Eris Lifesciences Limited (ERIS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the webcast of Eris Lifesciences Limited. We have with us on the call today Mr. Amit Bakshi, Chairman and Managing Director; and Mr. V. Krishnakumar, Chief Operating Officer and Executive Director. [Operator Instructions] Please note, this webcast 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.

Thank you. Am I audible?

Yes, sir.

Good afternoon, everybody. Welcome to this webcast. Sorry, just give me a minute. So we are here to talk about the two announcements we have made today. Eris proposes to acquire the India Branded Formulations business of Biocon Biologics and 19% stake in Swiss Parenterals from Eris Promoter Group. So at the outset, let us start by talking about our two key strategic objectives in the acquisition of Biocon business, India Branded Formulations. So this is an out-and-out sterile injectables business. So through this acquisition, we are achieving two key strategic objectives. Firstly, this is a great platform to jump start our India branded sterile injectable business. This is an entry into critical care and oncology. Secondly, it gives us leadership in insulin and an anti-diabetes franchise of nearly INR 1,000 crores in size. Put together with the Swiss Parenterals deal, which was announced last month, we have a bunch of synergies, which can be leveraged for speedy value creation. Talking a bit more about this, so we are able to share the big picture with you now. The Swiss Parenterals deal and the Biocon India Branded business deal, these were conceived together. And they were evaluated together. And we saw -- always saw the deals as belonging in one basket. They got done 1 month apart. But we are now in a position to share the integrated deal thesis with you. So just to recap, Swiss Parenterals is a dossier-driven sterile injectable business in RoW markets, impressive product range with more than 190 unique existing molecules and a pipeline of more than 40 new molecules and enabling a range of new growth opportunities for Eris, including India branded injectables, oral solid dose in RoW markets and injectables in RoW markets. What does the Biocon India Branded business brings to us? It is a branded injectable business with a revenue base of more than INR 360 crores per annum and an attractive product portfolio spanning insulins, critical care and oncology. It brings Basalog and Insugen, two power brands, and the largest Indian brands of Glargine and human insulin, each being a INR 100 crore-plus brand, and it gives us an entry into oncology with 3 mainstream MABs, aggregating INR 80 crores in revenue. So what are we trying to do here? What are we trying to put together? The Biocon business with a revenue base of INR 360 crores, we believe, is the ideal launch platform for us to address the India injectables market. We will be able to quickly scale up this business with new product launches from the Swiss Parenterals current and pipeline basket of more than 230 molecules. Biocon team will transition to Eris pursuant to this deal, which will help us ensure continuity of doctor and channel relationships. This deal will create the fifth largest diabetes care portfolio in India, with a revenue base approaching INR 1,000 crores per annum. And the notable part is this is probably one of the very few cases where we have a significant footprint in oral anti-diabetes as well as injectable anti-diabetes. This will leapfrog the Eris insulin franchise to a leadership position with the addition of two power brands, Insugen and Basalog. And we have significant margin expansion potential in the acquired portfolio by leveraging Swiss manufacturing, insourcing and long-term supply agreements with Biocon. So put together, we are targeting our next INR 1,000 crore vertical, which is in sterile injectables, where we are looking at a 3% to 4% market share in the INR 30,000-plus crores market over a 3-, 4-year time frame. Now we'll go into the details. A quick recap of Eris' journey in the insulin business. We entered the India insulin market in January 2022 with the formation of a 70-30 joint venture with MJ Biopharm. We commercialized 2 products, Xsulin and Xglar. And we achieved quick scale-up of a greenfield business where we did INR 18 crores of revenue in the first financial year. This year, we are looking at INR [ 48 ] crores to INR 50 crores of revenue, and we are currently doing a monthly run rate of INR 5 crores of sales. And we are targeting the launch of Liraglutide in the month of April. Biocon's insulin portfolio will leapfrog us to a leadership position. So Basalog is the largest Indian brand of Glargine in the market, with a market share of around 10% to 11% by volume. It is the only Glargine biosimilar with clinical data on complete interchangeability with the innovator product Lantus. Insugen, again, the largest Indian brand of recombinant human insulin in the market, market share of 10% to 11% by volume and value. The combined revenue of these 2 brands is in the vicinity of INR 200 crores per annum. We will continue our existing brands, Xsulin and Xglar, as well, put together, giving us a higher share of voice in the market. Moving on, Biocon's Critical Care portfolio has a revenue base of around INR 80 crores per annum, with leading brands in important segments like immunoglobulins, human albumin, enoxaparin, heparin and several ICU antibiotics. With the field force of more than 70 personnel, the unit has a comprehensive coverage of hospitals across the country. We have an immediate opportunity to start cross-selling the Swiss Parenterals' product portfolio through this channel, including niche inhalation anesthetics, sevoflurane and isoflurane. And we have the margin expansion opportunity by leveraging the Swiss Parenterals' manufacturing footprint for insourcing and technology transfer. The Oncology portfolio of Biocon brings us 3 significant MABs, with an aggregate revenue of INR 80 crores per annum. The first of these, BioMab, is a product called nimotuzumab, which is India's first novel MAB for head and neck cancer. And the interesting part about this product, it has a huge range of potential additional indications, which are approved in other world markets, including pancreatic, esophagal, glioma, et cetera. Canmab and Hertraz are the first biosimilars of trastuzumab to be approved anywhere in the world. These were codeveloped by Biocon and Viatris. And they address large indications, HER2-positive breast cancer and metastatic gastric cancer. Put together, the two brands have a combined market share of 9% in a market which is growing at more than 30% per annum. Krabeva and Abevmy, which are biosimilars of bevacizumab, they are approved for treatment of metastatic colorectal cancer and a wide range of other cancers. Combined market share of the two brands is 6% in a market growing at 26% per annum. An employee base of 40, including more than 30 medical reps, are transitioning to Eris as part of this deal. And we are very happy with this distinctive product portfolio, which also has room for significant expansion through new product launches. We are also happy to note that this deal is in line with the salient features of our M&A strategy, which is, number one, about expanding our presence in existing therapies and/or entering new therapies, turning around fundamentally good businesses that are sub-optimally run, targeting quick value creation, looking at a turnaround in 12 to 18 months from acquisition. And we achieved all this by rolling up our sleeves and doing the hard work and sticking to our financial metrics in terms of a 1-year forward EBITDA multiple of 10 to 12x and looking at assets with adequate growth potential and margin expansion potential. And whatever has been demonstrated in terms of value creation in some of our earlier deals, so the Strides deal, for example which we did in 2017, we picked up a brand called Renerve, which has grown 2.5x since then. We picked up a CNS franchise in the Strides deal, which has scaled 4x since then. The Zomelis brand that we picked up from Novartis has grown 9x since acquisition. And the dermatology basket that we put together in FY '23, we have already spoken to you about it in the recent past in terms of how we have created value there. So we expect a similar trajectory of value creation in the deals that we have put together in this financial year as well. Talking a bit about the deal contours. So we have signed a definitive agreement to acquire the Indian Branded Formulations business of Biocon Biologics Limited. And the scope of the acquisition includes multiple aspects as a going concern: The entire India Branded business with the current revenue run rate of more than INR 30 crores per month, trademarks and licenses pertaining to all mother brands and net working capital. Pursuant to the transaction, over 435 employees, including 325 reps, will join Eris. We have signed a 10-year supply agreement with Biocon for sourcing drug substance and drug products, with an option to technology transfer the manufacturing to locations of our choice. The consideration is INR 1,242 crores, including net working capital, and will be funded through debt financing. We expect the transaction to achieve financial closure before 15th April. The next announcement is that Eris Lifesciences proposes to acquire an additional 19% stake in Swiss Parenterals from the Eris Promoter Group. This was a temporary bridge arrangement, as discussed with you last month, which is now being reversed. We would also like to take this opportunity to underscore our commitment to deleverage our balance sheet. As you all know, our cash flows have been strong and sustained over the last 6 years, with an average OCF of 75% of EBITDA, and we expect this to continue in the years to come. And this cash flow will enable debt servicing as well as principal repayment principal repayment from FY '25 onwards. We expect that net debt at the end of FY '25 will be less than 2x of 1-year-forward EBITDA. Putting it all together, we have added a number of strategic growth engines over the last 2 years: injectable anti-diabetes, dermatology. We've created a platform for India sterile injectables. We have gotten into strategically important therapies like nephrology and oncology. We have created a platform for OSD exports and sterile exports. Put together, this gives us the platform to look at a revenue of INR 5,000 crores in the year FY '28. Our strategic objectives for the next three years would be: number one, integration and value creation from the deals, deleveraging of the balance sheet and achieving the said revenue. That concludes our presentation. We're open for Q&A.

[Operator Instructions] We have our first question from Tarang Agrawal from Old Bridge Asset Management.

Just a lot of questions. On the Biocon portfolio, what are the GCs for this portfolio in injectables, biosimilars and the insulin business?

Yes. So is it on?

Yes, are you audible, Tarang?

Yes, yes.

Yes. So look, that is where we'll come in. We were trying to bridge both of -- trying to put both of these deals together, but it didn't happen. So I'll just give you an example. So for example, the CCD business in the old hand was more about 21%, 22% GC. But when we did the calculation of how -- when it's shifted to Swiss, how does it looks? So it goes almost close to 50%. So those were the synergies, the reason we had planned both of the deals together, but for some reason it got postponed. So we are looking for when we do an injectable business, which is without insulin, the injectable business should be at a 50% GC. While it takes time to get there, so a couple of quarters maybe. Insulin, we are very happy in the way Biocon has supported us. We are getting far better margins than we used to get for our Xsulin and Xglar. So another 1 or 2 quarters, we would be putting these things together. In the midterm, there's a potential of insulin to have a 70% kind of a gross margin. This is what we can see as of now. So we need to get some more time to just close the deal, but largely it's 70%. MABs, the hero MAB, the nimotuzumab, is having a GC of more than 70%. The rest of the GCs are more like 30% to 40%, but there is some scope there in terms of you moving the supply and those things. So those things are a little work in progress. But these two businesses largely have this kind of GC in the midterm.

Got it. And just to get a sense on the supply arrangement that you entered with Biocon, so Biocon will essentially be manufacturing those biologics, and Eris will be marketing them, right? So that will be pertaining to the biosimilars business only, right? The peptides and the insulin business, will it extend to that as well?

Yes, insulin majorly, insulin, you know, is the largest piece. There are 2 very large brands. So insulin majorly, plus all the MABs. You are right, the other products which they don't have a manufacturing capability as of now, will be -- were already at a third-party location. In our view, most of them will transition to our own injectable plant, and that's how we have put the GCs to work.

Also, the GCs that you enumerated in your address before, those are the GCs that will be relevant to Eris, is it, despite the supply arrangement from Biocon?

Yes, these are the GCs which we will achieve in the midterm, say, two quarters from now.

Okay. That's helpful. Okay. And I guess from considering that now the leverage on balance sheet will look like somewhere around INR 3,000 crores, if I'm not wrong?

Yes. Yes, that's right.

So from hereon, my sense is that a large portion of your bandwidth will look at -- go into integrating everything that you've acquired for the next 2 years, correct?

Absolutely, absolutely. So we used to say earlier if something exciting comes our way, we don't know, but we are putting other caveat there. And now it's time for us -- we have expanded quite significantly with what you saw in the slides. And these are all brands, which will give us a huge headroom for growth. So we are simply putting our heads down and looking into serious execution.

[Operator Instructions] The next question is from Kunal Randeria from Axis Capital.

I hope I'm audible. So can you let us know what has been the revenue run rate for the 2 insulin brands, Insugen, Basalog, in the last 5 years?

5 years?

Yes.

So last year, I mean, if I calculate the 12-month period since it is March. It is the number which we disclaim. Both put together, are in the range of INR 200 crores, largely sharing INR 105 and INR 101 crores kind of a number.

Sir, the reason I'm asking this is because at least as far as I have the AIOCD data, it's showing that sales in the last 5 years, that is flat at around INR 200 crores. So is my understanding correct here?

So Kunal, if I may give the AWACS perspective. So if you see the -- let us divide this into human insulin and Glargine, so human insulin market, by volume, it has actually declined, as per AWACS data. In terms of units, you see a degrowth over the last 5 years. The market share of Insugen in unit terms has grown from around 8%, 8.5% to around 11% over the last 5 years. So actually, Insugen has taken share in unit terms from the innovator brand. So when you look at this kind of a market, it is a unit growth and the unit share, which is strategically more important. And if you look at Basalog, again, Glargine is a market, which has been growing at around 2%, 3% in unit terms. And the market share of Basalog has also significantly expanded in the way we shared on the slides. So these brands have actually expanded their market share and grown faster than market in the last 5 years.

No, my question is in value terms, so while you are gaining market share, I understand that, right? But in value terms, both these insulins aren't growing. Is that correct?

Yes, yes, they have been flattish till now. There have been a couple of reasons. Glargine, if I remember correctly, 2 years that came in NLEM, and there was a 20%, 25% correction in the price across the board. So I can't really put my finger on the point, but yes, they had -- so has this product been doing wonderfully well in the last 5 years? The answer is no. One of the reasons was that there was an NLEM component there. And also understand that AIOCD, typically human insulins are now moving to a lot of hospital supplies, where there's a little bit of data here and there. So lastly, what you're seeing is right, the growth hasn't been phenomenal.

Sure. Sure. And maybe then, would you like to share what you expect -- we should expect from this portfolio in the next 3 years, the insulin portfolio?

So Kunal, we will come back to you by the end of the quarter. We'll get some more time to just put the numbers together. But having said that, you've seen our excellent performance, which has kind of come up in the last 2 years. So insulin is something which we -- our chances of growing significantly is higher just because of the kind of product it is and the kind of therapy it is. So I will be happy to tell you more about this in a -- once we come for our Q4 numbers. But in my view, these 2 brands will move very well in the market.

Sure. Okay. My second question is one of the -- I think you -- data point that you put in the slide, it said that you are maybe 1 year forward EBITDA, it will be somewhere around 12x or something, 10 to 12x, right? So you have -- and the press release says that you have bought at 18x, right, which basically means that the EBITDA of the acquired business should move from INR 70 crores to INR 100 crores, right, in just 1 year's time. How can -- I mean, I just want to understand if, let's say, we just discussed that the revenue is not growing as much, then how can the EBITDA in one year move so much? I mean what kind of a calculation...

No, no, Kunal you are taking at a Oaknet deal. I mean, I remember the same question at that point of time. Look, in the first year, we do manage costs very well. So the first year -- and this time, we have the people around. So what -- the number which we are telling you 10 to 12x, in my mind, we have no doubt on that because those are the cost synergies which would come up. For example, I told you when we move this business, some of the business from third-party to internal -- to our internal factory, we have a very, very significant jump. And the same thing will happen in the other products also. So I can commit to you today that what you're talking about the EBITDA margin doesn't seem to be difficult. The growth numbers is something which will take some time and come back.

Got it. Got it. And just one clarification, if I can. I think Tarang also asked this question, of the -- what are the products that you will in-source manufacturing? See, I'm sure you can do the monoclonal antibodies and probably insulin also, Biocon will manufacture. So out of this INR 360 crores, how much of that will come in-house in the next 12 months?

Only INR 80, INR 85 crores of existing sales. We plan to grow that INR 80, INR 85 crores -- you remember when you were showing you the last deal of [ space ], we said we'll make first year INR 100 crores, INR 120 crores in the general injectable space. So all that general injectable space will be done in our factory. The largest piece out of that will be continued with Biocon and a partner, between a DS and a DP. And some of it would be from -- like you were talking about a couple of products, those will come from third party.

Got it. And just one more question, again, a clarification. So this INR 1,242 crores includes working capital, right?

So INR 1,242 crores breakup is like this. It's like INR 100 crores, which is in -- which is for supply advance, INR 50 crores for inventory, and the rest is the consideration for the brands.

Kunal, [Technical Difficulty] 3x of revenue.

Okay. So the reason I'm asking this is in Biocon's press release, it says that INR 1,242 crores and additional working capital if any. So that's why I just wanted to clarify.

Yes. So if there is additional working capital that we choose to take on, that will be on top up. But this INR 1,242 crores includes INR 50 crores of working capital, which Amit shared.

The next question is from Vishal Manchanda from Systematix.

Thanks for the opportunity. Hope I'm audible.

Yes, Vishal. Go on.

Yes. So basically, on the transfer and supply arrangement, just a clarity. Would you be procuring the API from Biocon and doing the fill and finish at Swiss Parenterals? Is that your plan?

It will be a mix of two, three things. There would be a mix of where the -- so I'll tell you. Most of the time MABs will be de minimis as a fixed fully formulated from Biocon. Insulins would -- the DS would come from Biocon, and we will have a third-party to fill and finish the way they had -- they have been arranged. It is akin to how we were getting Xglar earlier. And other -- all other products, we'll move into our facility. Of course, a couple of them, if we don't have, we'll shift to third party. But that's the larger kind of a broad idea.

So the third party, not in the Swiss Parenterals side, you mean, the fill and finish of -- formulation of insulin?

Largely, it will come -- okay. I think we are discussing -- I'll just be a little clear on this. There are three component: Critical care component, insulin and MABs. MABs and insulin, the drug supplies will come from Biocon. The formulation will happen at different sites, including Biocon itself. The critical care, which is largely general antibiotics and enoxaparin, most of it will be transitioned to Swiss facility. So the INR 80 crore piece will go to Swiss, the remaining will remain largely DS and Biocon and supply with third party.

And the gross margin expansion you shared in the -- in your first -- earlier in your comments, so how much would be that on account of this transfer?

CCD will be a very large kind of a gain, which we are expecting. We have done those numbers. Of course, it takes a couple of quarters to get there. And the other piece is, I said midterm, we are -- insulin, is something in midterm. We expect around 70% profit.

[Operator Instructions] We have a question from Rahul Salvi from Franklin Templeton.

Yes. Amit, on your own insulin brands from MJ Biopharm, so I think they will compete with these acquired brands as well. So what is the plan there? Will we kill those brands? Or will we continue to market both of them together?

No, we have seen a lot of examples in the last 5 years of having 2 brands, maybe three brands also. There has been -- had been a couple of good stories where 3 brands could have managed. If you look at the size of the market which we are talking about. I think 2 brands can grow and can also not compete with each other. The way we are positioning these brands, the market slice is going to be different so that we can grab more market share in both the worlds. But we plan and we are hopeful that there is enough headroom for both these brands to grow simultaneously.

Okay. And in terms of technology transfer, so you explained the immediate future. But post the 10 years transfer deals over then, will Biocon transfer technology for manufacturing of insulin to Eris or -- and in what manner?

No, Rahul, that is something which we have not discussed as of now. We have had a tech transfer agreement within our agreement, but that tech transfer is more about form and filling. So form and fill will happen sooner. And post 10 years is something which we haven't really applied ourselves as much. It will take some time. We have some time to get there.

Okay. And EBITDA margin and gross margin expansion, which we are talking about from, say, current INR 70 crores to INR 100 crores plus, so that is possible in the current structure itself, right, only from the complex...

Yes, yes, yes. That I'm talking in the next year itself, so not far off.

Okay. And just to get this clear that till I think we get our debt-to-EBITDA to more comfortable levels, we...

Yes, yes, yes, you're right. You want me to repeat that? We have enough on the plate, right? This was one thing which was conceived -- both the deals were conceived together, right? We are fully committed to reduce the debt and get our heads down and work on ruthless execution. We are doing nothing else.

Sure. And thank you for taking the investor feedback for reversing the Swiss stake.

Rahul look, it was always a bridge. It had to be a bridge. It was always a bridge. It was conceived that, like I would love to say thanks for your feedback. But I would again remind you, it was not for that purpose. We were conceiving both of them together. It was always a bridge, and this is a fact which will remain a fact.

The next question is from Tarang Agrawal from Old Bridge Asset Management.

So two things, right? One, if I look at your critical care business that you've acquired, right? What is the scope of expanding that business from whatever products that you're getting from Swiss? That's number one. Number two, just wanted to get off as well, how relevant will the MJ Bio JV be going forward? I mean, I know you've answered it, but you also spoke about positioning both the businesses differently. So just wanted to get your sense on that. And then a couple on financials, which I'll get back on.

So Tarang the first question, you need to give us time. It will take us some time to kind of put the whole thing together, but there is a possibility of newer products, and there's a good possibility of expansion. What I can tell you right now, we are taking the field force size up from 60 to 132 in an immediate -- on an immediate basis, so which is basically adding 60 -- 100% more people in that unit. So we have been vocal talking about this that we find more value in the India MJ market, the general sterile injectables. So we are putting our people behind that. To give you the growth scene, look, these businesses can grow very sharp because a lot of them is supply. And we don't have a handle of this at this point of time. So give us some time for you to get that. But I don't think even in this year, we can tell you clearly how much we are doing. It will be a quarter-on-quarter thing. When we go through 1 year of learning, we will be in a better position to talk about it. And the MJ piece, look, both the brands are important, they are doing well. It's not easy to create INR 50 crore of franchisee in insulin. And these are two different teams. So we think that we can sell both of them together. How do we work out with MJ is again something which is [Technical Difficulty] because you also understand, the supply of insulin is very critical. I think one more plan is always a good idea. So this is a very broad picture, but we are kind of -- these things are coming together. As soon as we have finalized these things, we'll come back.

Sure. KK, just on the cost of debt here, what's the cost of debt? And given that the INR 1,250-odd crores is without GST, so my sense is we'll see an 18% GST payout right now and then that will probably get reversed in the year itself, correct?

So there is no GST payout on this deal. It is a slump sale. That is the first answer. The second answer is the cost of debt is 8.65% first year.

It's a fixed debt, right? It's a fixed cost?

Yes, monthly reducing fixed.

[Operator Instructions] The next question is from Rahul Salvi from Franklin Templeton.

Yes. So just to get this clear on the insulin part, so on the macro side, the overall volumes are degrowing, if I'm not wrong. So is that understanding correct? That is part one. And secondly, in terms of -- when you say we will outgrow the market, is this -- does this constitute gaining market share from the innovators? And what health care initiatives or, say, PCI, patient care initiatives, will we kind of take to achieve this? So if you could throw some light, that will be helpful.

No, this is a little long one, but yes. No, I mean, before we're asking what will happen in the future, let me take you back. I'm sorry, I'm taking you back again on how insulins performs. So look, diabetes, as some of you guys have appreciated in the past, has been one of the therapies which is -- we are quite into it. And insulin is a very integral part of this therapy. And when you see unit growth, while what you're saying is right, but when it comes to insulin, the data might not be all reflected because a lot of the usage happens in other places than the OPDs. So there's a little bit of a caveat there. But we believe that having a greenfield project and having a brand which is not a known brand, so insulin, the typical history of an insulin brand is the older, gets better because availability, the cold chain, the supply chain and the confidence of an HCP is very important. So therefore, even when we were launching Xglar and Xsulin, we were very clear that we will go slow. And this is what happens when we go slow. But when it comes to Basalog, especially, I think they have a lot of headroom. And now look at the data, the changeability data. It's actually called the [ biosane ]. So interchangeability data is something which is -- which no other Glargine has. So if everything goes well, this is the brand which will sell the most.

No. But my question is when the industry itself is declining in volume, so our growth will come from adding new patients, completely new patients, who were not getting insulin in the past or gaining market share from the incumbents?

See largely, Rahul, it is gaining market share, right? And at the same point of time, Glargine might not be used for the -- right, the initiations are far more than human insulin. So it is a combination of gaining market share and gaining new patients. So both put together, basically, will come down -- will come together.

[Operator Instructions]

Team, if we have no more questions, can we close the call?

Ma'am, we have a few questions. Give me a moment, please.

All right. We'll take them. Sure.

We have a question from -- give me a moment, Tushar Manudhane from Motilal Oswal Financial Services.

Just extending the Rahul's question. So effectively, what kind of volume growth are we expecting in this market for next 1 to 2 years?

So Tushar, we'd give us -- we will talk more about this when the quarter ends, and we'll also get our hands on the whole thing. It's just coming. So I would request you to wait for a while. Once we are done with this quarter, we'll come back.

And secondly, given the INR 80 crores is what you highlighted that, that can be outsourced to -- or let's say, that can be in-sourced to Swiss Parenterals, remaining will still remain with Biocon, right?

Yes, Krish.

Tushar, the remaining will be a combination of Biocon and third party. This is a layered conversation. It is very difficult to explain it in black and white because there are two components here. There is drug substance, and then there is drug substance to drug product. So as part of the supply agreement, we have a technology transfer arrangement with Biocon, whereby the DS to DP technology will be transferred to any location of Eris choice. So it is up to us to decide whether this will be Eris or whether this will be Swiss or any other location. So that is one level of manufacturing. And then there is a second layer, which is where will the DS come from. So for the foreseeable future, the DS will come from Biocon. And as I said earlier on the call, we also have a second source for the DS, which is MJ, which is a good thing to have. So it is that kind of an arrangement that we will play on.

So just effectively trying to understand the improvement in gross margin that can happen because of these changes.

Yes, Tushar. So we articulated earlier on the call that we see insulin's gross margin at around 70% levels in the next couple of quarters itself, right? So that is going to be a combination of all these arrangements. And as far as the critical care margins are concerned, we spoke about a gross margin expansion from 20% to 50% as soon as we bring most of it in-house.

Got it. So at least that much improvement in profitability is very much given and then whatever rationalization of people force and all that will further improve the profitability. Is that the right...

There's no rationalization, Tushar. We don't need to do any rationalization. We guided you to an EBITDA. So this acquired business has an EBITDA of around INR 70 crores in FY '24. And we are talking about an EBITDA of INR 100 crores, INR 110 crores next year. This is something that will come by margin expansion. We don't need to do any rationalization. In fact, Amit appraised the group that we are actually doubling the inflows of critical care.

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

Thank you all for your participation in this call. We're very excited. We're very excited about the 2 deals that we have put together in the last 2 months. We believe that this is the start of something big and exciting, and we are all charged up and motivated. We have a clearer line of sight for INR 3,000 crores of revenue next year, with similar kind of margins and then that base organically growing to reach INR 5,000 crores in the next 3 years. We are committed to deleveraging the balance sheet. We are looking at a debt-to-EBITDA of less than 2x by the end of FY '25 on a 1-year forward level. So with that note, thank you all for your support, and we look forward to your continued support. Have a good evening.

Thank you. Thank you, guys. Thank you so much.

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.