wockhardt ltd Management discussions

Global Pharmaceutical Industry & Economies: The resilience of the Pharmaceutical Industry, the unprecedented efforts of the medical research community and the extent of humanitarian bonding between nations with an aim to target the deadliest health catastrophe of the century eventually paid off. In September, the head of the World Health Organization declared that the end of the pandemic is "in sight." That reality was evident in the fact that many countries abandoned the multiple restrictions and related measures that they had imposed when COVID swept across the world in early 2020. On the surface, the global economy appears poised for a gradual recovery from the powerful blows of the pandemic and of Russias unprovoked war on Ukraine. China is rebounding strongly following the reopening of its economy. Supply-chain disruptions are unwinding, while the dislocations to energy and food markets caused by the war are receding. Simultaneously, the massive and synchronous tightening of monetary policy by most central banks should start to bear fruit, with inflation moving back toward its targets.

As countries are battered with grave challenges, on the other hand they have become self-reliant and explored new avenues and opportunities in various areas to sustain the growth. Climate change awareness gained traction globally with key powers injecting fresh urgency on need to undertake positive initiatives. Renewables energy had a record year with significant flow of investments which marked the commitment of nations to shift to a more sustainable model for the long run.

Tensions between the U.S and China have been rising over the years, ranging from trade and tariffs to tech rivalry and alleged spying. In recent years, tensions between the United States and China have introduced new challenges—especially related to economic and defense issues. China is a major trading partner for the United States but it is also developing its military capabilities, which poses challenges to the U.S. military. Further, the current Russia-Ukraine conflict has severely strained U.S.-Russia relations and increased the risk of a wider European conflict. Tensions are likely to increase between Russia and neighboring NATO member countries that would likely involve the United States, due to alliance security commitments. The conflict will also have broader ramiRs.cations for future cooperation on critical issues like arms control; cybersecurity; nuclear nonproliferation; global economic stability; energy security; counterterrorism; and political solutions in Syria, Libya, and elsewhere. Additionally, Russias increasing isolation has not only destabilized global energy and resource markets but also pushed the country to seek stronger strategic ties with those states (e.g., China) still willing to partner with it, largely in opposition to the West. The war has also compounded other global crises, with military operations and violence hindering the delivery and distribution of much-needed aid, including food, and exacerbating an already severe shortage of available global humanitarian assistance and resources. This has led economies on brink of "Perfect storm" of crisis. It has set in motion a three dimensional crisis on Food, Energy and Finance that is producing alarming cascading effects to an ecosystem which is already battered by COVID-19, Food Infiation & Shortages, Energy and commodity price increase, Debt distress, Blackouts and Climate change. Additionally, political instability, economic, and climate crises wrecked Pakistan in 2022 with downfall of the existing government and escalating debt crisis. Lingering concerns: Tentative signs in early 2023 that the world economy could achieve a soft landing—with inflation coming down and growth steady. Although inflation has declined as central banks have raised interest rates and food and energy prices have also moderated, underlying price pressures are proving sticky, with labor markets tight in a number of economies. Side effects from the fast rise in policy rates are becoming apparent, as banking sector vulnerabilities have come into focus and fears of contagion have risen across the broader financial sector, including nonbank financial institutions. In parallel, the other major forces that shaped the world economy in 2022 seem set to continue into this year, but with changed intensities. Debt levels remain high, limiting the ability of fiscal policymakers to respond to new challenges. Commodity prices that rose sharply following Russias invasion of Ukraine have moderated, but the war continues, and geopolitical tensions are high. In a plausible alternative scenario with further financial sector stress, global growth declined to about 2.5 percent in 2023—the weakest growth since the global downturn of 2001, barring the initial COVID-19 crisis in 2020 and during the global financial crisis in 2009—with advanced economy growth falling below 1 percent. The anemic outlook reflects the tight policy stances needed to bring down inflation, the fallout from the recent deterioration in financial conditions, the ongoing war in Ukraine, and growing geo-economic fragmentation.

GLOBAL USE OF MEDICINES AND PROJECTED TRENDS

The use of medicines globally plateaued in 2022 following a significant rebound in 2021 as markets recovered from the pandemic. Overall volume is projected to grow 1.6% CAGR in days of therapy through 2027, driven by Asia-Pacific, India, Latin America, Africa and the Middle East, and China, all of which are expected to exceed global volume growth. Higher income countries in Western Europe and North America as well as Japan and Eastern Europe are expected to grow more slowly at 0.1Rs. to 0.4% through 2027, partly due to their already higher per capita use. Eastern Europe volume growth is also hampered by disruptions from the ongoing Ukraine conflict.

Per capita use of medicines varies by GDP, with use in higher-income countries typically higher than in lower income countries. Countries such as Japan and those in Western Europe have more than double the use of most other regions measured in WHO defined daily doses.

Countries vary considerably in the therapy areas which drive most of their volume use of medicines, linked to the burden of disease they experience as well as factors which influence the structure and functioning of health systems. While overall volume has increased by 2% CAGR over the past decade, oncology has increased at 15% per year, driven by the significant advances in novel treatments and improved access to cancer care around the world.

SPENDING AND GROWTH BY REGIONS AND KEY COUNTRIES

		Spending in USD Bn
	2022	2018-2022	2027	2023-2027
Regions		CAGR		CAGR
Global	1482.3	6.10%	1900-1930	3-6%
Developed	1088.3	5.70%	1370-1400	2.5-5.5%
10 Developed	968.9	5.70%	1207-1237	2.5-5.5%
Other Developed	119.4	6.40%	156-176	4-7%
Pharmerging	370.8	7.20%	487-518	5-8%
Lower Income Countries	23.2	6.00%	29-33	4.5-7.5%

The global medicine market — at invoice price levels — is expected to grow at 3–6% CAGR through 2027, reaching about $1.9Tn in total market size. Spending and volume growth will follow diverging trends by region with larger established markets growing more slowly, and growth markets in Eastern Europe, Asia and Latin America growing in both volume and spending.

The U.S. market, on a net price basis, is forecasted to grow -1 to 2% CAGR over the next five years, down from 4% CAGR for the past five years. Prior editions estimated 0–3% CAGR on a net basis. The new forecast, including projected effects of the Infiation Reduction Act, reflects an outlook that has a 1% lower range. Provisions of the new legislation are expected to drive incremental volume by reducing cost exposure for patients and by driving lower prices through inflation penalties and price negotiations. Other aspects of the law will impact the interactions of stakeholders and the responsibility for cost shifts between government, payers, and pharmaceutical manufacturers, especially in the Medicare program. In addition to discounts and rebates, ongoing market dynamics around the use of medicines, the adoption of newer treatments, the impact of patent expiries, and new generic or biosimilar competition will all contribute to historically slow market growth in the U.S. for the next five years.

Spending in Europe is expected to increase by $59Bn through 2027 driven by growth from New brands and existing brands. The focus would be on generics and biosimilars, and escalating pressures on the value and negotiated prices of novel medicines. The pandemics impact on Asia-Pacific countries varies considerably, but a return to steady growth is projected after 2021. Japan medicine spending growth is projected at -1 to 2% through 2027 as robust brand growth is offset by a shift in annual price cuts and ongoing moves to generics. Spending growth in China is expected to slow, with positives driven by greater uptake and use of new original medicines and offset by pressures on off patent and generic pricing. Growth in developed economies continues at relatively steady rates, with new products offset by patent expiries. Latin America, Eastern Europe and parts of Asia are expected to grow strongly from volume and adoption of novel medicines.

KEY THERAPY AREAS – BASEBUILDING FOR FUTURE GROWTH

The key growth area for medicines in the next five years is biotech, which will represent 35% of global spending and will include many of the areas of greatest activity for novel medicines. In addition, global savings from biosimilars will exceed $290Bn in cumulative spending through 2027, which is below estimates without new biosimilars, representing a significant mechanism to generate wider usage of these medicines as well as ease payer budget pressures on overall spending. Specialty medicines will represent 43% of global spending in 2027 and more than 55% of total spending in developed markets, continuing the shift from more traditional medicines underway for over a decade.

The two leading global therapy areas — oncology and immunology — are forecast to grow 13–16% and 3–6% CAGR, respectively, through 2027, reflecting diverging trends with one still driven by novel medicines and the other facing biosimilar competition. Oncology is projected to add 100 new treatments over five years, contributing to an increase in spending of $184Bn to a total of more than $370Bn in 2027 and facing limiting new losses of exclusivity. Treatments for auto-immune disorders are forecast to reach $177Bn globally by 2027, driven by steadily increasing numbers of treated patients and new products, and offset after 2023 due to biosimilars. Diabetes spending growth is slowing to low single digits in most developed markets and declining in some, especially net of rebates. New therapies contribute to growth of neurology markets, including greater use of novel migraine therapies, potential treatments for rare diseases, and the potential for therapies for Alzheimers and Parkinsons.

The outlook for next generation biotherapeutics includes significantly uncertain clinical and commercial prospects for cell, gene, and RNA therapies, which will grow from current $8Bn spending in 2022 to $27Bn by 2027.

Global Spending to exceed Pre-pandemic outlook

Source: IQVIA Market Prognosis, Sep 2022; IQVIA Institute, Nov 2022.

Company Performance

With the tightening of monetary condition across the globe and soaring inflation across economies, managing liquidity and smooth business operations has been the key priority during the year and your Company has effectively managed its liquidity position and continued with its sustainable business model without compromising on the overall long term vision of the organization.

Your Company started the year with focus on aligning operations with the long term goals and its vision statement. Primary objectives were to drive robust growth, de-leveraging the balance sheet to achieve operational efficiency, ensuring reasonable flow of working capital into the Business and gradually shifting away from acute to strengthen chronic presence in its portfolio mix, strengthening overall New Chemical Entity (NCE) and vaccines bucket. Amidst turbulent time your Company stood steady and delivered its key priorities thus paving the way for long term sustainability. The below image represents the business ecosystem in which your Company operates which can also be interpreted as the near to long term growth drivers for theRs.Company.

Key developments that took place in your Company during the year have been summarized below:

1) Wockhardt announces successful initiation of Global Phase 3 Clinical Study of its novel antibiotic WCK 5222: YourRs.Company announced the completion of first site initiation visit for the pivotal Phase 3 global Clinical Study of its novel antibiotic WCK 5222. WCK 5222 is a Super-drug which is entirely a new class of antibiotic known as "?-lactam ENHANCER". This is double-blind, multi-center, eRs.cacy, safety, and tolerability study in the treatment of hospitalized adults with Complicated Urinary Tract Infections, including Acute Pyelonephritis. This Study will have 70 centres worldwide inRs.11 countries including US, Europe, India, China and Latin America. This global study is expected to be completed in 18Rs.months.

2) Restructuring of the US Business: In view of the changed pharmaceutical market situation in the United States, the management had initiated various steps to restructure its USA business by closing down its manufacturing facility in Illinois, USA and undertake its business in USA through Contract manufacturing the products sold by it in US/North America by engaging USFDA approved manufacturing partners meeting the quality standards acceptable to theRs.Company.

In line with the above, the Company has now engaged multiple USFDA approved manufacturing partners, after thorough due diligence and inspection of their facilities, to manufacture various products of the Company for sale in US/ North America under the same brand and Wockhardt name.

The Company believes, that this new arrangement is in the best interest of the Company as this will help the Company to avoid the manufacturing and quality management cost completely and allow the management to focus on penetrating and expansion of the market share of its products in US/ North America.

Amidst the challenges, your Company was focused on deployment of funds and setting its investments priorities to ensure maximum return. Secondly it dedicated focus on the expense side with cost containment measures. Significant efforts to identify new revenue streams and enhance profitability and cash flow also translated into new partnerships into international geographies.

Business Performance:

Domestic Business recorded De-growth during the year mainly on back of higher base in the previous years on account of COVID upside. Secondly stringent regulations for certain product categories continued to impact the smooth liquidation ofRs.inventory. ROW business de-grew amidst significant global challenges and tight commercial negotiations with our partners on the pricing and credit terms front to enhance the business hygiene.

UK operations reflected de-growth mainly on account of negligible sales on UK COVID vaccines front.

The Companys International businesses continues to be under pressure because of aggressive channel consolidation and genericisation.

During the year, the Companys research & development expenses continued to grow keeping in view its strategic focus in Pharma, Biotechnology & NCE segment and was approx. 10% of consolidated revenue.

REVENUES

Total revenue during the year was Rs. 2,773 crore compared to Rs. 3,250 crore in the previous year with an annual decline of 14.68%. Excluding UK Covid Vaccines in PY, the annual decline stood at ~ 2%. Revenue from Operations during the year was

Rs. 2,651 crore compared to Rs. 3,230 crore in the previous year.

The revenue split of European Union Business contributed 11% (compared to 8% in FY 2022). UK operations contributed 33% (compared to 42% in FY 2022). The dip in contribution is mainly on account of significant contribution from UK Covid vaccine sales in PY. India and Rest of the World contributed 44% (compared to 39% in FY 2022).

PROFITABILITY

On Y-o-Y basis EBITDA excluding UK Covid Vaccines has been significantly higher vs previous year quarters despite the stagnancy in operations, thanks to the cost containment measures, rightful allocation of resources and partial impact of US business restructuring. Improved business mix accompanied with portfolio swings in favour of high margin segment continues to be of key focus for your organisation. The Companys strategic focus on R&D initiatives that are futuristic in nature, continue to impact the EBITDA as they are being expensed.

Particulars	FY 22	FY 23	Change %
Material Consumption	39.0%	41.1%	-2.1%
Personnel Cost	21.6%	21.9%	-0.3%
R&D	4.4%	5.2%	-0.8%
Other Expenditure	25.5%	26.5%	-1.0%
Interest	9.2%	11.2%	-2.0%
Depreciation	7.6%	9.3%	-1.7%
Exchange Gain	-0.3%	-3.0%	2.6%
Exceptional Item Profit/(Loss)	-5.6%	-10.9%	5.3%
Tax	-4.1%	-0.1%	-4.0%
Profits (Before NCI)	-8.6%	-23.1%	-14.4%
NCI	-1.1%	-2.3%	1.2%
Profits (After NCI)	-7.5%	-20.8%	-13.2%

Material consumption for FY 2023 stood at ~ 41% of total revenue compared to ~ 39% in FY 2022. This is mainly on account of significant UK vaccines business in FY 22. The Companys emphasis on R&D continued during the year while adopting selective strategy for rationalizing R&D spends which is reflected in spends for FY 2023 at ~ 10% including Capital and Revenue expenditure vs 9.3% in PY. Personnel costs as % to total revenue was in line with PY. However in absolute terms there was de-growth of 16%.

Other expenses for FY 2023 was higher than the previous year at ~ 26%. Interest cost as % to total revenue stood at 11% vs 9% in PY. Profits after Non-Controlling interest (NCI) declined from -8% in PY to -21% in FY 2023.

The EBITDA and corresponding margins (Exc UK Covid Vaccines) improved significantly. Outcome of cost ratio-nalisation initiatives and revenue growth from high margin segments enabled to strike the appropriate balance while countering the stagnancy in revenue growth. Further, the full impact of US business restructuring is yet to be seen in the EBITDA numbers which would be significant. Expanding market and therapeutic presence, realignment of portfolio mix to high margin segment, exploring new revenue generation streams and cost rationalisation measures remains the key focus in the near to mid-term.

DEBT POSITION

INR in Crore

	FY 23	FY 22	Change	% Change
Secured	843	992	-149	-15 %
Unsecured	981	813	168	21 %
Total	1,824	1,805	19	1%

RESEARCH & DEVELOPMENT & NEW LAUNCHES: COMPANYS STRATEGIC CORE

Globally across the pharma industry, the research and development pipeline remained fiat in 2022 with 6,147 products in active development from Phase I to regulatory submission, with growth slowing to 2% over the last two years but maintaining an 8.3% CAGR from 2017–2022. Oncology remains the focus of the pipeline, comprising 38% or 2,331 products and growing at 10.5% CAGR over the last five years with a recent shift to large-population solid tumor development contributing to the growth. Neurology continues to represent 11% of the pipeline, with research focused on Alzheimers and Parkinsons, and increasingly depression and other mental health conditions.

Rare disease focus continues with more than 1,800 molecules targeting one of the growing number of rare disorders for which there are often no or very limited therapeutics available. Half of these focus on oncology, and next-generation biotherapeutics account for at least a quarter of the rare-oncology products, with increased activity in CAR T and NK cell therapies, as well as gene editing and nucleic acid vaccines.

Sources of industry scientific innovation continue to evolve with more than 2,800 companies or organizations currently contributing to the R&D pipeline.

Clinical trial activity was remarkably resilient even as the pandemic stretched through 2022, with a 1% decline in non-COVID-19 trial starts over 2021 and an increase of 8% over 2019 activity. Most of the activity revolves around Oncology therapy while other therapeutic areas showed slight decrease.

A total of 64 novel active substances (NAS) launched globally in 2022, a decline from the more than 80 launched in each of the prior two years but representing a return to pre-COVID-19 levels. Declines were driven by fewer COVID-19 vaccines and therapeutics, fewer U.S. accelerated approvals, and fewer NAS launched only in China. A growing share of new launches in 2022 were first-inclass, reflecting the increasing availability of novel science for patients. 2022 also saw continued growth in number of specialty medicine launches. As new medicines have increasingly targeted areas of high unmet need, clinical trial designs have used single-arm and open label designs and have been used in the approval trials for 43% of launches over the past 5 years.

A total of 353 novel active substances have launched globally in the past 5 years, bringing the 20-year total to 903, with variations in timing of launch and access to these medicines across major geographies. Emerging biopharma companies originated 67% of all new drugs in 2022 and launched 69% of those, indicating more independence on the part of these companies in taking products from innovation to market.

Source: IQVIA Institute, Jan 2023.

Your Company also believes that robust R&D spend is a key strategy to sustain in the long run and its continuous focus in complex research in Pharma, Biosimilars & NCEs for past couple of years have shown encouraging results particularly in the field of Break through Anti-infective space.

GLOBAL ANTIMICROBIAL RESISTANCE CRISIS

Antimicrobial Resistance (AMR) or the ability of the infecting bugs to resist antibiotics could negate many of the medical breakthroughs of the last century such as complex surgeries, cancer treatment, and organ transplant. Many of the previously curable bacterial infections have now become untreatable and resistant bugs causing these infections have spread throughout the world. The report "Antimicrobial resistance: Global report on surveillance" from World Health Organization (WHO) showed that AMR is prevalent globally without any borders and could inRs.ict mortality and morbidity in all the age group of patients.¹ The current challenge of AMR could be judged from the fact that even common infections such as urinary tract infections and pneumonia pose severe therapeutic challenge in community and hospitals. Under such scenario, an an urgent and coordinated action is required as the world is possibly heading towards a post-antibiotic era.² World has recently experienced the COVID-19 pandemic while silent pandemic of AMR has been on-going for several years. Infections resulting from AMR bacteria are expected to claim 10 million lives globally, per year by 2050 (ONeill, 2014)³, but however it seems, unfortunately, this milestone would be met much earlier as a recent LANCET publication has revealed that mortality attributable to AMR in a single year of 2019 was as high as 4.95 million.⁴ Numerically, this is double that of mortality caused by COVID-19 in the same year.⁵ The six leading pathogens for deaths associated AMR are Escherichia coli, followed

by Staphylococcus aureus, Klebsiella pneumoniae, Streptococcus pneumoniae, Acinetobacter baumannii, and Pseudomonas aeruginosa, cumulatively accounting for 3?57 million deaths.^4,6 Infection wise, maximum deaths were caused by pneumonia followed by bloodstream infections. Among children, S. pneumoniae was the pathogen associated with the most deaths. Moreover, even during pandemic, most COVID-19 patients were treated with antibiotics^7,8 and significant proportions of mortality among COVID-19 patients was linked to bacterial infections.⁹ The WHO declared that AMR is one of the top 10 global health threats and although often more silent than the COVID-19 pandemic, it can have equally devastating consequences.¹⁰ By the year 2050, infections caused by AMR bacteria are projected to cause 2 million deaths in India.¹¹ The CDC in its 2019 report on Antibiotic Resistance Threats in the United States estimates that 2.8 million antibiotic-resistant infections occur each year in US alone.¹² Moreover, a special CDC report revealed the effect of COVID-19 on AMR which states that both hospital-onset AMR infections and associated deaths increased at least 15% during the first year of the pandemic.¹³ According to WHO, sepsis which could be a sequel to severe resistant infection acquired in hospitals affects 49 million people yearly and was linked to approximately 11 million deaths worldwide—roughly 20% of annual global deaths.¹⁴ Sepsis occurs when the body overreacts to an infection, setting off a chain of events that leads to tissue damage and organ failure. It is being considered as "the final common pathway to death" for severe infectious diseases. Around half of patients with sepsis in intensive care units acquire the infection in the hospital. Due to sepsis, about 42% patients die in intensive care units and 27% die in hospitals.¹⁵ This calls for discovery of novel antibiotics which could tackle the on-going AMR problem.

Number of death due to AMR in 2019

# Others include: Citrobacter, Enterobacter, Morganella, Proteus, Neisseria, Salmonella, Heamophilus, Enetrococci

Burden of resistance to antibacterial drugs

The overall health and economic burden resulting from acquired AMR cannot be fully assessed with the presently available data, however some estimates of the economic effects of AMR have been attempted, and the findings are disturbing. In a WHO report on Antimicrobial Resistance: Global Report on Surveillance (2014), the yearly AMR cost to the US health system alone has been estimated at US $21 to $34 billion dollars, accompanied by more than 8 million additional days in hospital.¹ Since AMR has effects far beyond the health sector, it was projected, several years ago, to cause a fall in real gross domestic product (GDP) of 0.4% to 1.6%, which translates into many billions of todays dollars globally.¹ The ONeill Review (The Review on Antimicrobial Resistance, December 2014) estimated that cost up to US $100 trillion in cumulative loss of economic output.³

Reference:

1. World Health Organization. (2014). Antimicrobial resistance: global report on surveillance. World Health Organization

2. Laxminarayan R. et al. Lancet Infect Dis. 2013 Dec;13(12):1057-98.

3. Jim ONeill, Tackling drug-resistant infections globally: final report and recommendations, 2016.

4. Antimicrobial Resistance Collaborators. Lancet. 2022 Feb 12;399(10325):629-655.

5. WHO Coronavirus (COVID-19) Dashboard, https://covid19.who.int/

6. Antimicrobial Resistance Collaborators. Lancet. 2022 Dec 17;400(10369):2221-2248.

7. Nandi A et al. EClinicalMedicine. 2023 Mar;57:101848.

8. Langford BJ et al. Clin Microbiol Infect. 2021 Apr;27(4):520-531.

9. Santos AP et al. Antibiotics (Basel). 2022 Jul 4;11(7):894.

10. EClinicalMedicine. 2021 Nov 24;41:101221.

11. Seethalakshmi PS et al. Sci Total Environ. 2022 Apr 20;818:151702. 12. CDC, Antibiotic Resistance Threats in the United States, 2019 13. CDC, Special report. COVID-19 impact on AMR in the United States, 2022 14. Jarczak D et al. Front Med (Lausanne). 2021 May 14;8:628302. 15. Rudd et al.The Lancet. 2020;395(10219):200–11.

OPPORTUNITIES

Global markets continue to offer opportunities because of transition in the form of lifestyle shift & related diseases in these countries. Because of the existing presence of operations in these economies your Company is well poised to capitalise and tap these growth opportunities. Your Company is striving in all aspects to establish its brand and ramp up its presence and operations in larger GCC countries, Latam Countries and Asia.

Global crisis of antibiotics availability continues to pose threat and the gap in Anti Infective segment has widened as relatively few drugs have been discovered in the last decade. However your Companys relentless focus for almost two decades in the Anti-Infective space has started showing recognition with consecutive approvals for QIDP in quick successions as well as approval from US FDA by granting abridged clinical trial for Phase III for its Superdrug antibiotic WCK 5222. This was based on the evaluation by US FDA of its preclinical and clinical data of Phase I establishing safety and clinical scope of efficacy for the drug. Notably your Company has 6 molecules (NCE) as on date which are at various stages of development.

The pandemic has gone long way to disrupt the global supply chain with too many countries focussed on single location for sourcing of supplies. As a result of the disruption in supplies, economies have realised the importance of localisation and decentralisation. This has increased considerable opportunities for countries with dominant API manufacturing capabilities as well as robust CMO infrastructure. Importantly such initiatives are being backed by government incentive schemes and investment back up.

The rising costs and regulatory pressure in developed markets are forcing many global pharmaceutical companies to reduce their internal capacities in research and development (R&D), and manufacturing, and turn to contract manufacturing and research services (CRAMS), and outsourcing of research and clinical trials to developing countries. These strategies help multinational companies reduce costs, increase development capacity, and focus on their core profit makings activities, such as drug discoveries and marketing, rather than on manufacturing. India, with a large patient population and genetic pool, is fast emerging as a preferred destination for such multinationals seeking efficiencies of cost and time. The countrys CRAM industry offers a significant cost-quality proposition, with potential savings of about 30-40 percent compared to western markets such as the US and Europe. Technology trends are driving a shift towards patient-centric healthcare, as evidenced by wearable biometric devices and telemedicine. This trend is resulting in more informed patients who are likely to take a more active role in any treatment plan their doctor may prescribe. Patient-centric care can provide challenges and rewards for the pharmaceutical industry. In the near future, the direct consumer may become the pharmaceutical Companys most strategic partner. The rise of consumerism provides an interesting dynamic for competition in this industry. The pharmaceutical industry will be driven by three levels of integration: products and services as well as data and technology. These three aspects will have a positive impact on the patients experience, as they will allow to adapt the medicines and treatments to each patient. This will change the approach to Clinical R&D as it will be based on real time accurate information the result of which would not just be medicine but more than that.

Disruptive technologies and emerging trends such as robotics, artificial intelligence, 3D printing, precision medicine or patient design will impact the manufacturing and distribution of pharmaceuticals. In order to prepare successfully for a better future of healthcare, the pharma industry has to embrace new technologies and put a greater focus on prevention and digital health.

RISK & CONCERNS – OVERALL CHALLENGES – WAY AHEAD

Elevated inflation is expected to persist for longer than envisioned, with ongoing supply chain disruptions and high energy prices continuing in 2022. Assuming inflation expectations stay well anchored, inflation should gradually decrease as supply-demand imbalances wane in 2022 and monetary policy in major economies responds. Risks to the global baseline are tilted to the downside. Supply chain disruptions, energy price volatility, and localized wage pressures mean uncertainty around inflation and policy paths is high. As advanced economies lift policy rates, risks to financial stability and emerging market and developing economies capital flows, currencies, and fiscal positions—especially with debt levels having increased significantly in the past two years—may emerge. Other global risks may crystallize as geopolitical tensions remain high, and the ongoing climate emergency means that the probability of major natural disasters remains elevated.

The emphasis on an effective global health strategy is more salient than ever. Monetary policy in many countries will need toRs. continue on a tightening path to curb inflation pressures, while fiscal policy—operating with more limited space thanRs. earlier in the pandemic—will need to prioritize health and social spending while focusing support on the worst affected. In this context, international cooperation will be essential to preserve access to liquidity and expedite orderly debt restructuringsRs.wherefineeded. Investing in climate policies remains imperative to reduce the risk of catastrophic climateRs.change. Even before the onset of this pandemic, the global economy was confronting turbulence on account of disruptions in trade flows and attenuated growth. The situation is no different as on today. The shape and speed of the recovery in the large economies will be key factors determining the nature and traction of global economic recovery.

While your Company has been focusing in India and the rest of world on securing the population from health hazards and on providing relief, especially to the poor, we also need to think long-term - to secure the health of the economy, the viability of businesses, and the livelihoods of people. Apart from providing robust safety nets for the vulnerable, ensuring job continuity and job creation is the key. And there is an urgent need to mobilize resources to stimulate the economies.

It would not be wrong to mention that customer expectations are rising and scientific productivity is lackluster and stagnant which poses bigger challenge as to how the mismatch would be addressed. There is dire need of developing and researching new medicines that can cure or prevent incurable complex diseases of the future. The ongoing pandemic is a perfect example of how unpreparedness for the worst could be disastrous in today,s world. In the back drop of all the challenges and ongoing issues, there are seven ways in which the business landscape will shift, not only in India, but the world around. Leveraging these will certainly help navigate the economically and socially viable path to the next normal:

1) Continuous Innovations and think beyond the unexpected.

2) Shift towards localization

3) Push of Digital wave

4) Cash being new king for Businesses.

5) Shift towards variable cost models.

6) Supply Chain resilience

7) Building agility

Apart from the above, evolving cGMP regulations have become stringent and the industry is striving unanimously to create world class capabilities to adhere to the mandates. Corrective measures for US FDA clearance are still in process with significant automation, technology upgrades and rollout of best practices at the manufacturing facilities. Your Company is monitoring the situation closely and is working with best of class consultants for resolution. Risk of regulatory quality compliance shall continue to remain critical for your Company in future. Pricing pressures in India continue to impact several organizations with latest NPPA circulars to include many critical drugs under the scope of price fixation / reduction. This has impacted the earnings of many Indian companies including yours. Amidst such challenges the Company has put remediation measures in place while ensuring growth and strengthening of its other business which consists of new product portfolio, new revenue streams and better brand management. Your Company is a global player and is not insulated against such external risks despite wide range of measures being taken. This has also to some extent impacted the earnings w.r.t. to countries where your Company operates in the home currency of these nations or where it is exposed to international transactions. This inherent risk will continue to pose challenges to a Company like yours that has a significant share of revenues from cross border operations.

New Drug Discovery Programme of Wockhardt

Your Company continues to focus on New Drug Discovery Program to bring novel antibiotics to market for catering to unmet needs in the area of resistant Gram positive and Gram negative infections where there is dearth of medicine across the world. With the global rise in the prevalence of resistant strains, and the emergence of newer resistance mechanisms as well as new pathogenic organisms, where the existing antibiotics are having little impact, the overall infectious disease scenario is highly concerning. This is further buttressed by a recent publication in reputed journal the Lancet which estimated the annual global mortality touching to 4.95 million due to antibiotic resistant infections. The Company with its array of drugs under development in this space aims to counter these diseases in both regulated and unregulated markets.

Current status of QIDP products: Spurring Clinical development of NCEs in different territories:

WCK 5222: Phase 3 study involving patients with complicated urinary tract infection started in October 2022. Currently 15Rs.clinical sites are recruiting patients for the Phase 3 study. As of now, more than 80 patients have been enrolled. All the patients have completed treatment with study drugs WCK 5222 or comparator drug meropenem. WCK 4282: The start of Phase 3 study involving cUTI patients is deferred for now in view of need to prioritize WCK 5222 clinicalRs.study.

WCK 4873: The Phase 3 Study recommenced in February 2022 and since then it has progressed well. As of March 2023 about 440Rs.patients have been recruited in the study. The study target of 500 patients would be attained in next three months. WCK 771 & WCK 2349: Since their launch, both Emrok & Emrok O have been gaining wider clinical acceptability by virtue of their ability to address unmet need in the management of serious Gram positive infections with about 45,000 patients already treated with these novel drugs.

WCK 6777: Worlds most prestigious and the largest bio-medical research organization, the National Institutes of Health (NIH, USA) has recognized the clinical significance of WCK 6777 and accordingly selected for the conduct of Phase 1 study. The study will be undertaken at NIHs Phase 1 clinical trial unit and is expected to start in June/July 2023.

Your Company has strong focus in developing intellectual property and filed 11 patents during the year under review. During the year 7 patents were granted of which 5 patents were for NCEs. As on 31^st March, 2023, combined pool of Companys patent has reached 3,239 filings and 810 grants.

Biotechnology Research of the Company

Development of Biosimilars and Biobetters is our Biotech R&D teams primary focus area. Biotechnology is viewed by global experts as the pharmaceutical technology of the future, and we have a very strong commitment to this field. Our highly accomplished multidisciplinary team of committed biotechnologists, biochemists, biophysicists, biochemical and chemical engineers as well as protein chemists is poised to develop biological drugs to address unmet clinical needs. Biotechnology R&D team of the Company has succeeded in developing and commercializing Recombinant Hepatitis-B Vaccine (Biovac-B), Recombinant Human Erythropoietin (WEPOX), Recombinant Human Insulin (WOSULIN), Recombinant Insulin Glargine (GLARITUS), which have all been well received in the market.

Your Company has a robust pipeline of recombinant therapeutic proteins for major healthcare needs. The overall focus is development and commercialization of antidiabetic Biosimilar products.

COMPANY OUTLOOK

The Companys long term outlook continues to be promising given the following: a. Overall growth in the global pharmaceutical industry b. Continued focus on R&D in regards to its biotechnology and NCE programs. c. Companys global reach in regulated market and continued efforts to enhance its reach in emerging markets. d. Increasing pipeline of niche & complex technology generic products. e. Expanding Revenue streams by adding New Partnerships and tie-ups to manufacture Vaccines.

SEGMENT-WISE PERFORMANCE

The Company is exclusively into pharmaceutical business segment.

DETAILS OF RATIOS

a)	Interest coverage ratio	:	1.62 to 0.59	- Adverse
b)	Operating profit margin	:	9% to 5%	- Adverse
c)	Net profit margin	:	(9%) to (23%)	- Adverse
d)	Return on Net worth	:	(7%) to (17%)	- Adverse
e)	Debtors turnover ratio	:	3.52 to 3.09	- Adverse
f)	Inventory Turnover ratio	:	1.61 to 1.55	- Adverse
g)	Current Ratio	:	0.81 to 0.64	- Adverse

INTERNAL CONTROL SYSTEMS AND ADEQUACY

The Company has internal control procedures commensurate with its size and nature of the business. These business procedures strive to optimum use and protection of the resources and compliance to the policies and procedures. The internal control systems provide for well-defined policies, guidelines and authorizations and approval procedures. Internal audits are performed to test the adequacy and effectiveness of the internal controls laid down by management and to suggest improvements. Internal Financial Controls laid out by the Company in accordance with the requirement of the Companies Act, 2013, were tested by Management using a self-assessment Tool implemented with the assistance from M/s Ernst and Young.

The Company has adopted a co-sourced model for internal audit. The internal audit team is assisted by M/s. Ernst & Young who carried out internal audit reviews in accordance with the approved internal audit plan. Internal audit team reviews the status of implementation of internal audit recommendations. Summary of Critical observations, if any, and recommendations under implementation are reported at quarterly Audit Committee meetings.

RISK MANAGEMENT FRAMEWORK

During the year, your Company has transitioned to a "Risk Enabled Performance Management" with the help of Ernst & Young with an overall risk management practices across the organization integrated with business planning. The overall objective of the framework was:

• Assess the impact of changes that have occurred in the business landscape over the past one year including key events, revisit identified risks impacting the Company, include emerging risks and remove redundant ones.

• Assess importance and implication of applicable risks and identify key risks requiring attention and monitoring by leadership team. Strengthen the risk culture of the organization by enhancing awareness and shared understanding of the purpose of risk management across Wockhardt.

• Review the risk management structure, risk policy and framework for periodic review of risk events and mitigation plans.

• Satisfactorily meet compliance obligations relating to risk management that are applicable to the Company.

HUMAN RESOURCES

Wockhardts talent base, as on March 31^st, 2023 stands at ~ 2600.

Wockhardt recognizes that Associates are the most valuable assets and always encourage them to meet business requirements while meeting their career aspirations. The Human Resource division mainly focus on supporting the business in achieving sustainable and responsible growth by building the right competencies and capabilities in the organization. It continues to emphasize on progressive Human Relations policies and building a high-performance ethos with a progressive mind-set where Associates are Empowered, Engaged, Efficient and Productive.

At Wockhardt, ‘Life Wins is a simple yet profound theme that defines our efforts, reflects our goals, highlights our aspirations and characterises our business.

Our ‘One Wockhardt motto creates a unique value driven, high performance and business driven work culture. At Wockhardt, HR plays a central role in implementing the organisations vision and strategy by aligning HR to the business. Better HR policies provide more innovative and forward looking HR focus and initiatives. Promoting diversity, learning environment and work-life balance establish a credible and integrated employee performance goal setting.

Our leadership values of Ownership, Respect, Trust, Integrity are the fundamental principles on which we have built our business. We truly believe that the progress of our associates and business are interlinked and thus created a work culture that offers a unique combination of our core values and functional proRs.ciency.

At Wockhardt, we believe that associates are the key players in business success and sustainable growth. In order to provide meaningful opportunities to our associates for learning and growth, we have strengthened our internal talent pool by launching various career programs for our field associates, ‘Emerge, ‘Surge and ‘Upsurge which provides career visibility to development to our sales force.

Using psychometric tests for senior level hiring has helped Companys understanding of employees, potential strengths and particular characteristics.

The Companys "Whistle Blower Policy" encourages the Whistle Blower to report genuine concerns or grievances of illegal, unethical or inappropriate events (behaviour or practices) that affect Companys interest / image. It also provides adequate safeguard to the Whistle Blower against victimization. The policy is available on the Companys website at www.wockhardt.com.