investor presentation sep2011

8/3/2019 Investor Presentation Sep2011

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Dr. Reddys Investor Presentation

September 2011


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Safe Harbor StatementThis presentation contains forward-looking statements and information that involve risks, uncertainties andassumptions. Forward-looking statements are all statements that concernplans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are other than statements of historical fact, including, but not limited to, those that are identifiedby the use of words such as anticipates, believes, estimates, expects, intends, plans, predicts,projects and similar expressions. Risks and uncertainties that could affect us include, without limitation:

General economic and business conditions in India;The ability to successfully implement our strategy, our research and development efforts, growth andexpansion plans and technological changes;

Changes in the value of the Rupee and other currency changes;

Changes in the Indian and international interest rates;

Allocations of funds by the Government;

Changes in laws and regulations that apply to our customers, suppliers, and the pharmaceutical industry;

Increasing competition in and the conditions of our customers, suppliers and the pharmaceutical industry; and

Changes in political conditions in India.Should one or more of such risks and uncertainties materialize, or should any underlying assumption proveincorrect, actual outcomes may vary materially from those indicated in the applicable forward-lookingstatements. Any forward-looking statement or information contained in this presentation speaks only as of thedate of the statement.We are not required to update any such statement or information to either reflect events or circumstances thatoccur after the date the statement or information is made or to account for unanticipated events. 1


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Company Overview

Looking Back / Looking Forward

Business Updates

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Purpose :

Providing affordable and innovative medicines for healthier lives.

Strategy:

Leverage industry-leading science & technology, product offering and

customer service with execution excellence.

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Overview

Integrated business model spanning 3 segments generics, active pharmaceutical ingredients &custom services , and proprietary products.

Strong vertically integrated portfolio of businesses, geographies & products.

Amongst the largest Indian pharmaceutical companies Revenues of U.S. $1.7 bn in FY2011with a CAGR of ~ 21% over the last decade

4

Global Generics

FY11 Revenue mix 71 % of total

Finished dosage businesses in

distribution-driven as well as doctor-driven markets

Strategic focus on key largemarkets North America,India, Russia / CIS, Europe

Pharmaceutical Services& Active Ingredients

FY11 Revenue mix 26% of total

Amongst the leaders in supply of generic APIs globally

Customers include genericmanufacturers, innovator companies

Proprietary Products

Focus on building sustainable andprofitable branded innovativebusiness

Efforts in new drugdiscovery, differentiated formulations& biosimilars


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1,510

1 2501,365

1,5631,677

Revenues [USD Mn]

Built the foundations for a strong business. Moved up the value chain. Strengthened capabilities.

Achieved scale and global presence. Acquired to aid growth.

The Last Decade

234338

380 463 447546

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11

Germany & MexicoacquisitionsAuthorized genericlaunches

All figures converted at respective years USD to INR convenience translation rate. 5


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Minimizing Business risk Diversified ModelDiversity in product service offering & geographic mix

GlobalGenerics

PSAI

Generics : North America // Germany // Rest of Europe

Branded Generics : India // Russia & CIS // OtherEmerging Markets // GSK Alliance

Active Ingredients

Pharmaceutical Services

6

ProprietaryProducts

Others

Dr. Reddys

Specialty/Differentiated Formulations

Biologics

Aurigene


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Our Strengths

Industry leading chemistry skills which have resulted in several niche product

opportunities in API & Generics; Early mover advantage in biosimilars

High vertical integration (majority of APIs sourced internally) , global leader in DMF filings

(495 global DMFs as of Jun 2011)

Critical mass of base business in key growing markets

(India, Russia & CIS, North America, Europe)

Maximizing value opportunities through large partnerships (GSK Alliance) and

successful history of monetizing IP

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Infrastructure

Investing for future : 18 bn finished dosage units in FY11 expanding to 25+ bn units

Current Infrastructure

API Manufacturing : India 6, UK 1, [All USFDA approved], Mexico 1

Finished Dosages : India 6 [2 USFDA approved]

Manufacturing US 2 [USFDA approved]

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Biologics Facility : India 1 [audited by multiple regulatory agencies]

Custom Pharma : 3 Technology Development Centers [2 in India & 1 in Cambridge, UK]

Services

R&D Centers : Integrated Product Development Organisation [IPDO] in Hyderabad, India

NCE R&D center in Hyderabad, India

Aurigene R&D center in Bangalore, India


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Company Overview

Business Updates

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Recap Efforts in the last few years (1/3)

Building depth & focus in key markets

Reaching critical mass NAG > $400 mn; Russia/CIS & India > $250 mn

Building Tier II markets CIS, Venezuela, South Africa & other EM

Turn-around of Germany

Restructured beta harm field force & ersonnel

Maximized vertical integration of portfolio

Improvement in financial ratios

Improved mix of products to gain higher margins

Scale Leverage: Controlled SG&A growth below sales growth

Capped risky R&D

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Geography Nature Rationale

M a r k e t s

Emerging Markets(Brazil, Mexico, Turkey, etc) GSK Alliance EM play

Japan Joint venture with Fuji Film Japan generics

US Generic Shreveport facility Bristol penicillin facility Manufacturing Penicillin assets

Bridging capability gaps & setting businesses towards growth

Recap Efforts in the last few years (3/3)

Russia JB Chemicals Rx portfolio In-licensing deals Merck / Cipla

Rx portfolio OTC portfolio

US Specialty Cloderm brand

R & D

Generics Chirotech facility First set of Limited Competition products

(tacrolimus, lansoprazole, fondaparinux, etc)

Proprietary chiral andbiocatalysis technology

Annuity of exclusivity

Biosimilars First generic launches in India (rituximab,darbepoetin alfa & pegylated GCSF) Building pipeline

Proprietary Products Progress of terbinafine into Phase III Building pipeline12


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FY13 Aspirations

Create compelling value for customers

by leveraging IP, technology and costleadership

Improve depth in key markets through

portfolio expansion and supply chainexcellence

Calibrate investments to create a self sustainable

model

Partner of Choice Leadership position

Viable Proprietary Products

Global GenericsPharmaceutical Services &Active Ingredients Proprietary Products

in key markets business

Revenues$3 bn

RoCE25%

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Addressing future growth through multiple levers

Upto FY13

FY13 to FY17

Momentum in US driven

Beyond FY17

Strong base business in

US (large base of limitedcompetition products)

Continued traction in

Scale-up in North America

Generics backed by new

launches

Strong growth in EM

(Russia, India & Other

EM)

API lock-ins for key

products

opportunities

Steady growth across

Emerging Markets

Scale-up of GSK Alliance

Emerging Markets scale-

up in biosimilars

Traction of biosimilars in

Regulated Markets

Commercialization of

Proprietary Products

pipeline

Scale-up in Japan

generics business

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Company Overview

Business Updates

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Recent Updates

Launch of fondaparinux & fexofenadine pseudoephedrine D24 in the US

Settlement of Lipitor (atorvastatin) ANDA litigation with Pfizer

Foray into Japan generics market through joint venture with Fuji Film

Import alert at Mexico facility

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FY06 FY07 FY08 FY09 FY10 FY11

37

123

199

275 301

417

Revenue ($ Mn)Excluding upside revenues

Global Generics North America Generics

Portfolio

Products spanning Rx, OTC, Antibiotics, MultipleDosage Forms, etc.

11 new launches in FY11; 9 in Q1 FY12

27 Rx products ranked Top 3 in market share

Generic Market Share of Key Rx Products :Key Rx Products IMS June 10 IMS June 11

Tacrolimus 2% 28%

All figures converted at respective periods average translation rate

Revenues $400 mn $156 mn $54 mn

Q4 FY10 Q1 FY11 Q2 FY11 Q3 FY11 Q4 FY11 Q1 FY12

77

8595

106131 129

Demonstrated strong sequential revenue growth

Lansoprazole - 14%

Omeprazole (Rx) 6% 16%

Amlo benazapril 7% 17%

Finasteride 11% 15%

Pipeline76 pending ANDAs (13 tentative approvals)

36 Para IVs of which 11 FTFs

21 ANDA filings FY11; 3 in Q1 FY12

($ Mn)

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North America: Growing annuity of opportunities

Opportunities Product Name FY12 FY13 FY14 FY15

Olanzapine 20 mgRosiglitazoneZiprasidoneClopidogrel 300 mg(Product A)(Product B)

RivastigmineDesloratadine (5 mg, ODT & Pseudoephedrine)

180 daysExclusivity

?

18

og azone

Finasteride 1 mgEsomeprazole MgMemantine HCl

FondaparinuxFexofenadine+Pseudophedrine OTC (180 mg /240 m

Lansoprazole OTCQuetiapine IR(Product C)(Product D)(Product E)(Product F)

= Anticipated Fiscal Year of Launch, subject to Regulatory, IP and Commercial Factors

Settlements

LimitedCompetition /

ComplexGenerics


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Global Generics Emerging Markets


131153

181 190228

262Revenue ($ Mn)India

Portfolio of > 200 brands

Oncology portfolio ~ 10 % of overall biz

Biosimilars ~ 50% of Onco portfolio

48 new launches in FY11; 12 in Q1 FY12

15%20%5%19%17%YoY gr

All figures converted at respective periods average translation rate

All figures converted at constant translation rate

RussiaRobust & consistent outperformance

Market Rank 13 th ; Our secondary salesgrowth of 17% Vs market growth of 7%

Top 4 brands ranked #1 in market shares

OTC portfolio ~ 30% of overall bizFY06 FY07 FY08 FY09 FY10 FY11

60

79101

126

152196Revenue ($ Mn)

29%21%25%27%31% YoY gr

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Global Generics Europe


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172179 183 144

140

Revenue ( Mn)Germany

Strong cost control measures

Commenced supplies to AOK tenders

Launch of new products outside the scope of tenders

Rest of Europe

UK, Romania and Italy markets

All figures converted at respective years average translation rate

Active ingredients Visibility of newlaunches, new customer lock-ins andimproving order book status

Pipeline

56 DMF filings in FY11; 9 in Q1 FY12

Cumulatively 495 DMFs (174 USDMFs)


216

408 413 408430 431

Revenue ($ Mn)

armaceut ca erv ces ct ve ngre ents

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Proprietary Products: Biologics

Portfolio (Emerging Markets) :Filgrastim Marketed in 7 countries ; Pending approvals in 3 countries

Rituximab Marketed in 6 countries ; Pending approvals in 8 countries

Darbepoetin Alfa Marketed in 1 countryPeg-filgrastim Launched in 1 country

Pipeline :

Seven other products in Early Development & pre-Clinical testing stage

Capacities :

Bacterial : 10 litres production bio-reactor

Mammalian : 7 x 200 litres production bio-reactors

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Dr. Reddys has sold approximately 1.4 million units of its biosimilar products

which has treated approximately 97,000 patients across 12 countries


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Proprietary Products: DifferentiatedFormulations and NCE Research & Development

Hybrid Differentiated Formulations/NCE Strategy anchored around :

Specialty indications with feasibility to self-commercialize

Higher conversion from preclinical-to-clinic

Enabled by core capabilities :

Enabling alliances in areas of alternative drug delivery (intranasals, injectables)

Resulting (from FY 2012 onwards) in an annual output of 3-5 quality clinical candidatesin/from :

High value differentiated formulations programs (US/EU-targeted) inpain, hospital, dermatology

Complementary NCE pipeline focusing on same indications

GSK Differentiated Formulations alliance

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Thank YouFor any information please contact Investor Relations Cell :Kedar Upadhye at [email protected] / +91 40 66834297Raghavender R at [email protected] / +91 40 49002135

Milan Kalawadia (USA) at [email protected] / +1 9082034931


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Q1 FY12 Performance

$97 mn

22% to sales $444 mn

Revenue EBITDA*

39 new launches

31 generics filings

& 9 DMFs

$56 mn

13% to sales

Launches& FilingsPAT*

24*Adjusted for a) interest on bonus debentures of ` 12 Cr; b) a one-time charge of ` 14 Cr on account of VRS; c) tax normalized to annual tax rate


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Key Balance Sheet Items

Cash & Cash Equivalents

Net Operating Working Capital

Property, plant & equipment

Jun 2011 Mar 2011

123 128

585 565

685 665

$ mn

Goodwill & Intangibles

Loans & borrowings (current & non current)

Equity & Reserves

335 342

537 529

1,097 1,031

o Net Debt Equity ratio as of March 11 0.38

o Capital expenditure for Q1 FY12 $41 mn

o

Current Cash flow hedge options of ~ $410 mn [range of Rs 45 to 47] All figures converted in USD at convenience translation rate as of Mar 11 25

investor presentation sep2011

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