Eris Lifesciences Ltd

NSE:ERIS

Ladies and gentlemen, good day, and welcome to the Q3 and 9 months FY '25 Conference Call of Eris Lifesciences Limited. We have with us on the call today, Mr. Amit Bakshi, Chairman and Managing Director; Mr. V Krishnakumar, Chief Operating Officer and Executive Director; Mr. Sachin Shah, Chief Financial Officer; and Ms. Kruti Raval, Head, Investor Relations.

[Operator Instructions] Please note, this call is being recorded. I now hand the conference over to Mr. V Krishnakumar, Chief Operating Officer and Executive Director of the company. Thank you, and over to you, sir.

Good afternoon, and welcome to our earnings call for quarter 3 and 9 months of this financial year. So getting right into the details. Our flagship Domestic Branded Formulations business has delivered an organic growth of 12% in quarter 3, and this has been on the back of new product launches and price increases taking effect. So the Base business revenue for quarter 3 was INR 529 crores. And for the 9-month period, it is INR 1,540 crores. So the quarter 3 growth is 12% and the YTD growth is 9%.

The Base business EBITDA margin has expanded substantially, so 39% in Q3 and 40% on a 9-month basis. The 9-month margin of 40% represents an expansion of nearly 270 basis points. So the same number was close to 37% for the same period last year. We continue to witness strong momentum in business integration. So we have a decline of around 518 bps in gross margin on a 9-month basis, which has been largely offset by a 460 basis points decline in the fixed expenses ratio, and we remain to deliver the numbers as per guidance in the Domestic Branded Formulations business.

This is the detailed set of numbers for the Domestic Branded Formulations business in quarter 3 and 9 months, so total revenue from operations, INR 635 crores in this quarter, which represents a 35% growth. EBITDA of INR 230 crores, which is a 31% growth. For the 9-month period, Domestic Branded revenue of INR 1,911 crores, which is again a 35% growth, with an EBITDA of INR 695 crores, which is a growth of 36%.

As mentioned on the previous slide, the YTD gross margin is down by 518 bps due to a change in the business mix, primarily the Biocon segments. This has been largely offset by the fixed expense ratio coming down by nearly 460 bps Y-o-Y due to synergies from business integration.

Moving on. We are gearing up well to leverage the market opportunity in GLP-1. So in terms of key updates, we have entered into a strategic partnership for the launch of Semaglutide. We expect Eris to be among the first to launch in India. And given the capabilities that Swiss Parenterals has in the form-fill-finish of synthetic peptides in cartridges, we are doing the necessary prework to initiate dosage form manufacturing in due course. We believe that after the initial launch, there is a strong economic case for the peptide to make way for the recombinant Sema as in the innovator product.

On this front, Levim has completed preclinical studies for recombinant Sema and it has obtained the approval to go ahead with the application for human trials. In parallel, we are preparing our Bhopal facility to be ready for the form-fill-finish of the recombinant Sema in the medium term. So in summary, we are taking all the actions required to have a complete control over the supply chain in terms of bulk and formulation and also a good cost position.

What makes us confident of our ability to win? It's really our market-leading position in the diabetes market. We are among the top 3 by prescription rank among diabetologists and endocrinologists. We rank among the top 5 companies in the overall diabetes therapy with a 6% market share, and we are the largest Indian company in the insulin segment with a 10% market share.

Our new product launches from our own R&D pipeline have started driving growth. We have been talking to you about this for a few quarters now. So happy to share that 3 first-in-market combinations of Dapagliflozin from our R&D stable were launched in quarter 3, which gives us a differentiated play in the fast-growing SGLT2 space. So Dapa-Biso, Dapa-Pio, and Dapa-Metoprolol. These were the 3 combinations that were launched. Liraglutide, which is our first GLP, which we launched in September, has scaled up to nearly INR 1 crore per month sale.

In terms of Q4 pipeline, we have 3 more interesting FDCs coming through from our R&D pipeline, combinations of gliclazide-Dapa-Met, Gliclazide-Sita-Met and Dapa-Telmisartan. The Empagliflozin and combinations family that is a patent expiration opportunity, which again, we will start realizing in this quarter. And Esaxerenone, a novel antihypertensive, this has been cleared for BEs and CT. So the BE study is in progress right now, and we will take up the CT subsequently.

A quick update in terms of what is happening at our Bhopal and Eris Ahmedabad manufacturing units. So at Bhopal, we are on track for operationalizing the form-fill-finish of insulins from the first quarter. So as we have been discussing with you, the tech transfer from Biocon is underway. The validation of insulin and Glargine vials has already been commenced and the margin benefits in insulin vials because of in-sourcing will start accruing from quarter 1. What follows will be the in-sourcing of cartridge fill-finish operations and the consequent margin benefits, which will start flowing in later in the financial year. We will subsequently target EU-GMP and RoW market approvals from this unit.

In terms of the key developments at Eris Ahmedabad Unit for the quarter, we were inspected by 2 RoW regulatory agencies in quarter 3. The Brazilian ANVISA inspection is scheduled for the first week of May. So on the back of these inspections and subsequent approvals, we are expecting OSD Exports to kick start from this unit in the later part of FY '26.

So what we would like to summarize here is that these 2 facilities, in addition to giving us margin benefits in our DBF business, these facilities are opening up new revenue streams for us in terms of export markets.

Moving on to Swiss Parenterals, the Base business, which is the RoW injectable business is chugging along at a quick pace. So the 9-month revenue stands at INR 232 crores with an EBITDA of INR 76 crores. And this business is on track to deliver its FY '25 guidance of INR 330 crores. Concurrently, we have been building the foundation to accelerate the growth trajectory of this business by adding new revenue streams. So both Swiss sites were inspected by Halmed in quarter 3.

ANVISA inspection again confirmed for quarter 1 and we have initiated the necessary groundwork to commercialize Levim's products, which are at present Liraglutide, Pegaspargase and Streptokinase. These are substantially meaningful markets in the RoW space where Swiss has a good channel penetration. So we've initiated the down work in terms of dossier preparation and filing so that these products can get across to the RoW markets.

We are significantly ahead of guidance in debt reduction. So we have 2 tables here, which compare the debt reduction plan that we shared with you at the start of this financial year, and what is the outlook like at this point. So we told you that by the end of this financial year, we will have a net debt of INR 2,600 crores. And we are currently looking at paying at INR 2,100 crores. This represents an INR 500 crore ahead of target. By mid of the next financial year, we will get to our target number of 1.5x debt to EBITDA. So looking at a net debt of INR 1,750 crores by the end of September '25.

So the TTM, debt-to-EBITDA issues are also moving in tandem. So compared to an opening ratio of nearly 4x at the start of this year, we will be at around 2x by the close of this year and 1.5x by mid next financial year.

We are also happy to share with you that our acquisitions have started delivering and this will drive a very exciting EPS inflection point starting next financial year. So on the left side of the slide, we have summarized the investment cycle of the last 4 years, which you are familiar with. Our asset base expanded from INR 921 crores to nearly INR 5,500 crores over the 4-year period, substantially driven by acquisitions. The EPS trajectory during the same time is what has been reflected. And this was a mix of multiple factors playing out.

One is, the acquisitions were in various stages of value creation, especially the ones acquired in February and April. There was a significant amortization and finance cost. The Guwahati facility fiscal benefits expired in FY '24. So we have a sharp increase in effective book tax rate to 25% in this financial year. And all of that resulted in the EPS trajectory being what it is. Now when we look at FY '26, we are seeing an inflection point in EPS growth with an EPS growth estimated of more than 50% in FY '26 due to 3 factors playing out. One is growth and margin improvement in the acquired businesses. Secondly, debt reduction in FY '25, which is higher than expectation by INR 500 crores, thereby lowering the interest expenses next year and tighter capital management.

Post-'26 EPS growth will continue to get amplified each year by quarter-on-quarter debt reduction and year-on-year declining book tax rate in addition to operating profit growth, which will happen.

These factors also substantially changed the ROCE trajectory over the next 3, 4 years. So again, if I look at the 2 factors, EBIT and invested capital, a lot of initiatives being taken on both fronts. So return on capital employed, which was at 11% in FY '24, will end up at 15% this year, looking at 18% next year and to exceed 20% in FY '27. And adjusted ROCE, which excludes the impact of deal-related amortization, stood at 19% last year, looking at 20% this year and 22% in FY '26.

Consolidated P&L for the quarter and 9-month period, consol operating revenue of INR 727 crores, which represents a growth of 50%; 9-month revenue of INR 2,188 crores again a growth of 50%. In terms of the margin movement, gross margin down by 600 bps due to significant changes in product business mix. This is on account of Biocon as well as Swiss Parenterals. Fixed expenses ratio down by 436 bps year-on-year.

EBITDA for the quarter was at INR 250 crores, which is a growth of 43%, 9 months at INR 765 crores, which is a growth of 45%. Book tax rate was 25.2% for the quarter and 24.3% YTD. OCF to EBITDA ratio of 103% YTD and cash EPS is in line with previous year's numbers.

So this brings us to the close of this quarter's presentation. And now we can move on to the Q&A.

[Operator Instructions] We'll take our first question from Kunal Randeria from Axis Capital.

I hope I'm audible. Firstly, would it be fair to assume that you're excluding Biocon 1 the growth will be like close to 8%, 9% for the quarter?

Excluding Biocon 1, the growth is 11%, including Biocon 1, it is 12%.

So which means -- okay, the Biocon 1 hasn't grown or has it degrown over the years?

It's a smaller base, Kunal. So it has grown much faster than 12%, but because the salience in the overall base is smaller. So the movement is 11% to 12%.

So then in that case, what would be a Biocon 1 plus 2 sales for the quarter? I mean I'm just comparing to the disclosure that you made in the previous 2 quarters.

It's in line with the disclosures in the previous quarter, so around INR 135 crores per quarter after taking into account the insulin shortages. So we continue to chug along at that pace.

Secondly, again, on the insulin business. Can you share what the market growth rate is today? And what are your growth expectations going forward?

Yes. So hi, Amit here. So no, this is a very interesting question because there are 2 sides of it. One is the market growth and the second, we see some discontinuation, some shortage rather, my bad, some shortages, which have been created by the largest player. And these shortages have been there for quite some time. So that -- those shortages are giving us and every other player actually, a chance to grow better. So our idea is that played human insulins, especially in the cartridges will give us more room to grow going forward. The only caveat is the supply should get back to the right levels, which we think should happen from March onwards.

And Amit, can you share why the biggest player has created the shortages? Does he, himself have supply issues? Or is it some other factor?

Kunal, I think you should find this out on yourself. But what I'm telling you is what I'm seeing in the market but you should find this because this is a big thing. This is around INR 600 crores, INR 800 crore market, which I'm talking about. So just do a channel check and see for yourself. What I can tell you that we see shortages and we feel that we will see more of them in the coming time.

All right. That's interesting. Okay. Just 1 more if I can squeeze in. Swiss margins have actually gone down around 500 bps in the last couple of quarters. Is it just quarterly variance or anything you would like to call out over here?

So it is a function of product mix, Kunal. So when you -- whenever, whichever quarter you have more of beta-lactam sales, the margins will be lower. So it is something that needs to get optimized and looked at on a year-on-year basis.

So we are on track, Kunal. We can tell you that we are tracked growth in the top line and at the bottom line here.

We'll take our next question from Harith Ahamed from Avendus Spark.

Yes. So your comment that synthetic Semaglutide will make way for recombinant Semaglutide. Can you give a bit more color on that? Because my understanding is that most generic companies are focused on the synthetic version? So trying to understand the rationale for that comment.

Rationale is very clear, boss, because the bio piece is made on a large pad, and you don't need columns for that, unlike synthetics. So that is more like a physical thing which you have to do. And bio once the yield comes in, it goes on. So it's a very -- it's a given fact actually, Harith. That the bio piece is less expensive and more scalable. And also don't forget, at some point of time, the innovator is also at the same level.

And then you also mentioned that you are targeting to be among the first wave of launches for Semaglutide. So where exactly are we in terms of development, have we completed clinical trials, have we done the regulatory filings? And when exactly is the market formation in India that you're expecting?

So Harith, you know we are all aiming the first quarter in the calendar year of next year, '26 that is, calendar year '26. And you can very well find out there are 7 people who have already applied. There are a couple of people where the CT has already started. So I think those are all in public domain now. And we have tied up with one of them.

And then last one, with your permission. Last quarter, I think you talked about foraying into the broader biologics segment in areas other than insulins, such as monoclonal antibodies. So where are we on that front? And if you can share some color on the kind of molecules that we'll be targeting and the time lines?

Yes. So Harith, that is like -- we are actually dabbling into a lot of things. Most of them are in a formation phase as of now. So I just can't comment on the time line. But for example, Pegaspargase is one product which we are launching in the domestic market next month -- this current month, sorry. And our pipeline today is -- we haven't seen this kind of a pipeline for the company. So FY '27, that is next year, when Sema maybe -- Sema is available. In that year, particularly, we are targeting 2 more antidiabetic injectables. But they are still a little far off. So we are not comfortable telling you the time line. But as per the planning, we have those things ready by FY '27.

We take our next question from Kunal Dhamesha from Macquarie.

Amit, can you share your thoughts as to how this Semaglutide market going to evolve in India in your view. And based on whatever you are seeing in the antidiabetic market and India is definitely a large market probably for anti-obesity use as well, but there's nothing available or there is no addressable market as of now, which we, let's say, had in Dapagliflozin or Sitagliptin, right? So how are we going to tackle it, looks like more like a market creation, right? So what are your thoughts here?

No, Kunal, thoughts are very clear. Why -- I don't know why are you asking this? Because if you go through the guidelines, if you go through 2025 guidelines, there are 3 indications where Lira -- sorry, GLP is indicated as the number one drug now. So it is with obesity and diabetes with ASCVD risk. So if you look at the addressable patient population, that is diabetes with obesity, with obesity, 60%, 70% time that is fatty liver, and there is hypertension and some amount of ASCVD. So -- actually, we feel as per the guidelines evolving, that GLP will become the first line of treatment. So where not to give GLP is actually, if you look at the guidelines, that is the question because -- and we are talking -- we -- in diabetes, we don't talk of obesity, we talk about adiposity. So if you look at the entire population of ours, we are all thin fat Indians. So what happens to GLP in obesity, non-diabetes is something which we are also waiting to see, right?

But when it comes to diabetes, I think it's quite clear how the things would shape up. So I think 2025 ADA guidelines, if you go on or any other guidelines, maybe EASD guidelines also. GLP is now getting indicated. In fact, the big man of diabetes is now saying that future of diabetes is GLP, Dapa, Pio and Metformin, in that order actually.

Sorry. What's the patient's willingness or what are you hearing from, let's say, key opinion leaders in terms of moving towards more injectable form of diabetes treatment versus type 2 diabetes typically has been oral form? Obviously, U.S. is a very different market, right?

Look, Kunal, I feel the adoption will be great. I'm only worried about -- we are very conscious about our GI, right? We are hypersensitive and hyperreactive in a manner with how the GI behaves. So that's one thing which we'll wait and see. But injectables should not be a problem. We have been with [ RERA ] now, I think, 2, 3 -- 2 months, right? We are now clocking INR 1 crores. So it's no great shakes but it's the adoption is happening better. And because everybody knows it's a matter of time, you get once a week. So I don't feel there is a prick phobia and please understand, the phobia with insulin is more of hypoglycemia than of prick. If you remove hypoglycemia from insulin, the prick is not as painful from a patient point of view.

Now, imagine a product which has no risk of hypoglycemia. If you overinject, no issues other than the GI side effect or some other side effects. So in my view, patient will have a good adoption. People love to see their weight going down and once the weight goes down, all the parameters starts behaving well. So if I put, Kunal, for a moment, weightless into the center and then see the periphery, so there is diabetes, there's hypertension. There is ASCVD, there is PCOD. There is IVF from PCOD.

There is joint pain. There is joint replacement. I mean quite a big portion of all these things. In all these cases, it is significantly documented that 5% to 10% of the body weight will give huge advantages. So we don't know how would a non -- in a way, if I can say a person who doesn't have any metabolic issue, how would they look at obesity alone from the jab point of view. But when it comes to this population, the adoption is going to be quite good.

Yes. No. And, one for KK on the expectation for our -- the Swiss parental export revenue of around INR 330 crores for full year, that kind of puts the last quarter at almost around INR 100 crore. So is there a seasonality there, which we should be aware of that business is typically stronger in Q4? Or how should we think about it because it's a sizable ramp up.

Yes, Kunal, this is a seasonal business. Q4 is always their heaviest quarter. It has been so for the last 2, 3 years in succession. And I think even outside Swiss Parenterals, wherever there is an export business, typically, our Q4 is a Q1 of calendar year in those markets. So because of that, the Jan-Feb-March quarter always tends to be heavy for these kinds of businesses.

So is it because of some purchase orders that comes in? Or is it the seasonality of portfolio that kind of works out for us?

PO driven. So as I explained, four of our fiscal year is Q1 of their fiscal year.

And in that case, if there is a meaningful ramp-up on sequential basis, that should take care of profitability due to the operating leverage kicking in? Is that fair understanding?

Yes. So profitability is a function of operating leverage and product mix. So product mix varies quarter-on-quarter, which I have mentioned before and the other point.

And for these 2 facilities where a lot of work is going on like Bhopal facility and the Ahmedabad unit. Are these facilities currently a drag on your EBITDA and if yes, what's the quantum of that drag? Which we expect that over the next couple of years too, kind of?...

Yes, yes, it is, Kunal. So what happened last year, Ahmedabad facility was a drag because our utilization was 20%. This time, it is the Bhopal wherein the whole thing -- so this is a -- this is how the game will be played out till the time it becomes functional and start producing, there will be a drag. But it seems -- it's like an every year thing. So we didn't make a point to kind of separate the expenditure out. But what you're saying is right.

And let's say, 2, 3 years down the line, when both these facilities are in full swing in terms of manufacturing and production, what kind of gross margin delta that you expect for a company as a whole?

So I can tell you about the Bhopal because Bhopal in the short term, will be producing all our insulins, that's what the case is. So insulins at this point of time would be more like a 60% gross margin, give and take something.

Slightly less.

Yes, 60% around. And we expect this to be at around 72%. So we expect a 1,200 basis point increase in the gross margins.

And then is there a portfolio -- so let's say, maybe the other way to look at it, with your permission, last question from my end. What proportion of portfolio you think or the proportion of revenue right now you think will be in-house over the, let's say, next 2 to 3 years?

80% in-house. We are aiming for 80% in-house.

And currently, how much it is? Currently, how much it is?

It is in 60s. It's come down to 60s. Yes, but we'll take it to 80s.

[Operator Instructions] We'll take our next question from Ritika Khandelwal from Perpetuity Ventures.

So you have mentioned that your OSD exports will kick start in FY '26. So we have largely been our domestic focused formulary company. So what will your strategy be behind this OSD export? And what is the size of the business we are -- what is the size we are targeting for this business? And 3 years out, you know what will be your ballpark export, if you can throw some light on that?

So today, we are 90% domestic formulations, 10% exports in terms of revenue composition. This might move a little bit here and there in 3 years. But 3 years out, I don't see a substantial swing because all pieces of our business are on a good trajectory. As far as the addressable market for OSD exports is concerned...

I think it's too early for us to even talk about it.

It's a huge market. But suffice to say that I think we, at Eris have always gone for good quality business, good margin business. So I think that ethos will stay with us.

So, Ritika, it's too early for this. How much we do in OSD, when do we do it? It is just -- you need to give us some time to really wrap our head around that. Until this point of time, we are just doing the procedural part and still dabbling with the market. This is not something which we have done in the past. So give us some time to really comment on this.

Next question is from Prashant Nair from Ambit Capital.

Yes. Just one question on the cash conversion side. So this year, it has been a lot stronger than in the past. And this is a year where you've also started international sales where we typically see a slightly longer working capital intensity. So can you elaborate on what has driven this? Is it mostly your own internal efforts to tighten up things? Or is there any other factor here? And is this sustainable as we go into the next few years?

So the easier answer is the second question, Prashant. No, it is not sustainable. But we are now looking at more like 80% OCF. This year, it has been because of tightening of things, internal efforts. But this is more like one time, we'll come back to that 80% from the next year.

[Operator Instructions] Next question is from Gagan Thareja from ASK Investment Managers.

Yes. So the first question is on the debt repayments. While you've given some guidance in the presentation up to the mid of next year, by when do you target to become completely debt-free? How should we think of leverage on the balance sheet?

I mean, I'm not sure completely debt-free is an objective for us or is it even a good thing to have. That is questionable, but I would not like to discuss that now. But I think in terms of leverage ratio, I think we have looked at INR 1,750 crores for end of next financial year. Post that, I think we'll be below INR 1,000 crores based on organic cash flows. So I think the theoretical answer, complete debt-free is, I think, end of FY '28, but I'm not sure that's a desirable objective. I'll reiterate.

And what's the current gross debt?

Gagan, we actually only give out the net debt numbers. Gross debt is something that you really need to understand. We'll come back to you offline with that.

Why that coyness? Why that coyness in giving gross and cash separately? I mean, what's so significant about it, not to reveal?

Sorry, sir, I did not understand your question. Can you please repeat?

You do not reveal -- this is Bharat Shah. My colleague, Gagan is also is on the call with me. So this is Bharat raising the question. You say you do not give gross, you give only net debt figure. So I said, what is so -- why being so coy about giving gross debt and cash and then the net debt? I mean there's nothing...

No, no, Bharat bhai, there is nothing. We'll tell you the gross, just give us some time.

It's just that it's been a practice for us and most of our peers also to give net debt numbers because they give...

Kruti, we'll give them. It takes 2 minutes.

It's just a question of time required. Okay, that's fine. I thought you were just being a bit coy about it.

No, no, Bharat bhai, [Foreign Language]. We'll get the numbers down.

Sir, I have one more question. Is it possible to give us an idea of how sales in all of your acquired businesses starting from Oaknet and thereafter, have evolved from '24 to '25 and how are they currently for 9 months to 9 months, if it's possible to give an idea?

Gagan, we have stopped doing that for ourselves also now. It's been 2 years. Everything has now come together. So it's all come together and come together piece is 12% in this quarter. Anyway, the new business, which we have acquired last year, we are giving you the numbers. And by Q4, we will give you everything in terms of the new business. So let it be like that. I mean, it's all integrated now.

Bharat again. In terms of your own assessment, qualitatively of the acquisition made, what are the things which have more than met with your expectations? And are there any things that might have underwhelmed you?

So Bharat bhai, within -- taking the cue from Gagan, look, Oaknet has been -- Oaknet with a combination of Glenmark and Dr. Reddy has been very good. Last year, Kruti, we gave EBITDA of 46% at some point of time for the Derma business. So the Derma business has done very well for us. But if you ask me, it's the Biocon business which has opened a lot of growth passages for us. Now how much we do in that? When do we do is something which we are working but the way we think about the business has, in a way, changed significantly after Biocon and with all the biotech and the new -- the complex product.

So at a personal level, while on the cash register, Oaknet, Glenmark and Reddy has done very well. But from a growth perspective and the future of the organization, I think Biocon has given us a lot of way forward.

Right. So strategically, it has expanded your reach and capability and the depth?

Correct. Absolutely, absolutely.

So I presume, based on what you have said that you have more reasons to be pleased with the acquisition in entirely -- speaking in entirety even there are parts which may or may not have fully met with expectations?

Yes. I cannot deny that, but this has been quite gratifying. Both of these acquisitions with Glenmark have been quite gratifying.

Next question is from Prolin Nandu from Edelweiss Public Alternatives.

Yes, so a couple of questions from my end. One is on the organic growth, right, now 12%, and if you remove Biocon 1, it's at 11%. So you have always been saying in the past couple of calls that Q2 or H2 would be launched heavy, right? So I just wanted to understand, and you gave some color on what will happen in FY '27 when Sema comes in and a couple of more products also come in.

So from here on till FY '27, is our pipeline robust enough to help us with this kind of organic growth numbers or we will see some volatility going ahead? How do you want to give some color on the pipeline from here till the launch of Sema and a couple of new products that you highlighted previously on the call?

Yes. So look, this 12% Q3 and 9%, 9 months, this is not -- the organic growth is -- this is not something which we are very happy about. We have not -- haven't delivered the number, but we had always aspired for 14%, 15% growth. So we've been working. We are still working on the same path. The only thing is if you look at how the portfolio has changed in the last 1 year, maybe last couple of years, we are now getting more and more confident of achieving that, especially from the newer products, which we are talking about. So is 10%, 12%, something which will bring a lot of ups and downs? I don't think so. But the new products which we are talking about is more about taking it ahead of 12%.

So this is a good baseline to work with, right, going ahead? Is that a fair comment to, probably, make?

Oh, yes. Definitely.

And one more question will be on your Bhopal facility and the in-sourcing there, right, in terms of technology transfer. Are there any delays because I thought some of the benefits were to accrue Q4 onwards. Now you are saying that Q1, so are we largely on drag? Or are there some delays in in-sourcing and some of the margin benefits that we are about to see from that in-sourcing?

Yes, there has been delays. There has been delays. And we actually expected delays, but it has gone a little beyond, but still in control. So our original thought was that in Q4, we will be able to do vials which will now -- which has now shifted to Q1. We still feel that we will be able to do cartridges in the second half of the next year. At this point of time, it seems to be online. But the caveat with all these things is because there are too many moving parts, there are licenses, there are multiple permissions, especially in the biotech. There are PV batches, stability, testing, all those things. So there is always a chance of some here and there in terms of time line.

Next question is from Tushar Manudhane from Motilal Oswal Financial Services.

Yes. So just on this Levim, where we have completed preclinical studies. I'm not sure if you've answered this, but just to understand how long will it take for human trials?

Human trials. So the additional trials will start early. So maybe in the first quarter of the next year, the human trials will start, but those will be Phase 1, then you will have to go through the entire process. So look, Tushar, this is going to be a process. So our best case scenario is calendar year '26 and/or '27 early. KK, am I right?

Commercial launch.

Commercial, so '26 and/or '27 early. But please don't confuse this with our launch. Our launch is separate, domestic launch is separate, and this is separate.

Yes. This is for the recombinant Semaglutide. And probably the synthetic Semaglutide is separate, right? That's what you are trying to indicate.

Yes, absolutely.

Sir, given that the innovative product is biological. So the acceptability of the peptide -- synthetic peptide in different markets, what's your sense?

No, Tushar. At the end of the day, the bioequivalent studies have been conducted across, so it will be completely unfair to say that at the last mile, there could be a -- there might be people who would like to use this. So that's a different thing. But technically speaking, the products are on par.

Okay. As acceptable by the regulatory body as well?

Of course, that's where the whole -- I mean, licenses have already come. So the drug licenses have already been received.

Sir, secondly, on this insulin Bhopal facility, because of in-sourcing, at least as far as vials is concerned, for that particular business, what kind of margin improvement is sort of expected?

So I have told you, Tushar, look, I just told the last caller that putting a time line is difficult. But when all of us -- all of this is in-house, which I think should happen in August, September, October. When all of this is in-house, it will be 12 percentage points, which we see. And once the vials come in, so there are 40 IU vials, 100 IU vials, this -- there are around 9 iterations into that, so this will take its own sweet time. But we expect September, October kind of time that everything will come together. And once that happens, I've given you the numbers.

September, October next year? I mean, coming September October, you are saying?

Coming September, October, yes.

This calendar year.

This calendar year.

Only on account of vials, right? Here, we are not considering this cartridges fill-finish or we are also factoring cartridge fill-finish as well?

Tushar, everything.

I meant to ask just only on vials if you are -- if possible to share?

We will gain some -- look, vials are 40% of our sales as of now, but it is the cartridges, which are growing. Vials are also -- there are too many SKUs in vial. So that will be a little too much of a detail. But yes, you will see the improvement coming from Q1, but the whole impact will be seen by the end of September, October kind of time line.

Next question is from Harith Ahamed from Avendus Spark.

Thanks for the follow-up opportunity. So your comment that you expect GLP-1 to become a first-line treatment in diabetes. So should we expect a decline or cannibalization of your insulin business as GLP-1s gain more traction in the diabetes indication? Given that insulin is a significant business for us.

Yes. Harith, look, technically, what you are saying, one of the indication approved by the ADA is before the initiation of insulin, right? But what is happening is simultaneously, even insulin is very underpenetrated in our country. So we haven't had -- we have been talking about sulfonylurea going down since last 10, 12 years now. Since the time Dapa had come in. But you look at what has happened. It is still sustaining and still sustaining well. So the larger point, Harith, here is that as a population, we are at 8.5 HbA1c. Now understand what is going to happen.

This -- the target of 7% HbA1c was not made because below 7, there was no benefit. The problem was when you go below 7, you had more hypoglycemia, morbidity and mortality, because the drugs which were used when the guidelines were formed were hypoglycemic drugs. So there is a whole new set of people. I mean I will appeal anybody of our age who is seeing diabetes. Now your goal is not 7%. We should look at medical remission, which is, say, 5.7, 5.8 HbA1c.

And this is where GLP will take you. So you can start from a 0.25 and take it to 2.4, 8x the initial dose and no hypoglycemia. So what I'm saying is that insulin still is underpenetrated. Technically, what you're saying has a merit. But because there is so much underpenetration, the Glargine today is very underpenetrated. And I see a trend in the future that Glargine will overtake premixed insulin. And that is what has happened globally, and we also are poising that direction. So I am positive for insulins as well, over the medium term, at least.

Next question is from the line of Kunal Dhamesha from Macquarie.

One on the -- basically on FY '25 guidance, we had put out a detailed guidance last quarter. So where do we stand on that? Do we -- is there any change in terms of console revenue, EBITDA expectations?

[Foreign Language] we are on it.

So we should assume that INR 3,000 crores kind of revenue run rate, right?

Yes, yes, more or less.

And then just 1 on the GLP-1 while we discussed a lot of stuff. What is your estimate of this market would be in, let's say, next -- where does it start in CY '26? And then by CY '30, how big it can get?

Kunal, '30 I don't know. But my idea is that we will have 1 million patients. I have said this already. So I feel field first year would be INR 2,500 crores to INR 3,000 crores. First full year.

Sure. And that would assume how many patients, 1 million patients?

One million patients. And then we have done -- you take 3 months and there is a dropout rate and all those things. So considering that on different dosages, we feel that 1 milligram will be a dose, which will be taken by a very large population. So all those things. But this is internal assumption based on whatever understanding experience and channel check we did. You had some other idea, Kunal?

No, no, I didn't have -- in fact, I'm just trying to triangulate what this could be. Because there's -- I mean, to me, it doesn't look very straightforward in terms of -- India is slightly different market. It's out of pocket, and I think pricing might also play an important role. But let's say, since we are primarily into anti-diabetes and we have done, what in your view would be the average cost of anti diabetic...

I'm not answering that, Kunal.

I'm seeing -- the prescription costs for a week or something on an average.

It's the same question, Kunal. I'm not answering that. It's a foot in the mouth kind of a thing. I'm not answering that, but yes, we will be very, very, very, very economical. India, all Indian offering would be very economical in reach of a significant number of patients.

We'll take our next question from Rahul Agrawal from Himalaya Investment Advisors.

Congratulations on strong execution across the acquisitions and organic growth. My question is more around the organic growth guidance that you just shared, Amit, which is that your aspiration is much higher than 12%. Is that factoring in the opportunity from GLP-1? Or is that more driven by these new combinations that you are launching in H2 of this year, which you expect to take you over the 12% line?

Yes. So more driven by -- I'm not even counting GLP as of now because it's a little far away. It's driven by the injectable insulins. It is driven by the cardio-diabeto space, the mid space between cardio-diabeto and it is driven by derma. These are the 3 top picks.

Got it. So the INR 2,500 crores to INR 3,000 crore market opportunity for GLP-1 that comes in, in year 1, like you said, that will be on top, whatever share you can win on that, that will be on top as a big driver in FY '27?

Yes, that's the aspiration, man, but I'm using the word very carefully. That's the aspiration.

And from a margin profile, we obviously have had good expansion in margin across the acquisitions we have done. But over the next year or 2, how much more room do we see in terms of EBITDA margin improvement at a broad level, if you look at it 2 years out, what sort of EBITDA margin do you see the overall business at?

EBITDA , we are doing quite okay with EBITDA. So we don't see -- look, the only thing which we now see in the next year is the Bhopal side started -- starting into production. And then the gain which comes in gross margin. Beyond that, we don't see any great thing. And look, we are happy with the EBITDA margins. It might expand a bit, but that's not the idea.

Yes, I know it's a very healthy margin anyway. So from here on, you are expecting a lot of organic growth coming in and GLP-1 should be a fill in, that's the growth path of the company from here?

Yes, I think so.

Ladies and gentlemen, we'll take that as the last question for today. I now hand the conference over to Mr. V Krishnakumar for closing comments. Over to you, sir.

Thank you for your participation. To summarize, our Branded Formulations business has delivered a 12% organic growth in quarter 3. The base business EBITDA margin for 9 months has increased to 40%, up from 35% -- 37%, I'm sorry, for the same period last year. Consolidated YTD revenue stands at INR 2,188 crores, which is a 50% growth. Consolidated YTD EBITDA stands at INR 765 crores with a 35% margin and 45% growth. On the back of strong cash flows and capital efficiency, we are more than 6 months ahead of schedule on debt repayment. This, combined with several operating levers, will soon take us to an exciting inflection point in EPS growth.

Starting FY '26, EPS growth will get amplified each year by quarter-on-quarter debt reduction and year-on-year declining book tax rate. We are confident that our market-leading position in diabetes, combined with our strategic investments in biologics and injectables will enable us to create significant value in the GLP space. We reaffirm our business guidance for the current financial year. Thank you, and a good evening to all.

Thank you very much, sir. Thank you, members of the management. Ladies and gentlemen, on behalf of Eris Lifesciences Limited, that concludes this conference. Thank you for joining us, and you may now exit the meeting.