Dr Reddys Laboratories Ltd Management Discussions.

Through our portfolio of products and services, we operate in multiple therapeutic areas. Of these, the major ones are (i) gastrointestinal, (ii) oncology,

(iii) cardiovascular, (iv) pain management,

(v) central nervous system (CNS),

(vi) respiratory, and (vii) anti-infective.

We are present in several countries across the globe, with the key geographies being the US, Europe, India, Russia, Commonwealth of Independent States (CIS) countries, China and other markets.

The FY2021 has been a year with an unprecedented set of challenges due to

COVID-19 related disruptions impacting the demand for certain sets of products, the supply chain and operations. We rose to the challenges and ensured minimal impact to operations. We ensured the health and safety of our employees and business partners. We continued innovating new solutions to operate under the difficult circumstances. We worked upon new avenues of growth such as development and launch of COVID-19 products portfolio and successfully integrated the portfolio acquired from Wockhardt for our India business. We were able to grow businesses across all our geographies, viz. GG for North America, Europe, India, several emerging economies, and PSAI across many parts of the world.

Our focus on cost controls, productivity improvements and on creating a leaner and more de-layered business model continued from the previous year. This helped us to become more efficient and also improve our profits.

Improvements in revenue and EBITDA in FY2021 were mainly due to the following factors.

Growth in branded generics markets: We continued our growth momentum across the key branded generics markets of India, CIS countries, China and some other regions. This was due to improved base business as well as the launch of new products. We also acquired a select portfolio from Wockhardt for the India business. Growth in Russia, however, was hindered due to an overall market slowdown.

Growth in the PSAI business: PSAI growth was driven by base business traction in API, custom pharmaceutical services and a favorable forex movement.

Continued growth momentum in the Europe generics business: FY2021 saw significant growth in the existing geographies as well as newer markets in Europe — driven by expansion of the base business coupled with new product launches.

Moving ahead on our journey of cost control: We continued making solid progress on the journey that began in FY2019 to trim cost structures through enhanced productivity and elimination of waste across our businesses. The initiatives that were put in place to drive cost efficiencies and productivity improvement across manufacturing, procurement, R&D expenditures and marketing spends played a significant part in improving the financial performance of the company. While we focused on productivity, we are also making investments to build capabilities, brands and product pipeline.

EBITDA growth was, however, impacted on a higher base of FY2020, when we had recognized income on the sale of our commercialized neurology products in the Proprietary Products (PP) in the US and selected territory rights.



Revenue from GG in FY2021 was Rs 154.4 billion, which represented an increase of 12% compared to the previous year. This growth was largely attributable to impressive performances witnessed in Europe, certain emerging markets, contribution from portfolio acquired from Wockhardt for India business as well as favorable forex rates.

Revenue from North America Generics (NAG) was Rs 70.5 billion, with a growth of 9% versus FY2020. This growth was supported by the launch of 27 new products. Of these, the major new launches were Ciprofloxacin Dexamethasone, OTC Diclofenac, Sapropterin, Abiraterone (Canada) and Colchicine tablets. It should be noted that while there was a healthy growth in the sales volumes of our existing products and favorable forex movement, these were offset by pricing pressures on some of our key products, such as Buprenorphine and Naloxone sublingual films, Atorvastatin, Metoprolol and Liposomal Doxorubicin.

In FY2021, we filed 20 new Abbreviated New Drug Applications (ANDAs) and one New Drug Application (NDA) under the section 505(b)(2) with the US Food and Drug Administration (USFDA). As on March 31, 2021, we had 95 generic filings pending approval from the USFDA. These comprise 92 ANDAs and three New Drug Applications (NDAs) filed under the Section 505(b)(2) route of the US Federal Food, Drug and Cosmetics Act. Of these, 47 are Para IV applications and we believe that 23 of these have ‘First to File status.

Revenue from Europe was Rs 15.4 billion, representing a growth of 32% compared to FY2020. This was primarily due to expansion of the base business and new product launches. Growth was also aided by the scaling up of our businesses in newer markets of Italy, Spain and France, as well as favorable forex movement.

Revenue from Emerging Markets was Rs 35.1 billion, or a growth of 7% compared to FY2020. This was driven by an improvement in our base business performance, new product launches and scale up of business in some of our new markets.

• Revenue from Russia was Rs 15.8 billion, representing a year-on-year decline of 6% due to a depreciation of ruble compared to the Indian rupee. Moreover, sales were subdued on account of an overall market slowdown.

• Revenue from other CIS countries and Romania was Rs 7.4 billion, or an annual growth of 15%.

• Revenue from Rest of the World (RoW) territories was Rs 11.8 billion, or a year- on-year growth of 25%.

Revenue from India was Rs 33.4 billion, which represented a growth of 15% compared to FY2020. This was primarily attributable to contribution from acquired portfolio of products from Wockhardt and launch of new products including those related to COVID-19. During FY2021, we launched 20 new brands in India.


Revenues from PSAI stood at Rs 32 billion, or a growth of 24% versus FY2020 mainly driven by traction in base business, services business growth and favorable forex movement. During the year, we filed 149 Drug Master Files (DMFs) worldwide, including 14 filings in the US.


Revenue from PP was Rs 0.5 billion. This translated to a decline of 93% following the divestment of commercialized products from our neurology franchise in FY2020.


The last year marked one of the most challenging year for all of humanity with the COVID-19 pandemic severely affecting the global population. The pandemic continues unabated with a severe second wave currently engulfing India, having previously wreaked havoc on the US and certain key European nations. As on May 14, 2021, the virus has infected over 160 million and has claimed the lives of 3.4 million people worldwide. The impact of the pandemic has also been severe in terms of the indirect number of casualties and suffering due to global lockdowns, delays in health screenings and treatments along with the rise in cases of mental health disorders. COVID-19 led to a disruption in medicine usage varying in both timing and magnitude in developed and pharmerging countries alike during the last year. These included significant stock-piling of over-the-counter chronic and mental health medicines during the initial stages of the pandemic. Medicine usage was also impacted by frequent and widespread global lockdowns.

The pandemic also emphasized the value of health infrastructure, medical research and science; and prompted a renewed focus on public health institutions, epidemiology and racial and ethical disparities and inequalities in health. It prompted extraordinary responses from the healthcare industry, the research community, public health administrators and governments to develop new therapeutics, repurpose existing drugs, and to develop new vaccines at speeds that have never been seen before.

Relentless efforts and ingenuity of scientists and the pharmaceutical industry led to cutting the traditional timeline for the development of new vaccines from four to 12 years on an average to just seven months. Novel methods of R&D were created along with active cross-border collaborations. These have set new standards and shorter timeframes for discovery and innovation for other life-threatening diseases in the future.

The pandemic also proved to be a fuel for digitally-driven therapeutic change — whether these be remote and virtual patient-doctor engagements through telemedicine and tele-health, digitized clinical trials leveraging artificial intelligence and the introduction of new disruptive business models. Indeed, COVID-19 has become the most significant trigger to force the major players in the industry to significantly expand their digital capabilities well beyond their normal annual plans

Equally, none can deny the major disruptions, especially ones relating to manufacturing and the supply chain.

While the landscape of the pharmaceutical industry was radically altered by the pandemic, probably more than any other sector, the industry will surely take stock of how it navigated the pandemic. And, in doing so, it will have to be prepared for similar sudden shifts and disruptions in operations and regulations in the longer term.

Adoption of novel treatments, offset by stiff competition from generics and biosimilars and patent lifecycles, will continue to influence medicine spending and growth in the developed markets. The global pharmaceutical market is expected to grow in the range of 3% to 6% CAGR over the next five years to reach US$ 1.6 trillion from US$ 1.1 trillion currently. In addition, the cumulative spend on COVID-19 vaccinations is anticipated to be around US$ 157 billion over the next five years. Much of this growth in vaccine demand will be in the pharmerging markets, being partially offset by a slower growth in the developed economies.

The US market is expected to grow in the range of 0% to 3% CAGR over the next five years, down from 3% CAGR in the past five. Japan, the third largest global market, should see a decline in medicine spends as a result of the continued biennial price cut policy, and policies to encourage a shift to generics for older medicines. The European market should grow by US$ 35 billion in the next five years with a focus on generics and biosimilars. Growth in pharmerging markets is expected to be led by China, and might accelerate post-COVID-19.

Table 1 gives the historical and forecasted pharmaceuticals growth outlook for the major countries of the world.

The number of new active substances (NAS) launches are projected to continue with an average of 54 to 63 per year over the next five years.

Spend on speciality medicines is expected to be nearly 60% in developed markets and 50% globally in the next five years, with the older and traditional therapies becoming progressively less expensive over time.

Oncology and immunology, the two largest therapy areas, should grow 9% to 12%

CAGR through 2025, led by significant increase in new treatments and medicine use. Oncology is forecasted to add 100 new treatments over the next five years, contributing to an increased spend in excess of US$ 100 billion.


REGION 2016-2020 CAGR 2021-2025 CAGR
Global 4.6% 3% to 6%
Developed 3.8% 1.5% to 4.5%
Top 10 Developed 3.8% 1.5% to 4.5%
United States 4.2% 2% to 5%
Japan -0.2% -2% to 1%
EU-5 4.4% 2% to 5%
Germany 5.3% 3.5% to 6.5%
France 2.4% 1% to 4%
Italy 4.2% 2% to 5%
United Kingdom 5.3% 2.5% to 5.5%
Spain 4.6% 1.5% to 4.5%
Canada 4.8% 2% to 5%
South Korea 6.8% 4.5% to 7.5%
Australia 3.3% 1% to 4%
Other Developed 4.2% 2.5% to 5.5%
Pharmerging 7.4% 7% to 10%
China 4.9% 4.5% to 7.5%
Brazil 10.7% 7.5% to 10.5%
Russia 10.8% 11% to 14%
India 9.5% 7.5% to 10.5%
Other Pharmerging 9.6% 8.5% to 11.5%
Lower income countries 3.9% 3% to 6%

While the future of medicine use will be influenced by a number of complex factors which shall emerge after the pandemic finally peters out, there is expected to be a renewed focus on (i) improved and efficient manufacturing technologies; (ii) augmenting pharmaceutical supply-chains; (iii) novel methods of drug development; and (iv) increased adoption of digital tools.

We now share with you some key trends that are likely to emerge.

• Smaller-scale manufacturing with flexible production capabilities for improved efficiency: Novel technologies such as cell and gene therapy will push the industry towards rapidly deployable facilities, with smaller scale, modular and portable plants being deployed. This will raise speed to market, diversify the manufacturing footprint globally and increase the need for real-time supply chain management. The pharmaceutical industry will also utilize such capability to cater to changing market dynamics — such as small batches of precision medicine — unlike what is needed for mass production of pharmaceuticals. On the flip side, when a smaller number of medications are produced, these will serve a smaller number of patients. Hence, a challenge associated with this model will be to raise profits through fast production to accommodate different demands.

• Emergence of new API competitors and increase in high potency API (HPAPI) capacity: The competition for active pharmaceutical ingredients (APIs) is expected to increase as more programs advance into late-stage clinical trials. Strengthening of supply chains will continue to become increasingly important as companies start to think strategically to develop secondary sourcing plans and carry significant inventory to minimize risks of a stock-out. Most likely, this will lead to the emergence of several new competitors in the API space. An area of growth in the industry is the high-potency active pharmaceutical ingredient (HPAPI) space. The HPAPI market alone is expected to grow to US$ 33 billion by 2025, up from US$ 16 billion in 2016. Importance of these HPAPIs lies in creating effective patient-centric treatments that require lesser doses to achieve the same therapeutic impact. We expect more API manufacturers, including contract service providers, to expand their aseptic and HPAPI capacity to meet higher customer demand.

• Greater focus on R&D value leveraging artificial intelligence (AI) for improved efficiency: With an increased focus on the value of medications, pharmaceutical companies are increasingly examining their R&D practices to ensure these are refined and sharply focused. The estimated R&D cost of each USFDA approved drug is around US$ 2.6 billion. The use of AI in drug discovery can expedite the overall R&D process by improving success rates by 8% to 10%, resulting in savings worth billions of dollars. AI can be also used to find candidate molecules for drugs, develop compounds from scratch, and aid the process of synthesizing the molecules with better efficacy.

• Renewed focus on mergers & acquisitions (M&As): 2020 was slow for M&As in the pharmaceutical industry, thanks to the economic instability brought about by COVID-19. The year saw nearly US$ 184 billion in M&A deals, which was one of the lowest in almost a decade. Instead of M&As, pharmaceutical companies focused on establishing partnerships to help fight the pandemic and develop vaccines. They not only partnered together but also established crossindustry partnerships with academic and healthcare establishments. However, in 2021, the focus should shift back to traditional level of M&A deals. According to a report by Price Waterhouse Coopers, M&A deals in 2021 are predicted to be about US$ 250-275 billion. If that were so, it will mark a return to normal M&A activity for the industry.

• Move towards patient-centric care model: The pandemic has driven the pharmaceutical industry towards a more patient-centered care model. This requires deep understanding of a patients health condition and needs in order to deliver more efficient treatment and ensure better availability of such treatments. The emphasis on treating patients with more effective drugs is encouraging innovators at early stages of drug production to incorporate patient- centered insights. Sounder targeting of patients needs will help the industry achieve better clinical results and ensure that pharmaceutical companies produce more effective medicines that improve their therapeutic value.

• Acceleration in digital transformation: Digital transformation in the pharmaceutical industry was already in progress before the pandemic. COVID-19 gave it an impetus like never before. Several pharmaceutical companies took many positive steps towards digitization

— such as appointing chief digital officers to their boards and implementing a data-first approach in their operations. The sector recognized that the digital revolution was here to stay and, in a data- rich industry, offered considerable benefits. During the pandemic, many of the industrys core activities moved to the virtual sphere. This has significantly accelerated digital adaptations, both within the pharmaceutical industry and in the healthcare systems it serves.

• Increased automation in the pharmaceutical supply chain:

Innovation in technology is expected to impact not just drug development but also the supply chain, ranging from speed to safety to manpower. Automation in pharmaceutical manufacturing can help build more resilient, flexible and supply cost- effective chains. These can help make the batch unit operations more efficient, reconfigurable and streamlined, and thus reduce the production-to-market timeline by allowing the faster technical transfer of data and greater versatility of equipment throughout the API network. It may also help to get better insights and recommendations, whether these be commercial, marketing or clinical trials data.

• Expansion of global vaccine manufacturing capabilities: Production of vaccines has traditionally been done by a handful of companies. However, given the pandemic, individual countries want a certain level of autonomy. This has led to expansion in vaccine production capacities in Asia and the Middle East. Biologics and vaccine manufacturing capacity needed globally for COVID-19 vaccines and treatments is expected to take a significant percentage of the overall available capacity. This growth in demand for vaccine manufacturing capacity that we have seen in 2020 will continue into 2021 and perhaps beyond.


NAG is Dr. Reddys largest market. In FY2021, it contributed to around 46% of the companys GG sales, and 37% of overall sales.

Revenue from the region for FY2021 was Rs 70.5 billion (US$ 948 million), representing a growth of 9% over the previous year. Even so, the year continued to see significant price erosion due to increased competition across some major products. However, this impact was significantly offset by an increase in volumes for some of our base products, and contribution from new product launches — the important ones being Ciprofloxacin Dexamethasone, OTC Diclofenac, Sapropterin, Abiraterone (Canada) and Colchicine tablets. Growth was further aided by the strengthening of the US dollar against Indian rupee. Some key developments were:

• Launched Ciprofloxacin Dexamethasone Otic suspension, a therapeutic equivalent generic version of Ciprodex (ciprofloxacin 0.3% and dexamethasone 0.1%), used in treatment of acute otitis.

• Launched OTC Diclofenac Sodium topical gel, the store brand version of Voltaren, used in treatment of arthritic pain.

• Launched the generic version of Sapropterin Dihydrochloride tablets, used in treatment of blood phenylalanine levels.

• Launched Abiraterone Acetate tablets USP, 250 mg, a therapeutic equivalent generic version of Zytiga, used in treatment of prostate cancer.

• Launched Colchicine tablets USP, a therapeutic equivalent generic version of Colcrys, used in treatment of familial Mediterranean fever (FMF).

• Gained market share in certain key products, such as Omeprazole DR and Metoprolol ER.

• Filed 20 new ANDAs and one NDA under section 505(b)(2), and these comprises some complex products and are across different dosage forms.

Our current priority includes accelerating new product launches and increasing the market share of existing products. The strategy is to significantly expand our portfolio and ensure right cost structures for our products to be able to compete in this highly competitive market.

We will continue to focus on complex formulations — primarily injectables and oral solid dosage forms, as well as OTC brands in the medium term, and 505(b)(2) generics, controlled substances under class II, and non-substitutable generics in the longer term.

NAG revenue for FY2021 was ^ 70.5 billion


Revenue from Emerging Markets for FY2021 was Rs 35.1 billion, representing a growth of 7% compared to the previous year. Significant part of the growth has been on account of increased revenues from our base business, new product launches and scaling up of business in CIS countries (including Romania) and Rest of the World markets.

Revenue from Russia for FY2021 was Rs 15.8 billion, representing a 6% decline over the previous year mainly constrained by an overall market slowdown and adverse forex movement. The growth was 1% in terms of the local currency (ruble).

In Russia, our key products — such as Nise, Omez, Nasivin, Cetrine and Ibuclin — were ranked among the top 200 best-selling formulation brands, as per IQVIA in its report for the 12-month period ended March 31, 2021.

Revenue from CIS countries (including Romania) was Rs 7.4 billion, representing 15% growth over the previous year. The growth was led by Ukraine, Kazak, Uzbek and Romania including certain tender sales.

In the current fiscal, Olanzapine sales continue to drive our growth momentum in China. We were the first Indian company to win a national tender in China in FY2020.

Revenue from our Rest of the World markets (which includes Brazil, China, South Africa, and certain other markets) was Rs 11.8 billion, representing 25% growth over the previous year. This was primarily led by scaling up in the markets such as China, Vietnam, Myanmar, and Jamaica.

Our focus is to improve market share in the chosen therapy areas through growth in the existing products as well as new product launches.

Our strategy for the Emerging Markets is to build a healthy pipeline of portfolio including differentiated and oncology products, and expansion of biosimilars across our markets. We will focus on scaling up in our major markets, which include Russia, China, Brazil, South Africa and Ukraine.

Revenue from Emerging Markets for FY2021 was Rs 35.1 billion


Revenue from Europe in FY2021 was f 15.4 billion, representing a growth of 32% vis-a-vis the previous year. This growth was due to increased revenues in our base markets of Germany and the UK, and was aided by expansion in the newer markets of Italy, France and Spain. The increase in revenues was propelled by high volume growth, new product launches across all our markets and favorable forex movement.

Currently, Europe comprises 10% of our global generics sales. In the medium to long-term, we expect it to grow by leveraging our in-house portfolio, seeking in-licensing opportunities, further scaling up business in new markets including and beyond Italy, France and Spain.

Revenue from Europe for FY2021 was f15.4 billion


Revenue from India in FY2021 was Rs 33.4 billion, or a growth of 15% compared to previous year. According to the IQVIA in its report for the 12-month period ended March 31, 2021, our growth has been 3.1%. Our market rank as per MAT (March 2021) improved to 11, from 13 in the last year. Our growth in this market has been on account of a select portfolio acquired from Wockhardt and launch of new products.

During the year, we launched 20 brands in India, including Invista, Redyx™, Avigan which aided growth. Thirteen of our brands — Omez, Omez-D, Atarax, Redyx™, Bro- Zedex, Razo-D, Ketorol™, Nise, Stamlo, Zedex, Practin, Mintop™ and Econorm — are among the top 300 brands of the Indian pharmaceuticals market.

In the near term, we will continue to drive productivity improvement and focus on our core therapeutic areas and big brands. We also have a wide range of COVID-19 portfolio drugs including a vaccine which may contribute to growth in the near to medium term. In the medium- to long-term, our strategy is to build a healthy pipeline of differentiated products in relevant therapies including biosimilars, and expand our presence in new areas such as nutraceuticals.

Revenue from India for FY2021 was Rs 33.4 billion


The PSAI business recorded revenues of 732 billion in FY2021, representing a 24% growth over the previous year.

In FY2021 we filed 149 drug master files (DMFs) globally, of which 14 were in the US.

This business primarily comprises of APIs and pharmaceutical services. We believe that with recent market developments, there will be a good opportunity for us to expand our API business. We are also focusing on expanding our services business and expect it to be a growth driver. With this intent, Aurigene Pharmaceutical Services Limited (APSL), a newly formed company, has been carved out to focus on contract research, development and manufacturing operations (CDMO).

Our strategy of building a sustainable and growing business involves new product launches and ramping up of base businesses in key geographies. We will also leverage our relationships with key customers by supplying materials that have value addition instead being ‘plain-vanilla APIs. We aim to be a partner of choice for global generics manufacturers and achieve global leadership through costs and service.

Revenue from PSAI for FY2021 was Rs 32 billion


The PP business recorded revenue of RS 0.5 billion in FY2021, a decline of 93% following the divestment of two brands of our neurology franchise in FY2020.

Going forward, our strategy is to focus on an in-house pipeline in a well calibrated manner which strives to achieve an optimal balance between risks and costs. At an overall level, this aligns well with our renewed strategy to enable us to achieve self-sustainability and profitable growth for each of our businesses.


ADTL is our wholly-owned subsidiary and is a clinical stage biotech company committed to bringing novel therapeutics for the treatment of cancer and inflammation. It recorded revenue of Rs 2.8 billion in FY2021, or a growth of 1%. It is reported as part of our ‘Others segment.


Our facilities are fully compliant with the USFDA regulations. Currently, the status for all our facilities is either ‘NAI, which means ‘No Action Initiated or ‘VAI which means ‘Voluntary Action Initiated. The warning letter which was issued to us in November 2015 was closed in August 2020 after USFDA ascertained that we have addressed the cited violations and deviations.

We remain fully committed to following high standards of quality and strive towards further strengthening of our quality management systems and processes for sustainability. Our plans to enhance quality management systems and operations include improvements in rigor of investigations and document control systems, standardization of instrument calibrations, strengthening controls with respect to information technology as well as shop floor training programs, and simplifying and standardizing standard operating procedures and batch records at the shop floor.

We have initiated additional operational improvements such as shop floor supervision and process walks, engineering, implementation of electronic batch records to eliminate manual errors, and focus on robustness of processes. We are fully committed to produce safe and efficacious products for our patients.


Table 2 gives the abridged IFRS consolidated revenue performance of Dr. Reddys for FY2021 compared to FY2020. Table 3 gives the consolidated income statement.


Total revenue grew by 9% to Rs 189,772 million in FY2021. The growth was primarily aided by increase in volume and new product launches across our businesses and benefits due to depreciation of Rupee against the US Dollar, partially offset by price erosion in our GG segments North America (the US and Canada), Europe and certain other emerging markets. FY2020 sales included the sale of the US and select territory rights for two of our neurology brands pertaining to PP segment.


Gross profit increased by 10% to RS 103,077 million in FY2021. This resulted in a gross profit margin of 54.3% in FY2021 - representing an increase of 50 basis points compared to FY2020. The gross profit margin for GG was 59.0%. The GG gross profit margin was largely benefited from cost optimization initiatives taken by the company, favorable product mix and the benefit from depreciation of rupee against the US Dollar, which was partly offset with price erosion in the US, Europe and certain emerging markets as well as reduction in export benefits. For the PSAI business, the gross profit margin was 29.5%. PSAIs gross profit margin improved primarily on account of manufacturing cost leverage, productivity initiatives taken by the company and the benefit from depreciation of rupee against the US Dollar, which was partly offset with price erosion and reduction in export benefits.



SG&A expenses increased by 9% to Rs 54,650 million in FY2021. This was largely attributable to increase in logistics costs primarily due to COVID-19 situation; increase in personnel costs primarily on account of increased head count and annual increments; and increases pertaining to legal and professional charges. The increase was offset by lower marketing and travel expenses with restricted activities due to COVID-19. SG&A accounted for 28.8% of sales in FY2021 versus 28.7% in FY2020 — or was in-line with last year.


R&D expenses for FY2021 were Rs 16,541 million, or 8.7% of revenue, versus 8.8% in FY2020. The R&D spends in FY2021 increased by 7% over FY2020, due to an increase in the development activities pertaining to generics segment, including COVID-19 related products development.


PARTICULARS (US$) FY2021 (Rs) % (US$) FY2020 (Rs) % Growth %
Global Generics 2,111 1,54,404 81.4 1,888 1,38,123 79.1 12
North America 70,494 64,659 9
Europe 15,404 11,707 32
India 33,419 28,946 15
Emerging Markets8 35,087 32,811 7
Pharmaceutical Services and Active Ingredients (PSAI) 437 31,982 16.8 352 25,747 14.8 24
Proprietary Products & Others 46 3,336 1.8 147 10,730 6.1 (69)
Total 2,594 1,89,722 100 2,387 1,74,600 100 9

* Europe includes Germany, the UK and out-licensing sales business, Italy, France and Spain.

<2> Emerging markets refer to Russia, other CIS countries, Romania and Rest of the World markets.


PARTICULARS (US$) FY2021 (Rs) % (US$) FY2020 (Rs) % Growth %
Revenues 2,594 1,89,722 100.0 2,387 1,74,600 100.0 9
Cost of Revenues 1,185 86,645 45.7 1,102 80,591 46.2 8
Gross Profit 1,409 1,03,077 54.3 1,285 94,009 53.8 10
Operating Expenses
Selling, General & Administrative expenses 747 54,650 28.8 685 50,129 28.7 9
Research and Development expenses 226 16,541 8.7 211 15,410 8.8 7
Impairment of non-current assets 117 8,588 4.5 229 16,767 9.6 (49)
Other operating (income) (13) (982) (0.5) (59) (4,290) (2.5) (77)
Results from operating activities 332 24,280 12.8 219 15,993 9.2 52
Finance (income), net (23) (1,653) (0.9) (20) (1,478) (0.8) 12
Share of (profit) of equity accounted investees, net of income tax (7) (480) (0.3) (8) (561) (0.3) (14)
Profit before income tax 361 26,413 13.9 247 18,032 10.3 46
Income tax expense 125 9,175 4.8 (20) (1,466) (0.8) (726)
Profit for the period 236 17,238 9.1 267 19,498 11.2 (12)
Diluted Earnings Per Share (EPS) 1.42 103.65 1.61 117.40 (12)

Note: The conversion rate is considered as US$ 1 = Rs 73.14

Gross profit increased by 10% to Rs 103,077 million. An increase of 50 basis points compared to FY2020.


In FY2021, there has been an impairment charge of Rs 8,542 million which pertains to charges of:

• Rs 3,180 million for the product Ethinyl Estradiol/Ethenogestral vaginal ring (generic equivalent to Nuvaring). During the year, there were significant changes to the market for the product — including the launch by a competitor of a generic version of the product in January 2021, thereby reducing the overall potential of future cash flows for us.

• Rs 1,587 million for the product Saxagliptin/Metformin (generic version of Kombiglyze-XR) and Phentermine and Topiramate (generic version of Qsymia). During the year, there has been a significant decrease in the market potential of these products, primarily due to higher than expected value erosion.

• Rs 3,291 million for the product Xeglyze.

In view of the specific triggers occurring in the year with respect to the Xeglyze forming part of the companys Proprietary Products segment, the company determined that there was a decrease in the market potential of this product.

• Rs 484 million on other products of global generics segment, as the company determined that there was a decrease in the market potential of these products.


The net finance income was Rs 1,653 million in FY2021 versus Rs 1,478 million in FY2020.


Net profit decreased by 12% to RS 17,238 million in FY2021. This represents a PAT margin of 9.1% of revenues versus 11.2% in FY2020. In FY2020, the net profit after tax was benefitted largely due to recognition of a deferred tax asset related to the Minimum Alternate Tax ("MAT") credits and planned restructuring activity between the group companies. In FY2021, the net profit after tax was impacted largely by de-recognition of deferred tax asset due to non-availability of depreciation on goodwill pursuant to an amendment to the Income Tax Act.


The data are given in Tables 4 and 5.

Cash generated from operating activities in FY2021 was Rs 35,703 million. Investing activities net outflow amounting to Rs 22,660 million in FY2021 includes net investment in property, plant, equipment and intangibles to build capacity and capabilities for future business growth. Cash outflow from financing activities was Rs 298 million. Closing cash and cash equivalents as on March 31, 2021 was Rs 14,820 million.


In FY2021, total borrowings, including the current and non-current portion, increased by Rs 8,288 million. As on March 31, 2021 the companys debt-to-equity ratio was 0.16 as against 0.14 on March 31, 2020. The net debt-to-equity position was at (0.04) versus (0.03) last year. Table 6 gives the data.


Our ERM function operates with the following objectives:

• Proactively identify and highlight risks to relevant stakeholders;

• Facilitate discussions around risk prioritization and mitigation;

• Provide a framework to assess appetite;

• Develop systems to warn when the appetite is being breached; and

• Provide an analysis of residual risk.

The ERM team connects with our business units and functions, which are the primary sources for risk identification. It also monitors external trends on liabilities and risks reported by peers in the industry. The team collaborates with the compliance, internal audit, information security, safety and other assurance teams to identify and mitigate risks of business units, including risk relating to cyber security.

Our ERM function focuses on identification of key business, and operational and strategic risks. These are carried out through structured interviews, on-call discussions, and review of incidents.

Risks are aggregated at the unit, function and organization levels and are categorized by risk groups. Our response framework categorizes these risks into (i) internal (preventable), (ii) internal (strategic) and (iii) external risks. The finance, investment and risk management (FIRM) council is a management level committee that helps the ERM function to prioritize organizationwide risks and steer mitigation efforts in line with our risk appetite.

Mitigation work carried out by the ERM team is periodically reviewed, and progress on key risks is discussed with the FIRM council, our senior management, as well as at the risk management committee of the board of directors. These include (i) updates on the progress of mitigation of key risks and (ii) specific risk-related initiatives carried out during the year.

During FY2021, risk mitigation efforts included review of cyber security, ethics and compliance program across the company, monitoring of environmental including climate change related risks and reviews of other operating risk exposures.

Opening Cash and Cash Equivalents 1,962 2,228
Cash flows from:
(a) operating activities 35,703 29,841
(b) investing activities (22,660) (4,923)
(c) financing activities (298) (25,159)
Effect of exchange rate changes 113 (25)
Closing Cash and Cash Equivalents 14,820 1,962


With the pandemic in FY2021, the primary objective was to facilitate health and safety of our employees and their families while ensuring that we continue supplying medicines across the world. A number of interventions and support mechanisms were put in place to transition to remote working and also safeguard the well-being of those employees coming to sites. Some of these were:

• A well-being and support plan was launched comprising tele-consulting, helplines, 24x7 unlimited access to certified clinical psychologists through an online platform and a home isolation program. Dedicated separate COVID-19 care facilities were launched for employees and dependents across three locations to provide pre-hospitalization care amidst the dire state of uncertainty in the external environment.

• For employees coming on-site in manufacturing and R&D, stringent social distancing and safety measures were deployed in the work locations, transport facilities and cafeterias. Other measures included multiple stages of disinfection, provision of personal protective equipment and automating actions that require manual contact. Daily hardship allowance was also provided.

• An additional insurance coverage for COVID-19 which covers hospitalization and home quarantine expenses was extended for employees and their dependents in India. Employees have also been provided a provision of additional COVID-19 leave.

• Support mechanisms to enhance work from home experience like ergonomic infrastructure and network support through mobile data plans were provided and work from home guidelines were shared.

A combination of ambiguity in the external environment with the new reality of remote working, virtual collaboration and unsupervised workdays has become the new normal. We have relooked at our people processes with that lens. In doing so, we have revamped our performance process to help employees work in this new reality and pursue individual and organizational priorities. The new performance process has been developed with the following principles in mind:

We revamped our performance process to help employees work in this new reality and pursue individual and organizational priorities.

• Clarifying success in terms of outcomes and behaviors aligned to the organization goals.

• Frequent check-in and flexibility to change the goals anytime.

• Continuous, real time feedback — moving away from assessments to development.

• Clear feedback on performance against goals and behaviors demonstrated

Digitization of the people processes is a key focus area. We have digitized processes across the employee lifecycle which include joining assistance, on-boarding, internal hiring, employee referrals, learning and compensation processes. This has resulted in reducing turn-around times and enhanced employee experience.

In the new normal, there is also a need to gauge employee engagement in real time.

To enable this, we launched ‘Heartbeat — our internal engagement platform that measures engagement levels on an everyday basis across different dimensions. Findings from the first cycle of Heartbeat indicated that 92% of employees were ready to put in discretionary effort for the organization and 82% would recommend Dr. Reddys as a great place to work. 87% to 89% valued the employee wellness, safety and respect that the organization provided.

With the acquisition of select business of Wockhardt Limited, we successfully integrated the related sales and marketing teams, as well as the manufacturing plant located in Baddi. During these times, we focused on virtual on-boarding, training and induction. Cultural assimilation sessions focused on people and organization processes were conducted by leaders to enable seamless integration between teams.

We continue to strengthen our talent processes through cadre and capability building interventions. Significant work was done in strengthening the capability building agenda in the organization. Employees were assessed against functional and behavioral skills required for them to be more effective in their roles. As part of developing future ready talent, strategic interventions have been designed in areas of digital and analytics. Learning journeys focused on competency building across specific cohorts were rolled out — examples being in marketing and business development. We also invested in strengthening our learning resources to be more contemporary and set up a digital infrastructure in the form of a Learning Experience Platform.

To promote internal talent mobility, we launched ‘growth bridges that provide employees structured assignments and experiences equipping them to take on vertical and lateral growth opportunities.

Diversity and inclusion continues to remain important in the organizational agenda. ‘Chrysalis, our flagship leadership development program, has been launched for women in middle management to prepare them for senior leadership roles.


Trade Receivables (A) 49,641 50,278 (637)
Inventories (B) 45,412 35,066 10,346
Trade Payables (C) 23,744 16,659 7,085
Working Capital (A+B-C) 71,309 68,685 2,624
Other Current Assets (D) 53,196 45,026 8,170
Total Current Assets (A+B+D) 1,48,249 1,30,370 17,879
Short & Long-term loans and borrowings, current portion (E) 24,000 20,707 3,293
Other Current Liabilities (F) 35,647 35,448 199
Total Current Liabilities (C+E+F) 83,391 72,814 10,577


Total Shareholders Equity 1,73,062 1,54,988 18,074
Long-term debt (current portion) 864 4,266 (3,402)
Long-term debt (non-current portion) 6,299 1,304 4,995
Short-term borrowings 23,136 16,441 6,695
Total Debt 30,299 22,011 8,288

For the fourth year in a row, we have been featured in the 2021 Bloomberg Gender Equality Index for our commitment to gender equality. We also won the 1" Runner up position in the ‘Leadership category (individual) in UN WEP awards.


In FY2021, we continued to make progress on our digital transformation journey, which is structured along the lines of Digitalize the Core and Transform with Digital.

Digitalize the Core:

We continued to simplify and digitalize our core business processes across the organization and ended the year with nearly 80% digitalization of all core business processes.

We expanded the digital footprint into regulatory and clinical processes resulting in faster cycle time and lower error rates. In manufacturing, we continued to expand implementation and adoption of the Manufacturing Execution System and the Laboratory Information Management Systems which result in paperless shopfloor and labs, eliminates errors and improves productivity. We also digitalized safety processes and equipment lifecycle management across the plants.

In branded markets, our digitalization efforts have been focused on increasing field productivity with improved accuracy of doctors information enriched with geocodes critical for route and call planning. Within B2B markets, digitalization of bid and tender management processes have resulted in higher win rates, improved pricing vis-a-vis profitability and maintaining product market share.

We extended our digital footprint to enable two major cross-functional value chain processes: ‘Selection to Launch and ‘Product Management. The ‘Selection to Launch platform digitalizes all core processes involved across R&D, manufacturing and supply chain leading up to the new product launch. The ‘Product Management platform helps facilitate a 360 degree view along the product lifecycles through internal KPIs as well as market intelligence.

Transform with Digital:

We continued to deploy digital and analytics solutions to improve customer engagement and drive speed and productivity in our value chain.

Within R&D, multiple digital solutions were deployed that drove reduction in cycle time of drug development and help improve our rate of being ‘first time right.

Within manufacturing, we are building Digital Lighthouse plants to increase plant productivity. These initiatives have markedly reduced Cost of Poor Quality (COPQ) and

per pack costs. Higher productivity is also enabled by scaling up of Robotic Process Automation (RPAs) as well as digitalized processes with automated incident tracking and near zero manual errors.

Market facing digital transformations are focused on improving customer and patient engagement. We had invested in Omnichannel connect platforms for our customers that helped us when the pandemic hit us. Similarly, in the B2B businesses, digital solutions have been deployed to drive improved customer service and account management. We have also deployed advanced analytics-based insights to improve productivity of sales and marketing.

Few experiments have been underway to establish new patient engagement platforms - e.g., for an integrated end-to- end care management for cancer patients - as well as to look at adjacent business models in the healthcare ecosystem.


We have continued to play our role in the fight against COVID-19 by acting proactively to bring multiple preventive and curative treatment options, including a vaccine. Some of our major COVID-19 products are:

• Sputnik V vaccine: We partnered with The Russian Direct Investment Fund (RDIF), Russias sovereign wealth fund, for conducting clinical trials and distribution of Sputnik V vaccine in India. We successfully completed Phase III trial for the vaccine, which demonstrated efficacy at 91.6%, consistent safety and immunogenicity results. In April 2021 we received the Government of Indias approval for emergency use of Sputnik-V in India. We have launched Sputnik V in May 2021.

• Remdesivir: We signed a licensing agreement with Gilead Sciences, Inc. that grants Dr. Reddys the right to register, manufacture and sell Remdesivir, a potential treatment for COVID-19, in 127 countries including India. We launched Remdesivir under the brand name "Redyx™" in India in September 2020. With the surge of COVID-19 cases in the second wave, we ramped-up our capacities to increase the availability of the medicine.

• Avigan (Favipiravir): We entered into a licensing agreement with Fujifilm Toyama Chemical Co. Ltd. to develop, sell and distribute Avigan (Favipiravir) in all countries other than Japan, China and Russia. This enabled us to launch Avigan 200 mg tablets in India and few other markets. We are also conducting Phase III trials in North America for outpatient setting with mild to moderate symptoms.

• 2-deoxy-D-glucose (2DG™): The 2-DG has been developed by Defence Research and Development Organization (DRDO), in collaboration with Dr. Reddys. The drug received emergency use as adjunct therapy for hospitalized moderate to severe COVID-19 patients.

In addition to these, we are also working on Molnupiravir, Baricitinib and several other COVID-19 drugs for treatment ranging from mild to severe conditions. We are committed to do our best in this pandemic situation.


FY2021 started with multiple COVID-19 related disruptions with lockdowns in several of our major markets. This impacted the physical connect of doctors with patients and pharma representatives and also led to several challenges on operations, supply chain and logistics. Some of these challenges continued throughout the year.

We rose to the occasion with proactive measures such as leveraging digital channels for many of our operations — examples being the enabling remote working for our employees and digitally connecting with doctors and business partners.

We managed to continue with most of our manufacturing operations through the year and ensured that supplies were available for each of our markets. We worked with innovative solutions ensuring business continuity; and while doing so we ensured the health and safety of our employees and business partners. We also converted the challenge to an opportunity with multiple set of COVID-19 related products.

The pricing pressures in the US, Europe and certain emerging markets have continued. However, our strong performance was led by volume growth and new product launches across these markets. Having said that, some delays in launch of a few key products hampered further growth.

Our commitment towards quality is reflected in all our facilities being fully compliant with the respective regulatory agencies regulations.

We remain focused on improving our market share position and continue our journey towards creating a leaner business model, leveraging productivity improvement, cost control and increased efficiencies across several functions in FY2021.

Simultaneously, we are committed to investing in business to make it even more competitive and future ready, especially through: (i) investments in digitalization;

(ii) development of complex products and biosimilars; and (iii) strengthening sales and marketing activities in branded markets. These initiatives will continue in FY2022, as well, and thus provide necessary impetus to our performance in future years.

We will remain focused on patient centric product innovation, operational excellence, continuous improvement and attaining leadership in chosen spaces. We are committed to look for opportunities aligned with our future business strategies for inorganic growth. This is reflected in select brand acquisition from Wockhardt and other small scale acquisitions during FY2021. We will continue to seek more such opportunities in future.

The last few months have seen a second wave of COVID-19 impacting several parts of the world, and the most in India. While vaccinations and several treatment options are now available, rapid spread of the infection has led to further uncertainties in terms of business outlook. Consequently, our overall business growth may remain volatile in FY2022.

However, we believe that we have enough levers of growth in terms of expanding our market share, new product launches, scale up of several businesses and opportunities arising from COVID-19 products. These should enable us to deliver satisfactory performance in FY2022.


The management of Dr. Reddys has prepared and is responsible for the financial statements that appear in this report. These are in conformity with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board, and accounting principles generally accepted in India and therefore, include amounts based on informed judgments and estimates. The management also accepts responsibility for the preparation of other financial information that is included in this report. This write up includes some forward-looking statement, within the meaning of section 27A of the US Securities Act of 1933, as amended and section 21E of the US Securities Exchange Act of 1934, as amended.

The management has based these forwardlooking statements on its current expectations and projections about future events. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. These factors include, but are not limited to, changes in local and global economic conditions, changes in government regulations, ability to successfully implement the strategy, manufacturing or quality control outcomes, ability to achieve expected results from investments in our product pipeline, change in market dynamics, technological change, currency fluctuations and exposure to

various market risks. By their nature, these expectations and projections are only estimates and could be materially different from actual results in the future. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect managements analysis and assumptions only as of the date hereof. In addition, readers should carefully review the other information in this annual report and in our periodic reports and other documents filed with all the stock exchanges.

Our commitment towards quality is reflected in all our facilities being fully compliant with the respective regulatory agencies regulations.