Saharsh Davuluri, Message from Vice-Chairman & MD

GDS

In our GDS business, growth was driven by specialty APIs such as Apixaban, Paliperidone, Ezetimibe and Donepezil, which involve complex chemistry and advanced technologies. The strong performance of our specialty portfolio significantly contributed to margin improvement. In the Prime segment, which constitutes the other part of our GDS business and focusses on mature and competitive APIs, our key molecules were Mirtazapine, Ciprofloxacin and Labetalol.

Despite encountering raw material price fluctuations during the first half of the year, our GDS segment demonstrated resilience. Our diligent focus on cost improvement initiatives and the product mix enabled us to mitigate the impact of raw material cost increases faced by the industry.

We remain steadfast in our commitment to strengthen our GDS business, which continues to be a vital component of our overall operations. Our strategic priority is to build a GDS portfolio that caters to quality-conscious customers and offers products differentiated by technology. This enables us to command a premium and effectively tackle pricing pressure and competition. Our strong focus on maintaining a healthy pipeline of new molecules ensures the sustainable growth of the GDS segment. Several initiatives were undertaken in alignment with our strategic priority. We aim to file around six US DMFs annually, to further strengthen our GDS portfolio and growth potential.

CMS

Our CMS business has witnessed significant growth over the past decade, driven by a strong portfolio of NCE API projects for biotech companies. During the year, the contribution of CMS to overall revenues has significantly scaled up, with a substantial portion of the CMS revenues derived from recently commercialised molecules as well as existing commercial molecules. Additionally, we observed significant contribution from molecules close to commercialization as well as other molecules in the pipeline.

In our previous communications, we emphasised the robustness of our NCE pipeline and projected the commercialisation of approximately six molecules in the medium term. The successful commercialisation of two molecules in the past two years, with two more on the verge of commercialisation in the near term, serves as a validation of strategy to focus on molecules which are moving Phase-II/III towards commercialization. These commercial milestones not only expand our revenue potential and enhance the visibility and predictability of our CMS revenues, but also generates a snowball effect, attracting companies to partner withus based on our recognised capabilities.

Our CMS portfolio continues to expand steadily, solidifying our reputation as a trusted contract development and manufacturing organization. With our growing strength, we also have the opportunity to be more selective when choosing the projects we engage in. As of March 31, 2023, our portfolio comprises 87 active CMS projects, including 21 in the commercial phase, 15 in the development phase, and the remaining 51 spanning pre-clinical trials to Phase III. All these projects involve collaborations with innovators in the field of human health, underscoring the high level of confidence customers have in Neuland's ability to scale up products from clinical to commercial as well the quality of our CMS portfolio.

Looking Ahead

We ended FY 2023 on a high note and are poised to sustain this momentum in the new fiscal year and beyond. This growth trajectory is being fuelled by our focus on high-margin business of CMS and specialty molecules, in line with our strategic objectives. While the macro environment seems volatile, the pharmaceutical market remains favourable, with the global market for generic drugs projected to reach US$ 760 billion by 2030, growing at a CAGR of 7.1%. In addition, the increasing trend among innovator companies to outsource drug development and manufacturing is driving the growth of the API CDMO market, expected to reach US$166 billion by 2030, growing at a CAGR of 6.7%.

It is important to note that, however, the nature of our business necessitates evaluating progress on an annual rather than quarterly basis. Even at an annual level, growth is unlikely to follow a linear trajectory, and the inherent challenges of our industry may result in some fluctuations. We continue to be vigilant of any future negative effects that the business mix, product mix, raw material prices or forex could have on our margins.

To uphold our leadership in key molecules, we are implementing targeted initiatives across various fronts. Our efforts include modernising and expanding our facilities, which is also helping us create buffer capacity for catering to increased volumes. Continuous investments are being made in our laboratories and for strengthening our R&D team, while providing training to our cross-functional teams to deliver complex products of high value. Likewise, our unwavering focus on product lifecycle management allows us to enhance yields and drive cost reductions for our existing portfolio.

As a complex API development and manufacturing organization, efficient project management is pivotal in ensuring customer satisfaction and bolstering our growth potential. Recognising this, we are undergoing a transformation from a product-centric to aproject-oriented company. This entails implementing structural and functional changes to align our organization accordingly. We are also fortifying our project management systems to foster increased customer collaboration and enhance our business agility.

Transparency and ethical practices are the pillars upon which we build trust and forge lasting partnerships. Our pureplay business model of exclusively focussing on the development and manufacturing of complex APIs and following a 'no-compete approach' eliminates conflicts of interest and provides a compelling value proposition for innovators. Moreover, our flexibility allows us to promptly respond to evolving customer needs, building trust and securing favourable long-term agreements at competitive prices. Biotech companies, known for their agility and emphasis on small molecules, highly value our flexibility, enabling us to expand our customer base and seize business opportunities.

Building on our reputation as a manufacturer of high-quality products, we aim to leverage the advantage of securing customer commitments ahead of capacity creation. This strategic approach not only ensures business visibility but also minimises time and risks associated with capital investments, while maximising returns.

In summary, our focus remains on achieving growth in both generic APIs and the CDMO space. The foundation of our success has been our unwavering commitment to high quality standards, and we remain confident of nurturing long-term partnerships with customers who appreciate Neuland's GMP credentials. Our strategic priorities will serve as a guiding force, ensuring that we meet the evolving needs of our customers and build a business that delivers long-term value for all stakeholders.

Thank you for your continued support and trust in our Company, inspiring us to reach for greater heights.