On Wednesday, Axis Capital (NYSE:AXS) Limited revised the price target for Zydus Lifesciences (ZYDUSLIF:IN), decreasing it to INR 1,160 from INR 1,180 while keeping a Reduce rating on the stock. The adjustment reflects the analyst's view on the company's generic Cabometyx prospects and the competitive landscape it faces.
Zydus, in a 50:50 partnership with MSN Pharma, has been working on a generic version of Cabometyx, which is considered a significant product in their pipeline due to its substantial market size of approximately USD 1.6 billion. The competition for this generic drug is limited, with only a few filers including Teva and Cipla. The launch of Zydus's generic Cabometyx hinges on the outcome of litigation concerning four outstanding patents, with a potential market entry in August 2026 if the decision favors MSN/Zydus.
However, Axis Capital's analysis does not include projected sales for generic Cabometyx, as the base case assumes that Exelixis (NASDAQ:EXEL), the original patent holder, will either win the patent litigation or reach a settlement that would delay the generic launch to around 2030. An early launch in August 2026 is considered unlikely but would add approximately INR 13 to the fiscal year 2027 earnings per share (EPS), compared to a decline of around INR 17 per share from other key molecules over fiscal years 2025 to 2027.
The firm has also adjusted its EPS estimates for fiscal years 2025 to 2027 down by 1-2% to account for the impact of Teva's generic Asacol HD, which was previously expected to face competition later in fiscal year 2025. These revised estimates lead the firm to maintain its below-consensus EPS projections for fiscal years 2026 and 2027.
In summary, Axis Capital remains cautious about Zydus Lifesciences' future earnings, prompting the decision to maintain the Reduce rating and lower the target price to INR 1,160. The firm's stance is influenced by the developments in the company's generic drug pipeline and the competitive challenges it may face.
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