Company Background

Dr. Reddy's Laboratories (DRL) was founded in 1984 by Dr. Anji Reddy. 1 Dr Reddys is
Indias one the leading pharmaceutical companies in terms of revenues. DRL commenced
operations as a supplier to Indian drug manufacturers and subsequently started exporting
products to semi-regulated markets. In the beginning of 1990s, DRL shifted focus towards
acquiring approvals for its drug formulations (vials and mgs) and consignment of bulk drugs
in regulated markets of US and Europe. Since its inception, DRL has acquired the aggressive
route of growth of acquisition. Some of the major acquisitions in the recent years have been.
Three key core business segments:
Global Generics (GG) includes branded and unbranded prescription and Over-TheCounter (OTC) drug products business and also includes the operations of our
Biologics business.
Pharmaceutical Services and Active Ingredients (PSAI) consists of Active
Pharmaceutical Ingredients (API) and Custom Pharmaceutical Services (CPS)
businesses.
Proprietary Products (PP) comprises of our Differentiated Formulations business and
our New Chemical Entities (NCEs) business in the therapeutic areas of dermatology
and neurology.
Year of Acquisition
2002
2004
2011
2013
2014
2014

Target
BMS Labs
Trigenesis
GlaxoSmithKline
Octoplus
Novartis
Ducere Pharma

Remarks
UK-based manufacturer
Dermatology segment in US
Us-based penicillin site
Research facility in Holland
OTC nicotine patch
Acquired 6 OTC brands

Revenue (Rs Million)

Gross Profit (Rs Million)

EBITDA (Rs Million)

PBT (Rs Million)

Company Businesses Performance

1 Crisil Research

Revenues grew by 4% y-o-y primarily on account of our Global Generics segments

operations in North America, Europe and India
Gross Profit as a percentage to sales, improved primarily due to an increase in new
product contribution, incremental export benefi t and favourable product mix
EBITDA increased to Rs. 36,252 million or 23.4% of revenues.
DRL Revenues from the Global Generic segment grew by 7% to Rs 128.1 bn from
2014-15
Revenues from the Pharma service and active ingredients segment declined to Rs 22.4
bn.
Revenues from Proprietary Products & others was 4.3 billion, which has grown by
28% since last year

Global Reach: Aggressive Expansion Strategies and Launch of New Products

In 2007, the Company launched the worlds first bio similar monoclonal antibody
called RedituxTM (rituximab). It remains a leader with a market share of
approximately 65% in India with global marketing spread in 14 other countries.
North America: Since the launch of its first OTC product in FY2009, the Company
has successfully brought in a variety of newer OTC products to the
The Company is a leading player in the oncology market with a strong branded
generics portfolio including Capiibine (capecitabine), Docetere(docetaxel) and
Cytogem (gemcitabine). The oncology portfolio registered a growth of 13.6% in
FY2013.
Nine new products were launched during the year 2013-14; the major ones being
decitabine, azacitadine, zolendronic acid (5 mg/100 mL), divalproex ER and
donepezil 23 mg. There was also a significant increase in the market share by 4% of
key existing products such as metoprolol succinate and atorvastatin.
In April 2015, Dr. Reddy Labs entered into an agreement to acquire select portfolio of
the Belgian firm UCB in India. The acquisition, for a consideration of Rs 8 billion,
gives DRL access to established UCB brands in Nepal, Sri Lanka, India and
Maldives. Further, it would widen its product base in the high margin and high growth
segments of dermatology, respiratory and paediatrics as well as give access to leading
brands such as Atarax, Nootropil, Zyrtec, Xyzal and Xyzal M.

In March, 2016, Dr. Reddy's Laboratories entered into a license agreement with
XenoPort, Inc., which granted Dr. Reddy Laboratories exclusive rights for the
development and commercialization of XenoPorts clinical stage oral new chemical
entity, XP23829 in the US. The company plans to develop XP23829 as a potential
treatment for moderate-to-severe chronic plaque psoriasis and may potentially
develop XP23829 for relapsing forms of multiple sclerosis (MS).

Medznat was launched in April 2016 and has already received very positive feedback
from experts in the field. Medznat, a mobile and web based App that enables doctors
to keep up to date with the latest scientific knowledge and insights relevant to their
practice.

Creative thinking and collaboration with partners enabled Dr. Reddys in 2016, to help
avert a critical shortage of a vital drug in the United Kingdom (UK), Zoledronic acid,
used to treat osteoporosis and Pagets disease of the bone in adults.

DISCUSSION ANANALYSIS
Green Roadmap:
Energy Consumption
During the year, DRL reduced energy costs by 8% at Chemical Technical Operation (CTO)
from the FY2015 cost base by sourcing power at competitive rates from open access,
sourcing coal from e-auction and implementing various energy conservation measures. IT
identified an energy conservation project including a co-generation power plant with an
annual savings potential of `240 million with a total investment of 620 million.
Additionally, various business units implemented energy conservation initiatives such as:
Project resulting in savings of Rs. 3.6 million at our Custom Pharmaceutical Services
(CPS) unit
24 energy conservation projects resulting in savings of Rs. 55 million at our
Formulation Technical Operations (FTO) units
Better sourcing strategy leading to savings of Rs. 14.9 million by our Biologics
Development Center
Waste Management
In continuation of the earlier practice of disposing organic waste to cement industries
as auxiliary fuel, we have undertaken pilot studies to dispose market returned/off
specified pharmaceutical goods. To this end, we are working closely with regulators
and cement industries to obtain necessary permits to commercialize the process. We
have also taken several initiatives to manage he waste generated, including:
Identifying specific waste stream from the Ranitidine manufacturing process to
Recover pure sodium sulphate salts (up-cycling)
Installing a new onsite incinerator at FTO-4 to dispose hazardous waste accumulated
over years
Replacing the existing Spray Dryer at CTO-2 with ATFDs to comply with directions
from the regulator
Green Value Chain

To strengthen our position in the Green Value Chain, safety awareness sessions were
held at the Leadership Academy with Strategic Business Partners (SBP) and Loan Licensing
(LL) sites in November 2013. They covered:
Good safety practices in the manufacture of intermediates and API Products Need,
selection, use, limitation, maintenance and replacement of Personal Protection
Equipment (PPE)
Emergency Response (Identification of Emergencies and their mitigation measures)
Recovering Acetone which was being sold as a spent solvent in the Clopidogrel EP
grade. It was introduced in the CB 23 stage after necessary R&D trials. For
Clopidogrel US grade, losses were addressed which resulted in more than 15%
improvement in overall recovery
Implementing process and facility modifications in manufacturing and SRS areas for
the use of 2-Butanol in the CB 4 stage of Clopidogrel Bisulphate. The modifications
resulted in substantial improvements in overall recovery and reuse of 2-Butanol
Sustainable Sourcing
Dr. Reddys has well defined and documented Supplier Code of Conduct addressing all
sustainable sourcing elements like Ethics, Labor & Human Rights, Wages & Benefits, Health
& Safety, Environment, Management System including Bribery and Corruption.
Dedicated resources are involved in capacity building and sharing best practices among all
strategic business partners (Total nos: 450). Alternate vendors are being developed where
single vendors are considered critical for business continuity. It has taken an ambitious target
of reducing air shipments to 40% as against 60% in FY2020 and achieved 51.7% in FY2020
as against a target of 40% in this reporting period.