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Dr. Reddy’s Investor PresentationNovemeber 2010
Safe Harbor StatementThis presentation contains forward-looking statements and information that involve risks, uncertainties and assumptions. Forward-looking statements are all statements that concern plans, 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 identified by 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 and expansion 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 prove incorrect, actual outcomes may vary materially from those indicated in the applicable forward-looking statements. Any forward-looking statement or information contained in this presentation speaks only as of the date 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
Overview
Global Generics
Pharmaceutical Services and Active Ingredients
Proprietary Products
Looking Ahead
2
Purpose:
Providing affordable and innovative medicines for healthier lives.
Strategy:
Leverage industry-leading science & technology, product offering and
customer service with execution excellence.
3
Global pharmaceutical company focused on active pharmaceutical
ingredients & custom services, generics and proprietary products.
Amongst the largest Indian pharmaceutical companies Revenues of U.S.
$1.56 bn in FY2010 with a CAGR of ~ 25% over the last decade.
Strong vertically integrated portfolio of businesses, geographies &
products.
Overview
4
183234
338 380463 447
546
1,510
1,250
1,3651,563
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10
Revenues [USD Mn]
Germany & Mexico acquisitions
Authorized generic launches
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
All figures converted at respective year’s USD to INR convenience translation rate.5
Integrated Business Model
Pharmaceutical Services & Active Ingredients• FY10 Revenue mix 1/3rd
of total
• Amongst the leaders in supply of generic APIs globally
• Customers include generic manufacturers, innovator companies
Global Generics• FY10 Revenue mix 2/3rd
of total
• Finished dosage businesses in distribution-driven as well as doctor-driven markets
• Strategic ‘focus’ on key large markets North America, India, Russia / CIS, Germany
Proprietary Products • Focus on building
sustainable and profitable branded innovative business
• Efforts in new drug discovery, differentiated formulations & biosimilars
6
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 (394 global DMFs as of Sep 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
7
API manufacturing : India – 6, Mexico – 1, UK – 1. All USFDA approved
Finished Dosages : India – 6 out of which 2 USFDA approved
manufacturing US – 1 approved by USFDA
Biologics Facility : India - 1, audited by multiple regulatory agencies
Custom Pharma : 3 Technology Development Centers – 2 in India & 1 in
Services Cambridge, UK
R&D Centers : State-of-the-art Integrated Product Development
Organisation [IPDO] facility,
NCE facility in Hyderabad, India
Aurigene facility in Bangalore
8
Infrastructure
Business Priorities
Create compelling value for customers by
leveraging IP, technology and cost leadership
Improve depth in key markets through portfolio
expansion and supply chain excellence
Calibrate investments to create a self sustainable
model
Partner of Choice Leadership positionin key markets
Viable Proprietary Products business
Global GenericsPharmaceutical
Services & Active Ingredients
Proprietary Products
9
Financial Targets FY13
Revenues$3 bn
RoCE25%
10
11
Recent Performance Results H1 FY11
• 73 new launches
• 47 generics filings & 16 DMFs
• $111 mn
• 14% to sales
• $172 mn
• 22% to sales• $797 mn
Revenue EBITDA
Launches & FilingsPAT
All figures converted in USD at convenience translation rate as of Sep 10
12
Key Balance Sheet Items
Cash & Cash Equivalents
Inventory & Receivables
Property, plant & equipment
Goodwill & Intangibles
Loans & borrowings (current & non current)
Equity & Reserves
Sep 2010 Jun 2010
139 143
631 611
570 537
303 298
325 311
1,015 1,009
$ mn
o Net Debt – Equity ratio as of Sep 10 0.18
o Capital expenditure for H1 FY11 $91 mn
o Current Cash flow hedge options of ~ $621 mn [range of Rs 47 to 49]All figures converted in USD at convenience translation rate as of Sep 10
Dr. Reddy’s Overview
Global Generics
Pharmaceutical Services and Active Ingredients
Proprietary Products
Looking Ahead
13
Global Generics
Generics
North America Germany UK
Branded Generics
India Russia GSK Alliance
CIS,Venezuela, Romania & ANZ
Global GenericsGeographically well diversified with mix of generics and branded generics
14
Key Priorities:
Deepening market presence
Differentiated product portfolio
Supply chain excellence
FY06 FY07 FY08 FY09 FY10
37
109
199
272 301
Revenue ($ Mn)Excluding upside revenues
Global Generics – Regulated Markets
North America
• 15 products ranked among Top 3 in market shares
• 74 pending ANDAs // 39 P IVs // 12 FTFs
• H1 FY11 Sales - $180 mn
FY07 FY08 FY09 FY10
172 178 182 144
Revenue (Euro Mn)
Europe• H1 FY11 Sales – Euro 72 mn
• Germany Significant reduction of SG&A and vertical integration of products to help participate in future tenders more effectively
All figures converted at respective years’ convenience translation rate
UpsideRevenues $400 mn $140 mn $55 mn
Opportunities Product Name FY09 FY10 FY11 FY12 FY13 FY14 FY15
180 daysExclusivity
(Product A) X
(Product B) X
(Product C) X
Settlements/ Go early
Sumatriptan X
Rivastigmine X
Desloratadine(5mg / ODT / Pseudoephedrine) X
Finasteride 1 mg X
Amlodipine Benazepril X
Fenofibrate Capsule (43 / 130 mg) Launch date not disclosed
Limited Competition /
Difficult to make
Omeprazole Mg OTC X
Tacrolimus X
Fondaparinux X
Fexofenadine Pseudoephedrine X
Zafirlukast X
Lansoprazole X
North America: Growing annuity of opportunities
16
Global GenericsContinued strong growth in Branded Markets
FY06 FY07 FY08 FY09 FY10
133 155
179 189 226 Revenue ($ Mn)
India• Top 10 brands ranked among Top 2 in
market shares
• Portfolio of > 200 brands
• H1 FY11 Sales - $129 mn
FY06 FY07 FY08 FY09 FY10
60 79
101 125
152
Revenue ($ Mn) Russia
• Top 4 products ranked #1 in market shares
• Increasing portfolio of Rx & OTC products
• H1 FY11 Sales - $94 mn
All figures converted at respective years’ convenience translation rate
Dr. Reddy’s Overview
Global Generics
Pharmaceutical Services and Active Ingredients
Proprietary Products
Looking Ahead
18
FY06 FY07 FY08 FY09 FY10
216
407 413 408 430
Revenue ($ Mn)
Pharmaceutical Services & Active Ingredients
Stable business catering to both internal & external customers
Internal sourcing of API for generics > 75%
Strong portfolio of API resulting in higher market shares for vertically
integrated generics
DMF filings 394 of which 215 in North America
Note : All figures converted at the respective years’ average USD to INR translation rates
Dr. Reddy’s Overview
Global Generics
Pharmaceutical Services and Active Ingredients
Proprietary Products
Looking Ahead
20
Proprietary Products: Biologics
Built product development and manufacturing capabilities with a focus on becoming a leading integrated global 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 ~ $40+ bn
• Our portfolio for select emerging markets represents an early entry opportunity
• Continue to work on monetizing US & EU opportunity
Established Development Capabilities Three commercial products – filgrastim, rituximab & darbapoetin– launched in multiple emerging markets; Revenues: H1 FY11 ~$9 mn
Recently filed our fourth biosimilar in India ; Five other products in pipeline
Several years of proven cGMP manufacturing experience with a history of successful audits including approval for European clinical trial product supply.
Proprietary Products: Differentiated Formulations and NCE Research & Development
22
Hybrid Differentiated Formulations/NCE Strategy anchored around :
Specialty indications with feasibility to self-commercialize
Higher conversion from preclinical-to-clinic
Enabled by core capabilities :
Strong internal formulation development team focused on oral and topical drug delivery
Enabling alliances in areas of alternative drug delivery (intranasals, injectables)
Resulting (from FY 2012 onwards) in an annual output of 3-5 quality clinical candidates in/from :
High value differentiated formulations programs (US/EU-targeted) in pain, hospital, dermatology
Complementary NCE pipeline focusing on same indications
GSK Differentiated Formulations alliance
Dr. Reddy’s Overview
Global Generics
Pharmaceutical Services and Active Ingredients
Proprietary Products
Looking Ahead
Key Messages
FY 11 Guidance : RoCE of 18 – 22%
FY13 Goal : Revenues $3 bn & RoCE of 25%
Amongst the leading pipeline of ANDA & DMF filings globally
Strong & sustained cash flows expected from product opportunities such
as Omeprazole Mg OTC, Tacrolimus & Fondaparinux
Attractive Emerging Markets presence with stronghold in two key ‘BRIC’
markets – India & Russia
Strategic alliance with GSK for Emerging Markets
Emerging biosimilars play
Thank You