Nomura upgrades Zydus Life to 'buy', sees 16% upside potential

Zydus Life shares are in the red for the last three months.

Global brokerage Nomura upgraded its rating on drugmaker Zydus Lifesciences to a 'buy' citing higher contribution from diabetes drug Sitagliptin. Accordingly, the firm also raised its price target for the drugmaker to Rs 1,140, translating into an upside potential of over 16 percent from Wednesday's closing price.

Nomura estimates Sitaglitptin's market size to be around $300-400 million, meaning that it can be offer a large revenue opportunity for the company.

Aside from that, Nomura also anticipates Zydus Life to benefit from an appreciating dollar as a large part of its exports, around 77 percent by FY27 are expected to be from the US. Despite that though, the brokerage currently factors in a 5 percent decline in Zydus' US revenues in FY26 as compared to FY25, largely on account of the patent expiry of blockbuster cancer drug Revlimid.

Earlier this week, shares of Zydus Life soared 5 percent after the company signed a deal with US healthcare firm CVS Caremark to add its diabetes combination products to its template formulary.

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Diabetes medications have emerged as a significant growth driver in global prescription drug sales. This deal enhances Zydus' footprint in the lucrative US diabetes market, a vital growth segment, while bolstering its portfolio of differentiated, high-quality products.

In addition to that, the drugmaker also announced that the US Food and Drug Administration accepted the New Drug Application (NDA) of its subsidiary Sentynl for CUTX-101, granting it a priority review.

CUTX-101, a treatment for Menkes disease, has been awarded a six-month priority review by the US drug regulator. The drug also holds breakthrough therapy, fast track, rare pediatric disease, and orphan drug designations from the FDA, along with orphan drug designation from the European Medicines Agency (EMA).

On Wednesday, shares of Zydus Life closed 2 percent lower at Rs 981.45 on the NSE.