Dr.Reddys_Investor_Presentation_June2010

8/7/2019 Dr.Reddys_Investor_Presentation_June2010

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Dr. Reddys Laboratories LtdInvestor Presentation, June 2010


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Safe Harbor Statement

This 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 otherstatements 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 that

occur after the date the statement or information is made or to account for unanticipated events.1


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Overview

Global Generics

P armaceutica Services an Active Ingre ients

Proprietary Products

Looking Ahead

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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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Global pharmaceutical company focused on active pharmaceutical ingredients

& custom services, generics and proprietary products.

Amongst the largest Indian pharmaceutical companies Revenues of U.S.

Overview

$1.56 bn in FY2010 with a CAGR of ~ 25% over the last decade. Proportion of

international (ex-India) revenues at 40% in FY2000 moved up to 82% in FY2010.

Strong vertically integrated portfolio of businesses, geographies & products.

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1,510

1,250

1,3651,563Revenues [USD Mn]

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

capabilities. Achieved scale and global presence. Growth aided by acquisitions.

The Last Decade

183234

338380

463 447

546

FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

Germany & Mexicoacquisitions

Authorized genericlaunches

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


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Integrated Business Model

Pharmaceutical

Services & ActiveIngredients

FY10 Revenue mix 1/3rd

Global Generics FY10 Revenue mix 2/3rd

of total

ProprietaryProducts

Focus on buildingsustainable and profitable

Amongst the leaders insupply of generic APIsglobally

Customers include

genericmanufacturers, innovatorcompanies

businesses indistribution-driven as wellas doctor-driven markets

Strategic focus on keylarge markets North

America, India, Russia /CIS, Germany

business

Efforts in new drugdiscovery, differentiatedformulations & biosimilars

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Our Strengths

Industry leading chemistry skills which has resulted in several niche product

opportunities (eg: fondaparinux, fexofenadine-pseudoephedrine, omeprazole mg)

High vertical integration (~75% of APIs sourced internally), global leader in DMF filings

(375 global DMFs as at March 2010)

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

Emerging biosimilars play

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API manufacturing : India 6, Mexico 1, UK 1. All US FDA approved.

Finished Dosages : India 6 out of which 2 USFDA approved

manufacturing US 1 approved by US USFDA

Biologics Facility : India - 1, audited by multiple regulatory agencies

Infrastructure

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

R&D Centers : State-of-the-art Integrated Product Development

Organisation [IPDO] Facility & NCE facility in Hyderabad, IndiaAurigene facility in Bangalore, India

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Key Performance Highlights

Focus on identified markets in Global Generics led to a strong base business

performance in FY 10. Growth well-diversified across key markets of North

America, India and Russia.

Leading EBITDA generating player in India pharma (adjusted EBITDA of $ 356 mn in

FY10, 23% to revenue) reflects the benefit of scale & operating leverage.

Recent launches of fluoxetine 90 mg, amlodipine benazepril and tacrolimus in US

generics market.

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FY10 Performance

$356 mn

23% to sales $1.56 bn

Revenue AdjustedEBITDA

10

103 launches

121 generics

filings, 36 DMFs

$208 mn

13% to sales

Launches& Filings

AdjustedPAT

Adjustments to EBITDA and PAT pertain to one-time charges for impairment and restructuring costs.


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Key Balance Sheet Items

Cash & Cash Equivalents

Inventory & Receivables

Property, plant & equipment

Mar 2010 Mar 2009

146 124

563 619

500 465

$ mn

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Goodwill & Intangibles

Loans & borrowings (current & non current)

Equity & Reserves

311 493

327 438

955 935

o Net Debt Equity ratio of 0.19 [Mar-10] vs 0.34 [Mar-09]

o Capital expenditure for FY10 ~ $ 92 mn

o Cash flow hedge options of ~ $410 million hedged in the range of 45 to 49


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Business Priorities

Create compelling valuefor customers by

leveraging IP, technology

Improve depth in keymarkets through portfolio

expansion and supply

Calibrate investments tocreate a self sustainable

model

Global GenericsPharmaceutical

Services & ActiveIngredients

ProprietaryProducts

and cost leadership chain excellence

Partner of Choice Leadership positionin key markets

Viable ProprietaryProducts business

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Financial Goals FY13

RoCERoCE

25%25%

$3$3 bnbn

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Dr. Reddys Overview

Global Generics

Pharmaceutical Services and Active Ingredients


Looking Ahead

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GlobalGenerics

GenericsBrandedGenerics

Global GenericsGeographically well diversified with mix of generics and branded generics

NorthAmerica

Germany UK India Russia GSKAllianceCIS,Venezuela,Romania & ANZ

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Key Priorities:

Deepening market presence

Differentiated product portfolio

Supply chain excellence


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FY06 FY07 FY08 FY09 FY10

37

109

199

272301

Revenue ($ Mn), Excluding

upside revenues

Global Generics: North America

Product Pipeline : ANDAs

Cumulative 158

Pending approvals 73

Para IVs 38

FTFs 12

Upside revenuesexcluded in the

graph

FY07 $413 mn

FY09 $149 mn

FY10 $53 mn

Ranked #10 with Rx market share of 2.1% in US (Source: IMS Health)

o Amongst the Top 3 market shares in 8 of 17 Rx new products launched in last 24 months

Portfolio of ~ 45 products, critical mass established

o 22 productsTop 3 positions

o 3/4th of portfolio vertically integrated

History of successful monetization of pipeline and settlements(fluoxetine, simvastatin, finasteride, ondansetron, sumatriptan, amlodipine benazepril & others)

OTC business gaining significant traction with launch of Omeprazole Mg

Louisiana facility: for capacity and platform for Rx/OTC/Government business

Note : All figures converted at the respective years average USD to INR rates

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Opportunities Product Name FY09 FY10 FY11 FY12 FY13 FY14 FY15

Assured 180 daysExclusivity

Product A X

Product B X

Product C X

Settlements

Sumatriptan X

Rivastigmine X

Desloratadine(5mg / ODT / Pseudoephedrine)

X

North America: Growing annuity of opportunities

/ Go early

Finasteride 1 mg X

Amlodipine Benazepril X

Fenofibrate Capsule (43 / 130 mg) Launch date not disclosed

Limited Competition/ Difficult to make

Omeprazole Mg OTC X

Tacrolimus X

Fondaparinux X

Fexofenadine Pseudoephedrine X

Product D X

Product E X

17Above list mentions only select of our limited competition opportunities


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133155

179 189

226Revenue ($ Mn)

Global Generics: India

Note : Nos are converted at constant translation rate

Top Brands Mkt. Rank

Omez 1Nise 1

Stamlo 1

Stamlo Beta 2

Omez-D 1

Razo 1

Mintop 1

Top Therapeutic Areas

Gastrointestinal (Rank #2)

Cardiovascular

Pain

Oncology (Rank #2)

Paedia

Anti-Infective

Diabetology

Dermatology

Dental (Rank #2)

Secondary sales trend : Dr. Reddys growth of 23% vs. industry growth of 18%. MarketShare 2.2% (ORG IMS MAT March 2010)

Strengths :

o Strong brand equity with doctors

o Ability to establish new brands despite late launches in the market (Leon, Telsartan, Pecef)

o Emerging leadership presence in niche areas

Strengthening product portfolio with the introduction of differentiated & niche products(biosimilars like Reditux, differentiated formulations like fentanyl patch, niche products like Strea range of aesthetic products)

o FY 2010 : Launched 62 new products (~ 5% of sales) (Launch History: FY08 20; FY09 36)

Tapping the underpenetrated rural markets through introduction of contractual field force18


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FY07 FY08 FY09 FY10

138 144 151

109

Revenue (Euro Mn)

Global Generics: Germany

3 years back

Branded market & influence of

doctor equity

Intangibles/Goodwill ~ 450 mn

Increasing influence ofhealthcare insurance

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Betapharm 5th largest in volumesamong generic companies

Business model aligning to competeprofitably

betapharms current contribution to Dr.Reddys consolidated revenues lessthan 10%

Currently

Tender based market with generic

pricing

Intangibles/Goodwill ~ 90 mn

compan es & ten er

driven market


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Measures initiated to remaincompetitive in Germany

Vertical integration to be taken up to 50 -60% by value of our portfolio by end of

FY11

Significant restructuring of the manpower

SG&A aligned to a tender based model

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85 4

2

8 7

8

15

54 4

1213

AOK - 1 BKK TK IKK BKK DAK - 2 KKH

Number of Tenders Won

Non Vert. Int.

Germany : Our Strategy

Judicious Product Selection

Product diversification by focusing on therapies which have a limited play in the tender

market

Focus on entry into products with difficult formulation process

Emphasis on timely entry of IP driven products

Product portfolio to improve the OTC business in the next financial year

K

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Strategic alliance with GSK for Emerging Markets

Branded Generics & Differentiated Formulations

o Strategic alliance will combine Dr. Reddys portfolio of high quality branded pharmaceuticals and

GSKs extensive sales and marketing capabilities

o The products will be manufactured by Dr. Reddys, licensed and supplied to GSK

o Revenues will be reported by GSK and will be shared with Dr. Reddys as per agreed terms

What does this mean for Dr. Reddys ?

o Significant opportunity to leverage wide presence of GSK in several emerging markets with minimal

investments

Latest Update

o Initial shipments made to Mexico in Q4 FY2010. The next set of shipments expected to be made to

Brazil shortly. Till date, more than 50 dossier filings made in various markets under this alliance.

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Dr. Reddys Overview

Global Generics

armaceu ca erv ces an c ve ngre en s


Looking Ahead

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216

407 413 404 430

Revenue ($ Mn)

Pharmaceutical Services & Active Ingredients

Note : All figures converted at the respective years average USD to INR translation rates

Customers include top generic manufacturers & innovatorso Amongst the leaders globally in generic APIs

o Pipeline coverage of 6080% of patent expiries in the next fewyears in the US

75% of current API requirement for Global Generics sourced

internally

Custom business model transitioning well to manufacturingservices from pipeline services. Two pronged strategy of :

o Product Service

o Technology leveraged manufacturing services

(Chiral technology, Steroids, peptides & prostaglandins, Generalchemistry expertise and Scale up and engineering skills)

Cumulative DMFs : (Mar 10)

o US - 156

o Europe 90

o Canada 59

o RoW 70

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Dr. Reddys Overview

Global Generics


Looking Ahead

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Proprietary Products: Biologics

Built product development and manufacturing capabilities with a focus on becoming a leading integratedglobal player in generic biologics.

Product Portfolio: Strategic focus on 2nd wave biologics

Products are complex glycosylated proteins requiring specialized competence in development and

manufacturing.

Global brand sales of development portfolio USD 40+ Bn (2008 sales)

Our portfolio for select emerging markets represents an early entry opportunity

on nue o wor on mone z ng oppor un y

Established Development Capabilities

Two commercial products filgrastim and rituximab launched in multiple emerging markets; extensivepatient safety database.

Four late stage products:

Highly glycosylated therapeutic protein (Registration phase)

Pegylated protein (Clinical trials ongoing)

MAb2 (Clinical trials to start in 2Q)

MAb3 (Clinical trials to start in 4Q) 26


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Proprietary Products: Biologics

Multi-year Investment Plan to Build Integrated Capabilities and Infrastructure

Current India-based team of 300 to increase to approximately 500 by 2013.

Several years of proven cGMP manufacturing experience with a history of successful audits includingapproval for European clinical trial product supply.

Creation of a dedicated, full fledged, regulated markets-focused development and commercialstrategy team based out of the US in 2010.

, .

Intermediate scale mammalian cell culture manufacturing plant of 4 x 1000L under construction andwill be commissioned in 2011.

Design and engineering readiness in place for larger scale plant of 4 x 5000L.

Emerging markets focus and early launches create self-sustaining business modelwith significant earnings impact at corporate level after regulated market entry in 2015.

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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 :

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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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Proprietary Products Pipeline

AssetPreclinical

testing

GLP tox/IND-enablingstudies

Phase I Phase II Phase III

Balaglitazone (NCE)

Onychomycosis (DF)

DRL-17822 (NCE)

Pre-clinical i eline includes a number of candidates across NCE / differentiated formulations in thera ies such as

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dyslipidemia, dermatology, migraine, etc.

Update on balaglitazone

Encouraging results on the headline data from the first phase III study.

The trial met its primary endpoint of glycaemic controls (HbA1C and FPG)

Next steps for additional phase III studies to be finalized after discussions with regulators.


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Dr. Reddys Overview

Global Generics


Looking Ahead

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Thank You

Documents

Dr.Reddys_Investor_Presentation_June2010