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Eris Lifesciences Ltd
Earnings Call Analysis
Q2-2024 Analysis
Eris Lifesciences Ltd
A noteworthy takeaway from the discussion is the company's ambition to expand its margins from the current 20% to a goal of 30% in the next fiscal year. This ambitious target relies on optimizing underperforming businesses and realizing synergies, specifically the potential cross-selling of Vitamins and Minerals (V&M) products. Undoubtedly, achieving this would mark a significant improvement in profitability and showcase the company's operational prowess.
The company's analysis of industry trends post-COVID reveals an interesting pattern: historically weaker first halves (H1) followed by stronger second halves (H2). The management expects this pattern to continue, which implies that the performance in the upcoming H2 could match or exceed that of H1. Despite not including the revenue from Biocon products in their guidance, the company has projected an EBITDA of INR 710 crores, which could potentially rise to INR 720-730 crores, indicating both caution and optimism in their forward-looking statements.
The last couple of years has seen the company achieving a Compound Annual Growth Rate (CAGR) of over 10%, with expectations to maintain this rate from FY '23 to '24. Further, the company's executive indicated that, following an acquisition, amortization would be around INR 17-18 crores annually over a 20-year period. This strategic move is expected to be accretive to Earnings Per Share (EPS) by FY '26. With regards to debt, the company anticipates ending the fiscal year with a net debt in the range of INR 700-720 crores, placing them at around 1x EBITDA, demonstrating prudent financial management and a clear roadmap for debt servicing.
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Ladies and gentlemen, good day, and welcome the Q2 and H1 FY '24 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. [Operator Instructions] 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 second quarter of FY '24. 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 crores, 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 crores per annum. The key leadership and entire sales 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 growth 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 and quick turnaround of under-optimized businesses, including the dermatology businesses acquired last year, which have recorded a significant uptick in margins since acquisition.
The acquisition of the Biocon business marked 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 amongst 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 crores 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 U.S. FDA-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 antianemia products and BMN products with the sub-play 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 3 out of the top 5 chronic therapy, 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 '24. 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 2 out of our own R&D products have received DCGI approval for launch in the current quarter. These are gliclazide-dapagliflozin and gliclazide sitagliptin first-in-market combinations. In addition, we have relaunched 2 of our at-risk products, Linares and FCM injection in the end of quarter 2. 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 4 new cosmetic derma products in Q2, including Hydroheal Nova, [indiscernible]. We had also outlined an objective of in-sourcing 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 antidiabetes franchise is also well on track to achieve INR 50 crores of revenue in this financial year. We clocked INR 19 crores of revenue for the first half, with the EBITDA burn down to INR 4.3 crores. Overall, we reaffirm our financial year '24 guidance of revenue INR 2,000 crores to INR 2,100 crores, EBITDA of INR 700 crores to INR 710 crores and profit after tax of INR 410 crores to INR 415 crores.
Coming to the Q2 financials. We clocked a branded formulations revenue of INR 492 crores in quarter 2 and INR 947 crores 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 IPM of this segment was INR 5 lakhs 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 crores in quarter 2 and INR 972 crores 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 crores, which represents a 36% margin and 25% growth. Operating cash flow stood at 82% of EBITDA in quarter 2 and 75% of EBITDA in H1.
Profit after tax was INR 122 in quarter 2 and INR 216 crores 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 crores 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.
[Operator Instructions] The first question is from the line of Kunal from Macquarie.
So the first one on the acquisition that we have proposed. I'm not sure if you have guided 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 we can give the exact proportion of what would be the financing from internal accruals and what we'll see from that, that would be great.
So Kunal, I'll start with the second answer first. The debt component is INR 280 crores and the remaining is being funded through internal accruals. And I'll request Amit to step in to answer the bigger question.
Kunal, good thing about this, if you just heard with the brief, the IPM business is very high. So we are talking about, say, INR 9 lakhs. INR 9 lakhs IPM. Now there are a couple of levers which we have. We haven't still able to talk to the larger teams. So there are some efficiencies on that side. But typically, I see this business at around 30% EBITDA margin in the next year. That's the general guidance.
Okay. And then does it mean that, et cetera, meaningfully lower margin? Then...
Right now, it is [ 20%, 22% ].
Right now, it is at about 20%, and we believe that we can make a difference to various things across the board, and that is the reason why we have a target of 30% for next year.
Okay. So next fiscal year or like your [indiscernible]?
Yes. So I mean, overall next fiscal year. But typically, you know that we have to spend some time with these businesses because, at this point, they are a bit under optimized. So it will take some time.
And from synergies perspective, you also highlighted that there is an opportunity to cross-sell our V&M products. Would that kind of upside be baked into this 30% margin expectation? Or that would be over and both?
So Kunal, typically, in this acquisition thing now when we acquired brand and not the people, then it takes a couple -- say, a couple of quarters to get the whole team transition. When the people are coming and joining us, it becomes a real growth in growth game. So from my understanding, it's a little premature. Because, as I said, I haven't really sat with the team. But I think this is a big growth delta, which we are talking of at this point of time. We are -- I am a little conservative when I said 30%. But -- and why I'm saying this because if you look at the nephrology portfolio, it is basically 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 to more or less vehicle. Then there is a good scope of prebiotics, probiotics and other V&M which could be added. So [indiscernible]. So there is a lot of stuff there. The good thing is that transplant is at a 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 large [ deals ] within dermatology. And we have been telling everybody [Technical Difficulty] about the clinical dermatology. This actually strengthens our clinical dermatology and there is no meaningful overlap with the [Technical Difficulty]
Participants please stay connected. The line for the management dropped.
Yes. So Kunal, are you there?
Yes, yes. I'm here, sir.
Yes. So on the dermatology side, I was speaking about the psoriasis, which is one of the largest in the clinical derma, and the first brand is almost INR 25 crores. So it's INR 25 crores, 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. We were having a little bit of limitation in our [indiscernible] piece. 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 view, I see a good synergy from a productivity point of view. So that is how we're seeing the business as of now. But you need to give me some time to really getting to the depth and be more strategic about this.
Sure, sir. And just one more on the guidance part. So we have guided for INR 2000 crores to INR 2,100 crores 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 is around [ INR 710 ] crores, which is basically -- at the 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 4 is like that is the margin compression, but over and above that thing that we should [ factoring. ]
So Kunal, if you show the trend of the industry in the last 2 to 3 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 laid 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 Biocon product at this point of time. So whatever happens in Biocon will be a plus over and above what we are talking. Now for that INR 710 crores could become INR 720 crores or INR 730 crores something, it is too kind of difficult to say at this point in 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, [indiscernible]
No, it's not that.
Okay. Okay. And when is this acquisition expected to close?
We are trying to close it sooner, but you know how it is. But we are trying to close it sooner. We'll let you know whenever it is closed.
The next question is from the line of Tushar Manudhane from Motilal Oswal.
Sir, just on the nephrology part again, so what rate this business has grown over the past 2 years?
Past 2 years, it has registered a CAGR of more than 10% in the last 2 years. In fact, from FY '23 to '24 also it's run rating at around 10%.
Understood. And secondly, so with this acquisition, how much do we take as the amortization rate?
So it will be around INR 17 crores to INR 18 crores per annum. We'll have a 20-year window.
Okay. So effectively, like even if I take INR 30 crore EBITDA 1 year down the line, INR 17 crores, INR 18 crores is an amortization. And then, I mean, 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 '26. As far as FY '25 is concerned, we just -- as Amit said, we have to put our numbers together and come back to you.
Got it. And sir, just lastly, on the -- considering the cash flows from the existing business and considering the net debt of INR 620 crores, so overall by end of FY '24, what kind of net debt [indiscernible] with that?
Yes. So Tushar, see you can do the math, INR 620 crores plus we are adding INR 280 crores, and then we'll pay down at least a couple of hundreds. So we believe that by the end of the year, we will be in the INR 700 crore, INR 720 crore kind of zone. So you're looking at 1x EBITDA or thereabouts.
Next question is from the line of Nikhil Mathur from HDFC Mutual Fund.
Yes. So just a couple of follow-ups on this acquisition. Can you talk about the return on capital expectations 3 years out from this particular transaction?
Nikhil, we are targeting 25% to 30%. That's the kind of hurdle that we put on any transaction that comes to our table. So yes, I think we can see good line of sight to get there.
So I mean, with 30% EBITDA margins in year 1, what are you most bullish on in this particular acquisition? Is it going to be elevated growth? Past year CAGR has been 10%, so can the growth be much better in 3, 4 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, don't you think it's pretty hard to achieve this particular hurdle rate that you're talking about?
So Nikhil, both the things will work out. At this point of time, there will be a 600 to 800 basis point improvement in the gross margins. At this point of time in our home book, there will be 600 to 800 points improvement there. [Technical Difficulty] these launches [ will happen ] plus the team size of derma is only 50. It's not a bad number. But derma 50 is [Technical Difficulty]. So we will have some opportunity of cross-selling through other divisions where we would operate through the new brand. So there are multiple levers, as I told.
So on the kidney, nephrology is quite a big business, and there has been -- and this is a little bulky business. So considering all these things, I think both will work. But if you ask me to choose one, look, gross margins will come automatically, that's been the play. But the real game here is the growth, and that is where we are quite bullish about.
Right. And on some of the software assets of this acquisition, so the team that you are -- 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 they could be -- what type of skill sets would the incoming team have with your existing operations?
So Nikhil, what happens is there are 40 people. Generally, the rule of thumb, 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 not -- 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 are you manufacturing them in-house, transferring them in-house? So what is the sourcing arrangement of these brands? And how will it change once the products are with Eris?
So right now, I think all of this is third party.
Yes. All of these are third party. So for the time being, we will continue with third-party sources. There 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.
Nikhil, this actually happens because now the derma piece is like INR 300 crores, INR 350 crores. The relationship with the suppliers is deeper because there is a deeper -- there's a bigger volume. So that becomes an advantage when you add products.
Okay. Okay. And just one final question on [Technical Difficulty] business. So the [ CAGR ] is 9.7%. How much of this is organic and what [indiscernible] is coming from acquisitions that we have done?
Yes. So Nikhil, organic growth was in the high single digits. Our covered market growth for the half year was 2.5%. So we have grown at more than 400, 500 bps over the covered market. That is where it has landed.
Sorry, your voice broke a bit. So [Technical Difficulty] is the organic growth and the remainder is acquisition?
Yes. So high single digit, you can take 7%, 8% of the organic growth, the remaining is from the acquisition.
Next question is from the line of Dhruv Maheshwari.
Can you hear me?
Yes, we can hear you now.
Yes. Out of the INR 366 crores of consideration for the acquisition, how much is the working capital?
Dhruv, we will be waiting for the purchase side allocation reports to come. And we'll update you after that.
All right. Noted. Just one quick clarification. On the guidance of the INR 2,000 crore revenue, INR 700 crores to INR 710 crores EBITDA, is the Biocon portfolio acquisition included in that?
No.
[Operator Instructions] The next question is from the line of [indiscernible] Park.
In recent months, there's been a lot of excitement around GLP-1 agonist. And we've also indicated plans to launch liraglutide through our MGA partnership. So I'm trying to understand for the other GLP-1 agonists, which probably will see payment expiry in the coming years, for instance, some other type.
Sorry, there is some disturbance from the line. May I request to mute the line from your side, please.
Yes. So on other GLP-1 agonist like semaglutide, do we have any plans firmed 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 insulins, will there be a shift in volumes from these therapies towards GLP-1 agonists? And do you see an impact of this for our business?
Yes. So like I'll answer the second question first, GLPs have been around for a couple of years now, whether it is the oral semaglutide or Liraglutide and the combinations have been available for, I think, 4 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 2026. No, that is oral, this is injectable. So injectable is out '26 in my view. And of course, if sema is out, there will be a big play in India because the global data on sema is very nice, and we will surely participate in that program whenever it happens. So right now, we see '26 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 most likely happen from here.
Okay. And you've talked about 3 emerging therapies for derma, CNS and [indiscernible]. I'm assuming that we are adding nephrology to that list of emerging therapies. So how should we think about or intend to get into new therapies from here on for the next few years? Are we going to consolidate these newly entered therapies before we think about getting into newer therapies? Or are we open to expanding our therapeutic exposure further?
Yes. So things have been a little 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 5, other than respiratory, is all covered. So we are good at that. So the immediate thing would be to scale this up because derma is in a good traction. Nephrology, we're just getting into. Neurology is also showing good traction. Let's see, there are a couple of products to be launched on that side also. So right now, we have all these therapies, which are ready to be scaled up. But what would happen in future, a little difficult to tell. Let us see how it goes.
But yes, we have been open to any good proposal, any good business, which makes sense and does not really depart that from our core thinking. So that's the line which we have always maintained.
Next question is from the line of Ankur Shah from Quasar Capital.
Sir, 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 1,500 crores after I consider the Biocon acquisition. So like what is the thought process there? 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.
Yes. 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 has always been a high margin and a high cash flow model. So in fact, you mentioned INR 1,500 crores. I just recap the journey over the last 6, 7 years. So if I look at the cash generation that has happened in the last 6 years, it's been north of INR 2,000 crores, right? And 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 off 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 there seems to be making sense to us because these acquisitions are being done without taking unnecessary pressure on the balance sheet, without breaking the house. So sitting from where we are and looking at it from where we are looking, it looks like a coherent and balanced growth approach to us.
And 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 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 ever diluted.
As far as acquisition is concerned, I will let Amit talk about the people point because I think that is a very significant point. I mean 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 should 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.
Yes. 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 leading like, okay, now derma is the focus area. But the areas where we have established brands and maybe they might have scope for growth or however I want to think about it, I'm just seeing the organic growth weaning 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 build segment, is it waning of? Like that is my overall concern. Obviously, [Technical Difficulty] how you have undertaken acquisitions [Technical Difficulty] growth from an organic point of view, that is something which concerns me.
There are a couple of data points I will share with you. I think one is that 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 [Technical Difficulty] the top 20 brands rank among the top 5 in their respective categories. So as far as our power brand portfolio is concerned, we have absolutely no challenge there. They continue to grow.
And the second point I would like to make is that at the end of the day, our growth is not diverse from the market. And Amit made the point earlier on in the discussion that for the last couple of years, H1 has seen a bit of a 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% to 8%.
Sure. So on the 20 mother brand portfolio, what you mean is that you have maintained or increased our market share in the covered markets where we are operating?
Look, if the market grows by 2.5% and you grow by 8%, then, of course, you gain market share. But to give up this perspective to what KK is saying, let's talk about our [Technical Difficulty]. I mean, I'm happy to [Technical Difficulty] move to #4 in our covered market. And just to digest this data point, on a MAT basis, the market has grown by INR 500 crores. The growth -- new growth is INR 500 crores, and we have garnered 15% of that growth. So not only the existing market share, but also the incremental market share. So at 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 we have the top [ pharma ] brands, which [Technical Difficulty] active in our primary sales. So KK just spoke about the 2 brands, which are Linares and FCM, which [ Novartis ] launched. So what would happen now that we have relaunched it. So I expect 300 to 400 basis point growth coming in only from these products when we start selling it again. So that's been 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, 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.
Next question is from the line of Rahul Jeewani from IIFL Securities.
Sir, now if you see for the second quarter, while there was stand-alone branded pharma business has grown at a 13% kind of a [ unit, ] the consol growth for us is only around 10%. So it is likely that the trade generics business is having an impact as far as our consol growth is concerned. So when do you see this impact waning off and the stand-alone growth to start mirroring on the consolidate as well?
And that now we are talking about the branded is 97% of the whole thing, right? So now what we are talking about is the remaining 3%. And we have been quite clear. I think we've been talking about this for a couple of quarters now. That trade generic is something 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 H2. And especially when the other products come in, that will start showing up in the primary numbers.
Sure, sir. And this organic growth of 7% to 8%, which is for these [Technical Difficulty]
Yes.
Okay. And sir, you indicated that the covered growth for us is around 2.5%. But if you look at the chronic segment, the chronic segment in first half would have still grown at a 9% to 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?
It's in a different page. I think you are talking about the IMS data. We have been subscribed to the AWACS data. Am I right on that?
Yes.
So I think what -- so if you look at the IMS data, our growth are different there. 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. And 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.
[Operator Instructions] Next question is from the line of Prashant Nair from AMBIT Capital.
My first question is the -- yes, 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 accrue?
These are primary revenues, Prashant.
Okay. Second question, so if you take your main therapy, say, diabetes, cardiac, dermatology now and [indiscernible], 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.
I've seen this data. So I think diabetes, we are 83%. Cardiovascular, we are at 54%. V&M is a very large market, so it will be a little difficult to guess that right. Dermatology, we are 50% -- we are 50%, 52%. So that's about the larger market, Prashant.
And dermatology is 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 to 2% here and there%.
Okay. So just one follow-up on that. So given cardiac and dermatology, you 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 segment that you want to be?
So yes, there are certain gaps, which -- so what happens, Prashant, like there are some markets very old like the amlodipine market, they're still big market, but they're very old market. However, the way we will enter -- enhance our present in cardiology is through new products. Out of these 14 products which we have been talking about, almost 5 to 6 are in the cardiology hypertension space. And that will start rolling in, I think, from Jan-Feb next year. And then every quarter, we have 1 or 2 products coming in.
So the new launches will be skewed towards cardiology because the coverage has been quite good in diabetes already. So we see a lot of launches in cardiology and dermatology, of course. It's going be a process which will happen for the next 2, 3 years. So we will like to get into more contemporary markets and try to have an indirect effect. So indirect means amlodipine, felodipine. So felodipine will replace amlodipine at some of time, that's the guess. So these are the markets which will replace the older markets, and those markets where we play the big buck.
Next question is from the line of Harshal from [ Mirae Asset ].
Most of my questions are answered. I just need one clarification from you. So in quarter 1 call, this is with respect to the brands in derma, which we acquired from Dr. Reddy's and Glenmark. We had said that 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 2, Glenmark is something a brand which we acquired from Glenmark, we have almost -- we have reached 100% rather. It is Dr. Reddy's brand where we have a little bit of a struggle. So our Q2 number is more like 90%, 92%.
Got it. And in the subsequent quarters, we can probably expect to reach the full thing?
Yes, we would reach there. So what might happen, we might not reach everything, say, in what we acquired a brand-to-brand. But on overall level, we will definitely beat that.
[Operator Instructions] 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 agreements for the acquisition of Biocon's nephrology and dermatology businesses for INR 366 crores inclusive of working capital. The business has a current revenue run rate of INR 100 crore per annum. The key leadership and entire sales force of this business are expected to move to Eris post deal.
For the first half of this financial year, our consolidated operating revenue grew by 13% to INR 972 crores. Our consolidated EBITDA grew by 25% to INR 351 crores, and our consolidated profit after tax grew by 1.7% to INR 216 crores. Our operating cash flow for H1 stood at 75% of EBITDA. We reaffirm our FY '24 guidance of revenue INR 2,000 crores to INR 2,100 crores, EBITDA INR 700 crores to INR 710 crores and profit after tax INR 410 crores to INR 415 crores.
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.