Dr.

Reddys Investor Presentation

June 2012

Safe Harbor Statement

This presentation contains forward-looking statements and information that involve risks, uncertainties and assumptions. Forward-looking statements are all statements that concern plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are other than statements of historical fact, including, but not limited to, those that are identified by the use of words such as anticipates, believes, estimates, expects, intends, plans, predicts, projects and similar expressions. Risks and uncertainties that could affect us include, without limitation: General economic and business conditions in India; The ability to successfully implement our strategy, our research and development efforts, growth and expansion plans and technological changes; Changes in the value of the Rupee and other currency changes; Changes in the Indian and international interest rates; Allocations of funds by the Government; Changes in laws and regulations that apply to our customers, suppliers, and the pharmaceutical industry; Increasing competition in and the conditions of our customers, suppliers and the pharmaceutical industry; and Changes in political conditions in India. Should one or more of such risks and uncertainties materialize, or should any underlying assumption prove incorrect, actual outcomes may vary materially from those indicated in the applicable forward-looking statements. Any forward-looking statement or information contained in this presentation speaks only as of the date of the statement. We are not required to update any such statement or information to either reflect events or circumstances that occur after the date the statement or information is made or to account for unanticipated events.
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Company Overview

Looking Back / Looking Forward Business Updates

Purpose:
Providing affordable and innovative medicines for healthier lives.

Strategy:
Leverage industry-leading science & technology, product offering and customer service with execution excellence.

Overview
Integrated business model spanning 3 segments custom services, and proprietary products. Strong vertically integrated portfolio of businesses, geographies & products. Amongst the largest Indian pharmaceutical companies a CAGR of ~ 21% over the last decade Revenues of U.S. $ 2 bn in FY2012 with generics, active pharmaceutical ingredients &

Global Generics
FY12 Revenue mix 75% of total

Pharmaceutical Services & Active Ingredients

FY12 Revenue mix 25% of total

Proprietary Products
Focus on building sustainable and profitable branded innovative business Efforts in new drug discovery, differentiated formulations & biosimilars

Finished dosage businesses in distribution-driven as well as doctordriven markets Strategic focus on key large markets North America, India, Russia / CIS, Europe

Amongst the leaders in supply of generic APIs globally Customers include generic manufacturers, innovator companies

* Revenue converted at the average billing rate for FY 12.

The Last Decade

Built the foundations for a strong business. Moved up the value chain. Strengthened capabilities. Achieved scale and global presence. Acquired to aid growth.
Revenues [USD Mn]

1,901 1,677 1,510 1,365 1,250

Germany & Mexico acquisitions Authorized generic launches

1,563

380

463

447

546

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

All figures converted at respective years USD to INR convenience translation rate.

Minimizing Business risk

Diversified Model
Generics:NorthAmerica//Germany//RestofEurope BrandedGenerics:India//Russia&CIS//Other EmergingMarkets//GSKAlliance

Diversity in product service offering & geographic mix

Global Generics

PSAI

ActiveIngredients CustomPharmaceuticalServices

Dr.Reddys Proprietary Products

Specialty/DifferentiatedFormulations Biologics

Others

Aurigene
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Our Strengths
Industryleadingchemistryskills
SeveralnicheproductopportunitiesinAPI &generics(tacrolimus/lansoprazole/
omeprazoleOTC/fondaparinux/fexofenadine productfamily,etc)

Highverticalintegration
GloballeaderinDMFfilings(543 Mar12)

Earlymoveradvantageinbiosimilars
Onlyglobalgenericlaunchofrituximab 4productsinmarketingportfolio

Infrastructure
20+billionunitsingenericscapacities 9formulationmfgfacilities(4USFDA
approved)

8APImfgfacilities(7USFDAapproved)

Diversifiedbusinessmodel
Riskdiversifiedacrossdifferentnature of businessesandacrosscountries

Infrastructure
Investing for future : 20+ bn finished dosage units
Current Infrastructure API Manufacturing : India 6, UK 1, [All 7, USFDA approved], Mexico 1

Finished Dosages Manufacturing

: India 7 [2 USFDA approved] US 2 [USFDA approved]

Biologics Facility

: India 1 [audited by multiple regulatory agencies]

Custom Pharma Services

: 3 Technology Development Centers [2 in India & 1 in Cambridge, UK]

R&D Centers

: Integrated Product Development Organisation [IPDO] in Hyderabad, India NCE R&D center in Hyderabad, India Aurigene R&D center in Bangalore, India
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Company Overview

Looking Back / Looking Forward

Business Updates

Recap

Efforts in the last few years (1/3)

Building depth & focus in key markets

Reaching critical mass Building Tier II markets NAG [>$650 mn]; India & RCIS [each > ~$250 mn] CIS, Venezuela & South Africa

Turn-around of Germany
Restructured betapharm field force & personnel Maximized vertical integration of portfolio

Improvement in financial ratios

Improved mix of products to gain higher margins Scale Leverage: Controlled SG&A growth below sales growth Capped risky R&D
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Recap

Robust improvement in financial metrics (2/3)

EBITDA ($ Mn) 1,918 1,639 1,353 1,428 332 240 334 360 Oneoffprofitsfrom exclusivitysales 530

Base Revenue ($ Mn)

1,242

FY08

FY09

FY10

FY11

FY12

FY08

FY09

FY10

FY11

FY12

Base revenues represent revenues excluding significant exclusivity sales

All figures converted at respective periods average translation rate

All figures converted at respective periods average translation rate

PAT%tosales
16% 14% 8% 12% 13% 10%

ReturnonCapitalEmployed
24% 18%

16%

18%

FY08

FY09

FY10

FY11

FY12

FY08

FY09

FY10

FY11

FY12
11

PAT adjusted for one time non cash impairment charges & other non recurring costs

RoCE mentioned above is pre-tax Operating RoCE adjusted for one time non cash impairment charges & other non recurring costs

Recap

Efforts in the last few years (3/3)

Geography Nature GSK Alliance Joint venture with Fuji Film Shreveport facility Bristol penicillin facility In-licensing deals Merck / Cipla Cloderm brand Chirotech facility First set of Limited Competition products
(tacrolimus, lansoprazole, fondaparinux, etc)

Bridging capability gaps & setting businesses towards growth

Rationale EM play Japan generics Manufacturing Penicillin assets OTC portfolio

Emerging Markets
(Brazil, Mexico, Turkey, etc)

Japan Markets US Generic Russia US Specialty

Generics R&D

Proprietary chiral and biocatalysis technology Annuity of exclusivity Building pipeline Commercializing biosimilars globally

First generic launches in India (rituximab Biosimilars

and darbepoetin alfa)

Merck-Serono deal

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Addressing future growth through multiple levers

Beyond FY17 Strong base business in US (large base of limited FY13 to FY17 Momentum in US driven Upto FY13 Scale-up in North America Generics backed by new launches Strong growth in EM by limited competition competition products) Continued progress in

Emerging Markets Contribution from

opportunities. Steady growth across

biosimilars in Regulated Markets Commercialization Proprietary pipeline Scale-up in Japan

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Emerging Markets India, Russia, Tier II markets, GSK Alliance Emerging Markets scale-

of

(Russia, India & Other EM) API lock-ins for key

Products

up in biosimilars

products

generics business

Company Overview

Looking Back / Looking Forward

Business Updates

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North America Generics

BaseRevenues($Mn)
Excludingupsiderevenues
417 275 199 301 570

Pipeline

80 pending ANDAs
(~$45+ bn of innovator brand sales value)

FY08

FY09 $156mn

FY10 $54mn

FY11

FY12 $100mn

Upside Revenues

Portfolio
26 Rx products ranked Top 3 in market share Growing portfolio of limited competition products
Key Rx Products Tacrolimus Lansoprazole Omeprazole Mg OTC Fondaparinux Market Share 23% 21% > 20% 28% Rank 3 3 2 2 Revenues

Combined revenue >$200 mn

North America Generics

Continued growth in the period upto FY17

Continued strong engagement with strategic customers Service Level excellence

Strategic Focus High Quality portfolio Steady growing business

Mix of limited competition and complex generics products to significantly enhance

15-20 new launches annually with launch-year revenues in the range of $100-200mn

Emerging Markets
Revenue ($ Mn)

Russia
232 196

5th largest branded generic Robust & consistent outperformance of industry growth over the years

152 126 101

FY08

FY09

FY10

FY11

FY12

Top 5 Rx products
Top Products Omez Nise Ketorol Ciprolet Cetrine
Source: Pharmexpert

Top 2 in market shares

Market Share 67% 66% 53% 45% 27% Rank 1 1 1 1 2

Increasing mix of OTC sales

26% 29% 13% 18% 8% FY08 FY09 FY10 FY11 FY12

Emerging Markets

Russia

Focus & Build portfolio in select Therapeutic areas :

FocusTherapeuticareas

Gastrointestinal

Pain

Antiinfectives

Dermatology

Cardiovascular

Gynaecology

Existing

GrowMegabrands
(brands>$20mn)

ScaleupOTCportfolio

Buildportfolioofdifferentiated
New

&difficulttomanufacture products

Biosimilars&Oncology

Emerging Markets
Revenue ($ Mn) 244 212 168 177

India
Strong relationship with GP/CPs
270

Coverage of > 200,000 doctors Overall prescription ranking at 9th Strong market share in Top brands

FY08

FY09

FY10

FY11

FY12

Top 10 Brands Omez

Market Share 52% 48% 19% NA 25% 12% 5% 13% 8% 33%

Rank 1 1 1 ~1 1 2 6 1 1 1

Growing portfolio of biosimilars

18 14 9 7

$ mn

Nise Stamlo Reditux Omez-DSR Stamlo Beta Atocor Razo Razo-D

FY09

FY10

FY11

FY12

Mintop

Emerging Markets

India

Focus & Build portfolio in select Therapeutic areas :

FocusTherapeuticareas

Gastrointestinal

Pain

Antiinfectives

Dermatology

Cardiovascular

Oncology

Existing

Grow&sustainMegabrands
(brands>Rs.30crs)

ScaleupBiosimilars&Oncology
1newbiosimilarlaunchannually

Enhancecustomer
New

engagementthroughscale upofDr.ReddysFoundation forHealthEducation

Global Generics Europe

Revenue ( Mn) 179 183 144 140 140

Europe Strong cost control measures Launch of new products outside the scope of tenders Selective approach of picking portfolio
FY08 FY09

FY10

FY11

FY12

Pharmaceutical Services & Active Ingredients

Revenue ($ Mn) 413 408 430 431 497

Visibility of new launches, new customer lockins and improving order book status Pipeline 68 DMFs filed in FY12 Cumulatively 543 DMFs (US 187)
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FY08

FY09

FY10

FY11

FY 12

All figures converted at respective years average translation rate

Dr. Reddys Merck Serono Biosimilars deal

Dealcoverage

Codevelopment

Comanufacturing

Co commercialization

Revenueallocations

Globaldeal Portfolioofbiosimilar compoundsinoncology, primarilyMAbs. Sharingofdevelopmentcosts. Fornoncoveredproducts,Dr.Reddys continuestocarryouttherequired development/manufacturing/ commercialization.

MerckSerono Exclusive marketswith Royalty arrangement

Dr.Reddys Exclusive& coexclusive markets

USmarketCo commercialization

Proprietary Products
Strategy
Calibrate investments and build a selfsustainable, commercially valuable portfolio of Specialty-oriented proprietary products

Approach
Pursue well-defined niche and semiblockbuster Specialty opportunities with limited competition

KeyAspects
Pipeline

ShiftfromNCEstofocusonlow riskR&D(differentiatedproducts) Focusontherapeuticareasof a) Dermatology b) Pain c) Antiinfectives AlliancewithGSKtofocuson commercializationofdifferentiated productsinEmergingMarkets

Pain

Dermatology

Other TAs

ThankYou
ForanyinformationpleasecontactInvestorRelationsCell: Kedar Upadhye atkedaru@drreddys.com /+914066834297 Saunak Savla atsaunaks@drreddys.com /+914049002135 RaghavenderRatraghavenderr@drreddys.com /+914049002135 MilanKalawadia (USA)atmkalawadia@drreddys.com /+19082034931

FY12 Performance
$500 mn
26% to sales 55% YoY gr

$ 1.9 Billion
30% YoY gr

Revenue

EBITDA

PAT*
$300 mn
16% to sales 42% YoY gr
*Adjustedforinterestonbonusdebenturesandonetimeimpairmentcharges AllUSdollarfiguresbasedonconveniencetranslationrateof1USD=`50.89

Launches & Filings

17 ANDA filings & 68 DMFs filings

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Key Balance Sheet Items

$ mn

Mar 2012 Cash & Cash Equivalents 357

Dec 2011 326

Net Operating Working Capital

691

723

Property, plant & equipment

653

637

Goodwill & Intangibles

265

298

Loans & borrowings (current & non current) Equity & Reserves o Capital expenditure for nine months FY12

633 1,129 $169 mn

757 1020

o Current Cash flow hedge options of ~ $609 mn [range of Rs 49 to Rs 50]

AllUSdollarfiguresbasedonconveniencetranslationrateof1USD=`50.89

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