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Edited Transcript of ERIS.NS earnings conference call or presentation 29-Jul-19 5:30am GMT

Q1 2020 Eris Lifesciences Ltd Earnings Call

AHMEDABAD Aug 21, 2019 (Thomson StreetEvents) -- Edited Transcript of Eris Lifesciences Ltd earnings conference call or presentation Monday, July 29, 2019 at 5:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Amit Indubhushan Bakshi

Eris Lifesciences Limited - Chairman & MD

* Sachin Shah

Eris Lifesciences Limited - CFO

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Conference Call Participants

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* Abhishek Sharma

IIFL Research - VP & Head of Life Sciences

* Abishek Laxminarayan

Catamaran Investment Pvt Ltd - Investment Director

* Aditya Khemka

DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare

* Anubhav Aggarwal

Crédit Suisse AG, Research Division - Associate

* Prakash Agarwal

Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals

* Prashant Nair

Citigroup Inc, Research Division - Associate Director of India Equity Research

* Rajiv Shah;RMS Investments;Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen. Welcome to the Eris Lifesciences Q1 FY '20 Results Conference Call Hosted by Axis Capital Limited. (Operator Instructions) Please note that this conference is being recorded. I now hand the conference over to Mr. Prakash Agarwal from Axis Capital Limited. Thank you. And over to you, sir.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [2]

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Yes. Thank you all. Welcome on behalf of Axis Capital to the Q1 Fiscal '20 Eris Lifesciences conference call represented by senior management team. Over to you, sir.

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

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Good morning. Thanks for this opportunity. What I'll do is I'll just call off with the presentation which we have put just to get the perspective right and then take up questions as usual.

So the first quarter FY '20, the company has shown a growth of around 12.8% versus 7.9% for the IPM. This is for as per the AICD data, which adds to the growth momentum of the second half of '19 last year.

Business continues to retain and grow focus on faster growing chronic and subchronic segment. That is now accounts almost 84% of chronic and subchronic, vis-a-vis the industry of 55%.

As we told you in earlier calls, we are expecting first commercial launch and in-licensed product by the second quarter, September, October rather. And one more product has just gone into regulatory and that is what will come.

We also launched [Sarti] 2.0 with Texas MD. It's a platform, which we are building for education of doctors across the country. And other airport kiosk are now screening a huge number of patients. We have 5 such kiosk and planning to add 3 more in the quarter. And to date, we have screened almost 200,000 patients, and almost 20% of those are being detected at the airport for diabetes, hypertension or both. As proposed, Kinedex is now wholly owned subsidiary of the company.

Now coming to the quarter result. Year-on-year growth in sales is 9.9%, roughly 10%, with an EBITDA growth of 19% and a [PAT] growth also of 19%.

We have almost prepaid external borrowing from internal [reference]. We have a debt-free status. Strong expansion and EBITDA margin led to increase because YPM has come from 4.1 lakhs to 4.4 lakhs in the first quarter. And we have been elucidating this that as soon as it crosses 4 lakh, the follow-up on the profit does generally very good.

To give a perspective to this thing, the standalone sales grew by 15.7%. The base rent use is 9.9%. Price is now doing INR 45 crores on a quarterly basis, that is INR 15,400 crore. It has very well modulated into our numbers also from a gross margin and the EBITDA margin perspective. So that's a good sign. Guidance, as you know, has come in, but has again shown the growth of around 11% for the first quarter, but the secondaries are now improving and we are expecting a significant turnaround in the next quarter.

From a industry standpoint, from the data standpoint, we grew by 12.8% at 48% of the IPM. IPM was a tad bit slow in the first quarter. One of the rare first quarter to report an 8% growth. We managed around 12.8% growth in this quarter. Chronic and subchronic therapies grew by 14% compared to 9% of the market. And we lagged -- we have been lagging a bit in acute therapy, growing at around 6% as compared to 7% of the market.

Prescription ranking more or less remained the same. 4 number in cardiology, 2 in diabetology, 4 in gastro, 6 in consulting physician and 3 in neurology.

Then we have put a 10-year highlight of the number, just to take everybody through. We also have added the manufacturing details -- Guwahati detail. Right now, we are doing a large change of around 61%, effective tax rate is 8%. And the tangible CapEx, which we are looking for this year, is around INR 35 crores to INR 38 crores. The facility is exempted till '24. And the large profile -- in the last slide rather, we have given the share of Eris profile for Q2, how the share will impact and it has evolved.

So this is from our side. Can we please take up the questions now?

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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 Laxminarayan from Catamaran.

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Abishek Laxminarayan, Catamaran Investment Pvt Ltd - Investment Director [2]

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I have 2 questions. First, regarding your outlook for the taxation on a consolidated level for this year, this financial year, and also for next 3 to 5 years. And second, in terms of the in-force expansion, what is that in that outlook for this year? And how is the attrition have been for (inaudible) there in many cultures?

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

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See if I heard you right, you were -- the first question is what is the outlook for the year in terms of the top line growth?

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Abishek Laxminarayan, Catamaran Investment Pvt Ltd - Investment Director [4]

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No, no. Taxation.

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

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Taxation?

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Abishek Laxminarayan, Catamaran Investment Pvt Ltd - Investment Director [6]

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I'm sorry. Yes, taxation and the outlook for the next 3 to 5 years on that. And the second question is regarding via same course or other routes, in terms of this year plan, and what is the attrition you are actually seeing.

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Sachin Shah, Eris Lifesciences Limited - CFO [7]

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Yes. The taxation outlook that we have is like we will have around 70% to 75% of production coming into Guwahati by Q3 to Q4 this year, and that transforming to sale, we have an positive impact on tax flow, so we see 8% to 10% of tax rate this year and this will go down next year.

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Abishek Laxminarayan, Catamaran Investment Pvt Ltd - Investment Director [8]

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So at an aggregate level, this -- for the full company, it will be around 8% to 10% is the taxation for this year?

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Sachin Shah, Eris Lifesciences Limited - CFO [9]

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Yes.

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Abishek Laxminarayan, Catamaran Investment Pvt Ltd - Investment Director [10]

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And you said next year the taxation will increase. Or it will go down -- I mean, it should go down?

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Sachin Shah, Eris Lifesciences Limited - CFO [11]

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It should remain stable or go down, not -- but marginally, not very much.

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Abishek Laxminarayan, Catamaran Investment Pvt Ltd - Investment Director [12]

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Okay, okay. And 3 to 5 years, what would kind -- what kind of outlook one can have? It will be around that [70, 80] is what it should look at?

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Sachin Shah, Eris Lifesciences Limited - CFO [13]

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Yes. 8% to 10% is something that we should look at for next 5 years.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [14]

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Yes. And as far as the airport expansion is concerned, we are looking for -- we might add between 300 to 400 people in the remaining part of the year, this year.

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Abishek Laxminarayan, Catamaran Investment Pvt Ltd - Investment Director [15]

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Okay. And what kind of attrition you are seeing at the airport?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [16]

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Our attrition is -- internal attrition is 20%, 22%. In the range of this.

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Operator [17]

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The next question is from the line of [Justin Paye] from Alpha Capital.

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Unidentified Analyst, [18]

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Congrats on a good set of numbers. My first question, sir, is on the buyback. You had announced your INR 100 crore buyback, but now there is a regulation by government on buyback tax of 20%. So how do we plan to go ahead?

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Sachin Shah, Eris Lifesciences Limited - CFO [19]

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Yes. We have gone by the process and we have filed a DLF with SEBI, and we are waiting for their feedback on the thing. So this is the only update that we have on the buyback that we have done.

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Unidentified Analyst, [20]

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Sir, we are okay if in case we have to pay INR 20 crore more tax, sir?

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Sachin Shah, Eris Lifesciences Limited - CFO [21]

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We are still looking at what is happening because there are a lot of presentation happening with the government and there are a lot of discussions with SEBI also. So we're just looking out -- we're waiting for the results.

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Unidentified Analyst, [22]

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Okay. Okay, sir. And sir, the second question is on our -- about gross and EBITDA margins have grown quite well over the years and now is among the best in Indian pharma names. So would you like to mention what has happened and why are we so good in terms of the growth and EBITDA margins?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [23]

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So although this has been the trend, it is precisely because of the portfolio which we have -- in which we operate. This portfolio is difficult to enter but enjoys a good margin, and that's been the case for a long, long time.

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Unidentified Analyst, [24]

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Okay. And sir, any outlook for, come this 1 total, for 2 -- 2 to 3 years on sales margins?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [25]

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So margins more or less have remained in a particular zone, so there's nothing much to talk about that. Sales growth, we will just maintain that we would like to grow 30%, 50% ahead of the market growth.

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Operator [26]

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

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Unidentified Analyst, [27]

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Sir, my first question is on the industry. You had also mentioned in your remarks that 1Q, the industry has been growing slower than the expected norm, the usual. What is, in your opinion, what is the reason behind this? And how do you see the industry growth rate going ahead? Because at some point of time you were growing at 13%, 14%. And now actually, we are anywhere between 7% to 10%. So do we see this continuing or do you see this further slowing down?

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

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Okay. So I'll take a couple of comments here. You were absolutely right, especially when we saw the volume growth plummeting to a new level of 0, 1%, 2%, we kind of had overall understanding regarding what is happening.

So what I have understood, and this is completely our understanding, not taking this out from anywhere, we understood, look, secondary sales which the data has already -- which has always taken, had always been a mix of 2 things. One is the tertiary sale, that means what patient takes away from the chemist. Plus, the stock which he maintains to service those tertiary sales.

These are the 2 components which add up for the secondary sales. Our challenges validates the fact that the tertiary sales are very well intact. Prescriptions are still intact, which is also validated from the fact of these prescription agencies which have been doing this for decades together. So our understanding is that's because of pressure on margins on retailers, especially due to online pharmacies and chain pharmacy. The inventory which they are maintaining to service their tertiary prescription has gone down. This is a structural change and that is the reason probably.

Probably the secondary data are a little haywire from this fact. So this seems to be the new normal. It doesn't seems because the pressure -- the margin pressure on the retailers should continue given the fact that online pharmacies and the chains are growing. So small pharmacies will keep really under the pressure and they will manage this pressure by reducing their inventory to have as minimal as possible and taking more and more discounts from the stockists.

So these are the 2 trends which we see happening. So I, for one, believe that prescription business hasn't suffered. The service of prescription business as per the inventory and the chemist is something which has taken a hit. And that is the reason probably we see secondary growth and the numbers which we have seen. That's it.

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Unidentified Analyst, [29]

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What time which would normalize and come back because there should always be a base minimum inventory which. ..

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

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Yes. Yes. Yes. It should.

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Unidentified Analyst, [31]

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And sir, my second question is also on your strategy as well as what is happening in the industry. Now what we are seeing of late is number of M&A, which we also participated with Stride, but also a number of in-licensing deal. Earlier -- about a year, 2 years ago, we saw that being in-license turned partner. And recently, in SG&T too, basically given to foreign. I mean with this happening, do we see any opportunities coming into Eris? Because if we get a free runway of some products which is relatively more unique, shouldn't we kind of benefit from this as well?

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

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Well, absolutely. And I've been telling this earlier also that we have gone into this sale year back very seriously. And I feel at the end of this year, we should be having 3 to 4 products, 2 of them quite significant, and because now we have maintained the pipeline, this will go on for some time. So it -- generally, what happens by the time you get the negotiations right, then it goes for negotiation, then it goes for regulatory. It is always along the station. But we have been doing this from last 1.5 year.

So as I wrote in my presentation, one product is commercializing in this quarter already by October, maximum. And the other product is going into regulatory. We are awaiting -- we will wait how the regulatory responds on the product. So it could be a 3 months to a 1-year kind of a time frame. And then we have 2 more product, which should be good to go at the regulatory level by the end of quarter 3. So this is the cycle which we'll now maintain on a year-on-year basis.

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Operator [33]

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

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [34]

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And I have 1 question on this personnel cost. And so this quarter, no annual increments have flown in?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [35]

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Yes. I think this is [a question] to Sachin.

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Sachin Shah, Eris Lifesciences Limited - CFO [36]

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Yes. Anubhav, there are 2 things that has happened this time. From Q4 to Q1, what we have done is we have got all the Kinedex people inside the payroll only. Hello?

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [37]

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Yes.

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Sachin Shah, Eris Lifesciences Limited - CFO [38]

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So there are 2 major impacts. One is the reversal of [clarity] that was standing in the Kinedex book that we have reversed because there was no point keeping it. All of them have come to Eris. So that was one point. Also, what happened at this time, we have done the recalculation of the dividend cash from clarity . So these 2 have had major impacts on the Q1 salary costs.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [39]

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So let's say when we look at consult, so that will take care of your first point, right? It doesn't matter with Kinedex how it has moved. Consult costs is flattish sequentially on the employees. Now on the leading cash metric, if this -- that portion has gone down and that's why the -- it's flattish number?

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Sachin Shah, Eris Lifesciences Limited - CFO [40]

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So one thing is leaving cash flow number. The other thing is that there was liability that was standing in the books of Kinedex, so which was a liability which is accumulative for years. So I guess now what we have to provide in Eris' books is only of the people that are currently there, right? So there was a liability which was accumulating for last 5, 7 years. So we have just reversed everything because there's no employee there.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [41]

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And how much was the liability which is now and how much it's reduced to?

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Sachin Shah, Eris Lifesciences Limited - CFO [42]

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Well, it should be in the range of 1 -- 1.5 -- [1 fee lakh] that we did agree it reversed. I'm not sure, but that was -- that should be the amount.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [43]

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But this seems small, right? So I'm just asking, have you guys given any [guidance]?

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Sachin Shah, Eris Lifesciences Limited - CFO [44]

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Yes. I'll try.

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

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I can give you, Anubhav. Increments have been to a tune of 5%, 5.5%, 6%.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [46]

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Because you know why I am asking is that I know increments have gone and we also -- our number of reps this quarter are higher than what we had in the previous quarter. Still, that overall cost is flattish. That should have been higher. That was my only question. Because the liability that Sachin talked about is only 1, 1.5 here. It should been much higher, right?

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Sachin Shah, Eris Lifesciences Limited - CFO [47]

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I see. We have done the increments of -- in the range of 5.5% and up to 6% approximately, right? So that should be around INR 2.3 crores, INR 2.5 crores of (inaudible). Now if we take that base and reduce the stability of the reversal of Kinedex and also the recalculation of given cash and liability, which is around, again, INR 0.5 crores. So -- and this should match the numbers to a large level.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [48]

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Okay. And second question was on the -- last quarter, we had mentioned about there is some impact of inventories we still need to take. So in this quarter, in this time line, when we reported about 9.7% growth, was the impact of the inventory -- higher inventory that we were carrying and we wanted to rationalize some of them?

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

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So look, if you remember, I told that there is no -- the lump is all over now. So there is no lump which was remaining. So now whatever is happening is in the real market term situation.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [50]

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But I remember you mentioned in the last call, that last call, you have taken INR 25 crore impact and there is another 4, 5 days of extra inventory, which is still lying in the channel that you arguably want to be lesser.

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

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So I also told subsequently, Anubhav, that this will be corrected on its own and might have just 1 day or 2 day in a month. So that -- so look, 13% has been our growth rate from an external point of view and we internally are at around 10%. So more or less, something in between is the adjustment.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [52]

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Okay. So it's already happening automatically. The last question is you mentioned about adding 300, 350 people, that's almost 15% addition to your sales force?

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

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Yes.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [54]

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Could you just give an idea what you're planning over there?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [55]

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So Anubhav, I have told previously that we are expecting -- in the third quarter, we might see more than 1 or 2 in-license deals going for us. Then we are having one team that's been crafted out to launch with that team which will happen in December. And plus one more expansion. Cosmetology, we have tried our hands with only 15, 20 people in the last 1 quarter, 2 quarters. We are expect -- we are expanding that team to a significant level. So these are 3 things which will increase manpower.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [56]

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And this 15, 20, are you really looking to make it 100-people team Eris cosmetology?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [57]

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Yes, of course. That will not only cosmetology, that will be cosmetology, dermatology.

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Anubhav Aggarwal, Crédit Suisse AG, Research Division - Associate [58]

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Okay. So dermatology, we're not there right now, but you really plan to introduce significant amount of products for this?

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

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Yes, yes. So it will be cosmetology, dermatology. It will not be only cosmetology or -- so dermatology, Anubhav, typically is one is which is more GP oriented which is more of infections and virus and all those things. There is something which is dermatology, cosmetology. Cosmetology, the product range is -- the price point is higher. Dermatology, price point is lower, but that is the bigger and the most growing market.

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Operator [60]

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The next question is from the line of Prashant Nair from Citigroup.

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Prashant Nair, Citigroup Inc, Research Division - Associate Director of India Equity Research [61]

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So my -- I had one question on inventory which you just answered. So just one follow-up on the employee cost question. So I mean is it fair to say that on an ongoing basis, before you add the new MRs, this quarter plus about 1.5 CR would be your recurring employee costs?

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Sachin Shah, Eris Lifesciences Limited - CFO [62]

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Yes, sure, sure.

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Operator [63]

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The next question is from the line of Rajiv Shah from RMS Investments.

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Rajiv Shah;RMS Investments;Analyst, [64]

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Just one question regarding your dividend policy. Just before lifting, you had 2 years of dividend paying. Now you have not been paying dividend. So you will start again paying dividend or not?

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Sachin Shah, Eris Lifesciences Limited - CFO [65]

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As of now, the dividend -- we give it back to the shareholders when we have excess funds with us, which we had this year. So we have planned for the buyback, but it increases the shareholder value. And if you see, going forward, how do we do it? Depending on the cash flow that we have, the surplus cash flow that.

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Rajiv Shah;RMS Investments;Analyst, [66]

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Have we paying a dividend policy or we are not paying the dividend policy till now?

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Sachin Shah, Eris Lifesciences Limited - CFO [67]

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We have a dividend policy.

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Rajiv Shah;RMS Investments;Analyst, [68]

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Okay. So if the buyback is failed, then we will be paying a dividend? That's the understanding?

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

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So that will go to the Board again. All these decisions are at the Board level. So this will be -- it will not be good to comment on.

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Operator [70]

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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 [71]

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Yes. So question, what's our current net cash position?

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Sachin Shah, Eris Lifesciences Limited - CFO [72]

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As of -- I mean it was around INR 190 crores as of 30th June. Today, it is -- as of today, it is INR 210 crores.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [73]

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INR 210 crores?

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Sachin Shah, Eris Lifesciences Limited - CFO [74]

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Yes.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [75]

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That's the net cash?

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Sachin Shah, Eris Lifesciences Limited - CFO [76]

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Yes. We don't have any debt.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [77]

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Yes. So 0 debt and this is a net cash. Okay. And secondly, on the IPM that has gone up from 4.1 to 4.4. I'm not sure. Sir, do you care to sort of divide this between, let's say, your MRs which are 2 years or older versus those MRs who are relatively newer? Because my understanding is the newer MRs will be at a lower number and the older MRs will be at a higher number. So could you give us some sense on what the newer MRs are doing in terms of IPM and what date more mature, older MRs, are doing in terms of IPM?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [78]

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Look, I am not sitting with that math. And so -- but what we said is a thumb rule. If you want, we haven't really done who is doing what. But yes, lower MRs. I can say that the new royalty business, which we had expanded last year, that is growing much better than other mature businesses. That is how the trend is. But having the numbers of those buckets, we don't have that at this point of time.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [79]

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No, sir. Then I can take it from you later. Also, if you can just remind me what was the number of MRs that we had last year around this time, 30 June 2018? What would have been the number? Or in other words, how many MRs have we hired in the last 1 year, net of attrition?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [80]

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We are more or less ranging between 2,000 to 2,075, I think, all the time. The addition hasn't happened. Addition all happened when the -- the real organic addition happened when we took the Strides business. Otherwise, there had been some minor addition. But the next round of later addition will happen in quarter 2 and quarter 3, which I just alluded to my answer.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [81]

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Yes. I got that. And then, sir, on the Strides portfolio. So now they are doing about INR 45 crores this quarter, which is heartening to see compared to the INR 40 crores previous quarter number. But do you think this is further scalable? Or do you think this INR 180 crore to INR 200 crore annual run rate is where the Strides portfolio would really lie, given the potential of the products and the reach of the company?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [82]

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Well, the -- I'd reiterate that these are the brands which have legs. So if you see internally or externally also, the portfolio is growing by 15%. So it is just growing double the speed of the industry. If I take 8% and 15% for just -- for a moment. So this product -- this portfolio has some very good brand. And as you would know, that ReNerve which was the main brand after IMS, has now growing INR 8 crores, INR 8.5 crores here. So these are brands which has a potential to grow a long, long way. And they have been completely amalgamated in the overall businesses. And now it's all about growth.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [83]

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Understood. And I just couldn't get your earlier comment on the buybacks. So you have filed it with SEBI. And the industries are presenting against pre-taxation on the buyback. But assuming that buyback actually still stands, as a company, what are you looking at? If the buyback policy of the government position stands, would you still go ahead with the buyback? And if you could also at the same time tell me whether promoters plan to participate in the buyback or not?

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

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Aditya, the promoters are not participating, that we have made very clear in our Board level there. Promoters are not participating. And whatever happens from now is more of regulatory and Board. So I will not be able to comment as of yet actually. But we will do as per the law, as per the advice of the Board and the other regulatories.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [85]

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Understood. So just one follow-up on that, sir. So in case, let's say we don't do the buyback, let's say the Board recommends that we don't do the buyback, then how do we utilize the cash flow seeds that we have? What is the plan of capital deployments from this point onwards?

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

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Well, let us reach that point where we get into this discussion. We are still a little away from that point. Let us be there and then we will let you know as per -- whatever happens at that point in time, we will be happy to let you know. But at this point of time, we really don't have an idea.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [87]

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Sure. One last question, if I may a bit, sir. On this in-licensed products that we're getting, licensing deals that we are getting, so if my understanding is correct, almost all pharma companies in India, the larger ones at least, are looking to invest in these products, right? It has sort of become a focus area for all of them. So what made us clinch these deals? I mean is it like a bidding process where each of you go and sort of put a bid that I will be able to distribute your product for x number amount of margin? And then compared to your bid and your competency, do you know to decide which company he chooses to outlicense or they talk you given your expertise in a particular area and then you negotiate a deal with them on the table? How does it work, really?

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

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So I mean basically, I mean, the process could be, in summary, as you alluded. It could be so many different things. But what typically happens is that Eris as a company is considered to be a better company in terms of able to sell innovative products, it's able to tell the story and have the super speciality reach. So within our 4 segments, new partners sometimes do prefer us to get it done. So that's how it generally works. It's more about what kind of investors be as the new partner could do to the brand and what kind of a promise we can make. So it's in that zone. So when we look at the portfolio, you will see most of the line in our strength areas of cardiac, diabetes and other areas which we are reasonably good at.

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Aditya Khemka, DSP Investment Managers Pvt. Ltd. - Assistant VP Healthcare [89]

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Okay. Understood. But sir, when you were talking about the additional MRs, you said that some of these MRs need to be added because you are in-licensing some products. So if it's a strength area, would you still need to add more MRs to promote...

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [90]

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Yes, yes. We would, we would. We would. Because right now, our portfolio is quite good. It's time for us to add people. And these new products are all promising. They require a lot of space. So in order to discuss these products, you will require a lot of space. So if you clump this with the existing products, either of them is compromised, which nobody wants. So that's the area -- that's the reason we have [new deals].

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

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Okay. Sorry. One more question, sir. This straight margin cap that the government and the regulators keep talking about, can I have your thoughts on it? How does it impact business? How are you seeing the industry move [with you]?

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Sachin Shah, Eris Lifesciences Limited - CFO [92]

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Trade margins.

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

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Yes, trade margins.

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

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Yes. We have no impact on the margins. Our margins have already been -- they have been -- all the domestic business, the branded domestic business, will not have an impact on this. Like what we sell devices, nor we sell any products where the trade margins are different from what is prescribed.

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

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Right. And sir, earlier, when there was a practice of sort of giving 3 units bonus to distributors than incentivizing prescribers. How do you see the industry moving from -- in that context? I mean is the industry moving away from such practices to a more hygienic selling practice? Or do you think some players are choosing to be at one end of the spectrum while some players are still at the other end of the spectrum?

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

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Yes. As far as the distribution is concerned, it clearly depends on the portfolio, giving discounts as such. Till the time the distributors [of deliverables] can actually help the brand. It's a good idea. How much to do is something which everybody has to take. It's individual call. As for us, if you look at our data from the [authority], we are one company which has never given bonuses to that extent. So we are practically not there. And that is typically because of the kind of portfolio and the kind of speciality we are in.

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

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Right. And regarding the doctors, the treatment of doctors?

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

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And the treatment of doctors. Everybody is the calling the norms, the norms which have been laid out. All the companies which are scaled up. They are following it with a lot of responsibility, and then this responsibility is only growing by every year.

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Operator [99]

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The next question is from the line of [Charla Dajitani] from Dalal & Broacha.

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Unidentified Analyst, [100]

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Yes. I wanted to know whether you have any FDC combinations in your portfolio which will not be allowed to be sold.

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

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So as of now, nothing.

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Operator [102]

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(Operator Instructions) The next question is from the line of Laxminarayan from Catamaran.

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Abishek Laxminarayan, Catamaran Investment Pvt Ltd - Investment Director [103]

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I have 2 follow-up questions. Firstly is in terms of the end doctor coverage, how you are tracking? And how -- what is the plan ahead? My second question is that lot of your investments affected cash, I understand it's in mutual funds, given that the last couple of months, you have had some haircuts in terms of (inaudible). Any impact for us? And how do you reconcile the excess cash investment policies and mutual funds? What kind of views do you have there?

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Sachin Shah, Eris Lifesciences Limited - CFO [104]

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All right. So what we did in April this year is that we -- whatever was outside the existing funds we have, we redeem all of them and invested all of them into AAA bonds, debt funds. So as of now, what we feel is like AAA-rated funds is what we invest in. And as of today, they are very secure.

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Abishek Laxminarayan, Catamaran Investment Pvt Ltd - Investment Director [105]

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Okay. There is no markdown or anything you have taken?

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Sachin Shah, Eris Lifesciences Limited - CFO [106]

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No. No.

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Abishek Laxminarayan, Catamaran Investment Pvt Ltd - Investment Director [107]

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Yes. And the other question is in terms of your doctor coverage. What has been the doctor coverage last year and what is your plan for this year?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [108]

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So we need around 90,000 doctors, all put together, all specialists.

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Abishek Laxminarayan, Catamaran Investment Pvt Ltd - Investment Director [109]

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Okay. Okay. I mean do you actually measure something like how many additions, new doctors, you have met and what's the traction? Something you had, you like to share?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [110]

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No. So we'll need 90,000 as per -- whenever we expand, we try and incorporate new speciality or new doctors. Yes.

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Operator [111]

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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 [112]

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Yes. Sir, just on the outlook front. You mentioned you'll be adding a few people and you have clarity of commercializing a couple of products. And given that you already done 10% growth overall for the quarter, how should we look for full year on top line growth, sir?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [113]

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So Prakash, we generally maintain that we will be between 30% to 50% above the market. And what -- depending upon the market, that might corroborate into 12, 14 -- 12% to 14% of growth, depending upon how the market shall behave in the first quarter.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [114]

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Okay. And secondly, on the margin also, since we're adding some people, what would be the outlook for the margin, sir?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [115]

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Okay. Margins, we don't expect any movement here or there because the addition of so many people will also bring revenue. The base business will also grow. So 200, 300 people will really not change the margin perspective.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [116]

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Understood. And one more question. On the therapeutic growth. So you have major therapies like cardio and diabetol, would the growth have been similar to what the Eris standalone are showing or they are much higher versus -- and the remaining would have been much lower?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [117]

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So we showed you the slide in the presentation for cuts. The chronic has grown by around 12.9% compared to a 9% industry. And acute has actually lagged behind the industry by 100 basis point. So cardio, that it will continues to be good. Neuro is also picking up, and that is the current area which we are focusing, other than the women's health. So this 4 put together will be our 4 (inaudible).

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [118]

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Yes. So that is the LCD data. And would the -- I mean question was, is the LCD reflecting the current data in terms of higher growth in the diabetol and the cardio which usually is the case for us?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [119]

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Yes, yes. Absolutely.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [120]

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Okay. And lastly, on...

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [121]

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Okay. Prakash, if you look at this quarter, last year, when we -- there was some rationalization in the FDC, so there has been a loss of at least INR 4.5 crores, INR 5 crores, if not more, in diabetes care which we lost out. There is another loss of at least INR 2 crore in FSSAI alignment which we have done in the other product which are semi-chronic. So that has only been -- that has already been taken in. And with these numbers, one can easily understand that the base business growth has been particularly high to have an offset on this data point.

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Operator [122]

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The next question is from the line of Abhishek Sharma from IIFL.

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Abhishek Sharma, IIFL Research - VP & Head of Life Sciences [123]

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Yes. Sir, I wanted to understand, out of the 300 reps that you are planning to add this year, how many of them are we planning to add in neuropsychiatry?

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

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Lower and no addition in neuropsychiatry.

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Abhishek Sharma, IIFL Research - VP & Head of Life Sciences [125]

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And why would that be, sir? Because you acquired a company there recently. I thought you would be looking to grow in that area or consolidate operation.

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

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Yes. But Abhishek, right now, in neuropsychiatry, we have around 275 people and their productivity is still less than 2 lakhs. So the whole game here is going to be the productivity game. We are quite -- we have actually looking at this segment, looking at the promise. And our intent, we have actually expanded it quite a bit even early on. So neuropsychiatry will only see consolidation in terms of YPM not any expansion in team.

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Abhishek Sharma, IIFL Research - VP & Head of Life Sciences [127]

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And just a follow up on that. I just wanted to understand. So you are basically adding newer therapeutic areas like cosmetology, dermatology, and you are also planning to expand your portfolio in diabetes with buildup. Will that take away some of that focus that you intend to, or you intended to bring on neuropsychiatry?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [128]

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No. We should do that 2 different buckets altogether. One doesn't eats up to the other. And the reason why we are planning to put another team in cardio metabolics is also an indication of not losing the intensity and focus on our current portfolio.

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Abhishek Sharma, IIFL Research - VP & Head of Life Sciences [129]

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Got it. Just my last question then, sir. Are you seeing any impact of trade generics on your part of the portfolio?

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [130]

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Trade generics?

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Abhishek Sharma, IIFL Research - VP & Head of Life Sciences [131]

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Yes.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [132]

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Not really, Abhishek. As I alluded in one of the question, I find that the tertiary and the stock which is kept to maintain or handle that tertiary scale is something which has gone down at the chemist level. That is why the secondary sales even in the data is a little -- is little worrisome. But when I did my channel check, from a prescription point of view, everything stands okay.

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Operator [133]

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(Operator Instructions) As there are no further questions, I now hand the conference over to Mr. Prakash Agarwal for his closing comments.

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Prakash Agarwal, Axis Capital Limited, Research Division - Executive Director of Pharmaceuticals [134]

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Yes. I thank the management and the participants for the call. Over to you, sir, for the closing comments.

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Amit Indubhushan Bakshi, Eris Lifesciences Limited - Chairman & MD [135]

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Thanks for attending the call, the quarter 1 call. And I hope we have been able to answer everything. If there is something which you guys would like to know, you can get in touch with [Kuti] and Himanshu off-line and we'll be happy to talk with you. Thank you so much. Have a good day. Bye.

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Sachin Shah, Eris Lifesciences Limited - CFO [136]

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Thank you.

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Operator [137]

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Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes today's conference. Thank you for joining us and you may now disconnect your lines. Thank you.