ANG Lifesciences India Ltd Management Discussions.

Management Discussion and Analysis

ECONOMIC PERSPECTIVE WORLD

The year 2020 saw the global economy contract following the worst humanitarian and health crisis unleashed by COVlD-19in over a hundred years. Economic activities across the world were impacted for several months owing to complete lockdown and restricted mobility imposed by governments to flatten theCOVID-19 curve. As a result, the global output declined 3 3% in 2020 (Source: IMF). To combat the overwhelming challenge, governments and central banks provided unprecedented fiscal and monetary support to protect economies, businesses and support the vulnerable sections of the population.

In terms of the global economic recovery, the IMF forecasts a stronger revival in 2021 and 2022 than its earlier predictions, with a 6% growth in 2021 and 4.4% growth in 2022.

Global grow th forecast

Particulars Actual Projections
2020 2020-21 2022
World output 13.3) 6.0 4.4
Advanced Economies (4.7) 5.1 3.6
US (3.5) 6.4 3.5
Eurozone (6.61 4.4 3.8
Japan (T81 3.3 2.5
UK (9.9) 5.3 5.1
Other Advanced Economies (2.1) 4.4 3.4
Emerging market and developing Economies (2.2) 6.7 5.0
China 2.3 8.4 16

Source: IMF April 2021 Outlook

A strong economic recovery depends on rapid and effective vaccination rollout with stronger policy support. The IMF has projected a global economic outlook of 6% for 2021, owing to additional policy support from a few large economies and the expected vaccine-powered recovery. The IMF recommends a tailored approach for each economy based on the pandemic scenario, recovery rate, along with social and economic capabilities.

INDIA

The Indian economy was also impacted by the COVID-19 pandemic in 2020. Among sectors, services and manufacturing sectors including trade, travel, transportation registered the highest degrowth. As a result, the economy contracted by 24% in the first quarter of FY20.

In response to the massive decline in the first quarter, the Government of India (Gol) and the Reserve Bank of India (RBI) proactively took several stimulus measures {comprising both fiscal and monetary measures) to support the economy. On January 16, 2021 India, also launched the first phase of its vaccination program to inoculate its population.

The combination of support measures, vaccination rollout, pent-up demand and gradual restarting of economic activity after Q2 FY2I enabled the GDP to record 04% growth in the third quarter and 1.6% growth in the fourth quarter of FY21. Overall, Indias GDP shrank by 73% in FY2I

Outlook

Although the overall outlook for the Indian economy is positive, continued pace of vaccination of larger segment of population and containment of further surge in infections would be critical for the economys growth. Encouragingly, the agricultural sector has been resilient throughout the crisis, and with normal monsoonpredicted even in the current fiscal, the agriculture sector is poised to support the economy.

Due to sequential lockdowns and localised mobility restrictions in various states across the country in the wake of COVID 2.0. the aggregate demand conditions may be temporarily affected. The effect of these lockdowns, according to the RBI, is not as severe in the manufacturing and services sectors as it was a year ago. and consumer demand is also gradually picking up.

INDUSTRY INSIGHT

GLOBAL PHARMACEUTICAL INDUSTRY

In 2020, the worldwide pharmaceutical industry was valued at USS 1.27 trillion and is expected to reach USS 1.6 trillion by2025 with a compounded annual growth rate (CAGR) of 3-6%, excluding the expenditure on COVID-19 vaccines. The spendingwill be driven by the higher growth in pharmerging markets and the continued adoption of new products in developed markets.

The spending pattern was divergent across the world in 2020, this is expected to continue till 2022. The spending in dcvclopcdcountrics is likely to rebound in 2021 and can potentially surpass the prc-pandcmic outlook in the medium term. Even though the spending in pharmerging markets was disrupted, there was demand for new treatments and COVID-19 vaccines. In the next five years, the global spending of COVID-19 vaccines is expected to reach USS 157 billion.

From 2016 to 2020, the pharmaceutical markets in the developed world expanded at a ~-4% CAGR and are expected to grow at 15-4.5% CAGR to reach USS 1,130-1,160 billion by 2025. The adoption of new treatments, patent life-cycles impact, new generics launches and increased adoption of biosimilars competitions will be the growth drivers.

Biosimilars: With the changing regulatory landscape and increasing penetration of biosimilars, a robust growth is likely in die segment with USS 90 billion worth of biologies is expected to lose exclusivity, as per industry estimates. The total number of biosimilars approved by USFDA is 29 out of which three biosimilars were approved in the US in 2020 and the total number of biosimilars approved in Europe is 69 out of which 13 were approved in 2020. Biosimilars and its originator products accounted for USS 40 billion in spending in 2019 in key therapy areas where farther biosimilars entry would significantly reduce healthcare costs.

The promise of future biosimilar market is the potential for substantial savings in healthcare costs, particularly in developed nations. Biosimilar spending is expected to reach USS 16-36 billion by 2024 as more biosimilars products get commercialised. Cumulative savings are projected to exceed USS 100 billion over the next five years (below figure).

On ihe oilier hand, the pharmerging markets recorded a growth in spending at 7.4% CAGR in spending between 2016 and 2020,reaching US$ 290.8 billion in 2020 and it is expected to see a growth in spending through 2025. The larger pharmerging countries (Brazil, India, and Russia) are expected to grow at 7% to 10%, while smaller emerging markets may outperform with a CAGR of 8.5% to 115% between 2020 and 2025.

Global pharmaceutical market growth

(Rs. in billion)
Regions 2020 2016-2020 CAGR 2025 2021-2025 CAGR
Developed 959.5 3.8% 1.130-1.160 1.5-4.5%
P banner cing 290.8 7.4% 415-445 7-10%
Lower income countries 15.0 3.9% 18-22 3-6%
Global 1,265.3 4.7% 1,580-1.610 3-6%

Source: IQVIA Market Prognosis, September 2020; IQVLA Institute. March 2021

KEY INDUSTRY TRENDS

Specialty drugs: Specialty drugs arc those that treat chronic, complex or rare diseases and require detailing to the physicians or specialists by a dedicated field-force and are typically expensive. Specialty drugs will represent nearly half of the global spending in 2025 and almost 60% of total spending in developed markets. The 10 largest developed countries and other high and upper middle-income countries are witnessing consistent increase in their spending share on specialty drugs. Over the next five years, an average of 54-63 new active substances (NAS) are expected to be launched globally every year, totaling 290-315 over five years. This scenario is expected to contribute to a rising number of new product launches in the Specialty segment.

Source: IQVIA Global Medicines Spending and Usage Trends Outlook to 2025

Generics: Generics have witnessed an attractive, lucrative development path for over three decades. The global generic drugs market was valued at USS 3X7.92 billion in 2020, and it isexpected to grow at 57% CAGR till 2030 (Source: http: www globenewswire. com).

Mergers and acquisitions (M&A): The global economy faced headwinds resulting in slowdown in most of the sectors. The M&A activities in the sector was quiet on the megadeal front and the needle swung towards the mid and small size deals where companies sought to restore pipelines rather than transform via large deals which was dominant in the last year. The total value of deals during 2020 stood at US$700 billion. Some of the global companies altered their strategy to an opportunistic approachwhere they look at small deals and where there are research-based pipeline acquisition opportunities, which is likely to complement or diversily their portfolios. Source: S&P Global Market Intelligence

Precision medicine: It is an emerging way of disease prevention and management. It involves tailored approaches including predictive diagnostic, prevention and treatment strategies for an individual based on their genetic makeup and genetic modifications. Precision Medicine Market size exceeded USS 52 billion in 2020 and is expected to grow at a CAGR of over 11.5% from 2021 to 2027. Advancements in cancer biologies will drive thegrowth of precision medicine. Development of newer therapeutics approaches including gene therapy for cancer treatment and increasing number of patients undergoing predictive diagnosis will push the market growth. On the other hand, high cost andpotential threat to personal health data are some of the factors that may thwart the market expansion.

Source: Global Market Insights report, 2020

KEY GLOBAL MARKETS

USA

The US (worlds largest pharmaceutical market) medicine spending (-4% CAGR growth from 2016-20) is expected to reach U S S5278 Billion by 2025. Spending at net levels in the US is projected to grow in low single-digits as increase in off-invoice discounts and rebates are expected to slow spending growth over time. Additionally, ongoing market dynamics around the use of medicines, the adoption of advanced treatments, the impact of patent expiries and new- generic or biosimilar penetration will limit growth in the US for the next five years.

LS pharmaceutical spending and growth

2020 2016-2020 CAGR 2025 2021-2025 CAGR
527.8 4.2% 605-635 2-5%

Source: IQVIA Market Prognosis. September 2020; IQVIA Institute. March 2021

Europe

The top five European Union (EU5: markets grew at a 44% CAGR from 2016-20 to reach USS180.4 billion It is projected to grow at about 2-5% CAGR to USS215-245 million by 2025. Medicine spending in the top five European markets is expected to increase by USS35 billion over the next five years, registering the same increase as in the past five years, but with substantial shifts ingrowth drivers. Generics and biosimilars are likely to add over US$31 billion to the market size over the next five years, as a range of patent expiries and the maturation of biosimilars contribute tolower overall spending.

EU5 pharmaceutical spending and growth

2020 2016-2020 2025 2021-2025
CAGR CAGR
180.4 4.4% 215-245 2-5%

Source: IQVIA Market Prognosis, September 2020; IQVIA Institute,March 2021

PHARMERGING MARKETS

From 2016 to 2020, the spending on pharmaceuticals has increased at 7.4% CAGR. reaching US$290,8 billion by the end of 2020, A significant proportion of this spending and market growth has been driven by an enhanced access to chronic and specialty medications, leading to the ramp up of volumes and the adoption of more novel therapies.

Pharmerging markets-Pharmaceutical spending and growth

Region/ Country 2020 2016-2020 CAGR 2025 2021-2025 CAGR
China 134.4 4.9% 170-200 4.5-7.5%
Brazil 28.7 10.7% 43-47 7.5-10.5%
India 22 9.5% 28-32 7.5-10.5%
Russia 17.5 10.8% 33-37 11-14%
Other 89.1 9.6% 120-150 8.5-11.5%
Pharmcrging Markets 290.8 7.4% 415-445 7-10%

Source; IQVIA Market Prognosis. September 2026; IQVIA Institute,March 2021

India

Indias pharma sector has achieved significant growth in bothdomestic and global markets during the past five decades. During the same period, the country has established a leading position inthe global generic pharmaceuticals landscape and is now known as the Pharmacy of the world. The countrys pharma sector contributes over 20% by volume of the global generics market and 62% of the worldwide vaccines demand.

The pharma sector has been contributing significantly to Indias economic growth as one of the top 10 sectors in reducing trade deficit and attracting the Foreign Direct Investment (FDI). The drugs and pharmaceuticals sector attracted a cumulative FDr inflow worth US$16.54 billion between April 2000 and June 2020

(Source: EY analysis).

Thelndian pharmaceutical market had recorded growth at-9.5% CAGR between 2016 and 2020 to reach US$21 billion. It is expected to grow at 75-10.5% CAGR toUS$28-32 billion by 2025.

India pharmaceutical spending and growth

2020 2016-2020 2025 2021-2025
CAGR CAGR
21 95% 28-32 7.5-10.5%

Indian pharma exports reached US$20,7 billion in FY20 with year- on-year growth of 8,4% (exports size was US$19.1 billion in 2019). They have grown at a CAGR of 6.2% between 2015 and 2020. This was largely driven by exports of generics drugs to >200 countries (including both developed and developing markets). India is the source of 60,000 generic brands across 60 therapeutic categories.The country accounts for 40% of the generics demand in the US and -25% of all medicines in the UK. India also fulfills about 80%of global demand for antiretroviral drugs for Acquired Immune Deficiency Syndrome (AIDS), significantly contributing towards increasing accessibility of the AIDS treatments.

Further in the vaccine market, India exports vaccines to >150 countries. It contributes 40%-70% of the World Health Organisations (WHOs) demand for Diphtheria, Pertussis and Tetanus (DPT) and Bacillus Calmette—Guerin (BCG) vaccines, and 90% of the WHO demand for the measles vaccine. In addition, with its strong vaccine manufacturing capability and capacity, India will play a critical role in meeting the demand of COVID-19 vaccines globally. Some of thetop global companies have already tied up with Indian companies for manufacturing the vaccines.

Indias pharma sector has been a key contributor in improving the countrys healthcare and economic outcomes. The pandemic has opened up several opportunities and challenges for the industry. The country is also dependent on China for approximately two-thirds of its imports of bulk drugs or drug intemediaries and is looking at several policy initiatives to reduce dependence on imports, for the pharmaceutical sector was approved on February 25, 2021 with an outlay of 15,000 crore.

The government has approved a total of 33 applications with a committed investment of ‘5.082.65 crore under the production linked incentive (PLI) scheme for Active Pharmaceutical Ingredients (APIs), Intermediates, Key Starting Materials and allied raw materials. The setting of these plants will make the country self-reliant with respect to these segments.

The disbursal of PLI by the government over six years will be up to a maximum sum of 5,440 crore. Under the Aatmanirbhar Bharat campaign and with the aim to reduce import dependence on critical bulk drugs, the Department of Pharmaceuticals had launched a PLI Scheme for the promotion of domestic manufacturing by setting up greenfield plants in four different target segments with a total outlay of 6,940 crore for 2020-21 to 2029-30. The PLI scheme

In the Financial Year 2020-21, your company achieved a modest growth of around 21.72%% in the revenue from operations that has been increased to Rs. 15437.90 Lacs from Rs. 12683.12 Lacs in the previous year 2019-20. The Company has been able to maintain the profitability with Net Profits at Rs. 702.77 Lacs as compared to Rs 609.56 lacs in FY 2019-20. The growth in profitability is muted partly on account of after effects of onset of Covidl 9 in January, 2020. The Company continues to strengthen its position as a trusted parenteral pharmaceutical company and is diversifying its product portfolio and has recorded handsome growth in first half of F Y 2021 -22.

Pharmaceutical industry sector is facing global competition and most effected by a high attrition rate in India. Since this industry needs trained manpower who has the requisite experience to meet the compliances with statutory requirements, good manufacturing practices, good laboratory practices, QA and QC personnel, your company focuses on these aspects in human resources management.

ANG continuously implements its training programs that help in identifying the potential talent from employees and sharpen their talent skills and motivating them to do right things in the right way. Our Industrial relations continue to be peaceful and harmonious. The management has initiated various measures.

The management of ANG Lifesciences India Limited has prepared and is responsible for the financial statements that appear in this report. This report contains statements that may be "forward looking including, but without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to Companys future business developments and economic performance. While these forward looking statements indicate our assessment and future expectations concerning the development of our business, a number of risks, uncertainties and other unknown factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, general market, macroeconomic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments, and other key factors that could affect our business and financial performance. Company undertakes no obligation to publicly revise any forward looking statements to reflect futurc/likcly events or circumstances.