Raymed Labs Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

We submit herewith the "Management Discussion and Analysis Report" on the business of the Company as applicable to the extent relevant.

OVERVIEW OF GLOBAL IMPACT

According to Vision Research Reports, the global pharmaceutical market size was estimated at USD 1,559.53 billion in 2023 and it is expected to surpass around USD 2,832.66 billion by 2033. The pharmaceutical market is expanding at a CAGR of 6.15% from 2024 to 2033. The pharmaceutical market is a vital component of the healthcare industry, responsible for the research, development, production, and distribution of medications and medical treatments. It plays a crucial role in improving public health outcomes by providing essential drugs for the prevention, treatment, and management of various diseases and medical conditions.Several factors contribute to the growth of the pharmaceutical market. Firstly, demographic trends, such as aging populations and increasing life expectancy, drive higher demand for pharmaceutical products to address age-related health issues and chronic diseases. Additionally, rising healthcare expenditures, especially in emerging economies, support greater investment in healthcare infrastructure and pharmaceutical research and development. Moreover, advancements in biotechnology, genomics, and personalized medicine are driving innovation in drug discovery and development, leading to the creation of more targeted and effective treatments. Furthermore, the increasing prevalence of lifestyle-related diseases, such as diabetes and cardiovascular disorders, creates sustained demand for pharmaceutical interventions and therapeutics. Overall, these growth factors contribute to the expansion of the pharmaceutical market globally.

(https://www.biospace.com/article/releases/pharmaceutical-market-size-to-hit-around-usd-2-832-66-bn-by-2033/)

INDUSTRY STRUCTURE AND DEVELOPMENT

Often hailed as the pharmacy of the world, the Indian pharmaceutical industry is booming. It jumped from $40 billion in 2021 to an expected $130 billion in 2030, with projections hitting $450 billion by 2047. Beyond just keeping up with the demand at home, the Indian pharma industry commands over 20% of the global pharma supply chain and addresses approximately 60% of the worldwide demand for vaccines. It meets 40% of the generic demand in the US and provides a quarter of all medicines in the UK. It has undergone a remarkable transformation, evolving into a dynamic powerhouse driving healthcare advancements worldwide. Interestingly, India is the biggest contributor to UNESCO, with a share of over 50-60%. Plus, it boasts of the highest number of USFDA-approved plants outside the U.S.

The industry benefits from cost competitiveness, driven by factors such as lower labor costs, economies of scale, and efficient manufacturing processes. This cost advantage enables Indian pharmaceutical firms to provide competitively priced products both domestically and globally. The extensive scale and diversity of the Indian pharma industry offer resilience and adaptability to the demands of supply chain, enabling it to cater to diverse needs and maneuver through market fluctuations effectively. Such a widespread presence on the global stage underscores the importance of robust supply chain networks capable of meeting stringent regulatory mandates, ensuring high-quality standards, and overcoming logistical hurdles.

Industry Overview

Indian pharmaceutical industry plays significant role globally, supply in affordable and low cost generic drugs to millions of people across the globe. The sector offers lower cost without compromising on quality as is reflected by the fact India has the highest number of United States Food and Drug Administration (USFDA) approved pharmaceutical plants outside the US and also a significant number of World Health Organization (WHO) Good Manufacturing Practices (GMP)-compliant plants as well as plants approved by regulatory authority of other countries. Indias pharmaceutical sector forms amajor component of the countrys foreign trade and has been consistently making trade surplus as may beseenfrom theGraph1A.The pharma exports during the fiscal 2023-24 stood at Rs. 2.30 lakh crore, which is 13 per cent growth compared to Rs. 2.04 lakh crore of exports reported in the previous fiscal year whilethe imports of medicinal and pharmaceutical products, during the fiscal 2023-24 grew 2.02 per cent to $8.27 billion as compared to $8.10 billion in the previous fiscal year.(https://www.pharmabiz.com/ NewsDetails.aspx?aid=168694&sid=1)

Opportunities

The Finance Minister, Ms. Nirmala Sitharaman presented the Union Budget for 2024-25 on July 23, 2024. PM Narendra Modi said that his terms first full Union Budget will lay the foundations of Viksit Bharat and economic trends for Modi 3.0.

Some key highlights in budget 2024-25 for pharma are:

• Three more medicines viz. Trastuzumab deruxtecan, Osimertinib, and Durvalumab have been exempted from Customs Duties.

• Allocation of Rs.1 lakh crore for spurring private sector-driven research and innovation at commercial scale could give a boost to pharma R&D.

• Allocation of funds for skilling is expected to benefit the pharma sector too

• The Rs.100 crore credit guarantee scheme for manufacturing MSMEs without collateral or third-party guarantee in term loans for the purchase of machinery and equipment has also found favour with the pharma MSME sector.

(https://www.expresspharma.in/decoding-budget-2024-25-a-lacklustre-budget-for-pharma/)

Government Initiates - Production Linked Incentive (PLI) Scheme

The Indian pharmaceuticals market is supported by the following Production Linked Incentive Schemes to boost domestic manufacturing capacity, including high-value products across the global supply chain.

• PLI Scheme for Key Starting Materials (KSMs)/Drug Intermediates (DIs) and Active Pharmaceutical Ingredients (APIs) (PLI 1.0) - Under the PLI scheme for Bulk Drugs, the objective is to boost domestic production of 41 select critical bulk drugs in the country. 51 projects have been selected for the 34 notified bulk drugs. Out of this, 22 projects have been commissioned till 31st Jan 2023. An investment of INR 2019 Cr have been reported while employing 1900 persons in the same period.

• Production-Linked Incentive (PLI) Scheme for Pharmaceuticals d (PLI 2.0)-Under the PLI scheme for Pharmaceuticals, 55 applicants have been selected, including 20 Micro, Small & Medium Enterprises (MSMEs). As of 31st Jan 2023, sales of about INR 36,000 Cr have been reported by the select applicants. The scheme has garnered an investment of INR 16,199 Cr by these applicants in the first year of implementation while employing 23,000 persons in the same period.

(https://www.investindia.gov.in/sector/pharmaceuticals)

Threats

1: Regulations and directives

Pharma manufacturing is already highly regulated, with manufacturers continually refining their processes to overcome substantial compliance obligations and costs. Unfortunately, compliance will become even more challenging in the coming years. The U.S. Food and Drug Administration (FDA) recently issued pharma industry guidance documents that impact how organizations collect, manage and submit quality data.

The most significant challenges, however, are being driven by the Inflation Reduction Act of 2022 (IRA). The IRA allows Medicare to negotiate prices on select drugs and requires pharma companies to rebate price increases that exceed the rate of inflation. Experts anticipate that the number of drugs eligible for price negotiation under Medicare will increase substantially in the next few years. This has the potential to negatively impact the industry by reducing margins for profitable products, potentially reducing growth initiatives and investments in R&D, and lowering operating costs.

2: Government relations

Given the Biden administrations efforts to reduce drug pricing, the industrys relationship with the government is somewhat strained. The IRA will arguably have the largest impact by creating new challenges for manufacturers, like reduced profit margins and a decrease in innovation.

3: Talent shortage

As with all sectors, pharma manufacturers are struggling to attract the right talent. According to McKinsey, 80% of facilities are having difficulty finding candidates with the right skills.

4: Cybersecurity and data protection

Cybersecurity threats are a major concern for nearly every industry, but according to IBMs latest report, pharma ranks among the top three industry verticals for the highest average cost of a data breach. In 2023, the global average cost of a data breach in the pharma industry was an eye watering $4.82 million.

Data breaches, however, are not the only concern. Other threats include ransomware and phishing attempts. And, despite being so vulnerable to attacks, the industry has lagged behind others in adopting cutting-edge cybersecurity measures.

5: Cost and inflationary pressures

Inflation is still nearly triple what it was pre-pandemic, and it will continue to play a role in 2024. According to Deloittes 2024 Health Care and Life Sciences Outlook, 36% of survey respondents indicated that the economy and inflation would continue to influence their strategy.

Pharma manufacturers will need to find new ways to reduce costs and improve the customer experience. For many, this will involve adopting new digital technologies to automate processes, improving data analytics capabilities to enable better decision-making, and finding ways to overcome new regulatory challenges.

(https://www.pharmamanufacturing.com/production/unit-operations/article/55000463/five-challenges-pharma-manufacturers-face-in-2024)

DISSCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The financial statements have been prepared in accordance with the requirements of the Companies Act, 2013 and applicable accounting standards issued by the Institute of Chartered Accountants of India. The details of the financial performance of the Company are appearing in the Balance Sheet, Profit & Loss Accounts and other financial statements forming part of this annual report.

INTERNAL FINANCIAL CONTROL SYSTEM

Given the magnitude and nature of its business, the Company has maintained sound and commercial practice with an effective internal control system. The system ensures that all transactions are authorized, recorded and reported correctly to safeguard the assets of the Company and protect them from any loss due to unauthorized use or disposition. The adequate internal information system is in place to ensure proper information flow for the decision- making process. The Company also has well-established processes and clearly defined roles and responsibilities for people at various levels. The control mechanism also involves well documented policies, authorization guidelines commensurate with the level of responsibility and standard operating procedures specific to the respective businesses, adherence to which is strictly ensured. Internal audit is carried out frequently to create awareness and to take corrective actions on the respective units or areas, which need rectification.

These reports are then reviewed by the "Management Team" and the "Audit Committee" for follow-up action.

HUMAN RESOURCE DEVELOPMENT

The Company regards its human resources as amongst its most valuable assets and proactively reviews policies and processes by creating a work environment that encourages initiative, provides challenges and opportunities and recognizes the performance and potential of its employees attracting and retaining the best manpower available by providing high degree of motivation.

Your Company believes in trust, transparency & teamwork to improve employees productivity at all levels.

DISCLOSURE OF ACCOUNTING TREATMENT

While preparation of financial statements, a relevant Accounting Standard treatment has been followed.

CAUTIONARY STATEMENT

The Management Discussion and Analysis Report containing your Companys objectives, projections, estimates and expectation may constitute certain statements, which are forward looking within the meaning of applicable laws and regulations. The statements in this management discussion and analysis report could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operation include raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in the governmental regulations, tax regimes, forex markets, economic developments within India and the countries with which the Company conducts business and other incidental factors.