Eris Lifesciences trades lower after buying branded formulation business of Biocon Biologics

Broking house Motilal Oswal maintained neutral on Eris Lifesciences with a price target of Rs 930.

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The share price of Eris Lifesciences were marginally down in early trade on March 15 after the company acquired Biocon’s India-branded formulation business and a 19 percent equity stake in Swiss Parenterals Limited.

At 9:20am, Eris Lifesciences was quoting Rs 858.45, down Rs 5.05, or 0.58 percent, on the BSE.

“The company has announced the acquisition of Biocon Biologics’ India branded formulation business for a consideration of Rs 1,242 crore,” it said in a release.

The acquisition brings two major insulin brands – Basalog and Insugen – under the company and will also mark Eris’ entry into Oncology and Critical Care.

These are the largest Indian brands in their respective segments with market shares of over 10 percent. With this acquisition, Eris’s Diabetes care franchise will soon reach Rs 1,000 crore in revenue and become the fifth largest diabetes portfolio in India, the company said.

The company has signed a 10-year supply agreement with Biocon Biologics as part of this deal and under this agreement, the Biocon product range will continue to be manufactured and supplied to Eris for commercialization in India.

This acquisition also provides immediate synergies with the recently acquired Swiss Parenterals business. The Biocon product range can be quickly scaled up by leveraging the product portfolio of Swiss, which consists of 240+ unique molecules. The combination of the two deals also provides margin expansion opportunities through insourcing/ technology transfer of manufacturing to Swiss’ facilities.

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In an another development, company entered in to agreement to acquire 19 percent equity stake in Swiss Parenterals Limited from the four promoters (4.75 percent equity shares individually) of the company for Rs 237.50 crore and to be completed by September 30, 2024.

Motilal Oswal View on Eris Lifesciences

The broking house change earnings estimates by (-6 percent)/4 percent for FY25/FY26 to account for the acquisition and the increase in interest outgo in FY25. It assumes reduction in net debt in FY26 on the back of free cash flow generation.

The broking firm valued ERIS at 22x 12-month forward earnings to arrive at a target price of Rs 930.

ERIS has been aggressively expanding its product portfolio/therapy presence through M&A for the past 12-15 months. With total investments of Rs 35 billion till date, it has diversified into dermatology, nephrology, and women’s healthcare.

The latest acquisitions would enhance the company’s diabetes offerings in injectable dosage and add MABs in the oncology space. Now that the offerings are considerably expanded, scaling up the acquired business and improving the profitability of its overall business would be vital for ERIS in the medium term. Maintain Neutral rating on the stock.

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