For the financial year under review, the business operations of the
Company comprise Pharmaceuticals.
a. Economy, Industry and Development
The COVID-19 pandemic has been the most impactful global public health
crisis in decades, and yet it has illustrated the resilience of global health systems as
they have readily adapted to peaks in demand.
The outlook is uncertain again amid financial sector turmoil, high
inflation, ongoing effects of Russias invasion of Ukraine, and three years of COVID1.
However, the Indian Economy continues to show resilience amid global uncertainties, it is
expected to be 6.7 percent in FY 2022-232.
Structural changes in policy, centered around financial inclusion, has
created a solid foundation for long term growth in India.
Trends in medicine use and spending have been impacted by the immediate
effects of COVID-19, with a seven-year cumulative reduction in spending of USD 175 billion
through 2026 compared to the pre-pandemic outlook. Spending on COVID-19 vaccines and novel
therapeutics are expected to generate more than USD 300 billion in spending over the same
period, and the outlook is a cumulative USD 133 billion higher than projected prior to the
pandemic3.
The global medicine market is expected to grow at 3 - 6 percent CAGR
through 2026, reaching about USD 1.8 trillion in total market size in 2026, including
spending on COVID-19 vaccines4. This will be supported by strong growth in
pharmerging markets and new brands in developed markets will contribute to global spending
through 20 263.
The Indian Pharmaceutical Industry is currently valued at USD 42
billion and is expected to reach USD 65 billion by 2024 and ~USD 120 - 130 billion by
2030. Indian pharma exports witnessed a growth of 103 percent since 2013 to 2022. Exports
achieved in 2021-22 is the Pharma Sectors best export performance ever. It is a
remarkable growth with exports growing by almost USD 10 billion in 8 years5.
Indian drugs are exported to more than 200 countries in the world, with the US being the
key market6.
The Prime Minister of India announced the pilot project of the National
Digital Health Mission (‘NDHM) on August 15, 2021, and launched the project on
September 27, 20217. It will also aim to digitally reconcile the gap among
different stakeholders in Indias healthcare sector. NDHM comprises of five key
components such as Health ID, Patient Health Record, Electronic Medical Record, Digi
Doctor Platform, and Health Facility Registry. At a later stage, NDHM will also include
e-pharmacy and telemedicine services8.
According to NDHM, individuals will get a health card (ABHA: Ayushman
Bharat Health Account) containing personal details and current health record of the
cardholder. This mission will connect medical practitioners and patients digitally.
Additionally, it will promote stable and well-structured healthcare across the nation. The
ABHA number will be used for the purposes of uniquely identifying persons, authenticate
and threading their health records across multiple healthcare systems and stakeholders
with a consent from patient8.
The health-tech start-up space in India is witnessing an exponential
growth since COVID-19 pandemic. Pandemic has opened many opportunities for start-ups in
the areas of online video consultations, ordering medicines online, managing chronic
conditions using technology. The start-up ecosystem is well supported by start-up India,
is an initiative of the Government of India.
b. Performance
Revenue from operations for the financial year ended March 31, 2023 was
3,787.4 million illustrating a decrease of 5.3 percent over the previous year.
The Profit/ (Loss) before tax for the year stood at 1,153.8 million
versus (38.2) million in the previous year which is net of exceptional item.
Year 2022-23 witnessed the third wave of COVID-19 pandemic along with
sporadic increase in cases across geographies. However, having learnt from the previous
two waves, business was equipped to navigate this and ensure business continuity keeping
in mind employee safety.
Novartis continues to engage Physicians for high brand recall and for
dissemination of key scientific messages. This is done through differentiated campaigns
channelized through RTEs (Rep Triggered Emails) and CMEs (Continuing Medical Education).
We continue to create high differentiation for Novartis brands in a cluttered market for
Transplant maintenance portfolio. Physicians have adapted well to digital engagements and
we continue to implement them.
The Ministry of Health and Family Welfare, Government of India, has
released the revised National List of Essential Medicines (NLEM), 2022. The revised list
of NLEM has impacted 9 (Nine) brands marketed by the Company. These brands are majorly in
the areas of Oncology and Neurology.
The Indian population currently has a very high burden of vascular risk
factors, such as diabetes, hypertension and obesity, which can adversely impact the onset
and progression of dementia1. Offering great convenience and safety, our
Neurosciences innovative medicine for Alzheimers disease dementia, Exelon
Patch has seen greater patient acceptance and usability which is reflecting in the growth
numbers.
1 Vijayalakshmi et al. Changing demography and the challenge of
dementia in India. Nature Reviews Neurology 17, 747-758 2021
c. Operational performance
The Pharmaceuticals business registered Net Revenue from Operations of
3,787.4 million representing a decrease of 5.3 percent over the previous year.
Transplant business observed gradual recovery in the number of
transplants done throughout the year post COVID-19. Transplant business growth was driven
by the gain in induction therapy patient share where Simulect became a preferred choice of
induction therapy especially in low to moderate risk patients. This was achieved by
continuing to drive innovative medico-marketing initiatives focusing on ‘Prevention
of Infection. The innovative ‘TRIO campaign aimed at driving a
portfolio-based approach, has led to the revival of the maintenance portfolio.
It has been a year of the exclusive sales and distribution arrangement
entered into with Dr. Reddys Laboratories (Dr. Reddys) for the Established
Medicines Brand which include the Voveran range, the Calcium range and Methergine. The
arrangement aimed to broaden access of these medicines to larger geographies to benefit
many more patients, more efficiently through an expanded field force.
Pain portfolio with its flagship brand Voveran range rank improved by 2
points from April, 2022 to February 20231 and a 2.9 percent market share gain
for Voveran range in February, 2023 vs October, 20222. There is an increase in
share of voice and Voveran gaining prescription share among doctor specialties across
India. This was an outcome of strong differentiation for Voveran Emulgel in a cluttered
counter-irritant market with the ‘The Cool Movement demonstration campaign.
A high-pitched campaign contributing to better management of joint pain
and stiffness by driving patient awareness programs, ‘Zindagi Se Milao Kadam
further extended to enable patients to move beyond pain and stiffness through simple and
handy exercise education tool. ‘Awareness for Life Corporate Awareness talks
were conducted across India to raise awareness for joint pain at workplace. The premise is
that 72 percent office workers experience joint pain at workplace3.
The following brands hold key positions in major therapeutic areas such
as:
| Therapeutic Area |
Therapeutic Area Product |
| Bone and Pain |
Voveran? |
| Transplantation Immunology |
Simulect?, Certican?, Sandimmun?,
Neoral?, Myfortic? |
| Neurosciences |
Tegrital?, Exelon? |
References:
1 IQVIA MAT Feb23
2 Healthplix report Feb23
3 Dr. Reddys reported information
d. Key Financial Indicators
| Particulars |
2022-23 |
2021-22 |
| Operating profit margin (%) |
15.6 |
4.4 |
| Net profit margin (%) |
27.3 |
-0.9 |
| Debtors turnover ratio |
9.4 |
9.6 |
| Current ratio |
4.2 |
3.3 |
| Return on Equity (%) |
14.1 |
-0.5 |
| Inventory turnover ratio |
6.6 |
7.1 |
| Debt service coverage ratio |
19.4 |
1.0 |
| Debt equity ratio |
0.03 |
0.03 |
| Return on capital employed (%) |
7.9 |
-2.8 |
| Return on Investment |
5.2 |
3.2 |
Reasons for change compared to the previous financial year in key
financial ratios are as follows:
Operating profit margin
Operating profit margin is a profitability or performance ratio used to
calculate the percentage of profit of a company produces from its operations. It is
calculated by dividing the operating earnings before interest and tax by turnover. Margins
have improved because of operational efficiencies.
Net profit margin
The net profit margin is equal to how much net income or profit is
generated as a percentage of revenue. It is calculated by dividing profit for the year by
turnover. Net profit margin in the financial year 2022-23 has improved due to operational
efficiencies, interest on income tax refund and an exceptional item relating to business
transactions towards its erstwhile associates of Established Medicines Brand
(‘EMB) under employee separation scheme in previous year 2021-22.
Debtors turnover ratio
It is calculated by dividing turnover by average trade receivables, to
quantify a companys effectiveness in collecting its receivables. No major movement
compared to previous year.
Current ratio
The current ratio is a liquidity ratio that measures a companys
ability to pay short-term obligations or those due within one year. It is calculated by
dividing the current assets by current liabilities. Current ratio has improved due to
decrease in current liabilities due to inclusion of liability pertaining to exceptional
item relating to business transaction towards its erstwhile associates of EMB under
employee separation scheme in previous year.
Return on Equity
Return on equity is a measure of profitability of a company expressed
in percentage. It is calculated by dividing profit for the year by average
shareholders equity. Return on equity has improved due to operational efficiencies,
interest on income tax refund in year 2022-23 and an exceptional item relating to business
transactions towards its erstwhile associates of EMB under employee separation scheme in
previous year.
Inventory turnover ratio
I nventory turnover is the number of times a company sells and replaces
its inventory during a period. It is calculated by dividing turnover by average inventory.
No major movement compared to previous year.
Debt service coverage ratio
The debt service coverage ratio measures how many times a company can
cover its current interest payment with its available earnings. It is calculated by
dividing earning available for debt service by lease payments. The ratio has been impacted
positively due to exceptional item relating to business transactions towards its erstwhile
associates of EMB under employee separation scheme in previous year.
Debt equity ratio
The ratio is used to evaluate a companys financial leverage. It
is a measure of the degree to which a company is financing its operations through debt
versus wholly owned funds. It is calculated by dividing lease liabilities by shareholders
equity. No major movement compared to previous year.
Return on Capital employed
Return on equity is a measure of profitability of a company expressed
in percentage. It is calculated by dividing profit before interest and tax for the year by
capital employed. Return on capital employed has improved due to operational efficiencies,
interest on income tax refund in year 2022-23 and an exceptional item relating to business
transactions towards its erstwhile associates of EMB under employee separation scheme in
previous year.
Return on Investment
Return on investment is defined as return earned on the investment
done. It is calculated by dividing weighted average interest income on bank deposit by
weighted average bank deposits. Return on investment has improved due to operational
efficiencies.
e. Risks, Threats, and Concerns
Supply continuity, quality of drugs, increasing cost pressure,
inflation, high price elasticity (especially in Transplant products), control of prices of
certain drugs under the Drug Price Control Order (‘DPCO) continues to affect
the profitability of the Pharmaceutical Industry. Revision of NLEM in September, 2022 has
resulted in revision of ceiling prices, which would put further downward pressure on drug
prices. Building investments in non-traditional opportunities, coupled with heightened
competition and a rising cost of talent, will result in margin pressures.
The Indian Pharmaceutical Market (‘IPM) is dominated by
generic formulations and these drugs account for nearly 75 percent of the pharma industry.
Prescription by generic names could also have an impact on pharma companies and it could
necessitate a change in the Companys promotional strategies.
Regulations to cap trade margins on non-scheduled products, could
impact the business model for trade generics.
f. Outlook
Medicine spending in India is projected to grow 9-12 percent over the
next five years, leading India to become one of the top 10 countries in terms of medicine
spending1.
The last two years have been difficult for the world economy on account
of the COVID-19 pandemic. Repeated waves of infection, supply-chain disruptions and more
recently, global inflation have created particularly challenging times for policy making.
While government spending on healthcare has accelerated, the upward trend has been gradual
rather than transformative, and medium-term targets - which envisage that public health
expenditure will reach 2.5 percent of GDP by 20252 - are unlikely to be met.
However, macroeconomic stability indicators suggest that the Indian economy is well placed
to take on the challenges of the financial year 2023-24.
We are witnessing, Tier 2 and 3 towns are playing a pivotal role in
Indias flourishing economy. As per the National Council of Applied Economic
Researchs (NCAER) estimation by 2025, the contribution of Tier 2 and 3 cities will
escalate to 45 percent by 2025, proving that even the underdogs can triumph against all
odds3.
We have the optimism that with increased focus and harnessing the
potential of the ecosystem, coupled with innovative lifecycle management, leveraging
technology, capability building in the space of Health Technology Assessment and
meaningful partnerships, we are poised to benefit and expand access for many more patients
in India.
1 Indian Pharmaceuticals Industry Analysis Presentation : IBEF
2
https://pib.gov.in/PressReleasePage.aspx?PRID=1793820#:~:text=The National Health
Policy%2C2017,1.3%25 in 2019-20
3
https://www.outlookindia.com/business-spotlight/breaking-the-mold-the-vital-role-of-tier-2-and-3-towns-in-
india-s-flourishing-economy-news-267790
g. Internal control systems and their adequacy
The Company maintains appropriate systems of internal control,
including monitoring procedures, to ensure that all assets are safeguarded against loss
from unauthorised use or disposal. Company policies, guidelines and procedures provide for
adequate checks and balances and are meant to ensure that all transactions are authorised,
recorded and reported correctly.
The Internal Auditor reviews the effectiveness and efficiency of these
systems and procedures to ensure that all assets are protected against loss and that the
financial and operational information is accurate and complete in all respects. The Audit
Committee approves and reviews audit plans for the year based on internal risk assessment.
Audits are conducted on an ongoing basis and significant deviations are brought to the
notice of the Audit Committee of the Board of Directors following which corrective action
is recommended for implementation. All these measures facilitate timely detection of any
irregularities and early remedial steps.
During the year, the Company conducted a detailed review of its
internal control systems, evaluated the internal financial control systems with the Audit
Committee and discussed relevant issues with internal and statutory auditors. Based on the
recommendations of the Audit Committee, the Board has stated in its responsibility
statement that the Company followed proper internal financial controls and that such
internal financial controls are adequate and were operating effectively.
h. Personnel
The Company regards its employees as a great asset and accords high
priority to training and development of employees.
Number of permanent employees in the Company as on March 31, 2023 was
67.
Disclosures pertaining to remuneration and other details as required
under Section 197(12) of the Companies Act, 2013 (hereinafter referred to as ‘the
Act) read with Rule 5(1) of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014 are annexed to this report as an Annexure A.
In terms of the provisions of Section 197(12) of the Act read with
Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014, a statement showing the names and other particulars of employees
drawing remuneration in excess of the limits set out in the said Rules forms part of this
Report. However, in terms of first provision of Section 136(1) of the Act, the Annual
Report and Accounts are being sent to the members and others entitled thereto, excluding
the aforesaid information. If any member is interested in obtaining a copy thereof, such
member may write to the Company Secretary & Compliance Officer, stating their Folio
No./ DP ID and Client ID, whereupon a copy would be sent.
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