Eris Lifesciences - 100% of sales from India Pharma Market

Thanks for the prompt reply. One doubt that I have… In Q1, Oaknet’s contribution was only 31 cr ( as per investor PPT ). Doing 185 cr for full FY from Oaknet looks like a tall ask.

Did the management throw any light on this?? Is the Oaknet business showing increased momentum in Jul-Aug etc??

Thanks in advance.

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Quarterly run-rate of Oaknet is actually 55 cr., only 31 cr. was accrued to Eris in Q1 as the acquisition was done in early May 2022 (so 24 cr. did not accrue to Eris). Management is guiding that 55 cr. quarterly sales look sustainable, if thats the case for the full year Eris should get 31+55*3 ~ 196 cr. So 185 cr. is doable if Oaknet maintains the runrate.



  • Guidance: 30% consolidated revenue growth, 32-33% EBITDA margin. Will be back to 36% EBITDA margin by FY25
  • Zomelis brand has crossed 8.3 cr. monthly sales (annual run-rate of 100 cr.). This should be the 4th 100 cr. brand by end of FY23
  • Oaknet: Quarterly run rate of 55 cr. sales and 10 cr. EBITDA
  • Cardio market has started reviving in June-July (average growth has increased to 13% vs 2% in the past twelve month)
  • Aprica: profitability will be maintained ~20%
  • In order to get to 14-15% organic growth trajectory, IPM growth has to come back to 8-10%
  • Expect 200 bps pressure on gross margin due to newer launches
  • Expect to deliver 20 cr.+ annual sales of insulin with EBITDA loss of 15 cr. Will launch insulin Glargine in Q3FY23 (in-licensed from Biocon). One-time payment and then sourcing arrangement (no recurring royalties)
  • Gujarat facility will commence in Q4FY23 – capex incurred was 34 cr. (100 cr. incurred till date). Total expected capex ~ 170-180 cr.
  • EBITDA margins will be impacted: (1) EBITDA losses due to insulin launch, (2) a lot of new product launches in cardiology in Q2 and Q3, (3) Oaknet margins
  • Have not had new launches in CNS, but this segment is growing at 20-25%
  • Trade generics: Had 8 cr. EBITDA loss in FY22 and will move to breakeven in FY23

Disclosure: Same as before


This sounds like a catastrophic news for Domestic branded generic players.

Requesting views form better informed Forum members.

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Very insightful interview, management covers their diabetes and CV launches along with the rationale for Oaknet acquisition. Also, they mention that current rules will mostly impact trade generic companies.


Company came up with reasonable results, Oaknet business has turned around faster than earlier guided and is already doing 24% EBITDA margins. Management is guiding for 30% sales growth and 16-17% EBITDA growth in FY23. Recovery in cardiovascular division is the reason behind the confidence. Concall notes below.


  • Guidance maintained at 30% sales growth and 16-17% EBIDTA growth for FY23. Tax rate will be ~10% for FY23
  • Oaknet’s 50 cr. target EBITDA will be achieved in FY23 vs earlier guidance of FY24. Expanded dermatologist coverage to 90% from 60%
  • Oaknet will be amortized over 20 years
  • Growth in cardiovascular division has resumed. SGL2 & DPP4 contributes 35-40% to diabetes sales
  • The stark difference in primary (10%) vs secondary sales (19%) is because of certain products (probably Zayo, link) which have gone into legal issues, which were already supplied to the market (but are no longer being supplied). So these are captured in secondary sales data but not in primary sales
  • Launched 4 drugs (Zomelis D, Glura, Gluxit S & FCM Injection) in H1 FY23
  • Aim is to get 18-20 cr. of revenues from insulin in FY23. This will not be a cash burn business in FY24
  • Eris standalone PCPM ~ 5.3 lakh, Oaket PCPM ~ 3-3.5 lakh

Disclosure: Invested (position size here, no transactions in last-30 days)


New investor presentation here…Important slide for growth drivers added


Descent set of Q3 results. Most of the growth attributable to the acquired portfolios in the last 1 yr. PAT is flat despite steep rise in Consolidated Revenues due to higher depreciation, amortisation and employee expenses that come with acquisitions.

Key positive - Acquisition of Derma portfolio of Glennmark Pharma for 340 cr. The portfolio’s last yr sales were at 87 cr. Combined with Oaknet’s ( a Derma Formulations company ) acquisition last yr, Eris is now becoming a serious branded derma player in India. Should be a long term positive.

Disc : holding a tracking position. Biased.


Company came up with mixed set of results (27% sales growth, flat PAT YOY). Organic growth lagged due to loss in sale of 2 molecules, one due to legal issue and other was a covid product. Oaknet has turned out to be a very good acquisition, and this has given them the confidence to acquire 9 derma brands from Glenmark. Concall notes below.


  • Guidance lowered to 25-26% (from 30% earlier) and 14-15% EBITDA growth (lowered from 16-17%) for FY23.
  • Zayo revenues was 30 cr. in FY22 which has gone to zero due to legal issue. One more product launched during the 2nd COVID wave (called Zandi) was discontinued (30 cr. revenue contribution in FY22) and there was sales return of 18-20 cr. in 9MFY23
  • Acquired 9 medical dermatology brand (anti-fungal & anti-psoriasis) from Glenmark. 3 brands (Onabet, Halovate and Sorvate) are ranked #1 in their respective segments. 3 other brands (Demelan, Dosetil and Aceret) are ranked in top-3 of their respective segments. These brands have declined for Glenmark in past few years, they were considered as non-core by Glenmark
  • FY22 revenue base of these 9 brands: 85 cr. (purchased at 340 cr.). Will be financed fully through borrowings (8% rates). Gross margins are 78%+
  • Net debt / EBITDA will go to 0.8-0.9x after current acquisition
  • 70% of dermatology sales come from medical dermatology and is growing at 9-10%. Eris wants to position themselves strongly there
  • Oaknet: 60 cr. at 27% EBITDA margins. 9MFY23: 183 cr. (160 cr. has accrued to Eris) at 24% margins. Will exceed 50 cr. EBITDA in FY23.
  • Oaknet had 60% growth in doctor prescription (July, August audit)
  • Insulin sales will be around 20 cr. in FY23 (was 6 cr. in Q3; expect 7-8 cr. in Q4). Will burn (-20 cr.) of EBITDA on Insulin. EBITDA burn has come down to (-4 cr.) this quarter. Expect next year to reach 50 cr. in revenues with breakeven EBITDA
  • Margins have bottomed out in FY23 and will increase in FY24
  • Zomelis reaches 92 cr. MAT in Dec 2022 (#1 rank), Gluxit reaches 51 cr. MAT in Dec 2022 (#2 rank)
  • MRs: 3000 (consolidated), 2225 (standalone)
  • Tax rate: 9-10% for FY23 and FY24. For FY25, blended booked tax rate will be 27-28%. Cash tax rate will continue to be 17% for next 5-years and booked tax rate will also come to 17-18% over 5-years post FY25
  • Trial batches have started in Gujarat. Capex is largely finished. Depreciation will be 9-10 cr. per year
  • On 75 cr. of gross block in Guwahati, Eris does turnover of 800 cr (10x fixed asset turns). So with Gujarat facility coming on stream, there will be no requirement of further manufacturing facilities for a long time to come

Disclosure: Invested (position size here, bought shares in last-30 days)


Eris Lifesciences Q3 concall highlights -

Acquired 09 Dermatology brands from Glennmark Pharma

Had acquired Oaket Pharma ( a Derma company ) in May 22

Latest acquisition helps them consolidate their position in Derma Mkt, specially in anti fungal and anti psoriasis mkt

03 of Glenmark’s acquired brands are No1 in their respective segment. 03 others are among top 03

These 09 brands have a revenue base of 85 cr, Acquired for 340 cr, funded via borrowings @ 8pc

Post deal derma contribution for Eris will rise to 13 pc from 07 pc currently

Derma mkt rank to improve to No 6 from No 12 Oaknet’s

Q3 revenues at 60 cr, EBITDA at 27 pc up from 10 pc, pre acquisition

Oakent to clock yearly EBITDA > 50 cr, 1 yr ahead of expectations

Cardio-Metabolic share of revenues for Eris at 54 pc, grew by 15 pc

Eris’s biggest anti-diabetic brands are Zomelis and Gluxit

Derma+CNS+Women’s health - The emerging portfolio for Eris has grown by 15 pc. All three combined form 25 pc of Eris’s revenues

VMN (Vit-Minerals-Neutraceuticals) account for 17 pc of Eris’s revenues. Grew by 19 pc

Added 200 Medical Reps in FY 23

Launched various new and innovative products specially in Cardio-Metabolic space

These led to some compression in Gross Margins

Consolidated sales at 424 cr, up 27 pc

EBITDA at 132 cr, up 12 pc

PAT at 100 cr @ 24 pc net margins!!!

Consolidated EBITDA margins at 32 pc despite Oaknet integration, commissioning of new mfg plant in Gujarat and various new brand launch related investments

Margins to improve next FY onwards

All this growth despite base Qtr having an aprox sale of 10 cr of Covid drugs

Started selling ( new launch ) Insulin this yr. Aim to hit 22-24 cr sales this yr, 50 cr next yr

Currently having aprox 3000MRs. Oaknet may add a few more next yr

Next yr onwards, EBITDA growth to be better than top line growth as most investments are behind

Aim to launch Glargine by Q3 - Q4 next yr

Current consolidated yield of MRs at Rs 5lakh/month

May go for more inorganic opportunities next year as well

No of products going off patent and are likely to be launched next yr in India are quite high in the diabetes space

Disc : holding, biased


Eris’s 7 % revenue is coming from the products which are now come under NLEM policy of government of India. The margin in these products will be declined by 15- 20 %. So overall margin of company may declined 1-3 % in coming quarters. I’m not yet invested but waiting for some price correction to enter.

Eris does another acquisition in derma space, this time valuations paid were quite high (5.5x sales). Call notes below.


  • Acquired 9 cosmetic dermatology brands from Dr. Reddy for 275 cr. (50 cr. primary sales; 5.5x sales; 78-80% gross margins). Higher valuation was paid because growth is higher in cosmetology (15-20%)
  • Will be financed through borrowings (8-8.5% variable rate loan). 6 brands in top-5 with 3 brands in top-3. 3 brands have 10 cr.+ annual sales
  • Debt will be 850 cr. in FY23, net debt to EBITDA will be 1-1.5x in FY23
  • Used string of pearls strategy to build dermatology portfolio targeting portfolio gaps. Now time is to consolidate
  • Adding 40-50 MRs to dermatology field force to promote cosmetic dermatology (existing field force is 640 in Oaknet). Cosmetic dermatology is growing faster than medical dermatology
  • Eris will rank #3 (7% market share) in covered market in dermatology (Eris now covers 45% of dermatology market), have spent 1265 cr. in building dermatology portfolio. Aggregated revenue is expected to exceed 400 cr. in FY24
  • FY24 guidance for Oaknet: 400 cr. revenues at 36-38% EBITDA margins; 5 lakh PCPM
  • Contribution from emerging therapies (dermatology + CNS + women’s health) has increased to 28% (from 12%)
  • Third party manufacturing is 15-20% for the entire company

Disclosure: Invested (position size here, no transactions in last-30 days)


The question that comes to mind is why glenmark and drl selling despite being in leadership positions in the segment.
Low base
Low growth
Separate mr team

Are possible reasons that come to my mind, leading to a lower ROE.

04.05.2023 India Ratings notes

  • AA- rating (same as CRISIL)
  • 2,000 stockists, 3,669 field force (2,555 medical representatives and 1,144 field managers) and over 5,00,000 chemists
  • Top 15 mother brands contribute 75% to revenue
  • Majority revenues come from metros and class I cities
  • Ind-Ra expects them to grow at a CAGR of around 21% from FY22-FY26(estimate)
  • Utilized 41% of fund-based limits over 12 months ended March 2023

Disclosure: Invested (position size here, no transactions in last-30 days)


Muted set of nos continues for Eris, with organic growth at 9.5%. However, their big brands such as Glimisave, Eritel, etc. have finally started growing after a gap of 2-3 years. Management is very confident of recouping margins in FY24 and is looking to pay down 400 cr. of debt in FY24.


  • Organic revenue growth was only 9.5% due to discontinuation of Zac-D (covid product) and Zayo (legal issues). Ex of these, growth was 15.6% in FY23
  • Spent 1265 cr. in dermatology acquisitions
  • Clocked 17 cr. revenues in Insulin, should be EBITDA neutral in FY24. Q4 run rate was a bit lower due to supply issues
  • Trade generics: Hoping to not incur loss in FY24, not focusing on growth in this segment
  • Will give FY24 guidance at end of Q1 with more visibility on integration of Glenmark and Dr. Reddy brands
  • Dermatology brands are currently outsourced, looking to bring in to Gujarat facility by end of FY24 (15% tax rate)
  • FY24 ETR: 14-15%
  • Intend to pay down 400-500 cr. debt in FY24
  • Eris standalone metrics: 82% gross margins, 5L YPM and 38% EBITDA. Oaknet metrics: 78-80% gross margins, 5L YPM
  • MR expansion: will setup 1 more division in dermatology in H2FY24 (~100 people)
  • MR: 2200 (standalone) + 700 (Oaknet)
  • Oaknet FY23 revenues (pro-forma): 250 cr. (booked 226 cr. for 10.5 months) and 61 cr. EBITDA

Disclosure: Invested (position size here, no transactions in last-30 days)


Is there cyclicality in this business? Usually, Q4 is lower than Q3.

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Eris Lifesciences Q4 highlights -

Revenues at 403 vs 306 cr

EBITDA at 119 vs 97 cr

EBITDA margins at 30 vs 32 pc

PAT at 61 vs 80 cr (due higher interest outgo, higher amortisation, lower other income - all due aggressive inorganic acquisitions made by the company in FY 23)

Consolidated revenue growth for Q4 and FY 23 at 32 and 25 pc

Standalone ( organic business ) revenue growth for Q4 and FY 23 at 11.5 and 9.5 pc

Consol Debt at 774 cr. Expect accelerated pre-payments in FY 24 due generous cash flow generation

Oakent business ( Derma focussed company, acquired early LY) -

Revenues at 250 vs 195 cr, up 23 pc ( for full FY )

Generated EBITDA of 61 vs 20 cr YoY

Added complementary brands to this business by acquiring medical and cosmetological brands of Glenmark, DRL in FY 23

Oaknet’s MR productivity increased from 2.3 to 3.2 lakh / month. EBITDA expanded from 10 to 24 pc

Basically - a very sucessful turnaround of Oakent under Eris

Eris Life - therapy wise revenue share -

Diabetic- 29 pc
Cardiovascular- 21 pc
Vit & Minerals- 16 pc
Derma- 14 pc

CNS- 7 pc
Women Health- 5 pc
Others- 9 pc

Revenue wise Brand strength -

4 brands > 100 cr revenues
6 brands > 70 cr revenues
5 brands > 50 cr revenues

Added 200+ MRs in FY 23

Total cost of acquisition of Oaknet +Derma brands of DRL and Glennmark at 1265 cr incurred in FY 23

Consolidated gross margins sustaining at 80 pc !!

With Oaknet scale up and higher sales of Injectable Insulins, expect improvement in Gross, EBITDA margins in FY 24!!

Eris MJ (JV) for oral insulin hit 17 cr revenues for FY 23. Could have been higher but for supply issues in Q4

Going to launch a number of new formulations in FY 24. Even after accounting for these launches, expect significant jump in EBITDA margins in FY 24

Currently all Derma formulations being made by third parties. Intend to bring them in-house in their new Gujarat facility

Top 20 brands account for 70 pc of revenues

Effective tax rate should be around 14-15 pc this yr

Intend to pay back 400-500 cr of Debt this yr

Business Matrix improvements should be visible from Q1 FY 24 onwards

Going to add aprox 100 MRs in H2 FY 24 in Oaknet division

Disc: holding a tracking position, biased

Once the topline growth starts translating into bottomline growth, I personally expect a significant re-rating in the stock price … something similar to JB Chemicals

That a hunch

Do ur own homework before investing


Cycle is more granular … like monsoons come with illnesses … and winter comes with its own ailments …

Companies do sell brands and there are ready people who want to buy

Company reported very good revival in margins, sales growth was largely driven by inorganic acquisition with sales growing by 17%, EBITDA by 32% but EPS being flat. Tax rates have started hitting them as Guwahati tax shelter is over now, Gujarat ramp up can again bring down tax rates. More interestingly, Eris is launching a lot of products in FY24 again. They are also spending R&D and transitioning from a largely marketing focused co. Concall notes below.


  • FY24 organic growth: Expect IPM to grow at 8% and Eris to grow at 12%. Have seen volume decline in Q1 and most growth is coming from price increase and new product launches. Very confident of double digit growth in remainder of year
  • R&D: Spending 30 cr. on 10 combination molecules (3 cr./molecule). Transitioning from a pure marketing organization to doing R&D themselves
  • 2 FDCs in oral diabetes in clinical trials and will be launched in Q3FY24
  • 2 FDCs in cardiology in clinical trials and will be launched in Q4FY24
  • These 4 FDCs will be new mother brands
  • 6 FDCs are under development (2 diabetes, 2 CNS, 2 Gastro)
  • Relaunced Zayo in January 2023 and has achieved monthly run rate of 2 cr. in June 2023
  • Linagliptin will be launched at patent expiry (August 2023)
  • Insulin sales ramped up to 9 cr. in Q1FY24 with (-2.5 cr.) EBITDA loss (guidance: 50 cr. sales in FY24 and EBITDA breakeven by Q4FY24)
  • MJ’s Glargine and Liraglutide completed Phase III trials and is slated for commercial launch in Q4FY24
  • Gujarat: capex of 230 cr.+ (vs earlier guidance of 170-180 cr.). Capacity utilization was 14% in June 2023 and will ramp up in FY24.
  • Commercialization of Derma block will deliver margin benefits starting Q4FY24
  • Oaknet EBITDA margins are now 35%
  • Dermatology: First-in-market product like Minoxidil Booster and Hydroheal Nova launched in Q1, pipeline of 8-10 products to be launched in FY24. Entering Pediatric Dermatology in Q2FY24
  • Of acquired derma brands from Dr Reddy and Glenmark, have lost 25% of sales in Q1 and hope to get to 100% run rate by Q2FY24
  • PCPM: 5.02 lakh
  • Net debt reduced by 102 cr. (to 672 cr.)
  • Quarterly depreciation will be ~41 cr.

Disclosure: Invested (position size here, no transactions in last-30 days)