Glenmark Pharmaceuticals Ltd Management Discussions.

GLOBAL ENVIRONMENT

The global economy continues to witness slowdown with dips in GDP growth, amid prolonged trade disputes and wide-ranging policy uncertainties. Trade tensions between China and the United States reescalated in the second half of 2019 and have further intensified following the outbreak of COVID-19. These developments have triggered sharp movements in the global equity markets, a decline in global oil prices and higher capital outflows from emerging economies. Alongside recent monetary policy shifts by major central banks, persistent uncertainty surrounding trade actions has induced heightened investor risk aversion and financial market volatility.

As the human and economic costs of the COVID-19 pandemic continue to unfold, the global financial system has been both a source of strength—with banks and fintechs extending support to small businesses and households in need—and an area of potential risk, with record levels of market volatility and growing concern around credit losses. Governments, central banks, regulators, and international organizations have moved rapidly to address the economic collapse and financial fallout, but it remains to be seen how policy should continue to evolve to preserve financial stability.

(Sources: UN World Economic Situation and Prospects, WEF Impact of COVID-19 on the Global Financial System)

GLOBAL PHARMA SCENARIO

The global pharmaceutical landscape is undergoing a major overhaul with the advent of new technologies and more efficient and cost-effective manufacturing processes. This is paving the way for a whole new world of drugs and treatments of the future. In 2019, the global pharmaceutical industry was worth approximately $1.2 trillion, a figure predicted to increase to around $1.5 trillion by 2023. And the global generic industry is expected to be worth $474 billion by 2023, a 6.8% increase from 2018.

API manufacturing quality is most often a key indicator for the performance of pharmaceutical markets - with

many of the pharmas developed markets still perceived as ahead of the large volume producers. According to a 2019 CPhI report, Japan has pushed ahead of Germany with a respectable growth of 2.5%, to now holding the number one spot for API manufacturing quality. With regard to innovation, the USA continues to retain its top position. It also boasts the largest growth increase (2.5%) of all assessed markets, while Japan and Germany remain in second and third position respectively. The ever-increasing demand for pharmaceuticals and the push for more accessible and affordable drugs is fueling the biosimilar market to grow exponentially in the coming years. There is also growing interest from pharma companies to tap the rare and specialty disease markets. Innovations in advanced biologics, nucleic acid therapeutics, cell therapies, bioelectronics and implantables are attracting huge investments even from non-pharma companies like Facebook, Qualcomm etc.

More recently, and especially during the COVID-19 pandemic, telemedicine is being increasingly used to transform the way that patients receive primary healthcare, making it possible to consult with healthcare professionals virtually, through their personal computer and mobile devices. Telemedicine is predicted to become an increasingly integral part of healthcare systems in various markets around the world to help manage rising demand.

While most other industries and sectors suffered considerable losses as a result of the pandemic, the pharmaceutical industry faced increased demand and urgent business challenges, such as ensuring wellfunctioning supply chains for patients to get their prescriptions filled and remain on critical therapies.

The COVID-19 crisis is expected to have knock-on effects for the broader pharma environment, including reduced funding for early-stage biotech companies and diminished demand for contract research organizations. Pharmaceutical companies may have to delay certain product launches, and those that go ahead may fall short of expectations, given the impediments to commercialize drugs at the same speed and scale in

the current environment. Once the public health crisis is over and business operations return to normal, the pharmaceutical world will most likely have to adjust its go-to-market strategies for the new way of normal ahead.

(Sources: Pharma Industry 2020: Key emerging trends to watch for in the New Year, Pharma and Medical Devices Opportunities and Challenges: 2020 and beyond, Global Pharmaceuticals Industry Analysis and Trends 2023, CPhI Insights: New modalities, new methods and new thinking to solve old problems)

FINANCIAL SUMMARY (IND AS)

MATERIAL CONSUMED AND PURCHASE OF TRADED GOODS

Cost of Material consumed including finished goods purchased were at Rs36,986.39 mn in FY 2019-20 as against Rs33,623.42 mn in FY 2018-19 and as a percentage to sale of products was at 35.57% in FY 2019-20 as against 34.66% in FY 2018-19.

EMPLOYEE COST

Employee cost was at Rs 22,547.76 mn in FY 2019-20 as against Rs20,560.70 mn in FY 2018-19.

OTHER EXPENSES

Other expenses includes manufacturing overheads, selling and marketing expenses, administrative and general expenses and R&D expenses.

Other expenses increased to Rs29,894.72 mn in FY 2019-20 as against Rs 28,612.56 mn in FY 2018-19.

FINANCE COSTS

Interest expenses increased to Rs3,773.18 mn in FY 2019-20 as against Rs3,345.85 mn in FY 2018-19.

PROFIT AFTER TAX

Profit after tax for FY 2019-20 was at Rs 7,759.70 mn as against FY 2018-19 was at Rs 9,249.93 mn.

DIVIDEND

The Board has recommended a final dividend of 250% ( Rs 2.50 per equity share of Rs 1 each) on the equity share capital as at 31 March 2020 subject to the approval of shareholders.

EQUITY CAPITAL

There is no movement in equity share capital during the FY 2019-20.

TRADE PAYABLES

Trade payables decreased to Rs.21,258.43 mn in FY 2019-20 from Rs.22,207.51 mn in FY 2018-19.

CURRENT TAX LIABILITIES

Current tax liabilities decreased to Rs407.13 mn in FY 2019-20 from Rs 457.56 mn in FY 2018-19.

SHORT TERM BORROWINGS

Short term borrowings increased to Rs 4,425.97 mn in FY 2019-20 from Rs 3,030.24 mn in FY 2018-19.

OTHER CURRENT LIABILITIES

Other current liabilities increased to Rs1,432.65 mn in FY 2019-20 from Rs 1,119.44 mn in FY 2018-19.

TRADE RECEIVABLES (NET)

Trade receivables increased to Rs 24,089.62 mn in FY 2019-20 from Rs 21,945.90 mn in FY 2018-19.

INVENTORY

Inventory decreased to Rs21,356.24 mn in FY 2019-20 from Rs 22,520.74 mn in FY 2018-19.

OTHER CURRENT ASSETS

Other current assets decreased to Rs10,228.44 mn in FY 2019-20 from Rs 10,321.30 mn in FY 2018-19.

PROPERTY, PLANT AND EQUIPMENT (EXCLUDING CWIP)

The Gross block of property, plant and equipment increased to Rs 39,813.90 mn in FY 2019-20 from Rs 31,961.29 mn in FY 2018-19.

OTHER INTANGIBLE ASSETS (EXCLUDING CWIP AND GOODWILL)

The gross block of other intangible assets increased to Rs 38,585.61 mn in FY 2019-20 from Rs32,764.04 mn in FY 2018-19.

INDIA FORMULATIONS

During the year under review, the India Formulations (IF) business performed well, registering revenue of Rs. 32021.67 Mn (USD 452.41 Mn) as against Rs. 27,769.71 Mn (USD 398.07 Mn) in the previous year, recording growth of 15.31%. The India business continues to be a strong contributor to the companys overall growth, with the fourth quarter being an exceptional quarter in terms of growth.

As per IQVIA MAT Mar 2020, the IF business is ranked 14th in the Indian pharmaceutical market. The highlight for the India business has been the launch of Remogliflozin, a novel anti-diabetic drug in the SGLT2 inhibitor class of molecules. Glenmark was the first company to launch this product in India. Since its launch, Remogliflozin

continues to do exceedingly well in the market and is well received in the medical community. It has achieved impressive market penetration of 34% in the SGLT2 segment, a figure that is progressing month on month. Glenmark now ranks third in the respiratory segment in the Indian pharmaceutical market. In the cardiology space, the most notable brand remains Telma, which is the first Glenmark brand to feature in the top 20 IPM Brands. It has jumped 11 ranks in the last 12 months (IQVIA Mar20). Overall, notable changes in market share of the IF business core therapy areas (from MAT Mar19 to MAT Mar20) are as follows:

? The Dermatology business from 9.07% to 8.89%

? The Cardiology business from 4.52% to 4.72%

? The Diabetology business from 1.61% to 1.78%

? The Respiratory business from 4.76% to 5.10%

IF TOP BRANDS IN IPM 300 BRANDS LEAGUE AS PER IQVIA: (MAT MAR 2020)

Glenmark has the following nine brands among the Top 300 Brands in the Indian Pharmaceutical Market:

Brands Val (Crores) Val Growth %
TELMA 236.60 20.64
TELMA-H 185.35 15.06
TELMA-AM 119.54 17.54
CANDID 117.08 13.23
ASCORIL+ 113.29 17.55
ASCORIL-LS 112.85 20.92
CANDID-B 100.67 11.54
ALEX 76.52 17.83
ZITA-MET PLUS 66.05 8.47

GLENMARKS CONSUMER CARE BUSINESS

Glenmarks consumer care business continued its strong growth trajectory in FY 2019-20, with the business setting a new milestone of sales of Rs. 2038 Mn. in this financial year. This strong growth was led by Candid dusting powder. The new launch of Scalpe PRO also helped drive the business with a growth of 42% in the last quarter. Modern trade channel led the growth agenda for the Consumer Care portfolio, with 34% growth for the year.

The company also announced that it has entered into

IN THE CARDIOLOGY SPACE, THE OST NOTABLE BRAND REMAINS TELMA, WHICH IS THE FIRST GLENMARK BRAND TO FEATURE IN THE TOP 20 IPM BRANDS. IT HAS JUMPED 11 RANKS IN THE LAST 12 MONTHS

an agreement with Hindustan Unilever Limited (HUL) for the divestment of its VWash brand and other extensions. Under this agreement, the brand and other trademarks, copyrights, know-how associated with Glenmarks VWash business will be transferred to HUL. Glenmark will receive an upfront payment and a certain percentage of sales for three years. No employees will be transferred as a part of this agreement. The transaction was completed on June 25, 2020.

US FORMULATIONS

For the financial year 2019-20, the US business registered revenue from the sale of finished dosage formulations of Rs. 31,404.49 Mn (USD 443.69 Mn) as against revenue of Rs. 31,392.70 Mn (USD 450.01 Mn) for the previous corresponding year.

In the fiscal year 2019-20, Glenmark was granted approval for 14 Abbreviated New Drug Applications (ANDA), comprising 12 final approvals and 2 tentative approvals. Additionally, Glenmark received approval on a Prior Approval Supplement (PAS) to make an over-the-counter version of their Adapalene Gel, 0.1% available. Notable approvals include: Fulvestrant Injection, 250 mg/5 mL (the companys first injectable product), Pimecrolimus Cream, 1%, and Deferasirox Tablets for Oral Suspension, 125 mg, 250 mg and 500

mg. The company filed a total of 8 ANDA applications with the US FDA throughout the fiscal year.

As part of a distribution agreement with Elite Laboratories, Glenmark also launched Isradipine Capsules. During this financial year, the US business was significantly impacted in terms of sales on account of three products viz. Mupirocin Cream, Atomoxetine hydrochloride & Calcipotriene cream. Sales were also impacted due to the Ranitidine issue in the US market. Glenmarks marketing portfolio through March 31, 2020 consists of 165 generic products authorized for distribution in the U.S. market. The company currently has 44 applications pending in various stages of the approval process with the US FDA, of which 24 are Paragraph IV applications.

IN THE FISCAL YEAR 2019-20, GLENMARK WAS GRANTED APPROVAL FOR 14 ABBREVIATED NEW DRUG APPLICATIONS (ANDA), COMPRISING 12 FINAL APPROVALS AND 2 TENTATIVE APPROVALS

REST OF THE WORLD

For the year under review, revenue from Africa, Asia and CIS region was Rs.12,854.45 Mn (USD 181.61 Mn) as against Rs. 12,759.35 Mn (USD 182.90 Mn) for the previous corresponding year, recording growth of 0.75%.

RUSSIA/CIS REGION

According to IQVIA MAT March20 data, Glenmark Russia recorded faster than market growth of +10.7%

in value v/s overall retail market growth of +8.9%. In the dermatology segment, Glenmark ranks 11 amongst dermatology companies present in the retail market on MAT March20 basis. The introductions under the Oflo umbrella i.e. Oflomil nail lacquer and Oflomycol cream & solution will further strengthen the companys position in this segment. In the respiratory space, Glenmark continues to secure a strong position and ranks 4th, as per MAT March20 data amongst the companies present on the expectorants market (retail segment) of the local pharmaceutical market. Launch of Momate Rhino OTC helped to further strengthen Glenmarks respiratory franchise in the Russian market.

During the year under review, Glenmarks Ukraine business showed growth of 25.5% in units.

FOR THE YEAR UNDER REVIEW,

R EVENUE FROM AFRICA, ASIA AND CIS REGION WAS RS.12,854.45 MN (USD 181.61 MN)

ASIA & AFRICA

During the year under review, sales in the Asia region continued to remain subdued across all markets. The Africa region recorded strong secondary sales growth during the year. All the major subsidiaries viz. South Africa and Kenya recorded good growth. The company has also made good progress in expanding its presence in the GCC region.

EUROPE FORMULATIONS

Glenmark Europes operations for the year under review recorded revenue at Rs. 12,484.48 Mn (USD 176.38 Mn) as against Rs. 11,207.09 Mn (USD 160.65 Mn), recording growth of 11.40%.

During the year under review, the Western European business continued expanding through increased penetration in the UK, Germany, Spain and the Netherlands while Nordic countries witnessed some de-growth. During the year under review, the Central Eastern European region also managed to grow well in constant currency with major markets witnessing sales growth. During the year under review, GSK concluded a settlement agreement concerning the existing litigation against Glenmark and Celon regarding the shape of their inhalation product containing salmeterol xinafoate

Molecule (INN) Form Country
Hydromorphone Modified-release DE
Sunitinib Capsules PL, RO, SK, CZ, SE, DE
Sitagliptin Tablets DE, CZ, DK, FI, UK, NO, SK, ES, SE
Tiotropium pMDI pMDI All major markets in Europe
Omeprazole OLS Capsules UK
Sitagliptin/Metformin Tablets DE, CZ, DK, FI, UK, NO, SK, ES, SE
Lenalidomide Polymorph RO Capsules RO
Lenalidomide Polymorph SPC Capsules PL, CZ, UK, DE, RO, ES, DK, SE
Dabigatran Capsules, hard UK, DE, SE, NO, DK, FI, CZ, SK
Ibuprofen + Paracetamol Tablets CZ, SK

and fluticasone propionate, named Salmex (aka Stalpex, Salflutin and Asthmex) in selected European markets.

Under the settlement agreement concluded between the parties, Celon and Glenmark are permitted to sell Salmex in certain European markets in an agreed shape of inhaler device, free from intellectual property challenges. Also Glenmark Poland partnered its CNS

IN JUNE 2019, GLENMARKS BRAZILIAN SUBSIDIARY ENTERED INTO AN EXCLUSIVE PARTNERSHIP WITH NOVARTIS AG, FOR THREE RESPIRATORY PRODUCTS INDICATED FOR TREATMENT OF CHRONIC OBSTRUCTIVE PULMONARY DISEASE (COPD)

portfolio to Neuraxpharm, a leading European pharma company. Following the transaction, the Glenmark CNS commercial team in Poland joins Neuraxpharm Polskas existing sales and marketing organization to create a strong player in the Polish CNS market, with excellent access to psychiatrists, neurologists and pharmacies. The transaction was closed in April 2020.

LATIN AMERICA

For the year under review, Glenmarks revenue from its Latin American and Caribbean operations was at Rs. 5355.57 (USD 75.66 Mn) for FY 2019-20, as against Rs. 4179.53 Mn (USD 59.91 Mn) for the previous corresponding year, recording growth of 28.14%. In June 2019, Glenmark announced that its Brazilian subsidiary has entered into an exclusive partnership agreement with Novartis AG, for three respiratory products indicated for treatment of Chronic Obstructive Pulmonary Disease (COPD) in Brazil. The products involved in the agreement are Seebri (Glycopyrronium bromide), Onbrize (Indacaterol) and Ultibro (combination of Indacaterol and Glycopyrronium).

Under the terms of the agreement, Novartis remains the holder of the registration of these medicines and and will be responsible for their manufacture and supply. Glenmark will be responsible for exclusively promoting, commercializing and distributing these products in Brazil. This deal strengthened Glenmarks respiratory franchise and helped consolidate the companys position in this segment in Brazil. The strong growth rate recorded by the region was on account of the in-licensed products. The Mexico subsidiary also performed well in the year under review in constant currency. Also the Brazilian subsidiary partnered a set of brands to a leading pharmaceutical company, Hypera. The transaction was signed in the fourth quarter of the financial year but was closed in the month of April 2020.

GPL SPECIALTY/

INNOVATIVE R&D PIPELINE

RYALTRIS™

Ryaltris™ (olopatadine hydrochloride and mometasone furoate) Nasal Spray is the companys respiratory pipeline asset, and is currently under review with the U.S. Food and Drug Administration (FDA) as a treatment for seasonal allergic rhinitis in the USA. During the year under review, Glenmark and Hikma entered into an Exclusive Licensing Agreement for commercializing Ryaltris™ Seasonal Allergic Rhinitis Nasal Spray in the US, wherein Glenmark will be responsible for the continued development and regulatory approval of Ryaltris™, while Hikma will be responsible for the commercialization of Ryaltris™ in the US.

Besides the US deal, Glenmark has already signed licensing deals for commercializing Ryaltris™ in China, Australia, New Zealand and South Korea. Glenmark is also working to close a partnership deal for Ryaltris™ in various other markets including the EU. The company has already filed an application for Ryaltris™ approval in the European Union. Further in the last few months, Ryaltris™ has been approved in Cambodia, Uzbekistan, Namibia and South Africa. Also Ryaltris™ clinical trials in Russia have been completed and the subsidiary will shortly seek regulatory approval from the regulator. During the first quarter of FY 2019-20, the US FDA issued a Complete Response Letter (CRL) pertaining to the New Drug Application (NDA) for Ryaltris™. We continue to work with the agency to resolve the issues raised in the CRL. The CRL response is currently on track for submission shortly. We are in communication with the FDA and all deficiencies, except the facility clearance, are minor in nature and have been already addressed.

GBR 310

Glenmark announced positive results from a Phase 1 study that suggested similarity in pharmacokinetic, pharmacodynamic, safety and immunogenicity profiles between GBR 310, and the reference product, omalizumab, marketed in the US under the brand name Xolair. The company is in discussions with potential partners and is targeting to conclude a deal before initiating Phase 3 studies.

GRC 39815 (RORYT INHIBITOR)

GRC 39815 is a NCE currently being evaluated as an inhaled compound for the possible treatment of Chronic Obstructive Pulmonary Disorder (COPD). It is an inhibitor of the Retinoid-related Orphan Receptor gamma t (RORYt). The compound is currently in preclinical development and the company plans to initiate a Phase 1 study shortly.

GLENMARK LIFE SCIENCES

Glenmark Life Sciences primarily includes manufacturing and marketing of Active Pharmaceutical Ingredient (API) products across all major markets globally. It also includes captive sales (i.e. use of API by GPL for its own formulations).

For the year under review, external sales for Glenmark Life Sciences was at Rs. 10,239.17 Mn (USD 144.66 Mn) as against Rs. 9,493.11 Mn (USD 136.08 Mn), recording growth of 7.86% over the corresponding period last year.

GLS HAS THREE US FDA APPROVED API MANUFACTURING FACILITIES (ANKLESHWAR, DAHEJ AND MOHOL). IN JULY 2019, THE US FDA AND HEALTH CANADA JOINTLY INSPECTED THE ANKLESHWAR MANUFACTURING FACILITY OF GLS AND RATED IT ‘COMPLIANT

GLS has three US FDA approved API manufacturing facilities (Ankleshwar, Dahej and Mohol). In July 2019, the US FDA and Health Canada jointly inspected the Ankleshwar manufacturing facility of GLS. Subsequently the U.S. FDA issued the EIR for the facility and Health Canada has rated the facility as "Compliant."

Domestic and ROW regions led the growth for GLS, with both regions recording good growth over the corresponding period last year. The US business also revived in the year under review. The company also expanded its presence in the Japanese market. GLS continued to sustain its leadership position in products like Lercanidipine, Atovaquone, Perindopril, Olmesartan, and Aprepitant.

GLENMARK IS STRONGLY

Positioned to continue being a

MARKET LEADER IN RESPIRATORY, DERMATOLOGY AND ONCOLOGY, WHILE ALSO BRINGING UNIQUE SPECIALTY PRODUCTS TO MARKETS AROUND THE WORLD

The organization continues to look at opportunities in emerging markets and has begun seeding multiple products across the region. It has begun filing products in China viz. Milnacipran, Adapalene and Tadalafil. GLS has been working on strengthening the business with top formulation companies specifically in the EU region and continues to work with them on new launches.

OUTLOOK

Glenmarks overall business growth in the last year has been close to 7.8%, with most businesses and regions

GLENMARKS TIMELY SUCCESS IN in TRODUCING THE ORAL ANTIVIRAL FAVIPIRAVIR FOR COVID-19 PATIENTS IN INDIA IS PARTLY DUE TO THE API BUSINESS

performing well. Despite the last quarter Q4 seeing some challenges on account of COVID-19, Glenmark still succeeded in growing overall at about 8%. The India business continues to be a strong contributor to the companys growth and continues to outperform in India. A major business highlight of the last year was the launch of Remogliflozin, a novel anti-diabetic molecule in the SGLT2 class, which continues to perform exceedingly well in the market. Glenmarks consumer care business is also recording growth in terms of sales every year, through the launch of various products particularly in the area of dermatology. Going forward, the Europe business will continue to be a big contributor to the Glenmark business. Last year proved to be a challenging year for the US, largely due to pricing pressure. Some of Glenmarks key products were impacted by significant price erosion. However despite these hurdles, the US did well in terms of cash flow management and EBITDA margins. In the future, the Monroe plant is expected to be one of our biggest contributors to growing the US business.

As for the Rest of the World (ROW) markets, the company recorded moderate performance, though certain challenges may continue, particularly operating in the COVID-19 environment and given the currency impact. In the long term however, we expect to see Russia, Asia, Africa and the Middle East demonstrate strong growth for the company. The key highlight for the Latin America business has been the Novartis deal last year, which significantly transformed the Brazilian business. The API business has also performed well and continues to grow from strength to strength despite industry challenges.

Glenmarks timely success in introducing the oral antiviral Favipiravir for COVID-19 patients in India is in large part due to the API business. Looking ahead, Glenmark is strongly positioned to continue being a market leader in respiratory, dermatology and oncology, while also bringing unique specialty products to markets around the world. •

RISK MANAGEMENT

PRINCIPAL RISK FACTORS AND UNCERTAINTIES

Companys business, financial condition and results of operations are subject to certain risks and liabilities that may affect the Companys performance and ability to achieve its objectives. The factors that the Company believes could cause its actual results to differ materially from expected and historical results have been discussed hereunder. However, there are other risks and uncertainties that may affect the Companys performance and ability to achieve its objectives that are not currently known to the Company, or which are deemed immaterial.

The Company has implemented an ERM programme through which it reviews and assesses significant risks on a regular basis to help ensure that there is a system of internal controls in place. This system includes policies and procedures, communication and training programmes, supervision and monitoring and processes for escalating issues to the appropriate level of senior management. Such a system helps facilitate the Companys ability to respond appropriately to risks and to achieve the Companys objectives and helps ensure compliance with applicable laws, regulations and internal policies.

The principal risks and uncertainties that might affect the Companys business are identified below. The listing agreement with the stock exchanges mandates the identification, minimization and periodical review of these risks and uncertainties. However, it is not possible for the Company to implement controls to adequately respond to all the risks that it may face and there can be no complete assurance provided that the steps that the Company undertakes to address certain risks, including those listed below under "Mitigating activities include," will manage these risks effectively or at all. The principal risk factors and uncertainties mentioned herein have not been listed in order of their importance.

DELIVERING COMMERCIALLY SUCCESSFUL NEW PRODUCTS

RISK DESCRIPTION: RISK THAT R&D

will not deliver commercially

SUCCESSFUL NEw PRODUCTS

The Company operates in highly competitive markets globally and faces competition from local manufacturers. Significant product innovations, technological advancements or the intensification of price competition by competitors may materially and adversely affect the Companys revenues. The Company cannot always predict the timing or impact of competitive products or their potential impact on sales of the Companys products.

Continuous development of commercially viable new products as well as the development of additional uses for existing products is critical to the Companys ability to increase overall sales.

Developing new pharmaceutical products is investment intensive, having a longer gestation period with uncertain outcome. A new product candidate can fail at any stage of the development process and one or more late stage product candidates could fail to receive regulatory approval. New product candidates may appear promising in development but after significant investment of Companys economic and human resources, may fail to reach the market or may have only limited commercial success. This could be, for example, as a result of efficacy or safety concerns, an inability to obtain necessary regulatory approvals, difficulty in manufacturing or excessive manufacturing costs, erosion of patent coverage as a result of a lengthy development period, infringement of patents or other intellectual property rights of others or an inability to differentiate the product adequately from those with which it competes.

Furthermore, health authorities have increased their focus on safety and product differentiation when assessing the benefit/ risk balance of drugs, which has made it more difficult for pharmaceutical products to gain regulatory approval. There is also increasing pressure on healthcare budgets as a result of the increase in the average age and absolute population in developed and developing markets. A failure to develop commercially successful products or to develop additional uses for existing products for any of these reasons could materially and adversely affect the Companys revenues.

MITIGATING ACTiViTiES iNCLUDE

The Company instead of following the traditional hierarchical R&D business model has its R&D business model based on smaller units in an attempt to encourage greater entrepreneurial and accountability for our scientists, which the Company believes creates an environment that is more conducive to the development of commercially viable new products and the development of additional uses for existing products.

In addition, the Company plans to continue collaborating with other pharmaceutical companies, which the Company believes enables sharing the risk, availability of technical expertise and decrease the amount of time it takes to develop products.

The Company reviews both product development and external collaborations and targets are selected after exhaustive screening and research across various parameters. The Company progressively evaluates both the scientific and financial considerations for a product as well as the potential benefits/risks associated with the continued development of the assets.

ensuring PRODUCT QUALiTY

Risk description: Risk to the patient or consumer as a result of the failure by the Company, its contractors or suppliers to comply with good manufacturing practice regulations in commercial manufacturing or through inadequate governance of quality through product development Patients, consumers and healthcare professionals trust the quality of our products at the point of use. A failure to ensure product quality is an enterprise risk which is applicable across all of the Company s global operations.

A failure to ensure product quality could have far reaching implications in terms of the health of our patients and customers, reputation, regulatory, legal, and financial consequences for the Company.

The quality of the product may be influenced by many factors including product and process understanding, consistency of manufacturing components, compliance with current Good Manufacturing Practice (cGMP), accuracy of labelling, reliability and security of the supply chain, and the embodiment of an overarching quality culture.

The internal and external environment continues to evolve as new products, new markets and new legislation are introduced. Particular attention is currently being focused on security of supply, product standards and sound distribution practices.

New cGMP legislation is being introduced in many emerging markets including China and Brazil. On the inspection front, pharmaceutical inspectors are increasingly looking for global application of corrective actions beyond the original site of inspection.

MITIGATING ACTIVITIES INCLUDE

The Company has adopted a single Quality Management System (QMS) that defines Corporate quality standards and systems for the business units associated with Pharmaceuticals products and R&D investigational materials. The QMS has a broad scope, covering the end to end supply chain from starting materials to distributed product, and is applicable throughout the complete life cycle of products from R&D to mature commercial supply.

The OMS is periodically updated based on experience, new regulation and improved scientific understanding to seek to ensure operations comply with cGMP requirements globally, and supports the delivery of consistent and reliable products.

A team of Quality and Compliance professionals are aligned with each business unit to provide oversight and assist the delivery of quality performance and operational compliance. Management oversight of those activities is accomplished through a hierarchy of Quality Council Meetings. Staff are trained to seek to assure that standards, as well as expected behaviours based on the Companys values, are followed.

The Companys Head -Corporate Quality Assurance oversees the activities of the Company Quality Council which serves as a forum to escalate emerging risks, share experiences of handling quality issues from all business units and ensure that the learnings are assessed and deployed across the Company.

The Company has implemented a risk-based approach to assessing and managing its third-party suppliers that provide materials used in finished products. Contract manufacturers making Company products are audited to help assure expected standards are met.

SUPPLY CHAIN CONTINUITY

RISK DESCRIPTION: RISK OF INTERRUPTION OF PRODUCT SUPPLY

Supply chain operations are subject to review and approval of various regulatory agencies that effectively provide our license to operate. The manufacture of pharmaceutical products and their constituent materials requires compliance with good manufacturing practice regulations. The Companys manufacturing sites are subject to review and approval by the FDA and other regulatory agencies.

Compliance failure by the Companys manufacturing facilities or by suppliers of key services and materials could lead to product recalls and seizures, interruption of production, delays in the approval of new products, and revoking of license to operate pending resolution of manufacturing issues. For example, non-compliance with cGMP requirements for US supply could ultimately result, in the most severe circumstances, in fines and disgorgement of profits. Any interruption of supply or the incurring of fines or disgorgement impacting significant products or markets could materially and adversely affect the Companys revenues.

Materials and services provided by third-party suppliers are necessary for the commercial production of our products, including specialty chemicals, commodities and components necessary for the manufacture and packaging of many of the Companys pharmaceutical products.

Some of the third party services procured, for example, services provided by clinical research organisations to support development of key products, are very important to the operation of the Companys businesses.

The clinical trial processes should strictly adhere to GCP standards in terms of quality, safety, procedures and other standards. Clinical trial service provider may lack in adhering to GCP standards.

Although the Company undertakes business continuity planning, single sourcing for certain components, bulk active materials, finished products, and services creates a risk of failure of supply in the event of regulatory noncompliance or physical disruption at the manufacturing sites.

The failure of a small number of single-source, third- party suppliers or service providers to fulfill their contractual obligations in a timely manner or as a result of regulatory non-compliance or physical disruption at the manufacturing sites may result in delays or service interruptions, which may materially and adversely affect the Companys revenues.

MITIGATING ACTIVITIES INCLUDE

The Supply Chain model of the Company is designed to help ensure the supply, quality and security of the Companys products and the Company closely monitors the delivery of our products with the intent of ensuring that our customers have the medicines and products they need.

Safety stocks and backup supply arrangements for high revenue and critical products are in place to help mitigate this risk. In addition, the standing of manufacturing external suppliers is also routinely monitored in order to identify and manage supply base risks.

The Company selects Clinical Trial agencies which are of repute and follows a process of regular monitoring and auditing of the clinical trial sites.

Where practical, dependencies on single sources of critical items are removed by developing alternative sources. In cases where dual sourcing is not possible, an inventory strategy has been developed to protect the supply chain from unanticipated disruptions. The Company has set up new manufacturing facilities/ upgraded the existing facilities which can continue the manufacturing operations in case of interruption of operations of a certain facility. The Company while filing for product approvals with various regulatory authorities registers multiple manufacturing sites.

PRODUCT PRICING

RiSK DESCRiPTiON: RiSK THAT THE COMPANY MAY FAiL TO SECURE ADEQUATE PRiCiNG FOR iTS PRODUCTS OR ExISTING Regimes OF

pricing laws and regulations

BECOME MORE UNFAvOURABLE

Pharmaceutical products are subject to price controls or pressures and other restrictions in many markets, around the world. Some governments intervene directly in setting prices. For example, in India, the government enforces price control through bringing the products under DPCO. In addition, in some markets, major purchasers of pharmaceutical products have the economic power to exert substantial pressure on prices or the terms of access to formularies. Difficult economic conditions, particularly in the major markets in Europe, could increase the pricing pressures on the Companys pharmaceutical products.

Some markets follow the reference pricing for fixation of the price of the products. The price depends on the home market price or the price where the product was launched. The Company cannot accurately predict whether existing controls, pressures or restrictions will increase or whether new controls, pressures or restrictions will be introduced. Such measures may materially and adversely affect the Companys ability to introduce new products profitably and its financial results.

mitigating activities include

The Company plans to initiate measures to reduce costs, improve efficiencies and reallocate resources to support identified growth opportunities in these markets. The Company is also continuously evaluating further strategic options to ensure the development of new capabilities and the ability to maximise the value of the Companys current and future portfolio.

The Company makes conscious efforts to launch new value added products with some differentiation i.e. improvised products which can fetch better pricing.

COMPLIANCE with RELEvANT LAWS AND REGULATIONS

Risk DESCRIPTION: Risks ARISING FROM NON- COMPLIANCE WITH LAWS AND REGULATIONS AFFECTING THE COMPANY

The Companys global operations subjects it to compliance with a broad range of laws and regulatory controls on the development, manufacturing, testing, approval, distribution and marketing of its pharmaceutical products that affect not only the cost of product development but also the time required to reach the market and the uncertainty of successfully doing so. The Company operates globally in complex legal and regulatory environments that often vary among jurisdictions.

As those rules and regulations change or as governmental interpretation of those rules and regulations evolve, the potential exists for conduct of the Company to be called into question.

Historically, there have been more stringent regulatory requirements in developed markets. However, in recent years, emerging markets have been increasing their regulatory expectations based on their own national interpretations of US and EU standards. Stricter regulatory controls heighten the risk of changes in product profile or withdrawal by regulators on the basis of post-approval concerns over product safety, which could reduce revenues and result in product recalls and product liability lawsuits.

There is also greater regulatory scrutiny, on advertising and promotion and in particular on direct-to-consumer advertising.

mitigating activities include

The Companys internal control framework is designed to help ensure we adhere to legal and regulatory requirements through continuous evaluation. We are in the process of further strengthening the framework in order to meet the evolving regulations.

The Company has implemented numerous mechanisms to monitor and support our compliance with legal and regulatory requirements. The following represent some examples of these mechanisms.

The Companys head of Regulatory oversees the activities of the Regulatory Team which includes promoting compliance with regulatory requirements and company wide standards, making regulatory services more efficient and agile, and further aligning regulatory capabilities with business needs at global and local levels.

The Companys senior management oversees the system of principles, policies and accountabilities to help ensure the Company applies the generally recognized principles of good medical science, integrity and ethics to the discovery, development and marketing of products. This includes reinforcing the Companys commitment to respecting a clear distinction between scientific engagement on the one hand, and product promotion on the other.

CHANGING GLOBAL POLiTiCAL AND ECONOMiC CONDITIONS

RISK DESCRIPTION: RISK OF EXPOSURE TO VARIOUS EXTERNAL POLITICAL AND ECONOMIC Conditions, AS wELL AS NATURAL

disaster that may impact the COMPANYS PERFORMANCE AND Ability TO ACHIEVE ITS OBJECTIVES

Many of the worlds largest economies, including the major markets in which the Company operates and financial institutions have recently faced extreme financial difficulty, including a decline in asset prices, liquidity problems and limited availability of credit. Due to the economic uncertainty in emerging markets there has been a huge devaluation of the currency in certain geographies in which the Company operates. Certain geographies have imposed restrictions on the imports as well as the remittances outside the country. In addition, the Company operates across a wide range of markets and these markets have the potential to encounter natural disasters that could impact business operations.

The economic conditions may also adversely affect the ability of our distributors, customers, suppliers and service providers to pay for our products, or otherwise to buy necessary inventory or raw materials, and to perform their obligations under agreements with the Company, which could disrupt our operations and negatively impact our business and cash flow. Some of our distributors, customers, suppliers and service providers may be unable to pay their bills in a timely manner, or may even become insolvent, which could also negatively impact our business and results of operations. These risks may be elevated with respect to our interactions with third parties with substantial operations in countries where current economic conditions are the most severe, particularly where such third parties are themselves exposed to risk from business interactions directly with fiscally-challenged government payers.

Such continued economic weakness and uncertainty could materially and adversely affect the Companys revenues, results of operations and financial condition. The Companys businesses may be particularly sensitive to declines in consumer or government spending. In addition, further or renewed declines in asset prices may result in a lower return on the Companys financial investments.

The Company has no control over changes in inflation and interest rates, foreign currency exchange rates and controls or other economic factors affecting its businesses or the possibility of political unrest, legal and regulatory changes or nationalisation in jurisdictions in which the Company operates.

MITIGATING ACTIVITIES INCLUDE

The extent of the Companys portfolio and geographic footprint assist in mitigating our exposure to any specific localised risk to a certain degree. External uncertainties are carefully considered when developing strategy and reviewing performance. The Company effectively manages its currency risk exposure.

COMPLIANCE WiTH FiNANCiAL REPORTiNG AND DISCLOSURE REQUIREMENTS

RiSK DESCRIPTION: RISK ASSOCIATED

with financial reporting and

DiSCLOSURE AND CHANGES TO accounting STANDARDS

New or revised accounting standards, rules and interpretations issued from time to time under the Indian Accounting Standards and IFRS could result in changes to the recognition of income and expense that may materially and adversely affect the Companys financial results.

Stock exchanges review the financial statements of listed companies for compliance with accounting and regulatory requirements. The Company believes that it complies with the appropriate regulatory requirements concerning its financial statements and disclosures.

mitigating activities include

The Company keeps up to date with the latest developments for financial reporting requirements by working with the external auditor and other advisors to ensure adherence to relevant reporting requirements.

compliance with tax law

risk description: RISk THAT AS THE COMPANYS BUSINESS MODELS AND TAX LAW AND PRACTICE CHANGE OVER TIME, THE COMPANYS

existing tax policies AND

OPERATING MODELS ARE NO LONGER

appropriate

The Companys effective tax rate is driven by rates of tax in jurisdictions that are both higher and lower than that applied in India. In India, weighted deduction is applicable for R & D and tax concessions are available for setting up manufacturing units in specified zones.

Furthermore, given the scale and international nature of the Companys operations, intra-Company transfer pricing is an inherent tax risk as it is for other international businesses. Changes in tax laws or in their application with respect to matters such as transfer pricing, foreign dividends, controlled companies,

R&D tax credits, taxation of intellectual property or a restriction in tax relief allowed on the interest on intra Company debt, could impact the Companys effective tax rate and materially and adversely affect its financial results.

The tax charge included in the financial statements is the Companys best estimate of its tax liability, but until such time as audits by tax authorities are concluded, there is a degree of uncertainty regarding the final tax liability for the period. The Companys policy is to submit tax returns within the statutory time limits and engage with tax authorities to ensure that the Companys tax affairs are as current as possible, and that any differences in the interpretation of tax legislation and regulation are resolved as quickly as possible. In exceptional cases where matters cannot be settled by agreement with tax authorities, the Company may have to resolve disputes through formal appeals or other proceedings.

mitigating activities include

The Company continuously monitors the changes in the tax policies in the key jurisdictions to deal proactively with any potential future changes in tax law.

Tax risk is managed by a set of policies and procedures to ensure consistency and compliance with tax legislation. The Company engages advisors and legal counsel to review tax legislation and applicability to the Company. The Company has attempted to mitigate the risk of more aggressive audits by being as up to date as possible with our tax affairs and working in real time with tax authorities where possible.

compliance with anti-bribery AND corruption LEGISLATiON

RISK DESCRiPTiON: RISK OF FAILiNG TO CREATE A CORPORATE ENVIRONMENT OPPOSED TO CORRUPTION OR FAiLiNG TO INSTiLL BUSiNESS practices THAT PREVENT CORRUPTION AND COMPLY wITH

anti- corruption legislation

The Companys international operations may give rise to possible claims of bribery and corruption. The Company operates in a number of markets where the corruption risk has been identified as high. Failure to

comply with applicable legislation such as the US Foreign Corrupt Practices Act and the UK Bribery Act, or similar legislation in other countries, could lead to action against the Company.

This could potentially include fines, prosecution, debarment from public procurement and reputational damage, all of which could materially and adversely affect the Companys revenues.

MITIGATING ACTiViTiES iNCLUDE

The Company has taken steps to develop a policy on Anti Bribery/Anti- Corruption (ABAC). The policy would prescribe ongoing training, and detailed requirements in respect to third party due diligence, contracting and oversight.

potential litigation

risk DESCRIPTION: RISK OF SUBSTANTIAL ADVERSE OUTCOME OF LITIGATION AND GOVERNMENT INVESTIGATIONS

The Company operates globally in complex legal and regulatory environments that often vary among

jurisdictions. The failure to comply with applicable laws, rules and regulations in these jurisdictions may result in legal proceedings. As those rules and regulations change or as governmental interpretation of those rules and regulations evolve, prior conduct may be called into question. Also, notwithstanding the efforts the Company makes to determine the safety of its products through regulated clinical trials, unanticipated side effects may become evident only when the drugs are introduced into the marketplace.

PRODUCT LIABILITY LITIGATION

Pre-clinical and clinical trials are conducted during the development of potential pharmaceutical to determine the safety and efficacy of the products for use by humans following approval by regulatory authorities. Notwithstanding the efforts the Company makes to determine the safety of its products through regulated dinical trials, unanticipated side effects may become evident only when drugs are widely introduced into the marketplace.

In other instances, third-parties may perform analyses of published clinical trial results which, although not necessarily accurate or meaningful, may raise questions regarding the safety of pharmaceutical products which may be publicised by the media and may result in product liability claims. Claims for pain and suffering and punitive damages are frequently asserted in product liability actions and, if allowed, can represent potentially open ended exposure and thus could materially and adversely affect the Companys financial results.

In some cases, the Company may voluntarily cease marketing a product or face declining sales based on concerns about efficacy or safety, even in the absence of regulatory action.

SALES AND MARKETING LITIGATION

The Company operates globally in complex legal and regulatory environments that often vary among jurisdictions. The failure to comply with applicable laws, rules and regulations in these jurisdictions may result in civil and criminal legal proceedings brought against the Company.

MITIGATING ACTiviTIES INCLUDE

The Company attempt s to mitigate the risks inherent in drug development through conscientious approaches to product development and distribution that focus on patient safety as an overriding priority, and that includes accurate documentation of the exercise of careful medical governance.

The Company has constructed a system of medical governance to help ensure the safety and efficacy of the drugs it produces. The Companys Chief Medical Officer (CMO) is responsible for medical governance for the Company. Safeguarding human subjects in Company clinical trials and patients who take Company products is of paramount importance, and the CMO has the authoritative role for evaluating and addressing matters of human safety. Senior physicians and representatives of supportive functions, as well as the lawyer who leads legal support for Pharmaceuticals R&D, is an integral component of the system.

In addition to the medical governance framework within the Company as described above, the Company uses

several mechanisms to foster the early resolution of new disputes as they arise and reduce the number of such disputes that actually proceed to litigation.

The Company formalised processes for proactive risk/ dispute management. The programme aims to drive a more standardised practice to the early resolution of disputes and consistent use across the organisation, and establishes a specific vocabulary and identity for the concept of early analysis and resolution, thereby accelerating the desired culture shift. The Legal team also routinely trains the Companys employees on strategies to attempt to minimize the Companys litigation exposure.

MANAGING ENViRONMENTAL, HEALTH, SAFETY AND SUSTAINABILITY COMPLIANCE

RISK Description: Risk of

ineffectively managing environment, health, safety, and sustainability (‘ehss) objectives AND requirements

The environmental laws of various jurisdictions impose actual and potential obligations on the Company to remediate contaminated sites.

Failure to manage properly the environmental risks could result in additional remedial costs that may materially and adversely affect the Companys financial results.

The impact of this risk, should the risk occur, could lead to significant harm to people, the environment and communities in which the Company operates and the failure to meet stakeholder expectations and regulatory requirements.

MITIGATING ACTiviTIEs INCLUDE

Management of EHSS risk is fundamental to the Companys performance and reputation. The Company is committed to appropriately managing EHSS risk and has embedded its importance into its operations.

The Company operates rigorous procedures to seek to eliminate hazards where practicable and protect employees health and well-being,but the right culture is our essential starting point. Our employment practices are designed to create a work place culture in which all Company employees feel valued, respected, empowered and inspired to achieve our goals.

The Companys continuing efforts to improve environmental sustainability have reduced the Companys water consumption, hazardous waste, and energy consumption. The Company actively manages our environmental remediation obligations to ensure practices are environmentally sustainable and compliant.

information technology

risk description: CYBER sECURITY AND DATA PRivACY REGULATioNs

A failure of Information Technology (IT) systems due to malicious attacks and/or non-compliance with data privacy laws can potentially lead to financial loss, business disruption and/or damage to our reputation.

MITIGATING ACTiviTIEs INCLUDE

• Foster a risk-aware culture that can anticipate and prevent attacks, and where necessary, effectively respond to security breaches

• Maintain strong cyber security infrastructure

• Compliance with data privacy law requirements through:

o Performing gap analysis to identify existing weaknesses o Policy and procedure roll-outs

Creating awareness amongst employees on applicable privacy requirements

• Securing suitable insurance cover

revenue concentration

risk description: risk of product/ revenue concentration

A few products may account for nearly 2/3rd of the revenue of particular regions. This may lead to decline in the revenue on account of declining phase in the product life cycle. In some geographical regions, the substantial revenue may be generated from a particular region. Failure to have adequate market penetration or early movers advantage may affect long term growth and market share. The regional needs for products of a particular therapeutic segment/ category varies across geographies. The product development strategy may not be in synergy with the regional needs or may not be able to deliver the desired product in timely manner so as to replace the products at the end of the life cycle or enable the company to penetrate new markets. The risk of not having a long term product pipeline will lead to not being able to replace/ introduce new products to counter the risk of fall in the market share of ageing products as a result of the introduction of generic versions after the expiry of patents.

MITIGATING ACTiViTiES iNCLUDE

The Company has a project management team which continuously monitors the short-term and long- terms needs of various geographies. Based on the research and interactions with the regional markets, the product development strategy is formulated. The product pipeline is built up based on a long-term vision of 3-5 years. The business plans are drawn up with an in-built mechanism to de-risk the concentration of revenues from a few customers and regions.

risk description: COViD-19

The world has been witnessing an unprecedented crisis as a result of COVID-19. In todays challenging times for the world in general and our nation in particular, the Company focuses on ensuring the safety of its employees and all other stakeholders. The saving of lives and protecting livelihood both are of utmost importance to the Company.

The Company has created a group of senior management team to monitor the events happening in the external environment and take suitable preventive and corrective measures to ensure continued safety of employees. The Company has taken several steps aimed at ensuring the safety, which include work from home, social distancing in the office premises, sanitization of our office premises; plant locations and Company vehicles, thermal screening for employees working at sites, providing sanitizers, masks, gloves etc. to employees.