ERIS Lifescience

Eris Lifesciences reported a strong Q3 FY26, with Domestic Branded Formulations (DBF) revenue reaching INR 696 crores for the quarter and INR 2,106 crores for the nine-month period, representing a 10% YoY growth. DBF EBITDA for 9M grew 12% to INR 781 crore, with the 9M margin expanding by 70 basis points YoY. On a consolidated basis, Q3 revenue hit an all-time high of INR 807 crore, an 11% increase YoY, and 13% YoY excluding trade generics. Consolidated PAT from continuing operations surged nearly 40% to INR 120 crore, primarily due to a 15% YoY reduction in interest costs and over 200 bps reduction in tax rate.

The company has successfully tripled its market share in the Insulin segment to 26% by January 2026, up from 8% at the time of the Biocon acquisition less than two years ago. This achievement fulfills its objective of securing 25% market share in RHI cartridges, and Eris is on track to replicate this in the broader RHI plus Glargine market. Manufacturing at the Bhopal facility is progressing, with over 5 million RHI vials produced since August 2025, Glargine vials commercial manufacturing starting this month, and RHI and Glargine cartridges expected to commence commercial production from Q2 next financial year.

Eris's international business recorded its highest-ever quarterly revenue in Q3, reaching INR 111 crore, a 45% growth YoY, with EBITDA growing 46%. The company projects FY27 as a breakout year for this segment, with revenue expected to be INR 550-600 crores and EBITDA of INR 180-200 crores. A significant driver is the EU CDMO segment, which boasts an order book exceeding INR 1,000 crores at the end of Q3. Eris anticipates INR 125-160 crore in CDMO revenue next year, with the full commercialization of the INR 1,000 crore order book expected over a three-year period.

Eris is preparing for the launch of Generic Semaglutide, following CDSCO approval for its partner Natco. The company has made significant progress in internalizing Semaglutide manufacturing at its Ahmedabad site, ensuring adequate capacity. Additionally, Eris is launching Esaxerenone, a novel nonsteroidal MRA developed in-house, for hypertension and proteinuria. This drug is considered a game-changer in hypertension management, offering benefits beyond blood pressure reduction, and Eris was the first company to develop and gain approval for it in India.

Net debt at the end of Q3 stood at INR 2,270 crore, with a clear target to achieve a net debt to EBITDA ratio of 1.5x by the end of calendar year 2026. Capital expenditure for Q3 was approximately INR 80 crore, contributing to a nine-month CapEx of INR 200 crore, primarily allocated to strategic projects in Insulin, GLP-1, and Injectables. The company's 3-year CapEx guidance (FY26-28) remains around INR 750 crore, with investments strategically front-loaded to capitalize on attractive opportunities.

Eris has decided to discontinue certain non-core tail-end brands, which are expected to result in an approximate 2% impact on DBF revenue next year but will improve overall operating profit and margin. Excluding these non-core brands, the company expects to close FY26 with a 13-14% DBF growth and an EBITDA margin of 39% plus. While initial gross margins for Semaglutide are anticipated to be lower, management believes the overall impact on the INR 3,000 crore DBF segment will not be significant, and consolidated margins are expected to remain stable next year.

Operating Cash Flow (OCF) conversion for Q3 was 50%, a notable decrease from 120% in the same quarter last year. This shift is attributed to changes in the product mix following recent acquisitions in Injectables, Insulins, and Hospital supplies. Management is actively working to improve cash flow conversion and expects to reduce debtor days by 10-14 days in Q1 and Q2 of the next financial year, aiming to enhance overall liquidity.

In terms of therapy area performance, Eris continues to lead in Insulins and Dermatology. However, the OAD portfolio is currently lagging market growth due to FDC bans and is expected to continue doing so for the next 2-3 quarters before stabilizing. The company has made significant R&D investments in new technologies and products, which have not yet yielded returns but are expected to contribute in the coming year. Eris plans to disclose R&D expenses separately starting from the next financial year for greater transparency.