Biocon Ltd

Dear Shareholders,

We are pleased to present Thirty-third Annual Report on business and operationstogether with the audited financial statements and the auditor’s report of yourcompany for the financial year ended 31st March 2011.

The financial highlights for the year under review are given below:

Results of Operations:

Consolidated Results (Under Indian GAAP):

For the year ended March 31, 2011 consolidated revenues grew by 17% driven by a stronggrowth in biopharmaceutical segment, EBITDA grew by 24% and Profit after tax (PAT) grew by25% to Rs. 3,675 million as compared to Rs. 2,932 million in the previous financial year.

The highlight of this past year was the strategic partnership with Pfizer for takingour biosimilar insulin global.

The standalone financial statements reflect higher profits on account of transfer ofcertain intangible to subsidiaries within the group, which are eliminated uponconsolidation.

A detailed performance analysis is also discussed in the Management Discussion andAnalysis, which is annexed to this report.

Dividend

Directors are pleased to recommend a final dividend of Rs. 3.00 per equity share, whichis in addition to the interim dividend of Rs. 1.50 per share takes the total dividendpayout to 90% on the paid up equity capital of the Company.

Transfer to Reserves

We propose to transfer Rs. 459 millions to the General Reserves and the balance of Rs.12,613 million is proposed to be retained in the profit and loss account.

Business Operations Overview and Outlook:

During the year, Company’s revenue increased by 17% from Rs. 24,048 million to Rs.28,137 million. The growth in biopharmaceuticals sales was driven by a significantincrease in sale across business segments including statins, immunosuppresants andinsulins. The immunosuppresants segment specifically grew by over 30%. The domesticbranded formulations business grew 36% on increasing market share of key brands,introduction of new products and the launch of two new divisions – Immunotherapy andComprehensive Care.

We have sought both research and marketing partnerships as a way to access globalmarkets and we have forged some key strategic partnerships this year. The most visible andhigh-profile partnership that we recently announced was with Pfizer to commercialize ourinsulins portfolio which is going to be a very important growth driver in the foreseeablefuture.

Industry reports cite the insulin market at about US$ 15 billion today and estimated togrow to a size of US$ 20 billion by 2020. The insulins space accounts for 46% of the totaldiabetes drug segment. We estimate this business will continue to grow at about 6% perannum going forward, factoring the advent of biosimilar insulins. Biocon’spartnership with Pfizer aims at addressing this very large opportunity first in theemerging markets, which offer sizeable volume and thereafter at a later stage, enter thedeveloped markets. Clinical trials for recombinant human insulin for the European Marketare in progress and patient recruitments are currently underway. Biocon’s insulinbusiness in India is also beginning to gain traction and although our insulins business ismerely seven years old, we have steadily gained market share. In volume terms, we havearound 11% share in the insulin vial segment and around 13% market share in the glarginevial segment. While the market has grown 11%, Biocon’s sales in the segment has grownby over 12%.

Another significant event in this past year was the supply agreement with OptimerPharmaceuticals for the supply of Fidaxomicin API. Biocon is the currently sole supplierof this product for certain regulated markets and has been involved with this project from2005. We have made considerable progress in our partnership with Mylan for developingbiosimilar monoclonal antibodies for the global markets. In addition to this, we have somevery key strategic research partnerships with Amylin, Vaccinex, the Center for Immunologyin Havana, and IATRICa. What really makes this whole partnering opportunity special for usis that we can develop all these programs leveraging India’s costs and clinical basein a very cost-effective manner, and we are able to take them first to the emergingmarkets and then on to the regulated markets as the program advances.

Within the novel pipeline, the Company released encouraging preliminary data from arecently concluded Phase III clinical study conducted in India on IN-105, its novel oralinsulin candidate for the treatment of diabetes. Initial data analysis show that anunexpectedly high placebo effect prevented IN-105 from meeting its primary end point oflowering HbA1c as compared to placebo by a margin effect. However, multiple secondaryendpoints on both efficacy and safety were met, further strengthening the emerging profileof IN-105. Our coveted T1h program for a novel Anti-CD6 targeting monoclonal antibody isin Phase III clinical trials for Psoriasis. Additionally, our novel anti-CD20 molecule(BVX 20 with Vaccinex) has completed preclinical studies and we are scheduled to commenceclinical trials this year. Our novel programs are expected to unlock substantial valueupon licensing in the coming years.

Syngene International Limited:

Syngene continues to be one of the leading contract research organizations in thecountry which offers integrated services across discovery and development continuum.State-of-the-art infrastructure, talented and experienced scientific and techno-commercialteam, flexibility of business models, robust communication systems, ability toconsistently deliver with quality and speed are some of the reasons why Syngene has becomea preferred partner of choice for several small, medium and large companies around theworld. In addition to pharmaceutical companies, Syngene has developed a broad customerbase in other industries including fine chemical, petrochemical, agro, cosmetic andelectronic companies.

During the year, Syngene continued to successfully manage large relationships includingthose with Bristol-Myers Squibb, Merck and DuPont Agro division which involved variousaspects of drug discovery and development research. With the emergence of biologics overpast few years as important medicinal interventions, Syngene also offer services indiscovery and development of biologic molecules. Syngene’s state-of-the-art biologicspilot plant is capable of delivering clinical trial material of both bacterial andmammalian origin. During the financial year 2010-11, Syngene registered a strong growth of21% in revenues from Rs. 2,675 million to Rs. 3,231 million. Operational Margin (EBITDA)increased from Rs. 877 million to Rs. 1,005 million representing a 14% increase during theyear.

Increased charge on account of depreciation has led to a marginal decline in the netprofit which was at Rs. 283 million for the year against of Rs. 308 million for theprevious year.

Clinigene International Limited:

For the year under review, Clinigene registered revenues of Rs. 289 million Clinigenehad a challenging year and has incurred a loss of Rs. 37 million on account unfavourablemarket conditions, delay in study startup and intensive pricing pressures. Clinigene iscontinuing to evolve and adapt its capability platforms and service offerings against abackground of continued macro market pressure as global R&D spends are being reduced,consolidation of market players continues and the shift to globally capable preferredpartnerships accelerates. In addition to our standard service platforms, we haveidentified several more specialized areas, for example patient based early studies,complex BA/BE studies and immunoanalytical services where Clinigene offers strongcapabilities. We believe that, these new speciality services, which have relatively highentry barriers, will allow us to drive new and differential revenue opportunities.

Biocon Biopharmaceuticals Private Limited:

During the year Biocon Biopharmaceuticals Private Limited (BBPL) became a wholly ownedsubsidiary of the Company.

For the year under review, BBPL earned revenues of Rs. 491 million as against Rs. 381million in the previous year. The net profits for the year stood at Rs. 192 million asagainst Rs. 26 million in the previous year.

Biocon Research Limited:

Biocon Research Limited (BRL) is a wholly owned subsidiary set up to undertakediscovery and development research work in biologics, antibody molecules and proteins.

For the current year BRL registered revenues of Rs. 649 million as against Rs. 392million in the previous year. BRL continues to progress the development activity on themonoclonal antibody program in joint collaboration with Mylan. BRL has reported a net lossof Rs. 322 Million for the year ended March 31, 2011 against a loss of Rs. 51 million inthe previous year.

Being a research driven enterprise, the Company is in the initial stage of operationsand has enlarged its scope to other challenging research projects during the year.

Biocon SA:

Biocon SA, a wholly owned subsidiary in Switzerland is primarily engaged in developmentand commercialisation of biopharmaceuticals across the globe. Clinical Development ofInsulin is currently ongoing in the European region.

AxiCorp GmbH:

AxiCorp is a specialized Pharma marketing and distribution company based in Germany.

For the current financial year AxiCorp revenues rose from Rs. 9,117 million to Rs.9,800 million. The Company earned a net profit of Rs. 353 million for the year against Rs.299 million for the previous year. Given the synergies brought about by the Pfizerpartnership, the Company has decided to divest its 78% stake in AxiCorp to the existinggroup of promoter shareholders.

NeoBiocon FZ LLC:

NeoBiocon FZ LLC is a pharmaceutical research and marketing company based at Abu Dhabi.Incorporated in January 2008, NeoBiocon is an equal joint venture with Dr. B.R. Shetty ofNeoPharma. During the current year, NeoBiocon registered significant growth in revenue toRs. 60 million and a net profit of Rs. 21 million.

In addition to launching oncology products. NeoBiocon’s range of branded genericproducts, now approved by the UAE Ministry of Health, has been successfully launched toaddress the therapeutic segments of cardiology, diabetology and infection management.

Biocon SDN. BHD.

During the year, Company has incorporated a wholly owned subsidiary in Malaysia to setup a state of the art manufacturing facility at BioXcell a biotechnology park promoted bythe Government of Malaysia.

In the first phase of capital outlay the Company envisages an investment of US$ 161million and expects the facility to go on stream by year 2015.

Consolidated financial statements:

The consolidated financial statements have been prepared by the Company in accordancewith the Accounting Standards as prescribed by the Companies (Accounting Standards) Rules,2006. The audited consolidated financial statements together with Auditors Report thereonalso form part of the Annual report.

Accounts of subsidiary companies:

The Ministry of Company Affairs has granted General Exemption to Companies fromattaching the financial accounts of the subsidiary companies to this Report pursuant toSection 212 of the Companies Act, 1956. However, a statement showing the relevant detailsof the Subsidiaries is enclosed and is a part of the Annual Report. The members can writeto the Company for obtaining the annual accounts of the subsidiary companies and copieswill also be available for inspection at the registered office in Bangalore, India.

Employees Stock Option Plan (ESOP):

Pursuant to the provisions of Guideline 12 of the Securities and Exchange Board ofIndia (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines, 1999,as amended, the details of stock options as on March 31, 2011 are set out in the Annexureto the Directors’ Report.

Corporate Governance:

We strive to attain high standards of corporate governance while interacting with allour stakeholders. The Company has complied with the corporate governance code asstipulated under the listing agreement with the stock exchanges. A separate section onCorporate Governance along with a certificate from the auditors confirming the level ofcompliance is annexed and forms a part of the Directors’ report.

Evaluation of Board effectiveness:

The evaluation of the performance of the Board is periodically carried out by theChairman of the Audit Committee to measure the effectiveness of the Board. Dr Bain hasconsiderable experience in Board reviews and has carried out similar exercises for othercompanies in the United Kingdom and elsewhere.

The review conducted earlier showed overall confidence in the company and theBoard’s oversight of corporate strategies. Action plans for certain improvements inkey areas were reviewed and evaluated for implementation.

Directors:

Dr. Neville Bain and Mr. Bala Manian shall retire by rotation at the ensuing AnnualGeneral Meeting, and being eligible, offer themselves for re-appointment. Mr. RussellWalls was inducted as Additional Director by the board of directors on 28th April 2011. Aresolution confirming his appointment as a director liable to retire by rotation isproposed at the Annual General Meeting.

Auditors:

The Statutory Auditors M/s. S. R. Batliboi & Associates (Firm Registration No.10104910), Chartered Accountants, Bangalore, retire at the ensuing Annual General Meeting,and have confirmed their eligibility and willingness to accept office, if re-appointed.

Cost Audit:

Pursuant to Section 233B of the Companies Act, 1956, the Central Government hasprescribed cost audit of the Company’s bulk drug and formulation division.

The board has appointed the Cost Auditors and they have been duly approved by theCentral Government.

Management Discussion and Analysis Report:

The report as required under the Listing agreements with the Stock Exchanges is annexedand forms part of the Directors’ Report.

Cumulative disclosure under the stock option scheme as on March 31, 2011:

Disclosure of the particulars of stock options schemes as on the above date, as perSEBI guidelines:

There are no employees who have received a grant in any one year amounting to 5% ormore of the options granted during that year.

There are no employees who have been granted options during any one year equal to orexceeding 1% of the issued capital (excluding outstanding warrants and conversions) of theCompany at the time of grant.

Consequent to the bonus shares in the ratio 1:1 on Sept 15, 2008, employees who had notexercised their options were credited with bonus entitlements based on ESOP Plan(Eligibility for corporate action).

Table (1) details regarding options granted to key managerial employees are providedbelow:

*Adjusted for 2008 Bonus issue.

Fixed Deposits:

The Company has not accepted any fixed deposits from public.

Directors’ responsibility statement:

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Board of Directors herebyconfirm as under:

i) In preparation of annual accounts, the applicable accounting standards have beenfollowed along with proper explanation relating to material departures, if any;

ii) We have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financial year and of the profitof the Company for that period;

iii) We have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act, 1956 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

iv) We have prepared the annual accounts on a going concern basis.

Particulars of Research and Development, Conservation of energy, technology absorptionetc:

Particulars required under Section 217 (I) (e) of the Companies Act, 1956 read withRule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors)Rules, 1988 is given in the annexure to the Report.

Particulars of employees

In terms of the provisions of Section 217(2A) of the Companies Act, 1956 read withCompanies (Particulars of Employees) Rules, 1975, as amended, is annexed and is a part ofthis report.

However, having regard to the provisions of Section 219(1)(b)(iv) of the said Act, theAnnual Report excluding the aforesaid information is being sent to all the members of theCompany and others entitled thereto. Any member interested in obtaining such particularsmay write to the Company Secretary at the registered office of the Company.

Acknowledgements

The Board greatly appreciates the commitment and dedication of employees at all levelswho have contributed to the growth and success of the Company. We would also thank all ourclients, vendors, investors, bankers and other business associates for their continuedsupport and encouragement during the year.

We also thank the Government of India, Government of Karnataka, Min istry ofInformation Technology and Biotechnology, Ministry of Commerce and Industry, Ministry ofFinance, Department of Scientific & Industrial Research, Customs and ExciseDepartments, Income Tax Department, CSEZ, LTU Bangalore and all other Government agenciesfor their support during the year and look forward to their continued support in thefuture.

Annexure to the Directors’ Report

Particulars under Companies (Disclosure of particulars in the Report of Board ofDirectors) Rules, 1988 for the year ended March 31, 2011.

Conservation of Energy

During the year, the Company has taken significant measures to reduce the energyconsumption by using energy-efficient machines and equipment.

FORM A

* Including used for production

B. Consumption per unit of Production

The disclosure of consumption figures per unit of production is not meaningful as theoperations of the Company is not power intensive and involves multiple products.

1. Specific areas in which R&D work has been carried out by the Company

- Process and Clinical Development of Novel Biotherapeutics in Oncology, Diabetes,Rheumatology and Cardiovascular segments.

- Process and Clinical Development of Biosimilars in Oncology, Metabolic disorders,Diabetes, Rheumatology and Cardiovascular segments.

- Development of Synthetic and Fermentation based Generic Small Molecules forAnti-infective, Cardio-vascular, Nephrology and Transplantation segments.

- Generation of Intellectual Property Development – Process Patents formanufacture of key Generic Small Molecules and Biotherapeutics and unraveling themechanism of action of novel biotherapeutics

- Development of globally competitive manufacturing processes

- Clinical Development of new drug combinations

2. Benefits derived as a result of R&D activities

- Scale-up of key Biosimilars with improved productivity and process efficiencies

- Strategic collaborations for development of new Biotherapeutics

- Global presence in supply of fermentation based Small Molecules to the GenericIndustry in regulated markets

- Rich pipeline of Generic Small Molecules catering to varied therapeutic areas

- Internationally competitive prices and product quality

- Established intellectual property with 1076 Patents/ PCT applications filed in Indianand International markets

- Safe and environment friendly processes

3. Future Plan of Action

- Greater importance in the research areas of New Drug Discovery

- Clinical Development of existing pipeline of Biotherapeutics for Regulated markets

- Strategic Collaborations for increased speed and cost competitiveness in DrugDiscovery

- Continued emphasis on Monoclonal Antibodies and Biotherapeutics leveraging onBiocon’s in-house process development and analytical skills

- Continue to strengthen R&D capabilities in the area of New Biotherapeutics

4. Expenditure on scientific Research & Development:

5. Technology Absorption, Adoption and Innovation:

No technology was imported by the Company during the year.

6. Foreign Exchange earnings and outgo:

Foreign exchange earned and used for the year:

*For details please refer to information given in the notes to accounts to the annualaccounts of the Company Schedule 17 item no. 7 (d) to (g).

Section 212

Statement pursuant to Section 212 of the Companies Act, 1956 relating to HoldingCompany’s interest in the Subsidiary Companies

All amounts in Indian Rupees thousands