RPG Life Sciences Ltd Management Discussions

1) Industry structure and developments

The Indian Pharmaceutical Market (IPM) is now valued at 2,33,261 crores with a year-on-year value growth of 8.0% as reported by IQVIA for MAT March 2025.

2) Opportunities and Threats

The Indian market has certain unique characteristics. Branded generics constitute greater than 70% of the retail market and prices are low due to the high level of competition. Early incumbents have dominated due to formulation development capacities. Though Indias rank is much lower in value terms, we rank 3rd in volume terms.

India is expected to break into top 10 countries in terms of spend on medicines as the spending is year 2025-26 since WPI based increase expected to grow at about 10% annually over the next five years. This augurs well for the domestic industry. The Government has emphasized on cost reduction to make healthcare more affordable and generic drugs have remained in focus.

Indian pharmaceutical industry has seen a gradual increase in government healthcare spending and expansion of the private hospital sector. Government initiatives such as allowing 100% Foreign Direct Investment (FDI) in health and medical services and PLI schemes are benefiting the industry.

The Government of India had announced the National Health Policy 2017 where the goal is to attain high level of health and well-being for all ages by improving access, improving quality and making cost of healthcare delivery affordable. The Government also plans to increase health expenditure to 2.25% of gross domestic product by 2025. This is also expected to give a boost to the pharmaceutical sector.

Several socio-economic factors, including increasing sales of generic medicines, continued growth in chronic therapies and a greater penetration in rural markets will further contribute to the growth of the Indian pharmaceutical market. Other contributing factors for growth are heightened health awareness, increasing affluence, changing lifestyles resulting in higher incidence of lifestyle diseases and a fast-growing health insurance industry. In addition, low cost of production and R&D boosts the efficiency of Indian pharmaceutical companies.

There has been an accelerated digital adoption across the pharma value chain right from drug development to patient connect and it is expected that the proliferation of technology will also aid in filling the existing gaps in the healthcare infrastructure. Through intelligent automation, companies are now able to gather an overall insight into a patients journey, from diagnosis to diseases management. This data-based insight, in turn, helps improve drug development and subsequently improves patient outcomes.

National List of Essential Medicines (NLEM) revision in 2022, resulted in 384 medicines coming under the price control and at present, about 18.58% of the Indian market is under price control. During the financial year 2024-25, the Wholesale Price Index (WPI) was only 0.01%, so there was no notable change in prices of products under NLEM. We expect prices to be marginally higher in the current financial is 1.74% which is taking effect from April 1, 2025.

The industry growth is led by chronic disease segments viz. cardiovascular, diabetes, dermatology, oncology and is largely influencedby changing lifestyles. Intense price pressure in global regulated markets, emergence of new local players affecting branded generic prices, delay in approval of manufacturing facilities by regulated authorities and increased regulatory intervention in price fixation for domestic formulations are threats faced by players in the industry.

The Government of India has announced Production Linked Incentive (PLI) scheme for Promotion of Domestic Manufacturing of critical Key Starting Materials (KSMs) /Drug Intermediates and Active Pharmaceutical Ingredients (APIs) in the country. This could lead to opportunities for the Indian Pharma sector in the future.

The Department of Pharmaceuticals has issued the

Uniform Code for Pharmaceuticals Marketing Practices 2024 ("the Code") which delineates permissible and impermissible activities for ethically promoting drugs and addressing complaints regarding unethical marketing practices by pharmaceutical companies. It covers critical areas such as the conduct of medical representatives (‘MRs), the provision of brand reminders and free samples, Continuing Medical Education (‘CME), and relationships with Healthcare Professionals (‘HCPs) and support for research.

3) Segment wise performance

The Company is exclusively engaged in the pharmaceutical business and operates across Domestic Formulations, International Formulations and Active Pharmaceutical Ingredients (API).

During the year under review, the and Plant (F2) has WHODomestic Formulations business achieved sales revenue of 425.00 crores, registering a growth of 10.1% over the previous year. The growth was driven by higher prescription generation, augmented product portfolio through new product launches and line extensions and control on sales hygiene and market inventories. The Company continued to focus on rejuvenation of its product portfolio by host of measures such as diligent life cycle management of the legacy brands, increasing new launches in chronic and specialty therapies such as Cardiovascular-metabolic,

Urology, Rheumatology, Gastroenterology and Dermatology and by entering clinical Dermatology,

Orthopedic and Critical Care segments. The Company also continued expanding customer coverage in targeted segment as well as in-clinic effectiveness of the fieldforce through extensive scientific training, innovative product demonstrations, emphasis on focus brands and innovative promotional strategies.

The International Formulations business achieved sales revenue of 132.30 crores, registering a growth of 24.4% over the previous year. The business has its footprints across geographies of UK, Australia, Canada, Myanmar, Germany, Colombia, Philippines, Vietnam, Mauritius, Chile, South Africa, Kenya, etc. The Company is actively scouting for geographic expansion through strategic partnerships in India, as well as markets like

EU, Canada, Middle East, Asia and Latin America as well as targeting new customers and new products.

A new Abbreviated New Drug Submission (ANDS) was submitted to Health Canada for a new product. An existing product was submitted for registration in a new market viz. Croatia. The Company has won CENABAST tender in Chile for its flagship product. The Company has received product approval in UAE and Mexico. The Company has also executed an agreement with a pharmaceutical company in Kingdom of Saudi Arabia for a complex generic molecule.

The API business achieved sales of 90.24 crores and has grown by 6.1% as against the previous year. Key APIs for the Company include Quinfamide, Azathioprine, Haloperidol, Risperidone, Propantheline Bromide, Lercanidipine, etc.

4) Outlook

As detailed above, the outlook for Indian pharma market is positive. The Domestic Formulations business of the Company will continue to focus on building chronic therapies and specialty portfolios and a comprehensive life cycle management of current legacy products.

The International Formulations business will focus on globalization of existing products, development of new products, scouting of new partners and entry into new markets.

The Companys Formulation facility at Ankleshwar, Plant (F1) has WHO GMP (India), Nigeria and Kenya Health

Authority certifications

(India), EU GMP (Hamburg Health Authority, Germany), TGA Australia GMP clearance, Health Canada Drug

Establishment License, Kenya, Ethiopia, Nigeria and Sudan Health Authority certifications. API facility at Navi Mumbai plant has WHO GMP (India), TGA Australia and PMDA Japan GMP Certifications. Such certifications testify to a hallmark of quality and shall help the Company to enter in new markets across multiple geographies.

The Company has also undertaken modernization and expansion of both formulations and API plants with the objective of export business enhancement.

5) Risks and Concerns

Some of the key brands of the Company are under NLEM. The list of NLEM is increasing. Also, more and more Fixed Dose Combinations (FDC) are coming under scrutiny. The regulatory environment across the globe is becoming more and more stringent, and this makes entry into new geographies more challenging. Low to negative volume growth, reports of counterfeit drugs, rising low cost generics continue to impact the industry.

6) Internal Control Systems and their adequacy

The Company has set up internal control procedures commensurate with its size and nature of the business. These business procedures ensure optimum use and protection of the resources and compliance with the policies, procedures and statutes. The internal control systems provide for well-defined policies, guidelines and authorizations and approval procedures. The prime objective of such audits is to test the adequacy and effectiveness of the internal controls laid down by management and to suggest improvements.

7) Financial performance with respect to operational performance

The total income during the year stood at 666.11 crores. EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) was 172.33 crores. After deducting the Finance Cost of 0.62 crores, Depreciation of 21.43 crores and Taxes of 38.65 crores, the Adjusted Profit After Tax (PAT) was at 111.63 crores.

8) Material developments in human resources/ industrial front

The Company firmly believes that people are its most valued resource, and their efficiency plays a key role in achieving defined goals and building a work environment. In its pursuit to attract, retain and develop best available talent, several programs are regularly conducted at various levels across the Company. Employee relations continued to be cordial and harmonious across all levels and all the units of the Company.

9) Key Financial Ratios

Current Ratio There is an increase in the current ratio on account of higher current investments and trade receivables.

Trade Receivables Turnover Ratio Reduction on account of higher number of receivables days mainly in exports.

Net Capital Turnover Ratio Reduction on account of higher current investments and trade receivables.

Cautionary Statement

Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. influencethe Important factors that could Companys operations include economic developments within the country, demand and supply conditions in the industry, input prices, changes in Government regulations and tax laws.