Bernstein on Zydus Life ; Buy, TP Rs 1457

During initiation, argued that Zydus deployed incremental profits from one-offs like Revlimid Gx, Mirabageron Gx in building out a Biologics and NCE franchise for US market through next generation of rainmakers rather than relying on next cycle of US Generics Believe that today’s announcement of acceptance of FYB206 - Biosimilar to Keytruda - by US FDA for review unequivocally reinforces this thesis Analysis suggests that it is first —& currently only pembrolizumab Biosimilar accepted by FDA, with a potential FDA action in Q3 2027 Estimate a pre-LoE US Keytruda franchise of approximately US$9–10bn, a commercially contestable year-one post-LoE IV market of approximately US$7–8bn, Merck retaining roughly 55–60% initially and Biosimilars capturing 40–45%, with four to six meaningful early competitors Estimate ~$500Mn gross end-market sales as base case for Zydus’ Pembrolizumab franchise Estimate that based on licensing deal, 60% product gross margin with Formycon receiving about half of territory gross profit, Zydus retains ~$150mn of annual gross-profit before its commercial expenses.

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