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Morepen Labs to spin off medical devices unit into separate entity
Industry News- Oct 08,24
The move aims to unlock value and enhance focus on this segment.
New Delhi-based Morepen Laboratories, known for its glucometers and blood pressure monitors, plans to separate its rapidly growing medical devices business into a standalone unlisted subsidiary within the next 12-24 months. The move aims to unlock value and enhance focus on this segment.
Sushil Suri, Chairman and Managing Director, Morepen Laboratories, highlighted the division’s strong performance, with its turnover nearing Rs 5 billion. He expects the medical devices business to grow at 25-28% annually, outpacing the 15-20% growth projected for the company’s active pharmaceutical ingredient (API) and formulations segments. "The medical devices sector, especially glucometers, offers significant growth opportunities," Suri noted.
Morepen Labs reported a turnover of Rs 17 biillion last year, with Rs 4.5 billion contributed by the medical devices unit and Rs 12.5 billion by APIs, formulations, and its over-the-counter consumer health business. In Q1 FY25, medical devices accounted for 30% of total revenue, and Suri expects this to increase to 35-40% over the next five years.
Suri believes a separate entity will not only unlock value but also provide clearer investor insights. Morepen Labs’ stock has surged 61.5% year-to-date, reaching Rs 78.7 on the BSE.
In August, Morepen successfully raised Rs 2 billion through a Qualified Institutional Placement (QIP), attracting global investors like Bank of America Securities Europe, Samsung India, Citigroup, Société Générale, Nomura, BNP Paribas, Morgan Stanley, and Eminence. Part of the funds will be allocated for capacity expansion: Rs 750 million for APIs and Rs 4.5 million for medical devices, alongside investments in backward integration.
Currently, nearly 80% of the medical devices revenue comes from glucometer sales. Morepen is set to expand its production from 2.5 million to 5 million glucometers annually by FY26 and from 500 million to 700 million test strips in the same period. The company also plans to venture into regulated markets like the US by FY27, leveraging its strong compliance record with the USFDA in the pharmaceutical sector.
Morepen is investing in research and development to introduce a more affordable continuous glucose monitor, targeting a cost of Rs 1,000 per month, compared to the current rate of Rs 1,000 per day. The company already has 12 million glucometers in circulation, with an average of 150 strips sold per device annually. Suri estimates a total of 35 million glucometers in the Indian market, with a potential reach of up to 100 million diabetic patients.
This year, Morepen aims to sell 3 million glucometers and 450 million strips, up from 2.4 million devices and 360 million strips sold last year. The company holds a 30% market share, competing primarily with Roche, which has another 10-12 million devices in circulation.
Morepen is also strengthening its manufacturing base, focusing on backward integration to reduce dependency on imports. The company is currently sourcing printed circuit boards (PCBs) from Korea while producing other components in-house. It is collaborating with firms in Panchkula and southern India to localise PCB production and is working with a Korean partner to manufacture strips domestically.
The company has secured 60 acres of land in Baddi, Himachal Pradesh, to support its expansion plans and aims to have its backward integration processes in advanced stages by the next fiscal year.
(Business Standard)
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