Panacea Biotec Ltd

BSE: 531349 | NSE: PANACEABIO | ISIN: INE922B01023 
Market Cap: [Rs.Cr.] 1,027 | Face Value: [Rs.] 1
Industry: Pharmaceuticals - Indian - Bulk Drugs & Formln

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Management Discussion and Analysis

Industry Structure & Developments

Global Vaccine Industry

In the last decade, vaccines have emerged as a strong part of the global healthcaremarkets. Vaccines, which are now preventing over 3 millions deaths annually, have alsohelped in improving the quality of life of millions across the globe. The pharmaceuticalcompanies worldwide have increased their focus on vaccines which appears to be a keysource of future growth. The growth of the vaccine industry can be largely attributed toincreased awareness worldwide supported by increased availability of vaccines ataffordable prices.

The global vaccine market was valued at US$ 27 billion in the year 2012 and is expectedto grow to around US$ 32 billion by the end of year 2013. It is expected that it willcontinue to grow at a CAGR of 11% to reach US$ 84 billion by year 2022. Its future growthwill be backed by vaccines developed through technical advancements for emerginginfectious diseases, cancers and allergies etc. The market is also expected to seecontinuous improvement not only in vaccine design but also in the delivery methodologies.There are several critical vaccines which are currently under different stages of researchand development across the globe including vaccines for HIV, malaria, tuberculosis, dengueetc. While the developed world is looking for these novel vaccines, the developing worldstill requires increased availability of currently available vaccines at affordableprices.

Indian Vaccine Market

India continues to be a major supplier of vaccines. Leveraging its low cost vaccines,India now caters for more than 40% of the global vaccine supply. Its own vaccine market isestimated at around US$900 million and is expected to grow at a CAGR of 23% from 2011 to2013.

India is on the verge of being declared polio free country as it has not recorded anycase of polio since January 2011. The country has now started focusing on increasing theimmunization of pentavalent vaccine as it has already included the same in theimmunization schedule of eight states by 2012. With its remarkable track record forproducing low cost vaccines and increasingly available funds for R&D, India is wellpositioned to take the lead in the creation of innovative affordable high quality vaccinesfor the developing world and cater to an ever growing demand of domestic as well asinternational market.

Global Pharmaceutical Market

The global pharmaceutical industry is going through a challenging time driven by trendssuch as increasing regulatory compliance requirements, patents going off, lower R&Dproductivity, pricing pressures from generic players and governments, globalization anddemographics. The global pharmaceuticals market reached US$962 billion, with a 2.4% growthin year 2012, its lowest growth in the last ten years. It is expected to grow at a CAGR of5.3% to reach US$ 1.25 trillion by 2017. While the US, Japan and other developed markets,coping with patent expiries are expected to grow by 1-4%, the major growth will be drivenby the pharmerging markets i.e. countries in Asia, Africa, Latin America and Australia.The major factor for this growth is due to the contribution made by 'pharmerging' markets,generics and the biologics space. Amongst all developed markets, the US still continues tobe the largest, followed by Japan and Germany. However, what's noteworthy is that bygrowing at a significantly higher rate, the pharmerging markets are expected to accountfor over 30% of the global market in 2017, up from 25% in 2012. In doing so, thepharmerging markets will, in the aggregate, exceed the size of the US market in 2017. Inthe year 2011 and 2012, few biggest blockbuster drugs lost patent protection. The impactof patent expiration or the "patent cliff" will continue by 2016. It isestimated that medicines that currently generate US$133 billion in US alone will losepatent protection and face generic competition.

* Total Unaudited and Audited Global Pharmaceutical Market By Region


2011 2007-2012 2013 2012-2017
Mkt Size *US$Bn Mkt Size **Const. US$ % Growth **Const. US$ % Growth **Const. US$ CAGR% **Const US$ Forecast % Growth **Const US$ CAGR %

**Const US$

Total unaudited and audited global market 962.1 959.0 2.4% 5.3% 5.3% 3.3% 5.3%
Total unaudited and audited market by region
North America 348.7 349.0 -1.0% 3.4% 3.0% -2.7 - 0.3% 0.7 - 3.7%
Europe (EU + non EU) 221.8 224.3 -0.8% 0.9% 2.4% -1.8 - 1.2% -0.4 - 2.6%
Asia (including Indian Sub-continent)/Africa/Australia 168.3 168.1 12.8% 12.8% 15.0% 11.4 - 14.4% 11.4 - 14.4%
Japan 112.1 110.5 0.0% 5.6% 3.0% 2.8 - 5.8% 1.7 - 4.7%
Latin America 72.5 68.6 10.9% 12.4% 12.0% 9.0 - 12.0% 10.0 - 13.0%

Source: IMS Health Market Prognosis, June 2013 *US$ uses actual quarterly exchangerates ** Constant $ uses Q4 12 average exchange rates

Notes: All forecasts are from IMS Market Prognosis 2013-2017 which provides a view ofthe audited and unaudited market, using audited sales and adjusting for unaudited sales.The forecasts are based on the June 2013 Market Prognosis release and includes IMS HealthAudited and Unaudited markets

Indian Pharmaceutical Market

India is one of the top five pharmaceutical emerging markets globally. It haspositioned itself as a front runner in a wide range of specialties involving complexdrugs' manufacture, development, and technology. The Indian pharmaceutical industry is ahighly knowledge based industry which is growing steadily and plays a major role in theIndian economy. The number of pharmaceutical companies are increasing their operations inIndia.

The Indian Pharmaceutical Industry is now ranked globally the 3rd largest in terms ofvolume and 13th largest in terms of value. The total market size of around Rs.1,233 bnincludes domestic consumption market of around Rs.600 bn (contributing around 49%) and theexports market being V around Rs.633 bn (contributing around 51%). The industrygrew at a CAGR of 13% during the past five years and is expected to grow at a robust CAGRof 15% during FY2012-17 given huge export potential coupled with steady growth in thedomestic formulation market.

The future growth in the domestic pharma market will be driven mainly due to increasein the penetration of medical facilities, increase in the prevalence of chronic diseases,rising per capita income and increase in the health insurance coverage. Growth in theexports of pharmaceutical products from India will be driven by patent expiries of themajor branded drugs across the world, particularly in the US market. The growth in the USmarket will be led by increasing generic penetration and healthy ANDA (Abbreviated NewDrug Application) pipeline of Indian pharma players.

Business Segments

Pharmaceutical Formulations

Domestic Sales and Marketing

Panacea Biotec has pan India presence through a structure of domestic strategicbusiness units (SBUs) operating through a network of distributors, depots and field force.The Company focuses on niche therapeutic segments with several established brandsattaining the leadership position in the market.

Panacea Biotec has six SBUs in the domestic pharmaceutical market catering to differentfocused therapeutic segments providing quality patient care in most of the majortherapeutic segments. The company has allocated the SBUs into two broad categories - SuperSpecialty and Acute & Chronic Care.

The Super Speciality business focuses on enhancing the quality of life of patients inneed of critical care with a range of formulations through 3 SBUs viz. Transplant SBUfocusing on organ transplantation, Nephrology SBU focusing on dialysis and OncoTrust SBUfocusing on oncology (cancer care).

The Acute & Chronic Care business focuses on multi-specialty therapies through 3SBUs viz. Diacar Alpha SBU focusing on diabetology, Procare SBU focusing ongastroenterology, orthopedics & pain management and Growcare SBU focusing on multiplespecialties.

The aim of each SBU is to attain leadership position in its chosen markets andestablish brand equity in respective therapeutic segment by way of innovative products andscientific marketing approach. The SBUs promote a portfolio of brands with a special focuson Orthopaedicians, Cardiologists, Diabetologists, General Physicians, Nephrologists,Oncologists, Haematologists, Chest Physicians, Surgeons, Dentists, Consulting Physicians,Pediatricians and Gastroen terologists.

Transplant SBU

The Transplant SBU contributes in prolonging the life of organ transplant recipientsand is responsible for marketing of the immuno-suppressive drugs in the therapy area ofpost multi-organ transplantation primarily kidney, liver, heart transplant etc. The SBUhas carved a niche in superspecialty segment and created a scientific image and hasachieved clear leadership in these segments.

Transplant SBU's brand portfolio includes PanGraf (Tacrolimus), Panimun Bioral(Cyclosporine), Mycept (Mycophenolate Mofetil), Mycept-S (Mycophenolate Sodium), Siropan(Sirolimus), EverGraf (Everolimus), Imuza (Azathioprine), VagaCyte (Valganciclovir) andAmphoject (Liposomal Amphotericin B).

This SBU is planning to enter newer segments and introduce many new products. There areplans to enter segments like anti-rejection segment to provide an end-to-end solution forthe organ transplant recipients.

It is also exploring the autoimmune segment in Hematology, Bone Marrow Transplant andRheumatology where there is immense scope for the use of the entire immunosuppressants andanti-infective range.

Nephrology SBU

Chronic kidney disease (CKD) is a worldwide health problem and incidence of kidneyfailure are rising significantly. People suffering from high blood pressure or diabetesare more prone to CKD. According to recent trends, population of people suffering fromhypertension & diabetes is on a steep rise leading to rise in number of patientsdiagnosed with CKD. Dialysis is primarily used as an optimal therapy to compensate thelost kidney function in such patients.

The Nephrology SBU is focused on providing "End to End solution in CKDmanagement" thereby catering to need of every CKD patient. The SBU is focused onrenal anemia management, renal nutrition and CKD-MBD (Mineral Bone Disorders) therapy.

The SBU currently has a brand portfolio of Epotrust (Erythropoietin), Overcom (IronSucrose), Alphadol (Alfacalcidol), SevBait & SevBait-DT (Sevelamer Carbonate), Fosbait(Lanthanum Carbonate), Mimcipar (Cinacalcet Hydrochloride), K-bait (Calcium PolystyreneSulphonate), Proseventy and Renhold.

The renal anemia segment is the largest contributor to the overall Nephrology businesshaving a share of 52% to the total business. Epotrust is amongst the fastest growing brandof Erythropoietinin anemia market & offers a wide range of SKU's (from PFS to Vials)catering the need of individual patients.

OncoTrust SBU

Cancer is the second leading cause of death worldwide. Like the western world, theperil of cancer has reached huge proportions in India with nearly 1 million new cancercases getting added every year to the existing cancer burden. The increasing cancerincidence has witnessed the Indian oncology community fighting this battle against cancerwith more dedication.

Oncotrust, the third Super Specialty SBU, is working with an object to make existingcancer treatment more affordable and also to develop NDDS cytotoxic drugs that enable thepatients to get high quality and affordable medicine for better cancer management alongwith highest order of safety.

The state-of-the-art Cytotoxic (anti-cancer) products facility at Baddi is going to befully operational in FY13-14 & demonstrates organizational commitment to serve morepatients in fighting this dreadful disease.

The new product launch by this SBU during the year included Neupokine (Filgrastim PFS)& re-launch of PeggTrust (PegFilgrastim) with new formulation matching internationalstandards.

The OncoTrust SBU has further consolidated its position as a profitable BU bycontinuing to grow year on year. This SBU has 15 products encompassing the major therapyarea in cancer like lung, breast & colorectal cancer, gliomas, haematology andsupportive care.

Diacar Alpha SBU

Today, India is the diabetes and hypertension capital of the world and Indians arefurther heading towards becoming the CAD (coronary artery disease) capital of the world.WHO estimates that diabetes related mortality may increase upto 35% by 2015. Today, Indiais poised at the ascending limb of epidemic diabetes. By the end of year 2025, 70 millionwill suffer from diabetes and associated complications. Similarly, cardiovascular segmentis consistently showing high growth every year.

Diacar Alpha SBU is the highest revenue contributing SBU of the company with dedicatedmarketing and sales infrastructure for Diabetes and Cardiovascular therapy management.

Diacar Alpha focuses on Endocrinologists, Diabetologists, \ Cardiologists andPhysicians in a fiercely competitive scenario and has achieved significant leadershipposition in oral anti-diabetic segment.

The flagship brand of Diacar Alpha is Glizid-M (Gliclazide & Metformin) which isthe No. 1 brand within the Company across all SBUs.

The brand portfolio of Diacar Alpha includes:

Oral Hypoglycemic agents: Glizid, Glizid-MR & Glizid-MOD> (Gliclazide Modifiedrelease), Betaglim (Glimepiride), Betaglim-M (Glimepiride & Metformin), Metlong &Metlong-DS (Metformin), Glizid Total and GlimTotal (Glimepiride, Metformin &Pioglitazone);

Cardiovascular agents: World's 1st Modified Release and patented Ramipril - RAMY(modified release Ramipril with double peaks) developed through in-house patentedtechnology, Lower-A (Atorvastatin), Lower TG (Atorvastatin & Fenofibrate) and Tecbeta(Metoprolol Succinate); and

Co-prescriptives: Myelogen Forte (Methylcobalamin 1500 mcg, Alpha Lipoic Acid 100 mg,Enzogenol 50 mg, Vitamin B6 3 mg & Folic Acid 1.5 mg) & Myelogen PG(Methylcobalamin 1500 mcg, Pregabalin 75 mg SR, Folic Acid 5 mg & PyridoxineHydrochloride 20 mg) which has gained wide spread usage and is growing fast. In co-morbidconditions like Diabetic Peripheral Neuropathy.

Procare SBU

Procare SBU caters to chronic care segment of Orthopedic and Gastroenterology therapythrough focus on specific disease management with deep rooting in osteoarthritismanagement. Within orthopedics, SBU's focus is on osteoporosis, osteoarthritis andrheumatoid arthritis management and within the gastroenterology focus is on constipation,anorectal disorders, acid-peptic disorders and product range in liver disease management.

This SBU promotes a portfolio of brands with special focus on Orthopaedicians, Surgeonsand Gastroenterologists along with Consulting and General Physicians. The brand portfolioof Procare includes:

Gastrointestinal: Sitcom (Euphorbia Prostrata) Tablets and Cream, Sitcom Forte(Euphorbia Prostrata & Calcium Dobesilate) tablets, Sitcom LD (Euphorbia Prostrata& Lidocaine) cream, Livoluk (Lactulose), Livoluk Fibre (Lactulose & Ispaghulahusk), Gush (Lactitol Monohydrate & Ispaghula Husk), ILAone (Ilaprazole) & ODpep(Pantoprazole & Domperidone);

Chronic liver diseases: Uciro (Ursodeo Xycholic Acid);

Anti-osteoporosis: Vacosteo (Zoledronic acid, 3rd generation injectablebisphosphonate), Alphadol-C, (Alfacalcidol), Calcom (Calcium Carbonate, Calcitriol &Zinc) & Monthiba (ibandronic Acid);

Anti-arthritis: Willgo (Nimesulide), KondroOD (Glucosamine) & Kondro Acute(Glucosamine & Diacerein), Kondroflex (Collagen peptide, Glucosamine & Vitamin C)& Kondrogen (Collagen peptide);

Pain Management: Nimulid-MR (Nimesulide & Tizanidine), Delupa-P (Aceclofenac &Paracetamol), Delupa-TH (Aceclofenac & Thiocolchicoside), Delupa-SP (Aceclofenac &Serratiopeptidase), Delupa-CR (Aceclofenac) & Dolzero; and

Gout and Hyperuricemia: Febarto (Febuxostat) launched during the year.

Sitcom has evolved as the first choice among anti-hemorrhoidals withinGastroenterologists and Surgeons. This success has motivated the SBU to launch innovativeformulations in the form of Sitcom Forte tablets and Sitcom LD cream for the first time inIndia.

Growcare SBU

Growcare SBU focuses on gastrointestinal (GI), anti hemorrhoidal, cough & cold,vitamins and minerals and pain management therapies.

Committed to reduce the burden of these diseases, Growcare marks the Company's presencein therapy areas like anorectal disorders (piles and hemorrhoids), gastrointestinal,respiratory (cough, cold and allergy), anti-infectives, pain relievers, vitamins andminerals. The different specialties serviced by Growcare SBU are General Physicians,Consulting Physicians, ENT Surgeons, Pediatricians and General Surgeons.

The brand portfolio of Growcare includes:

• Anti hemorrhoidal: Thank OD Tablet & Cream, Thank OD Forte & LD Cream;

• Anti-infective: Ocimix (Ornidazole), ValueCef (Cefixime), ValueCef-O (Cefiximeand Ofloxacin);

• Cough, Cold and Fever: Cough syrups range Toff MD, Toff DC & Toffexpectorant, Orangemol Suspension;

• Tecpara (technological advanced Paracetamol) an in house R&D patentedproduct), Tecpara-AC and Tecpara-D;

• Pain Management: Nimulid & Nimulid-MD (Mouth dissolving), Nimulid SP &Nimulid-HF;

• Gastrointestinal: EnBa, EnBa-Rab, FiberFOS, HiFibre and Livoluk kid;

• Vitamins & Minerals: Wholesum; and

• Anti TB: Myser (Cycloserine) & Myobid (Ethionamide).

Brands Review

Over the years, Panacea Biotec has established leading brands that enjoy top of themind recall by the medical fraternity. The Company's brands command excellent market sharein their therapeutic segments. According to AIOCD AWACS (MAT JUN'13) Sales value, PanaceaBiotec is among Top 50 companies in the Indian Pharmaceutical Market with Nephrologists,Dentists, Orthopaedicians and Diabetologists giving the best support. As per StockistSecondary Audit of AIOCD AWACS (MAT JUN'13), Glizid-M stands at 206th rank among topbrands in the Indian Pharmaceutical market and retain number one position within itscategory.

Glizid group grew by 18% during the year maintaining its leadership among Gliclazidesulphonyl urea market. Euphorbia prostrate (Sitcom and Thank OD) family also grew by 18%and is number one prescribed therapy in Hemorrhoids management. Mycept and PanGraf grew by12% and 13% respectively in FY 12-13, are also leading brands in the Organ Transplantationsegment where the Company enjoys market leadership position.

Brand Standing and Market share

The Company's key brands across therapeutic categories and their ranking/ market sharein India are:

Brands Market Share % Ranking
Diabetes and Cardiac Care:
Glizid M 25.2 1
Glizid 40mg 36.1 1
Glizid 80mg 25.9 1
Glizid MR 30mg 17.5 2
Glizid MR 60mg 10.3 3
Glizid Total 13.4 3
Pain Management:
Nimulid MD 5.7 3
Nimulid 100mg 7.4 3
Nimulid MR 11.4 2
Nimulid SP 8.9 4
Kondro OD 15.0 3
Kondro Acute 14.1 3
Vacosteo 10.2 2
Tuberculosis Management:
Myser 6.0 3
Myobid 2.8 5
Livoluk 5.2 4
Sitcom Tabs 7.9 4
Thank OD Tabs 7.3 5
Cilamin 96.5 1

*Source: AIOCD AWACS JUN'13.

*Market Share and rank is calculated within its immediate operating market i.e. thestrength or the immediate market (wherever applicable).

Panimum Bioral, Mycept and PanGraf are also leading brands in the Organ Transplantationsegment but have a poor reflection in IMS SSA/ AIOCD audit does not track institutionaland hospital sales.

New Product Launches

Panacea Biotec continues to expand its product portfolio by launching new productsevery year. During the year, the Company launched new products in various therapeuticcategories including:

• DeLupa-SP (aceclofenac & serratiopeptidase), Delupa-CR (aceclofenac CR),Delupa-P (aceclofenac & paracetamol), Tecpara-AC (aceclofenac & paracetamol),Tecpara-D (diclofenac & paracetamol) in Pain/Analgesics segment;

• Line extensions of flagship brands GLIZID and BETAGLIM family; including SemiGlizid-M, Glizid Total P 7.5, Glizid-M OD 30, Semi Glim Total 1, Semi Glim Total 2;

• KondroFlex (Collagen Peptide) in anti-arthritic management;

• Vagacyte 450 (Valganciclovir), Amphoject (Amphotericin), EPOtrust 5K(Erythropoietin), SEVBAIT & SEVBAIT-DT (Sevelamer), NEUPOKINE (Pegylated r-HumanGranulocyte Colony Stimul atin g Factor) in Organ transplant and immuno-suppressantsmarket; and

• Sitcom Forte, Thank OD Forte, Sitcom LD, Thank OD LD line extensions inAnti-hemorrhoids market.

International Pharmaceuticals Business

The year under review was a year of sustained growth and expansion for InternationalPharmaceuticals Business by strengthening the existing trade business in market place andventuring into new markets. During the year, the company's international pharmaceuticalformulation business generated revenue of Rs.1,278 million with a spetacular growth of40%.

During the year, the Company received its first USFDA approval for Tacrolimus Capsulesand launched the same in December 2012 in US market through the Company's strategicalliance partner Kremers Urban Inc. (part of UCB Group). During the year, Panacea Biotecalso entered in another strategic alliance with Osmotica Pharmaceuticals for research,development and commercialization of 18 drug delivery based, high barrier to entry genericpharmaceuticals products in US. The Company has recently filed its first ANDA with USFDAunder this collaboration.

The other achievements for international pharmaceutical formulation business during theyear includes:

• Panimun Bioral and Mycept got included in Russia MOH Federal list. PanimunBioral is the No. 1 brand of Cyclosporine in terms of units supplied to MOH Russia;

• Successfully launched 2 new products, Alphadol and Livoluk solution in Russia;

• Continuous preferred supplier to MOH Sri Lanka for Nephrology products;

• Glizid-MR and Dolzero are the fastest growing brand in respective categories inSri Lanka; and

• Entire Nephrology range of products is enlisted in MOH Kenya with regularsupplies to MOH.

During the current year, the Company is scheduled to enter into other potential marketslike South Africa, Egypt and Saudi Arabia. The Company has been successfully registered inUAE and commercialization of products is expected to start during the current year.

With this robust strategies and growth plans, the Company is aiming to achieve aprojected CAGR of 43% in International Pharmaceutical business over next 5 years.

Vaccines Business

Panacea Biotec has always adopted a long-term strategy of development of newer vaccinesand believes immunisation is one of the most important & cost effective ways ofreducing morbidity and mortality.

The Company is one of the leading vaccine producers in the country and has significantpresence in both institutional and private vaccines markets in India and internationalmarkets. It has created a strong portfolio of innovative vaccines against critical andlife threatening diseases like Polio, Hepatitis B, Diphtheria, Tetanus, Pertussis,Haemophilus Influenza type B (Hib), pandemic flu (H1N1), etc. The Company has over theyears developed advanced fully-liquid combination vaccines, opening a whole new dimensiontowards protecting multiple diseases with a single vaccine.

The Company has been playing a leadership role in the Vaccine R&D, manufacturingand supply to meet demands of National and International agencies for the developingworld. Panacea Biotec has made vital contributions in the development of vaccine marketand also improved the life of millions of children by providing innovative vaccines ataffordable prices across the globe. The Company is continuing with its efforts tostrengthen its vaccines portfolio by adding more vaccines in future.

Panacea Biotec has played a key role in polio eradication program by supplying around10 billion doses of Oral Polio Vaccines to Government of India and UN Agencies which ledto polio free India since 2011. Panacea Biotec continues to be committed to polioeradication programme and its objectives as laid down in GPEI.

Panacea Vaccines

During the year, the Company launched its SBU 'Panacea Vaccines, for marketing itsinnovative pediatric vaccines in the domestic vaccines market. The major brands of thisSBU includes Easyfive-TT (DTwP-HepB-Hib), Easyfour-TT (DTwP-Hib), Polprotec (enhancedInjectable Polio Vaccine), NovoHib (Haemophilus Influenza Type B vaccine) and Primopol(Trivalent Oral Polio Vaccine). The SBU is targeting to achieve a significant market sharein the pediatric combination vaccines segment in India.

International Vaccines Business

In the international markets, the Company focuses on the emerging and ROW countries.Over the last couple of years strategic collaborations have been initiated in more than 35countries with customized business models. Till date vaccines have been registered in 11countries with further registrations in around 20 countries expected in the near future.

During the year, the Company's international vaccine business achieved a revenue ofRs.38.6 million, from the overseas markets. Bangladesh, Peru, Nigeria, Philippines,Botswana were added as the new markets in addition to the existing markets of Chile,Pakistan, Botswana, Uganda and Swaziland etc.

During the year, the Company also entered into a strategic alliance with JSC BinnopharmInc. Russia for marketing of its Haemophilus influenzae type B (Hib) vaccines in theRussian Federation. The Company is currently in process of registering its Hib vaccines inRussia. The Company is also exploring further opportunities to expand the existingalliance.

Supply Chain Management & Logistics Network

Panacea Biotec has strong Supply Chain Management (SCM) systems designed for creatingend-to end visibility and controls right from sourcing of materials till collection ofreceivables in both Pharmaceuticals and Vaccines segments. The objective has been toensure customer satisfaction by monitoring and improving delive y performance on variousparameters including Turn-around Time (TAT), On-time in (Full (OTIF) and Error-freedelivery of products and promotional materials.

The Company has Pan-India sales and marketing network covering 600 districts in Indiaand targets more than 1.5 mil lion customers through more than1 400 train ed marketing andsales professionals. Panacea Biotec Ltd. has strong logistics network comprising of on ecentral warehouse and 31 Sales Depots/CFA (comprising of 22 Sales Depots/CFAs for pharmaproducts & 9 CFAs for vaccines). Product availability across India is done throughvast distributor network of more than 1,500 Pharma Distributors and 325 VaccineDistributors.

The Company has its Central Warehouse at Delhi and has expertise in cold chainmanagement for storage and distribution of Vaccines under monitored conditions using asystem of Vaccine Vial Monitors, Data Loggers, Ice Boxes, Coolant, Cold Rooms andRefrigerated Vehicles and Tyvek Sheet for sending temperature controlled productsoverseas. This ensures that the Vaccines remain safe and effective against changes in thevariant temperature conditions during transit.

Manufacturing Facilities

The Company's manufacturing facilities for vaccines and pharmaceutical formulations aresituated in India in Delhi, at Lalru in Punjab, at Baddi in Himachal Pradesh and at NaviMumbai in Maharashtra. The Company also has state of the art integrated facility for bulkvaccines, antigens and biopharmaceuticals at Lalru in Punjab. The manufacturing facilitieshave been set up in compliance with international regulatory standards including WHO-cGMPand European Union standards.

The Company's manufacturing expertise lies in various solid, semi-solid & liquidoral dosage forms and vaccines such as:

• Oral-solids - Conventional tablets/capsules, Controlled/ delayed release/entericcoated tablets and capsules, Tablet in Tablet, Tablet in Capsule, Multi Layered Capsules,Hard gelatin/Soft Gelatin capsules, Mouth Dissolving/ Chewable Tablets, beadsencapsulation, Coating (film, sugar & functional), Taste masking and fast-dissolvingtablets;

• Semi-solids - Ointments/Creams/Gels, Transdermal Drug Delivery System;

• Liquids - Suspensions/Syrups/Solutions;

• Vaccines - Recombinant Vaccines, Combination Vaccines, Cell culture Vaccines andlive vaccines; and

• Anti-cancer - Injectable.

Pharmaceutical Formulations Facility at Baddi

The Company has its state-of-the-art pharmaceuticals formulations facility at Baddi,Himachal Pradesh. The facility has been built in compliance with cGMP standards, receivedencouraging acclaim and numerous plant approvals from various regulatory authorities. Thefacility has been approved by National Regulatory Authority of India (NRA) and has alsobeen audited and certified as cGMP compliant by various regulatory agencies including theUSFDA, BfArM Germany and ANVISA Brazil. The Company's soft gelatin manufacturing facilityis also approved for markets in European Union.

The Company also has an Anti-Cancer Formulation facility with two lines dedicated forLiquid & Lyophilized vials as well as pilot scale up batches complying to USFDA, EU,ROW and cGMP norms with a capacity of 1.2 million vials per annum on three shift basis.

Vaccine Antigens & Biopharmaceuticals at Lalru

The Company has bulk vaccine manufacturing facilities at Lalru in Punjab with dedicatedblocks for manufacture of recombinant, bacterial & tetanus vaccine bulk & antigensand an integrated block for cell culture based vaccines and biopharmaceuticals. Theintegrated block comprises of three independent suites for manufacture of viral proteins/vaccines, non-viral recombinant bio-therapeutics (e.g. biosimilar molecules on cellculture in both conventional as well as disposable formats), egg based viral vaccines andrecombinant & conventional vaccines in microbial cultures. All the blocks have beendesigned, constructed and adapted following current Good Manufacturing Practices (cGMP).

The facilities have been approved by NRA for manufacture of Diphtheria Toxoid, TetanusToxoid, Whole cell Pertussis, Recombinant Hepatitis B surface antigen, Haemophilusinfluenzae type B conjugate bulk (Hib) and Inactivated H1N1 split viron influenza vaccinebulk (by traditional egg based technology).

Vaccines Formulation Facility at Baddi

The Company's state-of-the-art vaccine formulation facility at Baddi in HimachalPradesh, located in a complex of 23 acres of land, comprises of two blocks. Thethree-storey main building consisting of production, quality control and quality assuranceis spread over approximately 2,800 square meters construction area at each floor and afive-storey block of Warehouse-cum-Cold Storage facility is spread over approximately2,500 square meters on each floor.

The facility has two filling lines complying with cGMP norms, one for filling ofinjectable liquid Vaccines in pre-filled syringe (PFS) and another switchable line forfilling of liquid & lyophilized Vaccines in vials. The total filling capacity of thisfacility is 600 million doses per annum capable of being increased by addition of thirdline to one billion doses per annum. The vial line facility has been modified to enhancethe formulation capacity of pentavalent vaccine in order to meet the increased requirementof vaccine upon WHO pre-qualification.

The facility has been approved by NRA for manufacturing of vaccines as per WHO cGMPnorms. The facility has been successfully inspected by WHO in the month of Feb-Mar'13 aspart of assessment for WHO pre-qualification of Pentavalent vaccine Easyfive-TT. Thissuccessful assessment soon will lead to WHO pre-qualification of Easyfive-TT vaccine fromBaddi and its supply to UN vaccines procurement agencies (UNICEF, PAHO) and other ROWcountries.

Vaccines Formulation Facility in New Delhi

The Company's vaccines formulation facility in New Delhi is a c-GMP compliant facilityfor Oral Polio Vaccines (tOPV, mOPV1, mOPV3 & bOPV) and has also been approved by NRA.The facility has built up area of more than 50,000 sq. ft. and has one vial filling linededicated to Oral Polio Vaccines. The total annual production capacity of the facility is800 million doses of Oral Polio vaccines in two shift operation.

Pharmaceutical Formulations Facility in New Delhi

The Company's pharmaceuticals formulation facility in New Delhi caters to therequirements of products for emerging and ROW markets.

Manufacturing Facility for Anti-Cancer Products at Navi Mumbai

The Company has a manufacturing facility for manufacture of anti-cancer products(Injectables & Tablets) at Mahape, Navi Mumbai. This state-of-the-art containmentfacility (with isolator technology) is unique and capable of providing clinical supply andproduction of high value cytotoxic products. The Company is manufacturing its innovativeproduct in Oncology segment, viz. PacliALL in this facility.

Research & Development

Research & Development is one of the core strengths of Panacea Biotec. With itsfour highly sophisticated ultra- modern R&D centers manned with around 300 qualifiedand experienced scientists, the Company has built a strong R&D base to support itsbusiness segments, vaccines, pharmaceutical formulations and biopharmaceuticals. The keyareas of research & development includes new vaccine development, biopharmaceuticals,proteins, peptides, monoclonal antibodies, novel drug delivery systems, advanced drugdelivery system and drug discovery (small molecules), in compliance with internationalregulatory standards. The Company's R&D Centers have been accorded registration byDepartment of Scientific and Industrial Research, Ministry of Science & Technology,New Delhi.

The Company also has a state-of-the-art animal house and facilities for carrying outpre-clinical research and for undertaking in-vitro and in-vivo microbiology, pharmacology,safety, efficacy, proof of concept and toxicology studies.

As a result of its research efforts, the Company has been granted more than 400 patentsin India and worldwide including in major countries like USA, Australia, Eurasia, SouthAfrica and Singapore.

For the purpose of research and development of technology, the Company had receivedgrants of Rs.112 million and Rs.20 million from Department of Science & IndustrialResearch and Department of Science & Technology respectively, in earlier years. TheCompany also receive subsidized loan of Rs.12.5 million out of a total sanctioned amountof Rs.50 million from Technology Development Board.

During the year under review, the Company has made a total expenditure of Rs.901.6million on R&D as against Rs.1,026.5 million during previous fiscal. The revenueexpenditure on R&D was Rs.842.8 million in fiscal 2013, as compared to Rs.872.2million in fiscal 2012. The investment by way of capital expenditure on R&D has beenRs.58.8 million in current fiscal as compared to Rs.154.3 million in previous fiscal year.

LAKSH Drug Discovery R&D Center

The Company has its state-of-the-art research center Laksh which is dedicated fordevelopment of New Chemical Entities (NCEs, small molecules) and API research at Mohali,Punjab. LAKSH is spread over an area of 70,000 sq. ft. with sophisticated laboratoriesequipped with modern instruments to perform NCE research. This R&D Center employsabout 80 dedicated scientists including 12 PhDs.

The focus of research is on development of NCEs for the treatment of diabetes, centralnervous system (CNS) disorders and infectious diseases. This R&D center hassuccessfully delivered three Pre-Clinical Candidates (PCCs), two of which are currentlyunder investigation for IND (Investigational New Drug) filing at different stages of phaseI studies in India. Ten PCT applications and more than 50 patent applications in nationalphases have been filed from this Center. One of the patents has already been granted inthe US.

SAMPANN Drug Delivery R&D Center

SAMPANN is an integrated research and development facility for drug product,biopharmaceutical and vaccine formulation development with a world class state-of-the-artinfrastructure, adequate resources and skilled intellectual manpower. Innovativetechnologies like nano-crystal, solid-solid dispersion for highly variable drugs,hydro-gel based topical drug delivery system of peptides and herbal drugs,self-emulsifying drug delivery system (SEDDS) and controlled release drug delivery systemsin different therapeutic areas have been successfull y used and continuously developed toaddress unmet medical needs and patient convenience & compliance. Considering the needto adopt savvy development and marketing tactics to drive blockbuster product, variousregulatory filings have been done in US, EU and Latin America for anti-platelet andvarious immuno-suppressant drugs. As a major milestone, the company has launched its firstproduct Tacrolimus capsules 0.5mg, 1.0 mg & 2.0 mg in the US Market.

SAMPANN has prioritized R&D efforts in areas with the greatest scientific andcommercial promise resulting in a rich and diverse product pipeline for genericdevelopment and intellectual property development.

Vaccine Formulation Research and Development at Sampann Drug Delivery has anoutstanding portfolio of innovative pediatric vaccines which protect children againstdreadful diseases. These include diseases such as Diphtheria, Tetanus, Pertussis,Hepatitis B, Haemophilus influenza type b and Polio. Further to provide preventivetreatment for dreadful diseases, Sampann Vaccine R&D is developing new generationvaccines like Pneumococcal Vaccine-10-valent (Nucovac), Japanese encephalitis (JE)vaccine, Universal flu vaccine and Dengue vaccine. Easyfour pol vaccine and Easysixvaccine are novel combination vaccines against 5 and 6 diseases respectively which aretargeted to undergo Phase-III clinical trials shortly. Other vaccines which are in thepipeline include H1N1 vaccine (Pandyflu), Sabin-Inactivated Polio vaccine (S-IPV),Neisseria meningitidis vaccine (Tetravalent) and Easyfour-TT vaccine.

OneStream Research Center, New Delhi

OneStream Research Center at New Delhi is spread over 26,000 Sq ft. area in threefloors. The state-of-the-art R&D facility brings together rich experience of past somany years to develop novel, effective and affordable vaccines and biopharmaceuticals forprevention against various epidemic/endemic life threatening diseases for global markets.

OneStream R&D is backed by a team of 65 highly trained and skilled scientistsincluding 8 PhDs with excellent credentials.

OneStream R&D is dedicated to carry out extensive research in vaccines andbiological using genetic engineering, molecular biology, genomics tools, animal cellculture, fermentation, purification, formulation, immunology and analytical testingtechniques. OneStream has the infrastructure and expertise to take an idea throughdifferent stages of product development towards a successful commercialization.OneStream's focus is on development of novel preventive & therapeutic vaccines, noveltherapeutic peptides and therapeutic full y h uman monoclonal antibodies for treatinginfectious diseases and the lifestyle related disorders. OneStream is also activelyinvolved in developing different biosimilar therapeutic products.

OneStream has dedicated classified areas to work with pathogenic bacteria, viruses,cell culture, clone development, peptides & cell based assays. The center haswell-established P3 facility to handle pathogenic viruses like H1N1, Seasonal flu & JEvirus. The Centre has indigenously developed and licensed Pandy-flu against H1N1 virus(Swine flu).

During the year under review, the focus of the center is development of Company'scandidate vaccine for Pneumococcal disease which is in phase-I clinical trial, Vero cellbased live attenuated tetravalent Dengue vaccine which is awaited for safety evaluationfrom DBT & Darbepoetin is moving ahead towards tech transfer and pre-clinical studies.

GRAN D R&D Center at Navi Mumbai

Global Research and Development (GRAND) Center at Mahape, Navi Mumbai is involved indevelopment of products for international as well as I ndian market.

The primary objective of research & product development is to meet unmettherapeutic needs of the society, i.e. cancer, organ transplant rejection, etc. andprovide therapeutic advantage to the patients. The main focus of research is to developproducts using novel technologies like:

• Gastro-retentive Spatially Programmed Orally Retentive Technology (SPORT) forbioavailability enhancement;

• Pulsatile Drug Delivery for bioavailability enhancement and better patientcompliance;

• Matrix controlled drug delivery for better patient compliance;

• Oral Fast Dissolving Films for better patient compliance;

• Microspheres for better patient compliance;

• Nanoparticles for improved safety and efficacy; and

• Liposomes for better safety and efficacy.

Over the years GRAND has emerged as a strong contributor to intellectual property ofPanacea Biotec.

Briefly, innovative product development at GRAND is categorized in followingsub-classes based on the route of drug administration:

• Oral Drug Delivery: Controlled and modified oral delivery of bioactives and DrugDelivery for Immunosuppressant drug.

• Parenteral Drug Delivery: Nanoparticles: First indigeneousl y developednanotechnol ogy based parenteral product for delivery of Paclitaxel (PacliALL) has beenlaunched in Indian Market; Microparticles: Depot Injectable Formulations based onmicroparticles for delivery of peptide/drugs; and Liposomes: Products involving theconcept of'Stealth" liposomes.

Quality Assurance

Quality is among the most important reasons to encourage a customer to buy a product.Total Quality Management has always been the foundation stone of the Company which hasresulted in achieving greater milestones in the past couple of years. At Panacea Biotec,quality is in-built in products & services on continual basis with internal andexternal customers feedback and is integrated in each step of R&D, production,packaging, storage, marketing, sales & distribution. The Company is committed toadhere to the highest quality standards and regulatory compliance for products which areenabled through a highly qualified, techno-innovative & dedicated team.

Clinical Research

Clinical Research plays a crucial role in the process of drug development. Clinicaldevelopment establishes the safety and efficacy of a new drug product involvingsignificant expertise, time and investment.

The year 2012-13 witnessed several milestone achievements from Clinical ResearchOperations, including: First-in-man Phase I study for anti-diabetic new chemical entity(NCE), Pre-IND meetings with USFDA for novel drug delivery products; and scientific advicemeetings with WHO and NORCB, Egypt for 10-valent conjugate pneumococcal and pentavalentvaccine, respectively.

Intellectual Property

The Company has a full-fledged Intellectual Property Rights department which managesall the Intellectual Property related functions from inception to enforcement. The Companyhas been granted 33 product patents worldwide for different products/ technologies.

As at the end of the year under review, the Company has filed around 1,510 patentapplications worldwide including 225 Indian patent applications and 95 applications filedthrough the PCT (Patent Cooperation Treaty) route. Out of the total number of patentapplications filed, around 415 patents had been granted / accepted for grant including inIndia. Apart from this, the Company had in-licensed several patent applications, some ofwhich are under process in different countries of the world. During the year under review,6 patents were granted in Australia, Eurasia, South Africa, Singapore, USA and India.

So far the Company has filed over 720 domestic applications for registration of TradeMarks of which 436 have been registered including 4 trade mark applications registeredduring the year under review. In addition to this, the Company has filed 519 InternationalTrade Mark applications in various countries of which 276 have been granted.

Besides this, the Company had filed 221 applications for registration of Copyrights ofwhich 115 had been registered. The Company has till date also got registered 4 DesignApplications.

Human Resources

Panacea Biotec believes that for any high performing organization, its employees are atthe core of its existence. The Company continues to strive at providing employees with arewarding, productive and successful association. The Company's HR strategies are aimed atfinding a balance between reducing costs and investing in the added value of employees.

The Company has a total workforce of around 3,300 employees out of which 1,900 areskilled employees including corporate and managerial staff, sales staff and staff locatedat its manufacturing facilities. There are around 300 scientists engaged in R&Dcenters, around 1,000 employees engaged in production, Quality Control & QualityAssurance and over 1,400 engaged in sales, marketing and logistics.

Information Technology

In the past few years there have been huge changes in the world of informationtechnology and as a result, there is increase in productivity. Information technology haschanged the way we work and has allowed us to be more productive on the job.

Panacea Biotec has successfully re-implemented the Enterprise Application (SAP) andBusiness Process Re-engineering in the last financial year. As a result, Panacea Biotechas been able to optimize some of the business processes, it could improve the quality andreduce the costs. Also it has implemented the approval system for Purchase requisition,Purchase Orders, Leave sanction, Travel request through emails, which has helped reducethe time consumed in these activities.

Panacea Biotec always aims to fulfill the compliance for Software and License andaccordingly the company has started implementation of the tools to monitor theinstallation of software and license.

By using new technologies like Virtualization and Cloud Computing, InformationTechnology has been able to reduce the operational cost while maintaining the high qualitystandard of services.

Internal Audit & Control System

Panacea Biotec has a comprehensive internal control system that commensurate with itssize and nature of operations. These cover all manufacturing and research &development facilities, warehouses and sales offices besides corporate office.

The internal controls have been developed and implemented at each business processlevel across the Company. The user level responsibilities are constantly shared with keyusers for their implementation and compliance. The internal control systems are furthertested on a sample basis by internal auditors every quarter and also by competentpersonnel of the Company and are reviewed by the Management to ensure that processes andcontrols are in place and working as intended in achieving efficiency of operations,customer focus, financial reporting and compliance of applicable contracts, laws, rulesand regulations. The Company controls its revenue and capital expenditure budgets throughan effective SAP fund management module.

Further, internal audits are conducted periodically by independent Chartered Accountantfirms appointed by the Audit Committee of the Board of Directors. The Audit Committeecomprising of independent directors actively reviews the adequacy and effectiveness ofinternal controls, internal audit systems and advises improvements as may be required. Anymaterial change in the business process or outlook is reported to the Audit Committee andthe Board of Directors. Post audit follow-ups are carried out to ensure identified risksare addressed and recommendations of the Audit Committee are implemented.

Subsidiaries, Joint Ventures, Collaborations & Tie-ups

The Company continues to nurture and expand its relations with its collaborationpartners. The Company has several collaborations & tie-ups including through itssubsidiaries.


Best On Health Ltd: The Company's wholly-owned subsidiary (WOS) namely Best On HealthLtd. ("BOH"), which owns a prime immovable property being used by the Company asits Corporate Office at New Delhi and land at Pataudi Road, Gurgaon has charted out a planfor diversification in construction and development of township as part of its futuregrowth plans.

BOH has 6 wholly owned subsidiaries (WOS), viz. Radicura & Co. Ltd., PanaceaHospitality Services Pvt. Ltd., Sunanda Steel Company Ltd., Panacea Educational InstitutePvt. Ltd., Best on Health Foods Ltd. & Nirmala Organic Farms & Resorts Pvt. Ltd.Nirmala Organic Farms and Resorts Pvt. Ltd. owns land in Rajasthan as part of its plan tocarry out the business of agriculture farming, cultivation setting up motels, touristresorts, etc.

Lakshmi & Manager Holdings Ltd.: Lakshmi & Manager Holdings Ltd. (LMH), a WOSof the Company, involved into carrying the business of trading in securities of thecompanies. This company has a WOS Trinidhi Finance Pvt. Ltd., which possess NBFC licensefrom RBI and is involved in carrying out the business of non-banking financing activity.LMH also holds majority stake in another subsidiary company namely Best General InsuranceCompany Limited.

NewRise Healthcare Pvt. Ltd.: The Company's subsidiary NewRise Healthcare Pvt. Ltd. issetting up a 224 bedded state-of-the-art multi super-specialty hospital at Gurgaon,Haryana with a mission of establishing leading healthcare institution providingcomprehensive, committed and accessible care with an investment of around Rs.1,700million. The construction work of Hospital is almost over and the Hospital is set tocommence its operations during the current financial year.

Panacea Biotec (International) SA: The Company's WOS in Switzerland operates throughin-licensing of certain pharmaceutical products and is currently marketing products inAustralia and New Zealand through strategic collaborations. This WOS achieved a turnoverof CHF 540,348 (Rs.30.7 million) during the financial year 2012-13.

Panacea Biotec Germany GmbH (PBGG): The Company's indirect WOS in Germany achieved aturnover of Euro 323,401 (Rs.22.2 million) during the financial year 2012-13, from thesale of TACPAN (Tacrolimus) and MOWEL (Meropenem) in the German Markets.

Joint Ventures & Associates

PanEra Biotec Pvt. Ltd.: The Company's associate Company, PanEra Biotec Pvt. Ltd.(PanEra) is continuing to meet the Company's requirement of bulk vaccines and antigens formanufacture of Hepatitis B and Combination Vaccines & H1N1 Vaccine by the Company.PanEra achieved a net turnover of Rs.175.6 million during the financial year 2012-13.

Adveta Power Pvt. Ltd.: The Company's 50:50 joint venture Adveta Power Pvt. Ltd withits associate PanEra Biotec Pvt. Ltd, incorporated with a purpose to generate anddistribute power or any other energy from conventional / non-conventional energy sourceson a commercial basis. During the year, Adveta Power has been granted in-principleapproval by Govt. of Arunachal Pradesh for allotment of two Power Projects in ArunachalPradesh.

Chiron Panacea Vaccines Pvt. Ltd. (CPV): During the year under review, the JointVenture partners have mutually decided to terminate the Joint Venture and the CPV hasdiscontinued its operations. During the financial year, CPV achieved a turnover ofRs.325.7 million as compared to Rs.531.8 million during previous year. The process ofvoluntarily winding up has been initiated during the current year.

Collaborations and Tie-ups

Panacea Biotec has important business relationships with various research institutes,academic universities & commercial corporations, including:

The Institute for Translational Vaccinology (Intravacc), The Netherlands: Intravacc wasoriginated in January 01, 2013 from the former Vaccinology Unit of the National Instituteof Public Health (RIVM) and the Animal Research Center of the " Netherlands VaccineInstitute (NVI). The Company is one of the two companies shortlisted by WHO globally fordeveloping the sabin based injectable polio vaccine (sIPV) and has entered into anagreement with Intravacc (former RIVM) for in-licensing of proprietary know-how forproduction of sIPV vaccine and related quality control testing for commercialization inIndia and other international markets.

JSC Binnopharm Inc., Russia (Binnopharm): The Company has entered into a multi-phasesupply and technology transfer agreement with Binnopharm for supply of Company's finishedproduct, viz. Hib Conjugate Vaccine and for transfer of technology thereof, forcommercialization thereof in Russian Federation. During the year, the Company has receiveda license fee of Rs.27.7 million from Binnopharm. The Company is currently in process ofgetting the product registered in Russian Federation.

National Institute of Immunology, India: The Company has an exclusive ten-year licenseagreement with National Institute of Immunology, India for in-licensing of technology andprocesses for production of tissue culture derived formalin inactivated, Japaneseencephalitis vaccine. The technology has been further modified significantly at ourresearch center to yield a commercially viable and safer vaccine. The vaccine is currentlyunder pre-clinical development stage.

National Institutes of Health (NIH), USA: The Company has an in-licensing arrangementwith NIH, USA, for use of a peptide-based product for generation of hair follicles, hairgrowth for alopecia (hair loss) management and recombinant dengue vaccine.

Dr. Reddy's Laboratories Limited: The Company has a License and Supply Agreement withDr. Reddy's for its patented product, Nimesulide Transdermal Gel, for marketing,distribution and sale in Russian Federation. During the year the Company has received aroyalty income of Rs. 63.1 million as compared to Rs.31.4 million during previous yearunder this collaboration.

National Research Development Corporation (NRDC), India: The Company has in-licensingarrangement with NRDC for manufacturing the Foot and Mouth Disease (FMD) Vaccine developedby Indian Veterinary Research Institute (IVRI).

PT BioFarma, Indonesia: The Company has an agreement with PT BioFarma, to manufacture& market the measles vaccine and plans to supply the vaccine to UNICEF, PAHO and CIS,African, LATAM and Asian Countries in furtherance to Global Measles Reduction Strategy ofWHO and UNICEF.

Kremers Urban Inc. (UCB Group): The Company has entered into a long term contract withKremers Urban for the distribution of some of its products in US market. Panacea Biotec'sANDA for Tacrolimus has been approved by USFDA. Under the terms of the agreement PanaceaBiotec would be responsible for development, registration and commercial supplies of theproducts while Kremers Urban would be responsible for marketing, sales and distribution.

Osmotica Kereskedelmies Szolgaltato Korlatolt Felelossegii Tarsasag, Hungary(Osmotica): The Company has out-licensing agreement with Osmotica for research,development and manufacturing activities for commercialization of the Panacea Biotec ANDAproducts and Panacea Biotec NDA products in US market. During the year the Company hasreceived a research fee of Rs.271 million from Osmotica. The Company has successfullyfiled first ANDA under this collaboration in July 2013 and will shortly be filing thesecond ANDA with USFDA.

Financial Performance

Summarised Balance Sheet

(Rs. in million)

Particulars As at March 31,2013 As at March 31,2012
Sources of Funds:
Shareholders' Funds 5,612.6 8,140.9
Non-current liabilities 6,120.8 5,079.7
Current liabilities 5,064.8 5,308.2
Total Liabilities 16,798.2 18,528.8
Application of Funds:
Fixed assets 9,864.1 10,483.7
Non-current investments 2,653.5 2,584.7
Long-term loans and advances 1,026.8 1,063.1
Other non-current assets - 1.2
Current assets 3,253.8 4,396.1
Total Assets 16,798.2 18,528.8

Net Worth: The net worth of the Company is Rs.5,612.6 million during the year underreview as compared to Rs.8,140.9 million as at the end of previous year.

Non-Current Liabilities: Non-current liabilities include long term borrowings, deferredtax liabilities and long term provisions. The long term borrowings as at 31st March, 2013,have increased to Rs.6,072.0 million as against Rs.4,830.3 million as at 31stMarch, 2012, mainly on account of conversion of foreign currency term loan from SBIpayable during the year into rupee term loan amounting to Rs.3,744.3 million uponreschedulement thereof. The deferred tax liability is Rs. Nil as at the end of fiscal 2013as compared to Rs.205.0 million as at the end of the previous year.

Current Liabilities: Current liabilities include short term borrowings, trade payables,other current liabilities and short term provisions. The short term borrowings as at 31stMarch, 2013, have increased to Rs.2,991.4 million as against Rs.2,693.4 million. The tradepayables have increased to Rs.1,539.9 million as compared to Rs.1,181.4 million as at theend of the previous year. The other current liabilities have decreased to Rs.434.7 millionas at the end of fiscal 2013 as compared to Rs.1,339.8 million as at the end of theprevious year mainly on account of conversion of foreign currency term loan from SBI intorupee term loan.

Fixed Assets: The net fixed assets decreased to Rs.9,864.1 million as againstRs.10,483.7 million as at the end of the previous year on account of depreciation for theyear.

Non-current investments: The non-current investments increased to Rs.2,653.5 millionfrom Rs.2,584.7 million as at the end of the previous year on account of investment inequity shares of Rs.34.4 million in its subsidiary Panacea Biotec (International) SA andinvestment of Rs.33.8 million in its subsidiary New Rise Healthcare Private Ltd.

Long-term loans and advances: The long term loans & advances decreased toRs.1,026.8 million as against Rs.1,063.1 million as at the end of the previous year,mainly on account of provision made during the year in respect to loan given to theoverseas WOS Rees Investments Ltd.

Current Assets: Current Assets include trade receivables, inventories, cash & bankbalances, short term loans & advances and other current assets. The trade receivableshave increased to Rs.687.5 million as at the end of fiscal 2013 as compared to Rs.664.5million as at the end of the previous year. The inventories have decreased to Rs.2,247.4million as at the end of fiscal 2013 as compared to Rs.3,397.3 million as at the end ofthe previous year.

Summarized Profit & Loss Account

(Rs. in million)


For the year ended

31.03.2013 31.03.2012
Net Turnover 5,304.2 6,883.8
Other Operating Income 655.0 122.0
Revenue from operations (net) 5,959.2 7,005.8
Materials & Finished Goods Purchases 2,599.2 3,472.0
Employee benefits expense 1,372.3 1,504.5
Other expenses 2,828.6 2,968.4
Earnings Before Interest, Depreciation, Taxes & Amortization (EBITDA) (840.9) (939.1)
Other Income 54.3 74.6
Finance costs 1,057.4 1,011.1
Depreciation and amortization expense 835.4 753.9
Profit/ (Loss) Before Tax (PBT) (2,506.3) (2,629.5)
Provision for Taxes (including deferred tax) (205.0) (551.6)
Profit/(Loss) After Tax (PAT) (2,301.3) (2,077.9)

Segment-wise Net Turnover

(Rs. in million)




Rs. Million % Rs. Million %
Vaccines 1,722.9 32.5 3,579.5 52.0
Pharmaceutical Formulations 3,581.3 67.5 3,304.3 48.0
Total 5,304.2 100.0 6,883.8 100.0

Vaccines: The Vaccines segment's turnover declined by 52.0% and contributed Rs.1,722.9million or 32.5% of net turnover, as compared to Rs.3,579.5 or 52.0% of net turnover forfiscal 2012 due to decline in the institutional vaccine business which contributedRs.1,572.9 million in fiscal 2013 as against Rs.3,275.1 million during fiscal 2012,registering a degrowth of 52.0%. The decline in institutional business was primarily onaccount of delisting of the Company's pentavalent and oral polio vaccines from WHO's listof pre-qualified vaccines.

Vaccine sales to Chiron Panacea Vaccines for domestic market also decreased to Rs.150.0million during fiscal 2013 from Rs.304.4 million during fiscal 2012.

Pharmaceutical formulations: The pharmaceutical formulations segment's turnover grew by8.4% and contributed Rs.3,581.3 million or 67.5% of net turnover during fiscal 2013, ascompared to Rs.3,304.3 million or 48.0% of the net turnover for fiscal 2012. The increasewas mainly on account of increase in exports.


Materials & Finished Goods purchases: The raw and packing materials and finishedgoods purchases during the year under review has decreased by 25.1% at Rs.2,599.2 millionas against Rs.3,472.0 million during the previous financial year due to decline in the netturnover.

Employee benefits expense: The employee benefits expenses decreased by 8.8% toRs.1,372.3 million for fiscal 2013 from Rs.1,504.5 million for fiscal 2012.

Other Expenses: The other expenses decreased by 4.7% to Rs.2,828.6 million for fiscal2013 from Rs.2,968.4 million for fiscal 2012.

Finance costs: Finance cost increased by 4.6% i.e. Rs.1,057.4 million during fiscal2013 as against Rs.1,011.1 million during fiscal 2012. The increase in interest charges isattributable to higher utilization of borrowed funds for meeting funds requirement forcapital as well revenue expenditure and increased cost of funds.

Depreciation and amortization expenses: Depreciation has increased by 10.8% to Rs.835.4million as compared to Rs.753.9 million during fiscal 2012.


Earnings Before Interest, Tax, Depreciation & Amortizations (EBITDA): The Companyregistered negative EBITDA of Rs.840.9 million for fiscal 2013 as compared to negativeEBITDA of Rs.939.1 million for fiscal 2012 due to reasons explained above.

Profit/(Loss) Before Tax (PBT): The Company incurred a loss before tax of Rs.2,506.3million for fiscal 2013 as against loss before tax of Rs.2,629.5 million for fiscal 2012due to reasons explained above.

Profit/(Loss) After Tax (PAT): The loss after tax was Rs.2,301.3 million for fiscalyear 2013 as against negative PAT of Rs.2,077.9 million for fiscal 2012 due to reasonsexplained above.

Earnings per Share (EPS): The basic and diluted EPS stood negative at Rs.37.57 pershare for fiscal 2013 as compared to negative EPS of Rs.33.92 per share for the fiscal2012 due to reasons explained above.

Cash Flow Statement

(Rs. in million)

Cash Flows from: Fiscal 2013 Fiscal 2012
Operating Activities (251.1) 2,525.2
Investing Activities (287.9) (1,189.9)
Financing Activities 550.3 (1,613.7)
Net Cash Flows 11.3 (278.4)

Cash Flow from Operating Activities: The net cash outflows from operating activitiesduring fiscal 2013 was Rs.251.1 million as compared to net cash inflows of Rs.2,525.2million during fiscal 2012 primarily on account of decrease in inventories and othercurrent liabilities and increase in trade payables and other receivables.

Cash Flow from Investing Activities: Net cash used in investing activities primarilytowards addition of fixed assets for various ongoing expansion and long term investmentsdecreased to Rs.287.9 million as against Rs.1,189.9 million during previous year.

Cash Flow from Financing Activities: Net cash flow from Financing Activities amountedto Rs.550.3 million primarily on account of receipt and repayment of long term loans and> borrowings as against net cash outflow of Rs.1,613.7 million during previous year.

Consolidated Financial Statement

The consolidated net revenue from operations of the group has decreased to Rs.6,084.9million during financial year 2012-13 as compared to Rs.7,100.9 million during financialyear 2011-12, primarily on account of reasons explained above. Accordingly, theconsolidated EBITDA was also negative at Rs.860.6 million for fiscal 2013 as compared tonegative EBITDA of Rs.863.1 million for fiscal 2012. On consolidated basis, group hasincurred loss before tax of Rs.2,530.6 million for fiscal 2013 as against loss before taxof Rs.2,553.2 million for fiscal 2012. The consolidated loss after tax was Rs.2,342.8million for fiscal year 2013 against loss after tax of Rs.2,056.6 million for fiscal 2012.

Opportunities and Outlook

Indian pharmaceutical industry is one of the largest and most advanced pharmaindustries in the developing world. India has the highest number of USFDA approved plantsoutside the US. The expertise of Indian pharma companies in manufacturing low costqualitative products and research & development offers a huge opportunity to theindustry.

SWOT Analysis


• Indigenous capabilities of developing first in class and best in class NCEs,NBEs and patented drug delivery systems;

• Strong manufacturing capabilities;

• Cost competitiveness with quality products;

• One of the largest English speaking scientific and technical manpower in theworld; and

• Established marketing and distribution network and presence in major markets.


• Low investments in R&D;

• Increasing Price Control Regulations: strict monitoring by government throughprice control of several products; and

• Patent regime still not as strong as in developed markets.


• Favourable outlook for pharmerging economies and increased genericization in keymarkets;

• Emerging opportunities in Biotechnology and Biosimilars; Recent advances in thebiologics;

• Increasing coverage of vaccines under National Immunization Plan;

• Large population base, increasing lifestyle related diseases and increasinghealthcare expenditure offer significant future opportunities;

• General shift in mind-set from post facto to preventive treatment;

• Contract research & manufacturing services opportunities;

• Collaborative alliances with MNCs for production, sales and distribution ofproducts in India and abroad; and

• Last mile connectivity for distant areas and overall macroeconomic development.

Threats, Risks and Concerns

Risks, challenges and threats are inherent in any type of industry and needs to bemitigated through well planned strategies. The major risks/concerns associated to theindustry as a whole are as under:

• Increasing timelines in obtaining regulatory approvals in key markets;

• Declining innovation in pharmaceuticals;

• Increasing regulatory requirements for conducting large and complex clinicaltrials;

• Pricing pressure across the globe;

• High expenditure in developing new medicines;

• High volatility in currency exchange rates affects the industry adversely;

• Increasing competition from developing countries due to lower manufacturingcost;

• Increasing pressure from government to bring more and more products under pricecontrol;

• Rising costs of regulatory compliance in the form of audit burdens, inspectionsand fines;

• Strong lobbying by MNC players having increased business interests in India;

• Risk of Product failure - a risk of all R&D initiatives not leading tocommercially viable and successful products; and

• Risk of IPR challenges.

Besides above, there are a few risk factors that are applicable to the Company'soperations and business. While the effective measures are taken by the Company to minimizeor eliminate the impact of these risks on its business performance, they nonethelessexist. Some such risks, challenges or threats are outlined below:

• Cost and time overrun issues with several projects in the past;

• High attrition in sales and marketing;

• Significant dependence over tender based institutional business;

• Revenue contribution highly skewed towards few products; and

• Adverse developments at JV/Collaboration partners may impact the future of suchJVs/Collaborations.

Moreover, there is a policy paralysis on the drug regulatory approval process. If Indiais to retain its pharmaceutical growth story, it must quickly unshackle and revamp thedrug approval process, and put in place a more fast track balanced system.

Future Growth Drivers

During the year under review, the Company has faced many business challenges and hasalso implemented several corrective and preventive measures to overcome these challenges.With these measures, the Company's existing capabilities will get further strengthenthereby ensuring that the Company is strategically positioned against its competitors. TheCompany has well laid strategy for its future growth with clearly identified growthdrivers to ensure it derives sustainable revenues and profits in future.

The Company's key future growth drivers include:

Launch of several difficult to develop generic and innovative products in ICH regionsand other key pharmerging markets through partnership/out-licensing to strategic partners;

• Launch of DTwP and IPV based combination pediatric vaccines;

• Launch of new IPV & acellular pertussis based combination Vaccines currentlyunder development for pediatric age group;

• Launch of critical vaccines like Pneumococcal conjugate vaccine, JapaneseEncephalitis vaccine, Dengue Vaccine etc.;

• Global launch of Biosimilars;

• Strengthening product portfolio through internal devel opm en t an d/or i n -l icen si n g of produ ct/ technologies; and

• Diversification in related healthcare segment.

In addition, the Company will continue to explore further opportunities to fasten itsgrowth strategy.

Corporate Social Responsibility

Panacea Biotec recognizes Corporate Social Responsibility as one of its core values byputting continuous effort to assess and take responsibility for the company's effects onthe environment and impact on social welfare that go beyond what may be required byenvironmental protection groups.

Safety, Health and Environment Protection

The Company is privileged to be working in the healthcare industry in which it has aninherent opportunity to contribute towards improving the health of patients. The Companyundertakes all its operations with a high concern and sincerity for environment and itssurroundings as well as the safety and health of people. The Company has dedicatedEnvironment & Occupational Health and Safety (EOHS) Protection department and alsoengages the services of outside consultant for independent evaluation of EOHS activities.The main focus in EOHS is on three different objectives: (i) the maintenance and promotionof workers' health and working capacity; (ii) the improvement of working environment andwork to become conducive to safety and health and (iii) development of work organizationsand working cultures in a direction which supports health and safety at work and in doingso also promotes a positive social climate and smooth operation which enhancesproductivity.

The Company has made substantial investments in setting up effluent treatment plants,air pollution control devices and in developing "Green Belt" and greenlandscaping at the manufacturing sites at Lalru & Baddi to prevent possible adverseenvironmental impact on the community. All type of wastes, i.e. non-hazardous, hazardous& bio-wastes generated are managed separately and adequately as per the norms. Allpersonnel working in vaccine plant are vaccinated as per the Vaccination Policy.Manufacturing and virus handling areas are provided with cascaded negative pressuredifferentials with respect to air locks and corridors respectively. The air exhaust (AHU)from all process areas pass through HEPA systems (HEPA filters) with attached viralburning unit before going to outer atmosphere. It has dedicated decontamination autoclavefor removal of bio-hazardous waste material.

The Company has installed modern firefighting facility e.g. hydrant system, smoke /heat detection & sensing devices at its all major facilities, for an early detectionand extinguishing of accidental fire. The fire suppression systems also include fireresistant compartmentation, fire detection system and fire extinguishers at allfacilities.

The company has trained Emergency Management Teams at all locations to controlemergency situations, if any. Different mock drills / fire-fighting drills are conductedto create awareness amongst the employees during emergency situation. Regular safetytraining is also provided to the employees to update about the importance of safety inday-to-day life in general and work in particular.

The Company also celebrates "National Safety Week" by conducting varioussafety programs and prize distribution ceremony.

Social Responsibility

At Panacea Biotec, sustainability is a multi-dimensional aspiration, which has itsroots in the very purpose of our existence -providing affordable medicines to peoplearound the world and meeting unmet medical needs through innovation. The Company'sbusiness, by its very nature, serves a social good, so it has a far deeper reason thanprofits alone to drive its performance.

Panacea Biotec continues its efforts to make a significant difference in lives ofpeople around. It works closely towards the development of society, in line with itsphilosophy of creating happier and healthier society.

Dr. Rajesh Jain, Jt. MD is also involved in numerous initiatives for providing betterbusiness and regulated environment for nurturing pharmaceutical & biotechnologyindustry in India.

Health, education, disaster relief and patient awareness have been identified as theareas of priority. The Company's emphasis has been on providing assistance on a needbasis, and that too, assistance at a local level. The Company also regularly providesfinancial assistance or sponsorship for pursuing post graduates/ doctorate studies andcarrying out research projects being undertaken by Research Associates.

The Company regularly takes initiatives towards fulfilling its corporate socialresponsibility including:

• Organ Donation Day: The Company organized an awareness program on Organ Donationon 6th August on the occasion of 'Organ Donation Day' in which many employeesof Panacea Biotec pledged to donate their organs and supported this noble cause wholeheartedly.

• PRISM: One of the major challenges with cancer care in India has been latediagnosis and mis-diagnosis many times. Panacea Biotec Referral Interspeciality Meets havebeen initiated and conducted across the country. These meets are aimed at spreadingawareness at the primary physician level (Chest TB Physicians, Pulmonologist, Orthopedicsetc.) and hence early detection.

• Awareness for Life: A program designed to create cancer awareness for theemployees of corporate India. Such camps were conducted at many places to increaseawareness, early detection & prevention of the disease.

• JAGRUKTA Campaign: Radio campaigns conducted on various occasions to worktowards prevention by building awareness and providing education for prevention and earlydetection of cancer.

• No Tobacco Campaign: Organized on 31st May across India, whereby awareness wascreated amongst masses towards the ill effects of tobacco via posters, educationpamphlets, etc. Around 200 newspaper stories were also released on this occasion inleading newspapers spreading the same message.

• Winners of Life: "Breast Cancer Survivors Meets" are organised atvarious places across India as a part of International Breast Cancer Awareness Month inOctober to enhance the confidence & motivation of patients and medical fraternity tofight against Breast Cancer.

• Lung Cancer Awareness Month: Organised in the month of November wherein GreyRibbon badges were distributed amongst the masses along with Lung CME updates depictinglung cancer awareness graphics displayed in various centres for showing concern ineradicating the dreaded disease.

• World Kidney Day: With the aim to raise awareness of the importance of ourkidneys to our overall health and prevention of kidney disease events were organized toprovide a platform for doctors and patients to interact on World Kidney Day. This was doneat various centers across the country using awareness posters, patient education materialetc.

• Workshop for Promotion of Deceased Organ donation: Supported initiative taken byIndian Society of Nephrology/ Indian Society of Organ Transplant/ The Transplant Societyfor training Transplant Co-ordinators for increasing the deceased organ donation in Indiawhich will immensely benefit patients waiting for Organs with ESRD due to shortage ofOrgans.

• Launch and maintenance of website by Nephrology SBU, as India'sfirst online resource as an educational initiative. This website elucidates informationextending from biochemical bone and vascular derangements associated with CKD MBD.

• SURAKSHA: Detection and Awareness Camps on Diabetes and Complications wereorganized for patients in different cities wherein blood sugar was screened along withneuropathy. Further, patient education on Diabetes and Diet specific to different IndianZones in 9 regional languages was printed and distributed.

• PANDEPTH: The Company initiated the awareness program for checking heartproblems while checking diabetes for the patients to help early screening of heartproblems in diabetes.

• Contribution to several NGOs for supporting their efforts and contribution forsocial cause in the field of medicine, education and culture, etc.

• House of Flexibility Program: Needy patients given free therapy in treatment ofosteoarthritis.

Note: As a result of rounding off adjustments, the figures/percentages in a column invarious sections in the Annual Report may not add up to the total for such columns.


Peer Comparison

Company Market Cap
(Rs. in Cr.)
Sun Pharma.Inds. 161,408.62 0.00 19.95 112.59 6.6 8.3 0.01
Dr Reddy's Labs 46,771.45 24.95 5.01 15.64 22.6 23.1 0.28
Cipla 35,704.96 25.72 3.54 13.35 18.4 23.4 0.06
Ranbaxy Labs. 24,711.50 0.00 22.53 0.00 0.0 0.0 3.64
Cadila Health. 22,986.16 26.18 6.33 20.18 27.6 19.7 0.52
Aurobindo Pharma 20,209.70 17.24 5.04 7.02 18.3 14.8 1.03
Glenmark Pharma. 17,259.72 41.11 5.94 27.69 16.0 16.4 0.17
Torrent Pharma. 11,820.02 16.23 5.16 8.92 38.7 34.3 0.46
Piramal Enterp. 10,746.41 0.00 1.18 29.42 -3.3 3.2 0.54
Biocon 9,601.00 30.85 3.97 15.73 14.0 16.0 0.05
Ipca Labs. 9,084.51 19.55 4.58 14.77 26.9 27.4 0.34
Wockhardt 8,253.34 41.57 8.81 23.16 63.8 31.3 0.66
Alembic Pharma 6,231.81 27.25 9.90 15.03 43.8 45.3 0.27
Strides Arcolab 3,989.11 3.68 2.45 46.94 7.3 8.9 0.56
Natco Pharma 3,670.77 33.31 5.01 10.63 15.6 17.0 0.59

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Key Information

Key Executives:

Soshil Kumar Jain , Chairman & Wholetime Director  

Ravinder Jain , Managing Director  

Rajesh Jain , Joint Managing Director  

Sandeep Jain , Joint Managing Director  

Company Head Office / Quarters:
Ambala-Chandigarh Highway,
Phone : 91-1762-505900 (30 Lines)
Fax : 91-1762-505900/9/6
E-mail :
Web :
Skyline Financial Services Pvt
D-153/A 1st Flr
Okhla Industrial Are
New Delhi-110020

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