Lincoln Pharmaceuticals Ltd Management Discussions

An overview of the economic environment

Global Economy: Global growth appears to be stabilised in 2024 as inflation returned closer to targets, and monetary easing supports activity in both advanced economies and emerging markets and developing economies (EMDEs).

Major economies seem to be adjusting well to changing trade trends and policies, opening doors for sustainable and inclusive growth opportunities. While the recovery path is dynamic, these transformations pave the way for a more balanced and adaptive global economy.

Growth in advanced economies is estimated at 1.7% in 2024, with strong U.S. activity helping to offset slower growth in other regions. The sustained momentum in the US was driven by robust consumer spending, a strong labour market, and supportive financial conditions.

The Eurozone, on the other hand, has a weaker outlook. Its moderate growth will be a mere 0.8% in 2024. Despite a slow growth trajectory, Chinas economy grew by 4.8% in 2024.

Global inflation is falling faster than expected in most regions, reaching 5.8% in 2024, due to unwinding supply-side issues and restrictive monetary policy.

Commodity price trends in 2024 offer a mixed outlook. Ample supply and sluggish demand have kept commodity prices relatively stable in the latter half of 2024. Oil prices have faced continued pressure in late 2024, largely due to a lacklustre forecast for global demand and abundant supply.

Global trade, a key driver of economic activity, is estimated to grow 3.3% in 2024. Trade growth in advanced economies is expected to be modest at 2.1%, while emerging markets and developing economies (EMDEs) are set to expand at a stronger 5.0%. The slowdown reflects challenges like rising protectionism, trade distortions, and the impact of the Ukraine-Russia war, which disrupted supply chains and increased costs.

Financial markets exhibited a dynamic nature, with US equities benefiting from business-friendly policies while

EMDEs adapt to evolving capital flows. The ongoing strengthening of the dollar continues to shape global trade and investment patterns. Although geopolitical and trade shifts pose challenges, they simultaneously present opportunities for innovation and resilience, underscoring the necessity for forward-thinking strategies within an increasingly complex global landscape.

Outlook: The global economic outlook demonstrates resilience and opportunity. Global output is anticipated to grow steadily by 3.3% in 2025 and 2026, with the US maintaining strong momentum and emerging economies exhibiting significant growth potential. Advanced economies, particularly in Europe, are expected to experience moderate growth.

Economic policy shifts and evolving trade dynamics will likely drive businesses to adapt, innovate, and compete in a rapidly changing global market. The IMF underscores the importance of proactive policymaking to support a smooth disinflation process and enhance market confidence. These will create a dynamic business environment, encouraging strategic planning and resilience across industries.

(Sources: IMF)

Indian Economy: India recognised as the fastest-growing major economy globally, is poised for further expansion into the 2024-25 financial year. The growth remained moderate during a challenging year, largely due to the high base effect.

The GDP growth stood at 6.5% in FY25, primarily driven by positive consumption trends and a rebound in rural demand, growth in services, an increasing share of high-value manufacturing in exports, and more. Headline inflation for the full year moderated to a seven-month low of 3.6% in February, aided by favourable weather, relatively stable commodity prices, an improved supply chain, and a sharp decline in vegetable prices. In contrast, wholesale inflation rose to an eight-month high of 2.8% during the same period.

Annual inflation has been moderated at 4.7% in FY25 compared to 5.4% last fiscal year. Easing pressure on commodity prices led the MPC to cut the repo rate by 50 from 6.5% to 6.0%, reduced the repo rate twice during the fiscal year, in five years. Also, the urban unemployment rate did not increase until the third quarter of FY25.

In FY25, the agriculture sector grew by 3.8%, the industry sector expanded by 6.2%, and the services sector recorded a robust growth of 7.2%. The core sector maintained stable momentum, registering a 4.6% growth.

India Manufacturing PMI rose to 58.1 in March 2025, exceeding the _ash estimate of 57.6 and Februarys 56.3, marking the highest level since July 2024. New orders and output saw their biggest increase in eight months while buying levels reached a seven-month high.

Outlook: In 2025-2026, the Indian economy is expected to demonstrate moderate growth compared to the previous financial year, with a projected real GDP growth of 6.3-6.8%, albeit from a high base. With that, India is poised to strengthen its position as one of the fastest-growing major economies, significantly contributing to global GDP growth.

Its leadership in IT services, pharmaceuticals, and renewable energy, along with strategic trade agreements and the Production-Linked Incentive (PLI) scheme, will boost global competitiveness.

However, external risks such as a global economic slowdown, geopolitical tensions, tari_ wars and trade disruptions could impact Indias future economic outlook. Moreover, a slowdown in urban consumption, a spike in food inflation, and slow growth in capital formation can also influence the growth outcome.

(Sources: IMF, The Business Standard, India Today, Livemint, PIB, The Economics Times, Trading Economics)

Global Pharma Sector: The global pharmaceutical industry is a rapidly growing sector encompassing the research, development, and manufacturing of drugs and related products. These products play a crucial role in global health and economic growth. This growth has been fuelled by innovations in drug development, the rising incidence of chronic illnesses, and an increased demand for biologics and biosimilars. The industry is likely to exceed an estimated US$ 2.8 trillion in 2033.

Rising demand, increased healthcare investments, and the expansion of innovative therapies are fuelling global growth. In the long run, manufacturers of speciality drugs, chronic disease medications, and generics will benefit from opportunities driven by ageing populations.

In the global pharmaceutical industry, oncology, immunology, and anti-diabetics consistently rank among the most popular and highest-revenue therapeutic areas, with oncology leading in sales and growth potential. The US and European pharmaceutical industries are expected to continue growing in the coming years, driven by increasing healthcare spending, R&D investments, and the emergence of novel therapies. The US market currently dominates globally in sales.

Emerging markets, especially in the Asia-Pacific, Latin America, and Africa, present substantial growth opportunities for the pharmaceutical sector. Key enablers of this growth include government initiatives and enhanced healthcare infrastructure. Additionally, multinational pharmaceutical companies are investing in local manufacturing facilities to reduce production costs and meet regional regulatory requirements, which improves access to medications in these high-potential markets.

Indian Pharmaceutical Industry: Recognised as the pharmacy of the world for several decades, the Indian pharmaceutical industry has garnered global acclaim, particularly for its leadership in the generic drugs sector. Impressively, it commands over 20% of the global generics supply by volume and addresses approximately 60% of the worldwide demand for vaccines. Beyond its global impact in improving health outcomes, the Indian pharmaceutical industry plays a pivotal role in propelling the countrys economic growth and generating employment.

Third-largest in the world by volume, the Indian pharmaceutical industry offers a diverse range of products, including generic drugs, bulk drugs, over-the-counter medications, vaccines, biosimilars, and biologics, thereby creating a robust global presence.

Indian pharmaceutical exports extend to over 200 countries, including highly regulated markets such as the USA, Western Europe, Japan, and Australia. The rising demand for exports from regulated markets, price adjustments, and new domestic products drive expansion in the Indian pharmaceutical market.

The pharmaceutical sector is also one of Indias leading industries for foreign investment. Between April 2000 and March 2024, the drugs and pharmaceuticals industry received a cumulative FDI equity inflow of US$ 22.52 billion, representing approximately 3.4% of total FDI inflows across all sectors.

While aspiring to play a crucial role in Vasudhaiva Kutumbakam, India has collaborated with developed nations in the healthcare sector. International agreements, along with domestic schemes and reforms, are expected to have a transformative impact on Indias pharmaceutical sector.

The Financial Year 2024-25: The Indian pharmaceuticals sector is expected to achieve revenue growth of 8-10% in the 2024-25 financial year, following approximately 10% growth last year. This growth is supported by healthy exports to regulated markets, a recovery in semi-regulated markets, and steady domestic demand.

However, challenges such as geopolitical tensions, a global economic slowdown featuring recessionary trends in key markets like the US and Europe (which account for over 50% of Indias pharmaceutical exports), rising input costs, supply chain disruptions, and intense competition from other countries present significant obstacles for the Indian pharmaceutical sector. In FY25 (April-September), Indias drug and pharmaceutical exports reached US$ 14.42 billion, solidifying its position as a key global supplier.

New Government Initiatives in 2024-25: Existing schemes, such as the Production-Linked Incentive (PLI) scheme, along with initiatives like Ayushman Bharat, Pradhan Mantri Jan Arogya Yojana (PM-JAY), and the PRIP scheme, are strengthening domestic production and boosting Indias pharmaceutical industry.

To improve access to affordable healthcare, the government initiated plans to increase the number of Pradhan Mantri Bhartiya Jan Aushadhi Kendras

(PMBJK) to 10,500 by March 2025. This initiative currently provides a wide array of 1,451 medicines and 240 surgical instruments, thereby promoting greater availability of crucial healthcare products.

Recently, the Union government allocated _700 crores to establish centres of excellence at the National Institutes of Pharmaceutical, Education & Research (NIPER).

In March 2024, India introduced the Uniform Code for Pharmaceutical Marketing Practices (UCPMP) 2024, a quasi-statutory code that regulates pharmaceutical marketing. The code emphasises ethical practices and transparency and prohibits certain activities, such as offering gifts to healthcare professionals.

Outlook: Indias pharmaceutical industry is expected to grow from US$ 65 billion in 2024 to US$ 130 billion by 2030 and reach US$ 450 billion by 2047. The rising prevalence of non-communicable diseases and an ageing population are driving this growth in Indias pharmaceutical sector. The sector has witnessed substantial growth in recent years and is anticipated to grow at 9-11% in FY26.

Founded in 1979, our company is a leader in branded generics, known for affordable, innovative medicines. With advanced R&D and manufacturing in Ahmedabad, we commit to healthcare for all. Our units have EU GMP certification, allowing us to market in all 27 EU countries and the EEA. We provide a range of products, including tablets, capsules, dry syrups, liquid vials, injectables, and ointments. While strong in the acute segment, we are expanding into lifestyle and chronic care, focusing on womens health and dermatology.

Our portfolio includes immediate-release hard and soft gelatin capsules, syrups, sachet powders, suspensions, semi-solids like creams and gels, as well as injectables and sprays.

Lincoln Pharmaceuticals focuses on developing and producing cost-e_ective and innovative pharmaceuticals to enhance health outcomes.

Lincoln Pharma engages in the manufacture of a comprehensive array of pharmaceutical formulations, which includes tablets, capsules, injectables, dry syrup, liquid oral solutions, sprinkling powder, as well as both sterile and general ointments.

With an extensive portfolio comprising over 600 formulations spanning 15 therapeutic areas, the Company possesses a strong presence in the fields of anti-infectives, respiratory health, gynaecology, cardiology, central nervous system (CNS) disorders, antibacterial treatments, anti-diabetic medications, anti-malarial drugs, and others. The Company has successfully finalised the expansion of its Cephalosporin manufacturing facility located in Mehsana, Gujarat, and has commenced commercial production, with initial sales occurring within the domestic market. Moreover, the plant has secured World Health Organisation Good Manufacturing Practice (WHO-GMP) certification for its tablet, capsule, and dry-powder suspension products.

Lincoln Pharmaceuticals advanced R&D centre in Khatraj, Ahmedabad, founded in 2000, has obtained approval from the Department of Scientific and Industrial Research (DSIR), Government of India. Committed to innovation and ethics, the centre focuses on developing technology-driven, cost-e_ective pharmaceuticals to improve patient care.

The R&D facility, equipped with advanced analytical instruments for physical, chemical, and microbiological testing, is directed by a team of specialised technology experts. Primary activities encompass novel product development, quality enhancement, process optimisation, and validation, reinforcing Lincoln Pharmas commitment to scientific excellence and pharmaceutical innovation.

The Company is committed to developing innovative and technology-driven products that enhance medication efficacy for improved therapeutic outcomes. A strong focus on optimised drug delivery ensures greater potency, enhanced efficiency, reduced side effects and toxicity, improved stability, and cost-e_ectiveness. This approach increases drug availability and simpli_es administration, ensuring optimal patient compliance.

Chemical Research & Development Department: The API Process Development Division constitutes a pivotal segment of Lincolns Research and Development centre, specialising in multi-step chemical synthesis. A committed team of scientists operates within state-of-the-art laboratories, concentrating on the development of intellectual property (IP) as well as regulatory-compliant, scalable, and cost-e_ective commercial API production processes. The product development teams receive support from comprehensive analytical, regulatory, and intellectual property management (IPM) departments, thereby ensuring efficiency and adherence to compliance at every stage.

Formulation Development Department: The

Formulation Development team is dedicated to exploring new active substances, producing generics, resolving issues about existing products, and creating patent non-infringing formulations for both emerging and domestic markets. Within our Research and Development centre, we devise a comprehensive array of pharmaceutical dosage forms, which encompasses immediate-release, delayed-release, and extended-release tablets, in addition to hard and soft gelatin capsules, liquid preparations such as syrups, dry syrups, suspensions, and sachet powders.

Furthermore, the company specialises in semi-solid formulations, including creams, gels, ointments, small and large volume parenteral solutions, oral, and topical sprays. This diverse portfolio is a testament to our unwavering commitment to innovation and excellence in pharmaceutical development.

The Analytical Research and Development department performs a crucial function in facilitating both Active Pharmaceutical Ingredients and Formulation Development. Furnished with advanced instrumentation, it guarantees precision and reliability in all developmental processes, thereby enhancing product quality and compliance.

Lincoln Pharma operates two advanced manufacturing facilities in Khatraj (Ahmedabad) and Mehsana, Gujarat. The facilities meet strict international quality standards, certified by EUGMP, TGA, WHO-GMP; ISO-9001:2015, ISO-14001:2015, and ISO-45001:2018. The Company manufactures various pharmaceutical formulations, including tablets, capsules, injectables, syrups, and ointments. It has developed over 600 formulations across 15 therapeutic areas and maintains a strong product portfolio in anti-infectives, respiratory systems, gynaecology, cardiology, CNS, anti-bacterial, anti-diabetic, and anti-malarial treatments. The Company has over 1,700 registered products, with another 700 in development.

Lincoln Pharma aims to nurture innovations and provide affordable healthcare for Indian patients. Its strength lies in advanced research and development that drives scientific progress. The R&D department innovates, develops, and optimises products to meet market needs and regulatory standards. The company has launched various unique drug delivery forms, filed over 25 patent applications, and received seven patents. Focused on high-quality, cost-e_ective drugs, it emphasises complex generics, bioequivalence, regulatory speed, and smart patent strategies. Di_erentiated generics and global filing are key growth drivers.

We are expanding our pipeline with novel therapeutic candidates, strengthening our position in antidiabetic, antiviral, antiepileptic, antipsychotic, anticonvulsant, antihypertensive, antifungal, and cephalosporin products, among others. Several new projects are underway, covering various dosage forms like tablets, capsules, sustained and extended-release tablets, topical preparations (sterile and non-sterile), granules or powders, and parenteral forms including injections and dry powder for injection. These initiatives demonstrate our commitment to scientific innovation and addressing significant unmet medical needs. With these additions, the pipeline includes over 100 new development programmes for the coming year. Additionally, the R&D centre, in collaboration with CROs, will conduct 30 bioequivalence studies to support future generic filings. One patent application is in progress for domestic filing, helping protect our proprietary interests formulation.

The company has a strong domestic presence, supported by a dedicated field force of over 700 professionals and a wide national distribution through over 21 Super Stockists in 26 Indian states. Strategic marketing and sales initiatives have strengthened the companys brand recognition and market reach. It currently exports to over 60 countries in East and West Africa, Central and North America, Latin America, and Southeast Asia, recently entering the Canadian market and securing approvals from TGA - Australia and EU GMP. These achievements, along with product registration for its Cephalosporin plant in Mehsana, are key drivers of its global expansion into over 90 countries.

Lincoln Pharmaceuticals is driven by over 1,700 dedicated employees whose commitment to excellence, innovation, and quality enables it to deliver trusted healthcare solutions worldwide. The company fosters a culture of learning, collaboration, and integrity, emphasising employee well-being and skill development. By promoting inclusivity and professional growth, it creates an environment where talent thrives, making its employees vital to its mission of providing affordable, high-quality medicines globally.

Lincoln Pharmaceuticals is committed to sustainability and social responsibility. In FY 2023-24, the company installed a 4 MW solar plant in Radhanpur, adding to its 1 MW rooftop solar unit and two wind turbines. These initiatives now supply nearly 100% of the companys energy needs, reducing electricity costs and environmental impact. Lincolns green efforts also support local communities and employee well-being, establishing its reputation as an eco-friendly organisation focused on long-term positive impact.

Lincoln Pharma has exhibited strong and consistent financial growth, with a steady rise in total income over the past four fiscal years, demonstrating increasing market acceptance and product demand. The Companys ability to enhance its bottom line annually highlights the effectiveness of its strategic execution and business resilience.

Though EBITDA margins saw a slight dip due to higher input costs and planned strategic investments, overall EBITDA continued to grow, reflecting improved operational efficiency and a greater contribution from value-added products. The consistent expansion in Net Worth further reinforces Lincoln Pharmas robust financial foundation and commitment to long-term value creation.

Total Income: The total income for FY25 increased to C645.71 crore, showing a significant growth of 5 % compared to FY24.

EBITDA: The EBITDA for FY25 reached at C123.97 crore. PAT: The PAT for FY25 stood at C82.34 crore.

Net Worth: The net worth for FY25 increased to C671.67 crore, registering a significant growth of 13.31% compared to FY24.

Lincoln Pharmaceuticals aims for I750 crores in FY26 revenue while remaining net debt-free. The company has consistently grown profits from FY13 to FY25, showcasing financial resilience. Strategic initiatives involve expanding globally—currently exporting to over 60 countries with plans for 90+, aided by recent entries into Canada and TGA-Australia and EU GMP approvals. By leveraging advanced manufacturing, Lincoln is diversifying into lifestyle and chronic segments, focusing on womens healthcare and dermatology. A robust R&D pipeline, with over 1,700 registered products and 700 in development, drives its innovation-driven expansion.

Lincoln Pharmaceuticals recognises additional challenges beyond standard business and industry risks, such as foreign exchange fluctuations and regulatory policy changes. The Companys proactive risk management approach involves identifying risks at the departmental level, addressing them directly or escalating them to management for timely resolution. This ensures comprehensive risk mitigation and strengthens stakeholder confidence. Additionally, the Company prioritises environmental sustainability and actively promotes eco-friendly initiatives while implementing cost-control measures to enhance operational efficiency.

Lincoln Pharmaceuticals Limited upholds the highest standards of ethical business practices, reinforced by a robust internal control framework detailed in this statutory statement. This comprehensive system safeguards operational integrity by ensuring accurate financial reporting, protecting assets from fraud and misuse, and enhancing efficiency through strict compliance with legal and regulatory requirements.

Our strong internal control framework is built on key pillars that uphold integrity and operational excellence. We cultivate a positive control environment that promotes ethical conduct and reinforces the importance of internal controls. Through continuous risk assessments, we proactively identify and mitigate potential threats. Robust control activities are then implemented to address these risks and ensure adherence to established procedures. Clear and open communication remains essential, ensuring all employees understand their roles and responsibilities within the framework.

We continuously monitor and refine our internal control framework to ensure its effectiveness and adaptability. Our board of directors and senior management provide strong oversight, ensuring its development, implementation, and sustained performance. While the system offers reasonable assurance, we recognise that evolving risks and unforeseen circumstances may impact its e_cacy. Nonetheless, we remain steadfast in our commitment to maintaining a robust internal control framework, reinforcing our dedication to integrity and operational excellence.

Our objective is to provide stakeholders with a clear understanding of our unwavering commitment to a strong and reliable internal control framework. We acknowledge that external factors such as foreign exchange fluctuations and regulatory policy changes present additional challenges. To address these, we proactively identify risks at the departmental level, resolving them internally or escalating them to management as needed. This approach ensures effective risk management and strengthens stakeholder confidence.

Lincoln Pharmaceuticals also prioritises environmental sustainability and actively promotes awareness initiatives. Additionally, we implement strategic cost-control measures to enhance operational efficiency. Through these efforts, we remain a responsible and forward-thinking leader in the pharmaceutical industry.

At Lincoln Pharma, we recognise that our employees are the foundation of our success. Over the years, our human resources team has focused on initiatives that enhance skills, promote well-being, and cultivate a positive work environment. We are dedicated to attracting and retaining top talent while fostering organisational leadership development. Our commitment to diversity and inclusion drives innovation and strengthens our workforce. Moving forward, we will continue investing in our people, ensuring they are equipped to navigate the evolving pharmaceutical landscape.

Cautionary Statement: This report includes forward-looking statements reflecting Lincoln Pharmaceuticals Limiteds managements current expectations and strategic outlook. These statements outline the companys objectives, projections, and future plans. However, they are subject to inherent risks and uncertainties that may result in actual outcomes differing significantly from those anticipated. Various factors may impact the companys operations, including reliance on telecommunication and IT systems, potential government policy changes, and unforeseen circumstances. Lincoln Pharmaceuticals Limited disclaims any responsibility for decisions based on these forward-looking statements and is not obligated to update them in the future.