**Eris Lifesciences - **
Q2 FY 25 results and concall highlights -
Revenues - 741 vs 505 cr, up 46 pc
Gross Profit - 555 vs 411 cr, up 35 pc. GMs @ 75 vs 81 pc due significant changes in product mix
EBITDA - 265 vs 181 cr, up 46 pc ( margins @ 35.7 vs 35.8 pc )
PAT - 97 vs 122 cr ( due accelerated depreciation, amortisation and finance costs - because of a series of acquisitions made by the company in last 12 months )
Net Debt @ 2500 cr, ahead of schedule ( had guided for net debt of 2600 cr by 31 Mar 25 )
Guiding for a consolidated revenue of 3000 cr for FY 25 with EBITDA margins of 35 pc
Acquisitions made by the company in last 24 months -
Oaknet Pharma - entry into Derma business - paid Rs 650 cr
Select brands of Glenmark Pharma - paid Rs 340 cr
Derma brands of Dr Reddy’s - paid Rs 275 cr
Biocon’s domestic Nephro and Derma business - paid Rs 366 cr
Swiss Parenterals - sterile Injectables business - paid Rs 870 cr for 70 pc stake
Biocon Biologics India formulations business ( has significant presence in Onco and Anti-Diabetic therapies ) - paid Rs 1240 cr
Total cost of all acquisitions put together - 3740 cr
Total revenues of the acquired assets at the time of acquisition - 1070 cr
Launched Liraglutide ( GLP-1 ) brand - ERLY in Sep 24
Despite the drop in gross margins, the EBITDA margins of the consolidated business remain strong at 35 pc due successful business integration and cost + scale benefits thereof. Also, the company’s new manufacturing facility at Ahmedabad is ramping up with Q2 capacity utilisation @ 65 pc vs 55 pc in Q1. Additionally, company’s in-house production of Derma products has gone up to 30 pc vs NIL in previous FY. This number ( ie - percentage of in-house derma business ) is improving MoM. All these things are helping improve the Gross margins of base business and EBITDA margins of the consolidated business
Pre-Biocon acquisition, company’s anti-diabetes franchise was limited to OHAs ( oral hypoglycaemic agents ) with a topline of Rs 600 cr, 900 MRs and a yield per MR @ Rs 5.4 lakh/month. Post the acquisition and integration, the Anti-Diabetes franchise has OHAs + Injectables with a topline of 1000 cr +, 1200 MRs with a yield per MR @ 7.1 lakh/month - clearly company is benefitting from significant scale business in their Anti-Diabetes business
The OHA and Injectables teams are complementing each other at the field level - which is a great news for the company
Company has added six senior level officials to the Swiss Parenterals business - in the business development and regulatory compliance roles for business expansion in the African, Asia-Pacific and Latin American mkts
Likely to commence - Oral solid Dosage exports business. Expecting regulatory approvals from EU-GMO and ANVISA ( Brazilian regulator ) for the Ahmedabad site. Once approved, exports may commence in mid FY 26
In the process of commencing - CMO business wrt Injectables for the EU mkts. Target customers would be EU focussed big generics players. Looking to get into stable 3-5 yr manufacturing contracts with them
Company acquired 30 pc stake in Levim Lifetech for 54 cr in Q2 FY 25. Levim has developed and commercialised 3 products - Liraglutide ( GLP-1 ), Streptokinase ( used to treat blood clots in Heart, Lungs, blood vessels ) and Pregaspargase ( Onco drug used to treat a type of blood cancer ). Successful development of Liraglutide by Levim builds confidence for a future GLP play. They are likely to commission a large scale manufacturing facility in Mid-2025. Levim’s R&D pipeline is expected to expand significantly going forward
Company’s brand ERLY is based on the active ingredients manufactured at the Levim’s manufacturing facility
Capex for FY 25 should be at 150 cr ( aprox ) + 54 cr investment in Levim’s business
Breakdown of Q2 revenues -
Base business - 501 cr
Biocon’s business - 131 cr
Swiss Parenteral’s business - 82 cr
H2 should see a flurry of launches in the base business. Base business is expected to grow by 10 pc in FY 25
GLP-1 drugs should end up being a big opportunity in India. At present, company is going to play it via Liraglutide. Post FY 26, they ll introduce Semaglutide
As Levim is able to develop more products, ERIS is likely to increase their stake in that business
Expect the Insulins business ( acquired from Biocon ) to grow in high teens in next 2-3 yrs. Only concern here is the supply shortages of Insulins - not only in India but across the world
Swiss Parenterals should do a 330 cr kind of Topline for FY 25. This business is also likely to keep growing at a good pace going forward. CMO to Europe ( once it starts ) - should be an added kicker for future growth
Disc: holding, biased, added more recently, biased, not SEBI registered, not a buy/sell recommendation