Ladies and gentlemen, good day, and welcome to Q2 and H1 FY 2024 earnings conference call of Eris Lifesciences Limited. We have with us on the call today, Mr. Amit Bakshi, Chairman and Managing Director, and Mr. V. Krishnakumar, Chief Operating Officer and Executive Director. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. V. Krishnakumar, Chief Operating Officer and Executive Director of the company. Thank you, and over to you, sir.
Thank you. Good afternoon, and welcome to our conference call for the second quarter of FY 2024. Earlier today, we have announced the execution of definitive agreement for the acquisition of Biocon's nephrology and dermatology businesses for a consideration of INR 366 crore, inclusive of working capital that will be conveyed to us as part of the business. This business is currently operating at a revenue run rate of INR 100 crore per annum. The key leadership and entire field force of this business, consisting of over 120 personnel, are expected to move to Eris post-deal. We expect the transaction to achieve financial closure by the end of 2023. This acquisition is in line with our strategy of continued expansion in chronic and subchronic therapy through a mix of organic and inorganic routes and delivering market-leading growth.
We have historically leveraged acquisitions to enter and quickly scale up our presence in new therapies. In addition, we have established our credentials in quick turnaround of underoptimized businesses, including the dermatology businesses acquired last year, which have recorded a significant uptick in margins since acquisition. The acquisition of the Biocon business marks our entry into the nephrology segment. This is a logical extension of our market-leading position in the cardiometabolic segment, given that diabetes and hypertension are among the key drivers of chronic kidney disease, or CKD. Post-deal, we will be able to offer end-to-end care to patients, starting with diabetes, hypertension, and all the way to CKD. The market for nephrology drugs is presently worth around INR 3,000 crore per annum and is growing at 11% per annum.
Given the rapid progression being seen in the onset of diabetes and hypertension cases, we foresee a rapid increase in the number of patients who will require treatment for CKD and kidney transplants in the year to come. Biocon's nephrology business brings to us power brands like Tacrograf and Renodapt, which will give us a strong entry into the organ transplant category. The portfolio also includes CytoSorb, a USFDA-approved device, which has a wide range of potential applications, including cardiac surgery, septic shock, and acute respiratory distress syndrome. The portfolio has emerging brands like Bionesp and Erypro for treating CKD-induced anemia. This business gives us an established base to deepen our presence in the therapy through the launch of other anti-anemia products and VMN products with the subplay of hypertension. The Biocon acquisition also enables us to consolidate our position in dermatology.
The business brings us leading brands like Psorid, Tbis, and Picon, which significantly augment our position in medical dermatology, especially in psoriasis. Post-deal, Eris would become the second-largest player in psoriasis with an 11% market share. Dermatology is well on its way to become our third-largest therapy soon after diabetes and cardiovascular. With dominant market positions in three out of the top five chronic therapies, we are well positioned to deliver market-leading growth in the years to come. We will have over 120 professionals joining us from Biocon post-deal. This includes 90 medical reps. We are happy to welcome these domain experts in nephrology and dermatology. We look forward to us working together to build a large franchise that will deliver immense value to patients. Now, I would like to update you on the progress we have made on our strategic priorities for FY 2024.
The first strategic objective we had outlined was the successful commercialization of our new product pipeline. Towards this, I'm happy to inform you that two out of our own R&D products have received DCGI approvals for launch in the current quarter. These are Gliclazide-Dapagliflozin and Gliclazide-Sitagliptin, first-in-market combination. In addition, we have relaunched two of our at-risk products, Linares and FCM injection, in the end of quarter two. We have also expanded our own R&D pipeline from 10 candidates to 14. Our second strategic objective is to deepen our presence in the medical and cosmetic dermatology segment through new launches. We launched four new cosmetic derma products in Q2, including HydroHeal Nova, Efatop Hydra, and Crisoe. We had also outlined an objective of insourcing derma manufacturing starting Q4 of this year.
Towards this, we have equipment installation underway in our derma block at the Ahmedabad facility, and we are on track for commercial production starting Q4 of this year. The third objective, which is the scaling up of our injectable anti-diabetes franchise, is also well on track to achieve INR 50 crore of revenue in this financial year. We clocked INR 19 crore of revenue for the first half, with the EBITDA burned down to INR 4.3 crore. Overall, we reaffirm our financial year 2024 guidance of revenue, INR 2,000 crore-INR 2,100 crore, EBITDA of INR 700 crore-INR 710 crore, and profit after tax of INR 410 crore-INR 415 crore.
Coming to the Q2 financials, we clocked a branded formulations revenue of INR 492 crore in quarter two, and INR 947 crore in H1, representing a growth of 13% in Q2, and 17% in H1 respectively. This business accounts for 97% of our consolidated revenue and excludes EHPL. The YPM of this segment was INR 5 lakh in H1, which represents a growth of 17%. The gross margin increased to 83% in H1, and represents a 21% growth. The EBITDA margin increased to 37% in H1, and represents a 24% growth. Our consolidated operating revenue was INR 505 crore in quarter two and INR 972 crore in H1, representing a growth of 10% in Q2, and 13% in H1 respectively.
The gross margin increased by 440 basis points to 82% in H1, and represents a 20% growth. The EBITDA margin for H1 has expanded by 340 basis points. The EBITDA for H1 was INR 351 crore, which represents a 36% margin and 25% growth. Operating cash flow stood at 82% of EBITDA in Quarter Two, and 75% of EBITDA in H1. Profit after tax was INR 122 crore in quarter two and INR 216 crore in H1, and reflects the impact of last year's acquisitions. We delivered a cash earnings per share of INR 20.2 in H1, which represents a growth of 9.5%. Net debt stood at INR 618 crore as on 30 September 2023. These were the highlights for the quarter and the half year. We are now happy to open up for questions.
Thank you very much. We'll now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question.
There are more than 20 parties in the conference.
Ladies and gentlemen, you may press star and one to ask a question. Participants, we'll wait for a moment while the question queue assembles. The first question is from the line of Kunal from Macquarie. Please go ahead.
Yeah, thank you for the opportunity. So the first one on the acquisition that we have proposed. I'm not sure if you have provided any profitability aspect of this business. If you could provide that, that would be great. And secondly, we have said that it's going to be partly financed through debt, but if you can give the exact proportion of what would be the financing from internal accruals and what would be from debt, that would be great.
So, Kunal, I'll start with the second answer first. The debt component is INR 280 crore, and the remaining is being funded through internal accruals. And I'll, I'll request Amit to step in to answer the bigger question.
Hi, Kunal. Kunal, the good thing about this, if you, you know, if you just heard the debrief, the YPM in this business is very high. We are talking about, say, INR 900,000 ? INR 9,000 YPM. Now, there are a couple of levers which we have. We haven't still able to talk to the larger team, so there are some deficiencies on the- on that side. But typically, I see this business at around 30% EBITDA margin in the next year. That's the general guidance.
Hmm. Okay, and does it mean that it's at a meaningfully lower margin right now, then?
Right now, right now, it is very, very successful.
So right now it is at about 20%. We believe that, you know, we can make a difference to, you know, various things across the board, and that is the reason why, you know, we have a target of 30% for next year.
Okay, so next, fiscal year or like year, year one full close?
I think, yeah. So I mean, overall next fiscal year, but typically, you know that we have to spend some time with these businesses because, you know, at this point they are a bit under optimized. Yeah. So it will take some time.
Okay. And, you know, from synergies perspective, you also highlighted that there is an opportunity to cross-sell our VMN.
Correct.
Would that kind of upside be baked into this 30% margin expectation, or that would be over and above?
... So Kunal, typically, you know, in this acquisition thing, now when we acquire brands, it and, and not the people, then it takes a couple, say, a couple of quarters to get the whole thing transitioned. When the people are coming and joining us, it becomes a real growth, you know, growth game. So from my understanding, it is little premature, because as I said, I haven't really sat with the team. But I think this is, this is a big growth delta which we are talking of at this point of time. We are-- You know, I'm little conservative, when I said 30%, but... And why I'm saying this, because if you look at the nephrology portfolio, it is basically trans, you know, transplant at this point of time. Largely, it is going in the transplant.
The entire anemia piece, whether it is from biologics or non-biologics, is more or less vacant. Then there is a good scope of, you know, prebiotics, probiotics, and other VMN, which could be added, sodium bicarbonate, you know. So there is a lot of stuff there. The good thing is that transplant is at the core of nephrology. So generally, when you have brands at the core of any business, it is easier to build peripheral brands. So that's the plan on the nephro side. On the derma side, psoriasis is one of the largest TA within dermatology, and we have been telling, you know, everybody that we are quite excited about the clinical dermatology. This actually strengthens our original dermatology, and there is no meaningful overlap with the-
Participants, please stay connected. The line for the management dropped. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. Sir, you can go ahead.
Yeah. So, Kunal, you're there?
Yeah, yeah. I am here, sir.
Good. Yeah. So on the dermatology side, I was speaking about the psoriasis, which is one of the largest TA in the clinical derma, and, the, the first brand is almost INR 205 crore. So it is INR 25 crore, and it's a very good market to be in. So both sides, the synergies are quite good. The derma piece in Biocon is clearly focused into psoriasis only. Now, we were having a little bit of limitation in our ointment piece. You know, there were too many brands which we had acquired, so we were looking for one more team where we can do some cross-selling. So from that point of, point of view, I see a good synergy from a productivity point of view.
So that is how I'm seeing the business as of now, but, you know, we, you need to give me some time to really get into the depth and, you know, be more strategic about this.
Sure, sir. Thank you. And just one more on the guidance part. So, when we have guided for INR 2,200 crore-INR 2,100 crore revenue, which means you will be doing slightly better per quarter in the second half, probably also due to the acquisition as well. But then our EBITDA, you know, is around INR 710 crore, which is basically at midpoint at least, it would be like some form of margin compression in second half. Is that correct way of looking at it, or is it more conservative? Generally, I'm sure that quarter four is like, you know, there is a margin compression, but over and above that, anything that we should factor in?
So, Kunal, if you see the trend of the industry in the last two to three years post-COVID, generally, H1 is suppressed compared to H2. So typically, what you said was right for decades together. But if you see the trends, last year also, H1 was quite depressed, and then H2 kind of made it up for that. So I think we are moving towards a time where the last H2 is going to be at least like H1, if not better. And when we say this guidance, we haven't really included the, you know, the Biocon product at this point of time. So whatever happens in Biocon will be a plus over and above what we are talking.
Now, whether INR 710 could become INR 720 or INR 730-something, it's too kind of, you know, difficult to say at this point of time, but we continue to put our best effort. So let's see how it comes up.
So not in revenue and not in EBITDA guidance, the Biocon is not included?
No, it's not there.
Okay. Okay. And when is this acquisition expected to close?
We are trying to close it sooner, but, you know, you know how it is, but we are trying to close it sooner. We'll let you know whenever it is closed.
Okay. Thank you.
Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal. Please go ahead.
Thank you for the opportunity. So just on the nephrology part again, so what rate this business has grown over the past two years?
Past two years, it has registered a CAGR of more than 10% in the last two years. In fact, from FY 2023-FY 2024 also, it's run rate at around 10%.
Understood. And secondly, so for this acquisition, how much to be taken as an amortization rate?
So it will be around INR 170 crore-INR 180 crore per annum. We'll have a 20-year window.
Okay. So effectively, like even if I take INR 300,000 EBITDA, one year down the line, INR 170 crore-INR 180 crore as an amortization, and then, assuming 25% tax rate, so, from that point of view, the incremental earnings, given the size, is not so meaningful, correct?
... So if you say, if you're looking at EPS dilution or accretion, this is definitely going to be EPS accretive in FY 2026. As far as FY 2025 is concerned, we just, as Amit said, we have to put our numbers together and, you know, come back to you.
Got you. And just lastly, from considering the cash flows from the existing business and considering the net debt of INR 650 crore so overall, the end of FY will close, what kind of net debt figure one should look at?
Yeah. So, Tushar, see, you can do the math, INR 620 crore+ , you know, we are adding INR 280, and then, you know, we'll pay down at least a couple of hundred. So we believe that by the end of the year, we will be in the INR 700-INR 720 kind of zone. So you're looking at 1x EBITDA, or thereabouts.
Understood. Okay. Thank you.
Thank you. Thank you.
Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Nikhil Mathur from HDFC Mutual Fund. Please go ahead.
Yeah, hi, good evening. I hope my voice is clear. I'm on the road.
Yes.
Yeah, you're good.
Okay, sure. Yeah, so just a quick couple of follow-ups on this acquisition. Can you talk about the return on capital expectations three years out from this particular transaction?
Nikhil, we are targeting 25%-30%. That's the kind of hurdle that we put on any transaction that comes to our table. So yeah, I think we can see good line of sight to get there.
So I mean, with 30% EBITDA margins in year one, what are you most bullish on in this particular acquisition? Is it going to be elevated growth? Past two-year CAGR has been 10%, so can the growth be much better in three to four years, or do you believe that the margins can go up to, let's say, 40%-45%? Because unless one of these levers pick up, personally, it's pretty hard to achieve this particular hurdle that you're talking about.
So we can, you know, it, both the things will work out. At this point of time, we see a 600-800 basis point improvement in the gross margins. At this point of time, when we are, you know, our homework tells us there will be 600-800 points improvement there. Plus, there will be good number of launches which would happen. Plus, the team size of Derma is only 50, so Nephro 40 is, like, not a bad number, but Derma 50 is, you know, little suboptimal. So we will have some opportunity of cross-selling through other divisions where, you know, we don't operate through the new brand. So there are multiple levers, as I told.
So, you know, kidney, nephrology is quite a big business, and there has been this, and, you know, this is a little bulky business. So considering all these things, I think both will work. But if you ask me to choose one, the gross margins will come automatically. That's been the play. But the real game here is the growth, the growth, and that is where we are quite bullish about.
Right. And on some of the software aspects of this acquisition, so the team that will be coming on board, where is this team largely based out of in the country? I mean, are they more south-oriented, west-oriented? I'm just trying to figure out whether there could be what kind of a cultural fit would the incoming team have with your existing operations.
You can look what happens if there are 40 people. Generally, the rule of thumb is, you know, there are metros and state capitals, that is where generally people are put. But if you ask me, how is the mix of the business? The mix of business is more skewed towards east and south. So north, excluding Delhi, north and west are areas which could be worked up better. So that's how the business is split at this point of time.
Okay. And what is the sourcing of these brands? I mean, are they third-party sourced, or you'll be manufacturing them in-house, transferring them in-house? So what is the sourcing arrangement today of these brands, and how will it change once the products are with Eris?
Right now, I think all of this is third party, isn't it, Nikhil?
Yes, all of these are third party. So for the time being, we will continue with third-party sources. They may be existing third-party sources, or we might look at other third-party sources, but these will not be part of the first crop of products that we bring in-house.
Okay.
So, Nikhil, what actually happens, no, because now the Derma piece is like INR 300-INR 350 crore. The relationship with the suppliers is deeper because there is a deeper one, there's a bigger volume. So, you know, that becomes an advantage when you add products.
Okay. Okay. Just one final question on business. So this is 9.7%. How much of this is organic, and what component of this 9.7% is coming from acquisitions that you have done in this?
Yeah. So Nikhil, organic growth was in the high single digits. Our covered market growth for the half year was 2.5%. So we have, you know, grown at more than 400-500 basis over the covered market. That is where it has landed.
Sorry, your voice broke up a bit. So 67% is the organic growth and the remainder is acquisition?
Yeah. So high single digits, you can take 7%-8% as the organic growth. The remaining is from the acquisition.
Okay. Okay. Okay, understood. Thank you so much.
Thank you. Next question is from the line of Dhruv Maheshwari. Please go ahead... Maheshwari, your line is on top. Please go ahead.
Can you hear me?
Yes, we can hear you now.
Yeah. Out of the INR 366 crore of consideration for the acquisitions, how much is the working capital?
You know, we will be waiting for the purchase price allocation report to come, and we'll update you after that.
All right. Noted. Just one quick clarification. On the guidance of the INR 200 crore revenue, INR 700 crore-INR 710 crore EBITDA, is the Biocon portfolio acquisition included in that?
No.
Got it. Thank you.
Thank you. A reminder to all the participants, you may press star and one to ask a question. Ladies and gentlemen, you may press star and one to ask a question. The next question is from the line of Harith Ahamad from Avendus Spark. Please go ahead.
Hi, thanks for the opportunity. So, in recent months, there's been a lot of excitement around GLP-1 agonists, and we've also indicated plans to launch liraglutide through our MJ partnership. So I'm trying to understand, for the other GLP-1 agonists, which probably will see patent expiring in the coming years, for instance, semaglutide, and-
Sorry, there's a little bit of disturbance from the line. May I request you to mute your line from your side, please?
Yeah. So, on other GLP-1 agonists like Semaglutide, do we have any plans formed up as of now? And I'm also trying to understand the impact of GLP-1 agonists on other antidiabetic therapies like oral antidiabetic drugs and probably insulin. Will there be a shift in volumes from these therapies towards GLP-1 agonists, and will we see an impact of this for our business?
Yeah. So, like, I'll answer the second question first. GLPs have been around for a couple of years now, you know, whether it is the oral Semaglutide or, liraglutide, and the combinations have been available for, I think, four years now. And we have seen the kind of market which they have taken. They have not really disrupted the other oral OADs as well as insulin. Now, about Semaglutide, if I remember correctly, Semaglutide is out of patent 2026. No, no, that is oral. This is injectable. So injectable is out 2026, in my view. And of course, if SEMA is out, you know, there will be a big play in India because the global data on SEMA is very nice, and we will surely participate into that, in that product whenever it happens. So right now, we see 2026.
Liraglutide will set the tone for the Indian companies. It might not go as far as Semaglutide, of course, the product is different, but, that's what it seems to, you know, to most likely happen from here.
Okay. And you talked about three emerging therapies for your derma, CNS and women's health, and I'm assuming that we are adding nephrology to that list of emerging therapies. So, how should we think about our intent to get into new therapies from here on? For the next few years, are we gonna consolidate these newly entered therapies before we think about getting into newer therapies, or are we open to expanding our therapeutic exposure further?
Yeah. So things have been too dynamic in the past couple of years. As of now, technically, in the chronic space, we have almost covered everything other than respiratory now, with nephrology coming in. I think top five, other than respiratory, is all covered. So we are good at that. So the immediate thing would be to scale this up, because, you know, derma is seeing a good traction. Nephrology, we're just getting into. Neurology is also showing good, good traction. Let's see, there are a couple of products to be launched on that side also. So, you know, right now we have all these, therapies which are ready to be scaled up. So what would happen in the future? It is difficult to tell. Let us see how it, how it goes.
Yes, we have been open to any good proposal, any good business which makes sense and does not really depart us from our core thinking. That's the line which we have always maintained.
Okay. Thanks a lot. Thank you very much.
Thanks. Thank you. Thanks.
Thank you. Next question is from the line of Ankur Shah from Quasar Capital. Please go ahead.
Yeah, hi, sir. Thanks for the opportunity. So can you just throw some light on organic growth? Because I think that is coming off quite a bit. And also, second question is, like, just from a thought process point of view, we have been doing acquisitions, and I think now we have spent close to INR 15 crore after I consider the Biocon acquisition. So and, like, what is the thought process? Like, aren't we spreading ourselves too thin without getting the organic growth in line? Like, that's a concern from an investor point of view.
... Yeah, so I think, the way we think about growth is as follows: which is that I think one of the key features of our business model has been that it, you know, it has always been a high margin and a high cash flow model. So in fact, you, you mentioned INR 15 crore . I'll just, I'll just recap the journey of the last six, seven years. So if I look at the cash generation that has happened in the last six years, it's been north of INR 20 crore right? And, you know, as a company, we have a choice of strategically where we are going to deploy this. We have chosen to deploy it to get into therapies where we are not present.
So we got into neurology with the Strides acquisition, then we had an acquisition in 2019, where we got into the DPP-4 segment. We acquired a brand from Novartis. Then more recently, we've gotten into dermatology and now nephrology. So when we think about our capital allocation strategy, it's always about looking at cash that is thrown up by the business and see how we can deploy it meaningfully to deliver high returns. So I think when we look at it in that framework, I think this, this seems to be making sense to us. Because these acquisitions are being done without, you know, taking unnecessary pressure on the balance sheet, without betting the house. So, you know, sitting from where we are and looking at it from where we are looking, it looks like a coherent and balanced, you know, growth approach to us.
I think, I mean, I don't see any change in the business model, right? We expect to continue to be a high-margin business. We expect to continue to be a high-cash flow business. So I think this balance of organic and inorganic will continue to be a feature, you know, at Eris going forward as well. I think the one thing I can say is that we will continue to be very disciplined about it, so strategic discipline and financial discipline. I don't think that will be, you know, ever diluted. As far as execution is concerned, you know, I will let Amit talk about the people point, because I think that is a very significant point.
I mean, we are getting, we're getting a team from Biocon, so the whole leadership of the nephrology and dermatology teams and the field force is going to transition to Eris, right? So that, that should, you know, take care of your execution question. That doesn't necessarily dilute any bandwidth from the current operations, I mean, if that's what you're asking.
Yeah, yeah. So I appreciate the financial strength and the balance sheet. But like, just from a thought process angle, I think incrementally, when I look at the portfolio which we are leaving, like, okay, now derma is the focus area. But the areas where we have established brands and maybe, you know, they might have scope for growth, or, you know, however I want to think about it, I am just seeing the organic growth waning off. So that's a bit of a concern for me in the sense, yes, it will be cash flow generative and all, but like, is our competitive strength in that particular business segment waning off? Like, that is my overall concern. I obviously appreciate how you all have undertaken your acquisitions with the prudent approach.
But whatever we are, you know, building, is it sustainable growth, from an organic point of view? That is, that is something which concerns me.
There are a couple of data points I will share with you. I think one is that, you know, if you look at our established brands, I think somewhere you made that point about established brands. So if you look at how our established brand portfolio is performing, so we have top 20 mother brands, right? That account for 70% of our revenue, right? And this group has grown at 11%, if you look at the most recent data. And 13 out of the top 20 brands rank among the top five in their respective categories. So as far as our power brand portfolio is concerned, we have absolutely no you know, challenge there. They continue to grow. And the second point I would like to make is that, see, at the end of the day, our growth is not divorced from the market.
Amit made the point earlier on in the discussion that for the last couple of years, H1 has been a bit of a, you know, low growth phenomenon in the market, and H2 has picked up. So the covered market growth, right? The market that we operate in, that market has grown at 2.5% for the first half of this year, right? So the best we can do is to beat that market, which we have done, which is why our organic growth is 7%-8%.
Sure. So, on the 20 mother brand portfolio, what you mean to say is that we have maintained or increased our market share in the covered markets where we are operating?
Yeah, yeah, yeah. Look, if the market grows by 2.5, and you grow by 8, then of course, you have, you gain market share. But to give a perspective to what KK is saying, let's talk about our diabetes market, which is number one market. You know, it's... I mean, I'm happy to tell you that we have moved to number four in our covered market. And just to digest this data point, on a MAT basis, the market has grown by INR 50 crore. The growth, the new growth is INR 50 crore , and we have garnered 15% of that growth. So not only the existing market share, but also the incremental market share. So at a 4.5% or 4.8% market share, we have gained 15% incremental market share.
So that's how it is happening. The only caveat here is, you know, there are a couple of brands which we are selling, but not reflecting in our primary sales. So we, KK just spoke about the two brands, which are Linares and FCM, which were at risk launch. So what would happen now that we have relaunched it? So I expect 300-400 basis point growth coming in only from this product when we start selling it again. So that's the, that's the nutshell. But 2.5 and 8, you are always gaining market share. So most part of our large brands are gaining market share. But yes, if it could have been 10, it would have been better.
Of course, 10 would have been better, 12 would have been better, but we are getting there. I think once we get these new products finally, we should be getting there. And you see the H2 will become quite different from H1.
Sure, sir. Thanks for that clarification. Wishing you all the best. Thank you.
Thank you. Thank you, Rohan. Thank you.
Thank you. Next question is from the line of Rahul Jeewani from IIFL Securities. Please go ahead.
Yeah. Hi, sir. Thanks for taking my question. Sir, now, if you see for the second quarter, while your standalone branded pharma business has grown at a 13% kind of a rate, the consolidated growth for us is only around 10%. So it is likely that, the trade generic business is having an impact as far as your consolidated growth is concerned. So when do you see this impact waning off and, the standalone growth to start mirroring on the consolidated growth as well?
That now we are talking about 97-- the branded is 97% of the whole thing, right? So now what we are talking about is the remaining 3%. We have been quite clear, I think we've been talking about this from a couple of quarters now, that trade generic is something which we don't, you know, which we don't think is picking up the way we would have wanted. So the growth will again come from the 97% of the business. This 97% of the business is our core business, and that is where we expect more growth to come in in H2, and especially when the other products come in, that will start showing up in the primary numbers.
Sure, sir. This organic growth, 7%-8%, which you indicated, is for the, this whole 97% of the business?
Yes.
Okay. And, sir, you indicated that the covered market growth for us is around 2.5%. But if we look at the chronic segment, the chronic segment in first half would have still grown at a 9%-10% rate. So what is leading to this muted growth for our covered market in terms of any specific therapy segments, where the market growth has been lackluster, apart from, let's say, the oral anti-diabetes segment?
Totally different page. I think you're talking about the IMS data. We are subscribed to the AWACS data. Am I right on that?
Yes.
So I think, yeah. So if you look at the IMS data, our growth are different there. You know, they are much higher than what is reported here. And so the data which we refer to, the market data, is showing 4% growth in chronic and 2.5% overall.
Covered market.
Covered market. What you are looking, I don't have our numbers in IMS since we don't subscribe to it, but my decent guess is that our numbers would be quite fair in that data.
Okay, sure, sir. That makes sense. Thank you.
Thank you.
Thank you. Participants, you may press star and one to ask a question. A reminder to all the participants, you may press star and one to ask the question. Next question is from the line of Prashant Nair from Ambit Capital. Please go ahead.
Yeah, good evening. My first question is, the case-
Just a moment.
Yeah.
Go ahead.
Yeah, sorry. So my first question is, the revenue number that you have provided for the acquired business from Biocon, are those revenues at company level? Or do we have to mark them down to get the revenues that you would have paid? These are primary revenues, Prashant. Okay. Primary level. Thank you. Second question, so if you take your your you know main therapy, say, diabetes, cardiac, dermatology now and, you know, maybe VMN, would you have a sense of how much of these markets would you be covering now? So what is the proportion of your covered market to the overall market? Just to get a sense of how much more you have in terms of gaps to fill. So this, I've seen this data. So I think diabetes, we are 83%.
Cardiovascular, we are 54%. VMN is a very large market, so you know, it will be little, you know, difficult to guess that right. Dermatology, we are 50%. We are 50%, 52%. So that's about the larger market, Prashant. And dermatology, including, so after including this, acquisition you have done or this is before that? After including this, we are close to 50%, 50%, 52%. Give and take 2% here and there. Okay, so just one follow-up on that. So given, you know, cardiac and, dermatology are still at, like, 50% range, I mean, are these areas where you would be, looking to cover up any more of the gaps? Or do you feel you are present in the segments that you want to be?...
So yes, there are certain gaps which, so what happens to Prashant, like, there are some markets which are really old, like the amlodipine market, you're saying they're still big markets, but they're very old market. Our, the way we will enter, enhance our presence in cardiology is through new products. Out of these 14 products which we have been talking about, almost five to six are in the cardiology hypertension space, and that is, that is start, that will start rolling in, I think, from January, February next year, and then every quarter we have one or two products coming in. So the new launches will be skewed towards cardiology because, you know, the coverage has been quite good in, diabetes, already. So we see a lot of launches in cardiology.
Dermatology, of course, it's going to be a process which will happen for the next two to three years. So we would like to get into more contemporary markets and try to have an indirect effect. So indirect means amlodipine, cilnidipine. So cilnidipine will replace amlodipine at some point of time. That's the guess. So these are the markets which will replace the older markets, and those markets where we will play the big buck.
All right, yeah. Thanks a lot. That's it for me.
Thank you. Next question is from Vrijesh Kasera from Mirae Asset. Please go ahead.
Thanks for the opportunity, sir. Most of my questions are answered. I just need one clarification from you. So in quarter one call, this is with respect to the brands in Derma, which we acquired from Dr. Reddy's and Glenmark. We had said that it, we are like close to 75% of the full potential, and we are expecting to reach the full thing in Q2. So where are we on that?
Not completely on board in Q2. We are more likely at 90%. Between the two, Glenmark is something, the brand which we acquired from Glenmark, we have almost reached, we have reached 100%, rather. It is the Dr. Reddy's brand where we are, we have a little bit of a struggle. So our Q2 number is more like 90%-92%.
Got that. Got that. In the subsequent quarters, we can probably expect to reach the full thing?
Yeah, we would, we would reach there. So what, what might happen, we might not reach everything, say, in what we acquired, you know, brand to brand, but on overall, overall level, we will definitely be there.
Got that, sir. Got that, sir. Thank you. Thanks very much.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. As there are no further questions, I will now hand the conference over to Mr. V. Krishnakumar for closing comments.
Thank you. In closing, we have announced the execution of definitive agreement for the acquisition of Biocon's nephrology and dermatology businesses for INR 366 crore, inclusive of working capital. The business has a current revenue run rate of INR 100 crore per annum. The key leadership and entire field force of this business are expected to move to Eris's core team. For the first half of this financial year, our consolidated operating revenue grew by 13% to INR 972 crore . Our consolidated EBITDA grew by 25% to INR 351 crore and our consolidated profit after tax grew by 1.7% to INR 216 crore. Our operating cash flow for H1 stood at 75% of EBITDA.
We reaffirm our FY 2024 guidance of revenue INR 2,000 crore-INR 2,100 crore, EBITDA INR 700-710 crore, and profit after tax INR 410 crore-INR 415 crore. On behalf of Eris, we send you our best wishes to you and your loved ones for the upcoming festival season. Thank you, and have a good evening.
Thank you very much. On behalf of Eris Lifesciences Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.