Zim Laboratories Ltd Management Discussions.


The World Economic Outlook, for October 2019, described the global economy as experiencing a synchronised slowdown, with escalating downside risks that could further derail growth. Since then, some risks had partially receded with the announcement of a US-China Phase I trade deal and a lower likelihood of a no-deal Brexit. Further, monetary policy had continued to support growth and buoyant financial conditions. With these developments, there were tentative signs that global growth may be stabilising, though at subdued levels. This can be seen in January 2020 update of World Economic Outlook by IMF wherein global growth was projected to increase modestly from 2.9% in 2019 to 3.3% in 2020, and 3.4% in 2021. The slight downward revision of 0.1% for 2019 and 2020, and 0.2% for 2021, was owed largely to downward revisions for India. However, the projected recovery for global growth remained uncertain as it continued to rely on recoveries in stressed and underperforming emerging market economies.

The Great Lockdown

The world has changed dramatically since the January 2020 update of the World Economic Outlook. The coronavirus pandemic has resulted in a s tragically large number of human lives being lost. As countries implement necessary quarantines and social distancing practices to contain the pandemic, the world has been put under a Great Lockdown. The magnitude and speed of collapse in economic activity that has followed is unlike anything experienced in our lifetimes. Policymakers are providing unprecedented support to households, firms, and financial markets, and, while this is crucial for a strong recovery, there is considerable uncertainty about what the economic landscape will look like when the world emerges from this lockdown.


The economic impact of COVID-19 in India has been highly disruptive.

The Government of India announced a variety of measures to tackle the situation, from food security and extra funds for healthcare and for the states to sector-related incentives and tax deadline extensions. Despite the negative shortterm shocks from the pandemic, total foreign direct investment into India has remained buoyant. Foreign direct investment by technology firms in the first seven months of 2020 has already reached around US$ 17 billion, boosted by the US$ 10 billion new investment announced by Google in mid-July. An important positive factor for India is its large and fast-growing middle class, which is helping to drive consumer spending. Total Indian consumer spending is forecast to grow by 42% between 2020 and 2025, measured in US$ terms at constant prices.


Indian Pharma Sector Overview

Global pharmaceutical markets are in the midst of major discontinuities. While growth in developed markets is expected to slow down, emerging markets are slated to become increasingly important in the coming decade. The Indian pharmaceuticals market, along with the markets of China, Brazil and Russia, will spearhead global growth.

The drug delivery market is expected to grow at the highest CAGR during 2020-2025 and growth in this segment can be attributed to the wide range of advantages associated with this route of administration. The Indian pharmaceuticals market has characteristics that make it unique. Firstly, branded generics dominate the industry, making up for 70 to 80% of the retail market. Secondly, local players have enjoyed a dominant position driven by formulation development capabilities and early investments. Thirdly, price levels are generally low, driven by intense competition. While India ranks tenth globally in terms of value, it is ranked third in volumes. Pharmaceuticals export from India stood at US$ 20.70 billion in FY20 and includes bulk drugs, intermediates, drug formulations, biologicals, Ayush and herbal products and surgical products. Indias biotechnology industry comprising biopharmaceuticals, bioservices, bio-agriculture, bio-industry, and bioinformatics is expected to grow at an average growth rate of around 30% yoy to reach US$ 100 billion by 2025. Indias domestic pharmaceutical market turnover reached Rs 1.4 lakh crore (US$ 20.03 billion) in 2019, up 9.8% yoy from 129,015 crore (US$ 18.12 billion) in 2018.

Rising income levels and enhanced medical infrastructure have underpinned the step-up in growth trajectories. This growth has been broad-based across therapy and geography segments, and several leading players are beginning to focus on new and emerging opportunities. The pace of innovation in business models has been unprecedented. As a result, the expectations from the India businesses have risen, and aspirations have become bolder.

Novel Drug Delivery System (NDDS)

Novel Drug Delivery System (NDDS) refers to the approaches, formulations, technologies, and systems for transporting a pharmaceutical compound in the body as needed to safely achieve its desired therapeutic effects. It is a system for delivery of drugs other than the conventional drug delivery system and constitutes a combination of advance technique and new dosage forms which are far better than conventional dosage forms. In 2019, Annual Report FY 2019-20 the global Novel Drug Delivery Systems market size was US$ 24,170 million and is expected to reach US$ 27,240 million by the end of 2026, with a CAGR of 1.7% during 2021-2026.2

Based on the route of administration, the pharmaceutical drug delivery market is segmented into oral, pulmonary, injectable, ocular, nasal, topical, implantable, and transmucosal drug delivery. The topical drug delivery market is expected to grow at the highest CAGR during 2020-2025 and growth in this segment can be attributed to the wide range of advantages associated with this route of administration, including convenience and ease of use, right dosage to the right place, painless and non-invasive delivery, superior spreadability, and enhanced patient compliance.

COVID-19 Impact on the Pharmaceutical Drug Delivery Technology Market

The outbreak of COVID-19 has been increasing at an exponential level in many countries. This has led to the need to improve patient care and provide added nutritional/immunity support (including vitamins and other curing drugs) to patients affected by the virus. The medical practices of all sizes are under immense pressure, and healthcare providers need to rely on teleradiology solutions to read diagnostic reports and treat patients. There are a large number of drugs and vaccines in various clinical trial phases which are expected to be launched in coming months/years under emergency usage authorisation guidelines for treating COVID-19. As of May 2020, two vaccines are in Phase I clinical evaluation and 11 in the preclinical stage. About 95 clinical studies are on-going for COVID-19 as potential drug therapies. Such a strong pipeline is anticipated to drive the growth of this market.

Oral Thin Films (OTF)

Recently, oral dispersible films are gaining interest as an alternative to orally dispersible tablets and other conventional orals. The films are designed to dissolve upon contact with a wet surface, such as the tongue, within a few seconds, meaning the consumer can take the product without the need for additional liquid. This convenience provides both a marketing advantage and increased patient compliance.

The opportunity for oral dispersible films as a simple replacement for orally dispersible tablets and other conventional orals is by itself a huge opportunity considering that about 35,000 crores of the present Indian pharmaceutica market consist of oral products with single-dose less than 100mg. The simple advantage of differentiation in a crowded branded generics market-facing pricing pressures coupled with "greater convenience" to the patient is likely to lead to the rapid growth of this dosage form for the next 6-9 years. The intermediate to long term acceleration in growth is expected to come from more sophisticated applications such as sub- lingual/transmucosal absorption. The Company expects a rapid growth phase of the oral thin film market.

Internationally, oral thin film has developed in two different directions - in the pharmaceutical segment as well as in the nutraceutical segment. Both have large potential for business and growth. The pharmaceutical segment will grow based upon the opportunity available, regulatory constraints imposed by the various licensing authorities, the ability for the dosage form to serve as a non-infringing alternative to chemical entitie: coming off-patent and ability of the dosage form itself to enable oral sublingual and transmucosal absorption of small as well as large molecules. Secondly, there are a large number of nutraceutical products available internationally.

The technology to manufacture oral thin films is relatively new, and very few companies have developed proprietary know-how and expertise in the manufacturing process to enable consistent commercial manufacturing of products with acceptable quality. Comparatively few products are available in the market compared to the number of products which are possible. According to PR Newswire, the global market for orally dissolving products is US$ 11.40 billion and is expected to reach US$ 27 billion by 2025.


The conventional oral solid dosage forms, like tablets and capsules and other oral forms, have been used largely for the adult population. However, not everybody can swallow medicines or carry or ingest them in a non-messy manner. Special patient populations such as paediatric, geriatric, dysphagic, mentally challenged, and the bedridden have special needs that require an alternative to swallowing. Orally dissolving films are thin films which, when kept on the tongue, dissolve almost instantaneously. Unlike tablets and capsules, these thin films do not require water for their administration, and unlike liquids, these can be easily carried in bags, purses, and wallets. These films are taste-masked and have very good palatability. Being a measured unit, dose uniformity can also be ensured with thin films, which are a problem in the case of liquid medicines. Fast dissolving thin films are not only helpful for the special-need patient population but are also desirable by other groups of patients.


Zim Laboratories Limited ("Zim" or the Company) is an innovative drug delivery solution provider focusing on improving convenience and adherence of drug intake by patients. Its value proposition is its ability to provide a range of technology-based drug delivery solutions and non-infringing proprietary manufacturing processes for manufacture and supply of innovative and differentiated generic pharmaceutical products to its customers globally. Zim is promoted by Dr. Anwar Daud, a technocrat with deep experience in the pharmaceutical business, and is supported by a qualified professional management team having extensive industry experience in their field of expertise Headquartered in Nagpur, it owns a state of the art R&D Centre, and EU-GMP & WHO-GMP certified manufacturing facilities.

The Company is focused on Novel Drug Delivery Solutions (NDDS) and uses its proprietary technology and expertise to bridge the technology gap in Tier III Pharmerging and ROW markets and assist local players in various geographies to launch differentiated / combination generic products and compete.

It is a high-end product development partner for its customers by providing a constant pipeline of NDDS products supported with technical know-how, registration dossiers and marketing support. Its ability to provide a comprehensive range of value- added solid dosage generic products in semi-finished and finished categories, which include granules, pellets (sustained, modified, extended-release), taste-masked powder, suspense tablets, capsules and its recently developed oral thin strips (OTS), provides it with high flexibility in business development.

Our Capabilities

• Developing and manufacturing of differentiated complex generic pharmaceutical products. using proprietary technologies

• Strong R&D capabilities with more than 110 people in the R&D team.

• EU-GMP, WHO-GMP and ISO 9001 approved manufacturing facilities spread across 125,000 sq. ft.

• Well-diversified customer base of around 187 clients across 60 countries in Asia, Africa, CIS, LATAM, Middle East and SEA.

• Status of "Three Star Export House" accorded by DGFT.

Robust Drug Delivery Platforms

a. Modified Drug Release (Palletisation)

Being a niche technology, Palletisation requires the adoption of a unique manufacturing process. The end product is in the form of fine micro granules called pellets. The release of API through Pellets, administered via capsules, is done in a controlled manner and in required quantities.

This enables the Delayed Release, Dual Drug Release and Extended Release of a Drug in the human body.This timely discharge of pellets improves the drugs bioavailability in the body and circumvents the need to consume multiple dosages. This is more convenient for the patient as there is no need to remember the timing of dosage.

b. Stability & Solubility Enhancement - Directly Compressible (DC) Granules

Stability & Solubility Enhancement (DC Granules) is carried out using robust technology such as co-crystallisation, micro emulsification, co-precipitation, inclusion, complexation, micellar solubilisation, adduct formation, nanotechnology and powder coating.

c. Taste Masking

ZIM has developed a highly cost-effective technology that can mask the taste of bitter products, including antibiotics, without affecting their shelf life and maintaining their dissolution and bioavailability requirements. Taste- masking techniques are applied to mask or overcome the bitter or unpleasant taste of APIS to achieve patient acceptability and compliance. This is key for patient groups such as paediatrics and geriatrics.

We use taste-masking techniques such as adding flavours, sweeteners, and amino acids. Other techniques include the use of polymer coatings; conventional granulation; Ion-exchange resins; and spray congealing with lipids, gelatine, liposomes, lecithins, surfactants, salts or polymeric membranes.

d. Dosage Transformation

ZIM has mastered dosage transformation through its Oral Thin Film Technology. Our recent Thinoral technology produces thin film dosage form that dissolves instantaneously on the tongue. It obviates the need for water, thus enhancing the convenience of drug administration. So far, we have developed about products on this technology platform catering to the needs of pediatric, geriatric, dysphasic, mentally challenged, and bedridden patients. We are amongst a handful of companies in the world possessing this technology, with a significant number of products approved and commercialised.

Market footprints

Dosage Form Registered Applied Pipeline Total
Capsules 132 35 38 205
ODS 99d> 38 65 202
Suspension 19 13 12 44
Tablets 272 65 131 468
Registrations 522 151 246 919

Our Export Business

We primarily cater to the export market and have a growing presence mainly in the developing economies along with developed economies. This includes Asia, Africa, Middle East, LATAM and CIS. At 1,714 million, exports contributed 63% to our total revenues of 2,777 million in FY2020. This has partly offset the significant revenue volatility in the domestic tender based business arising from the sale to various government bodies, State Government hospitals, railway boards, and municipal corporations.


Key Financial Ratios

Key Ratios FY2019 FY2020 Reasons for variance more than 25%
Operating Profit Margin (%) 10.0% 5.2% -48% The effect on the operating profit margins are mainly due to increase in input cost coupled with revenue reduction majorly due to geopolitical issues, shortage of currency in the form of US Dollars in the various market
Net Profit Margin (%) 4.6% 1.2% -74% The effect of operating profit margin has extended to net profit margin.
Basic EPS 11.87 2.03 -83% The reduction in Earnings Per Share (EPS) due to reduced profit after tax, as explained above.
Interest coverage ratio 3.08 1.01 -67% The reduction is due to reduced EBIT margin and also due increase in debt for investments in Capex.
Return on Net worth (%) 10.7% 2.2% -80% The effect of net profit margin has extended to return on equity.
Return on Capital Employed (ROCE) (%) 13.7% 3.5% -75% The combined effect of increase in Debt due to additional capex and decrease in Net Margin
Current Ratio 1.25 1.26 1%
Debt Equity Ratio 0.51 0.58 14%
Debtors Turnover Ratio 3.58 3.24 -9%
Inventory Turnover Ratio 2.99 2.57 -14%

The Company recorded overall revenue growth of 7% (CAGR), of which the export business (PFI & Formulations) grew at a CAGR of 25%, leading to an improvement in gross margins. Moreover, the revenue share of export business increased from 47% to 63%. There was also a conscious reduction in deemed exports and domestic government business.


Over the years, there was the rapid growth in the Exports business, due to a consistent filing of products and Dossiers in various CIS, MENA, SEA countries including increased footprints in regulated markets like Canada, Brazil etc. These initiatives will continue our foray into existing and new markets in emerging and developed countries. There was a conscious reduction in our exposure to Deemed Exports and Domestic Government business due to low margins in Deemed Exports. Going forward, this will remain stable at FY20 levels

Strategic Outlook

Zim sees itself as a process innovation company creating several technology platforms going forward aimed at addressing patient convenience and adherence. The future trends favouring highly potent complex generic medicines and large molecule & biological formulations require new and novel modes of administration. The trend towards multi-busters and customised medicines have exciting opportunities for a pharmaceutical formulation process innovator, and we intend to develop further capabilities to meet these requirements through co-development partnerships.

In an age of continuous business disruptions and unpredictability, we are leveraging our formulation development capabilities to enter the co-development and out-licensing business as well as the nutraceutical market. We aim to build deep product pipeline in multiple markets and multiple business verticals by focusing on co-development particularly in the areas of oral solid complex generics, dosage transformation (OTF platform) and differentiated products for ourselves and our valued partners spread across all markets. On the back of our unique technology platform assets, we aim to develop unique proprietary non-infringing first to file products, which will provide long-term advantages for esteemed partners.

Further, by entering into supply partnerships with original product manufacturers and marketing companies globally across delivery platforms, our portfolio of delivery platforms for extending product lifecycle and specific customer targeting consists of unique offerings such as Multi-layer film technology, Electrospun nanofibers incorporated oral films, drug printed oral films, and liquid in pellets technology.

In the near future, we plan to leverage our current capabilities, in development, manufacturing and supply of various complex generic products under different dosage forms to increase our geographical footprint in the emerging markets both as semi-finished and finished formulations. We also plan to enter the regulated markets in the next three years - particularly with the differentiated product portfolio in partnership with leading marketing companies.

Key Risks & Concerns

1. COVID-19 impact on supply chain

The first quarter of 2020 saw the disruption of many industries supply chains in the wake of the COVID-19 pandemic. The pharmaceutical sector was no exception to this rule, with the manufacturing and distribution of key medicines severely impacted due to the varying availability of Active Pharmaceutical Ingredients (APIs). The manufacturing sector is split on the subject of moving production away from South-East Asia.

2. Time-lag and cost of legal expenses

The risk of time lag creates hurdles in registration in regulated Markets which will eventually result in a delay in product launch along with an increase in the cost of legal formalities.

3. Dependency for import of major APIs from China

Several Indian industries have a significant direct dependence on supplies from China. Some of these products (imported from China) such as activated pharmaceutical ingredients (APIs) is a critical commodity, and any disruption in the supply over the long term could have far-reaching economic consequences for India. This has been mitigated through the stocks in hand as well as stock available with various traders but at a premium. Also, the program of alternate local vendor development for major APIs will act as a catalyst for import substitution.

There is a general consensus that the post-COVID-19 world will accelerate localisation (import substitution) and affordability, fed by an urgent need to create local employment as far as pharma manufacturing in Indias various export markets is concerned. These are strong headwinds for Indias export markets. There is already a movement for localisation in several of Indias pharma export markets. Further, several countries have risen as worthy competitors to India in the last few years, such as Bangladesh, Indonesia, Turkey etc. This will open an opportunity for an increase in the supply of PFI products to the countries adopting indigenisation.


As a leading NDDS pioneer, we see tremendous value in investing in research & development (R&D). Our early commitment to R&D, beginning two decades ago, enabled us to make technology our key differentiator and develop a basket of robust products for diverse markets across the world. Today, we have attained a distinct peer position for delivering quality products within established timelines, at efficient costs without compromising on quality.

We have over 100 research scientists working in our R&D equipped with cutting-edge enabling technologies for research and development. Moreover, our knowledge in pharmaceutical research allows a rapid ramp-up of a diverse range of immediate and Novel Drug Delivery system. Our expertise enable us to cater to various formulation design needs and concepts. The ability to develop difficult-to- make, complex APIs by using the latest technologies is the key differentiating factor of our research.

Our scientists work closely with our business development team to generate innovative concepts and ideas, exploiting both market needs and synergies across therapeutic areas. We invest over 5% of our revenues annually in research. Even as we focus on developing new technologies, we continuously monitor research efficiency.

Towards ODS

As a platform developer and an end- use medicine manufacturer, we have successfully carved a distinct position as a leading player in oral thin films as a technology platform. Because of this capability, we stand to sustain a "first mover" advantage for ourselves. We keep adding more enabling add on features to our existing technology with our aggressive incremental innovation programme for this technology, which will favour further convenience and adherence.

Our products are better taste-masked with faster dissolution profiles, stable during shelf life and bioequivalent with the respective reference product of the target market. We have developed Mucostrip technology that has some features of Thinoral technology meant for the delivery of drugs through buccal or sublingual route for local or systemic action. During FY2019-20, we developed products based on this technology. The best use of the thin-film delivery system can be made by delivering molecules through the buccal or sublingual route.

We have made sound progress in preparing dossiers of pharma products and dossiers of nutraceutical products ready for submission into regulated and pharma-emerging markets such as Europe, Canada and Brazil.

We have successfully out-licensed our product dossiers for Europe, Canada and Brazil market at competitive terms. Beside, the Company has signed an exclusive marketing agreement with one of the Indian pharma majors for one of our novel products used in treating Alzheimer suffering patients, for which we earn royalty fees. Further, two of our patents were successfully granted last year in India and the United States, establishing us as an expert technology player within the thin-film technology domain.

Human Capital

During 2019-20, company has focused on improving process efficiency by capability building of people & by actively engaging the hi-pots.

For capability building & holistic development of our key talent we had organized a long term experiential learning program. It was designed & customized in collaboration with IIM (Indian Institute of Management) Nagpur, under the title LEAD (Leading the Enterprise through Advancement & Development). The objective was to put learning into action & give new perspective to our people, to broaden their horizon. As a result of this, many cost saving initiatives has been taken including atomization, manpower rationalization, reducing cycle time & wastage, energy conservation etc. Capability building has also helped in more in-house talent development thereby saving cost on hiring talent from outside.

Quality Circle is another people development initiative that was started by QA department, for improving PQS (Pharmaceutical Quality System) and redefining it as BMS (Business Management System ).

Projects like Simplification of Systems and Processes, Process Improvements, Facility Upgradation, Production Planning & inventory management has been started.

A part from this all such performance focused initiatives are helping in retaining the top talent & hence decreasing trend has been seen in attrition compared to last year.

Further re-engineering of performance process , last year has helped organization in becoming more data driven thereby bringing more objectivity in the system & encouraging staff to develop more collaborative approach towards their internal customer. As on March 31,2020, the Company had 518(staff) employee on its rolls, compared to 562(staff) employee as on March 31,2019.


The Company has adequate internal control systems in place, commensurate with the size and industry in which it operates. The Companys internal control framework supports the execution of the strategy and ensures regulatory compliance. The foundation for internal control is set by the risk management framework, financial control, internal audit and supporting policies. The aim of the internal control framework is to assure that operation are effective and well-aligned with the strategic goals. The internal control framework is intended to ensure correct, reliable, complete and timely financial reporting and management information, safeguard of company assets and ensure efficient productivity at all levels. The framework endorses ethical values, good corporate governance and risk management practices.

The Companys internal audit function independently scrutinises critical audit areas, based on audit plans that are approved by the Audit Committee. The plans are formulated on the basis of a risk evaluation exercise to assess relatively riskier areas. Significant Internal Audit findings are periodically reviewed by Management and Audit Committee and corrective action plan suggested by them are implemented by the respective process owner of the business units and thereby strengthen the Internal Control.


The document contains statements about expected future events, financial and operating results of ZIM Laboratories Limited, 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 risk that the assumptions, predictions and other forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause assumptions, actual future results and events to differ materially from those expressed in the forward-looking statements. Accordingly, this document is subject to the disclaimer and qualified in its entirety by the assumptions, qualifications and risk factors referred to in the managements discussion and analysis of ZIM Laboratories Annual Report, FY2020.