CURRENT STATE OF PHARMA INDUSTRY

Nov 2023

Ramesh Swaminathan
Global Chief Financial Officer
AGENDA

Market Prognosis

Market wise updates

AGENDA
• US
• India
• Other Market: Developed and Emerging

Biosimilars

Digital Health

India Pharma Industry

 Global Pharma: Growth expected to beat pre-covid levels
Market growth by type (2022 – 2027)

Types of
medicines
driving
spending and
growth vary
considerably
across
countries
broadly
correlated
with a degree
of economic
development

1. Source: IQVIA Pharmerging to grow at double the pace of developed markets till 2027 4
SOURCE: IQVIA Dataset SEP’20
 Global Pharma: Growth expected to beat pre-covid outlook

Global Pharma Market, including COVID-19 vaccines and therapeutics, is expected to exceed pre-
pandemic outlook in 2027 to reach $1.9 to 2.0 tn.

Global market growth will return to pre-pandemic projected growth rates by 2024 despite year-
to-year fluctuations.

1. Source: IQVIA
3
SOURCE: IQVIA Dataset SEP’20
 Global Pharma: Specialty to lead market growth
Specialty share of total medicine spend

Specialty
medicines
will represent
about 43% of
global
spending in
2027 and
56% of total
spending in
developed
markets

• Specialty medicines are those which treat chronic, • They treat only 2–3% of patients; but the unmet
complex and rare diseases, the most commonly needs of these few patients are being addressed
noted attribute is that they are more expensive
1. Source:
than other more traditional medicines.
IQVIA 5
SOURCE: IQVIA Dataset SEP’20
 Global Pharma: Specialty to lead market growth
Top 20 therapy areas in 2027 in terms of global spending with forecast 5-year CAGRs,
const US$

Oncology and
obesity lead
growth while
immunology
slows due to
biosimilars,
many other
classes • Oncology is expected to grow 13–16%
growing in CAGR through to 2027 as novel
mid-single treatments continue to be launched
digits for the treatment of cancer
• Immunology is expected to grow
slowly in the rang of 3-6% due to the
launch of biosimilars; while several
biosimilars are already launched in
Europe
1. Source:
IQVIA 6
SOURCE: IQVIA Dataset SEP’20
 Global Pharma: Next Gen Cell and Gene therapies

Cell, gene and RNA therapeutics

Cell and gene

therapies
have
differing
spending
outlook and
large
uncertainties
while RNA
therapies
have largest
potential
• In addition to the 30 cell, gene or RNA-based therapies launched globally to date, an
additional 55–65 are expected to be launched by 2027, with a dozen new per year on
average, up from the average of three per year in the past five years.
• Total global spending to date has reached $8Bn and is expected to rise to $27Bn by 2027,
1. Source:
IQVIA
but with the potential for both higher or lower scenarios
7
SOURCE: IQVIA Dataset SEP’20
US Industry Updates
 Customers concentration in US

Distributors, retailers and managed

care have consolidated both
horizontally and vertically
increasing their purchasing power
tremendously

Source: Drug Channels

16
 Channel Dynamics: Generics are money makers
But still generics and biosimilars provide significant upside for the distributors as they carry higher margins (~8%)
and often require ancillary services hence are hard to ignore;

Big Three public

wholesalers—
AmerisourceBergen, All wholesalers are
Cardinal Health, and pointing towards a
McKesson. The slower price
chart summarizes deflation in next 12
estimates of these -18 months after a
wholesalers’ 2022 severe price decline
average gross in 2022-23
margins for brand-
name and biosimilar
drugs

Source: Drug Channels

17
 US Pharma update: Growth to flatten despite Vol increase

Prescription growth
rates to accelerate
somewhat in 2023
and 2024 as
utilization further
normalizes post
Covid, but not in
value terms

Growth is only seen

in specialty drugs as
they represent 56%
of total drug spend
and is expected to
continue for the
next few years
Immuno-Onco lead
the growth
1. Source: Citi
9
SOURCE: IQVIA Dataset SEP’20
 US Generics update: Only complex generics / Biosimilars play

Generics decreasing
in value share
consistently when
compared to
branded and
specialtty

$63B of Drugs Will Lose Exclusivity Over the Next 5 Years

Generics to
continue to see
growth in volumes
driven by LOEs but
shifting majorly to
biosimilars

1. Source: Citi
10
SOURCE: IQVIA Dataset SEP’20
 US generics update: Price Erosion seeing moderating trends
In Q1 FY24, peers saw price stabilization
Record shortages and multiple exits are helping
US Generics price reduction to moderate Peers price erosion TRENDS

Company US Peers Commentary

• Sandoz has specifically called out a “lower price
Sandoz Q2
erosion” (at -3% in 9MCY23)
• Amneal has upgraded its sales/ EBITDA/EPS/CF
Amneal Q2 guidance once again as part of its trading update
released on 23rd Oct
• Stability in base business (price erosion at low single
Aurobindo Q2
digit
Price Erosion
• Dynamics in the US market remain unchanged and
Drug Shortages Zydus Q2
erosion levels are at mid single digit levels
• In certain other molecules, there has been a pricing
Cipla Q2
improvement.
Dr Reddys Q2 • Generic pricing is largely stable in the US

1. Source: Investec and company materials

11
SOURCE: IQVIA Dataset SEP’20
 US generics update: OSD slight uptick in Q2

However, price erosion could make a comeback as traditional oral solids has seen slight increase for
Indian peers with higher approvals

For Peer Group, amongst the Top 10 products, OSDs are ANDA Approvals are increasing for peers for OSDs with
regaining share in sales, except Sun and Lupin increased resolution of sites in YTD 2023
Sales evolution for last 3 quarters in OSD ANDA approvals by dosage form

(ex Revlimid)

1. Source: IQVIA and Orange Book

12
SOURCE: IQVIA Dataset SEP’20
Injectables growing faster than OSD but getting competitive
US generic injectables market has grown steadily • Top three players account for 27% of the total
over the past five years, to ~US$13bn, including injectable generics market
a few specialty products. The top three players • The prominent international players include
account for ~30% of the total market. Fresenius, Hikma, Teva, and Sandoz, among
others. From India, the key players are
Aurobindo and DRL

13
US generics: Top 10 Products Split by Dosage form (Jun-23 quarter)
Aurobindo and Dr Reddy’s have monetized heavily on injectables; Inhalation: Lupin and Cipla; Ophthal: Sun
Aurobindo Dr Reddy’s Sun Pharma

Oral
Complex
products

Zydus Cadila Cipla Lupin

Oral: mesalamine
large sales
Monetized
Transdermals next inhalation
focus (5 filed) and
injectables

Source: IQVIA Jun 2023 14

 US generics: Regulatory inspections increasing
FDA inspections increased in 2023 but inspection outcomes have been on the favourable side vs 2022

Resolution of important OAIs/WLs: Escalation/status quo

• Lupin – Goa, Pithampur U2 and Somerset and multiple • Biocon Malaysia (OAI), Intas 483
inspections with EIR • Sun - Halol (escalated to Import Alert from OAI)
• Aurobindo - Unit VII Mohali (OAI)
• IPCA – Ratlam unit clearance • Cipla –Pithampur (OAI), Goa (OAI)
• Zydus Ahmedabad (0 obs.) • Lupin Tarapur (escalation to WL)

1. Source: FDA
15
India Market Overview
 Branded domestic Market growth – more price and less volume

Domestic branded Gx market growth drivers Domestic branded market Last 12 months

IPM has grown at an average of around 9-10%% per Recent weakness in the IPM growth trajectory is
year – price growth has been around 5% per year driven by a) a stronger base vs last year, and b) a
while volume growth has been muted to around 2% weak monsoon season, leading to a lower acute
p.a contribution this year.

Despite recent weakness, secular growth story in IPM remains intact, driven by increasing per capita income, a rise
in lifestyle disease prevalence, and increased health awareness
Source: BofA, Macquarie
19
 Historical Growth in Branded domestic Market: Therapy wise

Most of the large companies have

Historically chronic segments have outperformed IPM, but in FY22
focused on increasing their chronic
Acute surpassed chronic growth due to Covid
footprint

Therapy Growth 5 yr CAGR Acute vs chronic Growth trends Chronic and semi chronic for peers

63
60

Source: BofA, Macquarie

20
 Chronic focused India companies have higher margins

chronic heavy companies have higher margins vs other companies

Gross Margins for India focused peers EBITDA Margins for India focused peers

Source: BofA,
21
 Historical Growth for top 20 companies

Top 20 domestic Pharma companies growth drivers

Value CAGR Volumes CAGR

Jun-23 MAT Sales
Corporation 3 yr CAGR 5 yr CAGR 3 yr CAGR 5 yr CAGR
(bn)
SUN PHARMA 144 11% 10% 4% 3%
ABBOTT 116 11% 9% 4% 3%
CIPLA 102 10% 10% 4% 4%
MANKIND PHARMA 83 13% 12% 4% 4%
ALKEM 67 15% 13% 7% 5%
LUPIN LABORATORIES 65 9% 9% 0.5% -0.1%
INTAS 64 14% 14% 5% 2%
TORRENT 63 11% 10% 1% 0%
MACLEODS PHARMA 62 14% 11% 6% 5%
ZYDUS CADILA 56 10% 9% 1% 2%
DR REDDYS LAB 54 11% 8% 4% 2%
ARISTOPHARMA 52 14% 13% 3% 3%
GSK 45 7% 7% -2% -4%
EMCURE 38 12% 10% 2% 1%
GLENMARK PHARM 38 12% 12% 5% 4%
USV 36 11% 10% 4% 3%
IPCA LABS 35 15% 15% 6% 6%
MICRO LABS 31 13% 11% 10% 6%
PFIZER 30 4% 4% -3% -2%
SANOFI 29 5% 6% -2% 0%
Source: IQVIA
22
Key Trends in IPM
 India: Shift towards trade generics and Jan Aushadi
Branded generics share has reduced from ~79% to around 76% in the last 4 years; trade generics and Jan Aushadi
have increased their market share from ~5% to ~9% during this period
A key reason for the lower volume growth in IPM in the last few years is attributed to the shift to trade generics

• Key players in Trade

India Branded vs Gx vs OTC Market Share Evolution Generics – Cipla (20% of
India sales); Alkem
(20%); Ajanta (10%);
Zydus (7%)
• Primary acute therapies
but recent trend
includes specialty like
thyroid and injectables
• Key concerns – brand
cannabalization; higher
cost of entry (Tier 3& 4);
lower margins

Source: BofA
25
 India: Growth of trade generics

• Trade generics have grown at 1.4X the branded generic market and today are around ~10% of the branded
market in size and expected to be around 12% of the branded market in the next 4 years
• Trade generics and Jan-Aushadhi have impacted IPM growth by ~1% in last 3-4 years

Branded vs trade vs Jan Aushadhi growth metrics

4 Yr
4 Yr Expected
INR bn 2019 2020 2021 2022 2023 CAGR 2024E 2025E 2026E 2027E CAGR
Branded market (excluding
trade generics and Jan
Aushadhi) 1,356 1,503 1,559 1,855 2,005 10% 2,205 2,448 2,705 2,989 10%

Trade generics market 120 137 156 186 205 14% 234 266 304 346 14%

Jan Aushadhi sales 3 4 7 9 12 41% 16 19 24 30 26%

Source: Kotak
26
 India: Jan Aushadhi performance

• Higher presence in urban and semi-urban market

• Current stores targeted to reach 25,000 from ~10,000 currently
• Per store revenues have increased from ~Rs 10 lac per store to ~Rs 14 lac per store; ramp up seen post Covid
• Lower fill rates at stores due to supply chain issues
• Incentive of 15% of sales (up to Rs 5 lac) for store owner provided by government

Jan Aushadhi total sales (INR mn) Jan Aushadhi total stores

Source: Kotak
27
India: Jan Aushadhi performance

• Jan Aushadi now has almost 4-5% volume market share in domestic market but less than 1% by value
• Chronic segment has surprisingly seen greater traction; 6 of the top 10 selling drugs are from chronic
segment
• Has captured volume share in chronic / semi-chronic formulations like pantoprazole domperidone 9%,
telmisartan 6%, amlodipine 5% and atorvastatin 9% share

Jan Aushadhi Volume Market price per

Jan Aushadhi annual
Molecule List Strength tablets per share (% of pack (10
tablets
month branded vol) tabs)
Amlodipine 5MG 8,555,650 102,667,800 4.8% 2.9
Atorvastatin 10MG 5,304,980 63,659,760 8.6% 5.6
Domperidone Pantoprazole 30MG+40MG 10,864,460 130,373,520 9.2% 18
Telmisartan 40MG 9,325,800 111,909,600 5.7% 9.6

28
 India: M&A - Not cheap and only expected to get
more expensive going ahead
Most companies are targeting a larger corpus towards M&A in India; Most acquisitions have been tuck in
portfolio acquisitions
Implied EV
Date Target Acquirer EV / Revenue EV / EBITDA
(INR Cr)
Mar-23 DRL (9 derma brands) Eris Oaknet Healthcare 275 4.6x NA
Jan-23 Glenmark (9 derma brands) Eris Oaknet Healthcare 340 4.0x NA
Dec-22 Glenmark (Razel) JB Chemicals 314 5.6x NA
Sep-22 Curatio Healthcare Torrent Pharma 1,885 8.2x 30.4x
Jun-22 Dr Reddys Labs (Paedia brands) JB Chemicals 98 3.0x NA
May-22 Oaknet Healthcare Eris Lifesciences 600 3.3x 16.0x
Apr-22 Novartis (Cidmus) Dr Reddys Laboratories 465 3.4x NA
Apr-22 Anglo-French Drugs portfolio Lupin 325 2.9x NA
Apr-22 Novartis (Azmarda) JB Chemicals 246 3.2x NA
TTK Healthcare (Human pharma domestic branded
Mar-22 Bharat Serums & Vaccines 805 4.0x NA
business)
Feb-22 Jagsonpal Pharma (70% stake) Infinity Investment Mgmt. (Convergent PE) 562 2.1x 12.0x
Feb-22 Panacea biotech (Domestic branded business) Mankind pharma 1,143 5.2x 20.1x
Jan-22 Sanzyme (Domestic brands) JB Chemicals 628 3.9x N/A
Sep-20 JB Chemicals and Pharma (65% stake) KKR 5,804 3.2x 16.3x
Feb-20 Wanbury brand portfolio Cipla 89 1.5x NA
Feb-20 Wockhardt Limited (Select business divisions) Dr. Reddy's Laboratories Limited 1,483 3.5x N/A
Jan-20 Glenmark (Gynae) Integrace 115 1.9x N/A
Aug-18 Integrace (Glenmark (Ortho)) True North 635 3.8x N/A
Nov-17 Strides (Indian branded generic business) Eris Lifesciences Limited 496 2.8x N/A
Unichem (Domestic formulations business in India and
Mar-17 Torrent Pharmaceuticals 3,600 4.0x N/A
Nepal)
Average 3.8x 19.0x
Source: Deal data
29
 Regulatory risks are increasing in India

Is pricing led growth sustainable in India?

Structural shifts – e commerce, lower volumes, higher share of trade generics, more govt intervention

Drugs in NLEM (latest is 2022 list) NLEM % of IPM by value

Source: BofA, Kotak

30
Other Markets
Other Markets: Learnings for Lupin
The emerging markets businesses have strong growth potential basis the unmet demand and growing population
but present certain risks at the same time

Key Considerations

High Growth but high risks Leveraging Portfolio

Fx risk and volatility Regulatory challenges

Integration is key Managerial Bandwidth

Cultural Challenges Return on Time Invested

1
 EUROPE 320.2 9.2% 7.5% 5.2% 39% 61% 75% 25% 90% 10%
EU Top 4 + UK 201.3 7.9% 6.6% 5.0% 46% 54% 77% 23% 93% 7%
Other Markets:
Rest of Europe 118.9
Growth Dynamics
11.5% 9.2% 7.5% 28% 72% 73% 27% 86% 14%

JAPAN 63.9 3 3.1% 1.0% 0.3% 45% 55% 86% 14% 97% 3%

CANADA 30.9Size Global

Market 9 9.6%
Growth 7.7%
CAGR N/A
CAGR 17% 83%
Split by Channel 75%by Product25%
Split Type 91% 9%
Split by Rx/OTC
Country
(USD Bn) Rank (YoY) 2018-2023 2023-2027 Hospital Retail Non
AUSTRALIA 15.7 14 12.2% 6.3% 3.5% 24% 76% 84%Gx Gx
16% Rx
75% OTC
25%
DEVELOPED MARKETS
EMERGING MARKETS
EUROPE 320.2 9.2% 7.5% 5.2% 39% 61% 75% 25% 90% 10%
CHINA 114.8 2 2.7% 6.0% 3.9% 92% 8% 69% 31% 95% 5%
EU Top 4 + UK 201.3 7.9% 6.6% 5.0% 46% 54% 77% 23% 93% 7%
BRAZIL
Rest of Europe 30.4
118.9 10 14.7%
11.5% 12.5%
9.2% 9.1%
7.5% 30%
28% 70%
72% 84%
73% 16%
27% 67%
86% 33%
14%

JAPAN
RUSSIA 63.9
25.6 3
11 3.1%
1.6% 1.0%
12.0% 0.3%
7.5% 45%
24% 55%
76% 86%
68% 14%
32% 97%
73% 3%
27%

CANADA
MEXICO 30.9
11.1 9
17 9.6%
6.5% 7.7%
8.4% N/A
7.8% 17%
22% 83%
78% 75%
91% 25%
9% 91%
79% 9%
21%

AUSTRALIA
THAILAND 15.7
6.4 14
23 12.2%
13.8% 6.3%
5.9% 3.5%
9.5% 24%
70% 76%
30% 84%
62% 16%
38% 75%
79% 25%
21%

PHILIPPINES 4.5 29 8.1% 6.1% 6.8% 11% 89% 95% 5% 69% 31%
EMERGING MARKETS
VIETNAM 4.5 30 25.9% 5.3% 10.8% 73% 27% 58% 42% 73% 27%
CHINA 114.8 2 2.7% 6.0% 3.9% 92% 8% 69% 31% 95% 5%
SOUTH AFRICA 3.5 35 3.5% 4.9% N/A 19% 81% 59% 41% 66% 34%
BRAZIL 30.4 10 14.7% 12.5% 9.1% 30% 70% 84% 16% 67% 33%
INDONESIA 3.1 38 5.8% -0.9% 7.1% 59% 41% 51% 49% 82% 18%
RUSSIA 25.6 11 1.6% 12.0% 7.5% 24% 76% 68% 32% 73% 27%

MEXICO 11.1 17 6.5% 8.4% 7.8% 22% 78% 91% 9% 79% 21%

THAILAND 6.4 23 13.8% 5.9% 9.5% 70% 30% 62% 38% 79% 21%
2
API CDMO
 Complex APIs a growing opportunity for India

Global API Exports ~$30b Exports to Reg Markets ~$12b Exports to Semi Reg Markets ~$18b

Large Opportunity in API exports India leads in mid to high complexity/Niche APIs, India controls large share, expect to shift another
dominated by India & China which account for 75%+ of upcoming patent 8-10% share from China with narrowing cost
expiries positions over next 3 to 5 years

Low Complexity Mid Complexity Niche

Low Complexity Mid Complexity Niche
API API API
API API API

* Niche API are APIs having 10 + step process and <1K TPA, Mid complexity APIs are APIs having 4 + step process and <10K TPA. 1
Small molecules CDMO is an attractive opportunity with large
addressable market and double-digit growth

38
 Indian CDMO players trading at ~2x multiples
compared to US, EU peers on the back of profitable
growth
Valuation multiples for Indian CDMOs/ API players vs US, EU Valuation multiples for Indian CDMOs

Note: Major players considered for benchmarking  EU – Catalent, Siegfried, Aenova, Recipharm; US – Charles River, Covance, Patheon; India API – Sai, Suven, Anthem; $1=₹80; [1] FY20-FY22; [2] Revenue 39
and EBITDA% for FY22; Source: CapIQ; VCC Edge; Pitchbook; Secondary research
 Fermentation CDMO: $8-9B opportunity with Indian players gaining
share;
Chemical Synthesis: India share Increased outsourcing & capacity build-out
increasing by ~5pp in next 5y Niche APIs driving growth in fermentation driving India fermentation growth
Small mol fermentation API market
split by TAs ($B) CAGR
(2021-2027)
18 6-8%
100%
Others 3-4%

80 Immunosuppressants 9-11%

Corticosteroids 3-5%
60

Oncology 11-13%
40

20
Anti-infectives 3-4%

• India gaining share on account 0

2027E Multiple growth drivers:
of increased tech, capabilities
& capacities; de-risking of • Low operating expenses due to cheap labor,
supply chains (from China; EU in utilities and machinery
• TAs like oncology, corticosteroids and
past year) • Declining manufacturing interest in Europe
immunosuppressants growing faster than market
• Indian vendors preferred for Cat since Ukraine crisis has led to 10x increase in
B molecules (medium electricity
• Outsourcing expected to increase from 40% in 2021 to
complexity, moderate volume) – • India’s strength in downstream quality due to
50% by 2027  outsourced market $8-9B in ‘27
the type Lupin currently does lower FDA warnings compared to China

Note: $1=₹80
• Favorable government policies like PLI
Source: IQVIA; Secondary research, Internal data schemes and Bulk Drug Parks
40
Biosimilars
Biosimilars: The opportunity
Biologics form the topmost growing piece in Pharma market Globally with growth above overall pharma market

Five of the top 10 selling drugs are biologics with US Global biotech spending to exceed $660Bn by 2027, with
sales from top 5 biologics itself at ~$70Bn growth slowing to 7.5–10.5% from biosimilar savings

Top 10 products by US sales ($ bn) MAT-2022

Source IQVIA, BofA

42
Biosimilars: Savings from biosimilars
Incremental savings from biosimilars are expected to be a cumulative $383Bn globally from 2023 to 2027.

Source IQVIA, BofA

43
Biosimilars: Deep dive into the opportunity
The current biosimilar market seem like the tip of an iceberg with the large untapped and under development
basket

Source IQVIA, BofA

44
Biosimilars Opportunity

• European and the U.S. markets dominate the use Key considerations:
of Biosimilars with 90% cumulative use (by
volume); other countries have yet to harness the Interchangeability and regulatory environment
potential benefits of Biosimilars Concentration
• The North American market is expected to grow
faster and hold a higher share of the global Competitive landscape
market in the future
• Competition among Biosimilars is likely to Collaboration
increase; being early to launch while keeping low
development costs is key Time to market
• Pharma players adopt more agile strategies
Regional focus
including developing a nimbler footprint
• Collaborations, In-licensing and Marketing
authorizations are preferred strategies over The U.S. biologics market has grown 12.5%
having large manufacturing base annually over the last five years, and now
comprises over 40% of spending

1
Current State of biosimilars market

• The current U.S. biologics market is already facing

biosimilar competition, with Biosimilars launched
for 12 molecules representing 14% ($38Bn) of
biologic spending (i.e., exposed originators and
their biosimilar competitor .
• The 20 molecules with Biosimilars in
development in the U.S. that are still protected
generated $68Bn in sales in 2021
2
Digital Health in India
Govt Promoting Digital Health

Source: BCG Report

46
6
Significant Government push for integrated digital health
infrastructure with Ayushman Bharat Digital Mission (ABDM

Source: BCG Report

47
6
Indian Healthcare value pools to expand to $450Bn+ by 2030

Source: BCG Report

48
6
Total size of heathtech market to increase to ~$35Bn by 2030

Source: BCG Report

49
6
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