challenges, delays in product approvals, currency fluctuations, and reliance on the US market.

Conclusion:

Zydus Lifesciences is on track for significant growth, driven by new partnerships, clinical trials, and its diverse drug pipeline. The stock remains a strong “Buy” with a target of ₹1,268, making it a compelling choice for investors looking for long-term gains in the pharma sector.