Pharmaceutical formulations giant made an acquisition worth Rs 1,242 crore!

Eris Lifesciences , a leading pharmaceutical formulations company, has announced the acquisition of the branded formulation division of Biocon Biologics for Rs 1,242 crore. The acquisition will be funded through debt.

This move comes on the heels of Eris acquiring a 51 per cent stake in Swiss Parenteral for Rs 637 crore in February, emphasising the company's aggressive expansion strategy.

The rationale behind this move

This acquisition will give Eris a headstart in the Indian injectables market, worth over Rs 30,000 crore. Notably, this acquisition will include buying two key insulin brands, Basalog and Insugen, with market shares of 14 per cent and 10 per cent, respectively. This will position Eris as a leading player in the Indian insulin segment. According to company reports, these brands collectively boast a revenue potential of Rs 200 crore.

Additionally, this move will mark Eris's foray into the oncology and critical care segment. It has also entered into a ten-year supply agreement with Biocon, under which the latter's products will be manufactured and supplied for commercialisation in India.

Investor's corner

There is no doubt that Eris Lifesciences' acquisition strategy, particularly over the last five years, has been aggressive. In the last five years, it has acquired:

• Strides Pharma 's branded formulations division
  
• Zomelis from Novartis
  
• Oaknet Healthcare
  
• Derma brands from Glenmark and DRL
  
• Biocon's nephrology and dermatology division

Although these acquisitions have resulted in 15 per cent annual revenue growth in the last five years, Eris's operating profit and profit after tax have witnessed muted growth due to higher expenses.

Consistent acquisitions, especially since FY22, have also resulted in ballooning debt. From having no debt back in FY21, its total debt has surged to Rs 786 crore as of September 2023. Its debt-to-equity ratio stands at 0.9 times at the moment. Consequently, this could affect the company's balance sheet and slightly worsen its interest coverage ratio.

This is all on top of a competitive environment. Thus, as enticing as these acquisitions may seem, investors should consider Eris's poor bottomline growth and a higher debt position. The company is trying to scale up its business rapidly, and whether it is coming at the cost of a stable balance sheet is a question.

Also read: Two pharmaceutical giants announce merger