gufic bioscience share price Management discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

The pharmaceutical industry engages in researching, developing, producing and marketing licensed drugs for medicinal use. Through its offerings, it provides relief and cures for a wide range of medical conditions to people worldwide while also contributing significantly to the economic performance of many nations. These distinctive attributes have made the industry a subject of intense debate, criticism and admiration.

As a global industry, its marketing and distribution approaches vary in different countries. Although, a pharmaceutical product might be available in multiple markets, its registration in each country is a nation-specific process. Regulatory systems in individual nations generally share the same core principles of evaluating quality, safety and efficacy. However, over time, the specific technical requirements have diverged, leading the industry to duplicate numerous time-consuming and costly testing procedures to gain international market access for new products.

GLOBAL PHARMACEUTICAL INDUSTRY

In the year 2022, the global economy encountered challenges as inflation surged due to increased energy costs and supply chain disruptions arising from the Russia-Ukraine conflict and COVID-19 lockdowns in China. Major developed economies experienced a slowdown, and central banks faced difficulties in managing inflation even after raising interest rates. However, despite facing inflation, energy uncertainties and unforeseen natural calamities, the world economy demonstrated remarkable resilience and likely exceeded earlier, more pessimistic expectations in terms of its performance.

The biopharmaceutical industry has displayed indications of transitioning into a phase of operational stability in the post-pandemic era, following disruptions over the past three years. The outlook for global spending on medicines has become clearer as the uncertainties during the COVID-19 pandemic have given way to more predictable challenges. The life sciences sector, encompassing pharmaceutical, biotech and med-tech industries, is currently witnessing strong growth. To sustain this growth trajectory, companies are realigning their portfolio strategies through acquisitions, divesting non-core assets, increasing investments in Research & Development (R&D), and adopting digital and data technologies.

According to the United Nations World Population Prospects, the global population is projected to surpass 9.3 billion by 2050, with approximately 21% of that population expected to be aged 60 and above. Alongside aging and population growth, the expansion of purchasing power and access to quality healthcare and pharmaceuticals for low and middle-class families worldwide is also contributing to the growth of the global pharmaceutical industry. Additionally, the pharmaceutical companies increasing focus on tapping into the market for rare and specialty diseases is a significant driving factor for this growth.

The industrys growth is further fuelled by advancements in areas like advanced biologics, nucleic acid therapeutics, cell therapies, and bio-electronics & implantable technologies. These innovations have attracted investments from non-pharmaceutical companies, such as Facebook, Qualcomm and others, leading to further expansion of the global pharmaceutical industry.

The growth outlook for the worldwide pharmaceutical sector is anticipated to be influenced by the adoption of cost control measures and stricter regulations imposed by governments in crucial markets. As a consequence of the recent growth deceleration, pharmaceutical companies are compelled to curtail their expenditures on research and development (R&D), a trend that is projected to impede the expansion of the global pharmaceutical market. This is particularly impactful as revenues from new drug sales constitute a substantial portion of pharmaceutical firms income due to the exclusivity period for these drugs. Furthermore, the generic pharmaceutical market is confronting diminishing returns on investment due to price deterioration in key markets. Consequently, numerous enterprises are actively exploring alternate avenues and markets to sustain their growth.

It is anticipated that the total spending and global demand for medicines will increase over the next five years to approximately US $1.9 trillion by 2027. The underlying growth rate of 3-6% in spending will be propelled by the introduction of novel drugs and the broader adoption of recently launched brands. Despite efforts by payers to limit their budgets and the influence of more economical alternatives, this growth is anticipated. The ongoing influence of COVID-19 on pharmaceutical markets worldwide is expected to persist, contributing to the expansion of the pharmaceutical market until 2027, primarily attributed to the proliferation of vaccines. Nevertheless, the years ahead are fraught with significant uncertainties as the global COVID-19 pandemic transitions into a new phase where vaccines and treatments are accessible but inconsistently utilized.

The impact on global pharmaceutical industries in the recent years can be summarised as under :

Rising Medication Utilization: As per IQVIA Global Use of Medicine 2023, the consumption of medications, as quantified through defined daily doses, experienced a 36% upswing in the past ten years. This surge can be attributed to improved availability of medicines. Nonetheless, this growth is predicted to decelerate until 2027, resulting in a cumulative intake of over 3.4 trillion doses, marking an approximately 8% rise from the 2022 figures. The regions anticipated to witness the most substantial growth in medication consumption are Latin America, Asia and Africa. This expansion will stem from a combination of population increase and enhanced medicinal access. Conversely, North America and Europe are expected to undergo minimal growth. Disparities in per capita medication consumption are evident across different regions, with Japan and Western Europe surpassing most other areas by more than twofold.

Expenditure and Expansion Across Regions: As per IQVIA Global Use of Medicine 2023, the global pharmaceutical market is anticipated to exhibit a Compound Annual Growth Rate (CAGR) ranging from 3% to 6% until 2027, resulting in a valuation of approximately $1.9 trillion. Distinctive trends are projected to emerge in different regions. Developed economies are predicted to sustain relatively consistent growth rates, as the introduction of new products counterbalances patent expirations. On the other hand, Latin America, Eastern Europe and certain parts of Asia are poised for robust growth, driven by increased volume and the wider adoption of innovative medications.

Impact of COVID-19 on the use of medicines: The influence of the COVID-19 pandemic on pharmaceutical sectors remains ongoing and is anticipated to result in a net expansion of approximately $500 billion in the cumulative pharmaceutical market from 2020 to 2027, primarily attributed to the impact of vaccines. Disruptions in the demand for numerous other medications due to delayed diagnoses continue to unfold, yet theres a prediction of the global markets growth returning to the levels projected prior to the pandemic by 2024.

Across all regions worldwide, initial vaccination rates have exceeded previously anticipated figures for the first wave of vaccinations. However, the adoption of booster doses has been slower. This situation introduces significant uncertainty regarding the pandemics trajectory and the potential risks associated with the resurgence of infections, particularly in areas with lower rates of immunization and booster utilisation. Growth in spending on specialty medicines: As per studies, specialty medicines will represent about 43% of global spending in 2027 and 56% of total spending in developed markets. Global spending on cancer drugs is expected to reach $370 billion by 2027, with growth accelerating from the launch and use of novel drugs and limited new biosimilar impact. The growth in Immunology spending will slow to 3-6% through 2027 due to price reductions associated with biosimilar competition as volume growth continues at 12% annually. New therapies for rare neurological disorders, Alzheimers and migraines are expected to drive spending growth in neurology.

Biotech spending: Biotech will represent 35% of spending globally and will include both breakthrough cell and gene therapies, as well as a maturing biosimilar segment. Major advances are expected to continue, especially in oncology and immunology. The outlook for next-generation bio therapeutics includes a definitively uncertain range of clinical and commercial successes .

1 An early transition from prescription-only (Rx) to over-the-counter (OTC) availability is a prominent development within the dermatology drugs market. In the past, the conversion from Rx to OTC status typically occurred close to or after the patent expiration of a drug. However, forward-looking companies are now exploring the possibility of making this switch well in advance of the drugs patent expiry. This strategic approach enables manufacturers to effectively tap into market opportunities for their product. Moreover, early Rx-to-OTC switching offers an additional advantage by facilitating the recovery of all expenses incurred during the products development by the company.

INDIAN PHARMA INDUSTRY AN OVERVIEW

The Indian pharmaceutical industry ranks third globally in pharmaceutical production by volume and is known for its generic medicines and low-cost vaccines. Major segments of Indian Pharmaceutical Industry include generic drugs, OTC medicines, bulk drugs, vaccines, contract research & manufacturing, biosimilar and biologics. India is one of the biggest suppliers of low-cost vaccines in the world. India accounts for 60 percent of global vaccine production, contributing 40 to 70 percent of the WHO demand for Diphtheria, Tetanus and Pertussis (DPT) and Bacillus Calmette Guerin (BCG) vaccines and 90 percent of the WHO demand for the measles vaccine. There are 500 API manufacturers contributing about 8% in the global API Industry. India is the largest supplier of generic medicines. It manufactures about 60,000 different generic brands across 60 therapeutic categories and accounts for 20% of the global supply of generics. Indian pharmaceutical industry plays significant role globally, by supplying affordable and low-cost generic drugs to millions of people across the globe. The sector offers lower cost without compromising on quality, as reflected by the fact that India has the highest number of United States Food and Drug Administration (USFDA) approved pharmaceutical plants outside the US and also a significant number of World Health Organization (WHO) Good Manufacturing Practices(GMP)-compliant plants as well as plants approved by regulatory authority of other countries.

As per IQVIA Indian Pharmaceutical Market Annual Report 2022, the Indian Pharma Industry (IPM) has reflected a growth of 7% in the year 2022 with overall IPM market size at Rs. 1.94 Crs and the growth in sales value was recorded at 7%, the Chronic therapies grew by 9% whereas Acute therapies grew by 5%. Further, the relative performance of Indian Pharma companies grew faster than the MNCs in 2022. The number of new launches have increased by 2% as compared to last year. According to a recent EY FICCI report, as there has been a growing consensus over providing new innovative therapies to patients, IPM is estimated to touch $130 billion in value by the end of 2030. India being the largest provider of generic medicines globally, occupying a 20% share in global supply by volume, supplying 62% of Global Vaccine demand is a prominent and rapidly growing presence in the global pharmaceuticals industry. India ranks 3rd worldwide for production by volume and 14th by value. India is home to more than 3,000 pharma companies with a strong network of over 10,500 manufacturing facilities offering over 60,000 generic brands across 60 therapeutic categories. India has the highest number of US-FDA compliant Pharma plants outside of USA and its API industry is third largest in the world, with 57% of APIs on the WHO. 3 As per recent study by E&Y, the IPM has grown at a compounded growth rate of (CAGR) of ~11% in the domestic market and ~16% in exports over the last two decades. While the domestic market has grown at a similar pace to the gross domestic product (GDP), the overall growth has been driven by the industrys leadership in supplying generic formulations to markets across the globe.

OPPORTUNITIES AND THREATS:

Growth Drivers for Indian Pharma Industry Cost Efficiency in Production

The Indian pharmaceutical sector occupies a robust position in global production volumes, contributing approximately 10% of the worlds output, while its global value share stands at around 2.4%. This dominant position is attributed to the combination of economical production costs and the proficient scientific and technical expertise of its workforce. Indias drug manufacturing expenses are among the most competitive on a global scale.

Patent cliff

Patent expiry allows the generic drugs to penetrate in the market and diversify product offerings. As per recent studies, it is estimated that over the next 3-4 years till 2026, the patented products worth of about USD 240 billion are expected to go off patent. This provides a large opportunity to Indian generic formulation companies. Many of the Indian pharma companies are already working to develop the generic version of patented products to exploit the upcoming opportunity. It is expected that Indian pharma companies might get an opportunity worth around USD 5-6 billion due to patent expiry in next 4-5 years.

Shifting Disease Profile Presents Opportunities

The disease profile in India has undergone a significant transformation over the years. The share of communicable, maternal, neonatal and nutritional diseases decreased from 53.6% in 1990 to 27.5% in 2016, while non-communicable diseases increased from 37.9% to 61.8% during the same period. This shift highlights a change in disease patterns, providing ample scope for healthcare services and the pharmaceutical industry. Non-communicable diseases typically demand extended healthcare services, fostering increased demand for treatments and medicines.

Foreign Investment

As per Indias Consolidated FDI Policy, foreign direct investment in the pharmaceutical sector in greenfield (new) projects is permitted up to 100% without the approval of the Department of Pharmaceuticals (the “DoP”). Separately, FDI up to 100% is permitted for the manufacturing of medical devices for both greenfield and brownfield projects without the approval of the DoP.

Increase in Per Capita Income

The per capita income of India is on an increase which paves the way for more demand of healthcare services as a rise in per capita income increases the ability of population to afford various expenses. This in turn, supports the need of quality medical care that comes at a relatively higher price. Indias per capita GDP increased in each of the years during FY-19 to FY-23 on y-o-y basis and grew at a CAGR of 2.3% during this period.

Surge in Healthcare Insurance Market

The prevalence of health insurance spurs demand for healthcare services, as policyholders pay premiums that are later reimbursed by insurers for necessary medical treatments. This coverage alleviates the financial burden of healthcare expenses, fostering demand for medical services. The rise in the health insurance sector is driven by factors like the Covid-19 pandemic, evolving lifestyles, and the evolving disease landscape. The health insurance market observed robust growth, with premiums increasing at a healthy CAGR of 19.2% from FY-19 to FY-23.

Challenges faced by Indian Pharma Industry Price Regulation

The Indian pharmaceutical sector contends with price control challenges, particularly concerning drugs listed on the national essential medicines roster. The government establishes and regulates the prices and inclusion criteria for these drugs. This regulatory environment limits the industrys capacity to allocate resources towards Research and Development (R&D) initiatives. Recently, Indias drug pricing authority sanctioned a 12.1% price increase for scheduled drugs, representing the most significant price hike allowed in several years. This adjustment is anticipated to offer a degree of profitability support to the pharmaceutical sector.

Relatively Modest Research & Development (R&D) Investments

The leading Indian pharmaceutical companies collective R&D investments, as a percentage of sales, consistently hovered between 7.1% and 7.9% from fiscal year FY-19 to FY-23. This comparatively lower allocation towards R&D activities stands in contrast to the investment practices of their international counterparts.

High Reliance on China with respect to Pharma Inputs

Indias reliance on imported Active Pharmaceutical Ingredients (APIs) or bulk drugs is significant. Over 60% of APIs are procured from foreign sources, with certain specific APIs exhibiting import dependency rates of 80% to 90%. API and bulk drugs serve as foundational components used in formulating pharmaceutical products that generate the desired therapeutic effects within the human body.

GOVERNMENT INITIATIVES

The Government of India has introduced various measures to foster growth within the pharmaceutical and healthcare sector in the country. Some of these initiatives include :

In May 2022, the Union Government sanctioned grants for five new medical colleges in Gujarat, allocating 190 crore (US$ 23.78 million) for each college. These institutions are slated to be established in Navsari, Porbandar, Rajpipla, Godhra and Morbi.

In July 2022, the World Bank granted approval for a substantial US$ 1 billion loan dedicated to Indias Pradhan Mantri Ayushman Bharat Health Infrastructure Mission.

To promote medical tourism within the nation, the Indian government is extending the e-medical visa facility to citizens hailing from 156 countries.

Furthermore, within the framework of the Union Budget for 2023-2024, the Government unveiled fresh programs and objectives to continue spearheading advancements in the pharmaceutical sector:

Launching a new initiative to foster research and innovation within the pharmaceutical field, with a particular focus on priority areas of health.

Initiating the establishment of 157 new nursing colleges and dedicated multi-disciplinary courses tailored for medical devices. This proactive measure seeks to address the prevailingscarcity of qualified medical personnel, catering to the escalating demands of the sector.

Demonstrating its commitment to healthcare, the Government has increased the allocation to the Ministry of Health and Family Welfare by 12.8%, amounting to 86,175 crores. Additionally, an extra allotment of 3,160 crores has been directed towards the Department of Pharmaceuticals.

COMPANY OVERVIEW

Gufic Biosciences Limited (“Gufic”) operates as a pharmaceutical enterprise on a global scale, delivering comprehensive pharmaceutical services to its clientele. The Company boasts a diverse collection of pharmaceutical offerings and serves as a one-stop solution provider across both domestic and international markets through an extensive distribution network. It is amongst the top 100 Pharmaceutical companies in India.

Gufic is one of the largest manufacturers of Lyophilized injections in India, boasting a fully automated lyophilisation plant at Navsari, Gujarat. These lyophilized products span various therapeutic areas, including Antibiotics, Antifungals, Cardiac medications, Infertility treatments, Antiviral solutions and proton-pump inhibitors (PPIs).

The Companys strategic focus extends globally, concentrating on key markets such as India, Germany, Switzerland, South Africa, Russia, Canada, Brazil, Europe and other emerging market regions. This expansion aims to enhance Gufics presence and impact in the pharmaceutical landscape while maintaining its commitment to providing cost-effective, high-quality lifesaving medications to the public.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Gufic is consistently enhancing its range of products by introducing novel offerings, often pioneering products in the market that bring substantial advantages to patients. Alongside these new introductions, many of Gufics established products are also experiencing an expansion in their market presence. During the year under review, twenty new products have been successfully launched by the Company, contributing to increased sales. These launches, combined with improvements to existing products and the commitment to providing affordable medications without compromising quality, have collectively fuelled Gufics progress.

OPERATIONAL PERFORMANCE

Gufic remains resolute in maintaining its leadership position in lyophilized injectable products within the domains of Anti-fungal and Anti-bacterial segments. This stands as a testament to the Companys unwavering dedication to providing impactful healthcare solutions.

Throughout the financial year 2022-23, Gufic achieved successful market launches for 20 generic products, with an additional 10 products poised for commercialization. Furthermore, the Company has around 22 new products in the pipeline, with several already in the developmental phase.

The Company received DCGI (Drug Controller General of India) approval for the manufacturing and marketing of Biapenem Dual Chamber IV Bag during the reviewed fiscal year. The successful launch of Ceftazidime + Avibactam in FY 2022-23 gave a good initial response.

The Companys strategic focus extends globally, concentrating on key markets such as India, Germany, Switzerland, South Africa, Russia, Canada, Brazil, Europe and other emerging market regions. This expansion aims to enhance Gufics presence and impact in the pharmaceutical landscape while maintaining its commitment to providing cost-effective, high-quality life-saving medications to the public.

Gufics business operations are categorized under four distinct verticals:

1) Domestic Business

2) Contract Manufacturing Business

3) International Business

4) Bulk-Drug Business

Domestic Business

Gufic maintains a comprehensive presence across India, encompassing various therapeutic domains, including Critical Care, Infertility, Ortho-Gynaec, Dermo-Cosmetic, Natural & Herbal, and General specialty sectors. The Companys influence extends across a wide array of major therapy areas such as Anti-Infective, Anti-Fungal, Gastrointestinal, Infertility, Womens Health, Hormones, Bone and Joint Care, Wound management and Immunity enhancement.

Gufics product range enjoys wide distribution, reaching over 1,500 hospital chains and prominent medical institutions. This extensive reach is facilitated by a dedicated network of over 1,000 Field Force professionals deployed throughout India. The domestic business of Gufic is strategically divided into 3 categories based on presence in various segments: Gufic Super Specialty Business, Gufic Specialty Business and Gufic Mass Specialty Business.

a) Gufic Super Specialty Business: This is the major part of Gufics Domestic Business which include the Critical Care and Infertility portfolio Critical Care: The focus of Critical Care Division is to consolidate its business with following strategy:

1. Retain the leadership position in Anti-Fungal and Anti-bacterial products.

2. Consolidate the acute therapy business in the Anti-Infective category and also introduce newer molecules in the segment through its major SBU in Secondary and Tertiary care hospitals and institutions.

3. Fulfil the requirements in the Carbapenem market through our own manufacturing at Navsari.

4. Launch the novel Oral form of Isavuconazole approved for the treatment of invasive aspergillosis which is a serious fungal infection caused by Aspergillus species.

Within the Critical Care segment, Gufic also completed a detailed door-to-door mapping for molecules offered by the Sparsh Division across India. More than 8000 hospitals were surveyed and supplies in few of these hospitals were initiated in FY 2022-23. The division will focus to increase the penetration and coverage in next financial year. Infertility: With its continuous efforts, Gufic ensured to regain the business loss in infertility segment during COVID-19 Pandemic, as Infertility business had seen a major decline in the pandemic due to dramatic decrease in the number of IVF / IUI cycles in the country. The business is now completely opened up and the division will focus on building brands within the Hormonal category and offer newer drugs and newer drug delivery systems with PFS (Pre-filled Syringes) and DCS (Dual Chamber Syringes). The launch of Dydrogesterone was successful in FY 2022-23. To increase the presence of this molecule, Gufic is working on the Sustained Release Tablet form of Dydrogesterone in the coming financial year. The leadership position of Gufic Infertility in the hormonal product range like HMG and HCG is maintained, and to further strengthen its presence Gufic has planned to launch the most potent form of HMG which reduces the chances of failures in IVF cycles. Innovations like these will help Gufic solidify the position in the Infertility segment.

b) Gufic Specialty Business :The two new divisions which were introduced during the financial year 2021-22 continues to focus on selected specialties in the Ortho-Gynae space and Aesthetics.

Gufic Stellar: The division focusses on products in segments like Pain, Pregnancy & Lactation, Bone and Muscle care etc. A novel analgesic-Polmacoxib is planned to be launched in the division which will definitely help to improve the treatment modality of patients with osteoarthritic pain. The combinations of Polmacoxib with a muscle relaxant is also planned to be launched later this year. The operations of this division was earlier restricted to selected cities only, which has been expanded to few other metros and tier-2 cities. There are further plans to expand the division and have a PAN-India coverage.

Gufic Aesthaderm: The sub-chronic therapy of Aesthetic Dermatology continues to show its growth for Gufic after its launch last year. Gufic was the 1st Indian company to manufacture and launch a brand of Botulinum Toxin Type-A Injection in India through its international tie-up with Prime-Bio Inc., a US based company. The division had also launched a range of high class Aesthetic products in segments like Moisturizing agents, Anti-aging, Hyperpigmentation, Sunscreen agents during its launch phase. The products continue to show a steady growth in the target market with more and more practitioners now confidently using the same. Within a short span of time, Stunnox - Gufics brand of Botulinum toxin gained momentum to reach amongst the top 2 brands in the space. Gufic also initiated the process of registration for a range of Hyaluronic Acid based Dermal fillers to complement and augment the basket of products in the category. Gufic has successfully completed a split face clinical trial between Stunnox (Gufics brand of Botulinum Toxin Injection) and Botox (the innovator brand of Botulinum Toxin Injection) c) Gufic Mass Specialty Business: Gufic has 2 divisions to focus on mass specialty segment like General Practitioners, Paediatricians, Gynaecologists and Physicians. The market of interest of these SBUs are Nutraceuticals, Pain, Arthritis, Immunity, Respiratory, Anti-Infective and Herbal. Gufic initiated a trial of a new product made from an Indian gum resin by a standardized extraction process for the use in management of asthma. The product is planned to be launched post completion of its clinical trial later in the year 2023-24. Gufics brand of Boswellia Serrata continues to retain its leadership position through the brand Sallaki. A new Zinc based multivitamin & multimineral formulation launched in 2022-23 has helped to improve the portfolio in the mass market division.

Gufic forayed into the science of advanced aesthetics by launching “Arisia - the centre of excellence” in Mumbai. Arisia is one of the most advanced aesthetic clinic and training centre designed to raise the standards of aesthetic clinics with excellence in services. Through Arisia, Gufic aims to offer a comprehensive quality aesthetic services under one roof through client centric care ensuring client safety, privacy and dignity. The multiple spacious rooms at Arisia are equipped with cutting edge US FDA approved technologies to provide the best non-surgical cosmetic care. The knowledge repository of the centre is made open to the healthcare practitioners across all fields to leverage our findings, thus making available the magnificent and marvellous capabilities of botulinum toxin to the society. The wide range of treatment options offers skin and body transformation through the FDA approved technologies. Arisia completed a training of more than 50 Gynaecologists in the field of cosmetic gynaecology using the toxin, fillers and FDA approved energy based devices. Arisia also trained more than 20 Dermatologists and more than 10 Ne urologists in advanced techniques of using the botulinum toxin injections in various aesthetic and neurological indications.

Contract Manufacturing Business and International Business

Gufic believes in scientific innovation which meets consumer needs with rigorous standards for product safety and quality. Gufic offers unit-lyophilized products which offers better product stability, quality and safety. The state-of-the-art manufacturing facility of Gufic is based at Navsari, Gujarat, with auto-loading and unloading technology for lyophilized products, thus no human intervention during the manufacturing process. Gufics manufacturing facility is accredited by various national and international governing bodies like WHO-GMP, EU-GMP, ANVISA-Brazil, HEALTH-Canada, GMP-Russia, Ukraine-PICS GMP, TGA-Australia, MCC-South Africa, INVIMA-Colombia, NDA-Uganda, BFAD-Philippines, FMHACA-Ethiopia, MOH-Thailand, NMRA-Sri Lanka, NAFDAC-Nigeria, MOH-Cambodia and PPB-Kenya.

The new manufacturing facility for Lyophilized injections, Pre-filled syringes and Liquid injections located at Indore, Madhya Pradesh is gearing up to go live. With continued investment in the development of newer molecules to be commercialized from Indore facility will help us reduce the time to market. We anticipate that the validation of the facility will be completed by the second half of FY 2023-24 post which the commencement of commercial production will take place. This facility will focus on developing newer innovative high quality products and cater to the domestic needs in India along with regulated markets like US and Europe. Gufic has seen a good growth of ~25% through international business. More than 190 products are now registered across regulated and semi-regulated markets. Another 150+ products are in pipeline for registration in over 40 countries. Gufic received 4 new international approvals from Columbia, Uganda and Ecuador. For Europe and LATAM, strategies are in place to register existing developed formulations in countries which has Gufics presence and also plan to enter new countries based on market gaps and opportunities.

Bulk-Drug Business

Gufic manufactures a varied therapeutic basket in its API facility, which is mostly utilized for Gufics captive consumption. The categories of API manufactured includes Anti-Fungal along with their Intermediates, Antibacterial and Anaesthetic agents. Gufic recently received an approval for Anaesthetic product Prilocaine for supply to China. With the Government promoting Atmanirbhar Bharat (A government initiative to manufacture API in India) to reduce the dependency on import of material from various countries, Gufic has plans to develop potential API as per the market needs.

RESEARCH & DEVELOPMENT (R&D)

Gufic has continued to invest in the Research and development initiatives on the newer innovative molecules, advanced NDDS and drug delivery systems, biologicals / peptides and some select APIs.

The API research development at Navsari has made noteworthy progress in development of molecules in therapeutic categories like Anti-fungal, Anticoagulant, Tetracycline antibiotic, Progestin, Beta 3 adrenergic agonist, Antidiabetic, and Cyclopeptide hormones. These projects are developing in line with the plans. Gufic is on the verge of a break-through in development of an innovative topical formulation of Botulinum Toxin which will be launched in the market very soon. A wide range of products are under development in the novel drug delivery system of Dual Chamber Bags and Syringes which will ease the reconstitution, ensure accurate dosing and maintain the sterility from plant to patient The R&D team is backed-up by a strong Clinical team which includes, Medical and Regulatory teams, with an expertise to take Synthetic and Biological products across Phase-II and Phase III clinical trials

FINANCIAL PERFORMANCE

The Companys total operational revenue for the financial year 2022-23 amounted to 69,062.08 lakhs, indicating a decline compared to the previous financial year 2021-22, during which it was 77,915.56 lakhs. The Profit before Interest, Tax, Depreciation & Amortization (EBITDA) for the period under review reached 13,722.52 lakhs, showing a decrease from 15,113.30 lakhs in the financial year 2021-22. Nonetheless, the EBITDA margin for the financial year 2022-23 exhibited an enhancement, reaching 19.9% in contrast to the 19.4% recorded in the preceding financial year.

During the year under review, the Company made significant progress in diversifying its revenue sources, with the domestic market contributing around 84.50% to the turnover, and exports accounting for around 15.50%, marking a substantial increase in the export market share, as compared to the financial year 2021-22 when exports contribution to turnover was accounted at 9.26%. The Net Profit of the Company during the year under review was 7970.48 lakhs as compared to 9,584.01 lakhs in the previous financial year 2021-22. It is important to note that the financials of 2021-22 and 2022-23 are not directly comparable due to the significant impact of the COVID-19 portfolio in the financial year 2021-22.

KEY FINANCIAL INDICATORS

PARTICULARS	Unit	2022-23	2021-22	Variance (%)	Reasons if variance is more than 25%
Operating profit margin	%	16.64	16.97	-1.91	-
Net profit margin	%	11.54	12.30	-6.17	-
Debtors turnover ratio	Times	3.87	5.64	-31.46	Due to increase in Debtors and decrease in sales
Current ratio	Times	1.61	1.72	-6.42	-
Return on Net Worth	%	22.92	35.61	-35.65	Due to decrease in Net Profit after Tax
Inventory turnover ratio	Times	4.55	6.79	-33.06	Due to decrease in Sales and increase in Inventory
Interest coverage ratio	Times	16.69	28.17	-40.75	Due to increase in finance cost and increase in borrowings
Debt Equity Ratio	Times	0.90	0.23	293.44	Due to increase in Current & Non-Current Borrowings

l INTERNAL CONTROL FRAMEWORK

Your Company has a robust Internal Financial Control system in place, commensurate with size, scale and complexity of its operations to ensure proper recording of financial and operational information and compliance of various internal controls, statutory compliances and other regulatory compliances. The internal control is designed to provide reasonable assurance with regard to maintaining proper accounting controls, protecting assets from unauthorized losses and ensuring reliability of financial and operational information and proper compliance with regulations. The Audit Committee of the Company reviews the reports of the internal auditors quarterly and based on the report, corrective actions in the respective areas are undertaken and controls are strengthened. During the year under review, no material or serious observation has been received from the internal auditors of the Company for inefficiency or inadequacy of such controls. The Company follows all the applicable Indian Accounting Standards for properly maintaining the books of account and reporting financial statements.

HUMAN RESOURCES

Gufic recognizes the integral role that individuals play in driving business growth. As of March 31, 2023, the Company boasts a robust team of 1628 employees hailing from diverse backgrounds.

In order to cultivate a secure and supportive work environment, Gufic ensures the implementation of environmentally-friendly work practices. Additionally, the Company follows stringent industrial hygiene practices to safeguard the well-being of its employees.

The Human Resource Development division is dedicated to establishing Gufic as a preferred workplace. The Company upholds strict adherence to internal codes and maintains a zero-tolerance policy against any form of discrimination.

Gufic is committed to creating an improved workplace for its employees and motivates them through a variety of initiatives, outlined as follows:

a. Employee engagement Gufic fosters a "Together Team," comprising members from various departments, which rotates every six months to organize diverse events for employees. These events are curated with innovative and unique ideas. Annually, the HR department arranges a week of enjoyable activities followed by the Annual Day celebration.

b. Awards & Recognitions Acknowledging the valuable contributions of employees to the organizations success and growth, Gufic confers rewards in various categories and parameters. This includes accolades such as Employee of the Month and Long Years of Service Awards for those who have completed 5, 10, 15, 20 and 25 years of service. c. Other key HR initiatives

Provision of Medical Insurance

Introduction of Suggestion or Grievances box l Implementation of Training Programs to tackle the new opportunities and challenges

Hosting Seminar programs to enhance knowledge in respective field l Providing sponsorship to the deserving employees who wants to pursue further education l Establishment of Internal Complaints Committee constituted under The Sexual Harassment of Women At Workplace (Prevention, Prohibition And Redressal) Act, 2013 to address issues related to sexual harassment at the work place. Moreover, the Company has established a whistle blower policy that encourages both directors and employees to report any occurrences of unethical conduct, instances of actual or suspected fraud, or violations of conduct within the Company. This policy structure guarantees that individuals who bring such matters to the Companys attention will not experience any form of retaliation or mistreatment. Oversight of the implementation of the Whistle blower Policy falls under the responsibility of the Board of Directors and can be accessed on the Companys official website www.gufic.com.

Gufic fosters a work culture that encourages employees to strive for excellence, contributing to the Companys growth while also enhancing their skill sets. The Company places great emphasis on team spirit and continually seeks to elevate it. The collective efforts of employees have propelled Gufic to achieve remarkable success over the years. Notably, there have been no significant developments in the realm of Human Resources or Industrial Relations during the past year.

OUTLOOK

Gufics commitment to progress remains steadfast as it continues to channel investments into research and development, with a focus on molecules slated for commercialization at its upcoming manufacturing facility located in Indore, Madhya Pradesh. The operational launch of this manufacturing facility is scheduled to commence in October 2023. It is anticipated that the impact of the new plants revenue contribution may become evident in the third quarter of the financial year 2023-24.

Gufic firmly believes in the power of a diversified product portfolio to ensure consistent and sustained business growth. The Company has strategically identified intricate and distinct products across multiple therapeutic areas, marking the threshold for the next phase of growth.

Throughout the financial year 2022-23, Gufic achieved successful market launches for 20 generic products, with an additional 10 products poised for commercialization. Furthermore, the Company has around 22 new products in the pipeline, with several already in the developmental phase.

During the financial year 2023-24, Gufic has outlined the following initiatives:

1. Commercialisation of manufacturing facility situated at Indore, Madhya Pradesh

2. Launching an Oral form of Isavuconazole

3. Focusing efforts on expanding market penetration for Enoxaparin within the infertility segment

4. Introducing a novel analgesic, Polmacoxib, which represents a first-in-class NSAID designed to alleviate signs and symptoms associated with osteoarthritis

5. Launching of a novel once-a-week anti-infective Dalbavancin for the 1st time in India. The phase-III clinical studies have been completed and the Market authorisation has been received from the DCGI of India.

6. Developing many new products, etc.

In the face of the future, we remain resolute in our dedication to quality and in constructing a portfolio that is poised to meet forthcoming health needs

THREATS, RISKS & CONCERNS

Risk management is an inherent part of the Companys business and management is proactive in terms of managing risks in an organised manner. Gufic has its comprehensive risk management policy, which is periodically reviewed and amended by the Board of Directors of the Company. However, the risks associated with the business cannot be wholly eliminated, it can be mitigated with the precautionary measures. By virtue of the nature of its business, the Company is susceptible to various risks and the Management had identified such risks and measures to mitigate or minimize them as mentioned hereunder:

Sr. No.	Risks	Measures to mitigate/minimize risks
1	Competitive Risk	Gufic strives to meet the challenges by delighting our customers with product quality, timely supplies, best industrial practices in providing better services.
2	Legal/Regulatory Risk	Gufic has a strong quality assurance mechanism and compliance monitoring checklist that ensures strict compliance at every level. Also, regular training for its employees to update them on new developments is an integral part of this process.
3	Foreign Exchange Risk	Gufic keeps a close watch on forex market, its trend and reviews the movements regularly to mitigate the risk
4	Economical and Political Risk	Gufic focuses on due diligence, ongoing research and political risk analysis to predict such events and plans accordingly.
5	Market Risk	Demand and Supply are external factors on which Company has no control, however the Company plans its production and sales from the experience gained in the past and on g oing study and appraisal of the market dynamics, movement by competition, economic olicies & growth patterns of different segments of users of Companys products.
6	Concentration Risk	Gufic derives revenues from multiple products, multiple customers across geographic regions. Thus, the Company will endeavour to remain diversified & mitigate concentration risk.
7	Price Risk	Gufic produces and sales some products competing with numbers of players in India and abroad. Increasing competition puts pressure on our realizations. Gufic regularly works on cost control, improved yields etc., to maintain our margins.

CAUTIONARY STATEMENT

Certain statements in the MDA section concerning future prospects, Companys objectives, projections, estimates, expectations, plans or industry conditions or events may be forward-looking statements which involve a number of underlying identified / non identified risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include global and Indian demand-supply conditions, finished goods prices, feedstock availability and prices, competitors pricing in the Companys principal markets, changes in government regulations and policies, tax regimes, economic conditions within India and the countries within which the Company conducts business and other factors, such as litigation and labour unrest or other difficulties. These forward-looking statements represent only the Companys current intentions, beliefs or expectations and any forward-looking statement speaks only as of the date on which it was made. The Company assumes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events, subsequent development or otherwise except as required by applicable law.

AUDITORS REPORT ON CORPORATE GOVERNANCE

To

The Members

Gufic Biosciences Limited

Shop - 37, First Floor, Kamala Bhavan II,

S Nityanand Road, Andheri East, Mumbai-400069

We have examined the compliance of conditions of Corporate Governance by Gufic Biosciences Limited, for the year ended on 31st March 2023 as stipulated under Regulation 34 (3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations). The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination has been limited to a review of the procedures and implementation thereof adopted by the Company for ensuring compliance with the conditions of the Corporate Governance as stipulated in the said Listing Regulations. In our opinion and to the best of our information and according to the explanations given to us and based on the representations made by the Directors and the Management, we certify that the Company has complied with the mandatory conditions of Corporate Governance as stipulated in relevant regulation(s) of above mentioned Listing Regulations. We state that such compliance is neither an assurance as to future viability of the Company nor of the efficiency or effectiveness with which the management has conducted the affairs of the Company.

	For Manish Ghia & Associates
	Company Secretaries
	(Unique ID: P2006MH007100
	Sd/-
	CS Mannish L. Ghia
Place: Mumbai	Partner
Date: August 11, 2023	M. No. FCS 6252, C.P. No. 3531
UDIN: F00625E000783831	PR 822/2020