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What is driving growth for pharma major Eris Lifesciences?

What is driving growth for pharma major Eris Lifesciences?

Eris Lifesciences recently acquired nine brands from Glenmark, consisting of derma portfolio for Rs 340 crore, with topmost brands having a leadership position in the pharmaceutical market

Eris Lifesciences recently acquired nine brands from Glenmark, consisting of derma portfolio for Rs 340 crore, with topmost brands having a leadership position in the pharmaceutical market Eris Lifesciences recently acquired nine brands from Glenmark, consisting of derma portfolio for Rs 340 crore, with topmost brands having a leadership position in the pharmaceutical market

Eris Lifesciences’s gradual expansion of derma portfolio through inorganic growth and outperformance in core cardio metabolic market is keeping analysts upbeat about the company’s growth in the coming years. 

In the recently announced third quarter FY23 results, the revenues of Eris increased 27 per cent year-on-year (YoY) at Rs 420 crore. The gross margin contracted 250 bp YoY to 79 per cent due to change in product mix. EBITDA increased at a lower rate of 13 per cent YoY to Rs 140 crore, PAT decreased 1 per cent YoY to Rs 100 crore, due to higher depreciation/interest cost. Further, for 9MFY23, revenue and EBITDA grew 23 and 4 per cent to Rs 1300 crore and Rs 400 crore, respectively. However, PAT declined 10 per cent YoY to Rs 300 crore.  

Eris Lifesciences recently acquired nine brands from Glenmark, consisting of derma portfolio for Rs 340 crore, with topmost brands having a leadership position in the pharmaceutical market.  Pharmaceutical analysts are reiterating buy ratings for the company citing various growth factors. “Eris has built multiple levers for growth in branded generics space by broadening dermatology portfolio through acquisitions, adding Insulin and its analogues in the anti-diabetes segment, sustained uptick in DPP4/SGLT2 sales, leveraging patient care platform and specialist engagement, and adding medical representatives to increase reach. Considering these factors and attractive valuations, we reiterate our BUY rating on the stock,” research analysts Tushar Manudhane and Sumit Gupta from Motilal Oswal said in a report.  

The company in its annual report has said that the era of patent expirations and exciting new product launches in oral anti-diabetes begins in 2023 and it expects to gain prominent market positions in the new product launches.  

Eris Lifesciences entered the Rs 3,500 crore market for Insulin (used in management of diabetes) and analogues (a drug with similar physical structure as some other drug) in January 2022 through an equity partnership with MJ Biopharm in January 2022. The company also launched Xsulin, its brand of human insulin in Feb 2022. Eris also entered the Rs 11,000 crore Dermatology segment in May 2022 through the acquisition of a 100 per cent equity stake in Oaknet Healthcare.  

“Oaknet enjoys near 100% coverage of around 11,000 Dermatologists across India with a 60% penetration. With a specialty component of 43% and a strong platform in medical dermatology, Oaknet provides us with a robust growth platform in dermatology as well as cosmetology. In line with our Strides and Zomelis acquisitions, we are confident that the Oaknet transaction will create long-term value for our shareholders,” said Amit Bakshi Chairman and Managing Director in the company’s annual report. 

Oaknet continued its growth momentum in Q3FY23 and on track with exceeding the EBITDA of Rs 50 crore in FY23 which is one year ahead of management expectation, according to analysts.  “Given its established presence in the cardio-metabolic segment and pipeline of patent expiries available over the near to medium term, we expect ERIS to outperform the industry in this segment over the next two to three years,” said Motilal Oswal report. 

According to another report from Prabhudas Lilladher, industry growth of the Cardio-Metabolic market remained at 9.9%, while company’s core Cardio-Metabolic segment grew by 15.1% YoY. During the quarter, company’s emerging specialty therapies i.e. derma, central nervous system (CNS) and Women’s health have contributed 21% of revenue and collectively grew by 50.7%, while vitamins/mineral/ nutrients (VMN) segment grew at 19.2%. Oaknet contributed Rs 597millon, while insulin contributed Rs 6.2 crore to total revenues. 

During the conference call after the results, the management remained confident having a clear visibility on secular growth of its three emerging therapies in Cardiometabolic segment. “The brands like Zomelis and Gluxit are at leadership position and growing significantly. Launch of human insulin performing well and ERIS also planned for new launches in dermatology, cosmetology and women health going ahead,” said analysts Param Desai and Akshaya Shinde from Prabhudas Lilladher. 

Eris Lifesciences reported muted performance during the quarter due to higher promotional expenses from new launches despite that analysts remain hopeful for the company’s growth. “However, we maintain our estimates and continue to believe benefits of operating leverage will play out, as revenue scales up from these new launches. Acquisition of Oaknet and Glenmark’s derma portfolio to strengthen Eris’s entry in the derma segment, which is currently operating at sub optimal profitability,” said Desai and Shinde. 

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Published on: Jan 25, 2023, 12:39 PM IST
Posted by: Priya Raghuvanshi, Jan 25, 2023, 12:33 PM IST
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