Eris Lifesciences - 100% of sales from India Pharma Market

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.