dr. reddy's investorpresentation november2010

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


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



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


133 155

179 189 226 Revenue ($ Mn)

India• Top 10 brands ranked among Top 2 in

market shares

• Portfolio of > 200 brands



60 79

101 125

152

Revenue ($ Mn) Russia

• Top 4 products ranked #1 in market shares

• Increasing portfolio of Rx & OTC products


All figures converted at respective years’ convenience translation rate


Global Generics



Looking Ahead

18


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


Global Generics



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


Global Generics



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

dr. reddy's investorpresentation november2010

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