Hindustan Bio Sciences Ltd Management Discussions.

Industry Structure and Development :

The Bio Pharma Industry, especially the r-DNA products being imported to India are facing a tough competition of late. Though our company has got its standing in selling erythropoietin, we could not sell good quantity, as compared to last year, as were facing a very tough competition from domestic manufacturersand in addition Additional Duty from customs on imported goods has become a big burden on the company. We could not exceed last year turnover.

Opportunities and Threats, Product wise Performance and Outlook :

The Industry is growing exponentially and so is the competition. Heavy competition is a major threat to our business. The management of our company is pursuing various options to overcome this threat. The following are a few steps that the company is taking to face the competition.

• Increasing the quantity and reducing the prices to compete with others.

• The company is treading cautiously while introducing new products due to the increased cost of launching new product, challenges faced in getting the necessary approvals and complications in conducting clinical trials.

The company is presently importing and marketing Recombinant Human Erythropoietin with the brand names EPOVIN and EPOSINO.

Risks & Concerns

1) The competition in the existing product portfolio has increased over the years which are affecting the profits of the company.

2) Increase in the custom duty which is almost 50% of the order value is also affecting the profits of the company.

3) The cost & time for getting approvals for new products have become unpredictable and there is no guarantee that the company will get the approvals, for new products.

4) The DCGI is insisting clinical trials for every product, even though it is marketed in many countries after successful clinical trials in other countries. The conduct of clinical trials involves huge amount of money and time and thus reduces the competitiveness of the product in terms of price.

5) In the Present year sales have come down drastically and we have to decrease the price to attract the customers which resulted in further loss.

Internal Control systems and their adequacy

The internal control systems are adequate to the size and nature of operations of the company.

Discussion on financial performance with respect to operational performance:

During the year the company has sales revenue of Rs. 101.25 Lakhs as against last year sales revenue of Rs. 126.01 Lakhs, decrease of about 19.65% in rupee terms.

1) As envisaged the company could not market 10000 IU potency, even though we have got the license for the same which is a reason for extra loss during this year.

2) Since, the market is not favorable some of our customers could not pay the agreed (invoice) amount resulting bad debts which is Rs.19.76 lakhs.

3) We have to reduce the prices of our products as the market is not favorable.