dr. reddys-annualreport2011

8/3/2019 DR. Reddys-annualreport2011

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L I F E . R E S E A R C H . H O P E

DR

.RE

DDY

SLAB

ORATO

RIESLIMITEDANNUALREPORT2010

11


2/220


3/220

Chairmans

Letter

Board of

direCtors

iGaaP standaLone

finanCiaLs

Key

hiGhLiGhts

manaGement

CounCiL

iGaaP ConsoLidated

finanCiaLs

our

PurPose

CorPorate

GovernanCe

extraCt of audited

ifrs ConsoLidated

finanCiaLs

human

resourCes

additionaL

sharehoLders

information

statement

Pursuant to

seCtion 212 of the

ComPanies aCt, 1956

safety, heaLth

and environment

five years

at a GLanCe

information on

the finanCiaLs

of suBsidiary

ComPanies

CorPorate soCiaLresPonsiBiLity

ratioanaLysis

notiCe of annuaLGeneraL meetinG

manaGement

disCussion

and anaLysis

direCtors

rePort

Contents

2 48 91

4 52 151

6 54 205

20 70 208

24 80 209

28 81 210

34 82


4/2202 D R . R E D D Y S L A B O R A T O R I E S L T D | C h a i r m a n ' s L et t e r

chara eer

dearshareholders > 2010-11 has been a very good

year or your Company. Here are the key consolidated

fnancial results.

Consolidated revenue or 2010-11 grew by 6% to

`74,693 millions, or US$ 1.7 billion. In the ten years between

2000-01 and 2010-11, your Companys revenue has been rising

at a CAGR o 21%.

Your Companys EBITDA in 2010-11 was`16,789 millions,

which was higher than the previous years EBITDA o

`15,828 millions.

Proft ater tax at`11,040 millions in 2010-11 was also

signifcantly greater than what it was in the previous year.

The year has seen several notable developments,

o which our give me great satisaction. I want to

share these with you.The rst is your Companys rapid presence

in biosimilars. Let me briefy explain what are

biosimilars. Cloning o human genetic material

coupled with the development o in vitro biological

production systems has allowed the production o

most recombinant DNA based biological substances

or eventually developing tailor-made and targeted

medicines.

Recombinant therapeutic proteins are complex

in nature and are made in living cells such as

bacteria, yeast, or animal and human cell lines.

The most well known recombinant drug is

insulin, used or treating diabetes. The ascinatingaspect o any biologic a drug containing a

recombinant therapeutic protein is that it is

largely determined by the process o production,

namely the choice o the cell type, the development

o genetically modied cell or production, the

production and purication processes, and how it is

eventually ormulated into a drug. It is a wonderul

combination o science and art. Biosimilars are

ocially approved versions o innovator biologics

that have come o patent. Unlike the more

commonly manuactured small-molecule drugs,

biologics exhibit much higher molecular complexity,

and are quite sensitive to manuacturing processchanges. A biosimilar manuacturer neither has

access to the originators molecular clone and the

original cell bank; nor to the exact ermentation

and purication process and the active drug

substance. Thus, biosimilars involve the art o de-

constructing how the innovator made the product

and, having done so, how to create the similar

through dierent non-patent inringing methods.

Biosimilars are, thereore, not just dicult to

engineer and produce, but are also very important

in meeting lie threatening therapeutic needs. Not

surprisingly, these are extremely valuable products.

I am proud that your Company has made itsmark in biosimilars, three years ago by launching

the rst MAB biosimilar in the world. Reditux,

the biosimilar o rituximab used in the treatment

o certain lymphomas, leukemia and rheumatoid

arthritis, has been a great success. In 2010-11, it

grew by 75% over the previous year and ranks

among your Companys Top Five brands in India.

This year, Dr. Reddys launched Cresp in India,

the rst generic darbepoetin ala in the world or

treating nephrology and oncology indications.


5/220

Your Company also launched Peg-graeelTM, an

aordable orm o peglgrastim, which is used to

stimulate the bone marrow to ght inection in

patients undergoing chemotherapy. Your Company

has sold some 1.4 million units o its biosimilars,

which have treated almost 97,000 patients across

12 countries.

Second, I am happy with the robustness o your

Companys revenues. I believe that it has nowreached a stage in its evolution where it can predict

a steady growth o baseline revenue, and enjoy the

upsides o periodically successul Para IV rst-

to-le launches in the USA either with 180-days

exclusivity or as an authorized generic supplier to

the innovator. With many innovator drugs getting

o patent in the years to come, I hope that your

Company will be able to leverage as many upsides

as possible. Indications are that it should.

Third, I am delighted to see research and

development (R&D) spends increasingnot just

absolutely but as a share o revenue. It shows up

in the success o biosimilars. In 2010-11, your

Companys investments in R&D grew by 33% to

`5,060 millions. This represents 7% o overall

sales, versus 5% in the previous year. We led 21

abbreviated new drug applications (ANDAs) in

2010-11, taking the cumulative total to 179 ANDA(including partnered ANDAs). O these, 38 are

Para-IV lings, and among these 10 are in the

category o rst to le. We have also led 56 drug

master les (DMFs) in 2010-11; our cumulative

record is 486 DMFs, which makes us one o the

global leaders in this category.

My ourth source o satisaction is your

Companys strategic partnership with

GlaxoSmithKline Plc (GSK) which I had touched

upon last year. Dr. Reddys is developing and

marketing key products or GSK across emerging

markets outside India. The products will be

manuactured by your Company, and will be

licensed and supplied to GSK in Latin America,

Arica, the Middle East, and Asia Pacic. In addition

your Company has acquired GSKs penicillin acility

in Tennessee, USA, which will allow it to enter the

US penicillin-based anti-bacterial market segment.

At Dr. Reddys, we must never orget our basic

aim. It is to provide aordable and innovative

medicines or healthier lives. We can do this i we

orever excel in our aspects o our business:

~ Excellence in science, intellectual property and

R&D, because these constitute the DNA o any

pharmaceutical enterprise worth the name.

~ Excellence in anticipating what patients need

where and how and being able to provideaordable variants o such medicine more oten

than not.

~ Excellence in processes quality,

manuacturing, logistics, supply chain, marketing,

customer relations and saety to be the rst to

occupy pharmaceutical bridgeheads in various parts

o the world.

~ Excellence in nancial and operating discipline,

because at the end we can never be accountable to

our patients by losing sight o our shareholders.

I am confdent that your Company has all these

attributes. Some exist in large measure. Others are

being scaled up. When they all fre together,Dr. Reddys will be a difcult act to beat. We represent

an idea whose time has come. And we will deliver.

Thank you or your support.

As always, with warm regards,

DR. K ANJI REDDY

Chairman


6/2204 D R . R E D D Y S L A B O R A T O R I E S L T D | K e y i n a n C i a L h i G h L i G h t s

3%CIS

1916

2011

36%North

America18,996

16%Europe

8,431

17%Russia8,942

22%India11,690

6%Others3,365

3%CIS1,916

2010

4%CIS1,887

34%North

America16,817

20%Europe

9,638

15%Russia

7,232

21%India10,158

6%Others2,874

2010 2011

FINANCIAL HIGHLIGHTS

Cl r

Consolidated revenues increased by 6% to

`74,693 millions, or US$ 1.7 billion in 2010-11

rom`70,277 millions in 2009-10.

eBitda

EBITDA increased by 6% to`16,789 millions in

2010-11 rom`15,828 millions in 2009-10.

P a t

Net prot o`11,040 millions in 2010-11 as

against`1,068 millions in 2009-10.

ll dl eg p s

Fully diluted earnings per share increased to

`64.95 in 2010-11 rom`6.30 in 2009-10.

anda us

Dr. Reddys led 21 ANDAs in 2010-11. As o

31 March 2011, the Company has 179 cumulative

ANDAs (including partnered ANDAs). The

companys North America generics pipeline

comprises 76 ANDAs pending with the USFDA as

o 31 March 2011. O these, 38 are Para-IV lings

with 10 in the category o rst to le.

dmThe Company led 56 DMFs in 2010-11. O

these, 19 were led in US, seven in Europe and

30 in other countries. As on 31 March 2011, the

Company had cumulative lings o 486 DMFs.

Pp Pc

As on 31 March 2011, Dr. Reddys had 27

products in the pipeline, o which seven are in

clinical development. These R&D products are a

CONSOLIDATED REVENUEin `millions

GLOBAL GENERICS REVENUESGEoGRAPHiCAl miX, in`millions

70,277

74,693

Key FinancialHighlights2010-11


7/2205 A N N U A L R E P O R T 2 0 1 0 1 1 | L i e . re s e arCh. ho P e.

2011

13%India

2,619

36%Europe7,020

16%NorthAmerica3,170

16%NorthAmerica3170

35%Others6,839

2010

13%India

2,646

33%Europe6,652

18%NorthAmerica3,673

36%Others7,433

20112010

mix o New Chemical Entities (NCEs) and novel

Dierentiated Formulations (DFs).

BUSINESS pErFormANCE

Globl Geec

Global Generics grew by 10% to`53,340 in

2010-11 rom`48,606 in 2009-10.

Revenues rom North America increased by13% to`18,996 millions in 2010-11 rom

`16,817 millions 2009-10. Signicant portion

o this growth was led by the companys

presence in products with limited competition.

Eleven new products were launched in US in

2010-11, o which ve products experienced

limited competition which includes amlodipine

benazepril, tacrolimus, lansoprazole, zarlukast

and exoenadine pseudoephedrine.

Revenues in India grew by 15% to`11,690

millions in 2010-11 rom`10,158 millions in

2009-10. Growth driven by volume growth o

11%, new product led growth o 4%.

Revenues rom Russia and CIS countries grew by

19% to`10,858 millions rom`9,119 millions

in 2009-10.

Revenues rom Europe decreased by 13% to

`8,431 millions in 2010-11 rom`9,638

millions in 2009-10.

reveue fom Phmceutcl sevce d

actve igedet (Psai)

Revenues de-grew by 4% to`19,648 millions

in 2010-11 rom`20,404 millions in 2009-10.

International revenues accounted or 87% o PSAI

revenues.

ANDA ILINGS IN ThE

UNITED STATES O AmERICA

DmsGEoGRAPHiCAl miX

PSAI REVENUESGEoGRAPHiCAl miX, in`millions

NonPara IV

6

NonPara IV13

Para IV6

Para IV8

2011

201019 USA

19 USA

9 Others

30 Other

8 Europe

7 Europe



S. Lakshmi Narasimha Murthy is a happy man

today. But he wasnt always as happy. Since

2000, when Narasimha got diagnosed with

diabetes, it was like living lie on the edge. In

2005, he got a stent implanted in his heart,

ollowed by another in 2006. In 2007, he was

put on medication or high creatine levels.When he got his third stent in January 2010,

his creatine levels became unmanageable; he

was diagnosed with Chronic Kidney Disorder

(CKD) and had to be put on dialysis.

Due to ill health, in July 2010 Narasimha took

voluntary retirement. His li e began to revolve

around our-hour sessions o dialysis twice a

week, and a monthly visit to the cardiologist

and nephrologist. Weakness set in; even

walking became an ordeal. A man o limited

means, he ound it extremely dicult to pay

or eight erythropoetin injections a month,

costing around`10,000 the dealers price.

Added to that was the cost o dialysis

`1,200 per session. It was hard to sustain

good health and well being.

In July 2010, Narasimhas nephrologistintroduced him to Cresp. As against

erythropoetin, Cresp had to be taken

only twice a month and immediately cut his

monthly expenditure by over`7,000. He

was also given a couple o injections, ree

o cost, under Dr. Reddys Sparsh program.

Narasimhas body also responded well to the

change and his lie began to return to near

normalcy. Today, Narasimha can aord to

eel better and even drive by himsel to the

dialysis center on his scooter.

pATIENT | S LAKSHmI NArASImHA mUrTHY | HYDErABAD | INDIA

Cresp is a wonderul

medicine. It has

helped me get back a

semblance o normalcy

to my lie. The best

part is that it is within

my reach.

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G V PRASAD

Vice-Chairman & CEO

Yes, it is a question o aordability.



over 12 millionsnew cancer cases are

detected and 7.6 millions cancer deaths

occur worldwide every year. 70% o those

happen in developing countries like India (IARC

Globocan 2002 data). According to the India

Pharma 2015 report by McKinsey & Company,

there is a long-awaited need o connecting

Oncologists and General Practitioners (GP).

ICON is extremely grateul

to Dr. Reddys or giving

an unrestricted educational

grant which has enabledPromOTE India to expand

across India over the last

three and a hal years.

It has helped doctors in

delivering better cancer

care to patients across the

country.

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DoCTor | D r pUrVI SH pArI KH | Co N VEN o r | I N D I A N Co - o pErAT I VE o N Co Lo



Dr. Parikh, Ph.D. and MBA, has served as proessor

and head o Medical Oncology at Tata Memorial

Hospital, Mumbai or 17 years. Also an expert in

hematology, he is ounder o Indian Co-operative

Oncology Network (ICON), a NGO that promotes

awareness about cancer in India.

Dr. Parikhs ICON, in association with Dr. Reddys

Foundation or Health Education (DRFHE), has

come up with a novel initiative called PromOTE

(Promotion o Oncology Training and Education).

PromOTE aims to change the cancer landscape

in India by promoting awareness, early detection,

diagnosis and prolonging the lie o the cancer

victims. It tries to empower proessionals like GPs

and other non-oncology doctors to enable early

detection o cancer.

So ar, over 110 programs have been conducted

across India by PromOTE involving more than 100

oncologists as aculty members. About 11,000

healthcare proessionals have benetted rom

this program and have learnt about the modern

advances in cancer care with which more than hal

o the cancer cases can be cured.

N ETWo rK ( I Co N ) | mUmBA I | I N D I A


12/22010 D R . R E D D Y S L A B O R A T O R I E S L T D | K e y i n a n Ci a L h i G h L i G h t s

In 1992, armedwithan mba degree rom

Osmania University, Hyderabad, and his eyes

rmly set on working in the eld o Interna-

tional Marketing, a young man gate crashed into

Dr. Reddys oce one day. By then, Dr. Reddys

interest in internationalizing its business was in the

news, and the young man knew that this was his

best chance to live his dream. This is M V Ramana.

I can never orget the

excitement and pressure

I elt rom the moment

I got an internationalassignment. I was allowed

to explore unamiliar

territory. Dr. Reddys

trusted and empowered

me. It makes me behave

like an owner and not an

employee.

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EmpLoYEE | m V rA mA N A | SEN I o r Vp A N D HEA D o F EmErG I N G mA rKET


13/22011 A N N U A L R E P O R T 2 0 1 0 1 1 | L i e . r e s e a r Ch . h o P e.

Ramana accepted the oer Dr. Reddys made to

him, although it was only 50% o what a global

FMCG major had already oered to pay him. But

the rest, as they say, is history. He landed himsel a

job as a Management Trainee. Joining Dr. Reddys

gave him a sense o deep ownership along with

responsibility and a desire to excel. This paved

the way or Ramanas stellar growth within the

company.

Today, he is Senior Vice-President and Head

o Emerging Markets. His 19-year tenure is a

testament o the encouragement the company

provides to anyone with passion and a drive to do

something big or the organization. A major part

o Dr. Reddys international expansion has come

rom the Companys ability to spot raw talent and

give them opportunities.

Starting with support roles in API and ormulation

marketing, Ramana went on to play larger and

more important roles. He set up Dr. Reddys

operations in various countries South East Asia,

Arica, Middle East and Latin America China and

Russia being his most notable achievements. In his

role as the Head o Russia & CIS countries, Ramana

guided the business, growing it by over ve times

within six years.

D r. rED D Y S | mo SCo W | rUSS I A



Yogitaramesh, at rst sight, appears

to be an ordinary girl. But she isnt. She

possesses extraordinary will power and

courage; she is also an alumnus o LABS. Today,

she works as a pre-seller with Coca-Cola India,

and unlike many other girls o her upbringing, she

draws an impressive monthly salary o`15,000.

Lie is looking up or Yogita and her amily.

My alma mater always

advised me to continue my

studies along with my job. It

has transormed my lie.

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CorporATE SoCIAL rESpoNSIBILITY | Yo G I TA rA mESH BHA LErA o | ULHA SN A



But it wasnt always as easy as that. Yogitas

childhood was a challenging one. Ater passing

her Class 12 examinations, she got engaged. But

her anc subsequently called o their marriage.

At the same time, her ather who was the primary

bread winner o the amily, ell ill. Yogitas mother

did not have a choice she had to step out to earn

money to support the amily.

Yogita started accompanying her mother to work,

who worked as a domestic help. She had to

do her bit to help her mother make ends meet.

Together, they earned`3,000 per month. As

Yogita says, she did not have a choice she took

ull responsibility or her school-going siblings and

her parents. It was around this time that Yogitas

riends told her about LABS Dr. Reddys fagship

program on livelihood and skilling.

Yogita enrolled hersel in the Customer Relations

and Sales domain. On successul completion o

the program, she got placed in Coca-Cola as a

Market Developer with a starting salary o

`7,000 per month. At LABS, Yogita understood

the importance o education. Yogita was so

inspired that she has decided to help her siblings

study urther and now she aspires to get an MBA

degree.

mA HA rA SHTrA | I N D I A

Picture taken at a departental store



mita agarwalis a Director o Priyam

Agencies Pvt. Ltd., a Carrying &

Forwarding (C&F) agent o Dr. Reddys.

But that is not what she had always wanted to

be. When Mita got married in 1984, lie was

perect or a while, especially with the birth o her

daughters. But her husbands sudden demise let

her with two young daughters, and a business she

knew very little about. Although her amily was

Being associated with

Dr. Reddys has helped

me turn my modest C&F

agency into a successul andproftable business.

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BUSINESS pArTNEr | mITA AGArWAL | DIrECT or | prIYAm AGENCIE S pVT.



unhappy with her decision to run her husbands

business, Mita decided to continue with it. She

started as a C&F agent at Patna, located in the

state o Bihar, India or American Remedies Ltd.

When Dr. Reddys acquired American Remedies

Ltd. in 2001, Mita was at the oreront. She

pitched to become the C&F agent in Kolkata,

West Bengal. Ater a lot o time and hard work,

most o which went into setting up her agency,

Mita started taking care o the entire state o

West Bengal. Meanwhile, Dr. Reddys rapid growth

resulted in increased business or her. What started

o as a 3,000 square oot warehouse then, has

today more than doubled in size! The business

that initially clocked sales o`70 lakhs per month

has now grown to over`6 crores per month.

As Mita looks back on her years o evolution as a

C&F agent, the support she received rom

Dr. Reddys is evident at every stage o her growth.

Personally too, she is a happy woman. She was

able to provide well or her daughters, and gave

them a ne education. Today, Mitas younger

daughter, who has an MBA degree, has joined her

in managing the business.

oLKATA | INDIA



From the momentyou step into Sangli a

small district town in western Maharashtra,

India, and ask or Gadgil, every one eagerly

points out in the direction o jewelry showrooms.

Prakash Shankar Gadgil, a jeweler by trade, is the

proud owner o a fourishing jewelry business. His

amily has been in the business since 1832, and

given his success at it, his two sons have chosen to

join him in the same proession.

Dr. Reddys manuactures

aordable medicines. It

also gives good returns to

its shareholders. Imaginesitting at home and making

money or nothing! All I

did was to buy the shares.

From then on, they went on

multiplying. I couldnt have

asked or more rom this

investment.

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INVESTor | prA KA SH SHA N KA r G A D G I L | SA N G LI | mA HA rA SHTrA | I N D I A



But, Prakash is more than just a businessman.

He is one o Dr. Reddys esteemed shareholders.

In 1986, when Prakash was evaluating his

investment options, he was introduced to

the stock market by a broker riend. Upon

recommendation he bought 600 shares o

Dr. Reddys at the rate o`55 per share. Those

were the rst shares he had ever bought in his lie.

Thereater, Prakashs story o nancial and business

success got directly linked to the regular dividends

and bonuses that his shares got him as they grew

rom the initial 600 to 21,600 in the last 25 odd

years. Not an active stock trader, he even thought

o selling o Dr. Reddys shares. But he decided

against it because o the good perormance o the

company, and the kind o returns it was giving to

its shareholders.

Prakash maintains that his rst investment in

Dr. Reddys shares has remained his best

investment till date. Today, he is happy to earn in

every possible way rom Dr. Reddys, be it good

health or good returns.



Startedin themid -1950s as a small

pharmacy called Santa Catarina in

the city o Santo Andre by Emiliano

Sanchez, EMS has now emerged as the largest

pharmaceutical company in Latin America.

EMS was the rst one to manuacture genericsor the Brazilian consumer and to prove the

reliability and saety o these drugs. Wilson

Zeerino Franco Filho is the Head o Business

Development at EMS a key customer o

Dr. Reddys Active Pharmaceutical Ingredient

(API) business or over 10 years. Today,

generics have changed the prole o the

Brazilian pharmaceutical market. The last

decade has seen a rise in the infuence o

Brazil, Russia, India & China (BRIC countries) in

the pharmaceutical sector. They have showed

continuous growth and have entered the radar

o many pharmaceutical giants. Brazil itsel

is experiencing the rise o generics and the

consolidations, steep quality and regulatory

requirements that go along with it.

According to Wilson, in such a scenario, the

role o API suppliers becomes very signicant.Dr. Reddys through its low-cost, high quality

manuacturing, strong chemistry, process

re-engineering and regulatory skills, provides a

solid oundation to sustain this kind o ervent

market growth.

Dr. Reddys has been a

valued API supplier to us

or a long time. It has a

solid structure that helpsin designing, developing,

producing and providing

unmatched assistance to API

customers worldwide.

CUSTomEr | WI LSo N ZEFErI N o FrA N Co F I LHo | EmS | Ho rTo LA N D I A | BrA Z

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22/22020 D R . R E D D Y S L A B O R A T O R I E S L T D | huma n re s o urCe s

During the year the organization took several steps

in integrating and aligning its people processes and

systems to ensure that it is not only able to meetthe current business growth but at the same time it

is prepared or the uture.

Hr moDEL

A new HR model was adopted which would largely

provide the guiding philosophy to the design

elements o people processes and systems. The

model has three elements:

~ Alignment o workorce to the overall purpose

o the organization and their respective business

units so that it brings long term value orthemselves and the organization.

~ Individual and team accountability, so that roles

and responsibilities are clear and there is clarity on

what is expected out o each, which in turn gets

regularly reinorced by reviews and consequence

management mechanisms.

~ Focus on ability and talent at all levels to help

employees nd their true calling in their respective

areas o interest and competence.

roLE BASED orGANIZATIoN

During the year we brought in the concept o role

based organization as part o our organization

renewal eort. The objective is to have a better

role-to-person t which will result in a more

engaged employee and a productive organization.

We examined the key HR processes such as

work level structure, manpower planning, talent

acquisition, perormance management, promotion,

leadership development and specialist tracks to

understand the gaps in each o them and makenecessary changes. We attempted to integrate all

these HR systems in a way that they can support

our growth journey and provide clarity to all

employees in terms o inter-linkages to all these

vital people, processes and systems.

In the ast-paced and competitive world o today, the

most signifcant dierentiating actor o business remains

unchanged: People. A highly engaged and motivated

employee-base along with adequate leadership, technical

knowledge and business skills remain the most attractive part

o an organization. At Dr. Reddys, we realize the importance o

both our people and their potential to contribute to the success

o our company. While our products, customers and innovation

will continue to be important enablers in stepping up the speed at

which we will grow, our people can be catalysts to our high growth

agenda.

harerce



LEADErSHIp & SCIENTIFIC CApABILITY

DEVELopmENT

As we continue to grow, and encourage our people

to make a dierence to the organization, we ensure

that we have invested appropriately in developing

them as the uture leaders o the organization.

In this regard, we have urther ne-tuned our

leadership competencies to make them relevant

and meet the leadership demands o the current

and uture. A set o six leadership competencies

were dened and incorporated into our leadership

model. The new leadership model was a result o

an extensive work o interviewing high perormers

across levels, understanding top management

perspectives and the organizations strategicpriorities.

The Annual Leadership Summit was held

between 14-17 July 2010 at Boston, USA around

the theme o Building Towering Competence

in Science and Technology. The top leaders o

the organization anchored by the CEO and COO

participated in this event.

Specic leadership skill programs have

been initiated to complement our leadership

development eorts.

The rst o the series on Strategic Negotiation

by Dr. David Lax and Pro. James Sebenius rom

the Harvard Business School, USA was attendedby over 45 senior leaders.

We also invited eminent personalities as part o

our Leaders Talk series Sir Chris Bonington,

one o the worlds most successul expedition

leaders, talked on Leadership in Adversities and

Dr. Indra Chowdhury, Historian and Scholar-in-

Residence at Srishti school o Art, Design and

Technology, Bangalore, India delivered a talk on

Inspirational Leadership.

Our leaders participated in the Senior Leaders

Program (SLP) as part o an industry consortium

o Wipro, Aditya Birla, Genpact, HDFC, Mahindra

& Mahindra and Colgate Palmolive. Dr. Reddys also partnered with MIT (Pro. Greg

Fus lab) or building capability in chemo-

catalysis.

National and international conerences in the

area o Drug Delivery, Drug Design and Quality by

Design were popular destination or scientists rom

R&D groups.

Womens Day Celebration at Dr. reDDys


24/22022 D R . R E D D Y S L A B O R A T O R I E S L T D | huma n re s o urCe s

TALENT ACqUISITIoN

Dr. Reddys global employee strength crossed

14,900 in 2010-11, o which over 2,400 were

based at our international locations. During the

year, around 4,100 new employees were hired,

including replacements. The highlights o the hiring

program were:

~ Critical talent was added in the areas o Saety

Health & Environment, Formulation Technology,

Development o Dierentiated Formulations,

Global Sales & Marketing, Project (Formulations),IPM Formulations, OTC Products, Strategy, Legal-

Patents, Quality, Corporate Development, Cell &

Molecular Biology.

~ India sales orce hires have contributed to

31% o the hiring while 43% o the hiring was

in manuacturing, quality, R&D and engineering

services.

~ We recruited 16 Management Trainees and

seven laterals rom prestigious B-Schools and about

119 technical trainees rom science, pharmaceutical

and engineering background which included a

number o IIT graduates as well.

~ There was a conscious eort at building

diversity in the workorce. We hired around 900

employees across international locations. We also

hired dierently-abled employees in various roles.

In FY11, almost 46% o the campus recruits were

women.

orGANIZATIoNAL HEALTH AND

EmpLoYEr BrANDING

During the year, we conducted Organizational

Climate Surveys to monitor the health o the

organization and more specically measure

employee engagement. We had commissioned

Gallup, a leading player in the area o employee

engagement. Over 10,000 employees participated

in the survey called The Beat.

a Workshop on organization Climate survey outComes



We also participated in an Organization Health

Index survey by McKinsey and Best Employer

surveys by Aon-Hewitt and The Great Places

to Work Institute. In all the above surveys the

strengths that came out consistently were our open

& trusting culture, entrepreneurship and creativity,

great place to socially connect-mutual respect and

trust, alignment with the overall purpose and pride,

and customer ocus. We are also addressing the

areas or improvement by instituting ocused cross

unctional teams.

During the year some o the external

recognitions which strengthened our EmployerBrand was:

We received the Aon Hewitt Best Employers

award and were ranked 13th Best Employer in

India across all industries.

We were recognized as the Best Pharmaceutical

Company to Work or by Business Today.

Our company was ranked the Best Company

to work or in the biotech / pharmaceutical

industry in India or the third consecutive year in

Indias Best Companies to Work For 2010 list

produced by Great Place to Work Institute in

association with The Economic Times.

partiCipants at the strategiC negotiation program helD at the Companys

leaDership aCaDemy

Our company was ranked

the Best Company

to work or in the

biotech / pharmaceutical

industry in India or the third

consecutive year in Indias

Best Companies to Work For

2010 list produced by GreatPlace to Work Institute in

association with The Economic

Times.


26/22024 D R . R E D D Y S L A B O R A T O R I E S L T D | s ae t y and he aLt h P e ro rmanCe

For us saety no longer is just a priority but a

business imperative. The year 2010-11 saw us

revisit many o our existing practices and lay downprocesses aimed at strengthening our SHE systems.

KEY HIGHLIGHTS

SAFETY AND HEALTH pErFormANCE

~ Cross-unit saety audits continued or the

second year across 16 manuacturing units with an

outcome o 425 recommendations which are being

tracked or closure.

~ Hazard identication and risk analysis were

completed or 276 manuacturing process stagesacross CTOs. A new guideline on SHE review or

FTO manuacturing processes was released during

the year. Key personnel were identied and trained

on the procedures that were applied or six new

process transers during FY11.

~ 2,155 internal training programs (equivalent

to 10,135 man days o training) on saety were

conducted. Apart rom these specialized external

training programs were also conducted on

industrial hygiene and process saety.

~ During the year, a Crisis Communication

workshop and various mock drills were conducted

to strengthen our ability to mitigate emergency

situations. A table top exercise simulating an osite

disaster to test our emergency preparedness was

conducted by the National Disaster Management

Authority (NDMA), the Medak District Collectorate,

Factory Inspectorate o Hyderabad Rural and other

authorities on a re and explosion scenario at one

o our units.

~ Saety toolbox talks were implemented or all

shop foor and construction personnel who areexposed to a majority o the risks. Saety toolbox

talks are less ormal, short saety meetings,

designed to reinorce saety inormation on a

particular topic and to oster sae behavior.

~ Occupational Health Surveillance was conducted

at the units. Quantitative exposure assessments

have also been done at various units during the

year to monitor industrial hygiene exposure levels.

Dr. Reddys today stands at the crossroads, poised or the

next wave o growth. Scaling up will increase challenges

in running our business. It will lead to more complex

business operations. With our growth ambition comes the need or

robust systems and processes backed by a secure and healthy work

environment that brings the best out o employees. At Dr. Reddys

we ully understand that impact o our saety and health practices

transcends our immediate workorce and aect their amily,

dependents and society.

aey adheah perrace



~ National Saety Day and Saety Week

celebrations were observed at all manuacturing

units and oces to mark the way our employees

and contractors rededicate and pledge to work in

saer ways.

~ Monthly saety campaigns were carried out on

themes like Contractor Saety, Static Electricity,

Emergency Management and Work PermitsSystem to bring awareness and increased ocus to

various improvement areas.

~ A behavioral saety program was initiated

across the units to identiy and gradually eliminate

repeated unsae behaviors in the work places.

More than 2,000 Behavioral Based Saety (BBS)

observations were identied, personnel counseled

and corrected ater the launch.

~ SHE review or capital projects was carried out

or seven new process acilities. The objective o this

review mechanism is to establish an eective plant

saety concept and environmental discharge control

strategy during the early design phase o a project,

and ensure those broader concepts are considered

in the engineering design and implemented.

~ Improving the saety perormance at our

strategic Business Partners manuacturing acilities

has been a key agenda during the year. Various

initiatives taken in this regard were:

Statutory compliance tracking online.

SHE audits.

314 man days o SHE training on various topics

like static electricity, general saety awareness,

emergency mock drills, etc.

Facilitated mock drills to test their emergency

management capabilities.

ENVIroNmENTAL mANAGEmENT AND

SUSTAINABILITY

~ FTO 3 has entered into an agreement with

M/s. Honeywell to carry out energy audits

which will translate into reduction o grid power

consumption and carbon ootprint.

~ CTO SEZ project Environment Clearance was

obtained rom Ministry o Environment and Forests

and Consent or Establishment obtained rom

Andhra Pradesh Pollution control Board.

~ Solvent Recovery System using carbon

adsorption system commissioned at FTO 3 or

coating machines to recover Methylene dichloride

(MDC) and Isopropyl alcohol (IPA) to eliminate

ugitive emissions o MDC and IPA.

~ Zero Liquid Discharge (ZLD) Plant at FTO 3

commissioned last year is working at desired

eciency.

~ 3,500 MT o organic residue was disposed as

auxiliary uel to cement plants, which is a 100%

increase over last years alternate disposal. Rest o

the waste was sent to Treatment Storage Disposal

Facility (TSDF).

g v prasaD, viCe-Chairman anD Ceo inaugurating the national safety Day

aCtivitiesA Green Ratingsystem or companies

across India was

launched under the leadership

o G V Prasad, Vice-Chairman

and CEO, Dr. Reddys and

Chairman o the CII Green

Rating System. Two o

Dr. Reddys units will be taking

the pilot implementation in

the coming year.


28/22026 D R . R E D D Y S L A B O R A T O R I E S L T D | s ae t y and he aLt h P e ro rmanCe

~ Environment license compliance audits

carried out in 14 manuacturing sites, with audit

observations tracked or closure.

~ Continuous Ambient Air Quality Station and

Stack Monitoring Analyzer installed at CTO 6 or

better monitoring o ambient air quality.

~Pilot studies regarding Membrane Bio Reactorsis being carried out at ZLD o CTO 2 to improve the

quality o the treated waste water.

~ At CTO 1 the coal red boiler was modied and

converted to use bagasse briquette as uel and the

same is being considered or Clean Development

Mechanism (CDM project registration at United

Nations Framework Convention on Climate Change

(UNFCCC)).

~ At our CTO SEZ in Vizag, India, a bagasse

red boiler is under installation, which is being

considered or CDM project registration at

UNFCCC. Prior inormation regarding the same is

already given to UNFCCC.

~ 67 energy conservation measures initiated

during the year resulting in annual saving o

2.0 million kWh.

~ Our FTO 7 unit was certied or ISO 14001 EMS

management system. With this three FTO units and

our Biologics center have been certied under EMS

management system

~ A green rating system or companies across

India was launched under the leadership oG V Prasad, Vice-Chairman and CEO, Dr. Reddys,

and Chairman o the CII Green Rating System.

Two o Dr. Reddys units will be taking the pilot

implementation the coming year.

As a recognized global pharmaceutical enterprise,

Dr. Reddys places great importance to product,

process and plant saety. Despite excellent saety

standards, the Company had two incidents in

2010-11 at its acilities, which led to the loss o

human lives. In December 2010, there were two

atalities due to accidental asphyxiation at CTO-3;

and in March 2011, there were two atalities dueto a re in the hoist area at CTO-1. Dr. Reddys has

done thorough investigation o these unortunate

accidents, and has put in place corrective and

preventive actions to avoid their recurrence.

CommuniCation on an organization WiDe Wellness Campaign



At Dr. Reddys, saety is an important element

o our value systems. We strongly believe that a

sae and healthy work environment is essential in

running a business.

We have had one o the most challenging

year with respect to our saety practices. A ew

unortunate incidents have served as a stark

reminder o the necessity o investing greatertime and eort to embed saety deeply into our

operations, and to plan and execute our operations

responsibly. We are determined to learn rom the

incidents that occurred to prevent recurrence. It has

also helped us emerge much stronger.

Our leadership team has instituted suitable

review mechanisms to ensure that saety

perormance attains the highest standards. We are

evaluating various reputed external organizational

change management experts as strategic partners

or bringing in an organizational wide saety

transormation.

We believe our organizational perormance isdirectly linked to the good health and well being o

its employees. During the year, a ocused wellness

program backed by various activities was designed

to reinorce the importance o good health.

We are working at improving employee

behaviour towards saety. We want every person

at Dr. Reddys to believe that saety is core to our

work. We have reviewed our SHE management

systems and are repositioning strategy to mitigate

uture risks.

Saety perormance metrics today orm an

integral element o the business and Individualsperormance targets. For us at Dr. Reddys, saety is

non-negotiable and an integral part o the way we

run our business.

SATISH REDDY

Managing Director & COO

We are working at

improving employee

behaviour towards

saety. We want every person

at Dr. Reddys to believe that

saety is core to our work.


30/22028 D R . R E D D Y S L A B O R A T O R I E S L T D | Co rP o rat e s o CiaL re s P o ns iB iL i t y

India today is home to nearly one-sixth o

humanity and one o the astest growing

economies. Though it is on its way to economicprosperity, access to quality healthcare and good

living are a distant dream or many.

At Dr. Reddys, our endeavor is to contribute

to this cause in ways which we eel can really

address these challenges. We engage with the

community at two levels, one being in and around

our campuses with the active involvement o our

employees and the other where-in we channel our

wide network o social activities through Dr. Reddys

Foundation (DRF) the social arm o Dr. Reddys

Laboratories.

Activity o DRF spans two broad areas o

social intervention: Livelihoods and Education.We are also building the necessary capabilities

and sot skills among medical support

proessionals, through Dr. Reddys Foundation

or Health Education (DRFHE) programmes

with an aim to strengthen the healthcare delivery

system.

LIVELIHooD ADVANCEmENT BUSINESS

SCHooL (LABS) & SKILLING rUrAL INDIA

(SrI)

LIVELIHooDS UpDATE

DRF through its Livelihood Advancement

Business School (LABS) addresses the needs

o disadvantaged youth constrained by low

income, inadequate skills, irregular employment

and absence o opportunities or training and

development. LABS oers short-term vocational

training courses in various demand-driven sectors.

The aspirants are also put through essential

lie skills, communicative english, and a Work

Readiness Module that helps them prepare theirresume, ace interviews and cope with workplace

responsibilities. At the end o the course, the

aspirants are also assisted in nding suitable entry-

level placements in their respective domains. With a

view to adapting the LABS model to the prevailing

socio-economic conditions o rural areas, DRF

initiated the Skilling Rural India (SRI) program.

A total o 25,403 livelihoods were generated

by LABS and SRI in 2010-11 through various

partnerships. (Reer: Partnership table). Andhra

Social responsibility at Dr. Reddys transcends cheque-

book charity. It is about enhancing healthcare, imparting

education, developing skills, providing opportunities, and

unlocking the doors o progress. We research community needs,

develop and pilot new projects, scale them up, and once proven,

collaborate with the government and various Non-Governmental

Organizations (NGOs) to roll them out.

crprae carepby



Pradesh in India accounted or 27.64% o the

total livelihoods generated ollowed by states oMaharashtra and Uttar Pradesh which accounts

or approximately 8.3% and 7.1% respectively.

78.2% o total youths trained were placed with an

average salary o`4,200. Since inception LABS has

generated over 232,000 livelihoods.

LABS pArTNErSHIpS INITIATED THIS

YEAr

Based on the experiences and results gained in the

pilot projects, DRF has been able to sign up or the

below sponsored projects:

~

acc: DRF has entered into a MoU withAccenture to create livelihoods or 2,250 aspirants

in the BPO domain across India.

~ Bht Petoleum Copoto Lmted (BPCL):

Two MoUs have been signed with BPCL at

Muzzaarpur (in the Indian state o Uttar Pradesh)

and Ranchi (in the Indian state o Bihar) to create

livelihoods or 300 and 250 aspirants respectively.

~ s G: A MoU has been signed between

Sesa Goa and DRFs SRI project.

~ nidhi: A MoU has been signed with Nidhi, a

non-prot organisation o Laarge India Pvt. Ltd. at

Himachal Pradesh, India or the SRI Project.

~ t Pw msd: DRF has signed a

tripartite MoU with Tata Projects and MSDF to

create 200 livelihoods at Mumbai.

~ a n K: DRF has also signed a MoU with

Hindustan Unilever Ltd. at Haridwar, India to create

75 livelihoods.

~ P w dbl (Pwd) Pjc: DRF

has signed a MoU with Wadhwani oundation to

create livelihoods or 150 aspirants with disabilities

at Ahmedabad and Chennai. DRF also signed a

MoU with Centre or PwD Livelihood (CPDL) and

Society or Elimination o Rural Poverty (SERP) in AP

to provide livelihoods to 100 aspirants with physica

disabilities.

Partnersip Table

Nae the Cate patneshi with Livelihds

Accenture LABS Accenture 97

WORLD VISION WORLD VISION 28

Total 125

Nae Gvenent Bdy patneshi with Livelihds

Grameen LABS MoRD, Government o India 5385

Skilling Rural India Laarge India Private LimitedDalmia Cements and ACCTata Power CompanyAshta No Kai

2984

EGMM IV EGMM, Government o AP 1269

EGMM V EGMM, Government o AP 56

MEPMA II MEPMA, Government o AP 2030

MEPMA III MEPMA, Government o AP 325

Corporation LABS Corporation o Chennai, Tamil Nadu 505

BPCL BPCL, Government o India 111

NABARD MoRD and NABARD 1310

SHG LABS WBSRDA, West Bengal 55

Total 14030

Nae Intenatinal NGos patneshi with Livelihds

Michael & Susan Dell Foundation (MSDF)LABS

MSDF 11248

Total 11248

Total Livelihoods Generated 25403

A total o 25,403livelihoods were

generated by LABS and SRI

in 2010-11 through various

partnerships.



ExpLorING NEW LIVELIHooD opTIoNS

~ Pg ckg c: As

part o a larger mandate DRF has signed a MoU

with International Organization or Migration (IOM)

to train victims o interstate human tracking. 23

inmates were trained in Bed Side Patient Assistance

domain along with Livelihoods at a rescue home in

Hyderabad, India.

~ mu w nl i ub

a (niua): A MoU was signed with NIUA to

develop curriculum and trainers. Handbooks along

with necessary teaching tools and assessments

in our domains customer relations and sales,

hospitality, ITeS and consumer durable technicians

were created. Over 60 employers in Delhi,

Chandigarh and Hyderabad rom these domains

were interviewed to seek inputs to develop the

content.

A pilot was conducted at Hyderabad in Food &

Beverage services or 16 aspirants. Out o the 16

aspirants 12 o them have been placed at leading

hotels in Hyderabad. This domain will be scaled up

to multiple centers across India.

NEW LABS CUrrICULUm

~ dc sl: A 60-day pilot program on direct

sales was conducted at Hyderabad which dealt

with various aspects o direct marketing and sales

o products. Out o 13 aspirants trained in the pilot

batch 12 o them were placed in organizations such

as Hindustan Unilever and Godrej.

~ BPo: DRF conducted a market scan with

the help o its acilitators and updated its BPO

curriculum to include non-voice / voice curriculum

to ensure that our aspirants have a larger pool o

employers to choose rom.

~ i tclg oc

a: DRF has started IT oce automation

programs which include MS Oce and internet

concepts. A pilot was conducted at Hyderabad. This

program was scaled up pan India.

~ i tclg tll: A new

domain was piloted in Barrackpore, West Bengal, to

cater to the growing demand o trained accounts

proessionals on Tally sotware. This domain imparts

basic computer knowledge, undamentals o

accounts, tally sotware etc and the aspirants are

placed in various companies.

~ il BPo: Inspired by the success

o the BPO domain which caters to the domestic

call center sector, DRF launched a new domain,

International BPO to cater to the growing demand

o International BPO markets.

a labs program at hyDerabaD, anDhra praDesh, inDia



EDUCATIoN UpDATE

~ Pudm neghbohood school: Pudami

schools address the rising demand or English

medium education rom marginalized / lower income

communities. The our schools in Hyderabad and

Ranga Reddy district, Andhra Pradesh have 120

teachers imparting education to a combined strength

o over 2,500 children drawn rom all sections.

~ P egl P: To make quality

English-medium education accessible to urban

children rom lower income groups, DRF set up 27

Pudami English Primaries in Hyderabad and Ranga

Reddy District, Andhra Pradesh where about 5500

students study.

~ y y Lg C: Community-

based adolescent youth learning centers established

in various urban slum areas around Hyderabad

help bring dropouts and working children into

the mainstream education system. These centers

help eligible students obtain ormal academic

certication, provide career counseling and job-

related training. Two Yuva Youth Learning Centers

were established in Hyderabad in 2010-11 with a

total strength o about 150 youth.

~ n-rl Bg C (nrBC)

rl Bg C (rBC): Bridge centre

are set up at construction sites to help provide

education to children o construction labours with

an aim o getting them into mainstream education.

In FY11, 31 non-residential bridge centres provided

education to over 800 students while two

residential bridge centres provided education to

over 100 students.

~ Kll aj r vl (Karv): The

Kallam Anji Reddy Vidyalaya at Hyderabad has

45 teachers providing education to about 1,200

students in both English and Telugu medium.

~ el Cl C & ec C

(eCCe): Early Childhood Care & Education (ECCE)

Center takes care o migrant children in the age

group o 0-5 years living on construction sites in

urban Hyderabad, India. 10 ECCE centers, unded

by the World Bank today support over 500 children

~ Jl h Gl B

hb: These juvenile homes house children

in three groups Juvenile delinquents in special

home, under-trials in observation home and

children who need care and protection in the

children home. A total o about 90 girls and 150

boys are housed in these homes.

stuDents at a yuva Center in hyDerabaD, anDhra praDes h, inDiaCommunity-based

adolescent youth

learning centers established

in various urban slum areas

around Hyderabad helpbring dropouts and working

children into the mainstream

education system.



Dr. rEDDYS FoUNDATIoN For HEALTH

EDUCATIoN (DrFHE)

DRFHE aims to create proessionals who would work

with the medical raternity to oer an integrated,multi-disciplinary approach to good health. The

programs also aim at building the necessary

sot skills with an objective o strengthening the

healthcare delivery system or better patient care.

DRFHE signifcantly scaled up its activities rom 383

programs in FY10 to 807 programs this year.

EDUCATIoN INITIATIVES

poST GrADUATE DIpLomA IN

HEALTHCArE mANAGEmENT

DRFHE is successully running its seventh batch o the

Post Graduate Diploma in Health Care Management(PGDHM) at Hyderabad. 17 students were enrolled

or the academic year 2010-11. A PGDHM-certifed

Patient Educator would be a combination o a

physicians assistant, patient counselor, health

educator and a physicians associate.

TrAINING INITIATIVES

~ inner CirCLe:Introduced in 2007 to impart sot

skill training to resident doctors, 41 Inner Circle

programs were conducted in FY11, beneting over

900 resident doctors.

~ aBhiLasha:It is a one-year program aimed at

helping nurses understand the true importance otheir work, showing them how they can perorm

their work more eectively, and boosting their

sel-condence and motivation. 415 programs were

conducted during FY11, beneting over 10,700

Nurses.

~ sarathi: It is a training program that enables a

doctors assistant to emerge as a sharper, smarter and

motivated individual. 60 programs were conducted

during FY11, benefting about 1,500 assistants.

~ sanJeevani:This program was introduced

in the year 2008 with an objective to ensure thatthe pharmacists develop empathy towards their

customers and improve various skills or eective

prescription dispensation. During FY11, 42 programs

were conducted benefting about 700 pharmacists.

pATIENT INITIATIVES

~ living well:DRFHE conceived this program

in 2008 in partnership with the ART OF LIVING

FOUNDATION, an international NGO, with an

stuDents at a puDami sChool in hyDerabaD, anDhra praDesh, inDiaPudami schools

address the demand or

English medium education

rom marginalized income

communities. Today, our

schools provide education to

over 2,500 children.



aim o helping people to reduce risk actors and

increase their resistance levels through awareness

and liestyle modication and to manage their

chronic condition through a sel management

support system. 10 Programs were conductedduring FY11 beneting about 200 patients.

~ liFe at YoUr doorsteP (laYd):Dr. Reddys

Oncology business in India and DRFHE launched

Lie at Your Doorstep in January 2008. This

Program ocuses on home care (related to Palliative

Care). It attempts to improve the quality o lie

orterminally ill patients with provision o access

to physical, psychological, emotional, social

and spiritual support in a culturally appropriate

manner. A well-equipped medical van with a team

consisting o a doctor, nurse and patient counselor

goes to the patients doorstep to provide the homecare service. DRFHE is also tying up with Dr. Reddys

Foundation through their LABS program to provide

livelihood to a member o a amily which has lost its

earning member to cancer.

During FY11, this service was also launched in

the Indian cities o Bangalore, Mumbai, Bhopal,

Jabalpur, Kolkata, Cochin and Coimbatore

beneting over 2,700 cancer patients.

NEW INITIATIVES

~ awareness For liFe:It is a program designed

or the beneft o employees in the corporate world

where interactive session by medical proessionals ondiseases take place. 107 programs were conducted

during FY11, benefting about 4,700 participants.

~ aastha:The objective o this program is toraise awareness levels o pain and palliative care

amongst doctors and nurses. It also talks about

end-o-lie care by encouraging and enabling an

open dialogue and service provision thereby hoping

to enhance the quality o lie o individuals acing

the last stages o lie. It is conducted in association

with the Indian Association or Palliative Care.

During FY11, Four programs were conducted

beneting about 160 participants.

~ disaster management:The program,conducted in association with AmeriCares India

Foundation and National Disaster Management

Authority is designed to introduce hospital sta to

the concept o disasters and disaster preparedness.

The workshop ocuses on response system and

communication capabilities giving hospitals an

opportunity to be prepared or such eventualities.

70 participants beneted rom the pilot program.

stuDents at a pgDhm Class in hyDerabaD, anDhra praDesh, inDia

The Aastha program is

conducted in association

with the Indian Association

or Palliative Care. DuringFY11, our programs were

conducted benefting about

160 participants.


36/22034 D R . R E D D Y S L A B O R A T O R I E S L T D | manaGe me nt d is Cus s io n and anaLy s is

In 2011, Dr. Reddys became the only Indian

pharmaceutical company to celebrate the 10th

anniversary o listing at the New York StockExchange.

The Company enjoys some key strengths which

are listed below:

Industry leading chemistry skills and development

processes which have resulted in monetizing

several niche product opportunities.

A high degree o vertical integration with most o

the APIs being sourced internally to manuacture

ormulations. This has not only helped in speed

to market but also kept Dr. Reddys generic and

ormulation products cost competitive. The

Company ranks amongst the global leaders in

Drug Master Filings (DMF), with 486 global DMFsas o 31 March 2011.

The Company enjoys critical business mass in key

markets such as North America, Russia and India.

Creates and leverages value opportunities

through strategic partnerships.

Has established a presence in biosimilars through

Reditux, Dr. Reddys brand o rituximab, the

worlds rst biosimilar monoclonal antibody,

as well as three additional products, Graeel,

Cresp and Peg-Graeel.

KEY FINANCIAL HIGHLIGHTS

As per nancial reporting standards prescribedunder the International Financial Reporting

Standards (IFRS):

The Companys consolidated revenue or

2010-11 grew by 6% to`74,693 millions

(US$ 1.7 billion). As C a shows, Dr. Reddys

revenue has been rising at a CAGR o 21% over

the last ten years.

Prot ater tax (PAT) or 2010-11 was`11,040

millions versus`1,068 millions in 2009-10.

KEY EVENTS

BUILDING STrATEGIC pArTNErSHIpS

In 2010-11, Dr. Reddys acquired

GlaxoSmithKlines (GSK) oral penicillin

manuacturing acility located in Tennessee,

USA. This allows the Company to enter the

US penicillin-containing antibacterial market

segment through brands such as Augmentin

and Amoxil, and serve the needs o customers

through manuacturing and other capabilities

that did not previously exist within Dr. Reddys.

overview> Incorporated in 1984, Dr. Reddys

Laboratories (Dr. Reddys or the Company) is a

global pharmaceutical company with ootprints over 25

countries. The Companys purpose is to provide aordable

and innovative medicines or healthier lives, which we do through:

Pharmaceutical Services and Active Ingredients (PSAI),

comprising Active Pharmaceutical Ingredients (API) and Custom

Pharmaceuticals Services (CPS).Global Generics (GG) businesses, which includes branded

and unbranded prescription and over-the-counter (OTC)

pharmaceutical products.

Proprietary Products (PP), comprising o biosimilars,

dierentiated ormulations and New Chemical Entities (NCEs).

aagee dcad aay

Note: Unless otherwise stated,fnancial data given in this

Management Discussion andAnalysis is based on the Companysconsolidated IFRS fnancial

statements



Promius Pharma, a subsidiary o Dr. Reddys,

collaborated with Valeant Pharma to market

Cloderm cream in the US market. Cloderm

is a well-tested product among dermatologists,

and is universally recognized or its saety prole

and unique non-sensitizing ormulation. It is used

or the relie o the infammatory and pruritic

maniestations o corticosteroid-responsive

dermatoses. This should bolster the PromiusPharmas eorts to build a successul prescription

branded ranchise in the US, and contribute

to the Companys goal to become a leader in

medical dermatology.

2010-11 saw an expansion o Over-the-counter

(OTC) and prescription portolio in Russia and

the Commonwealth o Independent States (CIS)

through various in-licensing deals with partners

or exclusive marketing rights. With strong

brands, increasing growth in the prescription,

OTC and hospital segments and the Companys

association with top tier distribution partners,

these deals should add to Dr. Reddys growth

ambitions in Russia and the CIS.

The Company entered into a settlement

with AstraZeneca in the US relating to the

Abbreviated New Drug Application (ANDA)

led or the generic versions o AstraZenecas

Nexium (esomeprazole). According to IMS,

Nexium is the second largest selling drug in US.

AstraZeneca has granted Dr. Reddys a license,

subject to regulatory approval, to launch generic

version o esomeprazole delayed-release capsules

in 2014, or earlier in certain circumstances.

The Company had entered the South Arican

market in 2003 through 60:40 Joint Venture (JV)

with a local partner, Calshel. During 2010-11,

the Company increased the stake in this JV to

100% ater acquiring the 40% stake o the

partner. South Arica is an important market and

the Company hopes to increase the presence

there, especially in the areas o the Central

Nervous System (CNS), oncology and womens

health.

BIoSImILArS: THE NExT WAVE oF

GroWTH

Dr. Reddys has sold approximately 1.4 million

units o biosimilar products and has treated

approximately 97,000 patients in 12 countries.

Launched three years ago, Reditux was the

rst and still the only biosimilar monoclona

antibody in the world. In 2010-11, Reditux

registered a growth o 75% over the previous

year and is now among the Companys Top Five

brands in India.

In 2010-11, Dr. Reddys launched Cresp in India

the rst biosimilar darbepoetin ala in the

world. This launch is a signicant achievement,

or it has again demonstrated the Companys

development capabilities in biosimilars. Cresp

oers patients with both nephrology and

oncology indications, an improved treatment

regimen at aordable prices.

In March 2011, the Company launched

Peg-graeelTM in India in the orm o an

aordable peglgrastim, which is used to

stimulate the bone marrow to produce more

neutrophils to ght inection in patients

undergoing chemotherapy. Peg-graeelTM

y 01 02 03 04 05 06 07 08 09 10 11

10, 97516, 498 18, 070

20,103 19, 519

24, 267

65, 095

50, 006

69, 441 70, 27774, 693

Germany and Mexico acquisitions

Authorised generic launches

c agr 21%

Dr. Reddys CAGR Consolidated Revenue Growt ro 2000-01 to 2010-11 `mi l l i on sChart

A

, 498

c agr

1%



represents a breakthrough in the pricing o this

complex molecule. It is priced at approximately

25% o the originator brand in India, and 95%

lower than the US price. This pricing has been

enabled by the Companys vertically integrated

global manuacturing network. Peg-graeel is

manuactured using Dr. Reddys PEGtech brand

o activated mPEGs, which are synthesized at the

Companys acility in Mexico and the UK.

FoCUS oN r&D

Investments in R&D in 2010-11 grew by 33% to

`5,060 millions. This represents 7% o overall

sales, compared to 5% in 2009-10.

Dr. Reddys has led 21 ANDAs in 2010-11.

As o 31 March 2011, the Company has 179

cumulative ANDAs (including partnered ANDAs).

The Companys North America generics pipeline

comprises 76 ANDAs pending with the USFDA

as o 31 March 2011. O these, 38 are Para-IV

lings with 10 in the category o rst to le. The

value o rst to le represents approximately

US$ 3 billion o innovator sales.

The Company has led 56 DMFs in 2010-11

which includes 19 DMFs in the US, 7 in Europe,

and 30 in the rest o the world. As o 31 March

2011, Dr. Reddys has led 486 cumulative DMFs,

and is among the global leaders in DMF lings.

roBUST GroWTH IN EmErGING mArKETS

In 2010-11, Dr. Reddys continued to outperorm

the Russian market by reporting a growth o

24% versus a market growth o 7.5% (Source:

Pharmexpert). The Company is ranked 15th inRussia.

The branded ormulation business in India

continues to be one o the key markets or the

Company. In 2010-11, Dr. Reddys expanded the

eld orce by approximately 500 people to widen

the reach with doctors, and reported a growth o

15% in line with the market.

Dr. Reddys grew in other emerging markets as

well by 12% over the previous year. The major

countries include Ukraine, Venezuela, South

Arica and New Zealand.

CoNTINUED GroWTH IN NorTH AmErICA

GENErICS

In the US prescription market, 25 o Dr. Reddys

products eatured among the top three ranks

in terms o market share (Source: IMS Sales

Volumes, March 2011).

The Companys presence in the OTC segment

yielded good returns, with key products such as

ranitidine and omeprazole magnesium growing

well. Within three years o commencement,

Dr. Reddys OTC business in North America

generics is worth approximately US$ 60 millions.

In 2010-11, North America generics showed

a revenue growth o 13% over previous year.

Signicant portion o this growth was led by the

Companys presence in products with limited

competition.

11 new products were launched in the North

America generics market in 2010-11. O these,ve experienced limited competition. These were:

amlodipine benazepril, tacrolimus, lansoprazole,

zarlukast and exoenadine pseudoephedrine

180 / 240 mg.

pHArmACEUTICAL mArKET TrENDS

Note: Global market inormation reerred to

in this and subsequent sections are based on

latest available reports rom IMS Health Inc., and

Datamonitor.

According to IMS Health, the global pharmaceutical

market value is expected to be around $880 billion

in 2011, exhibiting a growth o 5% to 7%. This

growth is expected to be about one percentage

point higher than in 2010, and will be largely

driven by stronger overall contribution rom

emerging countries. In the regulated markets,

products with more than US$ 30 billion o sales are

expected to ace generic competition, including

iconic brands such as Lipitor, Plavix, and

Zyprexa.

KEY GLoBAL TrENDS

~ icg pc gcz. On

average, brands in the US the most mature oall generics markets experienced the greatest

degree o volume erosion ollowing patent expiry

and exposure to direct generic competition.

Between 2006 and 2009, brand sales declined by

72% ater six months o generic competition. Ater

the US, brand erosion was the most severe in the

UK, Germany, and France, with mean sales erosion

in the region o 44% ater six months o generic

competition. Brand erosion in Australia, Italy,

Russia, Spain, and Japan ranged rom 54% (in Italy)

to 6% (in Japan) in terms o value, ater two years

o generic competition.

~ K gw cg

lc p p. A number

o actors have and will continue to eect

pharmaceutical sales and prots going orward.

Ageing populations, the growing prevalence

o chronic disease, greater use o expensive

treatments, and expanding public healthcare

coverage in markets such as the US are stretching

existing healthcare resources. Both public and

private payers across the world are pursuing a

11 new products were

launched in the North America

generics market in 2010-11.

O these, fve experienced

limited competition. These

were: amlodipine benazepril,

tacrolimus, lansoprazole,

zafrlukast and exoenadinepseudoephedrine 180 / 240 mg.



wave o budgetary control mechanisms that target

drug spending. For countries with publicly unded

healthcare, this is being implemented in the context

o restoring scal balance. Further, during 2010-15,

branded pharmaceutical is set to lose approximately

US$ 108 billion in sales due to patent clis and

the resultant generic erosion o branded sales.

However, the industry is implementing a number

o strategies to drive sales and protability goingorward: product innovation, diversication, and

cost-containment. It is dicult to estimate how

these will play out over time.

~ Glbl k bl pc

b 15 c z

. The global biosimilars market is

expected to grow rom US$ 243 millions in 2010 to

US$ 3.7 billion in 2015. This will be driven by patent

expirations o more than 30 biologic medicines,

with sales o US$ 51 billion in the next ve years.

~ rp Cns Ccl

tpc . CNS is the largest

therapeutic area across major markets ollowed by

cardiovascular drugs. However, these have become

increasingly saturated with me-too drugs, and are

suering rapid erosion rom generic competitors

ollowing patent expiry o key brands.

~ mblc, clg, g

lg f

wll pc g l gw

as these have between 2005 and 2009. The

growth is being driven by continued uptake o

novel biologic drugs. For the top 50 pharmaceutica

companies, sales across these three therapy areas

are orecasted to grow by 5.4%, 5.8% and 4.1%

CAGR during the period 2010-2015.

~ sgc w bkg

z. In 2011, the introduction and use

o new drugs a third o which are specialty

pharmaceutical products are poised to ulll

unmet patient needs and signicantly alter

treatment paradigms in several key therapeutic

areas. These include innovative treatment options

or stroke prevention, melanoma, multiple sclerosis,

breast cancer and hepatitis C. As these new drugs

are brought to market, patient access is expected

to expand and unding redirected rom other areas

where lower-cost generics are available. In total,

30 to 35 new chemical or biological entities are

expected to be launched globally in 2011.

Dr. reDDys CelebrateD 10 years of listing on the nyse on 15 april 2011



KEY rEGIoNAL TrENDS

rEGULATED mArKET TrENDS

~ ip us k gw.In2011, the US market is expected to grow between

3% and 5% translating to a market value o

US$ 320 to US$ 330 billion up slightly rom

the growth in 2010.

~ Pk p p j

p gc.In 2011, products withsales o more than US$ 30 billion are expected to

ace the prospect o generic competition in the

major developed markets. In the US alone, Lipitor,

Plavix, Zyprexa and Levaquin which

together accounted or more than 93 millions

prescriptions dispensed in the past 12 months and

generated over US$ 17 billion in sales will likely

lose market exclusivity. The ull impact o patients

shiting to lower-cost generic alternatives or these

products, as well as out o other brands in their

therapeutic classes, will be mostly elt in 2012.

~ us lc w us

P kg cl

p blgc . Branded

biologics in the US are eligible to receive our years

data exclusivity and 12 years market exclusivity.

However, this is currently under debate in the US

House o Representatives. In February 2011, the

US President announced that he wishes to shorten

market exclusivity rom 12 years to seven. I it were

to pass, it will signicantly reduce the timescale or

biosimilars to enter the US market.

~ G bcg c k. Historically, Germanys

generics market has been highly branded. But

new wide ranging reorms in Germany have put

the negotiating power rmly in the hands o the

countrys sick unds. This has resulted in auctioning

o generics and in making the sales and marketing

orces obsolete, with price playing the most

important actor.

EmErGING mArKET TrENDS

~ Pgg c cb

l l l gw.The 17 Pharmerging1

countries are orecast to grow at a 15% to 17% in

2011, to somewhere between US$ 170 and

US$ 180 billion. Many o these are expected

to benet rom greater government spending

on healthcare and broader public and private

1 Pharmerging countries includes China, Brazil, Russia,

India, Mexico, Turkey, Venezuela, Poland, Argentina,

Thailand, Romania, Indonesia, S. Arica, Egypt,

Ukraine, Pakistan and Vietnam.

healthcare unding, thus driving greater demand

and access to medicines.

~ C gw pc r

G l p.The genericsindustry in Russia is complex and ragmented, and

dominated by a small number o international

generics manuacturers. These companies enjoy

preerential uptake driven thanks to their perceivedsuperiority in terms o saety and ecacy vis--vis

domestically manuactured generics. In Russia,

investment in healthcare is considered a long term

national priority as a means o reducing mortality

rates and increasing lie expectancy. Government

health expenditures per capita reached US$ 590 in

2010 compared to around US$ 360 in 2005. Their

continued growth is anticipated: estimates rom the

Federal Ministry o Health and Social Development

suggest US$ 1,400 in 2017, rising to US$ 1,800 by

2020.

~ ac pc g c

i. The Indian pharmaceutical

market has seen a CAGR o about 15% in the last

ve years. The domestic industry grew by 15%

in March 2011(MAT) versus 18% in March 2010.

Acute therapy dominates, with a share o 73%

o the total market value. The chronic segment

has registered a CAGR o 18%. Anti-diabetics

grew by 24%, cardiovascular by 16%, CNS and

gastro-intestinal grew 17%, anti-inectives by 14%,

respiratory by 10% and dermatology by 15%.

Dr. rEDDYS mArKET pErFormANCE

rEVENUES

The Companys consolidated revenues increased

by 6% to`74,693 millions (US$ 1.7 billion) in

2010-11. Revenues rom Global Generics increased

by 10% while PSAI revenues decreased by 4%.

In 2010-11, Dr. Reddys share o revenue rom

the international businesses stood at 81%. The

remaining 19% came rom India. North America

(US and Canada) contributed to 31% o total

revenues in 2010-11, versus 30% last year. Europe

accounted or 21% o total sales in 2010-11,

compared to 24% in 2009-10. Russia and other

CIS countries contributed to 15% o total revenues.

C B plots the data.tbl 1 gives Dr. Reddys consolidated nancial

perormance by businesses under IFRS.

GLoBAL GENErICS

Global Generics revenues were at`53,340 millions

in 2010-11, versus`48,606 millions in 2009-10.

C C gives the geographic distribution.

Dr. Reddys ConsolidatedRevenue and Sare omarkets

Chart

B

21%

31%

Europe

14%ROW

North America

RCIS

15%

India

19%

2010-11

24%

Europe

15%

ROW

30%

North America

RCIS

13%

India

18%

2009-10



NorTH AmErICA

Over the previous year, revenues rom North

America increased by 13% to`18,996 millions in

2010-11. Signicant portion o this growth was

led by the Companys presence in products with

limited competition. As mentioned earlier, 11 new

products were launched in US in 2010-11, o which

ve experienced limited competition. These were

amlodipine benazepril, tacrolimus, lansoprazole,

zarlukast and exoenadine-pseudoephedrine.Dr. Reddys launched exoenadine-

pseudoephedrine on 31 January 2011 ater the

District Court o New Jersey lited the preliminary

injunction granted to Sano-Aventis.

The Company has led 21 ANDAs in

2010-11. As o 31 March 2011, the Company

has 179 cumulative ANDAs (including partnered

ANDAs). Dr. Reddys North America generics

pipeline comprises 76 ANDAs pending with the

USFDA. O these 38 are Para-IV lings, with 10 in

the category o rst to le.

INDIARevenues rom India grew by 15% to`11,690

millions in 2010-11driven by volume growth o

11% and new products led growth o 4%. During

the year, Dr. Reddys launched new products under

55 new brands including two biosimilarsCresp

and Peg-Graeel.

Dr. Reddys Top-10 brands accounted or

revenues o`4,317 millions (37% o India

ormulations revenue). Some o the details are:

Omez and Omez DR, the Companys brands

o omeprazole, grew by 15%. Omez now

accounts or 53% market

dr. reddys-annualreport2011

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