Marksans Pharma Chairman Speech

Dear shareholders,

It gives me pleasure to review the performance of the Company during the fiscal gone by.

A convergence of adverse external realities had decelerated our growth during FY2016-17. We underwent a number of audits during the year under review and I am pleased to report that we passed them all, validating our competence in this segment that holds out attractive revenue prospects across the foreseeable future.

I am even more pleased to informed that we reported a turnaround in performance during the year under review. We reported a 17.94% growth in revenues, a 67.78% growth in EBIDTA, a 272.69% growth in PAT, indicating conclusively that we have resumed our growth journey.

Operational highlights, FY2017-18

The most prominent achievement of FY2017-18 was the successful completion of factory audits by UK MHRA in UK (Bell) and US FDA (Time-Cap). These approvals provided us with necessary clearances to resume our presence in these regulated markets. Although a number of Indian companies had also faced regulatory hurdles in the past and to this extent we were not the only ones who were affected, I am pleased to state that Marksans was one of the quickest in clearing them successfully. This early resolution was the result of proactive measures taken in standardising critical processes, training people in functional and behavioural aspects and ensuring a rigorous compliance with stringent norms.

A sluggish UK market was one of the reasons behind our underperformance in FY2016-17. A visible improvement in the market during FY2017-18 allowed us to grow our Europe and the UK formulations revenues by 45.07% and improve EBITDA margins by 1,214 bps y-o-y.

We consolidated our US presence during our first full-year of integrated operations, penetrating deeper and adding a number of customers that helped reinforce revenues by 6.32% y-o-y. The US continues to be one of the largest revenue-contributing geographies for Marksans, generating 40.69% of revenues and supplying products to all major customers.

We launched nine products across geographies during the year under review, strengthening our performance and creating revenue engines for the future.

Prepared for tomorrow

At Marksans, FY2017-18 marked the beginning of a new growth phase for good reasons.

One, the US, the UK and Australian geographies remained key Marksans markets with all of them being now empowered with all regulatory approvals, we are free to sell our products in these markets.

Two, we are among a handful of Indian players with a proprietary marketing presence in the world’s largest pharma market - the US. By eliminating third-parties from the value chain, we protected our margins.

Three, we strengthened our US product pipeline to be launched in three to five years covering high-growth segments like cardiovascular, pain management, anti-diabetic, central nervous system, gastroenterology and anti-allergy, among others.

Four, the UK market, post-Brexit, began to report a rebound and our recent UK MHRA certification has brightened our prospects in that country.

Five, our state-of-the-art R&D centre in Navi Mumbai focusing on formulations and novel drug delivery systems addressing the regulated markets became functional under a strong team.

Six, we took a number of decisive initiatives in preparing dossiers for regulated markets, covering an exciting basket of products by leveraging proprietary R&D capabilities.

Seven, the combination of the right capacities and capabilities is expected to translate into sustainable growth.

Eight, we repaid long-term loans, deleveraged the Balance Sheet and reinvested the surplus in R&D, capacity creation and brownfield expansion.

Nine, we are widening our products portfolio in the complex and high-margin generics segment.

Ten, following our strong base in regulated markets, we are focusing on emerging markets segregated across four groups (South East Asia, Middle East, Russia/CIS countries and Africa), deepening our focus in each and filing relevant dossiers. We launched the CNS-Cerebella division in FY2017-18 and ramped our Indian marketing team to derive 10% of our revenues from this geography by 2022.

Creating a forward-integrated business model

We are proud to state that we are among a few mid and small-sized pharma companies to have created an integrated business model. Our in-house R&D team is engaged in creating and filing dossiers across major markets and helping commercialise these products through front-end companies. This distinctive business model makes it possible to develop products with low project investments coupled with low intermediation expenses as we market directly to customers.

In conclusion

I must thank all our shareholders for their support through a challenging phase. I must assure that we are on the verge of capitalising on opportunities that continue enhancing value for all our stakeholders across the foreseeable future.

Mark Saldanha

Managing Director