lupin Management discussions

Adding Muscle

LPI enjoys strong brand equity in the US wholesale and retail channels as a preferred supplier of quality generics and is an emerging specialty major focusing on Paediatric specialists and Primary Care physicians. Strong commercial capabilities in the US market for both generic and branded products have made LPI a key contributor to the Company’s growth.

FY 2016 was a year of heightened activity and consolidation in the US as we navigated our way through a fast changing and volatile pharmaceutical marketplace while maintaining growth momentum and performance. Lupin clocked in US revenues of USD 887 million during FY 2016, contributing 43% of the Company’s global revenues. This business performance has made Lupin the 5^th largest pharmaceutical player in the US (4.68% market share by prescriptions – IMS Health, National Prescription Audit, MAT March 2016).

US Generics

FY 2016 saw the US Generics business record revenues of USD 841 million, contributing 95% of the Company’s US sales. FY 2016 saw Lupin climb up one place in the leadership rankings to emerge as the 5^th largest generic player in the US (5.51% generic market share by prescriptions – IMS Health, National Prescription Audit, MAT March 2016).

We continued to build for the future. In March, 2016 the Company completed its acquisition of privately held US based Gavis Pharmaceuticals LLC and Novel Laboratories Inc. which has since been renamed Lupin Somerset. The Company specializes in formulation development, manufacturing, packaging, sales, marketing and distribution of pharmaceutical products. The acquisition enhances Lupin’s scale in the US generics marketplace and also broadens the Company’s pipeline in dermatology, controlled substance products and other niche, high-value complex generics and specialty segments. Gavis brings to Lupin a highly skilled US based manufacturing and research organization which would complement Lupin’s brand new R&D center for Inhalation in Coral Springs in Florida. The acquired company’s New Jersey facility also becomes Lupin’s first manufacturing site in the US.

The Company today has a portfolio of 124 in-market products and 163 filings pending approval, not to mention a deep pipeline of products under development for the US. The Gavis acquisition creates the 5^th largest pipeline of ANDA filings with the US FDA, addressing a USD 63.8 billion market. Lupin today has 45 First-to-File (FTF) products which include 25 exclusive FTF opportunities.

The Company also had to deal with acute pricing pressure as an outcome of the ongoing consolidation and expansion of alliances amongst key customers, as well as competition on previously exclusive and semi-exclusive products. FY 2016 saw Lupin launch 21 new products, including the successful commercialization of an exclusive generic version of Glumetza. Lupin now has 124 products in the market and the Company is the market leader in 44 generic products marketed in the US and amongst the Top 3 in 79 products (IMS Health).

US Brands

One of Lupin’s key differentiators has been our US branded business and the Company has been working hard to beef up and build on the same. The success of Lupin’s US Branded franchise is critical for our aspirations to build a sizable Specialty Pharmaceutical play in the US.

The Branded business contributed 5% of Lupin’s US revenues recording revenues of USD 46 million. The Company was able to garner 3.7% market share for its newly launched InspiraChamber Anti-Static Valved Holding Chamber (VHC) in the US market. Lupin has exclusive rights to promote, distribute and market InspiraChamber VHC in the US. The chewable tablet formulations for Suprax grew 66% in prescription terms during FY 2016 as compared to FY 2015. Prescriptions for Antara grew 16% over the previous year and branded Antara revenues increased by 14% during FY 2016.

Lupin further strengthened its branded play in the US with the launch of two new products, Methergine and Methylphenidate. The Company has re-introduced Methergine (methylergonovine maleate) Oral Tablets 0.2mg for the prevention and management of postpartum hemorrhage (PPH). Methergine is the only FDA-approved oral uterotonic and is a preferred oral agent in the management of PPH, according to guidelines issued by the American Congress of Obstetricians and Gynecologists (ACOG). More than half of all maternal deaths occur within 24 hours of birth, most commonly from excessive bleeding. Rates of maternal mortality continue to rise in the US where PPH is a leading cause of pregnancy complications. With Methergine, Lupin is making a significant investment to help improve the management of PPH, providing professional medical education, leveraging a new specialized sales force to drive better awareness and access to care, and ensuring a more stable supply of this essential medicine.

As we move into FY 2017 and beyond, Lupin aims to continue to strengthen its market presence by launching new products; expanding its pipeline as well as targeting opportunities in therapeutic areas such as Inhalation, Paediatrics, Women’s Health, Complex Injectables and Dermatology.

We are building for the future, adding muscle to ensure that Lupin stands recognized as amongst the most successful generic and specialty pharmaceutical companies in the United States.

Dispensed TRx US Pharmaceutical Industry

Dispensed TRx Total US Industry, MAT, March 2016

Lupin is ranked 5^th in the US industry standings of all pharmaceuticals

		MAT March 2016
Leading Corporations		TRx’s mn	% Market Share	% Growth
US Industry				1.03
1	Teva	504	11.42	-4.63
2	Mylan	350	7.93	5.37
3	Allergan	302	6.84	-4.00
4	Novartis	296	6.71	-2.42
5	Lupin	206	4.68	2.52

Source: IMS Health, National Prescription Audit, March 2016

Dispensed TRx US Unbranded Generics, MAT, March 2016

Lupin is ranked 5^th in the US industry standings of unbranded generics

		MAT March 2016
Leading Corporations		TRx’s mn	% Market Share	% Growth
US Industry				2.58
1	Teva	435	11.84	-5.31
2	Mylan	343	9.34	5.08
3	Sandoz (Novartis)	261	7.09	1.83
4	Actavis US	228	6.20	-3.12
5	Lupin	202	5.51	2.40

Source: IMS Health, National Prescription Audit, March 2016

Passion To Perform

Lupins India business continues to witness strong growth, outpacing and outperforming the Indian Pharmaceutical Market (IPM). All of this, in spite of hyper-competition and regulatory challenges posed by frequent changes in drug prices by National Pharmaceutical Pricing Authority (NPPA) and the expansion of the National List of Essential Medicines (NLEM) that now covers 376 products.

Therapy Area	Lupin Rank	Market growth %	Lupin growth %	Lupin Market Share %
Anti-TB	1	(2.1)	(0.3)	56
Cardiology	2	14.6	16.6	6.4
Respiratory	3	11.2	18.1	4.9
Anti-Diabetic	5	20.5	17.4	6.2
Neuro / CNS	8	15.9	7.5	2.4
Anti-Infectives	11	8.0	6.2	3.3
Gastro-Intestinal	12	15.6	22.0	2.3

Source: IMS TSA MAT March 2016 Lupin growth data: Company data

We have been able to counter these challenges by ramping up our sales force, setting up new divisions, entering new therapies and introducing first-in-class products to sharpen our approach in existing therapy segments. In FY 2016, the Company created 5 new business divisions to cater to high growth therapies and launched 19 brands.

Driven by strong ambition and fueled by an extremely passionate 6600+ specialty field force, the Company has emerged as a market leader, outperforming peers and the IPM alike. Lupin’s India business recorded revenues of Rs 33,916 million in FY 2016, a growth of 14% over the previous year. Chronic and semi-chronic therapy segments today contribute 87% of Lupin’s overall India revenues. The Company today has 3.3% market share and is the eighth largest player in the IPM (IMS MAT March, 2016). The Company has been recalibrating its product mix by adding new products; moving from acute to high growth chronic and semi-chronic therapy segments and entering into strategic alliances with leading global players with the objective to widen our product portfolio to address unmet needs in the market. During the year, the Company added 1,000 representatives to enable the creation of new divisions and bring focus so that we can build strong pillar brands. Lupin also launched ‘Ondero’ (Linagliptin), in partnership with Boehringer Ingelheim, marking our foray into the high growth Dipeptidyl peptidase-4 (DPP-4) Inhibitors segment in the Anti-Diabetic space. We continue to outperform in fast growing therapies of choice such as Cardiology, Respiratory, Gastro-Intestinal and Gynaecology. This bears testimony to the efficacy of the Company’s sharp sales and marketing programs and our ability to nurture and grow brands in an extremely fragmented marketplace. Lupin today has the largest portfolio of young high growth prescription brands in the IPM, over 29 brands with sales in excess of Rs 300 million. 4 of the Company’s brands have sales exceeding Rs 1,000 million. Gluconorm, Lupin’s largest brand in India crossed Rs 2,000 million in trade sales during FY 2016.

The Company has created structured training programs and regular scientific inputs for its specialty sales force, so that they are in tune with the latest advances and innovations. We use specialized sales force automation and detailing tools to leverage the benefits of technology. The Company continues to expand its coverage in the country in its efforts to reach out to more doctors and medical institutions, associations to build stronger relationships with the medical fraternity. We are cross-leveraging our existing associations with global think tanks and institutions to bridge and bring the latest medical know-how and advances to the medical community. We are committed to improving patient care in the country by spreading awareness, health education and meaningful care. The measure of our performance has never been in our growth numbers but in our collective passion to deliver.

The Next

Growth Multiplier

According to various industry and global think-tanks such as IMS, McKinsey and PWC, the APAC region is amongst the fastest growing markets in the world; and is currently sized at USD 350 billion, representing close to 30% of the global pharmaceutical market. Importantly, APAC is slated to drive close to 50% of the global incremental growth going forward. Demographic and epidemiologic factors suggest rapid urbanization, aging population and the growing prevalence of chronic diseases combined with strong GDP growth and increased healthcare spend will contribute to the region being a high growth market for the Industry.

Lupin’s growing presence and leadership credentials in Japan, The Philippines and Australia coupled with our efforts to enter new geographies with meaningful acquisitions are going to help us address these growth opportunities. FY 2016 saw us add depth by focusing on creating a quality pipeline, entering new therapies and expanding our manufacturing capabilities to address future demand which would ensure long-term growth. We have also entered new markets like Vietnam, Myanmar and Malaysia where we function through local business partners. Additionally, the region also covers geographies like Greater China, Taiwan, Indonesia, South Korea and Thailand, where the Company is keen to expand its footprint. We are switching gears and the APAC markets could well be the next growth multiplier.

Japan

Japan is Lupin’s 3^rd largest market and contributed 10% to our global revenues during FY 2016. It is also the Company’s largest market within APAC contributing 77% of the region’s revenues. FY 2016 was a good year for Lupin’s Japanese business, Kyowa Pharmaceutical Industry Co., Ltd. including Kyowa CritiCare Co., Ltd.

Japan Sales ( million) (collectively Kyowa) with the Company generating revenues of 25,062 million ( 13,646 million), a growth of 6% over the previous year. Lupin remains the 9^th largest generic pharmaceutical player in the Japanese market with a strong presence in the Neurology, Cardiovascular, Gastroenterology and Injectables segments. Japan is a very important market for Lupin and we plan to make significant investments in Japan and in India to address the Japanese market.

Japan is the 2^nd largest pharmaceuticals market in the world with sales of over USD 115 billion. Generics account for 56% of total pharmaceutical volumes in Japan, growing by 8%. The Japanese Government has a target of 80% generic penetration by 2020 which translates into an additional 25-30% of overall pharmaceutical volumes going generic. Add to this, patent expiries valued at over USD 14-16 billion by 2018 and the sum total amounts to one of the largest growth opportunities available to Lupin globally. The Company has been working on streamlining its business operations in Japan by focusing on creating a quality pipeline that includes biosimilars, taking measures to improve market penetration and expanding its manufacturing operations to meet future demand.

Construction for a new dedicated Oral Solids manufacturing facility at Tottori, Japan is on track and in full swing. FY 2016 saw Lupin’s dedicated offshore Japan manufacturing facility in Goa, India go operational and this will enable continued supplies from India and improved margins for the business. The new injectable line in Kyowa CritiCare has also gone on-stream this year.

The Philippines

The Philippines pharmaceutical market is valued at USD 3.4 billion. Lupin’s subsidiary Multicare Pharmaceuticals Philippines Inc. (Multicare) had a very strong year recording revenues of PHP 1,626 million ( 2,297 million) clocking a growth of 42% for FY 2016 as against an Industry growth rate of 9%. Multicare is ranked 22^nd and is amongst the fastest growing pharmaceutical players in The Philippines (IMS March 2016). Multicare is a premium branded generics company with a strong presence in Women’s Health, Childcare, Anti-Infectives, Central Nervous System (CNS) and Paediatrics segments.

Australia

The Australian Pharmaceutical Market is valued at USD 12.5 billion with generics accounting for over 20% of the total market. Our Australian subsidiary Generic Health Pty Limited (Generic Health), generated revenues of AUD 29 million ( 1,395 million) and reported a growth of 12%, outperforming the market growth rate. A rapidly growing Over The Counter (OTC) market combined with factors like National Health Insurance coverage makes Australia a lucrative opportunity. Generic Health is a supplier of key generic prescription and OTC medicines to pharmacies and hospitals in Australia. Generic Health has also recently launched ‘Pharmacy Action’ – a new comprehensive range of quality, OTC products.

Garnering Pace

Lupin is committed to increasing its presence in Europe, specifically in Russia, Poland and Eastern Europe. Healthcare spending for this region is forecasted to grow at 7.7% up to 2018. We are also looking to expand our presence in the Middle-East and Africa. We see rapid growth in healthcare spending in these two regions which would see an annual average increase of 8.7% till 2018, due, in part, to population growth and efforts to expand access to care.

Europe

Continuing its upward growth trajectory, Lupin’s Europe business recorded a growth of 30% with sales of Rs 4,278 million during FY 2016 as compared to Rs 3,279 million in FY 2015. Lupin further strengthened its footprint by acquiring the specialty products portfolio of Temmler Pharma GmbH & CO. KG. This enables Lupin to bring an enhanced specialty portfolio of 13 products to the German market including key Central Nervous System (CNS) products and specialty products that address rare disease areas like Myasthenia Gravis, Huntington disease as well as fast-growing dermatology products for anti-wart treatment.

The Company continues to build its partnered business by building its product portfolio and forging deeper relationships with select partners within the European Union (EU). Lupin’s business in UK, Germany as well as our partnered business in Europe contributed equally to the strong growth performance with our German subsidiary Hormosan Pharma GmbH, growing by 51%.

Lupin continues to invest in creating a quality pipeline for European markets. The Company filed 8 marketing authorization applications with European authorities and received 3 approvals during FY 2016. Cumulative filings for Europe now stand at 67 with the Company having received 52 approvals to date.

South Africa

The African Pharmaceutical Market is expected to grow by 10.6% on average, resulting in pharmaceutical sales of USD 45 billion by 2020. The growth in pharmaceutical sales is attributed to Governments striving to improve access to healthcare for their citizens as well as a very favourable economic and development outlook for the African continent. South Africa and North African countries boast of per capita incomes ranging between USD 6,000 and USD 11,000 and are important for our business as emerging markets.

The South African Pharmaceutical Market is valued at about USD 2.7 billion with the total market growing by 7.7% in value and 1.5% by volumes in FY 2016. Lupin’s South African subsidiary Pharma Dynamics (Proprietary) Limited (PD) clocked in revenues of South African Rand (ZAR) 835 million ( 3,998 million) during FY 2016, growing by 10% over the previous year in ZAR terms. PD is the 4^th largest generics player and ranks amongst the top 20 pharmaceutical companies in South Africa. The Company is also the largest cardiovascular player in South Africa, across all companies.

Expanding Horizons

The LATAM region is amongst the fastest growing pharmaceutical markets in the world, projected to grow at around 6.1% annually till 2018 with governments trying to improve accessibility as well public health care systems. Lupin is working on an aggressive strategy in this region building on the existing presence and we continue to review bolt-on acquisitions that will complement both Grin and Medqumica. The Company is looking to build efficiencies in sales by expanding our distribution channels; growing our portfolio and relationships with existing partners and exporting from Mexico and Brazil to adjoining regions. Lupin’s therapeutic focus in LATAM is on Ophthalmology, Dermatology, CNS and General Medicine and we are looking to expand this portfolio by leveraging Lupin’s global portfolio, in-licensing, acquisitions and through strategic alliances.

Mexico

Mexico is LATAM’s 2^nd largest pharmaceutical market valued at about USD 12 billion, growing by 5% annually. Incorporated in 1955, Lupin’s subsidiary Grin is a specialty pharmaceutical company engaged in the development, manufacturing and commercialization of branded Ophthalmic products. Grin is the 2^nd largest

Ophthalmic player by prescriptions and the 4^th largest Ophthalmic player by value; a trusted brand in Mexico. Grin recorded revenues of MXP 503 million ( 1,980 million) during FY 2016.

Brazil

The Brazilian Market is valued at over USD 25 billion, accounting for more than 35% of LATAM pharmaceutical sales and is expected to grow by 9-12%. Brazil is the 6^th largest market in the world.

Lupin marked its foray into the high growth Brazilian market with the acquisition of Medqumica in May, 2015. Medqumica is a broad-based pharmaceutical company engaged in the development, manufacturing and commercialization of branded generics, pure generics and OTC products. It is one of the fastest growing companies in the Brazilian branded generics market and a trusted brand with the distribution channel. Revenues grew 15% as compared to last fiscal, reaching BRL 82 million ( 1,464 million) in 9 months post-acquisition. We plan to not only leverage our research and technology strengths to build a high quality product pipeline but also use Medqumica’s commercial presence to expand business by targeting niche high-growth therapy segments.

A Strong Foundation

The market share of Indian API exports to regulated markets is expected to rise to about 51% by FY 2019. It is no surprise that India is the world leader in Drug Master Files (DMFs) applications filed with the US FDA. Sustained leadership in APIs has helped Lupin leverage its scale to ensure competitive advantage and superior margins. Lupin continues to make new inroads into markets such as The US, Europe and Japan and we are also exploring emerging markets like China, Brazil, Mexico, Korea and Russia. FY 2016 saw Lupin venture into developing Oncology APIs by setting up a dedicated API manufacturing facility in Vishakhapatnam. Lupin’s global API business generated revenues of Rs 12,074 million contributing 9% to global revenues. The Company’s Principal-to-Principal (P2P) business that is also managed by the same group grew by over 30%, given significant launches of several first-to-market products in India in the Anti-Diabetic and Gastro-Intestinal therapy segments.

Lupin is investing considerably in strengthening its API product portfolio. The Company is also consciously investing in adopting green chemistry-enzymatic technologies to improve efficiency and protect the environment.

Lupin continues to gain traction with its Global Institutional Business (GIB) and remains amongst the largest suppliers of Anti-TB products to the World Health

Organization’s Global Drug Facility (WHO). The Company is a leading supplier to India’s TB eradication program, as envisioned by the RNTCP. Lupin has the unique distinction of being the only Company to have its APIs and formulations for TB products prequalified by the WHO globally. The Company is now focusing on partnering with various health authorities in eradicating the menace of multidrug-resistant TB with a range of second line TB drugs.

Alchemy For Growth

The world of life sciences is converging like never before and the convergence of pharmaceutical, biotechnology and medical technology would improve outcomes that could dramatically alter drug development and delivery.

Today, over 1700 Lupin scientists spread across research hubs in India, US, Japan and Europe are working to make Lupin a key part of this evolving journey of Innovation. We are excited about the possibilities of what can be; pushing boundaries to broaden our understanding to create quality products that improve and simplify delivery and access. That is why Lupin is stepping on the gas and investing ahead of the curve. FY 2016 was a remarkable transformational year for our Research and Development, where the Company upped the ante by investing Rs 17,318 million in Research & Development (R&D) programs.

We have had 10 years of sustained growth built on our investments in research. We have mined our experiences, learning from our failures as much as from our successes in our quest to bring relevant products and technologies to our markets globally. That is Lupin’s Alchemy for Growth.

Novel Drug Discovery & Development (NDDD)

Lupin’s strong NDDD team has built a pipeline of over 10 highly differentiated and innovative new chemical entities in therapies such as CNS disorders, Oncology, Immunology, Pain & Inflammation and Metabolic disorders.

Key Targets & Status

CNS: Clinical Phase-II efficacy study in Alzheimer’s disease patients is progressing well in Europe; study to be completed this year.

Cancer: Clinical Phase-I study successfully completed in Europe in terminally-ill patients (Lung Cancer, Melanoma & Colon Cancer).

Endocrine: Clinical Phase-I study successfully completed in Europe meeting approvable primary end-point.

Immunology: Clinical Phase-I study successfully completed in Europe. Two proofs of concept Phase-II studies in Europe (Rheumatoid Arthritis and Psoriasis) have been initiated. We have the potential to be the first-in-class in this area.

Biotechnology Development Program

Lupin’s 200+ strong Biotechnology Group has developed a robust pipeline of biosimilars addressing therapies like Oncology, Anti-Inflammatory, Anti-Virals, Rheumatoid Arthritis, Endocrinology, Diabetes, Ophthalmology and Women’s Health.

Over the last 8 years, the Company has gained deep insight in terms of product development, market intelligence regulatory and Intellectual Property.

Highlights - FY 2016

• Successful commercialization of its first two Oncology biosimilars in India - Lupifil (Filgrastim) and Lupifil-P (Peg-Filgrastim) in India

• Global Phase III comparative clinical trial for Etanercept on track across geographies such as Japan and multiple countries within the European Union

• Completed Phase-I PK/PD trial for 2 products and pre-clinical studies for 2 products in India

• Scale-up and technology transfer for 5 products successfully mediated from research to commercial The Company is also making significant investments to augment its Biotech Manufacturing and R&D infrastructure. Lupin’s own fill finish facility is expected to be operational in FY 2017.

Generic Pharmaceutical and API Research

Lupin’s Generic Pharmaceutical and API Research programs have been the foundation of our growth and evolution as a Global Generic Pharmaceutical powerhouse. FY 2016 was a great year with industry-leading performance in terms of number of filings. The Company continued to make strategic investments for the future having fully operationalized a new Injectable product development laboratory at its global R&D hub in Pune, India. Lupin’s state-of-the-art R&D facility in Coral Springs, Florida was inaugurated in August, 2015. Lupin is now amongst the few pharmaceutical majors with the capability to develop world-class inhalation products.

The Company’s generic pipeline focus is to develop relevant products for advanced markets, specifically the complex ones losing patent protection. A majority of our pipeline is made up of products with high barriers to entry like complexities associated with developing complex formulations, device combinations and clinical trials. Development timelines are often longer and costs are typically much higher than those for other generic drug development programs. These factors help limit the number of companies capable of pursuing such generic products and considerably increase the commercial potential of these products. This is complemented by a comprehensive pipeline of oral solids. Lupin has a balanced pipeline of products which will help Lupin establish even higher levels of leadership as a generics player and will play an important role in building Lupin’s specialty pharmaceutical portfolio in the near future.

Cumulative DMF Filings

Highlights - FY 2016

• Filed 36 ANDAs (20 oral, 10 dermatology, 2 ophthalmic, 1 inhalation and 3 other products), including 2 First-to-File (FTF) products with the US FDA. The Company received 39 approvals in FY 2016. Cumulative ANDA filings with the US FDA now stand at 343 with 180 approvals received to date. Lupin now has a total of 45 FTF ANDAs, which include 25 exclusive FTF opportunities

• 8 MAAs were filed with European regulatory authorities and 3 approvals were received. Cumulative filings with European authorities now stand at 67 with the Company having received 52 approvals to date

• Filed 16 US DMFs, taking the cumulative total to 172 DMF filings. Additionally filed 3 EDMF, 2 CEP and 2 Japan DMFs

• The team received further milestone payments of USD 3 million for 2 of its products that are being jointly developed with Medicis Pharmaceuticals Corporation, now Valeant

Intellectual Property Management Group (IPMG)

Lupin’s Intellectual Property Management Group (IPMG) is responsible for building Lupin’s global generic product pipeline as well as creating, managing and protecting its high-value patent estate. The Company’s IPMG has become a benchmark in the industry for its litigation track record and carrying out patent challenges successfully.

In FY 2016, Lupin successfully launched the generic versions of Glumetza, Intermezzo, Loestrin 24 Fe, Phoslo Gelcaps, Generess, Mircette, Lofibra, Ortho Tri-Cyclen Lo to name a few.

During the year, the Company also settled 5 pending litigations as well as got favorable decisions or oppositions on Celebrex, Intermezzo and Teneligliptin.

Cumulative ANDA Filings

In FY 2016, the Company filed 325 patent applications including 136 new inventions taking the cumulative total to 2,525 patents filed till date in India and other countries. This included 57 Formulation patents, 75 API/Process patents, 33 Biotech and 160 NDDD patents. Lupin received approvals for 22 Formulation patents, 11 API patents and more importantly 41 NCE patents in the year.

Lupin Bioresearch Center

The Lupin Bioresearch Center (LBC) located in Pune, India is responsible for conducting bioequivalence studies for Lupin’s generic products and branded formulations. LBC also manages Lupin’s outsourced bioequivalence studies, clinical end-point studies as well as studies for the Company’s drug delivery program. LBC has both clinical and bioanalytical capabilities and houses 2 clinics, a bioanalytical lab with 12 state-of-the-art LC-MS/MS systems, 2 Ion Chromatography (IC) systems and a clinical chemistry lab that has been accredited by National Accreditation Board of Laboratories (NABL). FY 2016 saw LBC establish the in-vitro BE laboratory to meet regulatory requirements of respiratory product development program. LBC completed 36 full studies during FY 2016, taking the cumulative tally to 225 studies till date. LBC has had a stellar compliance record and successfully underwent US FDA, DCGI and French regulatory (ANSM) inspections during FY 2016.

Engineered For Excellence

Our sustained growth and leadership as a global formulations and a strong API powerhouse is a direct outcome of our unrelenting focus on manufacturing excellence and quality.

The philosophy is simple - drive continuous improvement and innovation, eliminate inefficiencies, facilitate teamwork and problem-solving and encourage lean manufacturing. This consistent discipline binds 18 world-class facilities spread across India, United States, Japan, Brazil and Mexico engineered to deliver affordable and quality products globally. Our manufacturing facilities are inspected and audited as per cGMP guidelines as laid down by leading regulatory authorities like the US FDA, World Health Organization (WHO), MHRA (UK), TGA (Australia), MHLW (Japan), ANVISA (Brazil) and MCC (South Africa), to name a few.

Lupin’s manufacturing network is ably backed by Lupin’s Global Supply Chain (GSC) that ensures that inputs reach our plants and our products reach customers ‘on-demand’ and ‘in-time’. Our fill ratios for the US are second to none and our ability to service our customers is the best in the industry, making Lupin a preferred and reliable supplier. A judicious procurement process is in place, ensuring on-time and in-full deliveries within budgeted costs. To mitigate supply dependency, continual de-risking projects are undertaken for seamless supply and cost optimization. Lupin’s manufacturing operations, supply chain and procurement are truly geared to support our global commercial plans.

Highlights - FY 2016

• Lupin successfully cleared US FDA inspections at our Indore, Tarapur, Aurangabad, Mandideep facilities as well as at the Lupin Bioresearch Center in Pune

• Lupin’s manufacturing sites were also audited and approved by other regulators such as MHRA (UK), ANVISA (Brazil) and COFEPRIS (Mexico) during the year

• An industry-leading quality transformation project has been initiated in collaboration with PricewaterhouseCoopers (PwC) across all Lupin facilities, starting with our Tarapur and Goa plants as a pilot

• Lupin commenced work on a new formulations facility at Sikkim; expansion of our Oral Solid Dosage (OSD) facility and setting up a greenfield sterile formulation facility at Nagpur; commenced work on a new OSD plant at Tottori, Japan as well as completed set up of an API facility at Vishakhapatnam

• ‘DISHA’ – the Company’s initiative for operational excellence completed 4 years. Key highlights:

• 100+ operational excellence projects are in progress. Lupin won the prestigious QCI-DL Shah National Award for operational excellence.

• Lupin has benchmarked its performance with global standards such as those of McKinsey & Company on productivity (POBOS).

• Capability development has been a key focus of ‘DISHA’. As a result, 1,110 Lupinytts have been trained and certified for Lean, Six Sigma, TPM, MOST and Investigator Training.

People First

We believe that each Lupinytt has played a vital role in contributing to the success and growth of our business, which has translated into outstanding shareholder value over the years. Our employees have not only been the catalyst in achieving superior performance, but have walked the extra mile and delivered beyond their limits. This passion and commitment of our people is an evitable outcome of the enduring leadership of the organization, a deep-rooted value system and a unique work culture that supports innovation and ambition. We have invested significantly in our human capital by providing several avenues for our people to nurture their skills, develop their potential and make an impact. Our HR programs, policies and practices are all ‘purpose-built’ and dovetail into business strategies so that our people receive precise inputs that are required to deliver high-performance results. These inputs could be in the form of development programs, meaningful employee touch-points, self-paced learning opportunities, diversity initiatives, contribution to social causes and a myriad of other ‘fun’, ‘learn’ and ‘grow’ initiatives. Be it our in-house ‘Induction and New Joiner Assimilation’ program or ‘Front-line Leadership Coaching’ program, our advanced analytic techniques have helped us gauge the effectiveness of our initiatives and make course correction to maximize impact and sustain efficacy of the programs. In today’s time, where technology is omnipresent, work automation is the norm and human capital is the only source of competitive advantage, it makes business sense to identify the critical success levers to build on this advantage.

In FY 2016 we took a big leap in providing technology- enabled learning solutions, promoted collaboration of cross functional teams for agility and action-orientation and at the same time, stayed focused on ensuring and maintaining business alignment. We would like to ensure that each Lupinytt stands to benefit from and experience the transformational culture that we strive to create. We believe that an engaged leader is the best catalyst for creating an engaged workforce. These leaders have tremendous influence on the morale and productivity of those whom they lead. At Lupin, our leaders and people managers at every level are ably equipped through structured learning inputs, formal classroom training and intensive job-oriented skills not only to command and control their teams to achieve results, but also to influence them to contribute meaningfully and valuably. Our open, transparent and enabling culture has created a truly engaged workforce that has ensured absolute alignment of the organizational purpose to their own. At Lupin, we have created a unique value proposition for our employees, built a strong internal brand and established credibility by delivering experiences that are enriching. This reflects continually in our high engagement levels and our consistent recognition amongst the Best Companies to Work for in India for the last six years. In fact, in FY 2016 we took it a step further with Lupin emerging as the proud recipient of the Best Companies to Work for in Asia award as also the Aon Best Employer, India award.

Social Conscience

Progress and self-development are levers to achieve the outcomes we seek in the world – individually and collectively. Yes, I Believe – Dr. Desh Bandhu Gupta (DBG), Founder & Chairman, Lupin Limited "To Believe" was the simple thought that was in DBG’s mind when he set up the Lupin Human Welfare and Research Foundation (LHWRF) in 1988. He in his own way rephrased the moral and ethical role that business could play in society; he believes it is his duty and his responsibility.

MISSION: To provide an alternative model of rural development that is sustainable, replicable and ever-evolving; to empower the underprivileged and marginalized sections of society

VISION: To see Indian villages not only develop economically, but flourish as centers of prosperity and progress

KEY INITIATIVES AND ACCOMPLISHMENTS: These include initiatives in increasing agricultural yields, animal husbandry, skill development & enterprise building, women empowerment, healthcare, literacy, education, rural infrastructure and natural resources management. REACH & IMPACT: LHWRF programs touch the lives of about 2.8 million people living in 3,463 villages in 21 districts spread across 7 states, Rajasthan, Gujarat, Madhya Pradesh, Goa, Uttarakhand, Jammu & Kashmir and Maharashtra. The Foundation operates through 18 hubs in these states.

THE OBJECTIVES:

Economic	Social	Infrastructure
Create opportunities for employment of youth and women.	Develop an outlook towards hygiene and healthy lifestyles.	- Create facilities and basic infrastructure like:
		- Roads
Boost primary means of livelihood by increasing yield from agriculture and animal husbandry.	Instill an urge amongst the villagers to work for their self-development.	- Natural resource management
		- Equipping schools
		- Creating and enhancing Community centers
Strengthen secondary occupations like cottage industry, handicrafts and service sector through training, quality enhancement and building marketplaces.	Augment requisite social, cultural, & spiritual outlook in rural communities.	- Banking facilities Drinking water
		- Basic sanitation

A Balanced Recipe

Business performance & balance sheet highlights

Our business operations continue to unlock and deliver value enabling us to drive growth across key markets globally. FY 2016 saw Lupin maintain its upward growth trajectory in spite of a very challenging and weak global economic environment. We ended the fiscal on a high note registering stellar performance across all key markets. Lupin remains committed to delivering incremental value which is reflected in shareholders return of over 15 times in the last 10 years, a CAGR of 32%.

• The Company recorded consolidated Net Revenues of Rs 137,016 million in FY 2016, a CAGR of 19% over the last 5 years

• Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) grew to Rs 39,412 million as compared to Rs 38,593 million in FY 2015, a CAGR of 27% over the last 5 years

• Profit Before Tax (PBT) grew to Rs 34,330 million during FY 2016, a CAGR of 28% over the last 5 years

• Net Profit was Rs 22,707 million in FY 2016 representing a CAGR of 21% over the last 5 years

• Our Reserves & Surplus increased to Rs 108,943 million during FY 2016

• Net Operating Working Capital increased to Rs 54,099 million as on 31^st March, 2016 as against Rs 30,980 million in the previous year

• Net Debt-Equity ratio for the Company stands at 0.58:1

Earnings per Share, Dividends & Taxation

The Company recorded Earnings Per Share (EPS) of Rs 50.45 during FY 2016. Lupin’s Board of Directors proposed a dividend of 375%. The Company’s effective tax rate for FY 2016 was 34%.

Investing in our Future Mergers & Acquisitions (M&A)

Lupin has been consistent in investing to expand its global business footprint over the last 10 years. In that respect, FY 2016 was a year of heightened M&A activity where the Company stepped on the gas to expand and grow its presence in existing markets, create beach-heads to enter new ones and also add brands to create meaningful growth drivers for the future. FY 2016 saw the Company announce and complete the acquisition of Gavis Pharmaceuticals LLC and Novel Laboratories Inc., in the US for USD 880 million; the largest buyout executed by an Indian Pharmaceutical company in the US. The acquisition enhances Lupin’s scale in the US generics market and also broadens Lupin’s pipeline in dermatology, controlled substance products and other high-value and niche generics. The New Jersey manufacturing facility is Lupin’s first manufacturing site in the US. Gavis has 58 ANDA filings pending approval with the US FDA and a pipeline of over 65 products under development. The acquisition goes a long way in strengthening Lupin’s leadership credentials in the US generics market and adds to our overall growth momentum. During the year, Lupin also acquired a specialty product portfolio in Germany from Temmler Pharma GmbH & CO. KG. The portfolio includes 13 fast growing specialty products including key Central Nervous System products and other specialty products. Lupin’s acquisition of 100% equity stake in Medqumica Indstria Farmacutica LTDA, Brazil marked the Company’s foray into the high growth Brazilian market and helped shore up its position in the Latin American pharmaceuticals market, coming close on the heels of our acquisition of Laboratorios Grin, S.A. de. C.V. in Mexico the previous fiscal.

Lupin entered into a Strategic Co-marketing Agreement with Boehringer Ingelheim for co-marketing Linagliptin, a novel Dipeptidyl peptidase-4 (DPP-4) inhibitor in India; the DPP-4 Inhibitors market in India is growing at 31% (IMS MAT March 2016).

Capital Expenditure

We continue to invest in creating new manufacturing facilities as well as ramping up existing manufacturing facilities globally to build capacities to meet future demand. We are also investing in technology, automation and IT infrastructure to help us build seamless business operations globally. The Company invested Rs 11,681 million on capital expenditure during FY 2016.

Research & Development

Lupin has always invested ahead of the curve and nowhere is this more obvious than our investments in R&D. FY 2016 saw revenue expenditure on R&D increase to Rs 16,038 million, 11.7% of Lupin’s Net Sales globally, our highest ever. The year saw the Company operationalize its new Center of Excellence for Inhalation Research in Coral Springs, Florida, in the US. The new research center would focus on the development of a global pipeline of inhalation products targeting treatments for Asthma, Allergic Rhinitis, Chronic Obstructive Pulmonary Diseases and other Lung diseases. We are investing in our future by creating a quality pipeline of complex generics, biosimilars and NCE’s.

Internal Control Systems & Information Technology (IT)

Lupin today, has in place a completely scalable and automated financial control and process framework which can effectively support any increase in growth and complexity across our global business operations. A well-established and empowered system of internal financial audits and automated control procedures ensures financial discipline and compliance. The Company has over the last decade made consistent investments to create a process integrated, IT enabled business organization. We have been working on re-engineering our internal Business Processes and reporting framework to help build efficiencies across the Companys operations. All Lupin businesses exist and work together in a common technological environment that includes the Companys global Enterprise Resource Planning (SAP) and Business Intelligence (BI) platforms. Key achievements this fiscal included the implementation of advanced reporting platforms such as TM1 Cognos, a planning, budgeting and forecasting platform that has been deployed with critical functions like SCM, HR and Manufacturing. This will enable complete automation, standardization and transparency in the planning process sparing time for meaningful analysis. All these initiatives are ensuring better operational and transactional control and helping us achieve better efficiencies within our businesses.

Risks, Concerns & Threats

FY 2016 was by the far the most volatile year that one has witnessed in the recent past given uncertainty born out of political turmoil, global economic slowdown as well as sharp fluctuations in global crude prices and foreign currencies. The way we managed risk was not only business critical but a key contributor in Lupin turning out another strong business year. Our hedging strategy for the short, medium and the long-term through forward exchange contracts helped minimize FOREX volatility risk. Our continued investments in creating a global supply chain leveraging real time business intelligence, reporting and forecasting systems has helped us ensure business continuity and sustained growth to deliver value. We continue to navigate challenges within the Industry successfully, be it price cuts or increased price controls, customer consolidation or increased competition. Our global supply chain, our efforts at continuously de-risking global procurement, our ability to increase market shares in key markets and our ability to service key customers globally has enabled us to consolidate and build on our leadership credentials and maintain growth momentum.

We have built a world-class financial organization standing tall on the pillars of Integrity, Discipline, Foresight, Prudence and Accountability – We at Lupin have a perfectly balanced recipe for growth and leadership.

Ramesh Swaminathan

Chief Financial Officer & Executive Director Lupin Limited