Eris Lifesciences Ltd.

NSE: ERIS | BSE: 540596 | ISIN: INE406M01024 |Industry: Pharmaceuticals
|Expensive Rocket
542.00 6.50 (1.21%)
NSE Aug 10, 2020 13:24
Volume: 168.6K

Eris Lifesciences Ltd.    
07 Jul 2020
A negligible hit from Covid for Eris, as it enters trade generics

by Suhani Adilabadkar

Eris Lifesciences, a leading midcap pharma company, has reported strong Q4 FY20 numbers with growth in the double digits. The company is engaged in the manufacturing, marketing and distributing of branded formulations in the Indian market. It has presence in high growth chronic, sub-chronic and acute therapeutic areas that require high intervention of specialists and super-specialists.

These chronic and sub-chronic therapies contribute 85% to Eris' total revenue mix. The Eris product portfolio comprises of more than 100 mother brands, focused mainly on lifestyle-related disorders. The company has its manufacturing facility spread over 1,00,000 sq. feet situated in Guwahati, Assam and is eligible for Income Tax exemptions till FY 2024. The stock is up 24% over the past three months. 

Quick Takes

  • Operating revenues for Eris stood at Rs. 248 crore in Q4 FY20, rising 16% YoY

  • Operating profit came out at Rs. 77 crore growing 24% YoY and PAT grew at a lower rate of 4% YoY.

  • Chronic therapies grew 19.6% YoY against IPM (Indian Pharmaceutical Market) growth of 12.1%.

  • Mainly into branded business, Eris Lifesciences has now forayed into trade generics business.

  • Eris has 10 mother brands which constituted 66% of sales in FY20. 

  • The company has been growing at a CAGR of 14% and 27% for revenues and PAT respectively over the past five years

Double Digit Growth in Q4FY20 

After a dull December quarter, Eris Lifesciences bounced back with double digit growth in the final quarter of FY20. Operating revenues stood at Rs. 248 crore in Q4 FY20 against Rs. 215 crore in the same period the previous year, rising 16% YoY. Operating profit came out at Rs. 77 crore, growing 24% YoY against Rs. 62 crore the same period last year. Operating profit margin stood at 31.03% expanding 200 pbs YoY in march quarter FY20. PAT or net profit grew at a lower rate of 4% YoY and in this regard, Amit Bakshi, Chairman and MD, Eris Lifesciences clarified, “So 4% YoY growth in net profit which you see is because of the treasury income. So once we adjust it for treasury and finance cost, it is close to the 20% vicinity”. 

Robust Growth – chronic and subchronic

Eris Lifesciences is a pure domestic play, with a robust portfolio of high margin drugs focussing on chronic lifestyle diseases with no exposure to FDA woes or export-currency vibrations. And the company has been growing quite impressively at a CAGR of 14% and 27% for revenues and PAT respectively over the past five years. Mainly present in chronic, sub chronic and acute segments of pharma sector, 65% of its revenue are garnered from chronic segment. Chronic focusses on cardiovascular, diabetes, oncology and central nervous system (CNS) related diseases.

Eris' growth has been industry-beating so far: chronic therapies grew 19.6% YoY against IPM (Indian Pharmaceutical Market) growth of 12.1%. Sub-chronic segment which constitutes vitamins, minerals and nutraceuticals grew 13.4% versus IPM growth of 7.3%. As a result of Covid-19, customers beefed up their chronic ailment stocks while sub-chronic therapy received a boost due to higher sale of nutraceuticals for immunity purposes.

And lastly acute therapy (such as anti-infectives, respiratory and gastro) continued its deceleration of the past two quarters since september quarter FY20, de-growing 5% YoY. Chronic and sub-chronic therapy segments constitute 87% of total revenue mix while acute therapy contributed 13% in march quarter FY20. 

Coming to Covid19, though there was disruption in april with respect to movement of goods, may was better and supply chain has completely recovered as per pre-covid levels. There was no interruption in manufacturing in Guwahati and the company has laid down an aggressive digital outreach for doctors in the last 2 months.

With almost negligible impact of Covid-19 in the March quarter and robust growth in chronic and sub-chronic therapies, Eris Lifesciences is one of the strongest mid-cap players in the Indian pharma space, especially in the chronic segment. In the past two years, in diabetes, 20% CAGR was reported against market growth of 13% while cardiovascular grew 14% compared to 12% and sub-chronic expanded 8.4% similar to market growth. Infact, diabetes, cardiovascular and sub-chronic contribute 85-87% of revenue mix always moving ahead of the market.

Moving to its brand strengths, Eris has 10 mother brands which constituted 66% of sales in FY20. Brands such as Glimisave (diabetes), Renerve (neuro), Tendia (diabetes), Olmin (hypertension), Cyblex (diabetes) and Lnbloc (hypertension) have market share of 6-12%, and all growing in robust double digits.  

Foraying into Trade Generics

Mainly into branded business, Eris Lifesciences has forayed into trade generics. Trade generics is more of a push business where customers or patients approach chemists fulfilling their ailment drug requirements.

Trade generics has been growing strongly over the past five years and as Eris enjoys strong presence and brand recognition in branded segment, trade generics seems to be a correct extension. In addition to this, trade generics is more of an acute business, thus strong boost will be received by acute therapy division.  Investment for trade generics will be only in the form of people and inventory which implies that it would be a completely outsourced business with expected gross margins in the range of 50%-52%.

The company was ready with 65 products in trade generics, a number of them have been launched and in this regard, Mr. Bakshi clarified, “We had launched an OTC portfolio, and this is the first quarter which we are working on that. We have already launched a couple of products, and there are couple of more innovative products, which are to be launched. These products have been preponed because of the COVID crisis. You will get more color on how the disease prevention portfolio, which we call it is performing in the next quarter”.

Eris Lifesciences seems to have shrugged off its defensive gear by foraying into trade generics, acquisition of brands (recent acquisition of Zomelis from Novartis), successfully capitalising off patent opportunities such as Vildagliptin (diabetes care), launching a new division, Aspire  for spearheading for Zomelis (6% market share), successful launch of In-licensing products such as Rariset and lastly integration and profitable turnaround of CNS portfolio (Strides Shasun acquisition). Whether Covid can damper this enthusiasm, the next few quarters will give a better picture. 

Eris Lifesciences Ltd. is trading above all available SMAs
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