Explained - Why Zydus Life shares are down 2% but Bernstein sees nearly 30% upside

Shares of Zydus Lifesciences Ltd. declined 2% on Wednesday, October 14, on the back of  two announcements made by the company a day prior with regards to the US drug regulator.

While the US Food and Drug Administration (USFDA) issued five observations for Zydus Life's manufacturing facility in Moraiya, Ahmedabad, it also accepted to review the Biologics License Application (BLA) of a proposed biosimilar to Keytruda (pembrolizumab). Global investment banking firm Bernstein is positive regarding the latter.

Five observations for Zydus' Ahmedabad plant

Zydus Life informed the exchanges on Tuesday that the US Food and Drug Administration (USFDA) inspected the company's manufacturing plant at Moraiya, Ahmedabad from October 5 to October 13, 2026. The inspection closed with five observations, it said.

The company said it will closely work with the US drug regulator to address the observations immediately.

USFDA to review BLA for proposed Keytruda biosimilar 

Zydus Life and Formycon AG jointly-announced that the the USFDA accepted the BLA review of a proposed biosimilar to Keytruda (pembrolizumab). The companies said that to the best of their knowledge this is the first publicly announced acceptance by the USFDA of an application for a Keytruda biosilimar.

Pembrolizumab is an immune checkpoint inhibitor that binds to and blocks the PD-1 receptor and is used to treat numerous types of cancer, the company said. Last year, the global sales of Keytruda, including the subcutaneous formulation Keytruda Qlex, reached $31.7 billion. In the first half of 2026, the combined sales of Keytruda and Keytruda Qlex amounted to $16.4 billion.

The company said the BLA was submitted in the third quarter of 2026. As per the Biosimilar User Fee Amendments (BsUFA), the USFDA is looking at completing its review within 12 months of submission, comprising up to 60 days for the filing review and 10 months for the substantive response, the company said. Based on this timeline, a decision could be expected in the third quarter of the calendar year 2027, it added.

Bernstein Sees 29% Upside On Zydus Life

Bernstein has maintained its "buy" rating on the Zydus Life with a target price of ₹1,457 per share. This indicates an upside of 28.7% from its previous close.

It said that during initiation of their coverage on the stock, it had argued that Zydus deployed incremental profits from one-offs such as Revlimid Gx, Mirabageron Gx in building out a biologics and NCE franchise for the US market.

Bernstein believes that the recent announcement of the USFDA's acceptance for review of the FYB206 - biosimilar to Keytruda unequivocally reinforces this thesis.

According to the firm, their analysis suggests that it is the first and currently the only pembrolizumab biosimilar accepted by the drug regulator, with a potential FDA action in the third quarter next year.

It also estimates a pre-loss of exclusivity (LoE) of the US Keytruda franchise of approximately $9 billion to $10 billion, a commercially contestable year-one post-loss of exclusivity intravenous (IV) market of approximately $7 billion to $8 billion, and Merck retaining roughly 55% to 60% initially and biosimilars capturing 40%-45% with four to six meaningful early competitors.

The global investment banking firm has estimated a $500 million gross end-market sales as the base case for Zydus pembrolizumab franchise.

It also estimates that based on the licensing deal, 60% product gross margin with Formycon receiving around half of the territory gross profit, Zydus Life retains the $150 million of annual gross-profit before its commercial expenses.

Zydus Life Shares A Buy Or Sell?

Of the 34 analysts that have coverage on the Zydus Life stock, 19 have a "buy" rating, nine have a "hold" rating and six have "sell" recommendation.

Shares of Zydus Life were trading 2.1% lower at ₹1,109 apiece at 9.33 am on Wednesday. The stock has gained 13% this year, so far.

Also Read: PNC Infratech shares in focus after Delhi High Court stays three-year NHAI ban