Margin revival continues for Eris. As they turnaround acquisitions, their appetite for newer acquistions keep increasing, with them now acquiring nephrology and dermatology brands from Biocon at 3.7x EV/sales. They are confident of increasing margins of acquired portfolio from 20% to 30% in a years’ time. Concall notes below.
FY24Q2
- FY24 guidance: 2000-2100 cr. sales, 700-710 cr. EBITDA (30% growth), 410-415 cr. PAT (without Biocon acquisition)
- Capital allocation strategy: focus on using operating cashflows to expand into newer therapies through acquisitions (Strides gave them Nephrology, Oaknet gave them Dermatology, Biocon adds to Nephrology and Dermatology)
- Acquired 12 brands in Nephrology (Organ transplant focused power brands like Tacrograf and Renodapt; 65 cr. sales; 40 MRs) and 9 brands in Medical dermatology (Psoriasis and Atopic Dermatitis; 35 cr. sales; 50 MRs; Psorid is 25 cr. brand) from Biocon for 366 cr. (including working capital; 3.7x sales; 280 cr. will be from debt). Total personnel: 90 MRs + 30 others. Very high MR productivity (9 lakhs YPM). Will reach 30% EBITDA margin in FY25 from 20-22% currently
- Amortization will be 17-18 cr. annual amortization (20 year window)
- Psoriasis market is 1100 cr. (2-year growth of 20%). This acquisition makes them second largest in psoriasis with 11% market share
- Nephrology market is 3000 cr. growing at 11%
- When there is personnel acquisition (and not only brand acquisition), then leakage of sales is lower
- In Glenmark acquisition, have reached 100% of sales but for Dr Reddy have only managed to get to 90-92% by Q2
- Organic growth: 7-8% (vs covered market growth of 2.5% in H1)
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Launches
o 2 FDCs in oral diabetes approved (Gliclazide-Dapagliflozin, Gliclazide-Sitagliptin) and will be launched this quarter. Both are first to market
o Launched 2 “at-risk” products (Linares & FCM) in Q2
o Launched 4 products in dermatology in Q2 (Hydroheal, Nova, Efatop Hydra, Crisanew)
o Pipeline increased to 14 from 10 in Q1: Added 2 FDCs in gynecology, 1 first time to Indian launch in cardiovascular and 1 in respiratory therapy in FY25 - Their 50 cr.+ brands reduced from 15 in Q1 to 13 in Q2. 100 cr.+ brands increased from 4 in Q1 to 5 in Q2
- Will start commercial production in dermatology in Q4FY24
- Insulin: 10 cr. sales in Q2FY24; (-1.8 cr.) EBITDA loss
- Market coverage: 83% in diabetes, 54% in cardiovascular, 50% in dermatology
Disclosure: Invested (position size here, no transactions in last-30 days)