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Letter from the MD & CEO

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Our focus over the last four decades on building a quality first injectable company with a broad product portfolio and a differentiated business model has ensured sustained growth over the years.

Dear Shareholder,

It gives me immense pleasure to present you our first annual report post listing of your Company on the Indian stock exchanges (NSE and BSE) on November 20, 2020. This has been a landmark year for us, with your Company debuting on the exchanges. I would first and foremost, thank all our investors for the invaluable trust you have shown in us. We assure you of our commitment and dedication towards value creation in our journey forward.

Review of FY 2020-21

The year gone by was an unprecedented year, with the world seeing a health and economic crisis like never before. Most countries across the globe closed their borders and were forced to curtail economic activity to control the spread of the COVID-19 virus deeply affecting the people as well as businesses.

Most of the economies around the globe contracted, with the world economy contracting by 3.4% in 2020. The extent of the impact varied across major developed and emerging economies, but all of them saw a contraction in growth.

Apart from having a widespread impact on the economy, the lockdown induced by the pandemic also affected the supply chain, raw material availability and demand mix for the pharmaceutical industry, including your Company. Due to the pandemic we had to accelerate adoption of technologies and other innovations to build a robust supply chain to make our business more resilient. In spite of the several challenges, we have been able to deliver a robust performance, backed by our resilient business model, diversified product portfolio and unwavering dedication of our team.

Business Overview

We are in the business of saving lives and true to this philosophy, our teams exhibited extraordinary dedication to help combat challenges posed by COVID-19. In order to maintain a continuous production and supply of critical medicines, our employees worked above and beyond the call of duty, working uninterruptedly to coordinate and get necessary timely regulatory approvals, while prioritising COVID-19 related customer orders. Continuous focus was given to maintain supply of medicines such as Enoxaparin, Rocuronium, Cis-atracurium and Atracurium, which are critical for COVID-19 patients. The teams took proactive measures, working with our suppliers to maintain a comfortable stock level of inventory to address any unforeseen future shortages due to increased patients’ requirements. We have also started the manufacturing Remdesivir and supplied around 1.68 million vials in FY 2020-21.

Financial Performance

Despite challenges, not least the impact of the pandemic as well as other macroeconomic factors, our teams remained strong, productive and committed to our customers, delivering exemplary performance. In consensus with our long-term growth trajectory, your Company’s revenue continued to show a strong growth of 32% to ₹ 34,629 million in FY 2020-21.

Our focus over the last four decades on building a quality first injectable company with a broad product portfolio and a differentiated business model has ensured sustained growth over the years. During the year our EBITDA and PAT for the fiscal stood at ₹ 14,370 million and ₹ 9,970 million, respectively. We saw a healthy growth in margins with our EBITDA margin rising to 40% in FY 2020-21, over 39% in FY 2019-20. Similarly, our PAT margin impressively stood at 28% in FY 2020-21, in line with that in FY 2019-20. Going forward, we will strive to maintain our margins on the foundation of a strategic blueprint for growth.

Strategic Overview

Our ability to respond to changing market demand during COVID-19 was visible, as we have registered growth in markets across the globe. We have continued our growth in regulated markets like North America, Europe and Australia on the back of new launches and volume growth in the existing portfolio supported by an increased capacity. In the domestic market also, the growth was driven by strong demand of our existing product portfolio, and new product launches. We have launched 47 product SKUs of 28 molecules during the year and the key launches for the year were Micafungin, Ziprasidone, Bivalirudin RTU and Olapatadine Ophthalmic (OTC). Our strategy of geographic expansion into emerging markets such as Singapore, Israel, Saudi Arabia and CIS countries through our new partners also showed promising results. Our Rest of the world business grew rapidly at 136% y-o-y, accounting for 16% of our revenue in FY 2020-21. We expect to further strengthen our presence in the global markets, with multiple product launches scheduled in the coming fiscal.

Charting New Frontiers of Growth

We continue to invest in R&D as we believe it is core to building a sustainable business. In FY 2020-21, total R&D expenditure was ₹ 1,220 million, which is nearly 3.5% of our revenue from operations. We have identified certain niche capabilities that need to be built on both the development and manufacturing front, towards which we are adding resources internally as well as evaluating external targets. As of March 31, 2021, we along with our partners had 284 ANDA filings in the US, of which 234 were approved and 50 were pending approval.

In concurrence with our long-term strategy, we have always been focused on strengthening our backward integration process. Today, we have a strong presence in key APIs used in our products. We continue to expand our API facilities to reduce dependence on external sourcing and protect us from cost volatility. With this approach we are confident to have more quality control in the process.

We are also exploring M&A opportunities to acquire companies,products and technologies that will add to our capabilities and technical expertise. We plan to acquire capabilities to strengthen product and technology infrastructure, such as long acting injectables, steroidal hormonal products, suspensions, anti-neoplastics and, nasal and inhalation products. We are also looking at niche API suppliers with complementary capabilities, especially in fermentation technology, corticosteroid APIs and hormonal APIs. Geographically, USA continues to be our primary market and we are looking at inorganic routes to enter the Controlled Substances market in the country, which is otherwise restricted. We are looking for assets that fit our strategy and culture, especially in terms of quality standards.

While we focus on building our operational capabilities, quality compliance is of utmost importance. Our stringent quality controls are designed to facilitate flexibility in our production process and deliver consistent product quality. While our quality team focuses on maintaining the quality standards required by regulatory authorities, they continuously invest in technologies to improve quality processes to provide the best quality product for patients. It gives me immense pride for being recognised as a quality manufacturer, having a clean record with major regulatory authorities over the years.

Above everything else, what stands out and what will also help us, going forward, are our culture and values, anchored in our long-term strategic objectives. We continue to leverage the strengths of our parent company, Fosun Pharma, to mobilise our resources and act quickly in the most unusual circumstances. Fostering our ties with Fosun Pharma, we are taking strides to penetrate in an otherwise difficult market of China, where we have already made six product filings and are also developing China-specific products.

Our agreement to manufacture Sputnik V vaccine of Russian Direct Investment Fund (RDIF) only validates our unique competencies. Enthused by the robust demand across product segments, we plan to continue investing in creating infrastructure in the vaccine and bio-similar space. Cost competitiveness, improving efficiencies and increasing speed-to-market will always remain our priorities.

Going forward, our market leadership will be clearly driven by delivering sustained high margins and strong performance across key financial metrics.

Our growth strategy includes both organic and inorganic plans. We are establishing capabilities in niche technologies like LAIs, Suspensions, Hormones, Peptides, both on development and manufacturing. Our inorganic growth plans are focused on acquiring new technologies, strengthening vertical integration and also growing by way of geographic expansion, which are part of our long-term growth strategy.

Strategic Efforts

In the post-pandemic environment, we are even more outcome focused and are working towards actionable work streams on four broad pillars:

  • 1 Re-grouping and Consolidation by transferring and sharing of resources, expertise and assets across all manufacturing locations. This will enable us to operate a lean, flexible and effective organisation.
  • 2 Diversification of Product Portfolio
  • 3 Streamlining of our Human Capital
  • 4 Effective and Efficient Manufacturing

I am humbled by the dedication and commitment of our employees who have swiftly adapted to the changing requirements with the onset of COVID-19. With their support, we have weathered the pandemic and found out ways of delivering on our promises to our stakeholders. I would like to take this opportunity to acknowledge their hard work and wish them continued success and growth with the Company.

Social Commitments

We also take pride in the efforts dedicated towards serving the community by providing Education, Good Health, Safety, Conservation of Environment, Eco-Systems and Natural Resources. Your Company launched free breakfast programme to ~ 9,100 children of 66 government run schools in association with the Akshaya Patra Foundation. We are also working towards development of needed infrastructure like classrooms, toilets, drinking water facilities, and kitchens for preparation of mid-day meals for the government schools in our neighbourhood. There has been dedicated efforts in improving the health of the community by contributing towards the health plan for socio-economically challenged children and supporting the eye care programme for the underprivileged and elderly. There are plans to set up RO plants in villages around our facilities, to improve drinking water quality.

Road Ahead

As we look ahead now from a position of strength, we need to raise our bar higher for the coming years. The future beckons us with limitless possibilities, holding out promising opportunities that lie behind the challenges that might confront us.

Motivated by a collective vision, we must march ahead to build a brighter tomorrow. We must adapt to new and uncertain market conditions, and keep revisiting our strategies ahead of the competition. We are today where our ideas have brought us. We will be tomorrow where they will take us.

Finally on behalf of the Board, I would like to thank every stakeholder of Gland Pharma for their efforts, contributions and continued support, especially the new shareholders for their trust and confidence in us. Your support goes a long way in inspiring us to deliver business excellence and a strong financial performance. We look forward for your continued support in the future as well.

With regards

Srinivas Sadu