Dr.

Reddy’s Laboratories Ltd

Investor Presentation, June 2010
Safe Harbor Statement
This 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.
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 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
Overview

 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. 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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The Last Decade

Built the foundations for a strong business. Moved up the value chain. Strengthened
capabilities. Achieved scale and global presence. Growth aided by acquisitions.

Revenues [USD Mn] 1,510 1,563

1,365
1,250

Germany & Mexico

acquisitions

Authorized generic
launches

546
463 447
338 380
234
183

FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

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All figures converted at respective year’s USD to INR convenience translation rate.
Integrated Business Model

Pharmaceutical Proprietary
Services & Active Global Generics
Products
Ingredients • FY10 Revenue mix 2/3rd
of total • Focus on building
• FY10 Revenue mix 1/3rd sustainable and profitable
of total • Finished dosage branded innovative
businesses in business
• Amongst the leaders in distribution-driven as well
supply of generic APIs as doctor-driven markets • Efforts in new drug
globally discovery, differentiated
• Strategic ‘focus’ on key formulations & biosimilars
• Customers include large markets  North
generic America, India, Russia /
manufacturers, innovator CIS, Germany
companies

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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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Infrastructure

 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

 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, 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
• $1.56 bn
• 23% to sales

Adjusted
Revenue
EBITDA

Adjusted Launches
PAT & Filings

• $208 mn • 103 launches

• 13% to sales • 121 generics
filings, 36 DMFs

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Adjustments to EBITDA and PAT pertain to one-time charges for impairment and restructuring costs.
Key Balance Sheet Items
$ mn

Mar 2010 Mar 2009

Cash & Cash Equivalents 146 124

Inventory & Receivables 563 619

Property, plant & equipment 500 465

Goodwill & Intangibles 311 493

Loans & borrowings (current & non current) 327 438

Equity & Reserves 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 11
Business Priorities

Pharmaceutical
Proprietary
Services & Active Global Generics
Products
Ingredients

Create compelling value Improve depth in key Calibrate investments to

for customers by markets through portfolio create a self sustainable
leveraging IP, technology expansion and supply model
and cost leadership chain excellence

Partner of Choice Leadership position Viable Proprietary

in key markets Products business

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Financial Goals  FY13

RoCE
25%
Revenues
$3 bn

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 Dr. Reddy’s Overview

 Global Generics

 Pharmaceutical Services and Active Ingredients

 Proprietary Products

 Looking Ahead

14
Global Generics
Geographically well diversified with mix of generics and branded generics

Global
Generics

Branded
Generics
Generics

North GSK CIS,Venezuela,

Germany UK India Russia Alliance
America Romania & ANZ

Key Priorities:

 Deepening market presence

 Differentiated product portfolio

 Supply chain excellence

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Global Generics: North America
Revenue ($ Mn), Excluding
upside revenues 301
272 Upside revenues
excluded in the Product Pipeline : ANDAs
graph
199
Cumulative  158
FY07 $413 mn
109 Pending approvals  73
FY09 $149 mn

37 Para IVs  38
FY10 $53 mn

FTFs  12

FY06 FY07 FY08 FY09 FY10

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

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 products  Top 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

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Louisiana facility: for capacity and platform for Rx/OTC/Government business
North America: Growing annuity of opportunities

Opportunities Product Name FY09 FY10 FY11 FY12 FY13 FY14 FY15

Product A X
Assured 180 days
Product B X
Exclusivity
Product C X

Sumatriptan X

Rivastigmine X
Desloratadine
Settlements X
(5mg / ODT / Pseudoephedrine)
/ Go early
Finasteride 1 mg X

Amlodipine Benazepril X

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

Omeprazole Mg OTC X

Tacrolimus X

Limited Competition Fondaparinux X

/ Difficult to make Fexofenadine Pseudoephedrine X

Product D X

Product E X
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Above list mentions only select of our limited competition opportunities
Global Generics: India
Top Brands Mkt. Rank Top Therapeutic Areas
Revenue ($ Mn)
226 Omez 1 Gastrointestinal (Rank #2)
179 189
Nise 1 Cardiovascular
155
133 Stamlo 1 Pain
Stamlo Beta 2 Oncology (Rank #2)
Omez-D 1 Paedia
Razo 1 Anti-Infective
Mintop 1 Diabetology
Dermatology
FY06 FY07 FY08 FY09 FY10
Dental (Rank #2)
Note : Nos are converted at constant translation rate

Secondary sales trend : Dr. Reddy’s growth of 23% vs. industry growth of 18%. Market
Share  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 force
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Global Generics: Russia
152 Top Brands Mkt. Rank Mkt Share
Revenue ($ Mn) 125
Nise 1 61%
101
79 Omez 1 67%
60 Ketorol 1 51%
Ciprolet 1 44%
Cetrin 2 28%
Enam 5 7%
FY06 FY07 FY08 FY09 FY10

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

Secondary sales trend : Dr. Reddy’s growth of 21% vs. 8% of Industry; Mkt Rank 16th
(Source: Pharmexpert MAT March 2010)

Customers  Business consolidated with Top 4 distributors > 80% of our revenue
o We continue to tightly control our working capital and customer credit terms

Portfolio :
o > 80% of portfolio vertically integrated

o OTC & Hospital segment gaining traction  ~ 20% of revenue

o Aggressively pursuing opportunities through various inlicensing deals

Healthy signs of revival in industry, continuing growth momentum for us. 19

 Global Generics: Germany

Revenue (Euro Mn) 3 years back

 Branded market & influence of

doctor equity
138 144 151
109  Intangibles/Goodwill  ~ €450 mn

Increasing influence of
FY07 FY08 FY09 FY10 healthcare insurance
companies & tender
driven market

 Betapharm  5th largest in volumes

among generic companies Currently
 Business model aligning to compete  Tender based market with generic
profitably
pricing
 betapharm‘s current contribution to Dr.
Reddy’s consolidated revenues less  Intangibles/Goodwill  ~ €90 mn
than 10%
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Germany : Our Strategy

Number of Tenders Won Measures initiated to remain

competitive in Germany
Non Vert. Int.
15
13
12
 Vertical integration to be taken up to 50 -
8 60% by value of our portfolio by end of
5 FY11
4 4
8 8 7
4 5 4  Significant restructuring of the manpower
2

AOK - 1 BKK TK IKK BKK DAK - 2 KKH  SG&A aligned to a tender based model
Spectrum GwQ Allianz -
K 2

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
Strategic alliance with GSK for Emerging Markets

 Branded Generics & Differentiated Formulations

o Strategic alliance will combine Dr. Reddy’s portfolio of high quality branded pharmaceuticals and
GSK’s extensive sales and marketing capabilities

o The products will be manufactured by Dr. Reddy’s, licensed and supplied to GSK

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

 What does this mean for Dr. Reddy’s ?

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. Reddy’s Overview

 Global Generics

 Pharmaceutical Services and Active Ingredients

 Proprietary Products

 Looking Ahead

23
Pharmaceutical Services & Active Ingredients

Revenue ($ Mn)

407 413 404 430

216

FY06 FY07 FY08 FY09 FY10

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

Customers include top generic manufacturers & innovators

Cumulative DMFs : (Mar 10)
o Amongst the leaders globally in generic APIs
o US - 156
o Pipeline coverage of 60–80% of patent expiries in the next few
years in the US o Europe – 90
o Canada – 59

75% of current API requirement for Global Generics sourced
o RoW – 70
internally

Custom business model transitioning well to manufacturing

services from pipeline services. Two pronged strategy of :
o Product Service
o Technology leveraged manufacturing services
(Chiral technology, Steroids, peptides & prostaglandins, General
chemistry expertise and Scale up and engineering skills) 24
 Dr. Reddy’s Overview

 Global Generics

 Pharmaceutical Services and Active Ingredients

 Proprietary Products

 Looking Ahead

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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 USD 40+ Bn (2008 sales)

• Our portfolio for select emerging markets represents an early entry opportunity

• Continue to work on monetizing US & EU opportunity

Established Development Capabilities

Two commercial products – filgrastim and rituximab – launched in multiple emerging markets; extensive
patient safety database.

Four late stage products:

• Highly glycosylated therapeutic protein (Registration phase)

• Pegylated protein (Clinical trials ongoing)

• MAb2 (Clinical trials to start in 2Q)

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• MAb3 (Clinical trials to start in 4Q)
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 including
approval for European clinical trial product supply.

Creation of a dedicated, full fledged, regulated markets-focused development and commercial

strategy team based out of the US in 2010.

Open for the right alliance(s), but not waiting.

Intermediate scale mammalian cell culture manufacturing plant of 4 x 1000L under construction and
will 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 model
with significant earnings impact at corporate level after regulated market entry in 2015.

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Proprietary Products: Differentiated
Formulations 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 :

 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

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Proprietary Products Pipeline
GLP tox/IND-
Preclinical
Asset enabling Phase I Phase II Phase III
testing
studies

Balaglitazone (NCE)

Onychomycosis (DF)

DRL-17822 (NCE)

Pre-clinical pipeline includes a number of candidates across NCE / differentiated formulations in therapies such as
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. Reddy’s Overview

 Global Generics

 Pharmaceutical Services and Active Ingredients

 Proprietary Products

 Looking Ahead

30
Highlights
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, Fondaparinux & Fexofenadine pseudoephedrine.

Attractive Emerging Markets presence with stronghold in two key ‘BRIC’

markets – India & Russia.

Strategic alliance with GSK for Emerging Markets.

Emerging bio-similars play.

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Thank You