Dr.

Reddys Laboratory
Presented By:
Neeraj Balani Vidya Bandgar Mayur Bangar Adesh Bansode Devendra Bendre

Index Page
Sr NO 1 2 3 4 5 6 7 8 Particulars Introduction Facts Products And Services Milestone Chairman Speeches C.S.R Financial analysis Competitors Page NO 3-4 5 6-11 12-13 14-15 16-17 18-28 29

Introduction:
Established in 1984 by entrepreneur scientist Dr. K Anji Reddy, Dr. Reddys Laboratories (NYSE: RDY) is an emerging global pharmaceutical company.

As a fully integrated pharmaceutical company, its purpose is to provide affordable and innovative medicines through its three core businesses:

Pharmaceutical Services and Active Ingredients, comprising our Active Pharmaceuticals and Custom Pharmaceuticals businesses; Global Generics, which includes branded and unbranded generics; and Proprietary Products, which includes New Chemical Entities (NCEs), Differentiated Formulations, and Generic Biopharmaceuticals.

Its products are marketed globally, with a focus on India, US, Europe and Russia. Dr. Reddys conducts NCE research in the areas of metabolic disorders, cardiovascular indications, anti-infectives and inflammation. Its strong portfolio of businesses, geographies and products gives them an edge in an increasingly competitive global market and allows them to provide affordable medication to people across the world, regardless of geographic and socio-economic barriers. At Dr. Reddys, sustainability is a multi-dimensional aspiration, which has its roots in the very purpose of our existence providing affordable medicines to people around the world and meeting unmet medical needs through innovation. Their business, by its very nature, serves a social good, so they have a far deeper reason than profits alone to drive their performance. For them, building a sustainable organization is not a trend they blindly follow; it is intrinsic to how they have operated for decades. For them, a commitment to sustainability means a commitment to fulfilling their obligations to all of their stakeholders -- their customers & partners, employees, shareholders and society. Thus, while optimizing profitability may be one measurement of their performance, they also judge their success by their performance with regard to the communities in which they live and work, the environment and their employees. They understand that it is only by increasing value to all of these stakeholders that they can build an ever flourishing and lasting organization.

While sustainability thinking was always woven into the fabric of organization, they formally declared their intent to institutionalize it in 2004, when they first began to publicly report on their sustainability practices. They annually publish their Sustainability Report with direction from the guidelines recommended by Global Report Initiative G3, covering social, ethical, and economic, safety and environmental aspects of their business.

Facts:
Dr. Reddys is among the largest pharmaceutical companies in India. First manufacturing company from India to be SOX certified. It is fastest Indian Pharma Company to cross $1 billion in revenues. 4

Business employs about 11000 associates globally. Among the top 12 generic companies in the US. Rank 5th in Germany. 7th Largest Generic Pharma Company in Russia. Six USFDA approved plants in India, one in Mexico and latest addition, a USFDA inspected plant in Mirfield, UK, having a total capacity of 3300KL. Acquired Betapharm .It was the largest overseas acquisition ever by an Indian company at that point of time. Over 40 product families marketed in the US,133 ANDAs filled till date,69 ANDAs pending approval at the USFDA of which 32 are PARA 4 and 19 are FTFs. About 160 products are marketed in the EU. 200+ branded formulations marketed in the Rest. PSAI: 8 USFDA inspected facilities ( 6 in India,1 in Mexico and 1 in UK ) 3 Technology Development centers (2 in India, 1 in UK). One Biologics Development Centre. One Integrated Product Development Facility

Product and Services:

1) Active Pharma Ingredients

Dr. Reddys ranked 3rd API player globally. It has strong portfolio of 140 products. It has 20 products under development at any given point of time. A highly skilled global team focuses on timely delivery of products, product development, technology leadership, cost competitiveness, the highest levels of customer service, and full compliance with regulatory and quality requirements. Dr. Reddy's bulk manufacturing operations are spread across six units in Andhra Pradesh, India, a state-of-the-art facility in Mexico and a manufacturing site based in Mirfield, UK

A brief overview of API manufacturing facilities:

UNIT 1: Set up in 1985 Located at Bollaram, Hyderabad Has a Reaction Volume Capacity of 130 KL Is USFDA Inspected and ISO-9001 certified UNIT 2: Set up in 1986 Located at Bollaram, Hyderabad Has a Reaction Volume Capacity of 152 KL Is USFDA Inspected and ISO-9001 certified

UNIT 3: Set up in 1995 Located at Bollaram, Hyderabad Has a Reaction Volume Capacity of 71 KL Is USFDA Inspected and ISO-9001 certified

UNIT 4: Set up in 1984 Located at Jeedimetla, Hyderabad Has a Reaction Volume Capacity of 110 KL Is USFDA Inspected and ISO-9001 certified UNIT 5: Set up in 1987 Located at Miriyalaguda, 150 kms from Hyderabad Has a Reaction Volume Capacity of 700 KL Is USFDA Inspected and ISO-9001 certified Has achieved 'Zero Discharge' UNIT 6: Set up in 1990 Located at Pydibheemavaram, 800 kms from Hyderabad Has a Reaction Volume Capacity of 570 KL Is USFDA Inspected and ISO-9001 certified

UNIT 7: Located in Mexico gives niche steroidal API capacities Has the worlds largest capacity for sodium naproxen 7

UNIT 8: The chiral and biocatalysis technology at the Cambridge facility The scale up capability in Mirfield adds significant value to the CPS business offerings.

2) Custom Pharma Solutions: Dr. Reddys is largest CPS player from India. Niche technology-led acquisitions have made them a one-stop shop for many customers. Acquisition of Roche's API manufacturing unit in Mexico added the capability to manufacture niche steroidal APIs. The acquisition of the Small Molecule business of Dow Pharma at its Mirfield and Cambridge sites in the UK has further strengthened the portfolio and service offerings for customers

3) Global Generics: Branded Generics: Branded Generics portfolio offers over 200 products in the major therapeutic areas of gastro-intestinal, cardiovascular, pain management, oncology, anti-infectives,

paediatrics and dermatology. Brands like Omez, Ciprolet, Nise, Enam, Ketorol, Exifine and Cetrine enjoy leadership positions in several key markets including India, Romania, Venezuela, Russia & the CIS countries. Unbranded Generics: Generics offerings deliver quality at cost-effective prices in the highly regulated markets of the United States, UK and Germany. In the US, rank among the top 12 generic companies, with 34 product families being marketed and a large pipeline is pending approval. In the UK have more than 30 products in the market Generic Biopharmaceuticals: Biologics, or biopharmaceuticals, are protein therapeutics drugs that are produced using recombinant DNA technology. Over the past two decades, Biologics have revolutionized the treatment landscape in several therapeutic areas, especially in Oncology & Autoimmune disorders. The biggest advantage of Biologics over conventional medicines is that they are targeted and highly specific. However, Biologics are more complex and difficult to develop and are therefore relatively expensive. As a consequence, in developing countries they are unaffordable for most people. View generic biopharmaceuticals as an integral part of mid to long term growth strategy and believe that building depth in development and manufacturing capabilities will be critical in accessing this opportunity Strengths: Dr. Reddys proven generic biopharmaceutical development capabilities with two marketed products - GrafeelTM (filgrastim) and RedituxTM (rituximab), in emerging markets. Developed and launched Reditux (rituximab) - the world's first generic monoclonal antibody. The product portfolio spans multiple therapeutic areas oncology, auto-immune diseases and CNS. CGMP facilities to manufacture Biologics, in adherence with global regulatory requirements at a significant cost advantage

Pipeline: Have a pipeline of 8 generic biopharmaceuticals in various stages of development with two in clinical development stage. 4) New Chemical Entities and Differentiated Formulations: Dr. Reddys engaged in the discovery, development, and commercialization of novel small molecule agents to address significant clinical unmet needs. Also they are developing novel formulations of approved products whose safety and efficacy profiles are well characterized. Therapeutic areas of focus are bacterial infections, metabolic disorders, and pain/inflammation. Focus Therapeutic Areas: a. Bacterial Infections: The incidence of hospital acquired infections is growing as drugresistant bacteria are becoming more difficult to treat. Dr. Reddys is working to identify new approaches to treating these infections with products that have improved efficacy and tolerability profiles. b. Metabolic Disorders: Cardiovascular Disease is one of the leading causes of death globally. Many patients suffering from CVD are also afflicted with insulin resistance, type 2 diabetes, dyslipidemia, and obesity. While there are several treatment options for a few of these conditions, a need persists for effective and safe therapies that address insulin resistance, obesity, low HDL cholesterol and atherosclerosis. c. Pain Inflammation: The prevalence of chronic and acute pain is growing steadily as our population ages and diagnosis rates improve. Dr. Reddys is developing

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products with improved efficacy and side effect profiles in several areas of acute and chronic pain.

Milestones:
Year 2004

Acquires Trigenesis gives access to drug delivery technology platforms.

Year 2005 Acquires Roche's API Business at the state-of-the-art manufacturing site in Mexico with a total investment of USD 59 million. Announces India's first major co-development and commercialization deal for it's molecule Balaglitazone (DRF 2593), with Rheoscience. Announces a unique partnership for the commercialization of ANDAs with ICICI Venture.

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Year 2006 Revenues touch USD 1 Billion in December 2006. Dr. Reddy's obtains its second 180-day marketing exclusivity for a generic drug in the US market with the launch of Ondenesetron Hydrochloride Tablets. Becomes an Authorized Generic Partner for Mercks Proscar & Zocor in the US market during 180 day exclusivity period.

Acquires betapharm- the fourth-largest generics company in Germany for a total enterprise value of 480 million.

Year 2007

Becomes No.1 pharmaceutical company in India in turnover and profitability. Launches Reditux (Rituximab) the Worlds first biosimilar of a monoclonal antibody

Blaglitazone (DRF 2593) enters Phase III of clinical trials becoming Indias most advanced NCE

Year 2008 Acquires BASFs Pharmaceutical manufacturing contract business and related facility at Shreveport, Louisiana Acquires Dowpharmas small molecule business at its Mirfield and Cambridge facilities, UK. Dr. Reddys formally announces its US Specialty Business, Promius Pharma, LLC.

Year 2009 Announces strategic alliance with GlaxoSmithKline plc to develop and market select products across emerging markets outside India. Receives approval for Three INDs.

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Reorganizes Drug Discovery Operations to merge into Aurigene, a wholly owned independent subsidiary of Dr. Reddy's.

Chairman Speeches:
A quarter of a century has evolved before us, as we have steadily treaded the path of sustainability, with the purpose of providing affordable and innovative medicines to all. For Dr. Reddys, Sustainability goes beyond our conscious attempt to conserve resources and build sustainable relationships with our business partners; it is also a vital area of cost savings, revenue generation and competitive advantage. 13

Along the journey as we gained fresh perspectives, we have re-energized our goals, advancing our commitment to the stakeholder community that supports us by investing in sustainability through collective actions.

Fifteen years ago, we were the first in the Indian pharmaceutical space to embark on the high-risk, capital intensive journey of discovering new drugs (NCE).

We built well equipped labs and put together a team of highly skilled scientists. Over the years our company kept its faith in drug discovery and at the same time has believed in keeping in tune with the interests of all its stakeholders.

Accordingly, we have recently announced the restructuring of our R&D operations. We will now be placing utmost emphasis on R&D activities that can have a significant impact on near-term earnings, while not losing focus on long-term interests of the company.

The Drug Discovery operations in Hyderabad (Discovery Research for us) has merged with Aurigene, our wholly owned Drug Discovery subsidiary in Bangalore. A new group called the Proprietary Products group will build the proprietary, branded R&D portfolio for the company in collaboration with various partners and other biotechs. This group will be responsible for the existing Intellectual Property (IP) of the company and will ensure effective management of ongoing and future drug discovery programs.

Giving back to the community that supports us is a mission at Dr. Reddys that we have been implementing from our earliest days. Over time, our efforts were stepped up to build long-term value for individuals and society as a whole. Today, we reinstate our steadfastness towards sustainable development with collective actions along with our employees, our strategic business partners, involving government and multilateral organizations, social institutions, universities and academia, industry, in particular the pharma and biotech sectors. From this vantage point we look ahead to another silver jubilee of milestones in sustainable business partnership in the global pharma arena.

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We launched sumatriptan the authorized generic version of Imitrex in the USA ahead of other competitors. This alone has contributed to Rs. 7,188 million or 10% of our Companys total revenues for 2008-09.

Dr. Reddys Global Generics revenue increased by 51% to Rs. 49,790 million, primarily on account of the launch of sumatriptan in North America and strong performance in Russia and CIS.

Sixteen new products were launched in the US generics market in 2008-09, including two over-the-counter (OTC) products.

The Pharmaceutical Services and Active Ingredients (PSAI) business grew by 13% to Rs. 18,758 million; and revenues from the emerging markets grew by 20%.

We made three new acquisitions: DowPharmas Small Molecules facilities in the UK, located at Mirfield and Cambridge (Chirotech); BASF Corporations manufacturing facility at Shreveport in Louisiana, USA; and Jet Generici SRL, a company engaged in the sale of generic finished dosages in Italy. These acquisitions are already paying dividends, and will act as building blocks for future growth of your Company.

On a consolidated basis, our Companys revenues (net of excise duties and sales returns) increased by 39% over the previous year to Rs. 69,441 million in 2008-09 or U.S.$. 1.37 billion.

EBIDTA stood at Rs. 14,529 million in 2008-09, or U.S. $. 286 million.

CSR

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Dr. Reddys engagement with the larger community continues through various programs conducted by Dr. Reddys Foundation (DRF) on the crucial issues of Education and Livelihoods.

Addressing the vital link between education and vocational / livelihood based skills, DRF Livelihood Advancement Business School (LABS) as on July 2009, has provided livelihood opportunities for over 190,000 youth.

Dr. Reddys also take pride in the English-medium education to children through four Pudami Neighbourhood Schools in Hyderabad and Ranga Reddy districts. The Ensuring Children Learn program has reached out to over 16,000 children in 378 schools.

Engaging with the Naandi Foundation, a well-recognised social sector organization, Dr. Reddys employees contribute under the Power of 10 employee giving program towards health and education programs, as well as safe motherhood and child healthcare initiatives.

Naandis WaterHealth project: Andhra Pradesh has 350 plants which has encouraged us to approach other states in the country. Naandis Giddarbah pilot in 2007 set up 60 plants in 90 days making it the first constituency in India where every household has access to drinking water as per WHO norms at a minimal cost of Rs.1 for 10 litres of water. Today, Punjab and Haryana have 300 and 50 water plants respectively. Naandi has also set up 20 plants in Rajasthan with another 20 plants planned in Karnataka.

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Financial analysis
P&L account statement

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Shareholding Pattern

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Ratio analysis
1. Sales turnover Sales turnover is purely the revenue from selling a good or service. It excludes things like return on investment, interest earned and asset appreciation which are also included in the annual turnover.

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2. Current Ratio The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. While this shows the company is not in good financial health, it does not necessarily mean that it will go bankrupt - as there are many ways to access financing - but it is definitely not a good sign. The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash. Companies that have trouble getting paid on their receivables or have long inventory turnover can run into liquidity problems because they are unable to alleviate their obligations. Because business operations differ in each industry, it is always more useful to compare companies within the same industry.

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3. Debt/Equity Ratio : It is a measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets.

Note: Sometimes only interest-bearing, long-term debt is used instead of total liabilities in the calculation. Also known as the Personal Debt/Equity Ratio, this ratio can be applied to personal financial statements as well as corporate ones. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing. The debt/equity ratio also depends on the industry in which the company operates

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4. Return On Capital Employed ROCE : This ratio indicates the efficiency and profitability of a company's capital investments. Calculated as:

ROCE should always be higher than the rate at which the company borrows, otherwise any increase in borrowing will reduce shareholders' earnings. A variation of this ratio is return on average capital employed (ROACE), which takes the average of opening and closing capital employed for the time period.

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5. Operating Profit Margin: This ratio used to measure a company's pricing strategy and operating efficiency. Calculated as:

Operating margin is a measurement of what proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt. Operating margin gives analysts an idea of how much a company makes (before interest and taxes) on each dollar of sales. When looking at operating margin to determine the quality of a company, it is best to look at the change in operating margin over time and to compare the company's yearly or quarterly figures to those of its competitors. If a company's margin is increasing, it is earning more per dollar

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of sales. The higher margin is better.

6. Earnings Per Share - EPS The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability. Calculated as:

When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. 26

However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period. Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding in the outstanding shares number. Earnings per share are generally considered to be the single most important variable in determining a share's price. It is also a major component used to calculate the price-to-earnings valuation

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7. Return On NetWorth: The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested. ROE is expressed as a percentage and calculated as: 27

Return on Equity = Net Income/Shareholder's Equity Net income is for the full fiscal year (before dividends paid to common stock holders but after dividends to preferred stock.) Shareholder's equity does not include preferred shares.

8. Inventory Turnover Ratio A ratio showing how many times a company's inventory is sold and replaced over a period.

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The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand or "inventory turnover days".

Competitors
Teva Mylan Merck & Perrigo

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 Sandoz Glaxosmithkline Plc Watson Pharmaceuticals Inc

Competitors Analysis:
MYLAN LABORATORIES: Acquired Mercks generic business in Europe in 2007 Acquired controlling interest in matrix

TEVA PHARMACEUTICALS LTD: Increased its equity ownership in Tianjin Hualida biotechnology co.ltd from 45% to 60%

SANDOZ: Merged with Ciba-Geigy to form Novartis in 1996 acquired Hexal of Germany and eon labs of the U.S.

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