The document provides an overview of the pharmaceutical industry in India and details regarding Sun Pharma and Lupin, two major Indian pharmaceutical companies. It discusses the regulatory environment, business models, financial performance, acquisitions, and growth strategies of Sun Pharma and Lupin. The summary highlights both companies' focus on expanding their global footprint and specialty product portfolios through acquisitions and internal research and development.

1. Pharmaceuticals

2. Industry Analysis

3. Pharmaceutical Sector overview

4. Advantage
India

5. Business Model of Pharma Sector

6. Regulatory
 Indian Drug Price Control Order (DPCO) - pricing policy of 348 drugs,
NLEM (National list of essential medicines)
 GDUFA (Generic drug user fee Act passed into Law July 2012) in US
 API manufacturers need to file a document known as Drug master File
(DMF) with regulatory bodies for receiving a marketing authorization grant.
 A Formulations player can only use APIs from sources with approved DMFs.
Formulation players have to submit samples and documentation for product
registration such as ANDA (Abbreviated New Drug Application) using an
API source with approved DMFs.
 Union Health Ministry banned 344 fixed-dose combination (FDC) drugs
 In FY16., highest expenditure on
research and development has been
done by Sun Pharma followed by Dr.
Reddy
 By 2020, the Indian healthcare secto is
expected to reach USD280 billion
from USD70 billion cunrently
 By 2020. India is likely to be among the top three
pharmaceutical markets by incremental growth &
6th largest market globally in absolute size
 India's cost of production is significantly lower than
that of the US and almost half of that of Europe. It
gives a competitive edge to India over others.
 Growth Divers: Increase in the size of middle class
households improvement in medical infrastructure
and increase in the penetration of health insurance

7. SUN PHARMA : Company Snapshot
 The Company’s global presence is supported by 49 manufacturing
facilities, spanning six continents,
 Post the merger with Ranbaxy, SPIL is the largest pharmaceutical company
in the domestic formulations market with a market share of 8.7% as of June
2016.
 Using acquisitions and partnering to bridge critical capability gaps
 Increasing contribution of specialty and complex products
 Key focus areas include dermatology, ophthalmic, oncology, controlled
substances, among others
 Sun Pharma remains one of our top picks due to its niche generic pipeline,
enhanced focus on specialty business, strong FCF generation and superior
execution track record
 The company's formulations are mainly sold in the United States and India,
which together contributed close to 74% of its revenues in 2015-16.

8. SUN PHARMA : Global Presence
92
1
1 1
API manufacturing sites
India
Australia
Israel
US
Sun Pharma also has four research centres - 3 in India
and 1 in Israel with over 900 scientists.

9. SUN PHARMA : Key Acquisitions
 Acquired Caraco in1998 to enter US markets
 2010 - Acquired Taro Pharmaceutical Industries
Ltd. - Israel - Enables entry into dermatology
segment. Enhances presence in US generic
market
 2013 - Acquired Dusa Pharma in US - Enabling
access to patented drug-device combination
useful for treating Actinic Keratosis, a
dermatology ailment
 2015 - Sun Pharma – Ranbaxy Merger – to further
strengthen Sun Pharma’s positioning as the 5th
largest Global Specialty Generic Pharma
Company and No. 1 Pharma Company in India
with strong positioning in emerging markets
 Entered into a joint venture with Intrexon
Corporation for developing gene-based
therapies for ocular diseases
 2016 - Acquired InSite Vision - Focuses on
developing new specialty ophthalmic products,
has three late stage programs
 Acquired 14 brands from Novartis for entering
Japanese markets in 2016 for a consideration of
US$ 293 million.
 In-licensed Tildrakizumab for treating chronic
plaque psoriasis. The preparations for submission
of a Biologics License Application for this product
to the US FDA are proceeding

10. SUN PHARMA : Recent Activities
 In 4Q, it is likely to register 26%YoY growth in revenues on the back of gGleevec sales under 180
days exclusivity.
 Keveyis sales halted voluntarily: Given the high costs and resources required to identify and
reach a limited number of viable patients, Taro has realized that it will be unable to sustain its
current level of investment in Keveyis.
 The US market (48%of overall revenue) witnessed a de-growth of ~1.5% due to regulatory issues
in Halol plant, customer consolidation and pricing constraints.
 In September 2015, Sun Pharma entered into an agreement to transfer two marketing divisions
of its India business, operating in the central nervous system (CNS), to Strides Arcolab Ltd. for a
consideration of ` 1,650 million.

11. SUN PHARMA : Financials
• Its emerging market (~20% of overall
revenue) performance has been adversely
impacted due to currency fluctuations and supply
constraints.
• In the domestic market (26% of overall
revenue), the company recorded a growth of
~9% due to strong presence in the chronic
segment.
• In 2015-16, SPIL's revenue grew by a marginal
~3% y-o-y, mainly on account of slowdown in the
US and emerging markets
• Operating margin improved by 40 bps in 2015-
16, because of a marginal reduction in
expenditure incurred for stocks.
• Net margin improved by 70 bps partly in line
with operating margin and due to a fall in tax,
depreciation and interest charges.

12. Lupin : Company
Analysis
Our Insight and
View ……

13. COMPANY SNAPSHOT
 Lupin, the second largest Indian pharma company in terms of market
capitalisation,
 Targets the generics opportunity in regulated markets.
 Currently, the chronic-therapy business contributes 66% of total
revenue in the domestic market, which makes Lupin a strong player in
the specialties segment.
 Lupin has emerged as a fully-integrated company, with manufacturing
capabilities in APIs and formulations and a direct marketing presence in
its target markets, including the US, Europe and Japan.
 In the US market, apart from being one of the fastest-growing
companies in the generic space, Lupin is also one of the few Indian
companies to have a strong presence in the branded generics segment as
well.
Acquisition
 The entire shareholding in Gavis Pharmaceuticals, LLC,
USA, Novel Laboratories, Inc., USA, VGS Holdings, Inc.,
USA, Edison Therapeutics, LLC, USA and Novel Clinical
Research (India) Private Limited, India (collectively referred
as Gavis), was acquired through Lupin Inc., USA, wholly-
owned subsidiary of the Company
 The entire shareholding in Medquimica Industria
Farmaceutica LTDA, Brazil (formerly known as Medquimica
Industria Farmaceutica S.A., Brazil) (Medquimica) was
acquired through Lupin Farmaceutica do Brasil LTDA, Brazil,
a wholly-owned subsidiary of the Company on June 24, 2015
Overview

14. Four Year Financial PerformanceCompetitive Performance

15. Operating Profit

16. •52 Week High Low : Rs 1280- Rs 2129
• P/E : 26.54
• Recommendation : BUY/HOLD
Net Sales
Net Worth
Market Watch

17. US Market
 Lupin’s Q1 EBITDA was 10% below estimate due to inventory adjustment in Gavis and
lower pricing for gGlumetza and higher staff cost
 Entire Gavis portfolio on both generic and brand side has been integrated into LPC’s
portfolio and LPC expects further growth from Gavis through launches (derma, controlled
substances) will add to profitability over the next few years. LPC has launched most of the
products that have been approved.
 India - Rs 9,313 mn, +5% YoY
Japan - Rs 4,232 mn, +31% YoY
 R&D - Rs 5 bn, 11.6% of Q1 revenue
 Margin was impacted as no profit was booked on inventory taken on the books in the previous
quarter from Gavis (impacted gross margin by ~1%)
 Higher other operating income was due to increased export benefits in the quarter
 Expect tax rate for FY17 at ~27%. Lower tax rate in Q1 was aided by higher R&D as well as
change in accounting standard
Q1 2016-2017
OVERVIEW

18. What to Expect
 Lupin expects 2HFY17 to be stronger for Gavis business led
by new launches and new capacity which is expected to
come online at Gavis’ existing plant by Sep-2016.
 Lupin expects to site-transfer all near-term critical products
from its Goa facility by Sep-2016.
 Lupin had received USFDA 483’s for Goa plants with 9
observations during March 2016. The company said it has
responded to these observations and awaits US Food and
Drug Administrator (USFDA) response.
 An FDA Form 483 is issued to firm management at the
conclusion of an inspection when an investigator(s) has
observed any conditions that in their judgement may
constitute violations of the Food Drug and Cosmetic (FD&C)
Act and related Acts.
 Two critical launches for Lupin in FY17 include Minastrin
(Lupin is FTF; launch in Mar-2017) and Epzicom (launch in the
later part of this fiscal).
 FY17 tax rate is expected to be 27%. Tax-rate will come
down this fiscal on account of higher R&D expenditure and
due to some adjustments under the Ind-AS reporting
standards

19. The Chemical, Industrial & Pharmaceutical Laboratories - 1935
Competitive Edge : High quality generic drugs at low cost
Business Model :
• Bulk drug manufacturing
• Reverse engineering capabilities
• Significant process skills
Key Developments :
• Trade Related Intellectual Property Rights (TRIPS) agreement
• extend patent rights - evergreening

20. • Cipla gets USFDA nod for overactive bladder treating drug
• Rs. 250 crores in a new R & D facility in Mumbai
• Cipla has formed Ciplagenpharm with an Australian company
• research alliance with Avesthagen, a Bangalore-based biotech
company
• strategic tie-ups :
1. AkomWatson – US
2. NeoLabs – UK
3. Medpro – South Africa
Cipla is rising up the value chain using Defensive Strategy

21. Stock price 577
52 week low 457
52 week high 704
Dividend 100%
EPS 17 rs

22. Aurobindo Pharma Business Overview
Consolidated revenues `138,960.8 million
#7 prescription supplier in the US
IMS total prescriptions dispensed as at March, 2016.
Among the top 15 generics companies in Europe by sales
(Market reports)
Revenue CAGR 33.4%
Between 2012-13 & 2015-16
Global presence : 150 countries across the globe
Consolidated revenues
International 87%
Domestic 13%
Manufacturing facilities (including wholly owned subsidiaries)
India 18
US 3
Brazil 1
Employee presence 15,000+ employees from over 30 countries
Product portfolio : Therapeutic/product areas encompassing neurosciences, cardiovasculars, gastroenterologicals, antibiotics, anti-
retrovirals, anti-diabetics and anti-allergics

23. Aurobindo Pharma
Company’s Strength
vertically integrating its active pharmaceutical ingredients (APIs)
To launch differentiated products including injectables,
ophthalmics, specialty products and controlled substances
Focus is on complex molecules, differentiated technology
platforms and specialty products.
New initiatives include gaining entry into complex R&D in new
businesses and differentiated technology platforms such as oncology,
hormones, enzymes, peptides, depot injections, inhalers, nasal and
dermatology products.
Plans are to expand penetration of OTC products
Well-entrenched US portfolio of 398 ANDAs filed, of which final
approvals received for 215 as at March, 2016.
Company Future Growth Plans

24. Major News: Boost in FY17 earnings and US &
Europe sales.
 Launch generics drug of multi-billion cholesterol-lowering
drug Rosuvastatin. The drug has an estimated market size of
$6.7 billion.
 Sales of $150-200 million from the product in the first six
months of launch.
 Stock gained 5.1 %
 Acquisition of Intellectual Property & Marketing Authorizations,
with TAD Italy, a generic company registered in Italy in 2014.
 OTC Mapooro and Carmiooro from TAD as a part of this deal.
 Acquisition of commercial operations in seven Western
European countries from Irish multinational drug
maker Actavis for €30 million.
 Sales of €320 million in 2013, but it is making
losses for the last several years.
 $1.5 billion to acquire certain products from
Israeli giant Teva in the UK, Ireland and a few
other European nations
 It isn't a bright idea for Aurobindo to go for any
acquisition. The company is yet to consolidate
its Actavis acquisition in Europe and investors
have been waiting to see the benefits of a
consolidation
 If deals is successful is will become the second-
largest Indian drug maker after Sun Pharma

25. Financial Analysis
Revenue growth drivers:
 US market (contributes to ~44% of overall revenue) grew by
27% due to new launches in the oral and injectable segment and
growth from the acquired Natrol Inc business
 The European market (22%) which grew by 375% in FY2015
due to the acquisition of West European operation of Actavis
witnessed a de-growth of ~2% in FY2016
 The API business (20%) registered a growth of ~7% whereas the
emerging markets (5%) grew by 22% y-o-y
 Operating margins increased by 170 bps because of a reduction
in traded goods purchased, other manufacturing expenses and
selling expenses.
 Net margin increased by 140 bps due to factors such as the firm
not incurring any extraordinary expenditure and realization of non-
operating income
52 weeks low/High
582.00 891.50
Today’s Price

26. Dr. Reddys Laboratories Business Overview
 Dr Reddy’s has the largest share (24.45 per cent) in the
Indian pharma market, with sales of USD1.66 billion during March 2015
In 2015, Dr. Reddy's Laboratories bought the established brands of Belgian
drugmaker UCB SA in South Asia for 8 billion rupees ($128.38 million)
USP- Strong vertically integrated portfolio of products, businesses & geographies
 Has a strong workforce of over 15,000 employees
Gross Profit Margin at 59.5%, improved by ~130 bps over last year. Research &
Development (R&D) spend at 4.1 billion. Continued focus on building complex
generics and differentiated products pipeline
Future prospects- firm will invest in new drugs such as complex generics,
biosimilars and proprietary products that offer higher margins besides exploring
new markets in Europe

27. Market Watch
Today’s Price
3122
Debt:Equity
0.3
Return on capital
employed
19.7
Return on equity
20.3
EPS
160
52 weeks low/High
4382.93 2750.00
R&D as % of
Revenue
11.5%
Dividend Yield
0.7
Dividend
Payout
17.6
Hold

28. Dr Reddy- Company Analysis
52 week
high
704
52 week
low
457
P/E ratio 41.66
Dividend
Payout
100%

29. Capital market Line
Depict the rates of return for efficient portfolios subject to the risk level (standard deviation)
for a market portfolio and the risk-free rate of return.
Rf, 0%, 7.10%
Lupin, 46.97%, 36.70%
Cipla, 38.78%, 15.75%
Sunpharma, 27.16%,
35.24%
Aurobindo, 130.00%,
79.56%
Dr. Reddy's Lab,
26.05%, 15%
Nifty, 15%, 6.79%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
50.00%
55.00%
60.00%
65.00%
70.00%
75.00%
80.00%
85.00%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% 120% 130% 140%
Return
Risk
Capital Market Line
Q2: High risk, high
return
Q3: High risk, Low return
Q4: Low risk, Low
return
Q1:
Low
risk,
high
return

30. Security market Line
It displays the expected rate of return of an individual security as a function of systematic,
non-diversifiable risk .
Rf, 0%, 7.10%
Lupin, 5.412979, 36.70%
Cipla, 2.32, 15.75%
Sun pharma, 2.09,
35.24%
Aaurobindo, 5.4, 79.56%
Dr. Reddy's lab 1.24, 15%
Nifty, 1.00, 6.79%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
55%
60%
65%
70%
75%
80%
85%
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 5.50 6.00
RETURN
BETA
SECURITY MARKET LINE
Overpriced
Underpriced

31. Thank you