Vivimed Labs Ltd Management Discussions

GLOBAL ECONOMY

In 2024, the global economy entered a phase of muted stabilisation rather than a strong rebound. While postpandemic disruptions eased, pre-crisis growth momentum remained out of reach. A confluence of structural challenges marked this period, prompting the World Bank to label it the weakest half-decade of global growth since the 1960s. The IMF warns that without decisive reforms; growth could slip further to 2.8% in 2025.

Global growth remained modest in 2024, with the IMF projecting a 3.3% expansion. Beneath this headline figure, regional disparities were pronounced:

• The United States outperformed expectations with 2.6% growth, driven by resilient consumer spending, a strong labour market and manufacturing recovery.

• India led as the fastest-growing major economy, propelled by government capital investment and robust domestic demand.

• Chinas growth slowed to 5.0%, weighed down by corrections in the property sector and weak external demand.

• The Euro Area grew by 1.0%, while Japan saw minimal progress at 0.6%, constrained by soft exports and demographic headwinds.

In contrast to major economies, many developing and low-income nations faced persistent headwinds in 2024. Elevated debt, constrained fiscal space and climate-related shocks defined their economic landscape. Sub-Saharan Africa grew by 3.1% and Latin America by 2.0%, buoyed by commodity exports but limited by tight monetary conditions—highlighting a widening recovery gap.

Inflation eased but remained stubborn. Global headline inflation was projected to decline to 5.8% in 2024 and 4.4% in 2025. However, persistent services inflation complicated monetary policy normalisation, prolonging high interest rates and tightening credit, particularly burdening lower- income economies with rising debt-servicing costs.

Trade dynamics remained volatile. Geopolitical tensions and renewed tariff escalations—especially between the U.S. and China—disrupted investment flows and raised supply-side costs. Despite this, global trade showed early signs of recovery, with projected growth of 3.25% in 2024-25, driven partly by energy transition-related goods. Yet, risks of fragmentation lingered and the IMF cautioned against using tariffs to correct imbalances.

Investment growth stayed subdued. High debt and elevated rates dampened global capital formation. While advanced economies prioritised green energy and digital infrastructure, developing nations struggled with capital flight and declining FDI, which threatened their long-term development.

Outlook: The global economy in 2025 is shaped by a "normalisation squeeze"—where easing inflation and emerging stability come at the cost of slower growth and widening disparities. Tight monetary policy, persistent inflation, geopolitical tensions and trade fragmentation continue to challenge global resilience.

A key narrative is the growing divergence between advanced and emerging economies. Advanced economies are projected to grow at a subdued 1.5%, weighed down by restrictive monetary conditions, soft demand and a cooling labour market. In contrast, emerging and developing economies (EMDEs) remain the primary drivers of growth, with a projected expansion of 4.1%.

Indias FY25 economic narrative reflects bold resilience and strategic foresight amid global uncertainty. Defying volatile headwinds, real GDP grew by an estimated 6.5%, anchored by strong domestic demand and targeted public capital expenditure.

Macroeconomic stability held firm. Retail inflation averaged 5.3%, contained within the RBIs tolerance band despite food price shocks. The repo rate remained steady at 6.50%, striking a balance between growth and inflation.

External dynamics remained resilient. Merchandise exports softened amid weak global trade, but services exports-led by IT, fintech and GCCs-provided a robust buffer. Forex reserves stood at USD 696.7 billion (July 2025), reinforcing currency stability. Nonpetroleum exports hit a record USD 374.1 billion, up 6.0% YoY, while the CAD widened modestly to 1.1-1.2% of GDP, remaining sustainable.

Industrial momentum continued. The IIP rose 4%, driven by a 4.1% uptick in manufacturing. Expanded PLI schemes catalysed private investment in electronics, semiconductors and green energy.

Digital and demographic dividends deepened. UPI has crossed 15 billion monthly transactions, underscoring the rapid digitisation. With a median age of 28.4, Indias young workforce is increasingly powering growth.

Labour market trends remained positive. Unemployment stood at 5.6% in May and June 2025, reflecting steady job creation in both manufacturing and services. Initiatives like the Rs.50,000 Crore Self-Reliant India Fund continue to support MSMEs and inclusive employment.

Outlook: India enters FY26 with momentum and confidence, building on the solid gains of FY25. The outlook signals sustained growth, contained inflation and continued strategic investment, even amid global headwinds. The RBI projects 6.5% GDP growth, echoing FY25 levels. This resilience is expected to stem from strong domestic consumption-across both rural and urban segments-bolstered by ongoing public capital expenditure and the continued impact of FY25s personal income tax cuts, which are lifting demand among middle-income households.

The global pharmaceutical market is projected to grow steadily in 2024, reaching USD 1,645.75 billion, with a CAGR of 6.12% through 2030, targeting USD 2,350.43 billion. While growth has moderated post-pandemic, key drivers include:

• Rising healthcare spend in emerging markets

• Advancements in oncology, immunology and rare disease R&D

• Accelerated adoption of AI in drug discovery

The U.S., China and major European economies continue to lead market share, with China gaining momentum through regulatory reforms and domestic innovation.

Chronic Disease Burden: Rising incidence of cancer, diabetes and neurological disorders is fuelling demand for advanced therapies.

Ageing Population: A growing geriatric demographic is increasing the need for age-related pharmaceutical interventions.

Therapeutic Innovation: Breakthroughs in oncology, immunology and rare diseases—especially in precision medicine, gene therapy and cell therapy—are transforming treatment paradigms.

Tech-Driven Efficiency: AI and ML are streamlining drug discovery, clinical trials and manufacturing, enhancing speed and cost-effectiveness.

Emerging Market Expansion: Improved healthcare access and rising incomes in developing regions are broadening the global patient base.

Biologics and Biosimilars: The demand for targeted biologic therapies continues to rise, while biosimilars gain traction amid patent expirations and cost pressures. Small-molecule drugs remain the dominant force in the overall market share.

Sustainability and ESG Focus: Pharmaceutical companies are ramping up investments in sustainability, focusing on energy efficiency, waste reduction and eco-friendly packaging to meet regulatory standards and strengthen corporate responsibility.

Outsourcing: Outsourcing to CMOs and CROs is accelerating, driven by the need for cost efficiency, faster development cycles and scalable manufacturing solutions.

Pricing Pressures and Regulatory Reforms: Governments worldwide—including the U.S. (via the Inflation Reduction Act), EU and Japan—are ramping up drug price controls, reshaping revenue models and pressuring pharmaceutical profitability.

Supply Chain Vulnerabilities: Geopolitical instability and global disruptions are exposing critical vulnerabilities in pharmaceutical supply chains, disrupting production and distribution due to heavy reliance on region-specific raw materials.

Regulatory Complexity: The pharmaceutical industry faces a constantly evolving and often conflicting set of international regulations, leading to delays in drug approvals and increased compliance burdens.

India has cemented its position as a global pharmaceutical powerhouse—the worlds largest provider of generic drugs and a key supplier of affordable vaccines. Ranked third globally in pharmaceutical production by volume, the industry has demonstrated consistent growth, with a CAGR of 9.43% over the past nine years.

India plays a pivotal role in global healthcare, supplying over 50% of the worlds vaccines, 40% of the U.S.s generic drug demand and 25% of the UKs medicines. Domestically, the industry comprises 3,000 drug companies and 10,500 manufacturing units, including the highest number of US FDA-compliant facilities worldwide.

Currently valued at US$50 billion, the industry generates over US$25 billion in exports, accounting for 20% of global generic exports. Its projected to reach US$65 billion by 2024, US$130 billion by 2030 and US$450 billion by 2047. This growth translates into affordable medicines, improved healthcare and widespread job creation—from small towns to major cities, Indias pharmaceutical sector is driving opportunity and saving lives.

Innovation-Led Growth: Indian pharma is shifting from volume- driven generics to innovation-led models, with rising R&D investment in complex generics, biosimilars, novel delivery systems and specialty therapies. Global partnerships and innovation hubs are accelerating this transformation.

Global Market Expansion: Regulatory approvals in the U.S., Europe and Japan are enabling Indian firms to scale globally. Strategic moves in differentiated portfolios and backward integration are strengthening their foothold in regulated markets.

Digitisation Across the Value Chain: AI-driven drug discovery, predictive supply chain analytics and digital therapeutics are reshaping operations. Industry 4.0 adoption is enhancing efficiency, compliance and patient engagement.

Rise of CDMO and CRO Services: India is emerging as a global hub for contract manufacturing and research, backed by cost efficiency, skilled talent and regulatory strength.

Government Push for Affordable Healthcare: Initiatives like PMBJP and Ayushman Bharat are driving demand for low-cost generics and fostering public-private partnerships in healthcare delivery.

Regulatory Compliance: Heightened scrutiny from global regulators, especially the USFDA, demands continuous upgrades in quality control, documentation and audit readiness.

Pricing & Margin Pressure: Price caps under NLEM and competitive export markets are compressing margins. Companies must drive efficiency and innovate to balance affordability with profitability.

Talent Retention: As products become more complex, attracting and retaining skilled professionals in R&D, biotech and regulatory affairs is increasingly challenging.

Global Uncertainty: Currency volatility, trade barriers and geopolitical tensions threaten export performance and raw material sourcing, especially in regulated markets.

SPI Scheme: Rs.500 crore (US$60.9M) allocated to boost productivity, quality and sustainability across pharma clusters and MSMEs.

PMBJP Expansion: Target of 10,500 Jan Aushadhi Kendras by March 2025, offering 1,451 drugs and 240 surgical items to ensure affordable access to medicines.

PLI Scheme: Rs.15,000 crore (US$2.04B) outlay (2020-2029) to enhance manufacturing, attract investment and diversify offerings. Rs.604 crore disbursed in Rs.1 FY25 signals active rollout.

Union Budget 2025-26: Rs.5,268.72 crore (US$602.9M) allocated to the Department of Pharmaceuticals-a 28.8% increase over FY25 estimates-reinforcing long-term sectoral commitment.

Vivimed is a global pharmaceutical enterprise dedicated to the development and manufacturing of generic and branded generic formulations. The organisation serves both domestic and international markets through a diverse array of delivery platforms.

Historically, Vivimed functioned as an integrated entity encompassing both API-CDMO and formulation divisions. However, focus shifted to formulation business growth with emphasis on exports, thereby ensuring the provision of high-quality products to its clientele. Additionally, Vivimed offers contract manufacturing services to other prominent pharmaceutical firms.

• Ongoing discussions with large Canadian partners for CDMO projects, substantial offtake of generics expected from next financial year.

• Regulatory filings for Edoxaban in Bolivia and Chile.

• Commercial order for Bilastine from various ROW markets received.

• Upcoming filings for many products in Canada markets.

This business has faced challenges due to disruptions within the field force, resulting in limited traction. Efforts have been made to harmonise salary levels for Medical Representatives and

Area Managers, as this is critical to reducing the high attrition rates within the field force. A proactive approach a new product launches will see a sharp rise of its export earnings

The R&D unit plays a pivotal role in fostering innovation at the company, continually enriching the innovation pipeline with advancements expected to fuel future growth. In the year under review, the team made substantial strides in both developing new products and scaling approved ones, underscoring the companys dedication to maintaining its industry leadership. They also forged partnerships in GCC, CIS and Canadian markets.

• Successful completion and delivery of various projects for our domestic/overseas customers:

• Positive pivotal Bio outcome and successful completion of a critical and protential project.

• Provided technical support for client approvals of products with regulatory queries.

• Ensured commercial supplies of Rivaroxaban Tablets.

• Accelerated development of internal products with commercial supplies in current and upcoming quarters.

• Completed regulatory filings for certain Tablets in several ROW countries.

• Filed multiple Ophthalmic Products in various ROW countries.

• Engaged in discussions with various Australian, EU, Canadian, and Indian clients for product development and tech transfer activities.

The company is dedicated to a people-centric culture, emphasising growth, empowerment and excellence.

People-First Culture: The company fosters a meritocratic, growth-oriented environment that encourages innovation, multiskilling and lateral thinking. Through continuous learning and development, it empowers employees to reach their full potential and prepares them for future leadership roles.

Commitment to Safety: Safety is paramount, with rigorous policies and procedures ensuring a secure workplace for employees, contractors and the surrounding communities.

Values-Driven Excellence: Employees are expected to uphold integrity, professionalism and teamwork. By living these values, the company drives meaningful impact and global progress.

Vivimed maintains strong internal controls to ensure efficient operations and compliance. The company is always working to integrate its various functions, from strategic support (like finance, HR and regulatory affairs) to core operations (such as research, manufacturing and supply chain management).

To enhance internal audit oversight, Vivimed partners with statutory auditors to monitor both legal and operational matters. Theyve also brought in independent agencies as internal auditors. These agencies assess how adequate and effective the internal control systems are and suggest improvements. Any significant findings are regularly presented to the audit committee for review.

In a dynamic global landscape, Vivimed adopts a forward-looking approach to risk management, continuously monitoring internal and external factors that could impact strategic objectives, operational continuity, regulatory compliance and financial reporting.

The companys agile, decentralised risk framework empowers business units to identify emerging risks and implement tailored mitigation strategies. This ensures responsiveness across the organisation and positions Vivimed to navigate disruptions while capitalising on new opportunities.

Risk oversight is embedded into governance practices, with regular updates provided to the Boards Risk Committee. This alignment reinforces Vivimeds commitment to resilience, accountability and long-term value creation.

THIS DOCUMENT CONTAINS STATEMENTS ABOUT EXPECTED EVENTS AND FINANCIAL AND OPERATIONAL RESULTS WHICH ARE FORWARD-LOOKING. BY THEIR NATURE, FORWARD-LOOKING STATEMENTS REQUIRE THE COMPANY TO MAKE ASSUMPTIONS AND ARE SUBJECT TO INHERENT RISKS AND UNCERTAINTIES. THERE IS A SIGNIFICANT CHANCE THAT THE ASSUMPTIONS, PREDICTIONS AND OTHER FORWARD-LOOKING STATEMENTS MAY NOT BE ACCURATE. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS AS SEVERAL FACTORS COULD CAUSE ASSUMPTIONS AND ACTUAL RESULTS AND EVENTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED HERE.