Aerial view of Lupin offices, Baltimore, US NAVIGA NAVIGATING TING THE THE NEXT NEXT WAV WAVE Morgan Stanley India Summit Nilesh D. Gupta Managing Director Lupin Ltd. June 5, 2018
Safe Harbor Statement Materials and information provided during this presentation may contain ‘forward -looking statements’ . These statements are based on current expectations, forecasts and assumptions that are subject to risks and uncertainties which could cause actual outcomes and results to differ materially from these statements. Risks and uncertainties include general industry and market conditions, and general domestic and international economic conditions such as interest rate and currency exchange fluctuations. Risks and uncertainties particularly apply with respect to product-related forward-looking statements. Product risks and uncertainties include, but are not limited to, technological advances and patents obtained by competitors. Challenges inherent in new product development, including completion of clinical trials; claims and concerns about product safety and efficacy; obtaining regulatory approvals; domestic and foreign healthcare reforms; trends toward managed care and healthcare cost containment; and governmental laws and regulations affecting domestic and foreign operations. Also, for products that are approved, there are manufacturing and marketing risks and uncertainties, which include, but are not limited to, inability to build production capacity to meet demand, unavailability of raw materials, and failure to gain market acceptance. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. The Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise. 2
Agenda 1 India Pharma Evolution 2 The Next Wave of Growth 3 Lupin’s Strategic Vision 4 Emerging Regional Trends 5 Near Term Priorities 6 Q&A 3
Aerial view of Lupin offices, Baltimore, US Indian Pharma Evolution
India Pharma Industry Evolution Indian Pharma Industry has evolved from almost being non- existent to one of the world’s leading suppliers of generic drugs 1970 2000 2016 Wave 3: Build on Complex Generics, Biosimilars and Specialty Wave 2: Dominated Wave 1: Developed Market Establishment of Generics Domestic Pharma Industry with ROW Exports 5
2001-2016: Golden age of India Pharma Industry Sales mushroomed Valuations expanded Lupin at the forefront Total Sales of Top 7 1 Indian Pharma BSE Healthcare Index Revenues 200 1,400 20,000 1,200 150 15,000 1,000 (INR bn) INR bn 800 100 10,000 600 400 5,000 50 200 0 0 2001 2003 2005 2007 2009 2011 2013 2015 2017 Industry grew at 17% during Returns doubled from 2010 to Lupin grew faster than market at these 15 years 2016 20% CAGR from FY’01 – FY’17 Pharma witnessed 17% CAGR and delivered 16-32% compounded returns Once Lupin entered US, we spearheaded this growth wave Note: 1. Top 7 includes Lupin, Sun, Dr Reddys, Cipla, Cadila, Aurobindo, Glenmark 6
FY’18 was the toughest year for the Industry Sector witnessed muted revenue growth and margin pressures in FY’18 Operating margins contracted Valuations declined Lupin also under pressure Top 7 Performance ($bn) Top 7 combined market cap ($bn) Lupin Performance ($ bn) 20 30% Market 55.1 $8.1bn 60 16.3 16.6 Cap: $5.2bn 46.2 15 25% 3.0 2.6 40% 20% 2.4 40 21% 10 2.0 15% 27% 20% 10% 20 21% 5 11% 1.0 15% 9% 0 0% 0.0 0% 0 FY17 FY18 FY17 FY18 31-May-17 31-May-18 Sales EBITDA margin Profit Margin Sales EBITDA margin Profit Margin Sales were flat but overall margins Sector valuations contracted by 16% Lupin sales declined 10% but declined in FY’18 market cap and margin saw much higher decline FY’18 has brought the outlook of the entire sector into question Note: 1. Top 7 includes Lupin, Sun, Dr Reddys, Cipla, Cadila, Aurobindo, Glenmark 7
Execution – Running on a Treadmill Identify Execution has become very Product Price erosion opportunities early Identification challenging today as high # of uncertainties at each stage Launch and Compliance is an additional Continue Development challenge Supply With significant base, Indian companies now need significant Develop Determine new product launches each year FDA CRLs products in Commercials just to maintain their position & IRs time Approval Filing The Old Model just does NOT work anymore Timely approval 8
Aerial view of Lupin offices, Baltimore, US The Next Wave of Growth
Wave 3: Three Key Drivers of Growth Complex Generics Biosimilars Specialty / Branded • Indian companies have only 19% • Current biologics market • Target areas which have unmet penetration in complex generics worldwide is estimated to be needs and provide clinical compared to 34% penetration in ~$240 bn advantage simple generics • Of this, biosimilars contribute • Acquire opportunities which are • Big classes of Complex products only ~$4-6 bn in late stage of development are not genericized or are still • US and EU are opening up • Supplement with internal semi-exclusive differently due to patent pipeline eventually • Exclusive and Para 4 expiries • Focus would be primarily US but opportunities will remain • Still considerable marketing / also developed markets like lucrative regulatory challenges in EU and Europe and Japan US 10
India Pharma is at End of Wave 2 We are at the end of Wave 2 and Wave 3 is still to kick in The Next 12 months are going to be challenging We are investing for Wave 3 now but Returns will start only in next two years Biosimilars & Factors Simple generics Complex generics Specialty Development costs Low High Very High Leverage the same Build Additional Develop Unique Scientific Expertise expertise expertise expertise Manufacturing Same Dedicated Not Relevant Setup Same Front end Same Build separate Not so much about giving up the Old but embracing the New 11
Aerial view of Lupin offices, Baltimore, US Lupin’s Strategic Vision
Our Strategic Vision: Well-Diversified Pharma business Specialty Focus Strong Complex Foundation Generics Focus Committed to Amongst the Top 10 Investing heavily in building a strong generic companies in developing high specialty business the World barrier products Sustain and Grow Build Evolve portfolio • • Major revenue contributor Deliver on key complex currently generics, especially Inhalation • Create a meaningful women’s • Maximize on capability to and Injectables health franchise in US • maintain leadership in US Continued filing of P4 and • Neurology / CNS focus in other semi-exclusive generics Generics developed markets • • Successfully file and Continue growth in India and commercialize biosimilars other emerging markets 13
Our Strategic Vision: Well-Diversified Pharma business Specialty Focus Strong Complex Foundation Generics Focus Committed to Amongst the Top 10 Investing heavily in building a strong generic companies in developing high specialty business the World barrier products 14
Global Generics Markets – Build on the Strong Foundation Varying growth trends seen within the ~US$ 300 bn global generics market We have built a solid foundation that we can build on Developed markets exhibiting stronger growth in Specialty 1 except Japan where Gx penetration increased Generics industry facing challenges and growth slowing US Generics grew slower than Specialty Generics Specialty • Customer consolidation continues to limit bargaining Market US$ bn 4 yr CAGR US$ bn 4 yr CAGR power US 68 2% 389 9% • New generic entrants and ramp-up in approvals EU5 42 (1%) 105 1% exert additional pressure Japan 8 9% 68 (4%) • However, customers now talking of supply continuity Emerging markets continue to show promising growth 1 • Industry leaders talking about unsustainability of 60 15% price pressure 11% 10% 40 10% India 6% 5% 5% • Growing well at double digit rates 20 5% • Still underpenetrated and high growth potential 46 19 36 10 21 0 0% Other 2 China India APAC MEA LatAM • Emerging markets saw 10% CAGR driven by 4 Generic market size (US$ bn) 4 yr CAGR increasing penetration Despite challenges, US shall remain the biggest market, including the biggest Generic Market Source: 1. IQVIA MAT DEC 2017; US and Japan Generics include only unbranded products; India includes total market; Rest of the markets include both non-original branded products and unbranded products 15 APAC – ex Japan/China/India 2.
Lupin - Leadership in Global Generics Globally Major Markets 6 th 8 th 3 rd 4 th 5 th largest Japanese largest generic largest Indian largest US India Pharma (by prescriptions 2 ) Market Rank 2 Gx 2 company Pharma (by sales 1 ) (by global sales 1 ) Diversified geographical footprint and strong growth profile 4 yr. Market vs Lupin CAGR API 14% 7% 15% 12% US 11% 9% 37% 9% 10% India 27% FY18 5% 5% sales 2% 0% 0% Developed US India Japan EMEA (Ex-US) EM's 3 Market CAGR Lupin CAGR 18% 11% Sources: 2. IQVIA MAT Mar-18 for respective markets 1. LTM sales available as of 31 st Dec 2017 16 3. QVIA MAT Dec-17
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