sanofi india Management discussions

Economic Overview

Amid a challenging global economic landscape and deteriorating geopolitical conditions, India continues to shine as a bright spot. It is the fifth-largest economy in the world and is poised to retain its position as the worlds fastest-growing major economy. Its GDP growth remained buoyant at 7.3% in FY 2023-24 as against 7.2% in FY 2022-23, supported by robust domestic demand, moderate inflation, a stable interest rate environment, and strong foreign exchange reserves. Furthermore, an accelerated pace of economic reforms and increased capital expenditure paved the way for construction activities and large-scale employment opportunities in the country. The International Monetary Fund (IMF) commended Indias economic resilience, robust growth, and notable progress in formalization and digital infrastructure.

India had successfully harnessed inflation in FY 2023-24 which is still plaguing major advanced economies. Indias Consumer Price Index (CPI) inflation rate decreased to 5.69% (provisional) in December 2023 against 5.72% in December 2022. The RBI, in its efforts to control and boost economic growth, decided to keep the policy repo rate unchanged at 6.50%. Furthermore, Indias per capita Net National Income (NNI) at constant (2011-12) prices increased by 6.08% from 98,374 in FY 2022-23 to 1,04,550 in FY 2023-24. Due to increasing disposable income levels, there is a surge in household consumption in both urban and rural regions, boosting the demand across sectors.

Indias economic outlook is optimistic as it reaps the benefits of demographic dividend, physical and digital infrastructure enhancements, increased capital expenditure and the governments proactive policy measures such as Production Linked Incentive (PLI) Schemes. According to the IMF, the Indian economy is expected to expand steadily at 6.5% in 2024.

Industry Overview

Indian Pharmaceutical Industry

India is the worlds third-largest pharmaceutical manufacturer by volume and the largest provider of generic medicines, occupying a 20% share of global supply by volume and contributing to around 60% of the global vaccines. The Indian pharmaceutical industry experienced steady growth over the last few years with a focus on generic medicines. The rapid expansion of generic drug manufacturing is a significant trend, solidifying Indias position as a global pharmaceutical hub. The Indian pharmaceutical industry offers 60,000 generic brands across 60 therapeutic categories and manufactures 500+ different Active Pharmaceutical Ingredients (APIs).

The Indian pharmaceutical market recorded a 10% growth in 2023, aligning with the 5-year CAGR. The growth was primarily driven by price increases, followed by volume and new introductions. In terms of growth drivers of the market, the predominant factor is price-led growth of 4%. It is closely followed by 3% volume growth, showing improvement compared to the previous year. The loss of patent for several chronic molecules and a surge in new launches contributed to 3% NI led growth.

Most chronic therapies have recorded slower growth in 2023 compared to the 5-year CAGR. There was loss of patent in few Cardiology and Diabetes molecules leading to lowering of the average price. Anti-Infectives demonstrated a growth rate higher than the average CAGR in 2023. This is mainly due to higher growth in Amoxy Clav and in antibiotics like Ceftriaxone and combinations, Meropenem, etc. Oncology and Vaccine therapies also recorded higher growth in 2023.

Indian drugs are exported to more than 200 countries in the world, with the US being the key market. Pharmaceutical exports are likely to touch US $28 billion in FY 2023-24, registering 10.2% growth, primarily due to drug shortages in the US and Europe and a revival in demand in Africa. According to IQVIAs report ‘The Global Use of Medicines 2024 Outlook through 2028, global spending for medicines is expected to reach US$ 2.3 trillion by 2028. The volume use of medicines globally is expected to grow at an average 2.3% rate through 2028, driven by China, India and other Asian markets all growing faster than 3%. This will create huge opportunities for

Indian pharmaceutical companies.

Various government schemes such as the production-linked incentive (PLI) scheme and the Strengthening of Pharmaceutical Industry (SPI) scheme have propelled the growth of the pharmaceutical sector. The flagship scheme, Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP) has achieved the target of opening 10,000 retail outlets to provide quality generic medicines at affordable prices. Additionally, 206 medicines have been added to the product basket in 2023. Furthermore, the Indian pharmaceutical sector attracted a foreign direct investment (FDI) inflow of 4,456 crore from April 2023 to September 2023.

The growth momentum of the Indian pharmaceutical industry is expected to continue in the coming years on the back of favorable government policies, increasing foreign investment, rising healthcare expenditure, rapid use of innovation and technology, and emphasis on domestic manufacturing of quality pharmaceutical products.

Growth Drivers

Improving affordability driven by rising per capita income: The middle-class population and per capita income are growing in India and other emerging markets.

Increased purchasing power and awareness have led to a rise in spending on healthcare solutions, including pharmaceutical products.

Growth in health insurance coverage and infrastructure: The penetration of health insurance is expected to increase with government-sponsored initiatives such as Ayushman Bharat -Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) and 7,200 crore budget allocation in FY 2023-24. Additionally, improvements in healthcare infrastructure will increase access to modern and innovative medicines and drive demand for pharmaceutical products.

Burgeoning lifestyle diseases: Demographics and lifestyle changes have led to the increasing prevalence of chronic diseases such as diabetes and hypertension and contributed to the growth of the pharmaceutical industry.

Growing penetration of e-pharmacy: E-pharmacies are expanding and acquiring a major stake in the overall pharma retail value chain in India. The e-pharmacy market in India was worth 25.50 billion in 2021 and it is expected to reach 89.47 billion in 2027, growing at a CAGR of 22.20% from 2022 to 2027. This will increase access to organized pharmacies across the country and revolutionize the pharmaceutical landscape.

Supportive ecosystem: The government has undertaken several initiatives to boost the pharmaceutical sector in India. The government approved PLI schemes with an outlay of 15,000 crore during the period FY 2020-21 to FY 2028-29 to promote domestic manufacturing of APIs, KSMs (key starting materials) and drug intermediaries.

Company Overview

We are one of Indias leading multinational healthcare companies. We offer a comprehensive product portfolio including a wide range of medications and dietary supplements across various therapeutic segments, such as cardiology, thrombosis, epilepsy, allergies, infections and diabetes (both insulins and orals). With a rich legacy spanning over 75 years, the Company has been at the forefront of supplying high-quality and affordable medicines for patients in India, driven by one purpose ‘chasing the miracles of science to improve peoples lives.

The Company has earned the trust of Indians, and its products are present in one out of three Indian households. As part of the Sanofi SA. Paris, an innovative global healthcare company with one purpose: to chase the miracles of science to improve peoples lives, the Company is committed to transform the lives of the patients in India by bringing first-in-class and best-in-class medicines and therapies in the country.

Manufacturing Operations

The Company has a state-of-the-art manufacturing unit in Goa which is equipped with internationally accredited infrastructure and seamless technology integration. Our manufacturing facility produces approximately 4.5 billion oral solid dosage forms and has prioritized safer, healthier, and environment-friendly working practices with strong quality systems. The manufacturing operations are heavily regulated by governmental health authorities worldwide, including Regierungsprasidium Darmstadt Germany, USFDA, Australia - TGA, WHO, UK-MHRA, Russian health Authorities, NMRA Sri Lanka and various regulatory approvals as per the Indian legislations. These regulations endorse the quality and safety of the products manufactured. We incorporate various digital capabilities for data integrity through automation of the manufacturing process, removal of physical leaflets and implementation of the QR Code.

The manufacturing operations at the Goa site are done in compliance with local and global regulatory norms, ensuring that environmental exposures stay within the specified limits. The waste generated from manufacturing operations is disposed as per the local regulations/

Sanofi guidelines.

Our customer service level has been >99% in 2023 and we intend to maintain the same. The manufacturing process is done on market demand basis to ensure Sanofi products are not out of stock. The Goa site is equipped with state-of-the-art automation systems for the manufacturing process, which ensures closed-loop operations with minimum manual material handling. The automation is further being enhanced to adhere to DIRA (Data Integrity Risk Assessment) compliance and reduction of manual errors. The site at Goa is a strategic sourcing site for the Sanofi Group and is continuously assessed for newer sourcing opportunities in the area of tablet formulations.

The Goa site has an in-house effluent treatment plant, wherein the effluent generated by the process is treated in-house and used for landscaping. There is ZERO discharge of our treated effluent outside the site.

The site has a system for periodic medical check-ups to ensure employee wellness. Voluntary stress tests have been initiated for employees above 40 years post COVID. There are bi-monthly health awareness programs conducted at the site by the internal or external faculty.

All activities are assessed for operational safety risks, and actions are outlined to mitigate any risk identified. Internal audits and external agency audits are conducted to ensure HSE standards are met. Employees are trained on operational safety. The site leadership team and managers conduct managerial safety visits to ensure safe working practices and employees are encouraged to proactively identify workplace weak signals.

As per the POBOS (Pharmaceutical Benchmarking of Solids) study conducted in 2023 by McKinsey, the Goa site is the 3rd most cost-competitive solids manufacturing site globally and also, among 35 sites in Asia. Sanofi Goa cost of goods is in the TOP decile of the Rating. We were at 7 US cents as compared to 10.1 US cents which is the TOP decile bench mark. This ranking has been maintained by the site since 2017, in spite of the challenges and inflation. Goa is also rated in TOP quartile for productivity. Furthermore, the Company is planning to invest in recent technology chillers (viz. centrifugal chillers) in the Goa site in 2024. These energy-efficient chillers will contribute to reducing CO emissions by approximately 3000 tons, in addition to the Solar Project that the site has already installed.

The Company continues to consolidate the network of CMOs (Contract Manufacturing Organizations) for better cost efficiency and management of third-party sites. These third-party manufacturers are qualified at the same level as the owned sites of the Company, in terms of customer service, quality systems and safety. They are regularly audited and supported by a team of specialists.

Operational Overview

Operational Performance FY 2023

The Companys performance for the year under review in the key therapeutic areas is highlighted below:

Diabetes Portfolio Insulin for Diabetes

India is referred to as the diabetes capital of the world. According to ICMR (Indian Council of Medical Research), the number of diabetic people in India increased by 44% and reached 101 million in 2023 from 70 million in 2019. Around 136 million people, or 15.3% of the population, have prediabetes. However, Sanofi, boasting a 75-year legacy, is dedicated to bringing about a transformation and treating people with diabetes by providing high-quality medicines and services. Our differentiated offerings give us a unique position as the only company with a substantial presence in oral anti-diabetes drugs and insulin.

The year 2023 witnessed almost a 20% negative price rationalization on our flagship brand Lantus ?, with Lantus^? getting included in the National List of Essential Medicines. The challenge heightened as the market experienced almost flat volume growth and increased competitive pressure. However, the price rationalization of Lantus presented a valuable opportunity for the Company to impact incremental volumes. Our strategies, focusing on expanding reach and prescription depth, have proven successful, with most lead parameters instilling confidence that the Company is on the correct trajectory for success with Lantus^?.

20% sales growth

for our strategic product Toujeo? in 2023

In addition to Lantus?, another strategic product of our portfolio, Toujeo? performed exceptionally well in 2023, by clocking more than 20% sales growth (Source: IQVIA MAT Dec 23) and contributed to 43% of the incremental sales in its represented market. With the increasing wall of evidence around Toujeo?, we play an important role in familiarizing the medical community with the developing science of time in range and glycemic variability through our educational initiatives. Apidra?, our rapid-acting insulin analog, also recorded around 25% incremental sales in 2023.

(Source: IQVIA MAT Dec 23)

The Company is committed to enhancing its product portfolio to solidify its future leadership in the years ahead. In 2023, we received approvals and positive comments for three new products, which we would launch in the first half of 2024. The Company eagerly anticipates the upcoming launch of its global blockbuster product, Soliqua^?, in India. As part of the Companys ‘India for India strategic outlook, it would also work towards the launch of local innovative products in its insulin as well as oral portfolio.

We would consistently invest in scientific endeavors, conducting clinical studies and research to deepen our understanding of diabetes paradigms in India. In 2023, the publication of the first and only real-world evidence study LANDMARC was published, which would serve as a pivotal reference document in the field of diabetes management in the future. Few additional real-world evidence (RWE) studies are set to be published in the coming months, addressing crucial aspects of diabetes management.

Portfolio for Oral Diabetes

Sanofis Oral Diabetes Portfolio has been a pioneer for quality and first-in-class medicines with Amaryl- the Original Glimepiride since 1997. In the evolving landscape of Diabetes management, Amaryl has maintained a strong position and relevance for over 25 years with the launch of successful line extensions like Amaryl M, Amaryl MV, Amaryl MP and strong play in the metformin category via differentiated formulation of Cetapin XR; each of which features amongst top brands in the industry in respective categories. The Portfolio is currently ranked #5 and continues to consolidate its market position via new Go to Market Models, reinvention of its medico-marketing initiatives to stay differentiated and embrace the power of the digital world to enhance reach and impact. The flagship program ‘Safe & Smart Summit has evolved from focusing on molecule science and evidence to partnering with thought leaders in Diabetes in co-creating meaningful and impactful initiatives for HCP education and patient empowerment with simple and practical self-management strategies.

The program aims to create an inclusive environment for HCPs, Patients and Caregivers to better manage diabetes and has been able to create a strong pull for HCPs across the country. Sanofi continues to strengthen its oral portfolio entering the category of Modern OADs with the upcoming launch of Cetapin S, a quality medication and bioequivalent to the innovator at an affordable price.

Patient Support Programs - Diabetes

As leaders in this segment, we acknowledge the significance of capability and capacity building amongst our stakeholders to alleviate the diabetes burden in our country. It is incumbent on the Company to shape and sustainably manage the diabetes ecosystem.

Our commitment to patients in the country is underlined by our longest and largest serving structured patient support program: Saath 7. This is done with a two-way engagement with patients via a blend of home-based face-to-face (or even remote video call) and tele-counseling over a period of 6 months. It touches the lives of more than 100,000 patients each year, in every major city of India, by educating and hand-holding them through their insulin journey. Through this period, they are provided with better education and training which empowers them to self-manage diabetes and increase medical adherence to help them achieve better therapeutic outcomes.

Digitalization

Through our customer-awareness initiative ‘INTOLIFE (www.intolife.in), we have launched the National Communications Campaign: ‘Sanofi Diabetes Dialogues, a series of social media programs to educate people about various aspects of diabetes management. This campaign successfully generated 90.5 million views across India.

*More details about the success of ‘INTOLIFE initiative are available at (www.intolife.in) and Facebook page of Intolife (https://www.facebook.com/IntoLife.in?mibextid=YMEMSu)

Digital channels for HCP communication have played an important part in our endeavor to reach a large number of HCPs to inform them about the improved affordability of Lantus post NLEM announcement on price cut.

We amplified Lantus price drop Share of Voice (SoV) on 600K HCPs (including uncovered HCPs) on various Digital platforms for HCPs, within the first 3 weeks of NLEM price drop notification. This campaign generated 2 million impressions across various digital channels, resulting in 77% of HCPs becoming aware of the new price for Lantus within the first month.

Under our HCP capability building model, we focused on providing more than 2000 HCPs with a customized learning experience. These digital educational programs were specifically designed to enhance their understanding of early insulinization and to introduce them to our flagship Time in Range (TIR) concept, with an emphasis on the application and benefits of second-generation basal insulins in TIR.

In 2023, we also initiated the ‘Emerging Clinicians Guidance webinar series, for supporting young healthcare professionals in their academic journey. These webinars are designed to impart practical skills to medical college students, such as creating poster presentations and submitting journal articles, which helps in their academic journey. The topics covered are carefully chosen to be unbiased, unbranded, and universally applicable. Although there are numerous knowledge-sharing programs available, our webinars are clutter-breaking because of the content that is relevant for young doctors. The success of our first three webinars is demonstrated by the growing number of participants and the keen interest from heads of departments (HODs) at various colleges and student coordinators.

Central Nervous System (CNS)

The Companys epilepsy portfolio recorded positive growth during the year, with FrisiumR registering a double-digit growth. The CNS portfolio maintained its market share in epilepsy, through different go-to-market approach, regular digital customer connects, market-shaping activities and academic engagements.

A world-class Healthcare Professional education and e-certification program, Neuro eZone was developed in collaboration with the University College of London enrolling 1000+ Neurologists.

Approximately 12 million people in India are living with epilepsy a neurological condition which contributes to nearly one-sixth of the global burden*. It is surrounded by social stigma and taboos that emanate due to lack of correct information. To help bust many common myths and spread right information about epilepsy, we created a film in partnership with Filter Copy one of

Indias leading digital content channels with social news and entertainment for the youth. This video got 25 million views across the multiple social media platforms. Many viewers shared their personal stories related to epilepsy, their challenges and their success stories which sparked a positive discussion among the community. Some comments from viewers expressed gratitude for raising awareness about epilepsy and debunking misconceptions.

*Reference- Epilepsy in India I: Epidemiology and public health - PMC (nih.gov), available at https://www.ncbi.nlm.nih.gov/pmc/ articles/PMC4564458/

Frisium? Suspension: Strengthening commitment towards epilepsy management in India

With the purpose of ‘Not let epilepsy control the childhood we strengthened our commitment towards epilepsy management in India with the launch of Frisium? Suspension. Frisium Suspension comes in unique taste masked formulation of very bitter drug through innovative CBS technology for enhanced patient compliance.

GEMS Portfolio

Thrombosis

For over 25 years, ClexaneR has been the standard in anticoagulant care, leading the way with its vision for a ‘VTE free India. The brand is dedicated to raising awareness about Venous Thromboembolism (VTE) in hospitalized patients.

Digital Initiatives:

Our collaborations with esteemed international scientific associations like the American College of Chest Physicians and innovative initiatives such as the ‘VTE Unplugged podcasts which has garnered support from over 2800 HCPs. Notably, our latest podcast series featuring Chest Faculty Prof. Beverley Hunt saw HCPs spending an average of 22.5 hours engaging with invaluable medical insights. This year, we expanded our reach, recording podcasts with four international faculties, generating 4.5 hours of enriching medical content focused on Clexane, reinforcing our commitment to advancing medical knowledge and patient care.

Clexane^? continues to strengthen its leadership position in thrombosis care. The brand is also actively driving patient education on VTE risk factors, On World Thrombosis Day, the brand orchestrated a comprehensive omnichannel experience, gaining significant traction among healthcare professionals.

Cardiology

Cardace^?, the flagship brand in cardiology with more than 29 years of Indian clinical experience, maintains its position as the foremost Angiotensin Converting Enzymes (ACE) inhibitor brand. The brand is diligently dedicated to enhancing the Post Myocardial Infarction (MI) Protection Space, aiming to optimize cardiovascular outcomes and mitigate the underutilization of ACE inhibitors within this patient demographic. The implementation of a strategically devised omnichannel approach has proven instrumental in elevating brand preference for the Cardace^? group within the Post MI domain.

Antibiotics

Targocid? leverages over two decades of practical experience, unwaveringly dedicated to achieving unmatched patient safety outcomes. As the preferred anti-MRSA agent in the realm of resistant Gram-positive pathogens, particularly for critically ill patients, Targocid^? has garnered unanimous favor among stakeholders. The brand consistently upholds its leadership in this specialized therapeutic domain. Targocid? has exhibited robust performance, achieving growth rates that surpass market benchmarks, both in terms of internal metrics and external indicators.

This success can be attributed to the effective reacquisition of a significant portion of crucial accounts, along with strategic utilization of regular digital customer interactions, market-influencing endeavours, and academic engagements. Moving forward, TargocidR is strategically prioritizing the continued emphasis on the early initiation of antibiotics to diminish mortality rates among hospitalized patients.

A bold leap in thrombosis and heart failure management

In our 25+ years journey of trust and protection, Clexane? (Thrombosis Management) and Cardace? (Post MI Management) have saved countless lives. In line with our ‘India for India strategy aimed at bringing first-in-class and best-in-class drugs to India, we proudly introduce two new brands - Sanoxaban^TM and Carmada^TM marking the evolution of our unwavering commitment to healthcare excellence.

Sanoxaban™ (Apixaban): A Leap in Thrombosis Management

Sanoxaban^TM, also known as Apixaban, takes center stage in our commitment to advancing patient care. It addresses stroke and embolism prevention in Non-Valvular Atrial Fibrillation (NVAF) and Venous Thromboembolism (VTE). With NVAF contributing to 70% of atrial fibrillation cases globally, Sanoxaban^TM stands as a beacon of progress, offering superior prevention over traditional methods.

Carmada™ (Sacubitril + Valsartan): Revolutionizing Heart Failure Management

Our commitment to progress continues with Carmada^TM, a revolutionary Angiotensin Receptor Neprilysin Inhibitor. Targeting heart failure, Carmada^TM relaxes blood vessels, lowers blood pressure, and improves heart function. With heart failure affecting 22.7 million in India, Carmada ^TM represents hope for improved outcomes.

Consumer Healthcare Portfolio

Allergy

Allegra^? and Avil?, our flagship brands, continue to occupy leading positions in the allergy category. While the Allergy category was muted in the year, Allegra demonstrated a robust performance that outpaced the market, driven by Allegra M in the Nasal segment which continues to be a key driver of the category.

During the year, Allegra focused on delivering robust, scientific engagement to HCPs through a series of international and Indian doctor symposiums in partnership with renowned doctor associations like American

Rhinologic Society and American College of Chest Physicians under the Best of Allergy banner. Through these symposiums Allegra delivered more than 5 lakh touchpoints. This was augmented with strong outreach digitally leveraging doctor networking platforms.

At Sanofi, we are committed to addressing some of the worlds most pressing challenges to build a healthier and more resilient world. In that spirit, Allegra stepped up to the cause of building a healthier environment through improving air quality. As part of the CHC Purpose Week, volunteers from the CHC teams were deeply engaged and involved in planting thousands of trees (as per Miyawaki concept) across 24 cities in India to maintain green spaces and help fight the inequality of air quality.

Nutritional Health

It has been an exciting year for DePURA. To unlock the tremendous potential of DePURA 60K, the brand was internalized and is now being promoted by the Sanofi scientific engagement team to the key specialties of Orthos, Gynecologists and Pediatricians with relevant science-backed content. Since the move back to Sanofi, DePURA 60K has undergone a revival and delivered a market-beating performance in the second half of the year.

In addition, DePURA proudly launched a new patent-pending formulation developed by the Sanofi Development Center in Goa. This new Wee dispersion technology launched for both DePURA 60k and DePURA KIDS has achieved a remarkable reduction in particle size expected to improve patient outcomes and will be a formulation exclusive to Sanofi, providing a compelling competitive advantage in the category.

Pain Care

Combiflam ^?, our heritage brand in the pain care segment, exhibited 5% value growth at the back of multi-layered channel engagement campaigns. Through a robust combination of distributor and wholesale programs, supplemented with various initiatives to enhance indirect distribution coverage, Combiflam delivered growth and retained its position as the preferred choice in pain management.

New Product Launches

The Company continues to launch a slew of new products. Below is the list of new product launches in the pipeline:

Segment	Products	Year
Neurology	Frisium	2023
Cardiology	Sanoxaban, Carmada	2023
Diabetes	Soliqua, Insutage, Cetapin	2024
CHC	Allegra- D	2025

Financial Overview

The Company registered 28,511 million Revenue from Operations for the year ended December 31, 2023, compared to 27,701 million in the previous year, representing growth of 2.9%. Net revenue from India, which constituted 81.5% of Net Revenue from Operations, declined from 23,421 million in 2022 to 23,227 million in 2023, reflecting a marginal de-growth of 0.8% due to flagship brand Lantus ^? bought under NLEM.

The Profit Before Tax and exceptional items increase from 7,323 million to 8,280 million, representing a growth of 13.1% for the year ended December 31, 2023. The Profit After Tax (PAT) decreased from 6,206 million in 2022 to 6,032 million representing a de-growth of 2.8% for the year ended December 31, 2023. Profit is not comparable due to exception items involve between period and price reduction due to NLEM.

Despite the challenges posed by the revised pricing of products listed in the NLEM, the Company recorded consistent growth in operating profit margins which escalated from 24.37% in 2022 to 27.43% in 2023. The improved operating margins were achieved primarily due to the Companys focus on cost optimization, facilitated by operational efficiencies through ‘India for India (IFI)

Key Financial Ratios
Particulars	2023	2022
Operating Profit Margin (%)	27.43	24.37
Net Profit Margin (%)	21.15	22.40
Debtors Turnover Ratio	21.86	20.37
Current Ratio	1.91	2.17
Inventory Turnover Ratio	2.24	2.97
Interest Coverage Ratio	NA	NA
Debt Equity Ratio	NA	NA
Return on Net Worth (%)	83.45	67.88

Opportunities and Risks

Opportunities

Adoption of the latest technologies and innovations:

The landscape of pharmaceutical manufacturing is undergoing a transformative shift. The growing adoption of digital technologies such as artificial intelligence (AI), telemedicine and machine learning (ML) is expected to improve healthcare delivery and amplify the demand for innovative medicines, revolutionize distribution channels and propel the pharmaceutical market in India.

Collaborations and partnerships: Indian pharmaceutical companies are increasingly forming strategic alliances with global counterparts, enabling knowledge exchange, resource sharing, access to newer geographies and co-marketing deals for new drugs. These collaborations and cooperative agreements foster innovation, offer opportunities to broaden existing portfolios and benefit both parties.

China plus one strategy: China plus one diversification strategy is expected to benefit Indian companies as global companies are actively exploring alternatives to Chinese contractors, driven by concerns over geopolitical tensions and supply chain vulnerabilities. India has greater appeal as an attractive alternative and it has tremendous potential to emerge as a reliable base for the manufacture of raw materials and pharmaceutical production. Furthermore, growth in domestic manufacturing will reduce Indias reliance on the import of key active pharmaceutical ingredients (APIs) from China.

Risks

The Company is exposed to several risks. However, it has a structured risk management framework for the effective identification, assessment and mitigation of key risks. The major risks are listed below:

Stringent regulatory environment: The Indian pharmaceutical industry operates under a highly regulated environment. Stringent and evolving regulations in both domestic and international markets and tighter norms for clinical trials as well as for the development of new drugs may hamper innovation and impact the growth of the industry. . Price control and NLEM: The drugs in the National List of Essential Medicines (NLEM) are scheduled drugs that are under price control by the central government. The NLEM can lead to pricing pressures for pharmaceutical companies, affecting their profitability. Inclusion of Sanofis products in the NLEM could adversely impact its growth. Any unfavorable alterations in government policies related to pricing or trade margins may impact the Companys performance.

Counterfeit and sub-standard drugs: The pharma industry has been grappling with issues related to counterfeit or spurious drugs. The presence of fake and substandard drugs in the market erodes trust and tarnishes the industrys image.

Data breaches and cyber threats: The data collected by pharmaceutical companies, including proprietary information about patented drugs, data related to pharmaceutical advances and technologies, and patient information are highly sensitive and valuable. Hence, the pharmaceutical industry is vulnerable to cybersecurity and data breach threats.

Fluctuations in costs of key ingredients: Volatility in prices of active pharmaceutical ingredients (APIs) and intermediates due to several factors, including inflation, changes in government policies, fluctuations in the foreign exchange rates and demand and supply conditions may impact manufacturing cost and profit margins. Investment in R&D: Increasing investment in R&D increases capital expenditure significantly and creates pressure on profit margins. Further, the Company manufactures products in major therapy areas including Diabetes, Cardiology, Thrombosis, Anti-infectives, CNS, Allergy and Vitamins, Minerals and Supplements. The Company depends on the research and development conducted by Sanofi group for new product commercialization. The future research and product pipeline strategy of the Sanofi group may not always cover these therapy areas, which may impact the growth of the Company in the future.

Outlook

With its well-established prowess in drug manufacturing, Sanofi India is well-positioned to capitalize on substantial opportunities in the domestic and international markets.

The Companys established presence in chronic therapies with a focus on diabetology, cardiology, gastro, and CNS products, rationalization of operations and new product launches are expected to drive profitability and bolster its growth.

The Company is steadily advancing its ‘India for India (IFI) strategy by implementing go-to-market initiatives, enhancing operational efficiency, and demonstrating its commitment to accelerate innovation. Through its IFI strategy, the Company focuses on all growth pillars, diabetes, consumer health, a combination of product innovation, supply localization, and strategic partnerships. Furthermore, the Company is demerging its consumer healthcare business into a separate entity, its wholly owned subsidiary, Sanofi Consumer Healthcare India Limited (SCHIL) by the second half of 2024. The demerging will enable the Company to focus on niche therapy areas, bring its global pipeline to India and optimize its growth potential in both pharmaceutical and consumer healthcare sectors in India.

Human Resources

The Company values its employees as the most important asset and integral to its growth and competitive position. We promote a conducive, productive and harmonious work environment. We also motivate employees with recognition and rewards and support them through various training programs to enhance their skills and competencies.

The Companys employee strength stood at 2,174 as on December 31, 2023. The overall industrial relations atmosphere continued to be cordial. Further details on Human resources form part of the "Human Capital" chapter of the Integrated Report.

Internal Control Systems and Their Adequacy

The Company maintains robust internal control systems which are configured in the ERP (SAP) in accordance with the size and complexity of its operations. The internal control systems are strengthened through a blend of standard operating procedures, authorization delegation for approval, and segregation of responsibilities of critical activities. The adequacy of the internal control systems is regularly reviewed as per the Audit Plan approved by the

Audit Committee. Internal audit findings and recommended corrective action plans for the improvement of the business process and internal control system are presented to the Audit Committee. Regular follow-ups are conducted to ensure the implementation of necessary remedial measures. Additionally, quarterly testing of key mandatory controls is undertaken which includes the financial control framework (FCF).

The internal control framework is responsible for timely and accurate reporting of operational and financial transactions, safeguarding of assets against loss or unauthorized disposal, addressing the evolving risks in the business, reliability of financial information, and stringent adherence to the regulations to ensure strong corporate culture governance practices.

The Internal Audit department has adapted to a hybrid auditing approach (physical or remote) based on business dynamics and external context to ensure the Management that all key controls were functioning according to our guidelines.

Furthermore, there has been a concerted effort to automate the monitoring controls of the business through the use of automation tools. This has resulted in a significant increase in employee productivity by automating repetitive and manual tasks, allowing the reallocation of resources to pursue our strategic goals. We are consistently broadening the scope of automated controls monitoring to further streamline and standardize operations, thereby continually enhancing operational efficiency.

The Audit Committee of the Board of Directors reviews the quarterly audit findings presented by the Internal Audit department and the audit program, covering all risks including operational, financial, strategic, technological, etc.

To strengthen the Internal Controls and Compliance culture, the Company has designated individuals as "Compliance/ Control Champions" who serve as ambassadors for the

Internal Controls and Compliance teams, disseminating messages across various areas through peer-to-peer communication in a common language.

Medical Affairs

In the area of Diabetes, the final year results of the LANDMARC study were published in the Endocrine, Diabetes and Metabolism Journal and five posters were presented at the American Diabetes Association Congress 2023, addressing the need for timely initiation and intensification from LANDMARC data. The team disseminated the study results extensively through print media. The team also published review articles on Gla-300 (Toujeo) in special populations, Effectiveness of Gla-100 (Lantus) from Electronic medical records/ Registries (LIVE INDIA and REALITY) and Evolution of Guidelines on Insulin Therapy in International diabetes journals. Furthermore, Mentor-mentee education programs were conducted through virtual forums, upskilling more than 2,000 healthcare professionals on insulin initiation and titration.

GEMS medical team also conducted international speaker meets and webinars for Thrombosis and as part of the launch of Carmada and Sanoxaban. A review on Venous Thromboembolism risk assessment models for different patient populations was published. Online newsletters were created and disseminated to physicians to increase awareness of recent updates in the management of Venous Thromboembolism.

The flagship program on Sulphonylureas (Amaryl) namely ‘Safe and Smart summit involving experts was conducted followed by regional rollouts to physicians. Additionally, the program ‘Ideas Evolve (Targocid) for critical care specialists on anti-infectives was extended to physicians across India.

In the Consumer Health segment, the Allegra medical team in association with ICS and AOI, organized the Pause Atopic

March program. This event was attended by pulmonologists, ENTs, pediatricians, dermatologists, and physicians. An oral presentation on the safety and effectiveness of Fexofenadine HCL 60 Mg+ Pseudoephedrine HCL 120 Mg in participants with Allergic Rhinitis was delivered at AOICON 2023.

Our teams gathered customer insights through interactions with physicians. Advisory boards and consultations are carried out through office-based medical engagements. Expert group meetings, one-to-one hybrid interactions with >6000 physicians, and responses to on-demand queries were executed with quick turnaround time through field-based medical teams, achieving a Customer Experience score of 100%.

Cautionary Statement

Certain statements in the above Report may be forward-looking and are stated as required by the legislations in force. The actual results may be affected by many factors that may be different from what is envisaged in terms of future performance and the outlook presented above.