UltraGreen.ai 1H26: ICG franchise remains strong, but US competition clouds the outlook

• Record first half, with underlying earnings still growing solidly: Revenue rose 24% to a record USD 87.2 million, supported by a close to 87% gross margins, while net profit increased 53%. Excluding one-off and non-operating factors, underlying earnings growth was closer to the mid-teens, reflecting continued healthy operating momentum.

• International markets now drive the volume growth: EMEA and APAC ICG volumes grew 24% and 45%, respectively, in 1H26, well ahead of the mature US market’s 4%, broadening the group’s revenue base.

• Zydus’ generic approval changes the US landscape: FDA clearance for a generic IC-Green introduces direct competition into a market that accounts for roughly three-quarters of group sales, marking a significant shift from the company’s longstanding US market position.

• Incumbency provides a near-term buffer: An estimated 80% US volume share and entrenched surgeon, hospital and GPO relationships should support customer retention and slow share loss, although sustained price erosion could still weigh materially on earnings.

• Downgrade to HOLD, target price USD 0.73: We cut our fair P/E from 20x to 10x as the monopoly premium fades. While the target implies around 13% upside, the risk-reward is constrained by binary pricing risk, with net cash and ongoing buybacks providing some downside support.

1H26: Record revenue and margins, but reported earnings flatter underlying growth

For the six months ended 30 June 2026, UltraGreen.ai’s revenue increased 24% year-on-year to a record USD 87.2 million, driven by continued adoption of Indocyanine Green (ICG) in fluorescence-guided surgery. Total vial volumes rose 11% to 589,511 units, led by international markets, with EMEA volumes increasing 24% and Asia-Pacific volumes rising 45%, while US volumes grew a more modest 4%. Gross profit increased 27% to USD 75.5 million, with gross margin improving by around two percentage points to 87%, supported by the full-period benefit of the US price increase implemented in 3Q2025.

The group also maintained an exceptionally strong balance sheet, ending the period with USD 197.6 million in cash and short-term investments and no borrowings apart from lease liabilities. The board declared an interim dividend of USD 0.01 per share, while management reaffirmed its full-year 2026 revenue guidance of USD 175–185 million, implying stronger revenue in 2H26. On an operating basis, the result confirmed that UltraGreen.ai’s core ICG franchise remains healthy and highly cash generative.

Table 1: UltraGreen.ai 1H2026 financial summary

Figure 1: Record revenue led by international markets, with gross margin improving to around 87%

The headline earnings figures, however, do not fully reflect the underlying trajectory. Reported net profit attributable to shareholders increased 53% to USD 39.2 million, while operating profit grew by a more modest 11% to USD 47.5 million. Adjusted EBITDA increased 16%, although the adjusted EBITDA margin declined five percentage points to 60% as UltraGreen.ai invested ahead of growth, with operating expenses rising 66%.

The divergence between reported net profit and operating earnings was largely driven by factors below the operating line. The sharp increase in net profit was partly attributable to the near-elimination of foreign-exchange losses, which declined from around USD 7.0 million in 1H2025 to USD 0.3 million in 1H2026 following the group’s adoption of the US dollar as its reporting currency. This was complemented by a USD 2.4 million increase in interest income on its post-IPO cash balance. Excluding these factors, underlying earnings growth was closer to the mid-teens than the reported 53%.

The result therefore presents a mixed picture: the core ICG franchise continues to deliver strong revenue growth and industry-leading gross margins, but the pace of operating earnings growth has moderated as UltraGreen.ai expands its organisation and invests ahead of its next phase of growth.

Zydus’ FDA approval resets the US competitive landscape, but incumbency provides a buffer

The defining development during the period was not in the results themselves, but in the competitive backdrop. On 4 August 2026, Zydus Lifesciences received final approval from the US Food and Drug Administration (FDA) for a generic version of IC-Green, UltraGreen.ai’s flagship ICG product. The approval was granted under the FDA’s Competitive Generic Therapy (CGT) pathway, which provides 180 days of marketing exclusivity from the first commercial launch, subject to the product being launched within 75 days of approval. Zydus has indicated that it intends to launch shortly.

The significance is gradual rather than immediate. The US accounts for roughly three-quarters of group revenue. Per Zydus's approval announcement citing IQVIA MAT June 2026 data, UltraGreen's IC-Green generated approximately USD 125.8 million in US sales in the year to June 2026, with value up 61% year-on-year — largely reflecting repeated price increases. With gross margins near 87%, the US franchise represents a sizeable and highly profitable revenue pool that is now open to direct generic competition.

The more immediate question is how quickly generic competition can translate into lost volumes or lower pricing. Here, UltraGreen.ai’s incumbency may provide a meaningful near-term buffer.

UltraGreen.ai holds an estimated 80% share of US ICG volumes and has built longstanding relationships with surgeons, hospitals and group purchasing organisations, supported by a long track record of supply reliability. Switching a product used in live surgery is not automatic: hospitals need to qualify alternative suppliers, complete formulary and procurement reviews, and establish that existing imaging workflows remain compatible, while surgeons place value on familiarity and continuity. These frictions should slow the pace of share loss, even if a competing product is offered at a lower price.

International expansion could also provide a meaningful medium-term hedge against US pricing pressure, although it is unlikely to fully offset a material US price decline in the near term. Encouragingly, international growth is already significantly outpacing the US. In 1H26, EMEA ICG volumes increased 24% YoY and APAC volumes increased 45%, compared with 4% growth in the US. This suggests international markets could become an increasingly important source of incremental volume as UltraGreen.ai builds awareness and ICG adoption outside its mature US franchise.

Beyond ICG, the group’s imaging and software assets provide potential avenues for diversification over time. The IC-Flow system, PerfusionWorks quantification software and UltraGreen.ai Data Systems could broaden the group’s revenue base beyond ICG consumables. However, these businesses remain at an early stage and are not expected to contribute meaningfully in the near term, leaving limited scope to offset the earnings impact of increased competition in the core ICG franchise.

Earnings impact depends on Zydus’s pricing and market-entry strategy

The magnitude of the earnings impact will ultimately depend on how Zydus approaches pricing and market entry, which remains uncertain. As a reference point, a peer-reviewed study of FDA Competitive Generic Therapy approvals found that generic entry reduced the price of the median affected drug by around 18%, without significantly reducing total market demand. This provides a useful benchmark, although the impact could differ for a specialist surgical injectable with a highly entrenched incumbent.

Under a more benign scenario, Zydus either forfeits its exclusivity by failing to launch within the 75-day window or enters at a price relatively close to IC-Green. ICG is a relatively low-cost consumable compared with the overall cost of surgery and alternative fluorescence agents, which may limit the economic incentive for hospitals to switch an established product solely on price. In this scenario, US ASP erosion would remain modest, with a contained impact on margins and earnings.

Taken together, Zydus’s entry marks a meaningful change to UltraGreen.ai’s earnings trajectory. The company’s dominant US position and entrenched customer relationships should provide time to adapt, but sustained US pricing power can no longer be taken for granted. Going forward, volume growth, international expansion and the development of the group’s imaging and software businesses will become increasingly important in determining whether they can offset pressure on US ICG pricing.

We downgrade UltraGreen.ai from BUY to HOLD, reflecting two structural changes rather than the 1H26 result itself. First, the monopoly premium is no longer justified: an approved US generic challenges the near-monopoly thesis that underpinned our previous 20x fair P/E. Second, the group’s high geographic concentration warrants a greater valuation discount. With roughly three-quarters of revenue generated in the US, a competitive shock to its core product in its largest market could have an outsized impact on group earnings, warranting a lower multiple than more diversified peers.

These factors are compounded by a flatter forward earnings profile. Incorporating the 1H26 actuals and the potential US price erosion outlined above, we now forecast low-single-digit earnings growth beyond 2026. This weaker growth profile, alongside the increased competitive and concentration risks, supports a lower fair multiple. We therefore reduce our fair P/E from 20x to 10x.

Applying the 10x fair multiple to our revised 2028E EPS yields a target price of USD 0.73, implying around 13.1% upside from the current price of USD 0.645. While the base-case upside remains meaningful, key variables — including whether Zydus launches and, if so, the extent of potential pricing pressure — remain uncertain. Against this backdrop, the risk-adjusted upside supports a more measured approach to adding to positions at this stage.

At the same time, the shares have already fallen by more than half from their listing price of USD 1.45, while the group’s USD 197.6 million net cash position and ongoing share buybacks provide some downside support. On balance, a HOLD rating reflects the stock’s de-rated valuation alongside its underlying financial support, while greater clarity on Zydus’s commercial strategy should provide a firmer basis for reassessing the investment case.

Table 2: UltraGreen.ai earnings forecasts

iFAST Research rating system

Disclaimer

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a position in UltraGreen.ai (as of 18 March 2026). The analyst who produced this report hold a NIL position in the abovementioned securities.

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