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Zydus Lifesciences Ltd Management Discussions

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Global Economy

Global economy continued its growth journey during the year 2023 though the growth moderated further to 2.6% viz-a-viz 3% registered during the previous year. In fact, the global growth over the last two years has slowed down after an encouraging 2021 when the global economy made a strong come back from the pandemic induced recession and registered a healthy 6.2% growth. Factors such as tight monetary policies, restrictive nancial conditions and weak global trade growth continued to impact the global economic activity during the year.

In terms of region-wise performance, growth in advanced economies slowed down during the year while emerging markets and developing economies (EMDEs) demonstrated steady growth. Despite growth moderation, advanced economies showcased resilience for the most part of the year, slowing down less than previously expected. This was largely attributable to the US, where the growth picked up to 2.5% from 1.9% last year, thanks to the robust consumer spending and expansionary scal policy. Growth in the Euro area on the other hand, slowed sharply to 0.4% as high energy prices weighed on household spending and the activities in manufacturing sector. EMDEs grew at the similar pace as that of the last year and posted 4% growth. However, excluding China, growth was 3.2%. In many EMDEs, subdued demand for goods in advanced economies impacted the exports, while elevated interest rates dampened domestic demand.

The table below shows the global growth reported for the calendar year 2022, estimated growth numbers for calendar year 2023 and forecast for the next year:

2022 Act. 2023 Est. 2024 Forecast

World

3.0% 2.6% 2.4%

Advanced Economies

2.5% 1.5% 1.2%
? US 1.9% 2.5% 1.6%
? Euro Area 3.4% 0.4% 0.7%
? Japan 1.0% 1.8% 0.9%

EMDEs

3.7% 4.0% 3.9%

Global headline and core in ation has been on the downward trajectory from the highs of 2022, though it remains above the target in most advanced economies. Monetary tightening in advanced economies is coming to an end, but real policy interest rates are expected to remain elevated for some time, as in ation returns to target only gradually. This will keep the stance of advanced-economy monetary policies restrictive in the near-term.

Recent geopolitical tensions in the Middle East impacted the global commodity markets which in turn, can a_ect the global growth adversely. The geopolitical turbulence arises at a time when the global economy is still experiencing the e_ects of the overlapping shocks of past four years viz. the COVID19 pandemic, Russias invasion of Ukraine and the rise in in ation and subsequent sharp tightening of global monetary conditions.

Going forward, global growth is expected to slow down further to 2.4% in 2024 which will be the third consecutive year of deceleration. This deceleration re ects softening labour markets, reduced savings bu_ers, waning pent-up demand for services, the lagged e_ects of monetary tightening and scal consolidation. Advanced economy growth is set to bottom out at 1.2% in 2024 as growth in the US slows, while Euro area growth, which was feeble last year, picks up a bit as lower in ation boosts real wages. EMDEs are expected to maintain the growth momentum in 2024 and register similar growth as that of 2023 (Source: Global Economic Prospects, January, 2024).

Indian Economy

In the post-pandemic era, Indian economy has displayed strong resilience as it is set to register a growth in excess of 7% for the third consecutive year. The achievement is signi cant considering that most large economies of the world struggled to maintain the growth momentum post the COVID19 pandemic. In fact, amongst the major economies of the world, India has been a standout performer amidst sluggish global growth trends.

growth for the third consecutive year (FY2022-FY2024)

During the year, consumption remained steady led by urban areas. Going forward, rural demand scenario is likely to improve on account of an expectation of a normal monsoon in FY2025. While consumption was steady during the year, robust investment activity drove growth. The governments sustained thrust on capex continued to crowd in private investment. Strong demand has stirred manufacturing and construction activities and the related services. Indias external sector faced few challenges during the year. While the ongoing geopolitical tensions had their impact, demand for Indias exports slowed down in key geographies like Europe on account of tepid growth. However, the reduction in global commodity prices provided the relief as the value of imports have come down during the year despite a substantial increase in import volumes. Overall, positive impact of the drop in the value of imports outweighed the negative impact of a decline in exports and resulted in narrowing of the merchandise trade de cit. Indias services exports have been consistently rising, leading to an increase in net services receipts. Going forward, narrowing merchandise trade de cit, coupled with rising net services receipts, is expected to result in an improvement in the current account de cit.

Retail in ation has remained inside the Reserve Bank of Indias (RBIs) tolerance range for the most part of the year. Moderation in core in ation (non-food, non-fuel items) continues to keep in ation under control. Overall, during the year, in ation was 5.4%, lower than 6.8% recorded during the previous year FY2023. Headline in ation also stayed below 6% for the most part of the year despite price volatility in certain speci c food items.

Indian economy closed the current nancial year on a positive note on account of strong growth accompanied by stable in ation and external account. Outlook for the Indian economy looks encouraging in FY2025 despite a few indications of headwinds like hardening crude oil prices and global supply chain bottlenecks to trade (Source: Monthly Economic Reports, Department of Economic A/airs and Global Economic Prospects). According to the World Bank report, Indian economy is likely to maintain the growth momentum with an estimated 6.6% growth in FY2025 and will remain the fastest growing economy across the world.

likely to be

growing economy in FY2025 as per World Bank

Global Pharmaceutical Industry

Global pharmaceutical industry grew by 8% in 2023 and is worth US$ 1.61 tn now. Going forward, global medicine spending is expected to grow in mid to high-single digit viz-a-viz an earlier expectation of low to mid-single digit growth and reach approximately US$ 2.3 tn by 2028. Year 2023 witnessed signi cant shift in the usage of medicines and acceleration in spending across geographies which led to an increase in outlook for medicine spending through 2028. The spending and volume growth will vary considerably across the regions.

value of global pharmaceutical industry

The largest driver of growth in medicine spending over the next ve years is still expected to be the availability and use of innovative therapeutics in developed markets to be o_set by losses of exclusivity and the lower costs of generics and biosimilars.

In terms of volume, consumption of medicines globally continues to expand with a 14% growth over the last ve years driven mainly by increased access to medicines across regions. In terms of therapies, immunology, endocrinology and oncology have exceeded the 14% growth over last ve years, driven primarily by substantial numbers of novel products and wider access to them across geographies. Going forward, consumption volume is expected to grow by a further 12% through 2028, to be driven by increased usage in China, India and other Asian markets.

growth in consumption of medicines through 2028

The table below depicts the current size and growth as well as estimated size and growth of digerent segments of the global pharma market.

Current Size CAGR Est. Size Est. CAGR
(CY23) - US$ bn 2019-23 (CY28) - US$ bn 2023-28
Developed Markets 1275 7.2% 1775 - 1805 5-8%
Pharmerging Markets 304 7.8% 400 - 430 10-13%
Low-income Countries 28 5.6% 33-37 3-6%

Total

1607 7.3% 2225 - 2255 6-9%

Global medicine spending is expected to grow by more than US$ 600 bn over next ve years, driven by existing branded medicines in the

Specialty medicines outlook

Share of specialty medicines in global medicines spending has gone up signi cantly over the last decade from 24% in 2013 to 40% in 2023. Specialty medicines are the ones that treat chronic, complex and rare diseases and are more expensive compared to other traditional medicines. Top ten largest developed expiries, removing US$ 192 bn. Other developed markets and fast-growing pharmerging markets will together add another US$ 184 bn.

40% in 2023 with more than half of spending likely to come from major developed markets.

share of specialty medicines in global medicines spending in 2028

The chart given below shows the proportion of specialty medicines spend over the last decade and over next ve years across di erent regions.

Specialty medicines share of spending

Forecast leading ten developed markets, which will grow by US$ 385 bn. New products will add US$ 193 bn but will be o_set by the impact of patent

countries have been the key drivers of specialty medicines over the last decade. In those countries, the share of specialty medicines spending has gone up to 50% in 2023 from 29% a decade ago. Over next ve years, share of specialty medicines is likely to go up to 43% of the total spending globally as compared to

Global biotech outlook

Biotech has emerged as one of the key drivers of pharma spending over the last decade. Spending on biotech products has grown at a robust CAGR of 15% during last decade and stood at US$ 503 bn in 2023, accounting for over 30% of the total global pharma market. Over next ve years, biotech spending is likely to continue its growth momentum albeit at a bit slower pace viz-a-viz the previous decade and exceed US$ 890 bn by 2028. Spending growth is likely to cool o_ a bit and remain in the range of 9.5-12.5% on account of the impact of key biosimilars, especially in developed markets. Continued ow of new medicines however, is likely to aid the growth going forward.

robust

CAGR over last decade

Therapy-wise outlook

In terms of therapies, oncology and immunology are expected to continue leading the chart in terms of spending over next ve years. In terms of growth though, oncology and obesity will be the fastest growing therapies while immunology is expected to grow slowly on account of launch of biosimilars. Oncology is expected to grow in the range of 14-17% CAGR over next 5 years as novel treatment options continue to be launched for the treatment of cancer. Obesity segment is likely to grow at the fastest pace with a CAGR of 24-27% as highly e_ective treatments have become available and are expected to gain wider usage across many countries (Source: IQVIA Global Use of Medicines, January 2024).

CAGR over next ve years in oncology segment

Indian Pharmaceutical Industry

Indian pharmaceutical market (IPM) is one of the fastest growing pharmaceutical markets across the globe as the market has delivered a compounded annual double-digit growth over the last decade. The growth was signi cant considering the fact that the industry faced several headwinds during last few years.

growth over last decade

The market is likely to maintain the growth momentum going forward with an estimated high single digit / double digit growth over next ve years and reach the size of US$ 38-42 bn (Source: IQVIA Report). Factors such as large population, increased government spending on healthcare, accommodative government policy, penetration of health insurance coverage, rise in disposable income and increased

estimated size of Indian pharma market over next ve years

Leadership in the global generics market

Indian pharmaceutical industry ranks third globally in terms of production volume and plays a prominent role in the global pharmaceutical industry. Major segments of Indian pharma industry are generic drugs, OTC medicines, bulk drugs, vaccines, contract research & manufacturing and life-style related disorders make India one of the most promising pharmaceutical markets in the world.

During the year gone by, IPM registered growth of 7.6%. Growth during the year was largely driven by price increases and new products as volumes displayed muted growth during the year. In fact, the volume growth in IPM remained at over last two years.

In terms of therapeutic performance, chronic therapies grew by 9.7% during the year and outpaced the growth of acute therapies. Cardiac was the largest therapeutic area during the year followed by anti-infectives.

Therapeutic area-wise break-up of India pharma market is as under:

Therapy area

Sales in FY 2024 (Rs. bn) Therapy Contribution YoY Growth
Cardiac 269.5 12.5% 10.0%
Anti-Infectives 243.3 11.3% 4.7%
Gastro-Intestinal 228.6 10.6% 7.2%
Anti-Diabetic 191.3 8.9% 6.0%
Respiratory 178.2 8.2% 2.7%
Pain/Analgesics 172.3 8.0% 8.1%
Vitamins/Minerals/Nutrients 169.0 7.8% 7.3%
Derma 148.6 6.9% 6.2%
Neuro/CNS 129.5 6.0% 8.5%
Gynaecology 108.6 5.0% 6.3%
Others 322.3 14.9% 12.8%

IPM - Total

2,160.9 100.0% 7.6%

(Source: IQVIA MAT March 2024 Report).

biological products. India is the largest supplier of generic medicines as it manufactures about 60000 di_erent generic brands across 60 therapeutic categories and accounts for 20% of the global supply of generics. India supplies over 50% of Africas requirement for generics, ~40% of generic demand in the US and ~25% of all medicines in the UK. The country has the highest number of USFDA inspected plants outside the US and is home to over 3,000 pharma companies with a strong network of over 10,500 manufacturing facilities as well as a highly skilled resource pool. In terms of production of vaccines, India accounts for majority of global vaccine production and accounts for a large chunk of WHO demand for DPT, BCG and measles vaccines. Indian pharma sector forms a major component of the countrys foreign trade and has been consistently generating the trade surplus over last many years. During the year, the sector generated exports worth US$ 27.8 bn with a growth of 10% over the previous year. The US was the largest export destination accounting for over 31% of overall exports (Source: Industry Reports).

? Largest generic supplier across the globe ? Accounts for majority of global vaccine production

Zydus Lifesciences Ltd. Overview

Zydus Lifesciences Ltd. is an innovative, global lifesciences company that discovers, develops, manufactures and markets a broad range of healthcare therapies with an overarching purpose of empowering people with freedom to live healthier and more ful lled lives. Product portfolio of the Company includes nished dosage human formulations (generics, branded generics and specialty formulations, including biosimilars and vaccines), active pharmaceutical ingredients ("APIs"), animal healthcare products and consumer wellness products. Innovation is at the core of the Companys thought process with an aim to make a di_erence in the world of health and care. The Company caters to the diverse needs of its customers across the globe as it supplies its products in the United States, India,

Europe and emerging markets including countries in Latin America, Asia Paci c region and Africa. The Company has a pool of 37 manufacturing facilities that adhere to stringent regulatory compliance standards and have capabilities to manufacture diverse dosage forms at scale, oiering cost-e_ective and high quality pharmaceutical products to customers worldwide.

Innovation The Growth Engine For Future

Innovation has been the cornerstone of the Companys success over the years. The Company invests its resources optimally to ensure that it continues to evolve as a progressive life sciences company. The Company will continue to drive the innovation agenda going forward as it reinforces its commitment to being dedicated to life and improving health outcomes of people globally. Even as the Company continues to expand the businesses in generic and branded formulations space, the innovation engines continue to progress in the novel drug discovery, vaccines, biosimilars and new dosage form development areas. The Company has achieved a notable success in the innovation space as some of its e_orts have already completed full development cycle, with products like LipaglynR and BilypsaR (saroglitizar), Oxemia (desidustat), Ujvira (biosimilar of KadcylaR), Exemptia ( rst launched biosimilar of adalimumab globally) completing the life cycle journey from the laboratory to market, and going strong.

Investments on research and development (R&D), over the years have continued to scale up, and more so in recent years as some of the di erentiated products have advanced and entered clinical phases of development.

The Companys innovation program is spearheaded by over 1,400 researchers across its 8 state-of-the-art R&D centres. The Company invests approximately 7 to 8% of its annual revenues on R&D. Adoption of advancement in technology, digitalisation, improved knowhow and competencies enable the Company to progress further in diverse areas from NCEs to vaccines, biosimilars, niche technologies and to generic product development. The Companys relentless pursuit of innovation helps to progress further in its mission to impact human lives with better health outcomes by ensuring that the high quality and e_ective products reach the patients globally.

The Company continues to invest in generics R&D pipeline build-up with a higher focus incrementally on more dierentiated products across diversi ed dosage forms including drug-device combination products. The generics R&D eorts which are largely centralised at PTC

(Pharmaceutical Technology Centre) in Ahmedabad, India have always focused on agility, execution and eciency. Consequently, the Company has been able to le at a signi cantly higher pace relative to industry standards in a very prudent and cost-ecient manner. PTC is responsible for generic dosage formulations development for the global businesses, including US, India, Europe and Emerging Markets.

An overview of the eorts being put in by the C ompany in dierent areas of innovation is provided below:

New Chemical Entity (NCE) Research

Driven by a commitment to address unmet healthcare needs of the patients globally and improve their health outcomes, the Company has, over the years, created a robust pipeline of New Chemical Entities (NCEs) across dierent therapeutic areas. Zydus Research Centre (ZRC), a dedicated research arm of the Company based in Ahmedabad, spearheads the Companys NCE research initiatives. The Centre houses a team of around 500 scientists (incl. around 100 for biotech research) and has the capabilities to conduct drug discovery and development from concept to Investigational New Drug (IND) enabling preclinical and clinical studies. Focused therapeutic areas of NCE research include cardio-metabolic illnesses, oncology, in ammation, brosis and infectious diseases.

During the year gone by, the molecules, which are under development, progressed along the expected lines.

The following is a molecule-by-molecule summary of the Companys progress during the year:

LipaglynR and BilypsaR (Saroglitazar Mg)

The Company has been supplying the molecule in India over last several years under the brand names LipaglynR and BilypsaR for multiple indications viz. Diabetic Dyslipidemia, Hypertriglyceridemia, Metabolic Dysfunction-Associated Fatty Liver Disease (MAFLD) and Metabolic Dysfunction-Associated Steatohepatitis (MASH). The patient base for these two brands continued to expand during the year. In order to generate real world evidence, the Company initiated EVIDENCES-XI phase IV clinical trials in India in MAFLD patients with comorbidities. The study would enroll approximately 1,500 patients. Duration of the study is approximately 56 weeks. The primary endpoint is to measure the change in liver sti_ness performed by transient elastography from baseline to week 52.

On the global development front, the molecule is currently undergoing clinical trials for the US market for Primary Biliary Cholangitis (PBC) and Metabolic Dysfunction-Associated Steatohepatitis (MASH) indications. Following are the key updates for these indications.

Primary Biliary Cholangitis (PBC)

? Initiated global pivotal Phase II(b)/ III clinical trials viz. EPIC-IIITM during FY2022. ? Patient recruitment was completed during the year. ? The trials would study the eects of a molecule relative to placebo over 52 weeks across 100 sites. ? The molecule holds an Orphan Drug Designation (ODD) from both the USFDA and the EMA and Fast-Track Designation from the USFDA. ? Completed hepatic impairment studies in 24 Cirrhotic Cholestatic patients. Outcome of the studies published in Clinical Pharmacology in Drug Development (CPDD).

Metabolic Dysfunction-Associated Steatohepatitis (MASH)

? USFDA approved Phase II(b) clinical trials protocol in FY2022. ? The protocol encompassed 52 weeks paired biopsy study to evaluate resolution of MASH and F2/F3 Fibrosis.

Phase II(b) clinical trials viz. EVIDENCES-XTM trials to ? evaluate the ecacy and safety of the molecule are going on at present.

Polycystic Ovary Syndrome (PCOS) and Metabolic Dysfunction-Associated Fatty Liver Disease (MAFLD)

? Clinical trials currently underway in the US. ? Only trial in the world going on at present for these indications.

OxemiaTM (Desidustat)

The Company launched its second NCE viz. Desidustat in India under the brand name OxemiaTM in 2022. The molecule is indicated for the treatment of anaemia in chronic kidney disease (CKD) patients both on dialysis and not on dialysis. Desidustat is an oral therapy and provides an alternative to injectable erythropoietin-stimulating agents (ESAs), thereby giving CKD patients a convenient option for the treatment of anaemia. Following are the key updates during the year gone by.

India Market

? Phase IV clinical trials viz. DREAM-CKD to generate real world evidence of the molecule in patients with CKD induced anaemia is going on at present. ? The study would evaluate the safety of the molecule over a period of 52 weeks.

Global Markets

? In 2020, granted an exclusive license to the molecule to China Medical System Holdings Limited (CMS) for China, Hong Kong, Macau and Taiwan markets. ? During the year, Chinese licensing partner CMS received acceptance from the Chinese regulatory authority for a new drug application (NDA) of the molecule.

Usno ast

During the year, WHO International Non-proprietary Names (INN) approved "Usno ast" as the recommended name for ZYIL1. Usno ast is a novel, oral, small molecule, NLRP3 inhibitor and highly potent in human whole blood assay and can suppress in ammation caused by the NLRP3 in ammasome. At present, Usno ast is undergoing clinical development for four indications viz. Amyotrophic Lateral Sclerosis (ALS), Parkinsons disease,

Cryopyrin-Associated Periodic Syndromes (CAPS) and Ulcerative Colitis (UC). Following are the key updates for these indications.

Amyotrophic Lateral Sclerosis (ALS)

? Phase II clinical trials are going on at present. ? ALS aaects approximately 31,000 people in the US and on an average 5,000 new patients are diagnosed every year with this disease in the US. ? More than 30,000 people are estimated to be living with ALS in Europe while India has an estimated 75,000 people living with ALS. ? People living with ALS have a median survival of approximately two years from diagnosis.

Parkinsons Disease

??Recently received the USFDA approval to initiate phase II clinical trials in patients with Parkinsons disease. ??It is estimated that there are over 8.5 mn people world-wide su_ering from Parkinsons disease, with 1 mn su_ering from the disease in the US. ??Each year 90,000 new cases of Parkinsons disease are reported in the US.

Cryopyrin-Associated Periodic Syndromes (CAPS)

??The Company was the rst to establish phase II proof-of-concept of the molecule in CAPS patients. ??Results of the study were published in ‘Clinical Pharmacology in Drug Development. ??Usno ast holds an ‘Orphan Drug Designation (ODD) from the USFDA for this indication.

Ulcerative Colitis (UC)

??Initiated phase II proof-of-concept study of the molecule in patients with UC. ??UC is characterized by an irregular, chronic immune response that creates in ammation and ulcers in the mucosa of the large intestine or rectum. ??In 2023, the prevalence of UC was estimated to be 5 mn cases world-wide.

ZY19489 (Potential single dose anti-malarial drug)

ZY19489 is a novel anti-malarial compound which is fast-acting and e_ective against both P. falciparum and P. vivax strains of malarial parasites. It is being developed to provide an e_ective alternative to the current front-line antimalarial drugs, as artemisinin-based combination therapies (ACTs) face the risk of resistance. During the year, the Company completed phase II clinical trials in India and submitted the protocol to DCGI to initiate Phase III studies.

Biologics

The Company has built one of the most comprehensive and diverse portfolios of biological products on the back of concentrated e_orts put in over the years. The portfolio consists of 30 compounds, including 8 novel biologics and 22 biosimilars and spans across multiple therapies such as oncology, autoimmune disease, nephrology, in ammation, rheumatology, hepatology and infectious illnesses. Building such a diverse portfolio in biotech research speaks volumes about the Companys commitment to innovation and improving healthcare. In terms of geographical presence, the Company caters to the patients of India and di_erent emerging market countries and has commercialised 13 products (including one novel biologic) so far. Going forward, oncology will be the most signi cant therapeutic area, accounting for the majority of the under-development portfolio. An update with respect to the progress made on biotech R&D front during the year for di_erent geographies is given below:

India Market

??Received marketing authorisation for Pertuzumab biosimilar. ??Rituximab - Applied for marketing authorisation in FY2022. Dossier being reviewed by DCGI. ??Completed Phase III clinical trials of one monoclonal antibody (mAb). ??Initiated Phase III clinical trials for one product. ??Completed pre-clinical studies for one mAb and applied for no objection certi cate (NOC) to Review Committee on Genetic Manipulation (RCGM). ??On the novel biologics front, completed animal toxicity studies for one of the molecules and applied for Phase I clinical trials approval.

Emerging Markets

??Continues to le dossiers of various biosimilars, which were developed for India market, in di_erent emerging market countries. ??Russia, Mexico, Algeria, Philippines, Morocco and South Africa will be the major markets for the Company. ??Received GMP approval for the mAb drug substance facility from Tanzania Food and Drug Authority. ??Received marketing approval for digerent biosimilars from di erent regulatory authorities viz. Renocrit and Bonmax PTH for Nepal, Trastuzumab and Adalimumab for Ecuador and Bevacizumab for Myanmar market.

Vaccines

The Companys initiatives in the area of vaccines research and development are driven by Vaccines Technology Centre (VTC) based out of Ahmedabad. VTC is engaged in developing the vaccines for basic vaccination programs and has also ventured into novel vaccines for certain lifestyle disorders. The Company has so far received marketing authorisation for seventeen vaccines which include rabies vaccine, measles containing vaccines, u vaccines, typhoid vaccines, pentavalent vaccine and Hepatitis B vaccine. In addition to the above approved vaccines, there are a few vaccines such as Hepatitis A vaccine, Hepatitis E vaccine, MMRV vaccine and Bivalent Typhoid and Paratyphoid A Conjugate vaccine which are undergoing clinical trials and several vaccines are in pre-clinical stage.

During the year, the Company initiated Phase IV clinical trials in healthy subjects to evaluate immunological non-interference of Typhoid Conjugate vaccine with Yellow Fever vaccine. The Company also submitted clinical study report of Phase IV clinical trials which were conducted to evaluate the noninterference of Typhoid Vi Conjugate vaccine with Measles and Rubella (MR) vaccine in healthy infants to CDSCO. With respect to measles containing vaccines, post marketing surveillance study to assess the safety of MR vaccine in subjects aged 9-12 months was completed and report was submitted to CDSCO.

The Company submitted marketing authorisation application to CDSCO for manufacturing MR drug substance from the newly constructed MR block.

The Company modi ed drug substance and drug product manufacturing processes of rabies vaccine which led to better productivity. The new process has been approved both by CDSCO and WHO pre-quali cation team. On the novel vaccine development front, Phase II clinical trials are going on for Hepatitis E vaccine while for Bivalent Typhoid and Paratyphoid A Conjugate vaccine, the Company has successfully completed pre-clinical toxicity studies and applied for Phase I clinical trials approval.

On the global development front, the Company has already submitted the dossier of Typhoid Conjugate vaccine for the purpose of pre-quali cation.

Going forward, the Company intends to penetrate the high-volume public market in India. Post WHO pre-quali cation, the Company intends to service the global markets over the medium term.

vaccines hold marketing authorisation in India

Specialty And Complex Generics

The Company has been building a portfolio of specialty products to cater to the unmet healthcare needs of the patients globally and in turn, enhance the value proposition to them. The Company has relied upon in-house development e_orts as well as resorted to inorganic moves to build the specialty portfolio. On an in-house development front, the Company has developed a portfolio of eight products, including one in orphan disease space through 505(b)(2) route for the US market. The focused therapy areas are Pain Management, Neurology, Metabolic Disorders and Liver Diseases. FY2024 was an encouraging year for the Companys e_orts on 505(b)(2) front as the Company received the USFDA approval for two NDAs viz. Sitagliptin tablets (ZITUVIOTM) and Sitagliptin and Metformin IR tablets (ZITUVIMETTM) in the area of metabolic disorder management. The Company also led one more NDA viz. Sitagliptin and Metformin ER tablets in the area of metabolic disorder management and completed the franchise of Sitagliptin (combinations) during the year.

NDAs approved by the USFDA

On an inorganic front, during the year, the Company acquired UK headquartered LiqMeds Group of companies which has unique capabilities in delivering novel liquid orals. The acquired entity has a healthy pipeline of liquid orals which comprises of a number of 505(b)(2) and FTF/ FTM products. US and UK are the key markets at present. Going forward, the Company will expand its o_erings of liquid orals to the other countries of international markets as well.

Orphan and ultra-rare diseases is a niche, focused area of the Companys US Specialty business. Recently, in the month of May, 2024, the Companys wholly owned subsidiary Sentynl Therapeutics Inc. USA (Sentynl) acquired worldwide proprietary rights to ZokinvyR (Lonafarnib) for treatment of Hutchinson-Gilford Progeria

Syndrome from Eiger

Biopharmaceuticals. With this acquisition, Sentynl has acquired three assets in this space so far.

The table below contains the status of three acquired assets:

Molecule Name

Indication

Current Status

CUTX 101 Menkes disease ? Orphan Drug and Fast-Track Designation by the USFDA

(Copper Histidinate Product)

? Completed asset transfer and acquired worldwide proprietary rights and USFDA documents from Cyprium Therapeutics

? NDA submission under progress, expect to complete the ling in calendar year 2024

R Molybdenum ? Orphan Drug Designation by the USFDA
NULIBRY
(Fosdenopterin) Cofactor ? Marketing authorization in the US and EU

for Injection

De ciency (MoCD) Type A

? Recently, in the month of April, 2024, received marketing authorization from the UK MHRA as well

? Finalized negotiation of Pan European/UK distribution agreement
ZokinvyR Hutchinson-Gilford ? Acquisition of worldwide proprietary rights from Eiger
(Lonafarnib) Progeria Syndrome Biopharmaceuticals
? Approved in the US, EU, Great Britain and Japan

The Company is working to extend its expertise from traditional generics to complex generics products which will drive future growth in the US. Development of complex generics poses a number of challenges right from the stage of API availability till the scale-up and in turn, make them attractive, low competition opportunities. Such opportunities help to counter the challenges associated with the US generic market in the form of continued price erosion in the base portfolio. The Company has entered into partnerships for some of these products to expedite the development timelines and favorably balance the associated risks and investments. Currently, several complex generics, such as modi ed release oral solids, complex injectables, transdermal patches and drug-device combinations are either under registration and/ or under development, for the US market. Till date, the Company has successfully in-licensed 31 products, addressing a market size of ~ US$ 58 bn (Source: IQVIA MAT February, 2024).

Global Generics Development

The Companys e_orts on the generics development front are driven by three Pharmaceutical Technology Centres (PTCs) located in Ahmedabad, India. These centres house over 700 scientists and are responsible for developing a robust product portfolio for di_erent markets in a timely, cost e_ective and regulatory complaint manner. These centres comprise of di_erent clusters with each cluster being responsible to meet the demand of a speci c market to bring in the desired focused approach. The US, India and other international markets comprising of di_erent countries of Emerging Markets and Europe are the key generic markets for the Company. For the US market, over the years, the Company has moved up the value chain by developing and ling incrementally higher proportion of complex products with a focus on rst to le as well as rst to market opportunities. The Company has put in place a mechanism to critically review all new product dossiers before submitting the same to regulatory authorities and provide speedy response to queries raised by regulators on product dossiers to expediate the approvals. For India market, in addition to delivering me-too kind of products, the Company has created a pipeline of First-in-India, Day 1 launches and next generation drug delivery platforms across focused therapies to drive the growth going forward. For other international markets, the Company leverages its existing rich pipeline to expedite lings in di_erent countries to support them in expanding their product o_erings.

PTCs have diligently worked on the Leveraging and Harmonisation of products in other international markets from the reference market, which has resulted in reducing the development timeline and cost. Under the Harmonisation approach, if during the early stage of development of a product, it is identi ed as a product to be supplied to multiple markets then, the product development meets the requirements of all geographies. If a product is already developed for a particular market and subsequently, it is identi ed for another market then, the Leveraging approach is followed. Under this approach, the development knowledge and dossier developed for one market will be extended to other markets with minimum changes.

scientists focused on generic development

Digital Initiatives To Empower and Enrich the Future

Digitalisation is one of the major trends changing the landscape for the businesses. Digitalisation also known as digital transformation is the rewiring of an organisation with the goal of creating value by continuously deploying the technology at scale. Digital transformation is the best way to empower dierent parts of the Company as it generates faster, simpler and more ecient processes and work ows. It oers multiple bene ts in the form of increased agility and productivity, ecient resource allocation, improved competitive advantage, better cost management and revenue growth and in turn, creates enhanced value for all the stakeholders. Over the years, the Company has embraced the digital transformation journey through the adoption of various digital tools and practices and in turn, has successfully generated greater value to all the stakeholders. The Company continuously endeavours to deliver better health solutions to its customers globally by successfully leveraging the digitalisation.

Here is an overview of key digitalisation initiatives being undertaken by the Company across dierent functions:

India Formulations Business

The Company is one of the largest players in the IPM with a strong presence across therapies. The Company has deployed dierent digital tools to eectively manage eld-force operations and enhance the engagement with all the stakeholders. A summary of key digital initiatives is given below: ??Use of an analytical tool to generate data-driven insights. This will aid in enhancing engagement with prescribers and create better brand visibility and re-call. The tool helps to device eective communication strategy by focusing on specialty-speci c priorities. ??Various customer centric developments provided better understanding of customers and in turn, helped to serve them better. ??Feedback from the prescribers helped to drive improvement in brand communication and strategy. ??Use of digital coaching module to assist the eld managers in assessing the capabilities of their team members in terms of product knowledge and capabilities, providing the feedback to them and supporting on the job learning.

Supply Chain

Over the years, the Company has undertaken several digitalisation initiatives in the area of supply chain to enhance the eciency and agility of the operations. These initiatives include end-to-end digitalisation of supply chain under the project Planning And Collaboration Excellence (PACE), strengthening master data structure of dierent functions through project SEED, adoption of digitally integrated vendor platform in the area of procurement, leveraging the power of analytics through power BI and implementation of Export Import digital documents automation using Arti cial Intelligence. Key ones among these initiatives are project PACE, project SEED and adoption of digital tools in the area of procurement.

Project PACE ??Advanced data analytics and machine learning algorithms provide detailed insights about demand and forecast patterns, production capacities and material shortages. ??Provides real-time visibility to enable data driven decisions resulting in improved forecast accuracy, reduce stock-outs and enhanced customer satisfaction.

Project SEED ??SAP based centralised solution to strengthen the master data of various functions to ensure greater control, accuracy and accessibility to critical information. ??Successfully rolled out 21 CFR compliant Material Master Data (SEED) framework.

Procurement Digitalisation ??Digitally integrated vendor platform for on-time communications, seamless process ows, vendor evaluation /ratings based on performance and ESG parameters.

The Company is working towards building core digital, advanced analytics and AI/ML capabilities to lower cost, enhance inventory health and develop advanced AI/ML predictive solutions tailored for all markets.

SAP S/4 HANA implementation

The Company is rapidly progressing towards implementation of SAP S/4 HANA across the enterprise. The project is expected to become operational during the current nancial year. Key bene ts of this initiative are: ??Enhanced speed of execution leading to better productivity ??Harmonisation and simpli cation of practices across functions ??Improved decision-making capabilities through the use of advanced analytical tools ??Real-time tracking of di erent stages of manufacturing processes and digitalisation of shop oor activities

Research and Development

R&D team has developed a project management tool "IRIS" to get an end-to-end visibility of the project starting from product nomination to successful launch of the product. IRIS is a customized digital tool that is positioned for cross functional collaboration for developing and launching new products in di_erent markets. The tool mainly covers two modules viz. new product development (NPD) and new product launch (NPL). The Company has made a signi cant progress on tool development and successfully completed the rst phase i.e., the implementation of NPD module. The Company is working towards developing the next phase of the tool viz. NPL module which is expected to be over during the current calendar year. IRIS will help to manage the projects in a more e_ective manner by ensuring timelines and accountability for new product development. It provides management dashboards for tracking the status of various projects and the risks and costs associated with them.

Technical Operations

The Company has undertaken number of digitalisation initiatives in the area of technical operations through the adoption of advanced technological tools. These initiatives are aimed at real-time data generation to assist in well-informed decision-making, automating di?erent processes and ensuring consistency across locations. Digitalisation also helps to improve the compliance by providing greater control over the operations. Here is the list of key digital initiatives taken by the Company in the area of technical operations: ??Creation of multiple dashboards to have real-time data analytics by integrating them with di_erent softwares. ??Automation of high volume, repetitive tasks using virtual bots to complete those tasks more rapidly and consistently. ??Leveraging the digital performance management tool to monitor and improve the performance of each function by tracking key matrices associated with each function. ??In the laboratories, implemented Laboratory Information Management System (LIMS) to connect all the systems to software and ensure data integrity. ??Creation of a seamless interface between track-wise software and SAP automating the retrieval of material master and employee master details. This initiative aims to incorporate a batch release checklist logic in SAP, utilizing information obtained from Track-wise. ??Implementation of an HR analytics tool to visualise organisation structure and span of control across each layer. Benchmarking the same with peers provides insights into the industry practices.

Consolidated Financial Highlights

The nancial statements for the current nancial year and the comparative nancial statements of previous nancial year have been prepared in accordance with the Companies (Indian Accounting Standards) Rules, 2015 (Ind AS) prescribed under Section 133 of the Companies Act, 2013 and other recognized accounting practices and policies to the extent applicable.

Total Income from Operations

growth in FY2024

Total income from operations grew by 13% to Rs. 195.5 bn from Rs. 172.4 bn last year. US formulations business, which was the largest contributor to the consolidated revenues, grew by 17% and registered sales of Rs. 86,851 mn during the year. India geography, which comprises of formulations and consumer wellness businesses and which was the second largest contributor to the consolidated revenues, grew by 7% to Rs. 76,707 mn.

Pro ts and Margins

EBITDA margin in FY2024

EBITDA (Earnings before Interest, Taxation, Depreciation and Amortization) grew by 40% to Rs. 53,843 mn from Rs. 38,599 mn last year. EBITDA margins expanded signi cantly during the year and stood at 27.5% of revenues, which is an improvement of 510 bps over the previous year. Net pro t for the year was Rs. 38,595 mn, up 97% over last year.

Debt

as on 31st march, 2024

The Company continued to hold net cash position as on 31st March, 2024 as it had a net cash of Rs. 8,561 mn as

st

on 31 March, 2024 vs. Rs. 5,461 mn as on 31st March, 2023. Net debt-equity ratio was -0.04 as on March 31, 2024 as against -0.03 as on March 31, 2023. Net debt to EBITDA ratio for the year was -0.16 as against -0.14 in FY2023.

Fixed Assets and Capital Expenditure

The consolidated gross block (including capital work in progress) at the end of the year was Rs. 223.5 bn, up by about Rs. 28 bn, from

Rs. 195.5 bn last year. The increase was on account of acquisition of LiqMeds group of companies, API manufacturing facility at Ambernath from Watson Pharma and organic capex. Net capital expenditure, including capital work in progress but excluding acquisition related spend, during the year was Rs. 8.6 bn. The capex during the year was incurred mainly for creation of new facilities and upgradation and capacity expansion of existing facilities.

Return on Net Worth

return on Net Worth in FY2024

Return on net worth, excluding exceptional items and pro t from discontinued operations, improved by 570 bps for FY2024 and stood at 20.6% viz-a-viz 14.9% during FY2023. Improvement in return on net worth was largely driven by improvement in pro tability during the year.

Capital Employed and Operating E ciency

ROCE in FY2024

Total Capital Employed (CE) at the end of the year was Rs. 228.7 bn, up from Rs. 208.5 bn, at the end of the previous year. Increase in capital employed was mainly on account of increase in total equity. Return on Capital Employed (ROCE = Adjusted earnings before interest / Average CE) improved by 750 bps during the year and stood at 23% viz-a-viz 15.5% registered during the previous nancial year. Improvement in ROCE was mainly on account of higher growth in pro t during the year.

An analysis of the performance of di erent business verticals of the Company is given below.

India Geography

Formulations Business

The Companys formulations business in India has been one of the key pillars and has played a pivotal role in its growth journey. The business has grown consistently over the years on the back of focused brand building initiatives, enhanced reach, new product launches, deepening presence in newer therapies and leveraging the Companys innovation engine to o_er novel healthcare solutions to the patients. The business was the second largest contributor to the overall revenues during the year, accounting for 28% of the total business.

FY 2024 was an encouraging year for the Companys India formulations business. The branded prescription business sustained the growth momentum through the year, outpacing the market. Double digit growth in this business during the year was driven by healthy volume growth along with new product launches. Strategic interventions done in the recent past have started to deliver results as the branded formulations business maintained double digit growth over the last couple of years. Seven of the

Companys brands were ranked amongst the Top 300 brands of the IPM during the year. Out of all the brands currently being marketed, 9 brands recorded sales in excess of

Rs. 1,000 mn, 22 brands recorded sales between Rs. 500 to Rs. 1,000 mn while 34 brands recorded sales between Rs. 250 to Rs. 500 mn (Source: IQVIA MAT March 2024 Report). Ongoing brand building initiatives will ensure that this tally continues to improve in the coming years. A table is given below which depicts the success of the Companys brand building initiatives over the years.

Brand Value

#Brands - MAT Mar 20 #Brands - MAT Mar 24
>Rs. 1,000 mn 4 9
Rs. 500-1,000 mn 12 22
Rs. 250-500 mn 29 34

Total

45 65

Cardiology, Anti-Diabetes,

Respiratory, Gynaecology, GastroIntestinal, Dermatology and super specialty areas of Oncology and Nephrology are the focused therapy areas for the Company. During the year, the Company grew faster than the IPM in Anti-Diabetic, Anti-Infectives, Pain Management, Respiratory and Oncology therapies. Contribution of chronic portfolio in overall India formulations revenues has gone up consistently over the years and stood at 41.2% in FY2024 which is an improvement of 360 bps over the last 3 years.

Therapeutic area-wise break up of Companys formulations sales in India as per IQVIA MAT March 2024 is as under:

The Company continued to channelise its e_orts and resources towards strengthening the presence in focused therapeutic areas through multiple levers. The Company has identi ed select agship brands also known as Growth Booster brands. These brands have displayed strong traction and were one of the key growth drivers during the year. Focused brand building initiatives will scale up more brands and ensure that Growth Booster brands will gain share in their respective covered market, thereby improving growth trajectory for the overall business .

chronic share in FY 2O24, up 360 bps over last 3 years

Over the years, the Company has created a robust pipeline of New Chemical Entities (NCEs) and biosimilars to cater to the unmet healthcare needs of the patients. The Company has leveraged its innovation capabilities to ensure sustainable business growth. The Company launched its rst NCE viz. Saroglitazar Magnesium over a decade back. The molecule is now approved for multiple indications viz. Diabetic Dyslipidemia, Hypertriglyceridemia, MAFLD and MASH and is marketed under the brand names LipaglynR and BilypsaR. LipaglynR brand, since its launch, continues to display signi cant growth momentum and is among the top 5 brands of the Company. The brand registered 40% increase in patient base during the year FY2024, evidencing the e_ectiveness and relevance of the Companys innovative product for the patients. The brand has treated over 3.5 mn patients since its launch.

BilypsaR brand, following its inclusion in the guidelines for

MAFLD and MASH by the Indian National Association for the Study of Liver (INASL), has experienced a surge in market share and further consolidated its position in the

Gastroenterology and Hepatology therapeutic areas. The guidelines have prescribed minimum duration of one year for the therapy. Strategic initiatives, such as pan-

India project for liver scanning using Shear Wave Elastography Liver

Scan, have played a pivotal role in improving the diagnosis of MAFLD

and MASH. Over one mn subjects have been screened till date and

around 75,000 subjects during the year FY2024 alone. Secondary sales

of the brand as per the IQVIA more than doubled during the year and

reached Rs. 520 mn. During the year, the Company further strengthened its position in

Nephrology with its second NCE and agship brand, Oxemia which

continued to make strong inroads in the CKD anemia market. Oxemia ,

the countrys rst oral alternative to erythropoietin-stimulating agents

(ESA), provided relief to over 45,000 CKD anemia patients during

the year.

During nancial year FY2022, the Company launched UjviraTM brand

for the treatment of breast cancer.UjviraTM is the worlds rst biosimilar

of an antibody drug conjugateKadcylaR. The brand was launched

with an aim to make the treatmentaiordable to a larger pool of

patients who were unable to a_ordm the cost of the innovator drug. The

brand has witnessed rapid volume expansion since its launch and now provides access to over 4,000 patients every year on account of the a_ordability of the product compared to the innovator brand.

Overall, the Companys formulations business in India posted sales of

Rs. 53,690 mn during the year, up 9%. Growth of branded formulations business was 10% during the year.

Over the years, the Company has built a sizeable presence in the consumer wellness space in India. Zydus Wellness Limited (ZWL), the Companys subsidiary, spearheads the groups operations in the wellness space. ZWL operates in two di_erent segments viz. personal care segment and food and nutrition segment and has a portfolio of category-leading health and wellness products. Five out of the six brands of the Company continue to hold leadership positions in their respective categories.

During the year, demand scenario in FMCG sector remained challenging both in urban and rural India. The weakness in demand was more prevalent in rural India during the large part of the nancial year on account of erratic monsoon and lower growth in agriculture sector. The personal care segment of the Company, which comprises of NycilR and EverYuthTM brands, registered a very strong double-digit growth while the food and nutrition segment reported a attish growth during the nancial year.

In ation across commodities moderated in India during the year. In line with the broader trend, the Company also witnessed gradual reduction in prices of key input materials. On account of moderation of in ationary pressure in key inputs, e?ective hedging strategies and calibrated price increases taken over last few quarters, the Company registered improvement in gross margin during the year.

Market share of diierent brands in their respective categories is as under:

The Company continued to work on three key pillars to grow the business and unlock the value for all the stakeholders. They are:

A. To accelerate growth of core brands

The Company continued to support the growth of existing portfolio and new products through di_erent marketing initiatives and go-to-market (GTM) strategy.

On the personal care front, NycilR brand displayed strong ??traction and grew faster than the category despite the intense competitive scenario. The brand maintained its number one ranking in the prickly heat powder category.

EverYuthTM brand demonstrated ??sustained growth momentum over the years driven by superior product experience. The core portfolio of EverYuthTM scrub and peel-o_ further strengthened their leadership positions with increase in volume share during the year. On the food and nutrition segment front,

??To drive the relevance of Glucon-DR brand, a new campaign viz. "Thakaan Gone, Energy On" was launched. The

Company launched ready to drink format viz. Glucon-D Activors Electrolyte Energy drink, with pilot launch done in couple of key states during the last quarter of the nancial year. ??Continued to support the ComplanR brand through focused communication by emphasising nutritional di_erentiation of the brand. Volume o[take progressively improved quarter on quarter for the brand.

SugarFreeTM Green continued its ??robust growth journey on the back of continued support through new campaign. The Company launched ImliteTM, a unique formulation of sugar blended with stevia which o_ers 50% less calories than that of regular sugar.

NutraliteTM brand registered good ??volume growth driven by dairy and spread portfolio. The Company continued to support the brand with digital media, e-commerce channel activations and various customer engagement activities like Chef Meets and participation in food exhibitions.

B. To expand international presence

The Company aims to build scale in international business by focusing on key regions like South Asian Association for Regional Co-operation (SAARC), Middle East and Africa (MEA), South East Asia (SEA) and Indian SubContinent (ISC), entering new geographies and introducing suitable innovations and extensions to cater to the needs of di erent markets. During the year, the Company continued to build strong foundation across markets with double-digit growth in South Asia and GCC markets. ComplanR and SugarFreeTM are the lead brands in the international markets.

C. To grow the scale and improve pro tability

The Company has taken various initiatives to increase consumer base and improve pro tability. The Company continues to drive growth of iconic brands through reimagined narratives and exploring new approaches to media exposure for the brands to achieve consumer connection with greater precision. As a result, the company has been able to increase overall penetration of its key brands.

Over past two years, the Company completely switched from distribution led model to doing direct business with all modern trade and e-commerce chains. This disintermediation helped the Company to improve lead time and availability and also resulted in margin savings. The Company has transitioned over last few years towards increasing the share of organised trade with channel speci c oerings to build more relevance with new age consumers. With a strong in-house R&D team and new state of the art R&D facility at Ahmedabad, the Company has built a robust pipeline of new products to satisfy the changing preference of consumers by o ering them the novel solutions. The Company ensures that new products are well researched and backed by scienti c claims and substantiation. The company continues to strengthen the competitive positioning and market share across brands through strong distribution, category expansion and investments in product innovations, media campaigns, sales promotions, and digital initiatives. The Company meets the need of over 50 mn consumers every year through multiple online and oine channel including 3 mn stores which stock the Companys products. This is a testament to the brands and the Companys go to market capability built to meet consumers daily needs and varying shopping baskets.

Overall, the consumer wellness business grew by 3% and posted revenues of Rs. 23,017 mn.

The Company pre-dominantly operates in the generics and specialty segments of the market through its wholly-owned subsidiary Zydus Pharmaceuticals USA Inc. The business achieved signi cant milestone during the year as its revenues surpassed US$ 1 bn for the rst time. Overall, the business delivered a robust double-digit growth during the year, a strong performance in a highly competitive market, on the back of sustained volume expansion in base business, execution success in new product launches and supported by a benign pricing environment. The base business sustained sequential growth through the year. Overall, the US was the largest market for the Company during the year, accounting for 46% of consolidated revenues.

Currently, the Company distributes over 200 generic products in the US market. Out of these, the Company has leadership position in over 20% of the product families and is ranked amongst top 3 players in approximately 60% of the product families. In terms of overall ranking, the Company continues to maintain the fth spot amongst the US generic companies based on prescriptions (Source: IQVIA, Regulatory Insights, MAT March 2024 TRx). The Companys success in the generics space is driven by its strong customer relationship, comprehensive product portfolio and an agile and resilient supply chain. In recognition of its strong customer service levels, during the year, the Company won the Healthcare Distribution Alliances DIANA award for "Best New Generic Product Introduction" for topiramate ER capsule launch.

During the year, the Company launched 28 generic products in the US market. Signi cant new launches for the year include Indomethacin suppository which was granted 180 days of Competitive Generic Therapy (CGT) exclusivity and 3 transdermal patches. The Company received 46 new product approvals (incl. 5 tentative approvals) during the year, taking the cumulative number of approvals to 402. The Company led 20 ANDAs with the USFDA during the year, taking the cumulative number of ANDA lings at the end of the year to 460.

revenues generic Company in the US

ANDA lings and approvals summary

The Companys specialty pipeline, built over last several years, started yielding results as it launched its rst 505(b)(2) product viz. ZituvioTM during the year.

In order to complement its own portfolio and broaden the range of healthcare options it can provide to the patients, the Company is constantly looking at business development and licensing (BD&L) prospects. During the year, the Company launched two such in-licensed products viz. Indomethacin suppository and Methylene Blue injection. It also entered into an exclusive licensing and supply agreement with Synthon BV for Palbociclib tablets for the US market. Under the terms of the agreement, Synthon BV will be responsible for obtaining US regulatory approval and subsequently manufacture and supply the product. The Company will be responsible for the commercialisation of this oncology product in the US market. During the year, the Company entered the US animal healthcare market with the launch of its rst generic product. The US animal healthcare market is valued at around US$ 9.9 bn with companion animal products accounting for about 60% of the overall market. The Company has a robust prescription drug portfolio, spanning various therapy areas and includes simple and complex solid orals, injectables, topicals and other dosage forms. The Company received seven approvals for animal healthcare products and launched three of them during the year. The Company has partnered with eleven distribution partners covering the US market, including general practice hospitals, corporate hospitals and group purchasing organisations. Going forward, the Company looks to continue its growth journey by focusing on successful execution of several of its key launches in the market over the coming years, across dosage forms. On the generics front, the Company looks to expand its presence in the complex generics space to o_set the impact of price erosion in the base portfolio and e ectively grow the business. In addition to progressing the development of its internal pipeline, the Company will keep on evaluating the partnership opportunities to enter into the dosage forms and therapies in which the Company historically hasnt had a presence in. In order bring additional value to the customers by satisfying their unmet healthcare needs, the Company is committed to expand its portfolio of 505(b)(2) products. Overall, the Companys US formulations business posted revenues of Rs. 86,851 mn during the year, up 17%. In constant currency terms, the revenues for the year stood at US$ 1,049 mn.

The Companys international markets division comprises of various countries in Emerging Markets and Europe. The Companys emerging markets include selected territories in Asia Paci c, the Middle East, Africa and Latin America. In Europe, the Company has a direct presence in France, Spain and the United Kingdom, while other European countries are served through a business-to-business (BTB) model. In the emerging markets space, the Company pre-dominantly operates in the branded generics segment with Cardiology, Diabetology, Neuro Psychiatry and Pain Management being the focused therapeutic areas. The Company engages with Key

Opinion Leaders (KOLs) in the focused therapies for overall disease management. Marketing e_orts over the years have transitioned from traditional brand management to a more holistic approach centered around the disease management. This approach involves engaging with all stakeholders across the value chain and is not just limited to the prescribers. By engaging with all the stakeholders, the Company can create a more comprehensive strategy to address the challenges and needs associated with managing diseases e_ectively. This strategy has helped in building bigger brands over the years across markets. The tally of million-dollar club (MDC) brands now stands at 43 with an addition of 15 such brands over last 3 years.

million-dollar club (MDC) brands

The Company retained its leadership position in Sri Lanka with a market share of 7.4% with 30 brands ranked rst in their respective molecule categories. In Philippines, the Company continued to grow at a faster pace than the participated market and was the 9th largest Company in the participated market. In the African continent, South Africas economic environment remains conducive, with healthy growth indicators. The Company was ranked 2nd in the covered market of South Africa (Source: IQVIA Report). On the Latin American front, in Mexico, the Company maintained strong momentum with healthy double-digit growth. The business in Brazil, however, was impacted on account of sluggish market growth. The Company has implemented necessary measures to increase business resilience to external market adversities.

The Company keeps on evaluating partnership opportunities with local players in select geographies as it looks to expand its footprint in di_erent emerging market countries. The Company has already initiated regulatory process in some of the countries such as Australia and Saudi Arabia, for which the business outcome will be realised in coming years.

In order to safeguard future growth and di_erentiate itself from the competitors, the Company is increasingly focusing on launching di_erentiated products, value-added generics and novel dosage forms. The Company continued to leverage its rich innovation pipeline and le dossiers of di_erent biosimilars with the regulatory authorities of di_erent countries.

In Europe, the Company has a direct presence in the generics markets of France and Spain. Throughout the year, the demand scenario held up well. The Company is pursuing a number of initiatives to bolster its position, including expanding its pharmacy coverage, boosting its retail presence through portfolio growth, improving its cost proposition and breaking into the wholesale channel. In the BTB space, the Company is scaling up the business in existing countries and looking forward to enter into new countries through partnerships. The Company expanded its presence in Europe during the year with an entry into the UK market. The Company commenced ling process in the UK to leverage its global R&D portfolio of di_erentiated and niche generics as well as specialty products and build a strong growth path for the UK market going ahead.

During the year, the Company acquired the UK headquartered

LiqMeds group of companies which has capabilities and specialisation in development, manufacturing and supply of liquid orals for global markets, which it currently commercialises through partners. Liquid orals is a large, growing market and serves unmet needs with signi cant new market expansion opportunities. It would help geriatric and paediatric patients as it brings in greater ease of convenience and ensures therapy compliance. LiqMeds has an oral liquids manufacturing facility in the UK and caters to the requirements of the US and the UK markets. Overall, the Companys International Markets formulations business posted revenues of Rs. 19,294 mn during the year, up 22%.

JVs and Alliances

Zydus Takeda Healthcare Pvt. Ltd.

Zydus Takeda Healthcare Pvt. Ltd. is a 50:50 JV between the Company and Takeda Pharmaceuticals Co. Ltd., Japan. The JV owns a manufacturing facility in India which is designed to manufacture both intermediates and APIs. The manufacturing facility caters to Europe, Japan and Korean Markets and is compliant with both national and international GMP standards. The APIs produced by the JV cover a broad range of therapeutic

Zydus Hospira Oncology Pvt. Ltd.

Zydus Hospira is a 50:50 contract manufacturing JV between the Company and Hospira Inc., USA (now part of P zer group), which manufactures oncology injectable products. The JV supplies products to the JV partners to cater to the requirements of the markets assigned to them. The JV has an annual capacity to manufacture upto 7 mn vials and it currently manufactures and supplies around 30 products from the facility. During categories like Anti-ulcerant, Antiseptic, Analgesic/Anti-in ammatory, Antihypertensive etc. and are supplied exclusively to the JV partner for its generic portfolio. The JV aims to strive for sustainable sales growth through system and facility upgrades, inclusion of new products, prioritising planet and sustainability, and fostering agility to embrace new ways of working and technology.

the year, in order to expand the business, the JV identi ed two external parties for contract manufacturing and commenced supplies to one of them. On the regulatory front, the JV facility successfully underwent multiple GMP inspections during the year. It was inspected by di_erent regulatory authorities such as the USFDA, EAEU, EMA, PMDA, ANVISA, WHO and Taiwan FDA.

APIs produced by the JV cover a broad range of therapeutic categories like Anti-ulcrant, Antiseptic, Analgesic/Anti-in ammatory, Antihypertensive etc.

APIs

API business plays a critical role in Companys operations by delivering the essential components for the Companys product portfolio across dierent markets in a timely and cost-ecient manner. Having a strong presence in API space enables the company to exert more control over its supply chain and reduce dependence on external suppliers. This backward integration strategy can enhance eciency, quality control and potentially reduce costs, which are all valuable advantages in todays competitive landscape. The Company has a wide range of capabilities to produce APIs and intermediates across dierent therapeutic areas. This versatility allows the Company to cater to the requirements of its own product portfolio as well as for meeting the needs of its external customers.

The Company has six state-of-the-art manufacturing facilities, a dedicated R&D centre and a team of talented scientists to ensure sustainable growth of this vertical. The Company currently manufactures and supplies a wide range of over 250 products to its customers. The Company continuously endeavours to ramp up the base business and build a portfolio of value-added new products through improved process chemistry and better yields and in turn, ensures consistent supplies to both internal and external clients. The Companys focus on cost competitiveness, technology adoption and building scale highlights its commitment to stay competitive and meet market demand eectively. During the year, the Company successfully completed the acquisition of Watson Pharma Pvt. Ltd.s API manufacturing facility at Ambernath, Maharashtra, which further strengthened the Companys backward integration capabilities. The facility is inspected by the USFDA. During the year, the Company led 4 US DMFs, taking the cumulative number of lings to 142.

The Companys API business posted sales of Rs. 5,658 mn during the year, up 3% and accounted for 3% of consolidated revenues.

products portfolio

US DMFs led in FY2024, 142 cumulative US DMF lings

The Company has a pool of modern, cost ecient and regulatory compliant manufacturing facilities which supply high quality, aordable products to its customers across the globe. The Company has the capabilities to manufacture diverse products such as small molecules, APIs, vaccines, biosimilars, complex products, animal health products as well as consumer wellness products. The Company has built vertically integrated operations for the key markets and key molecules to ensure high quality, low cost, seamless production schedule and timely availability of raw materials and nished products. The manufacturing network of the

Company comprises of 37 manufacturing facilities. Out of these, 33 facilities are for manufacturing of nished dosage formulations and active pharmaceutical ingredients. 16 of these 33 facilities have been inspected by the USFDA.

The Company has undertaken multiple initiatives to optimise the cost of operations as the Company believes that eective cost management is a key to succeed in a competitive industry like pharmaceuticals. The initiatives include alternate vendor development for key components, reduction in process time, unlocking eciencies in packaging operations etc.

Over the years, the Company has been continuously working on building a quality culture among its employees through the program Quality Excellence by Sustainable Transformation (QUEST) as the Company believes that the culture is the driving force behind the quality. During the year, the QUEST initiative was extended to the newly constructed Oral Solid Dosage (OSD) facility II located in Ahmedabad SEZ and the acquired API site at Ambernath.

manufacturing facilities

During the year, ??OSD facility I located in Ahmedabad SEZ received an Establishment Inspection Report (EIR) with Voluntary Action Indicated (VAI) status from the USFDA against an inspection which was conducted during the preceding nancial year 2023. The facility also completed EU-GMP audit and received EU-GMP approval during the year. ??Biologics ll nish facility located at Zydus Biotech Park in Changodar, Animal health formulations manufacturing facility located in Ahmedabad SEZ and the newly constructed OSD facility II in Ahmedabad SEZ

successfully completed USFDA inspections without any observations. ??Goa formulations facility completed the audits of EU-GMP and WHO-Geneva. ??Topical formulations facility located in Changodar successfully completed CDSCO audit while Vatva manufacturing facility completed joint inspection by Indian FDA, CDSCO and National Institute of Biologicals (NIB) for commercial manufacturing of biotech products at the site. ??On the API front, API

Ahmedabad facility completed USFDA inspection and received an EIR during the year while Ankleshwar Unit II completed the inspection by WHO-Geneva.

? OSD facility I located in Ahmedabad SEZ received an Establishment Inspection Report (EIR) with Voluntary Action Indicated (VAI) status from the USFDA ? API Ahmedabad facility completed USFDA inspection and received an EIR during the year ? Large volume block of OSD II located in Ahmedabad SEZ was made operational during the year

In order to meet ever rising customer demand, large volume block of OSD II located in Ahmedabad SEZ was made operational during the year. The Company received rst ANDA approval from this facility during the year.

The Company has built an agile and an integrated supply chain which serves as the back-bone of its operations across dierent geographies globally. It stands as a foundation of the Companys operational success, characterised by robust planning processes and agile operations with relentless focus on cost optimisation and risk mitigation.

Here are the key strengths of the Companys supply chain:

? Vertical integration on key molecules resulting in better control over the entire supply chain, increased eciency, reduced cost and better customer satisfaction by ensuring on-time delivery of the products.

? Agile production planning to swiftly adapt to market dynamics and customer preferences. This agility enables the Company to deliver quality products consistently across the markets.

? Resilient supplier ecosystem leading to rigorous supplier selection criteria and robust risk mitigation strategies. This enhances transparency, eciency and collaboration in the procurement processes.

? End-to-end supply chain digitisation enables to make data driven decisions leading to improved forecast accuracy, reduced stock outs and enhanced customer satisfaction.

The Companys supply chain canvas covers over 4,500 SKUs across multiple dosage forms being supplied to over 75 countries. The Company remains committed to advancing its digital capabilities, enhancing operational eciencies and delivering superior value to the customers.

Environment, Health and Safety

As a responsible corporate citizen, the Company continuously works towards achieving Environment, Health and Safety (EHS) excellence across all its operations. The Company has deployed dedicated EHS teams at each site to take care of day-to-day activities of EHS management system and a corporate cell which engages with all the stakeholders to build a harmonised EHS culture across units. The Company has a governance mechanism in the form of EHS monthly report, which evaluates the performance of all the sites across multiple parameters. EHS performance of each site is reviewed by corporate EHS cell every month and is communicated to the senior management. The EHS cell develops policies and SOPs pertaining to various EHS matters and periodically updates the same to ensure compliance with all the applicable regulations. The Company has an e ective internal audit mechanism to ensure compliance and validation of these policies and SOPs.

The Company has taken several initiatives towards conservation of natural resources. The Company has signed an agreement with M/S AFPRO for a watershed development project in couple of talukas which cover 11 villages. Through this project, rain water will be collected, reused for cultivation and harvested into aquifer so that water is available to farmers for their second crop of the year, enabling improved livelihood of farmers and achieving the objective of water neutrality for the Company.

Waste water generated at manufacturing sites is treated in accordance with regulatory requirements and recycled to the maximum extent possible. E orts have been made to minimise the waste going to secured land ll. During the year, six of the manufacturing sites achieved "Zero waste to Land ll" objective. The Company aims to achieve similar status across all the formulations manufacturing sites by end of calendar year 2024 and API sites by the end of calendar year 2026. In the area of energy conservation, the Company has deployed energy e cient equipments across sites. Several energy conservation measures were initiated across sites, through which electrical and thermal energy optimisation was achieved. In order to reduce greenhouse gas (GHG) emissions, renewable energy in the form of solar/ wind energy is sourced through third party power purchase agreements. Renewable energy consumption went upto 39% of total energy consumption during the year viz-a-viz 36% during the preceding nancial year.

On health front, pre-employment and periodical medical check-up is carried out for all the employees. Work place monitoring and personal monitoring is conducted to check the adequacy of various engineering controls installed for personal protection. Based on the operation and exposure risk, various exposure control measures like isolators, local exhaust ventilation systems, powered air purifying respirators (PAPRs) and other required personal protective equipments are made available to employees and workers involved in those operations.

Risk Identi cation, Risk Mitigation and Internal Controls

Zydus Lifesciences Limited, a leading Indian pharmaceutical company, is an integrated, global healthcare solutions provider. The Companys operations cover the entire spectrum of pharmaceutical value chain and are spread across the globe. The variety of business activities being performed and the geographies being served by the Company pose various risks and challenges. The Company has a well-de ned process of risk management which includes identi cation, analysis and assessment of various risks, measurement of probable impact of such risks and formulation and implementation of risk mitigation strategies. Implementation of these measures help to minimise the impact of such risks on the Companys operations. These are brie y described below:

Risk of competition, pricing pressure and Government control on prices

Risk Involved

Mitigation Strategy

Presence of a large number of players in the generic space results in increased competition which in turn, brings the prices down Expand the volume of existing portfolio and launch of new products
Entry of a new player/s in existing product results in increased competition leading to pricing pressure Move up the product value chain and launch complex products which have signi cant entry barriers and in turn, limit new competition
In some countries, Government regulates prices of medicines and reduces them periodically to make them a_ordable to patients Continued focus on brand building in the branded markets
Implementation of various cost optimisation initiatives across the value chain

Risk related to economic and political environment

Risk Involved

Mitigation Strategy

Frequent political changes including civil unrest and war like situation in di?erent geographies lead to signi cant uncertainties in Companys operations in such regions Continued evaluation of political and economic scenarios across the globe to cap the exposure to the a_ected regions

Secure receivables through letter of credit or advance payments

Regulatory Risk

Risk Involved

Mitigation Strategy

Penal action by the regulators if regulations of di_erent geographies are not complied with Loss of reputation and consequent threat to future operations

Continued evaluation of applicable regulations to ensure compliance at all times Build a strong quality culture in the organisation and adoption of new technologies and automation to ensure better compliance

Ever-increasing regulatory bar resulting in increase in cost of operations Proactively improve the systems and processes in the light of regulatory actions taken on other players

Independent audits and cGMP compliance checks to ensure all time audit readiness

Litigation Risk

Risk Involved Mitigation Strategy

Litigation with IP owners if patents granted to them Implementation of review mechanism to check for are claimed to be infringed possible infringement of intellectual property rights

Litigation with government authorities for alleged before developing and lings the dossiers

overcharging, non-compliance with pricing norms, Develope the products through non-infringing

quality, misbranding, labelling, etc. processes and formulations

Litigation with tax authorities on account of Ensure compliance with various statutory di_erences in interpretation of various provisions requirements by leveraging di_erent compliance

due to frequent changes in tax laws tools

Maintain internal domain expertise in taxation through continued knowledge updation

Risk of delay in/ non-receipt of product approvals

Risk Involved Mitigation Strategy

Loss of business/ opportunity due to delay in receipt Implementation of a mechanism to critically review

of new product approvals/ rejection of dossiers by all new product dossiers before submitting the same

the regulators to regulatory authorities

Delay in re-registration of product dossiers Speedy response to queries raised by regulators on

impacting the existing business product dossiers; Improvement in quality of

response based on learnings from de ciency trends

End-to-end tracking of new product development

(NPD) and new product launch (NPL) activities

through a digital tool viz. IRIS

Risk of international operations including foreign exchange risk

Risk Involved Mitigation Strategy

Presence in di_erent geographies exposes the Adoption of appropriate hedging strategy to

Company to currency volatility of di?erent countries; safeguard against adverse currency movements; use

Growth, pro tability, investments and liabilities can of natural hedging viz. foreign currency revenues are

vary considerably depending upon the uctuations hedged against foreign currency expenses and

foreign currency debt

Risk of cyber-attack on digital infrastructure

Risk Involved Mitigation Strategy

Disruption of Companys operations caused by cyber Strengthen cyber security controls, multiple

security breach on digital infrastructure initiatives to lower operational and strategic risk

Financial, operational and reputational loss pro les and to take swift actions on emergence of

risks across businesses

Risk of vulnerability on supply chain

Risk Involved Mitigation Strategy

Rising raw materials, utilities and logistics cost Identify key APIs, excipients and other inputs and

impacting the pro tability continued monitoring of pricing trend to take

Disruption in supply chain on account of geo-political appropriate buying decisions to protect against the

and socio-economic threats resulting in an inability increase in cost

to consistently service the demand of customers Regularly monitor and build the safety stock of key

APIs whose supply can be impacted on account of

potential geo-political and socio-economic threats

Identify alternate vendors for key raw materials and

develop domestic vendors to have better control on

cost, quality and supply

Risk of failure to achieve the objectives of large projects

Risk Involved Mitigation Strategy

Non-achievement/ signi cant delay in achievement Ensure realistic approach to valuation, critical of objectives of large inorganic opportunities/ capital evaluation and due diligence of each and every projects can signi cantly impact the pro tability and aspect related to the project

return on investments Monitor implementation of key strategies planned

and achievement of key milestones vs. plan on a periodic basis

Establish discipline on investments and debt raising with a policy on capital investment and structure; De ned criteria and threshold for new investments and optimum debt to EBITDA ratio

Risk Management and Internal Control Systems

Though it is not possible to completely eliminate various risks associated with the business of the Company, e_orts are made to minimise the impact of such risks on the operations of the Company. The Company has put in a place a robust risk management framework. Through this framework, an enterprise-wide risk evaluation and validation process is carried out regularly. Risk management policy is also reviewed regularly by the Risk

Management Committee and the Board of Directors. This is done to identify the new risks and gauge the impact of existing risks which might have gone up and in turn, put in place a proper strategy to mitigate such risks. The Company has put in place various internal controls for di_erent activities so as to minimize the impact of various risks. Also, as mandated by the Companies Act, 2013, the Company has implemented an Internal Financial Control (IFC) framework to ensure proper internal controls over nancial reporting. Apart from this, a well-de ned system of joint internal audit is in place so as to independently review and strengthen these internal controls. The Audit Committee of the Company regularly reviews the reports of the internal auditors and recommends steps for further improvement in the internal controls.

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