Pharma || Hospitals || Diagnostics : Industry perspective

GSK PHARMA - Broad overview -

No 1 in India in - vaccines, anti-infectives derma therapies

Has 4 brands in top 50 branded generics in India. These are - Calpol (PCM), Augumentin (amoxycillin), T-Bact ( topical cream for bacterial skin infections ) and Ceftum ( Cefuroxime - a second Gen Cephalosporin ). Company launched brand extensions of two of these brands - Calpol 650+ and Augmentin ES in 2023. Eltroxin( for hyperthyroidism ), CCM ( Vit D supplement ), Neosporin ( topical cream for bacterial skin infections ), Betnovate ( anti-inflammatory skin cream ) are other popular brands from GSK

05 of GSK’s vaccines are ranked among top 15 vaccines brands in India. Have launched an adult vaccine in India to prevent - Shingles - in FY 23

In 2024, GSK will complete 100 yrs in India

Company also owns 02 popular speciality brands in India - Nucala ( only biologic treatment for eosinophilic asthma ) and Trelegy ( to treat obstructive pulmonary disease )

FY 23 financials -

Sales - 3216 vs 3218 cr

EBITDA - 800 vs 755 cr (margins @ 25 vs 23 pc)

PAT - 605 vs 552 cr

Current Size of IPM @ $52 billion. Expected to cross $ 100 billion by 2030

Company’s formulations facility is located at Maharashtra. Company has 22 Contract manufacturing partners in India

Disc: hold a tracking position, not SEBI registered, biased

3 Likes


Not getting pls brief it.

DNB is equivalent to MD/MS or DM/MCh degree. The hospital will get workforce for mere stipends. The DNB residents will work under the guidance of consultants.
They don’t charge huge fees for DNB like in medical colleges (for DM and MCh). However, the hospital will be able to cater to more patients at lesser operating expense. The same goes for fellowships and internships too.
Observerships don’t add anything to the workforce.

1 Like

Indoco Remedies

Q3 FY 24 concall highlights -

Sales - 459 vs 399 cr
EBITDA - 63 vs 62 cr ( margins @ 14 vs 16 pc - unexpected compression )
PAT - 16 vs 28 cr ( big miss ). Company incurred an exceptional cost of 8 cr towards provisioning for VRS at one of its Goa Site

Goa plant - 1 received EIR from US FDA in Q3

Segment wise revenue break up -

Domestic formulations - 216 cr, up 4 pc

International formulations - 197 cr, up 4 pc
(sharp growth in US and emerging mkts, sharp de-growth in EU, Australia, NZL)

API sales - 33 cr vs 16 cr

Indoco analytical services - 8 vs 4 cr

Company’s Goa plant - 2 ( for sterile products ) was given OAI status in Feb 23. Expect increased level of remediation costs to continue for some more time before the plant is again cleared by US FDA

Drop in EU sales primarily due to drop in PCM sales due overstocking by a particular customer

Company is trying hard to mitigate the effect of disturbances in Red Sea. The situation remains unpredictable

India business had a significant component of institutional sales in the base Qtr. Adjusted for that, India business would have grown at far higher rates

Higher depreciation incurred in Q3 due expanded manufacturing facilities

Overstocking issues in EU should be a thing of the past - after Mar 24. Apr 24 onwards, EU sales should pick up nicely

New introductions have done very well in Q3 vs flattish growth for legacy brands in India. Company is also withdrawing from a lot of smaller products/brands in the India business. That also had an adverse impact on Q3 India sales

Deficient rains in India in Q3 had an adverse impact on the sales of anti-infective where company has a strong presence

Company is making concerted efforts to reduce the overall cost structure of the company

In the medium term, the company aspires to go back to 22-23 pc kind of EBITDA margins ( this can potentially super-charge the company’s bottomline ). My take - The proof of the pudding shall however be in the eating

Company has a total of 2300 MRs on its payroll for India business

Capex guidance for next yr - 120-150 cr. Capex for FY 24 should be around 150 cr ( basically, the company is sitting on a lot of operating leverage … only if they realise it )

Company can more than double its sales with the current capacities

Company expects Goa- plant 2 to be cleared by end of Q2 next FY - at the earliest. It may take more time

Disc: hold a tracking position, biased, not SEBI registered

IMHO - the company has a lot of potential. Execution has been below par in the last 12 odd months. For the time being, I am ready to be patient and give them a lose rope for another 2 Qtrs - minimum

2 Likes

Cipla Q3 FY 24 -

Concall highlights -

Sales @ 6604 cr, up 14 pc
EBITDA @ 1748, up 24 pc (margins @ 26 vs 24 pc)
PAT @ 1068 vs 808 cr
R&D spends @ 6.1 pc of sales, up 10 pc YoY

Region wise performance -

India sales @ 2859 cr, up 12 pc, fuelled by chronic therapies and big brands ( 44 pc of total sales )

North America sales @ $ 230 million, up 18 pc ( 29 pc of total sales )

South Africa sales @ ZAR 1355 million, up 15 pc
( 1 ZAR = Rs 4.4 )

Other international Mkt sales @ $ 90 million ( 11 pc of total sales )

API and others represent 4 pc of sales

Company’s cash holdings @ 7200 cr ( I hope they r used to acquire speciality, branded portfolios )

Forecort Inhaler - became the No 1 Indian brand in Q3

Filed gSymbicort and one more product in US mkts

Awaiting approval for one peptide product launch

Therapy wise rank of Cipla India -

Respiratory - 01
Urology - 02
Cardiac - 07

Overall rank in India - 03
Rank in chronic therapies - 02

Company has 10 brands in top 100, 06 brands in top 50 and 03 brands in top 25 in IPM. Company has 20 brands with sales > 100 cr/yr

Cipla’s popular Indian OTC brands - Omnigel, Nicotex, Cofsils, Cipladine, Prolyte ORS solution

Acquired Actor Pharma in RSA for $ 49 million in Q3. Integration process is on

Q4 is a seasonally weak Qtr - both in India, US

Company’s Goa plant is scheduled for a re-inspection by USFDA in Q1 FY 24. It was last inspected in Aug 22 and was given a warning letter. Similar is the case with their Pithampur plant which was also given OAI status in Feb 23. OAIs at these 2 plants are hampering the new product launches in US

One Peptide product should get launched by Q1 FY 25. Cipla should be the first company to launch it. Mkt size for the product is descent ( they did not quantify )

Company is hopeful for an approval for the launch of Advair in US by end of FY 25. Current price of the generic Inhaler is around $ 30 / inhaler

Cipla has about 20 pc mkt share for lanreotide 505(b)(2) product in US. Hope to keep gaining incremental Mkt share in the coming Qtrs

Going fwd ( 3-5 yrs ), Respiratory and Peptide assets shall continue to be company’s two largest segments in the US mkt

Cash on books to be used for bolt-on acquisitions. Can go for larger assets in India, relatively smaller assets in Intl Mkts

Disc : holding, biased, not SEBI registered

3 Likes

Curious if you’re still tracking hospitals? From what I understand, hospitals is a multi-decade trend as our median age inches up. Within the space, nearly all hospital assets are now trading at upwards of 50x PE (exception of Yatharth).

From a qualitative standpoint, metrics being tracked / judged on are:-

1. ARPOB
This affects RoCE directly. Higher the ARPOB, more the absolute EBITDA would be even if margins remain the same. Drivers of ARPOB usually are complex specialities such as oncology, neurosciences, cardiac sciences, etc. All these require attracting medico staff with high patient loyalty. Most of them go to the bigger brands (Fortis / Apollo / Max / Medanta, etc.). Currently, Max Hospitals has the highest ARPOB at upwards of 70k (Q3FY24) while Yatharth has the lowest (33k)

2. Payer mix
More self payer and third-party insurance mix, higher the institutional rates and shorter would be debtor days (since govt usually takes long to release payments). Most of the hospitals mentioned in #` above have OCF / EBITDA in the range of 60-70% which is quite healthy. Again, most of these hospitals have high proportion of self pay / TPA mix while low govt mix (opposite for Yatharth).

I’m closely following the space since I’m invested in Yatharth because of a) extremely cheap valuation compared to peers; and b) multiple earnings trigger in FY25.

Yatharth has done 87crs of EBITDA in H1FY24, and I expect it to cross 200crs in FY24. It has 300crs of surplus cash so as on date, EV is around 2920 crs. Therefore, an EV / EBITDA of around 14.5, the cheapest among the lot by a significant margin.

Valuation re-rating triggers could be:-

  1. Increasing utilisation levels across Greater Noida & Noida Extension hospitals, leading to higher margins (operating leverage play)
  2. Higher ARPOB due to introduction of robotic surgery in Q4FY24
  3. Renegotiation of rates with GoI and reduction in debtors (cash flows)

Risk

  1. Ramraja Hospital case (land dispute) going the MP govt way, but I don’t see this risk playing out in foreseeable future.

Happy to discuss and brainstorm ideas if people are tracking this space.

Thanks!

2 Likes

At cmp, I feel Shalby ltd is a good bet

Its margins ( EBITDA ) are in 20s or at least high teens even when the occupancies are in mid 50s. This is because of the good surgical mix that they have

Basically, they might be sitting on a lot of operating leverage. They are likely to do a PAT in the range of 100 cr for FY 24. Going by Hospital standards, doesn’t look expensive to me

Disc : holding, biased, not SEBI registered

1 Like

I don’t like the unncessary diversification into academy and mfg business & international businesses (Consolidated ROCE is lower than standalone ROCE).

  • Also while occupancy has gone up from 49% to 54% in Sept quarter, the EBITDA (and it includes other income too) % is still around 26%. Including Other Income, Yatharth’s EBITDA is already around 30% while there still remains significant headroom for higher utilisation of both the Noida hospitals (Greater Noida & Noida Extension).

  • Higher revenue growth (absolute INR crs) despite much smaller base for Yatharth vs Shalby

  • Shalby also has limited superspecialities vis-a-vis Yatharth. Pulmology (lung) is missing in Shalby vs Yatharth.

  • Shalby doesn’t have a significant presence in Tier 1 cities, so I guess, the ARPOB to an extent would be capped?

Valuation wise, both are almost similar - Yatharth is 14.5x EV / EBITDA while Shalby is around 15x EV / EBITDA (3300 crs & 220 crs of EBITDA).

D - Invested in Yatharth. Biased.

3 Likes

Hospitals are local monopolies. Spend on healthcare 2 times the GDP growth rate check here https://twitter.com/amitverma21/status/1746214866090606848, it is also a combination of Pharma, Diagnostics, and Biologics. hospitals are platforms and have network effects and their brand becomes stronger over time. Hospitals over time will consolidate but for now, there is a long run way ahead for the next 20 years. the investment thesis is quite simple on good Hospital chains. You can put large amounts of money with good promoters

Narayana Hrudalya is 6 X for me at large allocation in the last 5 years.

Apollo hospitals is up 400 X times in the last 30 years. https://twitter.com/amitverma21/status/1743515237721018392

I see this as a brainer theme for concentrated investors who think like businessmen, B2C businesses are any day better than B2B.

6 Likes

What are some of the markers of brand? is it the speciality mix or what? How do you even gauge the strength of a brand? I guess payer mix is one if self-pay and TPA are increasing consistently… what would be some others?

In hospitals, Brand is associated with Clinical Outcomes and the complexity of procedures. These are done when you have the best Doctors and the latest Equipment. if your and loved one’s life depends upon the operation you will do the research. The way new hospitals try to cover this by building 5 star buildings but outcomes are what matters. More complex surgeries you do more image builds for hospitals and famous people get operated and legacy is built.

Insurance companies and TPA would like to squeeze the margins of these hospitals but people can decide not take insurance from companies that don’t cover good hospitals. so the power of good hospital chain is immense. Think Breach Candy in Mumbai or Mayo Clinic in the US.

All the great Pharma company’s products even if it Novo Nordisk Ozempic will be recommended and can be sold by Hospitals.

No one is shopping for a cheap hospital esp with insurance. Life is precious so pricing power is unlimited.

2 Likes

Alembic Pharma -

Company overview & Q3 FY 24 highlights -

Company’s manufacturing base -

Formulation facilities -

F1 @ Panelav - General oral solids

F2 @ Panelav - Oncology oral solids, Injectables

F3 @ Kharkhadi - General injectables, Ophthalmic products

F4 @ Jarod - General Oral solids

F5 @ Kharkhadi - Various Derma product forms

API facilities -

02 facilities at Panelav

01 facility at Kharkhadi

Company is ranked @ 20th position in the IPM

Supplying APIs to 60+ countries

Division wise sales mix for Q3 -

India formulations - 36 pc - 596 cr, up 9 pc

US formulations - 28 pc - 474 cr, up 9 pc

RoW formulations - 17 pc - 272 cr, up 32 pc

APIs - 19 pc, 326 cr, down 11 pc

India sales breakup -

Acute - 30 pc

Vet - 16 pc ( operating in Livestock and Poultry market )

Speciality - 54 pc

In India, 04 of company’s brands clock sales > 100 cr / yr

03 of company’s Veterinary brands clock sales > 30 cr / yr

No large capex is lined up for the US business in the foreaeable future

RoW growth driven by various partnerships that the company got into. Key RoW mkts include - EU, Canada, Australia, Brazil, RSA. Commenced ops from Chile. Aiming to expand to Mexico, ME and North Africa in near future

Company has been spending > 12 pc of their topline on R&D for last 5 yrs !!!

Veterinary and RoW businesses grew by 32 pc each in Q3

Company is sitting on a lot of operating leverage as its US facilities are under-utilised. As their utilisation goes up, return ratios, margins should get a good bump

Fall in API sales is due to slower off take by a few customers. Should correct in 2-3 Qtrs

Aim to launch 05 new products in US in Q4 followed by 10-15 launches in FY 25. These launches should help take the plant utilisation to higher levels

Company’s R&D focus these days is greater on Injectables vs Oral solids, Derma products

Company is working on GLP-1 products. These are complex generics. Launches are some time away

Company feels it has $ 230 million/yr kind of base business in US ( unless there r some major disruptions ). The Mkt is looking better now vs the last few yrs. The US business is already profitable

Disc: planning to take up a tracking position, biased, not SEBI registered

2 Likes

An observation -

Dependence on plain vanilla US generics ( even for larger players like - sun, cipla, dr reddy ) …… is falling with every subsequent qtr

Share of profits from branded mkts are increasing with every passing qtr

Bigger guys like - Sun, Cipla, Dr Reddy are sitting on cash like 5-6-7 k cr ( company to company ) and are now spending these on either niche / specialty or limited competition complex generics. Plus they r generating tons of Cash every year

Eg - Sun’s specialty portfolio is doing very well. With increased R&D dollars, it should only get better

The pain caused by heavy dependence on plain vanilla generics may not get repeated easily ( all companies seem to be aware of this and are acting accordingly )

May lead to a structural re-rating of the sector

4 Likes

Another observation -

Ppl or Mkts keep taking about the shift from unorganised to organised players in various sectors due various factors- known to all of us

There r 2 sectors where the unorganised sector is rolling out red carpet for the organised sector- hotels / hospitals

A lot of standalone hotels / hospitals are willingly handing over their operations to organised chains like - royal orchid, kamat hotels, taj group etc

Similar things are beginning to happen in Hospitals - like with Shalby, KIMS

I m sure - the trend is only gonna accelerate

The organised players either get into a management contract or take up the assets on lease

Its a win win for all

I wonder - what will be the size of these hospital / hotel chains after 5-6 yrs

They can simply keep adding to their profits without capex and without creating any new capacity too ( hence the supply may also remain limited :laughing: :joy: )

Possible Goldilocks Scenario

Disc: biased, invested in a lot of Hotel and Hospital companies

4 Likes

Yatharth Hospitals posted its results yesterday:-

Can someone help explain to me if Q3 has any sort of seasonality? I don’t see a reason for QoQ degrowth otherwise.

Anyways, posting few of my observations:-

  1. Noida extension is emerging as a super speciality hub with robotic surgeries starting in Q3FY24 and Oncology treatment starting in Q4FY24. One can see the effect in ARPOBs, which is substantially higher (at 34k) vs the next best in Yatharth i.e. Noida hospital at 30k. Despite lower footfalls, the hospital was able to register a higher revenue, owing mostly to the higher mix of super specialities (to be confirmed by management but looks but obvious).

To build on this further, the Noida extension occupancy is currently at 45% and the company is undergoing a brownfield expansion to add 250 beds to take total hospital capacity at 700.

I fully expect the hospital to reach around 40k ARPOBs by end of next year, which puts it not too behind the bigger hospitals.

Imo, this is a very favorable news for Yatharth from a brand and capability point of view.

  1. Greater Noida hospital also registers a 10% ARPOB increase (possibly driven by transplants?). Despite lower footfalls, the overall revenue of the hospital is up by nearly 20%. This indicates the growing mix of higher specialities. Occupancy levels remain at around 70% and the company is undergoing another brownfield expansion of 200 beds.

  2. Acquisition of Asian Fidelis for 116crs cash. Sector-88 is a fairly populated area in Faridabad and with upcoming infra (connectivity from Jewar Airport in next 1-2 years), Faridabad will naturally have higher residence density. Needs to be seen how Yatharth can scale the metrics in this hospital. Prima facie, the acquisition looks fairly cheap.

Zooming out, Yatharth is adding nearly 250+200+175 = 625 beds, taking total bed capacity to >2k in next 1-2 years. This is a near 40% capacity addition.

  1. Valuations, I estimate FY24 EBITDA to be at around ~180 crs and with current acquisition, the net cash comes out to be around 180 crs. So EV is 3600 crs or lower if cash accruals in 9MFY24 are somewhat healthy. Assuming 3600crs though, current EV / EBITDA is 20x. Peers trade at much higher valuation:-

However, the peers in NCR region trade at much higher valuation. Part of the higher valuation is justified because Apollo, Max, Medanta, Fortis all are well recognised and much older brands with greater surgical prowess.

Hard to estimate the EBITDA growth for next year, but conservatively I expect EBITDA to register 40% increase primarily due to:-

a) Contribution from Asian Fidelis (around 20crs total).
b) Higher ARPOBs across hospital (barring Noida). I expect ARPOBs to inch up by 10-15%

FY25E EBITDA: 252
Expected net cash surplus: ~ 300 crs

Basis the above, Yatharth is currently trading at ~14x FY25E EV/EBITDA.

D - Invested (from lower levels) & biased

3 Likes

I think Samhi hotels working model is similar to what Ranvir ji has mentioned. They acquire the hotels which are kind of dislocated and are not working/performing to their optimum capacities. They then renovate and re-brand these hotels with the operators like Hyatt, Merriott & IHG.

Because of this strategy, their construction time reduces a lot, the difficulties/challenges with setting up a hotel from scratch reduces and last but not the least their cost per room is significantly less than average room cost across the industry.

All in all, they are reducing the intricacies/complexities by acquiring the hotel asset and also operating the assets.

Disc. Invested. Biased.

6 Likes

ALKEM LABS -

Q3 FY 24 concall highlights -

Revenues - 3323 vs 3040 cr, up 9 pc
Gross margins @ 61 vs 59 pc YoY
EBITDA - 707 vs 599 cr, up 18 pc ( margins improved 160 bps to 21.3 pc )
PAT - 604 vs 460 cr, up 30 pc

R&D expenses @ 111 cr, 3.3 pc of sales ( on the lower side - imho )

India sales @ 2232 cr, up 12 pc
International sales @ 1024 cr, up 3 pc

Domestic business grew strongly led by GI, Anti-Diabetic, Vit-Minerals segments. Trade generics also grew strongly

Company’s rank in various therapeutic areas-

Anti-Infectives - 1st
Vit-Minerals - 2nd
GI - 3rd
Pain/Analgesics - 3rd

Company is an emerging player in Diabetic, Neuro, Derma, Cardiac segments

US sales @ 683 vs 761 cr, down 10 pc due very strong base in the previous FY. 9M US sales are up 12 pc

Non-US international ( Australia, EU, LATAM ) sales @ 340 vs 230 cr, up 47 pc !!!

Company has launched 7 biologics in the domestic market via its subsidiary - Enzene ( doing sales of around 200 cr/yr )

Company holding a cash surplus of around 3500 cr

Chronic sales as a percentage of India sales @ 17 pc ( still quite low for the company ). Should be able to take it to above 20 pc in 3 yrs or so

LATAM growth continues to be strong - plus its a healthy EBITDA margin business

Guiding for a full year EBITDA margins of around 17 pc as Q4 is a weak Qtr for Alkem Labs

Looking at deploying cash on balance sheet for growth - ie - acquisitions, organic projects

Anti-Diabetic, Respiratory are strong focus areas for the company in IPM

Enzene ( Biosimilars - subsidiary ) likely to break even this FY

As the Chronic sales in India, RoW sales pick up - margins should improve ( beyond the current annual run rate of 17 odd pc at EBITDA level )

Going fwd - Intend to spend 100-150 cr / yr on R&D related to Biosimilars

Acute portfolio on an avg has 10-15 pc lower Gross Margins vs the Chronic portfolio

Remain bullish on RoW mkts. Should continue to grow well in LATAM, EU

Aim to keep increasing EBITDA margins by 100 bps / yr for the foreseable future

Expecting tax rates of 10-12 pc for next 2-3 yrs for the company. Tax rates will go into the 20s range post FY 27

Around 30 pc of company’s portfolio falls under NLEM

Expecting Q4 EBITDA margins @ 12 pc or better

US business’s economics is now far better vs previous 2-3 yrs

Disc: hold a tracking position, biased, not SEBI registered

3 Likes

Glenmark Pharma - Exiting management commentary -

Q3 FY 24 highlights -

Sales - 2507 vs 3100 cr
EBITDA - (-) 209 vs 474 cr
PAT - (-) 331 vs 291 cr

Consolidated revenues fell 19 pc due to one time impact on India business

India revenues fell 75 pc @ 262 cr !!! Adjusted for that, revenues would have grown 9 pc YoY

EU business grew 29 pc @ 635 cr. Key brands like Riyaltris and Asthmex continue to grow strongly

RoW business grew 10 pc @ 725 cr. Company continues to witness strong sales momentum in the Respiratory and Derma segments

North America business de-grew 9 pc @ 762 cr ( due lack of new launches. Have launched 07 new products ) Over last few Qtrs, company has launched 05 new Injectable products in the US Mkts. Company hopes that these products may start to gain descent traction wef Q4 FY 24. Also awaiting approvals for 02 generic nasal sprays in the respiratory segment ( both these are big launches )

API business grew 10 pc @ 412 cr

India business impacted due - extensive changes in company’s distribution model through consolidation of stock points

India consumer division with brands like - Candid, La Shield, Scalp - grew 20 pc

Riyaltris - already launched in 31 countries. Has been approved for 18 more markets and will be launched there in next 3-6 months. China launch is expected in Mid-2025

Glenmark Pharma is ranked 2nd in both Derma and Respiratory segments in Indian Mkt. Company ranks 5th in the Cardiac segment. Company has 9 brands in top 300 brands in India

Glenmark is the first company to launch the bio-similar Liraglutide in India in Jan 24

R&D spends for Q3 @ 308 cr which is > 10 pc of sales

Gross and Net Debt @ end Q3 stands at 4900 and 3500 cr respectively. Likely to be paid off once the company receives the proceeds from the stake sale in GLS

India business restructuring done to correct the inefficiencies in the product distribution, help reduce working capital. In Q4, company should be back to > 1000 cr/Qtr India business. Post restructuring, company’s working capital need should reduce by Rs 500 cr

India business should be able to sustain 10-12 pc growth CAGR from hereon

R&D costs should almost half going into 2025. All this additional savings ( about 250 - 300 cr / yr ) should flow through to the bottomline )

Company’s Monroe plant in US is ready for inspection post all the remediation work. Expect to commercialise 02 products in FY 25 from this facility. From FY 26 onwards, expect this number to scale up meaningfully. As the plant goes commercial, expect a lot of operating leverage for the company’s US business to flow in

Going fwd, company is going to lay greater focus on the Injectables and Respiratory business in the US. Derma business should continue its steady trajectory

Riyaltris is expected to clock sales of $ 80 million for GPL. Once it is launched in the remaining mkts, the peak Riyaltris sales should further ramp up meaningfully. Plus this is a high margin product

The Chinese drug ( Envafolimab - an immuno-onco product ) that company has in-licensed can potentially be a big molecule going forward. Company believes, it would be the next Riyaltris for them

India business should clock > 1100 cr / yr sales from FY 25 onwards

Company expects to be debt free by end of Mar 24. Guiding for > 18 pc kind of EBITDA margins for FY 25

Assuming a topline of 12k cr, EBITDA for next year may be around 2200 cr with little or no interest outgo !!!

Disc: hold a tracking position, biased, not SEBI registered

2 Likes

Eris Lifesciences -

Q3 FY 24 concall highlights -

Current rank in IPM @ 21st vs 29th in Mar 18

Make share in Diabetes @ 5 pc, in Vit/Minerals @ 2.5 pc

Last 6 yrs avg GMs > 80 pc, EBITDA margins > 35 pc

Therapy wise sales breakdown -

Diabetes - 28 pc

Cardio - 19 pc

Vit/Min - 16 pc

Derma - 14 pc

CNS - 6 pc

Women’s health -5 pc

Nephro - 3 pc

Others - 8 pc

Q3 financial outcomes -

Sales - 486 vs 423 cr

EBITDA - 176 vs 137 cr ( margins @ 36 vs 32 pc )

PAT - 116 vs 107 cr ( due higher amortisation, interest costs )

Vision 2029 - to hit a annual revenue run rate of Rs 5000 cr / yr

Acquired SWISS PARENTERALS in Q3. Its a dossier driven - generic and speciality Injectables business focussed on RoW Mkts ( Africa, LATAM, ME, Asia Pacific ). They own 02 manufacturing plants in Gujarat. Swiss Parenterals currently does a topline of 250 cr with 25 pc PAT margins. Eris has bought 51 pc stake for 637 cr in the company. An additional 19 pc stake shall be acquired separately by Eris promoter group for 237 cr

It also offers Eris an ideal platform to launch India focussed Sterile - Injectables portfolio

Company’s 100 cr/yr brands -

GlimiSave ( anti-diabetic ) - 300 cr

Eritel ( Telmisartan - anti-hypertensive ) - 170 cr

ReNerve ( Gabapentin + Methylcobalamin - CNS drug ) - 160 cr

Zomelis ( anti-diabetic ) - 105 cr

Company’s 50 cr/yr brands -

Tayo ( Calcium + Vit D supplement ) - 80 cr

Gluxit ( anti- diabetic ) - 75 cr

Remylin ( folic acid supplement ) - 70 cr

Company plans to launch Glargine and Liraglutide in Q4 ( both are biosimilars )

The Derma companies and brands acquired by the company in FY 22 have seen an EBITDA margin improvement from 10 pc to 35 pc inside 2 yrs !!!

Both the injectable plants acquired by Eris are currently running on single shift basis offering significant operating leverage opportunity to the company

Eris intends to do a business of 100 cr in the domestic mkts from year-1 iro the newly acquired Injectable facilities

Looking at Swiss Parenteral’s RoW focus ( basically branded and unregulated mkts ), wide product portfolio ( they make a lot of injectable antibiotics ) , R&D focus and juicy EBITDA margins - its a sweet sweet deal for Eris

Swiss Parenteral currently operates on distributors led front end in the RoW mkts. After partnership with Eris and Eris’s brand name, the front end distribution challenge in the Indian Mkt is virtually gone for Swiss. Hence, its a win win for both

Eris had acquired the derma and nephro brands of Biocon Biologics for 366 cr in Mid Nov 23. This business is doing a Gross Margins of around 70 pc vs 50 pc at the time of acquisition !!! This portfolio is likely to do a revenue of 10 cr or so / month from next FY onwards

Eris intends to put up another Injectables plant under the guidance of Swiss Parenteral. It may need a capex of 40-60 cr

Company is on track to achieve 2000 cr topline, 700 cr EBITDA, 400 cr PAT for FY 24

Disc: holding, a core holding, biased, added more recently, not SEBI registered, not an investment advice