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Biocon Ltd Management Discussions

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Jul 19, 2024|09:44:56 AM

Biocon Ltd Share Price Management Discussions

Inflation peaking amid low growth in the global economy

A report by the International Monetary Fund (IMF)1 indicated that global growth is expected to weaken from the 2022 levels of 3.4% to 2.8% in 2023. The rise in central bank rates to fight inflation, the on-going war in Ukraine and delayed reopening of China amid resurgence of COVID-19 towards the end of the year, were some of the factors that contributed to dampened growth in 2022. These factors are expected to continue to weigh on the global economy in 2023, even as China has begun making a comeback following the reopening of its economy. The higher, broad-based inflation that was seen globally was largely due to supply disruptions during COVID-19, coupled with rising energy prices. However, this is expected to weaken to 7.0% in 2023 from 8.7% in 2022 on the backdrop of lower food, fuel and commodity prices due to a weak global demand environment, normalization of supply chains and tighter monetary policies by global central banks.

They need to be nimble in their response to the evolving global macro to maintain financial stability while simultaneously working towards to containing inflation.

Global Medicine Market

A recent IQVIA report2 estimates the global medicine market, using invoice price levels, and excluding spends on COVID-19 vaccines and therapeutics, is expected to grow to ~USD 1.9 trillion by 2027, at a compounded annual growth rate (CAGR) between 3% and 6%. Medicine spends and volume growth trends will vary across regions, with larger and more established markets expected to grow slower, and growth markets in Eastern Europe, Asia and Latin America growing in both volume and spending.

Reduced global demand is also expected to weaken global trade volumes to around 2.4% in 2023 from 5.1% in 2022.

Downside risks dominate the outlook with recession fears being echoed. Fallouts from recent instability in some sections of the banking sector could result in continued tightening of global financial conditions, which could result in decline in business and consumer confidence.

However, it is also possible that the global economy could surprise on the upside with household consumption in several markets exceeding expectations.

With the present uncertainty around current and likely economic conditions, policy makers have a fine line to tread if they are looking at achieving strong, sustainable, and inclusive growth.

The U.S. medicine market, the largest in the world, at invoice prices, is expected to increase by USD 134 billion to USD 763 billion through 2027. This is slower than the increase seen in the previous five years. Increased uptake of both existing as well as new launches of protected branded medicines will be the primary drivers of growth during the period. This is expected to be offset by loss of exclusivity of both small and large molecule drugs. The reduced estimates include the projected impact from the Inflation Reduction Act (IRA) which is expected to drive volumes by reducing out of pocket costs for patients, levying inflation penalties on manufacturers and via direct price negotiations, especially in the Medicare program. The rate of spending growth in China is also expected to slow down, however the market is expected to grow from USD 166 billion in 2022 to USD 194 in 2027. Growth in medicine spending is expected to be supported by higher number of innovator medicines being reimbursed via the National Reimbursement Drug List (NRDL). In Japan, the third largest global market, medicine spend is expected to remain largely unchanged at ~USD 75 billion with increasing spends on protected innovator drugs offset by shift to annual price cuts and policies promoting

1 https://www.imf.org/en/Publications/WEO/Issues/2022/01/25/world- economic-outlook-update-january-2022

2 IQVIA Report on The Global Use of Medicines 2022: Outlook to 2027

a continued shift to generics. In Europe, medicine spending in the top-5 markets (France, Germany, Italy, Spain, and U.K.) is expected to grow by USD 59 billion to USD 263 billion over the next five years. Growth in these markets, like the U.S., is expected to be driven by protected branded drugs with generics and biosimilars also contributing to growth.

Oncology, immunology, anti-diabetics and cardiovascular are therapy areas which are expected to have the highest spending.

Oncology and immunology, are expected to grow at a CAGR of 13 to 16% and 3 to 6% respectively through 2027. While in oncology the growth rate will be driven by newer treatments and higher use of medicines, growth in immunology, by contrast, is offset by losses of exclusivity and a growing adoption of biosimilars. About a hundred new drugs are expected to be added for cancer treatment alone over the next five years, contributing ~USD 184 billion to grow the total market size to USD 370+ billion through 2027. Diabetes spending, while expected to be the third largest therapy area globally, is estimated to grow 3 to 6% over the next 5 years. However, newer, highly effective treatments which fall under the category of glucagonlike peptide-1 (GLP-1) agonists (e.g. liraglutide, semaglutide) or glucose-dependent insulinotropic polypeptide and glucagonlike peptide-1 receptor (GIP/GLP-1) agonist (e.g. tirzepatide), are expected to gain wider usage across geographies and are projected to be multi-billion dollar opportunities. These drugs have also seen to be better in aiding patients to lose weight and can be prescribed for weight loss. With obesity affecting many million patients globally, this addressable markets across diabetes and obesity for these newer treatments is projected by analysts to be over USD 100 billion over the next decade. Growth in Neurology or medicines used to treat conditions related to the Central Nervous System (CNS) is expected to be driven by greater adoption of newer treatments for migraine, expected treatments for Alzheimers, Parkinsons and other rare diseases.

Worldwide prescription drug sales are forecasted to grow at a CAGR of 6.0%3 between 2021 and 2027 to USD 1.4 trillion. COVID-19 provided a huge boost to drug sales as demand for pandemic products including vaccines, antivirals and antibodies caused sales to rise in 2021.

The recent drug price reform in the U.S., and upcoming patent cliffs could impact growth rate of the sector. However, this could be offset by biologic drugs, the importance of which continues to grow, and are projected to account for ~40% of the total drug sales, and ~60% by sales of the 100 top selling medicines by 2027. These molecules tend to be more expensive and have better patent protection, thereby providing greater durability than small molecules which further enhance their ascendancy.

Worldwide pharmaceutical Research and Development (R&D) spend is forecasted to be more measured with annualized growth reducing to low single digits between 2022 and 2027 to reach USD 278 billion, compared to the historical CAGR of 7.3% between 2014 and 2021. After the spike seen due to COVID-19 necessitated R&D, in a tightened financial climate, biopharma, especially small companies, will focus of cash conservation. As R&D efficiencies improve due to increased adoption of digital methods, the expected benefits should help lower drug development spends in the coming years.

Emerging Trends within the Pharmaceutical Sector

The pandemic changed the pharma landscape considerably. As treatment paradigms and the healthcare delivery systems across the globe continue to evolve, some key trends impacting the global pharmaceutical industry have emerged:

3 https://info.evaluate.com/rs/607-YGS-364/images/2022%20World%20 Preview%20Report.pdf

Continued pressures on drug pricing, access to healthcare remains a challenge

The slowdown in global economic growth and the Russia- Ukraine conflict have led to an increase in financial burden on major economies resulting in reimbursement pressures on governments and healthcare systems. Inflationary pressures on the industry persist, and there remains intense competition in the generics industry as pharmaceutical manufacturers continue to compete aggressively for market share. In the U.S., the introduction of the Inflation Reduction Act (IRA), that allows Medicare to negotiate drug prices, imposes additional pressure on the pricing of medicines.

In this backdrop, globally, patients still struggle to get access to the medicines they require due to cost, inequity or structural issues in healthcare systems. While this situation is more acute in lower-income countries, it is a problem in developed countries as well.

New operating models changing work practices

To remain competitive and resilient in the evolved operating environment, pharmaceutical companies need to be more agile, leverage the power of data and make bold changes to reinvent their traditional business models to more decentralized models of working, particularly as they invest to build specialized capabilities in research and development (R&D) and manufacturing.

Adoption of digital continues to accelerate

Companies are increasingly adopting emerging technologies and investing in areas such as advanced analytics, automation and artificial intelligence. They are also moving from transactional engagements to an insight-driven, value-based enterprise.

The use of algorithms and machine learning in detecting, diagnosing and treating disease has become an important area of focus for life sciences. Some believe it is the biggest healthcare revolution of the 21st century. The use of data science and technology is increasing across the industry in all aspects - from R&D, manufacturing, supply chain and marketing, to automation of human resource and finance processes. While this is helping bring greater efficiency, it requires new investment and skills.

Emerging scientific innovation in medicine

In recent years, innovation in medical treatments has advanced at a rapid pace. The swift response to COVID-19 through the development of effective vaccines is a testament to such endeavours. New treatment paradigms, including RNA therapies, gene and cell therapies, which offer targeted methods for treating diseases have been approved. Precision medicine presents great opportunities in transforming the future

of healthcare. While it is currently most advanced in oncology, precision medication also has wider, exciting applications, such as in rare and genetic diseases. However, integrating precision medicine into healthcare is set to be a challenging process with issues such as infrastructure, inequalities, and expertise that need to be overcome before this becomes mainstream.

Growing importance of environment, social and governance (ESG) practices

Apart from financial results, companies performances are also judged on a variety of ESG issues / initiatives which can contribute to the long-term sustainability of their performance. Climate change, social inequity, access, affordability and safety of medicines, and ethical behaviour have become increasingly important discussion topics with stakeholders, including governments, customers, investors and employees.

To that effect, the industry is adapting to meet stakeholder expectations. Manufacturers are working to reduce waste, conserve energy and use environmentally friendly processes and materials.. Pharma manufacturing is becoming increasingly digitized and automated, allowing for greater efficiency and accuracy in the process, reducing the risk of errors and improving quality control.

Many global organizations such as S&P Global, Carbon Disclosure Project (CDP), Ecovadis, Sustainalytics and FTSE Russell assess companies on ESG topics and their reporting, with the results of these assessments widely publicized. In addition, investments in ESG funds that specialize in investing in companies performing well in such assessments have become increasingly popular, and major institutional investors have publicly emphasized the importance of such ESG measures in making their investment decisions.

Trends, such as the ones listed above, will continue to transform the pharmaceutical industry.

Biocons approach towards sustainable growth

As an integrated, innovation-led biopharmaceutical company, we have used our scientific and technical know-how, vertical integration, global scale manufacturing capabilities, talented people, a strong quality culture, strong global partners and customers to develop complex small molecule APIs, generic formulations, biosimilars as well as novel biologics across therapy areas. We also provide an integrated range of scientific services from the earliest stages of discovery research to commercial manufacturing. All this has been done while operating with the highest level of global regulatory compliance and upholding corporate governance standards. Over the years, this has helped us deliver a sustained financial performance and growth and create value for our stakeholders.

We leverage the synergies across the group, share skills and resources to continuously innovate. Our focus on generics and biosimilars enables us to make available high-quality affordable alternatives to expensive drugs, thereby lowering costs, increasing access and improving treatment outcomes for patients globally. We also enable R&D organizations to benefit from enhanced productivity by delivering world-class contract research and manufacturing services.

Business Review FY23 Highlights:

• Biocon generated revenues of 115,501 million in FY23, recording a year-on-year growth of 38%, driven by a strong growth of 61% in Biosimilars, 23% in Research services and 13% in Generics, over FY22.

• Biocons biosimilar arm, Biocon Biologics completed the landmark acquisition of Viatris biosimilars business on November 29, 2022, following a definitive agreement entered into with Viatris in February 2022. Completion of this strategic investment will help drive our ambition of global leadership as a fully integrated biosimilars player.

• The Generics business continued its geographic expansion initiatives with multiple strategic partnerships across markets. FY23 marked the year of launch of our products in a few ex-U.S. geographies such as the U.K. and emerging markets.

• Syngene, Biocons Research Services arm delivered the highest absolute year-on-year increase in revenue and EBITDA in the last 5 years with all four divisions of the Company delivering sustained growth through the year. Manufacturing Services had a particularly strong year, led by the commercial-scale biologics manufacturing business supporting the partnership with Zoetis, following successful regulatory inspections by the U.S., EU and U.K. regulatory authorities.

Other FY23 updates:

• Biocon has always strived to create a work environment conducive to enabling our employees to create viable careers for themselves while contributing towards the organizations objectives and goals. We continue to develop and implement people processes and policies to facilitate such efforts. These processes cover talent acquisition, performance evaluation, talent development and succession planning

Our efforts have consistently been recognized through several awards and recognitions we received in FY23:

• Biocon was ranked Number 8 in the pharma, biotech & biopharma category for the Global Top Employers List by the U.S. Science Magazine for the 10th consecutive year.

o We were recognised by the UN Women as a winner in the India - Transparency and Reporting, India - Youth Leadership and Asia-Pacific Youth Leadership categories for exemplary practices embracing Womens Empowerment Principles, Asia Pacific.

o We featured in Avatars 2022 Exemplars of Inclusion in the Most Inclusive Companies Index & Best Companies for Women in India.

o Biocon Group has been chosen as one of the Most Preferred Workplaces in Manufacturing 2022 by Team Marksmen.

o We were conferred Best Women Employer Award received by the Economic Times in association with Femina.

• Sustainability is integral to Biocons business purpose, and the Company continues to develop a progressive agenda for its Environment, Social and Governance (ESG) practices in alignment with stakeholder expectations and the companys objectives. Biocons efforts continue to earn receive global recognition, reflected in the scores from leading global sustainability indexes:

o Biocon improved its score in the Dow Jones Sustainability Index over 2021, from 45 to 52. Based on this performance, we were inducted into S&P DJSIs prestigious annual "Sustainability Yearbook" under the "Industry Mover" category.

o Biocon was Awarded a Silver medal by EcoVadis for its Sustainability Accomplishments.

Biocon has a clear ESG strategy that is being implemented across the organisation. In line with the purpose, we have published our first GRI-aligned Integrated Report aligned with the International Integrated Reporting Councils (IIRC) framework this year. We continue to work on developing our strategy to carrying out our priorities, governed through our ESG and CSR Board Committees.

Biocon operates four distinct business segments:

a. Generics

b. Novel Biologics

c. Biosimilars (Under Biocon Biologics Limited)

d. Research Services (Under Syngene International Limited)

Generics

Our Generics Business comprises of a growing portfolio of Active Pharmaceutical Ingredients (APIs) as well as finished dosages. The business started in the late 90s with a fermentation based, cholesterol-lowering, statin API called Lovastatin and shortly after, in 2001, Biocon became the first Indian company to be approved by the U.S. Food and Drug Administration (U.S. FDA) to manufacture the API. Today, we are one of the largest manufacturers of statin and immunosuppressant APIs in the world. With a strategy to forward integrate our in-house APIs, in 2013, we forayed into the generic formulation space. This allowed us to move up the value chain while ensuring reliability of supplies to our customers and patients. The business has five API manufacturing facilities across Bengaluru, Hyderabad and Visakhapatnam in India and an oral solid dosage (OSD) formulation facility in Bangalore that has capabilities to manufacture both regular and high potency tablets and capsules. In addition to our in-house formulation manufacturing, we also leverage capacities of Contract Manufacturing Organisations (CMOs) as required.

Our strategic priorities

Over the last few years, our strategic priorities were: Product Pipeline, Cost Competitiveness, Manufacturing Expansion, Strengthen Quality, Base Business, Talent Development, Regional Expansion and Digital Initiatives. These had evolved over time and enabled us to get to where we are today. Now, as we aim to raise ourselves to the next level on the global pharma arena, we have accordingly defined a new set of strategic priorities that will get us to where we want to be.

These eight priorities have been carefully thought through and developed to span the lifecycle of our business - product selection, development, mapping, capex execution, scale-up and validation - all with the ultimate objective of bringing our products to market at the right time and right cost. The first four priorities are foundational to our existence and speak of

how we define ourselves as a company. The focus is on execution excellence. Priorities five to eight complement, support and enable the first four.

In line with these strategic priorities, we will continue to focus on growing our product pipeline, where possible through vertical integration, with a clear focus on innovation. We continue to add capacities and niche capabilities in areas such as peptides, high potent drugs, and injectables. De-risking our supply chain and leveraging digital transformation efforts should further aid achieving our key strategic objectives in the coming time.

Active Pharmaceutical Ingredients (APIs)

Global API Market:

The global API market is estimated to reach USD 2864 billion by 2027, from USD 173 billion in 2020. The growing prevalence of chronic diseases, fuelled by an increasing older population, sedentary lifestyle, rise in per capita healthcare spending in emerging economies and continued investment in R&D for newer drug discoveries is expected to drive of the global pharmaceutical market, and in turn the API market. Recent R&D trends indicate a shift in the demand towards the development of more complex oncology and peptide APIs, which are used in formulations that target niche therapeutic areas. Furthermore, upcoming patent expiries of key drugs should help drive volumes for both small and large molecule APIs.

The North American market is the dominant consumer of APIs driven by increased incidence of chronic diseases as well as being a hub for innovative drug development. This is followed by Europe, and then Asia Pacific. The growth in the Asia Pacific market is expected to outpace the more mature markets of North American and Europe. China and India are preferred destinations for outsourcing API manufacturing due to favourable factors such as lower labour costs, relatively favourable regulatory policies as well as high availability of raw materials to produce APIs.

The COVID-19 pandemic has demonstrated the importance of being nimble in adapting to unprecedented events. There remains continued focus on supply chain augmentation against the backdrop of disruptions seen during the pandemic, with increased prioritization for supply reliability and independence. This has resulted in a shift in purchasing trends, with

organizations and governments advocating preference for domestic manufacturing over imports. For example, in 2021, the government in India had approved a USD 955 million5 production-linked incentive (PLI) scheme to promote domestic manufacturing by setting up greenfield plants from FY21 to FY30 and achieve self-reliance and minimise import dependency for important starting materials, pharmacological intermediates and APIs.

Our Generic API Business:

Our API business comprises of a balanced portfolio of 50+ APIs spread across Cardiovascular, Anti-Diabetics, Immunosuppressants, Oncology, Peptides, Neurology and a few speciality and niche molecules. We leverage our strengths of R&D and manufacturing technology platforms in developing differentiated APIs that have a high degree of complexity. While expertise in fermentation technology, large scale chromatography and synthetic chemistry have been our strengths built over the years, we have expanded beyond these areas into manufacturing a basket of peptides and high potent APIs. Peptides, especially those molecules which are used to treat diabetes and obesity are a is a big focus area for Biocon. We have a pipeline of more than 10 peptides under development.

With a track record of over 20 years of Current Good Manufacturing Practice (cGMP) compliance, we have a global reach of ~750 API customers in 100+ countries. Further, the Company has been successfully inspected by several regulatory agencies, including the U.S. FDA, EMA, TGA Australia, Health Canada and Cofepris Mexico, standing testament to our quality track record.

Over the last few years, we have invested in expanding our portfolio and capacities as well as in adding complementary capabilities to support our growth plans and to better serve the increasing market demand for API. During FY23, we commissioned our greenfield immunosuppressant API facility in Visakhapatnam and a new larger peptide facility in Bengaluru. Both facilities are expected to complete validation activities during FY24, paving the way for regulatory filings from those sites.

4 https://www.researchandmarkets.com/reports/5576448/global-drug-api- market-forecasts-from-2022-to

5 Report on Indian Pharmaceutical Industry by India Brand Equity Foundation Nov.22, https://www.ibef.org/industry/pharmaceutical-india

Our API Portfolio* -

Cardiovascular

Anti-Diabetics Immunosuppressants Oncology Anti-fungal Multiple Sclerosis Others

Apixaban

Liraglutide Tacrolimus Dasatinib Micafungin Fingolimod Orlistat

Atorvastatin

Dapagliflozin Mycophenolate Mofetil Everolimus Anidulafungin Teriflunomide Deferasirox

Dabigatran

Empagliflozin Mycophenolate Sodium Lenalidomide Posaconazole Brinzolamide

Fluvastatin

Linagliptin Everolimus Temsirolimus Mirabegron

Ivabradine

Repaglinide Sirolimus

Pravastatin

Sitagliptin Pimecrolimus

Rivaroxaban

Vildagliptin

Rosuvastatin

Pioglitazone

Simvastatin

Lovastatin

Sacubitril Sodium

*Filed DMFs

Generic Formulations

Global Generic Formulations Market:

The global generics drug market is anticipated to grow from USD 414 billion in 2021 to USD 574 billion6 by 2027, driven by growth in chronic diseases related to an aging population. Lifestyle changes are further adding to the increase in preventable deaths due to non-communicable diseases such as heart diseases, diabetes and cancer. All of this puts additional pressure on global healthcare resources leading to efforts from governments and regulators to promote lower- cost generic formulations as the alternative to branded drugs. While innovation in medical treatments continue to advance, generic drugs are expected to provide cost effective remedies for the therapeutic needs of much of the population. Although the trend indicates an increasing adoption of biosimilars, small molecule generic drugs will comprise approximately two thirds of the market.

The U.S. is the largest generics market globally. In the past few years, the growth environment within the U.S. generics market has been a challenging one with increased price erosion as a result of change in the industry structure due to the consolidation of buyers and heightened competition. During the COVID-19 pandemic, as supply chain security and drug availability became important factors in the marketplace, this led to an improvement in the pricing environment for a few drugs, however, pricing remains suppressed in general. With the pandemic behind us, there has also been a revival of the on-site inspections conducted by the U.S. FDA, which has made buyers aware of supply disruptions as a result of compliance related

6 https://www.biospace.com/article/generic-drugs-market-size-to-reach-usd-574-63-billion-by-2027/ issues such as import alerts. Despite such challenges, the U.S. remains a key focus market, and manufacturers are investing heavily in terms of regulatory, manufacturing, and technological capabilities to tap into the opportunities. Furthermore, the U.S. approvals also serves as a platform to introduce products into other key markets globally thereby enabling companies to leverage their R&D investments and infrastructure. With the saturation of simple oral solids market in the U.S., companies have shifted focus towards developing complex products which they expect to offer higher or sustainable value in terms of growth and profitability in the coming years.

Given its low-cost advantage, India ranks 3rd 7 in terms of pharmaceutical production by volume and 14th by value, positioning the country as the one of the largest providers of generic drugs globally. The Indian pharmaceutical sector, comprising of around 3,000 drug companies with over 10,500 manufacturing units, supplies over 50% of the global demand for various vaccines, 40% of the generic medicines demand in the U.S. and 25% of all medicines in the U.K.

Our Generic Formulation Business:

In line with our commitment of enhancing global healthcare by providing high quality, affordable therapies, that can lower costs and increase access, we are committed to invest in the development and commercialization of generic formulations. Since the commercialization of our first generic formulation in the U.S. in 2017, we now have thirteen commercial drug products in the U.S., two in Europe and a few in the

7 Report on Indian Pharmaceutical Industry by India Brand Equity Foundation Nov. 22, https://www.ibef.org/industry/pharmaceutical-india emerging markets leveraging the U.S. approvals. We anticipate commercializing 5-6 products every year in the U.S. market and strengthen our presence in most-of the-world markets. We now have 75+ drug products in various stages of portfolio classification - commercial, tentative approvals, filed or under development. Our portfolio addresses 13 of the top 50 drugs in the U.S. market. Per IQVIA MAT March23, the combined addressable market before accounting for discounts and rebates for this portfolio is USD 134 billion in the U.S. Many of our products are vertically integrated, giving us better control over the supply chain and thereby ensuring continuity of supplies to customers and eventually to patients.

Our portfolio is focused on therapeutic segments such as Diabetes, Cardiology, Oncology, Immunology, Auto-immune indications and Obesity which is poised to grow at a significant rate in the coming years. Therefore, peptides, as a platform technology is a key focus area for us. The peptide portfolio will target drug products in therapeutic areas such as Diabetes, Obesity and Oncology. Filings from the peptides portfolio have already been made by us with regulatory agencies in the U.S. and Europe, among others. These are injectable formulations with a drug device combination and complex characterization.

From a dosage form perspective our portfolio includes oral solid dosage (OSD), both potent and non-potent forms, in multiple dosage forms like immediate release formulations such as oral dispersible tablets, modified release formulations such as delayed release tablets, extended release tablets, capsules. We also have injectables with complex API (e.g. peptides, low molecular weight heparins) and complex formulations (suspensions, long acting in situ gels and lyophilized), available in vials, drug-device combination products like pre-filled syringes (PFS), pen device and auto-injectors (both disposable & re-usable) for which we have built capabilities over the years.

We continue to expand and invest in our portfolio and build inhouse manufacturing capabilities and capacities that will drive our future growth.

Our Generic Formulations Portfolio* -

Product

Status Update

Cardiovascular

Rosuvastatin Calcium

Launched in U.S. and EU; launched/ approved in select most-of-the-world (MoW) countries

Simvastatin

Launched in U.S.

Atorvastatin

Launched in U.S.

Pravastatin

Launched in U.S.

Prazosin

Approved in the U.S.

Labetalol HCl

Launched in U.S.

Oncology

Everolimus

Launched in U.S.; approved in EU and select MoW markets

Pemetrexed

Approved in U.S.

Lenalidomide

Approved in the EU, U.K.

Dasatinib

Approved in select MoW markets

Immunosuppressants

Tacrolimus

Launched in U.S. and approved & launched in select MoW countries

Mycophenolic Acid

Launched in U.S.; approved in select MoW markets

Others

Esomeprazole DR (Gastrointestinal)

Launched in U.S.

Posaconazole (Anti-Fungal)

Launched in U.S., U.K.; approved in select EU markets

Dorzolamide (Ophthalmic)

Launched in U.S.

Dorzolamide Timolol (Ophthalmic)

Approved in U.S.

Fingolimod (Multiple Sclerosis)

Approved in U.S., EU, U.K., select MoW markets

Vigabatrin - Oral Solution (Central Nervous System)

Approved in U.S.

Dapagliflozin (Anti Diabetic)

Tentatively approved in U.S.

Teriflunomide (Multiple Sclerosis)

Approved in the U.S.

Aminocaproic Acid - Tablet & Oral Solution (Antifibrinolytic agent)

Launched in the U.S.

*Approved or Tentatively Approved as ot

n March 31, 2023

Generics - FY23 Highlights:

Steady growth of our Generic Formulations business in the U.S.: Our statins portfolio in the U.S., comprising Atorvastatin, Simvastatin, Rosuvastatin, and Pravastatin finished dosages maintained or improved its volume market share as compared to FY22. Products launched during FY22, such as Tacrolimus, Everolimus and Posaconazole contributed to growth in FY23. During the year, we launched Aminocaproic Acid, an antifibrinolytic agent, in both tablet and oral solution forms and Mycophenolic Acid delayed released tablets in two strengths - 180 mg and 360 mg. Mycophenolic Acid is indicated for the prophylaxis of organ rejection.

Focus on geographical expansion: In FY23, we initiated product launches in U.K. and certain most-of-the-world markets. We signed two significant partnership deals: In Europe, we signed a semi-exclusive partnership agreement with Zentiva, a leading pharmaceutical company in the region, for the commercialization of our vertically integrated, complex formulation, Liraglutide, a drug-device combination for the treatment and management of Type 2 diabetes and obesity. Under the terms of this agreement, Biocon will manufacture and supply Liraglutide to Zentiva for its commercialization in 30 countries across Europe. Biocon will also retain the right to commercialize this product under its own brand in the region.

Biocon also entered into a long-term strategic partnership with Farmanguinhos, in Brazil, for the supply and tech-transfer of an immunosuppressant finished dosage formulation (FDF) product.

In Europe, we received approvals for Lenalidomide, Posaconazole, Dimethyl Fumarate and Everolimus tablets and have necessary infrastructure in place to bring these products into the market. In the U.K., we received approvals for Posaconazole, our vertically integrated product, Lenalidomide capsules, and Fingolimod capsules.

With our increasing focus on most-of-the-world markets, we continue to receive approvals for our product filings across geographies. We received approvals in the UAE for Fingolimod capsules and Mycophenolic acid delayed release tablets 360 mg. In Singapore we received approvals for Rosuvastatin tablets and Mycophenolic acid delayed release tablets 180 mg and 360 mg and as part of our Latin America push, Dasatinib approval was received in Chile.

Expanding our portfolio and infrastructure: During the fiscal, we made 32 filings and received 19 approvals for our generic formulation products across markets including U.S., EU, U.K., and most-of-the-world markets. In addition, we made multiple Drug Master Files (DMF) submissions across global markets.

Our product selection is driven by complexity of either API or formulations or both, cost competitiveness driven by our vertically integrated business model for key products, complex technology platforms, or a tactical play. To support development needs and new capability building linked to these products, we have added an additional 30,000+ square feet to the existing labs in FY23. We will continue to invest in our R&D capabilities and focus on filing about 10-15 Abbreviated New Drug Applications (ANDAs) each fiscal.

Bolstering manufacturing capacities and capabilities: We commissioned our greenfield, fermentation-based immunosuppressant API manufacturing facility inVisakhapatnam, Andhra Pradesh. Efforts are now focused on qualification and validation, which we expect to complete in FY24. This is our first facility to be fully enabled with Industry 4.0. and will add much needed capacities to serve our customers demands. To support our long-term strategy of being a significant player in the area of peptides, both in API as well as finished dosage/ drug device combinations, we commissioned our larger peptides API manufacturing facility in Bengaluru, which is also undergoing qualification and validation. We are investing in expanding our synthetic and potent API manufacturing capacities in addition to an injectables facility, work on which began during FY23.

Key operational and digital initiatives: During FY23, we carried out several improvement initiatives across our operations. These included programs that involved adding new capabilities, programs to attain cost efficiencies in our manufacturing processes, use of new technologies for yield improvement, process optimization to debottleneck capacities, and reducing consumption on solvents thereby lessening the impact on the environment and contributing to savings.

Digital transformation has become a critical aspect for organizational growth and sustainability. Cognizant of this, we continue our journey to invest and implement several digital tools across the business, to support enhanced efficiency in human resources, product development, quality control and quality assurance.

During the year we launched a customer portal for APIs, a sales force management system, additional modules including dashboards in Laboratory Information Management System (LIMS), a contract management system, and robotic process automation for finance, IT and Business Resource Management (BRM) processes etc. We have also successfully implemented other projects which include a QR code-based track and trace mechanism for APIs, all modules of Quality Management System (QMS) rollout across all sites, paperless preventive maintenance, cleaning validation in formulations facility, and R&D workbench processes. Data analytics derived from digitization solutions

implemented in quality function helped us in improving compliance and productivity.

Focus on talent development and gender diversity: As part of our digital push, we built upon programs which we started in FY22, which included using Artificial Intelligence (AI) in our talent acquisition program. The internal job posting process had also been revamped to promote opportunities for internal talent growth and development. We also implemented a fully automated background verification process for prospective employees which has helped in reducing onboarding timelines and made the process paperless. Manpower planning process was also consolidated to give a single window view to various stakeholders.

We continue to invest in talent development and enabling our employees to broaden their knowledge and skillsets through several digital learning platforms we have. We also partner with proficient external organizations to assess and train leaders and critical talent across levels as part of their career journeys in the company. These interventions included assessments, master classes, group trainings, action learning projects, as well as one-on-one coaching sessions.

With a continued focus on Diversity, Equity and Inclusion (DEI), for the first time, hired an entire batch of 16 women in fermentation, for shop floor roles in Biocon, which we believe is a first in the Indian pharmaceutical industry. Based on feedback and learning from the program, we hired additional batches of women@shopfloor in Hyderabad and Visakhapatnam and look to build upon its success, going forward. Another highlight during FY23 was the hiring of ex-service women in senior roles across support functions.

Supply chain de-risking and renewable energy sourcing: Towards ensuring continuity of supply of our products, we built upon our efforts to de-risk our supply chains for key APIs, especially those dependent on a single source, region specific suppliers. This has been achieved by establishing alternate partners in India and elsewhere either via technology transfer, or long-term arrangements or both. As we grow our Generic Formulations business in the U.S., we are now better positioned to manage the end-to-end value chain for the market, across therapeutic indications. Building on this, we intend to further add capabilities that will address future needs, such as the handling of complex products that require cold-chain transportation. In the EU, where we made our first sales in FY23, we are now capable of handling end-to-end distribution of products.

As part of our sustainability initiatives, we rolled out a Supplier Code of Conduct: which outlines Biocons expectations and guidelines on responsible sourcing, including our commitments

to human rights, the environment, health and safety, business ethics and the development of a diverse and sustainable supply chain. Additionally, Biocon expects its suppliers to operate in compliance with applicable laws, rules, and regulations of the regions they operate in.

Over the years, Biocon has made targeted efforts to replace the use of non-renewable energy sources with greener sources. At the end of FY23, ~80% of the energy requirements at our Bengaluru locations are being met via renewable sources such as wind and solar power, which is significantly higher than many others in the industry.

Ensuring continued compliance through quality management: Based on an on-site inspection conducted by Medicines and Healthcare products Regulatory Agency (MHRA), U.K. in May 2022, at our oral solid dosage formulations manufacturing facility located at Biocon Park in Bengaluru, we received a certificate of Good Manufacturing Practice (GMP) compliance.

In July 2022, the U.S. FDA concluded a pre-approval inspection for Site 3, located at Hyderabad, Telangana. Three observations were cited at the end of the Inspection. The Company responded with a comprehensive CAPA and the facility underwent another pre-approval inspection, in May 2023, with no observations. In July 2022, we also successfully completed an audit done by the Brazilian Health Agency, ANVISA, for Site 2 at Bangalore.

In December 2022, the European Directorate for the Quality of Medicines & HealthCare (EDQM) issued a GMP Certificate of Compliance for the API manufacturing facility in Bengaluru following a GMP inspection of the site conducted in September 2022.

While quality compliance certifications from leading regulatory agencies are testimony to our strong quality systems and compliance track record, we continue with efforts to improve our systems and processes to meet with increased expectations of global regulatory agencies. Use of data analytics helps us identify any potential short coming, which is mitigated via regular education and training of our staff, thereby leading to improved quality culture and continuous compliance.

Generics - FY23 Financial Performance:

The Generics business contributed 23% of consolidated group revenues with revenues at 26,367 million in FY23 compared to 23,409 million in FY22, reflecting a growth of 13%. The segment recovered from a muted performance in FY22 with growth during the year, on a lower base of the previous fiscal, which was impacted by COVID-related operational and supply chain challenges. The performance was driven by API sales, notably immunosuppressant APIs as well as generic formulations

where improved volume market share of products launched in FY22 in the U.S. contributed to growth during FY23.

Generics - FY24 Outlook:

We expect growth trajectory to continue in FY24 driven by enhanced capacities in our API business, volume growth of our base business and recently launched generic formulation products gaining traction. Growth in generic formulations will also come through new product launches in the U.S. and other geographies. Given our vertical integration on some of these products, we see this as an opportunity for us to increase our market shares. While supply chains have normalized and input costs moderated, pricing environment in the U.S. continues to remain a challenge. We believe that to be successful in the evolving pharma landscape, it is important for us to leverage our backward or vertical integration for critical products, have the right portfolio selection strategy, cost leadership and an unwavering focus on quality and compliance. To this effect, we continue to work on de-risking our base business by making necessary R&D investments in new products that will strengthen our pipeline, executing on key capex projects and improving processes to drive operational and cost leadership to support long term business sustainability.

Novel Biologics

Our Novels Biologics business continues to address unmet patient needs with a focus on oncology and immunology. The lead molecule, Itolizumab, is the worlds first novel humanized anti-CD6 monoclonal antibody that selectively targets the CD6-ALCAM pathway. The drug is Biocons second global lab to market novel biologic after Nimotuzumab. Under the brand ALZUMAb™, Itolizumab was launched in India in 2013 to treat chronic plaque psoriasis. In 2017, we licensed the rights to develop and commercialize Itolizumab to U.S. based biotechnology company, Equillium Inc. for the U.S., Canada, Australia and New Zealand markets. Itolizumab is currently being developed for indications such as acute graft-versus- host disease (aGVHD), systemic lupus erythematosus (SLE) or lupus nephritis (LN) and ulcerative colitis. Equillium has received fast track designation from the U.S. FDA for Itolizumab for the treatment of patients with aGVHD and LN. Itolizumab has also received orphan drug designations from the U.S. FDA for both prevention and treatment of aGVHD. Biocon has received orphan drug designation from the EMA for treatment of graft- versus-host disease and EMA has given a positive opinion for paediatric investigation for the treatment of aGVHD. The drug had also been granted Restricted Emergency Use approval in 2020 in India for the treatment of Cytokine Release Syndrome in Moderate to Severe Acute Respiratory Distress Syndrome (ARDS) patients and was repurposed for the prevention and treatment of COVID-19 complications.

Our Boston based associate, Bicara Therapeutics, is a clinical- stage biotechnology company developing first-in-class biologic drugs, engineered to bring together the precision of targeted therapy and the power of immunotherapy. In line with its vision to develop meaningful therapies for cancer patients, Bicara continues to make progress on its lead molecule, BCA101. BCA101 is a bifunctional antibody designed to target a TGF-p trap to EGFR-positive tumors by inhibiting epidermal growth factor receptor (EGFR) and disabling TGF-p directly at the site of the tumor, ideally achieving superior anti-tumor efficacy with an improved therapeutic window. BCA101 has the potential to target multiple tumor types and has a higher local tumor concentration of immuno-modulatory arm resulting in a better therapeutic window. A first-in-human, Phase 1/2 study in EGFR- driven tumors was activated in July 2020 at leading institutions in the U.S. and Canada.

Novel Biologics - FY23 Highlights:

Our partner, Equillium, Inc., initiated a Phase III clinical study of Itolizumab in patients with aGVHD in May 2022. The randomized, double-blind study will assess the efficacy and safety of the drug versus placebo as a first-line therapy in combination with corticosteroids.

After observing positive trends in Part A of its Phase 1b EQUALISE study for SLE and LN indication, Equillium has expanded the Part B portion to clinical centers in India.

Biocon, along with Equillium, initiated a Phase II clinical study of Itolizumab in patients with moderate to severely active ulcerative colitis in December 2022. The randomized, doubleblind, parallel group, and active controlled, two treatment period study will evaluate the safety and efficacy of Itolizumab for the induction of remission in biologics naive patients with moderate to severely active ulcerative colitis.

In April 2023, the European Medicines Agencys Paediatric Committee (PDCO) granted the positive opinion for Paediatric Investigation Plan to Itolizumab for the treatment of aGVHD.

Based on the very encouraging and promising data in aGVHD, Equillium recently entered into an Option and Purchase Agreement with Ono Pharmaceutical Co., Ltd, Japan, where Equillium has granted Ono an exclusive option to acquire its rights to Itolizumab. We believe this is a very important event as Ono is a highly respected company that has brought several important molecules to the market through partners.

Bicara Therapeutics completed dose escalation studies evaluating BCA101 as a single-agent and in combination with pembrolizumab and has initiated the dose expansion arm of the clinical study.

During FY23, BCA101, in combination with pembrolizumab, was evaluated in front-line systemic patients with unresectable, recurrent or metastatic head and neck squamous cell carcinoma (HNSCC), with very encouraging response rates. BCA101 as a monotherapy was evaluated in patients with advanced or incurable cutaneous squamous cell carcinoma (cSCC) who have received previous anti-PD-1 therapy. Bicara has previously reported promising efficacy and safety data from its ongoing Phase 1/1b clinical trial and presented data from its combination study during an oral presentation session at the 2023 American Society of Clinical Oncology (ASCO) Annual Meeting being held in Chicago from June 2-6, 2023.

Based on the promising data generated thus far, Bicara completed an oversubscribed USD 108 million Series B financing to advance its lead program BCA101 and its pipeline of investigational candidates to treat solid tumor cancers. The financing was co-led by RA Capital and Red Tree Ventures, with participation from a group of dedicated-biotech investors. Financing will support future studies of lead program BCA101, currently in Phase 1/1b clinical development in head and neck cancer, and pipeline growth.

Post the series B financing, Biocons stake in Bicara will be reduced to 23.3% on a fully diluted basis.

Biosimilars (Biocon Biologics Limited)

Biocon Biologics Limited (BBL) is the biosimilars arm of Biocon Limited. It is a unique, fully integrated global biosimilars player with a demonstrated track record of success across the value chain from R&D through to manufacturing and commercialization. BBL was the largest contributor to the Companys revenues in FY23 and is its fastest growing business segment.

The early 2000s marked our entry into biosimilars when we became the 1st company globally to develop and commercialize bHuman Insulin in 2004 using a proprietary Pichia pastoris platform. We subsequently forayed into developing monoclonal antibodies (mAbs) and therapeutic proteins targeting Cancer and Autoimmune diseases using mammalian cell culture-based expression systems. As an early investor in the biosimilars business, we have invested more than USD 1 billion till date to build world-class R&D and global-scale manufacturing capabilities.

We have also built a hybrid commercial model with selfcommercialization capabilities in select Emerging Markets (e.g.

India) coupled with a network of partners and distributors to commercialize our products in 100+ markets globally, including Advanced Markets such as the U.S. and Europe. Our strategy of developing core and differentiated R&D and manufacturing capabilities, coupled with our commercial network, has made us a frontrunner in the biosimilars industry. We have achieved several global "firsts" and been among the first wave of biosimilars entrants, expanding patients access to essential and lifesaving biologic drugs. In addition, we have one of the most comprehensive portfolios in the industry with 20 biosimilars spanning Oncology, Immunology, Diabetes, and other therapeutic areas.

Our most significant and enduring partnership has been our global strategic collaboration with Viatris (earlier Mylan) for the development, manufacturing, supply, and commercialization of biosimilar mAbs in 2009, which was then expanded to insulin analogs in 2013. The Viatris collaboration was a cost-share and profit-share model wherein we participated in about one- third of the economics in Advanced Markets where Viatris had exclusive commercial rights and about half of the economics in Emerging Markets where we shared commercial rights.

In FY23, BBL accelerated its self-commercialization aspirations with the historic USD 3 billion+ acquisition of Viatris global biosimilars business to create a unique, fully integrated player with end-to-end capabilities from lab-to-market. The acquisition is an inflection point in our journey and is designed to create a global leader in biosimilars and maximize value for all our stakeholders.

Our end-to-end capabilities, industry leading portfolio, strong business fundamentals, favorable market dynamics and ability to attract marquee global investors, set us up for success and provide a runway to sustainable, profitable growth.

Biosimilars: An attractive market with growing acceptance among stakeholders Biosimilars represent a significant and rapidly expanding market opportunity

Biologics are large, complex molecules produced from living organisms that require specialized expertise to develop and manufacture. Biologics have become an important therapeutic category in the treatment of several life-threatening diseases, accounting for about one-third of the global pharma market and 9 out of the Top 20 pharmaceuticals in 2022. As per IQVIA, the biologics market is expected to grow at a ~10% CAGR to USD 666 billion in 2027.

However, given their significantly high cost of treatment, affordability and access to Biologics remain a challenge for patients and healthcare systems globally both in Advanced and Emerging Markets.

For example, in the U.S., the treatment cost of biologics is typically USD 10,000-30,000 per year and in many cases, it can be much higher8 which makes it out of reach for many patients especially those without or limited insurance. In Low- and Middle-Income Countries (LMIC) only half of insulin-dependent patients can afford Insulins, a biologic drug.

Source: IQVIA Global Use of Medicines 2023; IQVIA Biosimilars in the United States, 2023-2027; IQVIA Global Use of Medicines, 2022-26; IQVIA White Paper, Nov20

8 PubMed, National Library of Medicine 2018

A biosimilar is a biological medicine highly similar to another already approved biological medicine (the reference product) in terms of structure, biological activity, efficacy, safety and immunogenicity profile. It has no clinically meaningful difference versus the reference product and is developed and manufactured with the same strict quality guidelines. However, biosimilars are more affordable alternatives to their reference product and can address the affordability and access challenge while ensuring the same treatment outcome. In many cases, such as Adalimumab (an immunology product) in the EU, the launch of biosimilars at a more affordable price has translated into an expansion in the overall market size and improved access.

The loss of exclusivity (or patent expiry) of a referenced product or biologic opens up a large opportunity for biosimilars, thereby expanding the current biosimilar market opportunity. In the near term, ~USD 85 billion of blockbuster drugs are expected to lose exclusivity, creating a very large opportunity for biosimilars players.

Source: EvaluatePharma, Jan 2023; Public disclosures; McKinsey Report Aug22

Note: "Blockbuster" defined here as a drug with annual sales of more than USD 1 billion in the peak year. Analysis based on timing of U.S. patent expiry

Source: McKinsey BiosimCast, 2022

As early adopters, Europe and the Emerging Markets have been driving the growth in the biosimilars industry. However, over the past few years we have also seen an increase in acceptance among prescribers and patients in the U.S. translating to biosimilar adoption rates of over 80% for some products. This increased adoption will drive the next wave of growth across the industry. According to a report published by McKinsey, the market size of biosimilars is projected to reach USD 56 billion by 2027.

The growth in biosimilars is driven by the need to expand access to cutting-edge therapeutics thereby improving patient outcomes. The rapidly increasing disease burden, especially of Non-Communicable Disease (NCDs) such as Diabetes and Cancer, and strained healthcare budgets only underscores the need for affordable biosimilars.

As a unique, fully integrated player with a successful track record of developing, manufacturing, and commercializing 8 biosimilars in global markets till date, Biocon Biologics is well positioned to participate in this growth opportunity.

Evolving Regulatory Landscape

We have witnessed the rapid adoption of biosimilars in Europe and Emerging Markets especially in the tender segment where all biosimilars are treated at par with the originator product. In Sep22, European Medicines Agency (EMA) and the Heads of Medicines Agencies (HMA) issued a joint statement confirming that biosimilar products approved in the European Union (EU) are interchangeable with their reference product or with an equivalent biosimilar, further validating the regulatory acceptance of biosimilars.

The acceptance of biosimilars in the United States is more recent but has come with a quicker adoption profile. The U.S. FDA has approved 41 biosimilars and 30 have been launched till date, generating significant savings of ~USD10 billion per year for the U.S. healthcare system. In the U.S., policymakers and healthcare agencies are increasingly introducing policies that support biosimilars adoption.

Unlike the EU, the current U.S. regulatory landscape requires additional interchangeability studies that are essential for certain commercial segments, increasing the cost of biosimilar development. Some recent developments in the U.S. point to a simplification of the regulatory pathway, supporting biosimilars uptake. These include a waiver of additional studies for insulin biosimilars, an interchangeability designation granted to

Cimerli? (Coherus bLucentis) without an additional switching study, Biosimilar Red Tape Elimination Act, etc.

In addition, several regulatory bodies globally are eliminating the requirement of a Phase III clinical trial to measure product efficacy (e.g., U.K. MHRAs guidance from May22 suggesting that a comparative efficacy trial may not be necessary if sound scientific rationale supports this approach). These developments augur well for companies like Biocon Biologics as it helps reduce both the cost and time for development, allowing us to fully capitalize on the large and growing biosimilars opportunity ahead.

Differentiated versus traditional small molecule generics

The role of biosimilars is akin to that of generics for off- patent small-molecule drugs, providing a cost-effective

alternative to off-patent biologics with no clinically meaningful differences, thereby expanding access. However, developing and manufacturing biosimilars are significantly more timeconsuming, capital-intensive, and scientifically complex. Establishing biosimilarity with a reference product to ensure similar safety, purity and potency is a fundamentally complex task requiring, among other things, highly specialized scientific know-how and infrastructure.

Biosimilars require significantly more investment in product development and building large-scale manufacturing facilities with stronger quality control systems and processes than generics. These higher investments require commensurate financial returns with a higher margin profile, to justify the high cost of capital for biosimilar development.

Small Molecule Generics

Biosimilars

EKpertise & Capabilities

Easy to build given limited complexity

• Highly specialized skills developed over time • Experience with complex technological platforms

Development Spends

• Simple Gx:<USD 1 million • Complex Gx: USD 15-20 million

• USD 50-300 million

Manufacturing Investments

• Simple Gx: USD 20-30 million • Complex Gx: USD 40-50 million

• USD 200 million+

Development Timelines

2-3 years

6-9 years

Clinical Studies

Bioequivalence studies in healthy volunteers

Pharmacokinetic comparison studies in Phase3

No. of subjects in clinical studies

20-50

100-500

Source: GaBi; McKinsey Aug22; US FDA; EMA; IQVIA; BBL analysis

Evolving strategy of biosimilars players

The expertise and quantum of investment required to develop biosimilars have been high barriers to entry thereby limiting the competitive landscape to large originator pharmaceutical companies with biosimilar divisions and select other players including some large generics companies. While the attractive size of the biosimilars market has drawn interest from several companies, there have been limited success stories so far.

The initial commercial success of biosimilars was driven by the biosimilar divisions of large biopharmaceutical originator companies with the scientific knowhow, manufacturing capabilities, commercial reach, and access to capital. However, there are now competing internal demands for resources such as capital, people, R&D and manufacturing facilities at these large organizations, resulting in a reprioritization of opportunities and many announcing their intent to either leave the segment or scale back investments.

On the other hand, there are also smaller companies, most of which are not vertically integrated, have limited portfolios and often lack sufficient resources, knowhow, and skills. As a result, they are required to partner or outsource several activities potentially losing control over costs and quality.

As a unique, vertically integrated global biosimilars player with a strong portfolio and proven track-record, Biocon Biologics can compete effectively in global markets.

Biocon Biologics robust product portfolio

We have one of the deepest and broadest portfolio of biosimilars in the industry, spanning across insulin, monoclonal antibodies, and recombinant proteins. We have a well-established offering in Diabetes, Oncology, and Immunology of which eight products are commercialized in global markets9.

9 Includes in-licensed programs (bAdalimumab and bEtanercept)

We were the first company to receive U.S. FDA approval for bTrastuzumab and bPegfilgrastim. Our bInsulin Glargine was the first product to secure an interchangeability designation in the U.S., a landmark milestone in the biosimilars industry. Our bBevacizumab and bAspart have received approval in EU and Canada and are awaiting approvals in the U.S. Our in-licensed Immunology products, bAdalimumab and bEtanercept, are both commercial in the EU. The launch of bAdalimumab in the U.S. expected to be a key growth driver in FY24 and beyond.

In addition to our 8 commercial products, we have a pipeline of 12 assets at various stages of development which also expand our offering to other therapeutic areas such as Bone Health and Ophthalmology. Our bAflibercept asset, acquired as part of the Viatris transaction, is the first-to-file biosimilar in the U.S. and is under FDA review. Upon approval and launch, it will mark our entry into the Ophthalmology segment. We have 3 assets currently in the clinic, bUstekinumab, bDenosumab and bPertuzumab, which are also progressing well. These late-stage products coupled with several other early-stage molecules will sustain our growth in medium and long term.

Commercial performance of Biocon Biologics

Over the years, we have developed a strong network of strategic partners and distributors to commercialize our biosimilars in global markets. Together, we have successfully navigated through the nuances of regulatory approvals and taken our products to patients in 100+ global markets. The acquisition of Viatris global biosimilars business will allow us to forward integrate these capabilities, especially in Advanced Markets.

By leveraging this hybrid commercial model, the business has delivered a strong performance in FY23 driven by increased market shares, key tender wins and over 35 new launches across both Advanced and Emerging Markets.

Advanced Markets

Our business in the U.S. recorded significant growth with all 3 commercial products (bPegfilgrastim, bTrastuzumab and bInsulin Glargine) crossing 10% market share. Prescription shares for our interchangeable bInsulin Glargine are trending higher which augurs well for FY24.

On the European front, our bTrastuzumab and bAdalimumab products, have seen an uptick in market shares with bAdalimumab achieving double-digit market shares in Germany and France, two of the largest European Markets. As we start integrating the Viatris commercial infrastructure in Europe, the region will continue to be an important market for Biocon

Biologics. We intend to leverage the strong acceptance of biosimilars in the region and increase focus in key countries with a bespoke strategy based on the nature of the market.

FY23 also saw the launch of four new products in Canada: bBevacizumb, bAdalimumab, bGlargine and bAspart. These launches expand our product offering to patients and build on our already strong foundation where we are the biosimilar market leader for bTrastuzumab.

Emerging Markets

Our presence in Emerging Markets is built through our organically developed B2B business and Viatris led Emerging Markets business. Our B2B business has increased in both depth and breadth by entering new countries through regional partnerships and distributors as well as the addition of new products. We have further strengthened our recombinant human insulin (rHI) business in several key markets and hold majority market shares in some.

As a part of the Viatris acquisition, we will be setting up direct commercial infrastructure in select Emerging Markets, allowing us to get closer to patients and customers, augmenting our direct commercialization strategy.

Our Branded Formulations India (BFI) business delivered growth in key Brands such as Canmab (bTrastuzumab), Krabeva (bBevacizumab) and Basalog (bInsulin Glargine).

Biosimilars - FY23 Highlights:

FY23 has been a stepping-stone in our transformational journey as we prepare for important launches in FY24 and execute on the integration of Viatris acquired biosimilar business. Our products have delivered strong performance during the year.

Acquisition of Viatris Global Biosimilars Business

We successfully closed the acquisition of Viatris global biosimilars business, one of the largest outbound pharma deals in India, in November 2022. This acquisition is transformational as it brings together complementary capabilities from both organizations and propels Biocon Biologics into a global biosimilars player with lab-to-market capabilities.

As a part of completing the transaction, we issued Compulsorily Convertible Preference Shares (CCPS) in BBL valued at USD 1 billion and made an upfront cash payment of USD 2 billion to Viatris. To fund the upfront payment, we raised USD 1.2 billion of Sustainability Linked Loan (SLL). The balance was funded through an equity infusion of USD 650 million by Biocon Limited and USD 150 million by Serum Institute Life Sciences (SILS). In May 2023, we raised ~USD 98 million from funds managed by Edelweiss Alternate Asset Advisors Limited through issuance of Optionally Convertible Debenture (OCDs) to Biocon Limited (which issued Non-Convertible Debentures (NCDs) to Edelweiss) and issuance of Compulsory Convertible Debentures (CCDs).

Post closure of the acquisition, Viatris continues to provide commercial and related services as part of a pre-agreed Transition Services Agreement. During this phase we remain focused on ensuring business continuity for all stakeholders. We have also drawn up a robust transition plan and intend to start integrating the business in a phased manner by geography in FY24.

Product Performance

• bPegfilgrastim: In the U.S., we have seen an improvement in the market share of Fulphila? to low double-digit versus high-single digit at the beginning of the year. In Europe, there was an uptick in the market share reaching mid-single digit.

• bTrastuzumab: In the U.S., there was a temporary drop in market share of Ogivri? towards the end of FY22 which has recovered to low double digits. We have also seen a strong performance of Ogivri? in Canada and Australia. We have expanded our reach by entering new markets and winning key tenders in our B2B Emerging Markets business, opening new opportunities for growth.

bBevacizumab: We have launched our bBevacizumab in various countries during FY23 including Australia and Canada. We received a CRL from the U.S. FDA in February 2023 citing the need for a satisfactory resolution of observations made during the facility inspection in August 2022. We have submitted a comprehensive CAPA plan and are in dialog with the agency to address these expeditiously. There are no outstanding scientific queries.

• bAdalimumab: Hulio™ continues to maintain mid-single digit market share in EU and has delivered significant growth in key markets such as Germany and France where it has garnered double digit shares. It has been approved by the U.S. FDA and launched in the U.S. in July 2023. It will be an important growth driver for the business.

• bEtanercept: Nepexto? was launched in the EU in August 2020 and we are seeing an uptick in shares in some markets.

• bGlargine: FY23 was the first full year of commercialization of our interchangeable Glargine in the U.S. Effective January 2022, Express Scripts and Prime Therapeutics, leading pharmacy benefit management organizations, had listed our bGlargine as a preferred insulin brand on their national formularies that together include more than

60 million patients lives. Towards the end of FY23, our Glargines total prescription market share has been around low-double digit while new prescriptions were at middouble digit, indicating strong demand for the product.

• bAspart: Our bAspart is approved in EU, Canada, and Malaysia. We received a CRL from the U.S. FDA in October 2022 citing the need for a satisfactory resolution of observations made during the facility inspection in August 2022. Our comprehensive CAPA plan has been accepted by the Agency and we are expecting a site inspection in Q2 FY24. The CRL did not identify any outstanding scientific issues with the product.

• Recombinant Human Insulin (rHI): We have

commercialized recombinant human insulin in several Emerging Markets worldwide and continue to be one of the largest players globally with a majority share in markets such as Malaysia and Mexico.

We entered into a strategic out-licensing agreement with Japanese pharmaceuticals company Yoshindo Inc. for commercializing two of our pipeline biosimilar assets, bUstekinumab and bDenosumab, in the Japanese market. Under the terms of this deal, Yoshindo gets exclusive commercialization rights in Japan for bUstekinumab and bDenosumab developed and manufactured by Biocon Biologics, for an addressable market opportunity of ~USD 700 million10. This partnership will allow us to expand our offering to patients in Japan.

Facility Updates

The European Medicines Agency renewed the Certificate of GMP Compliance of our integrated insulins manufacturing facility in Malaysia following a site inspection in July 2022. We continue to invest in the expansion of this facility, driven by a strong demand for our current insulin portfolio and the needs of our future pipeline.

Our facility has been recognized as the first and largest integrated insulin manufacturer in Malaysia by the Malaysia Book of Records (MBR), which officially recognizes record- creating and record-breaking achievements in the fields of human endeavor, building & structures, transportation, arts & entertainment, business, sports & games, science & technology, and nature in Malaysia.

Our new integrated, multi-product mAbs Drug Substance Facility in Bangalore (B3) received a Certificate of GMP Compliance for bTrasutuzab and bBevacizumab, from the representative European inspection authority, Health Products Regulatory

10 Source: IQVIA MAT Qs2, 2022 data Authority (HPRA), Ireland. This approval reflects Biocon Biologics compliance with the highest international regulatory standards and unlocks significant additional capacity to cater to the needs of patients in the EU as well as our pipeline products. This facility, one of Indias largest mAbs manufacturing facilities, was also awarded the Facility of the Year Award (FOYA) with an Honourable Mention, by the International Society for Pharmaceutical Engineering (ISPE) in 2021

ESG

As a purpose-driven organization with an unwavering commitment to integrity and ethics, we remain committed to going beyond financials to have a positive impact. In line with this commitment, we have set-up an ESG and CSR Board Committee as well as an internal ESG Steering Committee to help design and govern the implementation of our ESG strategy and programs.

We have identified five key ESG strategy pillars with clear targets such as increasing green power usage, reducing emissions, reducing fresh-water consumption in our operations, increasing filings in LIC/LMIC countries to improve access, and improving gender diversity in our workforce.

This Integrated Report is our first GRI-aligned Integrated Report aligned with the International Integrated Reporting Councils (IIRC) framework. Over the year we have improved our ESG score in the DJSI Index11 from 45 to 52 and committed to the United Nations Global Compact, the worlds largest corporate sustainability initiative.

Biosimilars - FY23 Financial Performance:

Biocon Biologics delivered a strong revenue growth of 61% over last year to 55,838 million on account of consolidation of the revenues from the acquired business for part of the year and improved uptake of our products across markets.

Core EBITDA margin, which is EBITDA less licensing, forex, mark- to-market movement on investments and R&D expense was at 41% versus 39% in FY22 driven by an increase in revenues. This a reflection of the robust profitability of the core business.

We continue to invest significantly in our pipeline to drive future growth with three products under clinical development. These higher R&D investments (+186% vs. FY22) impacted our in EBITDA margin from 29% in FY22 to 24% in FY23.

We ended the year on a strong note and remain focused on delivering profitable, sustainable growth.

11 Scores based on joint submission of Biocon Limited and Biocon Biologics Limited

Biosimilars - FY24 Outlook:

FY24 will be a pivotal year for Biocon Biologics as we progress the integration of Viatris global biosimilars business. We ended FY23 on a USD 1 billion revenue trajectory, forming a strong base for FY24.

There are clear growth catalysts, including the launch of bAdalimumab in the U.S., potential approval of bBevacizumab and bAspart in the U.S. and growth of our existing business. Our fully integrated business model, backed by a strong product portfolio, sets us up well for long-term success.

Research Services (Syngene International Ltd.)

Syngene International Ltd. (Syngene) is a research, development, and manufacturing services company that provides an integrated range of scientific services from the earliest stages of discovery research to commercial manufacturing. This breadth of capabilities makes Syngene a one-stop solution provider for the global pharmaceutical, biotechnology, nutrition, animal health, consumer goods, and specialty chemical sectors. With over 8,000 employees, the Company partners with over 400 clients mainly located in the US and Europe.

Operating on campuses in Bengaluru and Hyderabad, Syngene provides end-to-end services within the Contract Research Organization (CRO) where it operates at the leading edge of science and technology. It also offers a wide range of services within the Contract Development and Manufacturing Organization (CDMO), including a dedicated commercial scale manufacturing site in Mangaluru, India. It has flexible collaboration approaches which include full time equivalent (FTE), fee for service, productivity based and risk-reward models, and dedicated centers.

The Company is listed on the Indian stock exchanges.

Contract Research Organisation (CRO)

CRO Market:

Contract Research Organizations (CROs) provide research and development services to the pharmaceutical, biotechnology, medical device, and other industries in the form of services outsourced on a contract basis. The contract research industry has experienced rapid growth over the past decade with the pharmaceutical industry continuing to invest heavily in R&D, with a focus on developing innovative therapies to address unmet medical needs.

The global CRO market is expected to grow at a CAGR of 10.8% from USD 39 billion in 2022 to USD 49 billion in 202612. The growth of the CRO market is driven by factors like increasing R&D activities in the pharmaceutical and biotechnology industries,

rising demand for outsourcing activities, and a growing trend towards strategic partnerships and collaborations.

In the current economic scenario, the large pharmaceutical companies are facing pricing pressure and inflation challenges. As they look to optimize their R&D budgets and restructure their costs, increasing the outsourcing of R&D activities offers an effective response. Additionally, the COVID-19 pandemic has highlighted the risks associated with relying on a single supply route. As a result, many companies are looking to build resilience in their supply chains by expanding and diversifying their suppliers which can help companies mitigate the risks associated with potential disruptions and ensure continuity of supply. Further, the geopolitical shifts are currently favoring outsourcing in the contract research sector to countries like India. Considering these and other demand drivers for the CRO industry, Syngene is cautiously optimistic of the growth opportunity for outsourcing of R&D services.

Our CRO Business:

Our CRO business comprises Discovery Services and Dedicated R&D Centers.

Discovery services span the entire spectrum of early-stage research from target identification to delivery of drug candidates for further development across small and large molecules. Syngenes flexible approach enables clients to choose functional services or integrated drug discovery solutions. Functional services include chemistry, biology, safety assessment and toxicology, and computational and data sciences.

Dedicated Centers are underpinned by long term strategic partnerships, offering dedicated multi-disciplinary scientific teams, support personnel, and a tailormade ring-fenced infrastructure built to each clients specifications to support its R&D goals. Currently, Syngene operates dedicated R&D centers for three clients: Bristol-Myers Squibb, Baxter Inc., and Amgen Inc. These collaborations have shown steady growth and expansion in scope of engagement over the duration of the partnership.

The demand for CRO services continues to be strong. The Company is well-positioned to capitalize on this opportunity given its continued focus on driving functional services and integrated drug discovery solutions supported by investments in capabilities, technologies, and platforms to meet the needs of clients. Some of the focus areas include, establishing proprietary platforms for protein-yielding cell lines and antibody therapeutic discovery; continuing to leverage the power of artificial intelligence and machine learning to reduce discovery timelines and costs; and further expanding the research facilities in Hyderabad and Bengaluru.

In the Dedicated Centers, the Company will continue to focus on meeting the needs of its long-term strategic partners through investment in new capabilities and the continuous improvement of the services provided within these collaborations.

Contract Development and Manufacturing Organisation (CDMO)

CDMO Market:

CDMOs specialize in the development, scale-up and manufacturing of drug products both for clinical trials and commercial distribution. CDMOs offer a range of services that include drug development, process development, analytical testing, formulation development, scale-up, manufacturing, packaging, and distribution. The services can be for clinical trials and commercial level supplies. These services can be provided on a stand-alone basis or as part of a complete end to end service offering.

The global CDMO market was valued at USD 76 billion in 2022 and expected to grow at a CAGR of 17.8% to reach a market size of USD 143 Billion in 202613. Like CROs, the growth in CDMOs is due to the increased outsourcing trend in the current market.

A small molecule CDMO offers services which cover commercial scale development and manufacturing services of small molecules. The global small molecule CDMO market was USD 50 billion in the year 2022 and is expected to grow at a CAGR of 15.5% to reach a market size of USD 89 billion by 202613. The expansion in the global small molecule drug discovery industry is a result of factors such as the increase in chronic diseases, increase in healthcare expenditure, and upcoming patent expirations. Over the past few years, small molecule drugs have largely been leaders among the various drug types.

Services offered by large molecule CDMOs can be divided into two areas: drug product (DP) development, which includes filling the drug substance into the primary container, and drug substance (DS) development, which includes the development of master and working cell banks, manufacturing process development, and scale-up. The large molecule market size is currently estimated at USD 26 billion and is forecasted to grow at a CAGR of 20% to reach the market size of USD 54 billion by the year 202613. Even though the current market size of large molecules is approximately half of small molecules, the growth rate is higher. This can be attributed to a higher number of large molecule drug approvals, driven by the increase in infectious diseases, rise in demand for novel therapeutics and increased capital investments by pharma companies in the area, most notably cancer. As more novel therapeutics are being developed and launched by emerging biopharma companies, they are partnering with CDMOs to develop, manufacture and bring products to market.

Our CDMO Business:

Our CDMO business offers Development services, including a range of preclinical drug substance and drug product development services for both small and large molecules. Our clinical development services are across Phase I, II & III trials and support our clients in drug filing with U.S. FDA and other global regulatory authorities. Manufacturing services completes the integrated platform offering to our customers. In addition to the small molecule commercial manufacturing facility in Mangaluru, the Company offers biologics manufacturing with the capacity to run multi-product production campaigns simultaneously, based on a single-use technology platform.

The Companys strategy for Development Services is to leverage existing capabilities as an integrated CMC solutions provider. In Manufacturing Services, the Company aims to capitalize on strong demand for biologics across clinical and commercial supplies by driving an integrated approach for biologics development and manufacturing to provide a one stop-shop capability. For the small molecule commercial scale manufacturing, regulatory approvals from the U.S. FDA and other major global regulators will broaden the range of opportunities for the Mangaluru facility.

Research Services (Syngene) - FY23 Highlights:

10-year biologics manufacturing partnership with Zoetis: The Companys partnership with Zoetis started back in 2011 including research and development work on several monoclonal antibody projects for use in animal health. In the first quarter of fiscal year 2023, the Company achieved a significant milestone in manufacturing services, by signing a 10-year biologics manufacturing agreement with Zoetis, to manufacture the drug substance for Librela? (bedinvetmab), a first in class monoclonal antibody used for treating osteoarthritis in dogs. The agreement is expected to be worth USD 500 million over 10 years, subject to regulatory approvals and market demand.

BMSpartnership completes25 years: The Companys partnership with BMS marked 25 years of collaboration in March 2023. The collaboration, which started out with a handful of scientists in a single lab, is now BMSs largest R&D facility outside the US, accommodating several hundred scientists.

Continued investments in capability and capacity building: A new state-of-the-art sterile clinical scale fill-finish facility with a filling capacity of about 2,000 vials per hour was operationalized. The GMP-compliant facility will offer end-to-end solutions in developing and manufacturing small and large-molecule injectables to support the delivery of clinical supplies. We also commissioned a kilo lab for polymers and specialty materials. At Hyderabad, the Company opened a dedicated PROTACs (proteolysis-targeting chimeras) facility for clients involved in researching treatments for cancer and other therapy areas.

Another important area of focus was our supply chain where we took steps to increase supply resilience. We increased the number of suppliers we have outside of China, added more suppliers in India and took steps to improve our supplier ecosystem.

Research Services (Syngene) - FY23 Financial Performance:

Syngene generated revenues of 31,929 million, contributing to 28% of Biocons overall revenues and reflecting a healthy growth of 23% over FY22. This is the highest absolute year- on-year increase in revenue in the last 5 years for Syngene with all four divisions of the Company delivering sustained growth through the year.

FY23 proved to be an important year in the delivery of Syngenes long-term strategy. The CRO business saw strong performance in Discovery Services with sustained growth in Chemistry services. Development Services delivered a steady operating performance reflected in the number of repeat orders from existing clients. Substantive progress was made in the manufacturing division led by long term commercial-scale biologics manufacturing deal with Zoetis. This performance sets a solid foundation for the future amidst inflationary challenges, geopolitical issues and recessionary strains in some parts of the world.

The consolidated financial performance of Syngene for FY23 is available in its Annual Report, available on its website, https:// www.syngeneintl.com/investors/.

Research Services (Syngene) - FY24 Outlook:

The Company expects the contract research, development and manufacturing market to continue to see growth with key fundamentals remaining strong. The demand for CRO services continues to be healthy on the back of global pharma and biopharma companies continuing to diversify their supply chains. The Company is well-positioned to capitalize on this opportunity backed by its continued focus on driving functional services and integrated drug discovery solutions supported by investments in capabilities, technologies, and platforms. Most of the investments will be focused on adding biologics manufacturing capacity, laboratory space for future expansion of research business and capability additions across our service lines.

For the year ahead, the Company sees healthy demand for its services. With stable revenues in the dedicated centers, good growth in Discovery Services, healthy repeat and new business in Development Services and start of commercial manufacturing in biologics, it anticipates the growth momentum to continue in the current fiscal year.

Financial Performance - An Overview Consolidated Statement of Profit and Loss

The following table highlights key components of the statement of Profit and Loss for the fiscal years ended March 31, 2023 (FY23) and March 31, 2022 (FY22).

All Figures in Rs Million

Particulars

FY 23 FY 22 Change

Total income

115,501 83,967 38%

Expenses

Cost of materials consumed

36,631 27,184 35%

Employee benefits expense

20,041 17,098 17%

Research and development expenses, net of recovery partners

11,194 5,950 88%

Other expenses

18,759 11,906 58%

Finance costs

4,190 676 522%

Depreciation and amortisation expense

11,131 8,142 37%

Total expenses

101,946 70,956 44%

Share of profit / (loss) of joint venture and associate (net)

(1,670) (2,069) -19%

Profit before tax and exceptional item

11,885 10,942 9%

Exceptional items, net

(2,914) (1,111) 162%

Profit before tax

8,971 9,831 (9)%

Tax expense

1,763 2,407 (27%)

Tax expense on adoption of new tax regime - exceptional

1,071 - -

 

All Figures in Rs Million

Particulars

FY 23 FY 22 Change

Tax on exceptional item

(293) (292) 0%

Profit for the year

6,430 7,716 (17)%

Non-controlling interest

2,244 1,316 71%

Non-controlling interest on exceptional item

(441) (84) 425%

Profit attributable to shareholders of the Company

4,627 6,484 (29)%

Other comprehensive income attributable to shareholders

1,138 967 18%

Total comprehensive income attributable to shareholders of the Company

5,765 7,451 -23%

Acquisition of Viatris biosimilars business

On November 29, 2022, Biocon Biologics Limited (BBL) acquired control through two new subsidiaries over the Viatris biosimilar business. BBL had made an upfront payment of USD 2 billion and issued USD 1 billion of convertible securities to Viatris Inc. The balance amounts of USD 0.3 billion is payable on future dates as per the terms of the agreement. Consequently, incremental revenues and profits post acquisition are reflected in the results for the year.

Total income

During the year, Total income grew by 38% from 83,967 million to 115,501 million. Revenue from operations in Biosimilars and Research Services were up 61% and 23% respectively, while Generics grew by 13%. Our Total income number includes 2,170 million of stake dilution gain in Bicara, pursuant to fund raise during the year and accrual for benefit under Product linked Incentive (PLI) scheme.

Our Biosimilar revenues have increased by 61% over last year to 55,838 million, primarily due to Viatris biosimilar acquisition

effective consummation date representing fully integrated enterprise and increase in market shares of products in U.S. and EU markets.

The Generics revenues grew 13% at 26,367 million. The performance was driven by API sales, notably

immunosuppressant, specialty APIs and new launches. Our formulations business grew on account of higher volume market share of products launched in FY22, growth in base business products in the U.S. and new product launches in most of the world markets partly offset by price erosion in statins.

The Research services grew 23% at 31,929 million. The growth in Discovery Services was led by a healthy demand for chemistry services delivered in part by its new research facilities in Hyderabad. In Manufacturing Services, this year saw the start of manufacturing of drug substance at commercial scale for Zoetis, which added to the strong year-on-year growth. The growth in Development Services was driven by further orders from existing clients reflecting high service levels and sustained on-time delivery.

The Total Income composition for FY23 and FY22 is detailed below:

Particulars

FY23

FY22

( million) (%) ( million) (%)

Generics

26,367 23 23,409 28

Biosimilars

55,838 48 34,643 41

Novel Biologics

192 - 510 1

Research Services

31,929 28 26,042 31

Inter-segment

(2,584) (2) -2,764 (3)

Revenue from operations

111,742 81,840

Other income

3,759 3 2,127 2

Total income

1,15,501 83,967

Cost of material costs consumed

Material costs include raw materials, packing materials and change in inventories. In FY23, material costs, as a percentage of revenue from operations ex-licensing stood at 33% similar to FY22.

Employee benefits expense

Employee costs increased by 17% in FY23, driven by increased headcount and annual increments across all the segments.

Research and development expenses

The net R&D expenditure for FY23 increased by 88% to 11,194 million (5,950 million in FY22). Net R&D was at 14% of revenue ex-Syngene. We capitalised 759 million, taking gross R&D to 1 1,953 million for the year compared to 7,105 million in FY22. The R&D spend increased largely due to clinical advancement of the biosimilar pipeline.

Other expense

Other expenses comprise of power and fuel costs, professional fees, selling expenses and other general overheads. Other expenses for FY23 increased by 58% to 18,759 million (11,906 million in FY22). This was largely driven by the Viatris acquisition, natural gas rate increase, foreign exchange loss (strengthening of USD over INR) and increase in maintenance & travel expenses.

Interest and Finance charges

The finance cost for FY23 increased to Rs 4,190 million from 676 million in FY22 primarily due to funds raised for Viatris biosimilar business acquisition.

Depreciation and Amortisation

During the fiscal, the depreciation and amortisation cost increased 37% at Rs 11,131 million from Rs 8,142 Million in FY22 primarily due to amortisation of acquired intangibles on Viatris biosimilar business and commissioning of new facilities in FY23.

Tax expenses

The effective tax rate (ETR) for the year before exceptional item and adoption of new tax regime stood at 15% (22% in FY22). Lower ETR in FY23 is primarily due to profits in tax holiday units of our biosimilars business.

Effective FY23, the Company has decided to adopt the new tax regime notified in India. Consequently, the Company has written off Minimum Alternate Tax (MAT) balance of Rs 1,071 million, which can no longer be claimed.

Exceptional items (net)

The Exceptional items during the year include the following:

a) Biocon Biologics Limited (BBL) obtained services of professional experts (like advisory, legal counsel, valuation experts etc.) for Viatris biosimilars business transaction. During the year ended March 31, 2023, BBL recorded Rs 2,374 million, as an expense under the head Exceptional items. Consequential tax impact of 231 million is included within tax expense.

b) Pursuant to the acquisition, the Group also reassessed the value of certain licensed products for development and commercialization and recorded an impairment of certain intangible assets amounting to Rs 470 million. The impairment has been recognized as an exceptional item during the year ended March 31, 2023. Consequential tax impact of 62 million is included within tax expense.

Other Comprehensive Income (OCI)

Other comprehensive income includes re-measurement gains/ losses on defined benefit plans, gains/losses on hedging instruments designated as cash flow hedges and exchange differences on translation of foreign operations and gains/ losses on the fair value of the investment in equity instruments, designated as Fair Value Through OCI.

Consolidated Balance Sheet

The following table highlights the Consolidated Balance Sheet as on March 31, 2023 (FY23) and March 31, 2022 (FY22)

All Figures in Rs Million

ASSETS

Mar-23 Mar-22 Change Viatris Net Change

Tangible assets

101,226 93,643 7,583 - 7,583

Goodwill and intangible assets

266,621 13,151 253,475 253,430 45

Investment in associates and a joint venture

1,378 80 1,298 - 1,298

Inventories

42,437 22,982 19,455 13,360 6,095

Financial assets (other than cash and bank balances)

49,485 29,999 19,486 28,218 (8,732)

Cash and bank balances - A

43,867 32,179 11,688 3,050 8,639

Current and Deferred tax

6,553 6,068 831 - 831

Other assets

8,861 5,838 3,023 - 3,023
520,428 203,940 316,488 298,058 18,430

EQUITY AND LIABILITIES

Equity

Share capital and other equity

178,669 84,325 94,344 83,516 10,828

Non-controlling interests

46,219 10,375 35,844 34,339 1,505
224,888 94,700 130,188 117,855 12,333

Liabilities

Borrowings - B

177,707 49,040 128,667 121,720 6,947

Financial Liabilities

94,019 37,436 56,583 58,483 (1,900)

Income tax and deferred tax liabilities

6,068 2,141 3,927 - 3,927

Provisions and other liabilities

17,746 20,623 (2,877) - (2,877)
295,540 109,240 186,300 180,203 6,097

Total

520,428 203,940 316,488 298,058 18,430

Net Debt C= (B-A)

133,840 16,861 - 118,670 -

Tangible assets

Tangible assets grew 8%, primarily due to additions in Biosimilars facility expansion in Malaysia and India, Generics immunosuppressant and peptides facility in Visakhapatnam and Bengaluru, India and Research Services in Hyderabad, partly offset by depreciation during the year.

Goodwill and intangible assets

Goodwill and intangible assets increased primarily on account of the acquisition of Viatris biosimilars business and intangibles under development in Biosimilars.

Investment in associates and a joint venture

These comprise of investments in Bicara (associate) and Neo Biocon (joint venture). During the year ended March 31, 2023, changes in Bicara investment of 1,261 million are

primarily resulting from conversion of loan given to Bicara into Investment, stake dilution gain on fund raise, offset by Groups share of loss.

Inventories

Inventories stood at 42,437 million (March 22 - 22,982 million). Increase is primarily on account of Viatris acquisition and built up towards new launches/ base business in Generics, Biosimilars and Research services in line with business growth.

Financial assets

Financial assets primarily include Trade and other receivables, derivative assets and other financial assets. Increase is primarily due to trade and working capital receivable from Viatris, partly offset by losses in derivative contracts and loan converted to investments.

Other assets

Other assets comprise of Balance with statutory / government authorities, capital and other supplier advances, prepayments. Increase is on account of capital advances, PLI receivable and other balances with government authorities.

Share Capital and other equity

Other equity majorly comprises of securities premium, treasury shares, retained earnings, FCTR and other reserves. Increase in FY23 is primarily due to gain on stake dilution in Biocon Biologics (18%) and Syngene (15.5%), and current years profit accumulation.

Non-Controlling Interests (NCI)

Increase due to stake dilution by the Company in Biocon Biologics and Syngene 34,471 million and current years share of NCIs profit.

Borrowings

Total Borrowings stood at 177,707 million (March 31, 2022: 49,040 million). During the year ended March 31,2023, to fund the acquisition of Viatris biosimilars business, the Biosimilars business raised a long-term syndicated loan of USD 1.2 billion and Generics business raised USD 280 million, comprising of mezzanine finance of USD 150 million and proceeds from issuance of NCDs amounting to USD 130 million.

Also, the Group raised funds via ECB and working capital loans in FY23, net of repayments to meet is working capital and expansion requirements of base business.

Subsequent to the year end, mezzanine finance of USD 150 million in Generics business has been converted into equity in BBL.

Net Debt stood at 133,840 million (March 31, 2022: 16,861 million). Debt raise of 128,867 million was offset by cash generated from operations and stake sale in subsidiary to arrive at 1 16,979 million increase in Net Debt.

Other financial liabilities

Increase in other financial liabilities primarily comprise of:

• 27,587 million and 6,583 million of deferred compensation and contingent consideration payable for Viatris acquisition.

• Trade and other payables acquired on Viatris biosimilar acquisition

Provisions and other non-current liabilities

Provisions and other non-current liabilities primarily include deferred revenue, deferred tax liability and provision for gratuity and compensated absences.

Decrease is primarily attributable to deferred revenue adjustments through Goodwill as part of purchase price allocation on Viatris acquisition.

Key financial ratios

Particulars

FY23 FY 23$ FY22

Debtors turnover

3.13 3.81 3.98

Inventory turnover

1.34 1.87 1.93

Interest coverage ratio

4.79 10.17 13.84

Current ratio

1.45 1.86 2.19

Debt equity ratio

1.00 0.67 0.58

Operating profit margin (%)#

15% 15% 16%

Net profit margin (%) *

7% 8% 9%

Return on net worths

6% 9% 9%

# Operating margin is defined as Profit before taxes and interest

* Net Profit before exceptional item and tax thereon

A Net Profit before exceptional income and tax thereon to average equity $ These ratios are presented excluding impact of Viatris biosimilar business acquisition

Risks, Threats, and Concerns

Organizations can create sustainable value for its stakeholders by effectively managing the risks they are willing to take, be it be it in the nature of strategic, financial, regulatory, geo-political, catastrophic, or operational. Therefore, identifying, analyzing and promptly managing risks is critical from a Corporate Governance standpoint to enable an organization to attain its strategic objectives and protect the interest of its stakeholders.

Our risk management framework is given below:

Biocon Groups Risk Management Framework

i

2 3 4

Risk Identification

Risk Prioritization Risk Mitigation Monitoring and Reporting

*

* * *

Structure

Role,,nd

1

Risk Management Activity Calendar

Risk, as defined by ISO 31000:2018 (Risk Management - Principles and Guidelines), "is the effect of uncertainty on objectives". A risk is a potential event or non-event, the occurrence or non-occurrence of which can adversely affect the objectives or strategy of the Company or result in opportunities being missed. Risk is measured in terms of likelihood of occurrence and potential impact if it materializes. Risks can be categorized as financial, operational, strategic, regulatory/

statutory, reputational, geo-political, ESG, and catastrophic/ pandemic.

Amongst the risks discussed above, regulatory/statutory, operational, strategic, and financial are usually controllable, while geo-political and catastrophic/pandemic (impacting business continuity) risks are not usually within the control of an organization.

Risk Management:

Risk management is a structured, consistent, and continuous process across the organization for identifying, assessing, deciding on responses to, and reporting on opportunities and threats that may affect the achievement of its objectives.

Risk management does not aim at eliminating the risks, as that would simultaneously eliminate all chances of rewards or opportunities. Instead, constant efforts are made to analyze their potential impact, assess the changes to the risk environment, and define actions to mitigate their adverse impact.

At Biocon, we have implemented a risk management framework that ensures timely identification, analysis, and assessment of risks and potential consequences, formulation of specific mitigation strategies, and their seamless execution. The framework recognizes that risks are highly interconnected and interdependent. This evolved approach views risks within a coordinated and strategic framework integrated throughout the organization.

In addition to the above, the Risk management framework also attempts to identify and understand significant emerging ESG topics, issues, and trends (e.g., sustainable practices, health and safety, respect for human rights, compliance to statutory requirements, ethical business conduct etc.) that may impact the Companys overall business strategy and reputation.

Our Risk Management Structure:

Biocon Limiteds Board of Directors has direct oversight over the Companys overall risk management framework. The Board has formed a Risk Management Committee which reviews critical existing or emerging risks, monitors the adequacy of de- risking strategies as well as the progress on implementing such strategies. The subsidiaries also have a structure and process like that of the parent.

The Risk Management Committee, which comprises of the Chairperson, Managing Director and CEO and Independent Directors, meets once every quarter and invites senior business leaders, who are essential to the discussions, to these meetings.

An enterprise-wide risk evaluation and validation process is conducted regularly and reviewed by the Risk Management Committee and the Board of Directors. The Governance, Risk and Compliance (GRC) team coordinates and monitors organization-wide risk management activities and reports the progress to the Risk Management Committee on a quarterly basis.

Our Risk Management Process:

The risk management process at Biocon involves the following three steps:

1) Risk identification

2) Risk Prioritization

3) Risk Mitigation

4) Risk Monitoring and Reporting

Our effective process ensures that these four steps are aligned with regular operations, thereby, ensuring relevant and timely reporting and action on all risks which the organization faces. The organizations risks are identified, analyzed, and prioritized from time to time. Once a risk is identified, there are four different ways in which a risk can be handled - Treat, Terminate, Transfer, Take. At Biocon, a responsive action plan is initiated for treating or managing the key risks identified and restricting them to a tolerable level.

The risk monitoring and reporting process aims to provide assurance to the Management that risks have been adequately identified, prioritized and critical risks are well managed. The Risk Management Committee reviews the critical risks with respect to their gross exposure, mitigation action status, and net exposure periodically.

Key Business Risks:

Biocon is committed to conducting business while adhering to all applicable statutory laws, government notifications and regulations. Given the complex and highly regulated nature of the global pharmaceutical industry in which Biocon operates, the Company can potentially be exposed to the risks inherent

to the industry such as product safety and quality issues, intellectual property tangles, regulatory delays, etc. These risks could lead to penalties, product recalls, brand/reputation loss, and revenue loss, unless properly mitigated. In this context, it is imperative to respond to risk with a holistic risk mitigation framework that can help the organization maintain consistency in product quality, patient and employee safety and long-term sustainability.

Our established risk management framework addresses risks that are inherent to the pharma business and any others that may impact our strategic goals. For details of critical risks, impact and mitigation actions in place, refer section "Current Risks" detailed in page 79 of the Integrated Report.

Syngenes Risks are available in its Annual Report available on its website, https://www.syngeneintl.com/investors/financial- information/.

Considering the mitigation measures implemented to address risks arising out of COVID-19 pandemic, the Company is in a better position to address any such risk which might arise in the future.

Internal Controls

A robust, comprehensive internal control system is a prerequisite for an organization to function ethically, commensurate with its abilities and objectives. We have established a strong internal control system for the Company, which comprises of policies, guidelines, and procedures adopted to ensure operational effectiveness and efficiency, compliance with laws and regulations, asset safeguarding and reliability of financial and management reporting. The Company is staffed by experienced, qualified professionals who play an important role in designing, implementing, maintaining, and monitoring our internal control systems.

An independent firm of Chartered Accountants carry out periodic internal audits to provide reasonable assurance of internal control effectiveness and advises the Company on industry-wide best practices. The Audit Committee, consisting of Independent Directors, reviews important issues raised by the internal and statutory auditors regularly and the status of rectification measures to ensure that risks are mitigated appropriately on a timely basis.

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