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Edited Transcript of ERIS.NS earnings conference call or presentation 7-Nov-19 11:00am GMT

Q2 2020 Eris Lifesciences Ltd Earnings Call

AHMEDABAD Nov 15, 2019 (Thomson StreetEvents) -- Edited Transcript of Eris Lifesciences Ltd earnings conference call or presentation Thursday, November 7, 2019 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Amit Indubhushan Bakshi

Eris Lifesciences Limited - Chairman & MD

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Conference Call Participants

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* Aditya Khemka

DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare

* Anubhav Aggarwal

Crédit Suisse AG, Research Division - Associate

* Ashish Thavkar

Motilal Oswal Asset Management Company Limited - Associate VP

* Ashok Shah

LFC Securities, LLC - Former Analyst

* Prakash Agarwal

Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Eris Lifesciences Q2 FY '20 Results Conference Call. (Operator Instructions)

Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Bakshi, Managing Director. Thank you, and over to you.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [2]

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Hello. I welcome everyone and thank you for joining for this call.

Let me begin by taking you through the presentation that we uploaded and then we can open for Q&A.

So far the quarter, we've grown by 9.4% versus -- what IPM, stood at 11.5% growth. In our Chronic and Sub Chronic therapy, which comprises around 86% of our business, we have grown 11.4% versus 10.6% for the IPM.

On -- we've also shared the secondary numbers for H1 '20, where the trend continues of Eris outperforming IPM in chronic, sub chronic segments. We also continue to have high ranks among our key specialties, fourth with cardiologists, third with diabetologists, gastroenterologists as well as neurologists.

Moving on, some commentary on what we have planned for the year ahead. The portfolio for all brands, which is now more focused and sharper after the rationalization exercise we did last year, continues to report high growth, growing at 12.6% year-on-year on an adjusted basis.

We are also planning to expand our Cardio Metabolic franchises and launch a dermatology division. These 2 exercises, we see an addition of around 300 people. The newer business of IVF and Nutrition that we launched in the recent past, has also seen some traction.

As we have said before, Eris will continue to keep considering in-licensing opportunities to leverage on our super specialty reach and ability for successfully bringing in new concepts. In this line, there are 2 new license deals we have signed in the recent past: one is Sideral, which is an iron preparation, which will be launched in the market in the month of November and December; and second, TPIAO, which is first of its kind, to be launched in India, which is just -- we have just applied and await regulatory trust.

We have already alluded to the fact that there will be opportunities in-licensing -- in the non-patent market, for products which are going off patent.

Now some of the financial highlights. Sales for the consolidated entity have grown by 7.6%, EBITDA by 9.1% and net profit by 8.4%. As I shared before, we're adjusting for the rationalization exercise and the FDC ban component. Sales have grown by 12.6% for quarter 2 and 13.3% for H1.

We've added around 145 people in H1 taking the number of people as of 30 September to 2,145 and of IPM INR 2,454 max per person.

As you know, we had announced a buyback of shares on 3rd July 2019. The company has filed a Letter of Offer with SEBI in relation to such proposed buybacks and is waiting for regulatory approval of the sale. We've also sought a confirmation from the Ministry of Finance in relationship to the applicability of the buyback tax announced in the Union Budget in July, in fact, July 5, 2019.

Now we look at the quarter 2 and H1 '20 income statement. Sales have grown by 7.6% for quarter 2 and 8.8% for the first half. EBITDA margins have expanded slightly to 38.6% in quarter 2 from 38.1% quarter 2 last year. The finance cost of this quarter is minimal, as we repaid the borrowing in quarter 1. Net margins have also slightly expanded to 32.6% in quarter 2 versus 32.4% last year.

The envied performance of our stand-alone base business grew 6.8% in quarter 2 and 8.2% in H1. Strides recorded INR 53 crores this quarter, growing on a year on year basis of 17%.

Kinedex continues to face de-growth, while our subsidiary, Aprica, has grown by 20%. Again, adjusting for the disruption last year, the consolidated business has grown by 12.6% this quarter year-on-year.

As you know, we are now debt-free after having prepaid from internal actions, the term loan we took for the Strides acquisition. For the 6 months ending September, we have generated operating cash flow of INR 133 crores and our conversion of EBITDA to OCF is now 62%.

We have shared a snapshot of our financial performance for the last 10 years and our shareholding pattern. We may now open for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

The first question is from the line of Aditya Khemka from DSP Mutual Fund.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [2]

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Amit, so you have reported adjusted sales of 12.6% growth Y-o-Y. When did we roughly start this for rationalization of tail products? Which quarter did we start this?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [3]

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Look at your -- there are 2 components to it, as I said, in my presentation. One is the discontinuation of FDC. Just the discontinuation of FDC, if I only adjust for that, the growth is 10.5%. The rest is coming from inbound registering, which I -- which we had mentioned in our annual report also.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [4]

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Right. So I just wanted a refresher of my memory. As you know -- which time did we -- did this FDC ban hit us, which quarter?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [5]

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This was the same time. So if I'm talking about H1, I'm talking about -- I'm comparing it to the H1 last year.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [6]

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Great. Okay. So in other words, when will our base be excluding the FDC ban in the tail product rationalization? When will our base quarter, not have any impact of our rationalization or the FDC ban?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [7]

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Yes. The FDC ban is now behind us. The quarter 3, there was no component in quarter 3 last year because it all closed in September. So going forward, this is no FDC component.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [8]

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And the tail rationalization?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [9]

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Tail rationalization is very minimal of the total portion. So some of it will take time until it grows out. So there's nothing much I can say on the tail part. But on the FDC, which is the major component, we are done and dusted with that.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [10]

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Understood. And would you say your gross margins reported now include the entire benefit of moving production to Goa? Or do you think there's more to go?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [11]

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So we haven't started Goa, I think, in the 2.0 regime. I think that will start in Q4, but it's only at Q1 when we'll have, almost all or most of it done.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [12]

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Okay. And now that we have a healthy balance sheet, as in no debt, what is the plan for further capital deployment?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [13]

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So we'll let you know as soon as something happens. Right now, there is nothing which is in the outlook.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [14]

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But would the strategy be dramatically to look at more acquisition targets and try to sort of increase our vet in the market?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [15]

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Yes. So that remains -- we have always taken the line that we think the best opportunity of deploying cash is in the business itself. And as and when we get opportunities, and we have money to go through it, if it's strategic in nature, we will continue to look out for such opportunities.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [16]

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And just making sure that I heard it correctly, without the FDC ban, the growth would have been 10.6%?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [17]

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Yes. Only the FDC ban, then 10.6%, you're right.

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Operator [18]

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(Operator Instructions)

Next question is from the line of Anubhav Aggarwal from Crédit Suisse.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [19]

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Question on this Derma divisions that we're talking about, this is cosmetology division? Or are we talking about the pure derma products here?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [20]

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We -- this is a mix of derma and cosmetology. The bent is towards our division in cosmetology, but it's a fair mix of both dermatology and cosmetology. To get this in perspective, Anubhav, it should be a large field force of around 110 people. So it's not something which is very niche, which goes to only a couple of hundred cosmetologists, but the portfolio will have a bent towards cosmetology.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [21]

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Okay. And when you also mention the Cardio Metabolic division, what kind of product are we talking about as a launch or expansion here?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [22]

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So Anubhav, we haven't really confirmed that launch.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [23]

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So that this is what...?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [24]

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Yes.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [25]

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Because you also had asked it in the budget, the bottom until you called out separately?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [26]

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Yes, yes.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [27]

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And on Aprica growth, my question was that I hear from the industry that the pricing has really gone down. Any comments there? Is that really opportunity now? I don't know what will happen (inaudible). But take it lower now, is a surprise, the kind of pricing, which has come down?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [28]

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I'm not surprised because the (inaudible) was selling at whatever the price was offering benefits, which were quite significant. So typically, there is a cycle -- there's a life cycle to these products. And we believe that within 12 months of the launch, when the API supply gets ironed out, then the margins will start ticking. So even if there are little or no margins to start with, it's a matter of time with the supply chain getting firmed up. On the ACI side, the model is generally ticking.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [29]

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Okay. And just a couple of more questions on this in-license opportunity. Let's say if all goes well, in 2, 3 years, how big can these products be it for Eris?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [30]

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So Anubhav, the larger chunk of in-licensing opportunities will show up in quarter 3 and quarter 4. These are just the 2 products. The TPIAO which I was talking about, which is first of its kind, will take a significant time going through the regulatory. We expect this to take 4 to 6 quarters exactly. But the other things which we are in advanced stock will open up in quarter 3 and quarter 4.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [31]

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Okay. So you're talking about further in-license opportunity there.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [32]

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Yes. Yes. Yes. We are only telling you all that which has been signed and completed.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [33]

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Understood. But what about this (inaudible) product? How is it -- how big current supplement can be?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [34]

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Look, the overall market is close to INR 1,800 crores. It's one of the largest markets. And this product in the oral category is technically the best product going from a tolerability point of view and the efficacy point of view. So therefore, it obviously has a very large scope. How much we do about this is something which we will figure out in the next couple of quarters. But if you take our market share in our represented market, it hovers around 4% to 5%. So 4% to 5% is something which is -- which we could -- we have been able to do and demonstrate in the last -- last decade.

So that's where the -- that's where it could be pointed out.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [35]

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So you're saying that if you launch at the current pricing, potentially, this can be a INR 70 crore, INR 80 crore product for us?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [36]

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Yes, potentially. And the market says that we have, we have 4 or 5 different market shares. So going by the same logic, this is a large market. It has that kind of an opportunity also.

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Operator [37]

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(Operator Instructions)

The next question is from the line of Prakash Agarwal from Axis Capital.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [38]

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Sir, just picking up on Anubhav's question. So you mentioned target is 4% to 5%. But I mean, what is the sweet spot here in terms of access to doctors? Or is it just a product, which will help us get to that market share? Or do we need specialized sales force for that?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [39]

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No. This will actually fit very well in our existing field forces. There are 2 large specialties here. One specialty, obviously, in the gynecology, where we already have -- we already have the team. The second and very important specialty here is going to be nephrology. Because almost in all severe cases, iron supplementation happens.

And we believe that this product offers far superior results, both in the efficacy as well as in the tolerability. So these are 2 large specialties other than the GPs and physicians.

And these 2 specialties, we are fairly placed. So we will not be needing any extra people. This will drive on our existing teams.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [40]

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Great, understood. And sir, just when you say sharper and stronger brand focus, I mean, the AICD clearly shows top 10 is growing at 18%. Would you agree? I mean, it is a high double-digit, the top 10 products.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [41]

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Prakash, AICD is seeing -- it's the same data we see.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [42]

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You know sometimes there's a lot of lag. And I mean, sometimes there's a lead indicator, sometimes a lag indicator. But would you -- I mean, would you say 18%, 20% kind of growth for the top 10 products?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [43]

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So look, my -- cardiovascular diabetes have always outshined, even at times as a company, we haven't done well. And other than 2 products, 8 products in the top -- fall into that category. So obviously, they are doing much better than the entire portfolio.

And acute businesses, which is -- which we showed in the presentation, (inaudible) quarter. So largely, the growth is coming from there. And we've been a very focused brand-building company. The top brands enjoy a better market share as well as better growth.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [44]

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Okay. And one more question I had, like, in terms of if you just break it down into volume, new product and pricing. So what would that mean the breakup here? As I understand, the new product would have been lower, and it will pick up going forward. If you can break the quarter?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [45]

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So if I remember one of the reports, wherein -- what was mentioned for EBIT and the contribution -- so that 1% of the introduction which was 4% of the industry, will now see a jump because you know, there is a lot of products which will come in quarter 3 and quarter 4.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [46]

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Okay. And my last question. Sir, in one of your comments in the presentation, it talks about increasing the credit terms from 7, 14 days to now 21 days.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [47]

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Yes.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [48]

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So if you could explain that? And what would have been -- is there any sales impact which we have booked?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [49]

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There is no payment lag which has happened in the 3 months -- in 3 months' time. It's -- there is no sales impact. You would have heard me saying that, typically, we have a higher component of metro sales. And metro, in other terms, used to be 7 days. So between 7 to 14 days, it is not something which is very, very significant. But it actually helps to ease out a bit. So that was our effort to ease that out of it.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [50]

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Okay. And this has happened over the last quarter, you are saying?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [51]

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Yes.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [52]

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So I mean, obviously you're entering a low base in the second half, but on this run rate, what you've already achieved now, and with Strides turnaround that we can see now, is it fair to say our Q-on-Q growth as well? Or the industry slowdown would lead to a flattish kind of growth from here?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [53]

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I think, as far as we are concerned, you are right. It's only the third and fourth quarter, typically in the fourth quarter the base has actually gone down quite a bit. So for the remaining 2 quarters, because of the base, forget about what the industry growth happens, it is very difficult to really pick up the (inaudible) industry growth. But because of the base, our growth engine will be better.

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Operator [54]

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(Operator Instructions)

The next question is from the line of (inaudible) from (inaudible).

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Unidentified Analyst, [55]

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Amit, we are relatively new shareholders to your company. So I may not have a lot of detail on your history. I just wanted to have your comments on the acquisitions you have done in 2016-'17. You haven't done any since then.

And I realize you have digested the debt that was taken for these acquisitions. And now we are, again, at a debt-free level, which is all commendable.

In particular, I wanted to know how you assess the Strides acquisition in hindsight, now that it has been done, dusted and digested? And relative to your expectations, when you made the acquisitions, how have they worked out? And how do you feel about these acquisitions in summary?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [56]

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So look, a large part of this is captured in the annual report. We have stated all these things in quite a bit of detail. So if you could find some time to get through it, most of the things would be clear. Since you have asked this -- asked this question very briefly, I can tell you that Strides have gone as per our expectation. And it is still building up. The growths are still building up.

So Strides is something, which I have always been saying that it's a candidate for a good turnaround. And within Strides, the brands have been doing -- the brands which we were interested in, were doing quite well -- have done quite well. So the details would be mentioned in the annual report, but more or less, we are happy with the Strides acquisition.

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Operator [57]

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The next question is from the line of (inaudible) from [Bajaj Alliance].

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Unidentified Analyst, [58]

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Since you are targeting more in-licensed products, I just want to understand how that the margin profile of this innovation products look like? Whether it was significantly lower as compared to branded product? Or is it like almost in line with the expanded and deployed? How it looks like, margin profile?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [59]

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So there are different products -- they're all different. But broadly, I can tell you that the margin -- the gross margins are not in line with the -- with our current gross margins. Having said that, the ticket size or the price of the product is substantially higher because these are generally highly backed products. So the value of the volume is actually quite higher. So you gain on volume and you lose at the gross margin.

But generally, the gross margins are not comparable to the domestic gross margin.

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Unidentified Analyst, [60]

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Okay, okay. So will it differ significantly as compared to branded, is it another like 10%, 15%? Can you quantify it?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [61]

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No, quantification is very difficult. But largely, what needs to be seen is what is the portion of the sales which come through this because the impact will only be limited to what all of sales we do overall. At an overall level, at INR 1,100 crores, roughly INR 1,100 crores base and 80%, 84% gross margin. The incremental effect will be limited.

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Unidentified Analyst, [62]

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Okay, okay. The second is I want to understand the concentration risk. Can you please tell our top 5 or top 10 products contributes, what percentage of total sales?

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Unidentified Company Representative, [63]

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(inaudible)

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [64]

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What is that number? (inaudible)

So top 10 contributes to 63% of the total sales. And we topped about 10,000 other brands. But if you look at the market size, which we cater to, it would roughly be in the range of INR 6,000 crores to INR 8,000 crores. So these are not niches, these are large markets and large implications.

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Unidentified Analyst, [65]

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Okay, okay. So lastly, and this is what's your current and (inaudible) numbers on the productivity.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [66]

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So we mentioned here, the current number is close to 2,100, with the productivity overall INR 4.5 lakhs.

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Operator [67]

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Next question is from the line of Ashish Thavkar from Motilal Oswal Securities Limited.

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Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [68]

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So on this Cardio Metabolic division that we have recently planned. So how do you plan to integrate the product by division?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [69]

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So integration in what sense you're asking if I can ask you?

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Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [70]

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Yes. So yes, you are adding -- putting 190 people here, right? If I'm not wrong? Or...

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [71]

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Yes.

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Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [72]

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So would you consider this cardiac and metabolic division, the same? Or you are considering it as a different division all together?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [73]

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No. It will be a part of -- it will be largely -- nothing will differentiate. It will be one of our other divisions, which is in cardiometabolics. A good portion of people who will start this division will really be from our internal divisions. So that you maintain a continuity and hit the ground running. So there is no difference between Eris and the [mixtures].

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Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [74]

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Okay. And so the 300 people that we are planning to add, their costs will be reflected in second half, right?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [75]

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Yes, it will.

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Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [76]

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Okay. On these off patent licensing opportunities, the product that we have with 3SBio. So we have applied for a patent in India and we'll be having the patent protection as such?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [77]

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So these are patent protected globally. So -- and will come under that umbrella. So whenever we launch the product, we would be under patent for the next 10 to 12 years.

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Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [78]

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Okay, good. Last question on this diabetic side. We have like almost a 25% exposure there. So it's good to hear that -- are we getting back into this category as well, because we have like huge exposure to (inaudible).

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [79]

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Yes, you're right. So yes, that's what I've been alluding to, that in the next 2 to 4 quarters, there are more than 2 additions, which will happen to diabetes family. And they are all large markets.

So what I was telling your colleague was that our new introduction has been very, very low over the last year. And this is the time when everything will catch up. So you're right. We are very keenly looking into SGLT-2. But as policy, we only talk about products which we have already signed.

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Ashish Thavkar, Motilal Oswal Asset Management Company Limited - Associate VP [80]

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Okay. So expansion of (inaudible) something like -- is that on your mind?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [81]

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Yes. So the opinion of (inaudible) comes in, which will come in next month, more or less, things will be okay. Then you will start looking into the other categories, which are -- which you talked about the SGLT-2 and 1 or 2 others.

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Operator [82]

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(Operator Instructions)

The next question is from the line of Ashok Shah from LFC Securities.

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Ashok Shah, LFC Securities, LLC - Former Analyst [83]

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Sir, can you just throw some light on the buyback, which we had planned?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [84]

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Yes, of course. So I had gone through the statements. We will just -- I'll just go through the statement, once again, so that we are clear.

This -- yes. So our Board of Directors had approved a buyback of shares, amounting INR 200 crores in a meeting held on July 3. The company then filed a Letter of Offer with SEBI in relation to such proposed buyback. We are still waiting for regulatory approval of the sale. Importantly, we have sort of confirmation from the Ministry of Finance in relation to the applicability of the buyback tax announced in the Union Budget on July 5.

So we did our board voting on July 3, no budget set, anything before July 5, we have seeked clarification from the Finance Ministry and it is underway. So as soon as we get clarity, as a company, we are completely committed about having the buyback done. We are just waiting for things to -- for more clarity from the regulator. As soon as the clarity comes, we will go ahead with that.

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Ashok Shah, LFC Securities, LLC - Former Analyst [85]

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Okay. And any -- the project has been announced? Or it's over?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [86]

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Any?

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Ashok Shah, LFC Securities, LLC - Former Analyst [87]

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(inaudible).

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [88]

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They're recorded in there. We have already given the -- budget is closed.

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Ashok Shah, LFC Securities, LLC - Former Analyst [89]

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(inaudible). Yes, yes. So it should be there. Okay.

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Operator [90]

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The next question is from the line of Aditya Khemka from DSP Mutual Fund.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [91]

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Amit, how much -- what was average price increase across the portfolio you took?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [92]

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We don't -- we're not carrying this information.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [93]

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Okay, no problem. Secondly, so I see your employee costs went up about 8% year-over-year. And you've added field force of about 150-odd people in the last 6 months. So I'm just wondering, did the sales force get their incentives for the first half?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [94]

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Yes. So see, this is what happens, even in the last call, we said -- gave this figure of INR 47 crores for the Q1, was lower by INR 2 crores, INR 2.5 crores because of some adjustments about the provisions. And the Kinedex employees that we took in. So it was more over registered INR 47 crores. Approximately, it was INR 49.5 crores to INR 50 crores -- INR 49 crores approximately.

And then in the last 6 months, we have added 150 people. So they have got their salaries. So there's a basic increase that has happened because of the number of people increased.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [95]

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Yes. So I understand the basic increment and the number of people. But in terms of the variable incentives that you pay to the field force. So given the growth rate has been like a single-digit growth rate, has the field force been able to earn their incentives?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [96]

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So Ashish, this is a very, very large question. Who was able to win what, not been able to win, I will not be able to tell you. But we have been moving as per the process, which we have been doing. So nothing has changed there.

Whosoever had to win, has been; whoever has not been able to make it, has not been able to make it.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [97]

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No problem. And lastly, what has been the attrition in our field force for the first half?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [98]

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Attrition is in the same zone of around 25%.

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Operator [99]

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(Operator Instructions)

The next question is from the line of Anubhav Aggarwal from Crédit Suisse.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [100]

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Yes. I just have 1 question on size of growth, very good growth shown. Just wanted to check, is there seasonality in this portfolio? I used to think that this should not be that seasonal, it's a CNS portfolio. So for example, quarter 2 sales are 18% higher than quarter 1. What leads to this exactly here?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [101]

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Anubhav, between INR 45 crores and INR 52 crores, there is INR 7 crores of this gap, over 3 months. So there is no typical seasonality, but the neurology business is now showing up. And we are at a point where the productivity is at INR 1.3 lakh, INR 1.4 lakh.

Also, out of this 147 people, 37 people were added in the neuro team. So we are expanding one of our new -- one of our neuro teams. They were 100, 110 now the one of the teams moved to 150, and we will take it to 200 in the next year.

So these are just the result of gaining traction and expansion. We might gain further traction in this because we are planning 3 launches now. Since the field force is quite into the mold now. So these are -- there is nothing seasonal in this, it is just the growth because of a low base.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [102]

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So are you implying that this INR 53 crores number is, basically, this becomes our base now? So we should, let's say, next 2 quarters, I -- we should at least be this much or higher than this side?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [103]

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Yes. INR 53 crores is the base in the second quarter. Now whatever happens in Q3, Q4 -- or Q4 is March, so that gets adjusted. But Q3, I don't see any reason that this base is not intact for growth.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [104]

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And this growth -- related question. This growth is coming. So we have to start products very carefully now. And we have the core portfolio there. Where is this growth coming from? When you -- is the growth more coming from the core in your portfolio? Is that what you are facing?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [105]

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Yes. So Anubhav, there are 2 parts of it. One is the growth and we have very steady growth. The growth in all the therapies which you are talking about (inaudible) and for the newer product is more than what it meets the eye. But why the number is INR 53 crores? Because even there, there are some products at the tail, which are still kind of dissipating. So on a stand-alone basis, if we talk about only the Aprica, ReNerve and the Europe portfolio, the growth is better.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [106]

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Okay. And among those 3, which is growing faster?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [107]

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I'm sorry, say that again.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [108]

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On Aprica, ReNerve and the core neuro portfolio, which 1 is growing faster?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [109]

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So as a brand, of course, Aprica is growing faster than ReNerve. And this is a portfolio. So as a book, this is a combination of 7, 8 brands. So as the portfolio, ReNerve is growing, as a brand Aprica is growing.

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Operator [110]

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(Operator Instructions)

The next question is from the line of (inaudible) Aggrawal of (inaudible) Capital.

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Unidentified Analyst, [111]

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Sir, I have a question on the acute business dividend. Now in acute this quarter we are showing a slight degrowth in spite of having a margin that we can see on an industry perspective (inaudible).

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [112]

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Maybe you could repeat your question once again?

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Unidentified Analyst, [113]

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Sir, I have a question about your acute business dividend. Can you tell this quarter, we have seen a slight degrowth in spite of having (inaudible) investor perspective (inaudible).

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [114]

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Yes, it is a good business, has been an underperformance, and -- so it hasn't been able to pick the (inaudible). When the season is right. But you know the season for acute was good, and we saw acute outgrowing chronic in the last quarter. But we were not able to manage the sales growth in acute because of the internal weakness in the portfolio and in the sale, which we are trying to get over. But yes, our performance has been poor in the Q3.

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Unidentified Analyst, [115]

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Okay. So sir, another question I had is on the new (inaudible).

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [116]

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Yes.

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Unidentified Analyst, [117]

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For the quarter (inaudible) is around 4.49. As we make no addition, what is the maximum potential that the team can achieve?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [118]

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What's the maximum potential?

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Unidentified Analyst, [119]

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Yes.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [120]

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So it is broken up into so many divisions around q 10, 14 divisions. Every division is at a different level. So let me give you an example. My best division in terms of productivity would be at a productivity of around 10.5, 11 lakhs. And the (inaudible) and the lowest would be at a productivity of 55,000, 60,000. So it depends upon the timing of the portfolio and everything.

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Unidentified Analyst, [121]

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At the same time -- sir, I have 1 more question. This is based on our capacity utilization. So on the (inaudible) how much is finished in-house and how much of this is outsourced?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [122]

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As of this quarter end, we have been able to sell 59% from Guwahati and that's from the third-party outsourcing because capacity utilization, all its -- it's still at 31%. We assume that we'll reach 75% to 80% of manufacturing by the end of the year is the estimate that we have because everything will start running from this October -- this November onwards.

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Unidentified Analyst, [123]

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Okay. And so is there any timing issues (inaudible).

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [124]

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No, there is -- I mean, whatever is more value-adding is what we're shifting to Guwahati and we always analyze what is -- it's basically base versus buy decision. So we decide with the first phase.

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Operator [125]

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(Operator Instructions)

As there are no further questions. I'll now hand the conference over to Mr. Amit Bakshi for closing comments.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [126]

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Thank you. Thanks, all of you for being on the call, and have a good day. Thank you so much. Bye.

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Operator [127]

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Thank you. Ladies and gentlemen, on behalf of Eris Lifesciences, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.