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Torrent Pharma: Curatio acquisition focused on derma branded portfolio

ICICIdirect Research 28 Sep 2022 DISCLAIMER

What's Buzzing? 

Torrent Pharma has acquired 100% of Curatio Healthcare for Rs 2000 crore with a strong presence in the cosmetic/paediatric dermatology segment, with a portfolio of over 50 brands (79% chronic/sub-chronic), marketed in India. 

Context 

Curatio's revenues has grown at a CAGR of 13% over FY20-22 to Rs 224 crore and is expected to grow 23% in FY23 to Rs 275 crore. Top three and 10 brands contribute ~50% and 75% of the total sales, respectively. Dermatology accounts for 95% of Curatio’s revenues. Within dermatology, cosmetic dermatology is a leading contributor with 84% share while other 16% is from medical derma. The deal propels Torrent Pharma to top 10 players in the dermatology segment and leadership in the cosmetic dermatology space. 

Our Perspective 

Torrent's acquisition of Curatio is valued at 8.4x and 6.9x FY22 and FY23E EV/sales, respectively. Over the last decade, cosmetic dermatology as a therapy has delivered 18% CAGR, which is 1.6x of the IPM CAGR. Cosmetic dermatology is a more specialist focus business with 62% dermatologist contribution in total Rx, which matches with Torrent's current DNA and makes this acquired portfolio a right strategic fit. Curatio’s FY22 EBITDA was Rs 60 crore and margins were ~27%, which is expected to inch up due to better operating leverage from Torrent’s focused approach on Curatio’s 600 MRs. Overall, with limited overlap (~10%) and gap filling in dermatology, we expect the acquired portfolio to be growth focused while EBITDA margins at the group level are expected to remain steady. This acquisition, which is a third of its kind (domestic branded formulations) since 2013, epitomises Torrent's quest for capital deployment in a highly remunerative/low risk business segments.

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