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NSE
2724.85
Change Change %
-2.55 -0.09%

Updated:18 Oct, 2019, 15:55 PM IST

BSE
2721.25
Change Change %
-5.40 -0.20%

Updated:18 Oct, 2019, 16:01 PM IST

CHAIRMANS LETTER:

Dear Shareholders,

On 15 March 2013, we lost Dr. K Anji Reddy, Founder Chairman of your Company. You know what a great visionary he was, and the energy and zeal with which he built this Company. The finest tribute that we can pay to him is to continue along the path of profitable growth, be recognized as a best-in-class global pharmaceuticals major, keep building deep science, technology and R&D skills, and continually innovate to improve the lives of patients around the world. 

Let me begin by touching upon the results for FY2013, and then move on to describing some key developments which should play their role in defining the trajectory of your Company over the next few years.

i. The consolidated revenue of your Company for FY2013 was Rs. 116.3 billion, and recorded a year-on-year growth of 20%. In terms of US dollars, this amounted to USD 2.23 billion (based on an average realized rate of 1 USD = Rs. 52.10)

ii. This growth was primarily driven by North America and Emerging Markets in Global Generics; and by the overall performance of the Pharmaceutical Services and Active Ingredients (PSAI) segment

iii. Earnings before interest, taxes, depreciation and amortization (EBITDA) grew by 9.5% to Rs. 27.8 billion, or 24% of consolidated revenues

iv. Profits after tax (PAT) adjusted for impairment of intangibles and its corresponding tax impact increased by 17% to Rs. 17.6 billion, or 15% of consolidated revenues

v. During FY2013, your Company globally launched 104 new generic products, and filed 56 new product registrations and 47 new drug master files (DMFs) 

Revenue from Global Generics for FY2013 increased by 18% to Rs. 82.6 billionof which North America accounted for Rs. 37.8 billion, with a growth of 19%. If one were to exclude the beneficial impact of olanzapine exclusivity of the earlier year and compare like-to-like, the growth was 38%. Several new product launches contributed significantly to revenues.

Global Generics also performed well in Emerging Markets with a 31% top-line growth and Rs. 22.4 billion of revenue. Each key marketRussia, CIS, and the Rest of the World territoriesgrew impressively.

I am especially pleased with Global Generics' Indian revenues. After some years of difficulties, your Company has stepped up its Indian operations. This has led to a 13% growth in the generics revenue, which rose to Rs. 14.6 billion. This business must continue growing and doing well.

The PSAI business has also done well. Revenue grew by 29% to Rs. 30.7 billion, mostly on increased sales to generic customers, greater lock-ins and larger orders in the custom pharmaceuticals services business.

Let me now move on to a few key areas of importance.

Over the foreseeable future, double-digit growth with appropriate returns on capital will depend upon your Company's ability to consistently succeed in introducing differentiated and hard-to-produce medicine in global markets. This involves excellence in several elements: (i) the right choice of molecules; (ii) Quality by Design (QbD); (iii) creating global R&D partnerships; (iv) having top class manufacturing operations which not only meet all global standards but also ensure that all launch dates are met with success; (v) successful plays in biosimilars and proprietary products; and (vi) building a best-in-class leadership team that is always hungry for victory.

We have started getting our early successes on these fronts. In large measure, your Company's good business results in FY2013 are due to appreciable improvements made in operationsbuilding on a company-wide consolidated theme of 'Safety, Quality and Productivity'. As an example, in the year, products worth over USD 310 million were developed based on the principles of Quality by Design. This will increase appreciably over the future.

We are selecting the right productsnamely, those with great therapeutic upsides and having significant technical challengesso as to carve high quality niches and also create technology-based future barriers to entry. And we are successfully manufacturing them.

We are building deep science and technology skillsboth in-house and through global R&D partnerships. We have our own R&D presence in some of the leading innovation centers of the world:

i. At the Chirotech Technology Center in Cambridge, UK, which is a Center of Excellence (CoE) for catalysis

ii. At OctoPlus in Leiden, Netherlands, which your Company acquired in FY2013. OctoPlus has significant in-house expertise in the development and creation of micro-spheres and liposomes that enhance and enable controlled release of active pharmaceutical ingredient into humans.

It is also well known for formulating complex injectables

iii. At Princeton, USA, which is a CoE for developing oral solid dosages

In our search for alternate molecules as well as dosage forms like injectables, topicals, patches and inhalers, we have created R&D partnerships with several other entities, both abroad and in Indiaincluding our subsidiary Aurigene and Dr. Reddy's Institute of Life Sciences.

Our biosimilars play is a major investment for the future. These products give us the opportunity to provide affordable and innovative medicines to patients across the globe. It is clear that any significant pharmaceutical player will need strong biologics development, manufacturing and commercialization capabilities. Your Company already has successfully produced four biosimilars: (i) rituximab called RedituxTM, which has been in India for more than five years, (ii) filgrastim, called Grafeel (iii) darbepoetin alpha called Cresp, and (iv) peg-filgrastim, which goes under the name of Peg-Grafeel.

To further strengthen biosimilars, the Company entered into an alliance with Merck Serono, a division of Merck KGaA, Darmstadt, Germany in June 2012. Merck KGaA is a global pharmaceutical company with proven expertise in developing, manufacturing, and commercializing biopharmaceuticals and chemical compounds. The partnership is to co-develop and globally commercialize a portfolio of biosimilar compounds in oncology, primarily focused on monoclonal antibodies (MAbs).

All these are parts of an exciting, yet complex journey. On occasions, the path will be difficult, as it must since the payoffs are so much greater. However, we have with usand are constantly creatinga world class global management team to execute these challenging goals. Through our people, we will continue to focus on safety, quality, productivity and supply chain reliability and flexibility. These initiatives, along with our investments in R&D, biosimilars and proprietary products should help deliver good growth and healthy shareholder returns.

I thank my colleagues and fellow employees for all that they doday in and outto better the performance of your Company. And my thanks to you for your good wishes. 

 With best regards, 

G. V. PRASAD

CHAIRMAN AND CHIEF EXECUTIVE OFFICER 

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