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L I F E . R E S E A R C H . H O P E
DR
.RE
DDY
SLAB
ORATO
RIESLIMITEDANNUALREPORT2010
11
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Chairmans
Letter
Board of
direCtors
iGaaP standaLone
finanCiaLs
Key
hiGhLiGhts
manaGement
CounCiL
iGaaP ConsoLidated
finanCiaLs
our
PurPose
CorPorate
GovernanCe
extraCt of audited
ifrs ConsoLidated
finanCiaLs
human
resourCes
additionaL
sharehoLders
information
statement
Pursuant to
seCtion 212 of the
ComPanies aCt, 1956
safety, heaLth
and environment
five years
at a GLanCe
information on
the finanCiaLs
of suBsidiary
ComPanies
CorPorate soCiaLresPonsiBiLity
ratioanaLysis
notiCe of annuaLGeneraL meetinG
manaGement
disCussion
and anaLysis
direCtors
rePort
Contents
2 48 91
4 52 151
6 54 205
20 70 208
24 80 209
28 81 210
34 82
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4/2202 D R . R E D D Y S L A B O R A T O R I E S L T D | C h a i r m a n ' s L et t e r
chara eer
dearshareholders > 2010-11 has been a very good
year or your Company. Here are the key consolidated
fnancial results.
Consolidated revenue or 2010-11 grew by 6% to
`74,693 millions, or US$ 1.7 billion. In the ten years between
2000-01 and 2010-11, your Companys revenue has been rising
at a CAGR o 21%.
Your Companys EBITDA in 2010-11 was`16,789 millions,
which was higher than the previous years EBITDA o
`15,828 millions.
Proft ater tax at`11,040 millions in 2010-11 was also
signifcantly greater than what it was in the previous year.
The year has seen several notable developments,
o which our give me great satisaction. I want to
share these with you.The rst is your Companys rapid presence
in biosimilars. Let me briefy explain what are
biosimilars. Cloning o human genetic material
coupled with the development o in vitro biological
production systems has allowed the production o
most recombinant DNA based biological substances
or eventually developing tailor-made and targeted
medicines.
Recombinant therapeutic proteins are complex
in nature and are made in living cells such as
bacteria, yeast, or animal and human cell lines.
The most well known recombinant drug is
insulin, used or treating diabetes. The ascinatingaspect o any biologic a drug containing a
recombinant therapeutic protein is that it is
largely determined by the process o production,
namely the choice o the cell type, the development
o genetically modied cell or production, the
production and purication processes, and how it is
eventually ormulated into a drug. It is a wonderul
combination o science and art. Biosimilars are
ocially approved versions o innovator biologics
that have come o patent. Unlike the more
commonly manuactured small-molecule drugs,
biologics exhibit much higher molecular complexity,
and are quite sensitive to manuacturing processchanges. A biosimilar manuacturer neither has
access to the originators molecular clone and the
original cell bank; nor to the exact ermentation
and purication process and the active drug
substance. Thus, biosimilars involve the art o de-
constructing how the innovator made the product
and, having done so, how to create the similar
through dierent non-patent inringing methods.
Biosimilars are, thereore, not just dicult to
engineer and produce, but are also very important
in meeting lie threatening therapeutic needs. Not
surprisingly, these are extremely valuable products.
I am proud that your Company has made itsmark in biosimilars, three years ago by launching
the rst MAB biosimilar in the world. Reditux,
the biosimilar o rituximab used in the treatment
o certain lymphomas, leukemia and rheumatoid
arthritis, has been a great success. In 2010-11, it
grew by 75% over the previous year and ranks
among your Companys Top Five brands in India.
This year, Dr. Reddys launched Cresp in India,
the rst generic darbepoetin ala in the world or
treating nephrology and oncology indications.
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Your Company also launched Peg-graeelTM, an
aordable orm o peglgrastim, which is used to
stimulate the bone marrow to ght inection in
patients undergoing chemotherapy. Your Company
has sold some 1.4 million units o its biosimilars,
which have treated almost 97,000 patients across
12 countries.
Second, I am happy with the robustness o your
Companys revenues. I believe that it has nowreached a stage in its evolution where it can predict
a steady growth o baseline revenue, and enjoy the
upsides o periodically successul Para IV rst-
to-le launches in the USA either with 180-days
exclusivity or as an authorized generic supplier to
the innovator. With many innovator drugs getting
o patent in the years to come, I hope that your
Company will be able to leverage as many upsides
as possible. Indications are that it should.
Third, I am delighted to see research and
development (R&D) spends increasingnot just
absolutely but as a share o revenue. It shows up
in the success o biosimilars. In 2010-11, your
Companys investments in R&D grew by 33% to
`5,060 millions. This represents 7% o overall
sales, versus 5% in the previous year. We led 21
abbreviated new drug applications (ANDAs) in
2010-11, taking the cumulative total to 179 ANDA(including partnered ANDAs). O these, 38 are
Para-IV lings, and among these 10 are in the
category o rst to le. We have also led 56 drug
master les (DMFs) in 2010-11; our cumulative
record is 486 DMFs, which makes us one o the
global leaders in this category.
My ourth source o satisaction is your
Companys strategic partnership with
GlaxoSmithKline Plc (GSK) which I had touched
upon last year. Dr. Reddys is developing and
marketing key products or GSK across emerging
markets outside India. The products will be
manuactured by your Company, and will be
licensed and supplied to GSK in Latin America,
Arica, the Middle East, and Asia Pacic. In addition
your Company has acquired GSKs penicillin acility
in Tennessee, USA, which will allow it to enter the
US penicillin-based anti-bacterial market segment.
At Dr. Reddys, we must never orget our basic
aim. It is to provide aordable and innovative
medicines or healthier lives. We can do this i we
orever excel in our aspects o our business:
~ Excellence in science, intellectual property and
R&D, because these constitute the DNA o any
pharmaceutical enterprise worth the name.
~ Excellence in anticipating what patients need
where and how and being able to provideaordable variants o such medicine more oten
than not.
~ Excellence in processes quality,
manuacturing, logistics, supply chain, marketing,
customer relations and saety to be the rst to
occupy pharmaceutical bridgeheads in various parts
o the world.
~ Excellence in nancial and operating discipline,
because at the end we can never be accountable to
our patients by losing sight o our shareholders.
I am confdent that your Company has all these
attributes. Some exist in large measure. Others are
being scaled up. When they all fre together,Dr. Reddys will be a difcult act to beat. We represent
an idea whose time has come. And we will deliver.
Thank you or your support.
As always, with warm regards,
DR. K ANJI REDDY
Chairman
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3%CIS
1916
2011
36%North
America18,996
16%Europe
8,431
17%Russia8,942
22%India11,690
6%Others3,365
3%CIS1,916
2010
4%CIS1,887
34%North
America16,817
20%Europe
9,638
15%Russia
7,232
21%India10,158
6%Others2,874
2010 2011
FINANCIAL HIGHLIGHTS
Cl r
Consolidated revenues increased by 6% to
`74,693 millions, or US$ 1.7 billion in 2010-11
rom`70,277 millions in 2009-10.
eBitda
EBITDA increased by 6% to`16,789 millions in
2010-11 rom`15,828 millions in 2009-10.
P a t
Net prot o`11,040 millions in 2010-11 as
against`1,068 millions in 2009-10.
ll dl eg p s
Fully diluted earnings per share increased to
`64.95 in 2010-11 rom`6.30 in 2009-10.
anda us
Dr. Reddys led 21 ANDAs in 2010-11. As o
31 March 2011, the Company has 179 cumulative
ANDAs (including partnered ANDAs). The
companys North America generics pipeline
comprises 76 ANDAs pending with the USFDA as
o 31 March 2011. O these, 38 are Para-IV lings
with 10 in the category o rst to le.
dmThe Company led 56 DMFs in 2010-11. O
these, 19 were led in US, seven in Europe and
30 in other countries. As on 31 March 2011, the
Company had cumulative lings o 486 DMFs.
Pp Pc
As on 31 March 2011, Dr. Reddys had 27
products in the pipeline, o which seven are in
clinical development. These R&D products are a
CONSOLIDATED REVENUEin `millions
GLOBAL GENERICS REVENUESGEoGRAPHiCAl miX, in`millions
70,277
74,693
Key FinancialHighlights2010-11
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2011
13%India
2,619
36%Europe7,020
16%NorthAmerica3,170
16%NorthAmerica3170
35%Others6,839
2010
13%India
2,646
33%Europe6,652
18%NorthAmerica3,673
36%Others7,433
20112010
mix o New Chemical Entities (NCEs) and novel
Dierentiated Formulations (DFs).
BUSINESS pErFormANCE
Globl Geec
Global Generics grew by 10% to`53,340 in
2010-11 rom`48,606 in 2009-10.
Revenues rom North America increased by13% to`18,996 millions in 2010-11 rom
`16,817 millions 2009-10. Signicant portion
o this growth was led by the companys
presence in products with limited competition.
Eleven new products were launched in US in
2010-11, o which ve products experienced
limited competition which includes amlodipine
benazepril, tacrolimus, lansoprazole, zarlukast
and exoenadine pseudoephedrine.
Revenues in India grew by 15% to`11,690
millions in 2010-11 rom`10,158 millions in
2009-10. Growth driven by volume growth o
11%, new product led growth o 4%.
Revenues rom Russia and CIS countries grew by
19% to`10,858 millions rom`9,119 millions
in 2009-10.
Revenues rom Europe decreased by 13% to
`8,431 millions in 2010-11 rom`9,638
millions in 2009-10.
reveue fom Phmceutcl sevce d
actve igedet (Psai)
Revenues de-grew by 4% to`19,648 millions
in 2010-11 rom`20,404 millions in 2009-10.
International revenues accounted or 87% o PSAI
revenues.
ANDA ILINGS IN ThE
UNITED STATES O AmERICA
DmsGEoGRAPHiCAl miX
PSAI REVENUESGEoGRAPHiCAl miX, in`millions
NonPara IV
6
NonPara IV13
Para IV6
Para IV8
2011
201019 USA
19 USA
9 Others
30 Other
8 Europe
7 Europe
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8/2206 D R . R E D D Y S L A B O R A T O R I E S L T D | K e y i n a n C i a L h i G h L i G h t s
S. Lakshmi Narasimha Murthy is a happy man
today. But he wasnt always as happy. Since
2000, when Narasimha got diagnosed with
diabetes, it was like living lie on the edge. In
2005, he got a stent implanted in his heart,
ollowed by another in 2006. In 2007, he was
put on medication or high creatine levels.When he got his third stent in January 2010,
his creatine levels became unmanageable; he
was diagnosed with Chronic Kidney Disorder
(CKD) and had to be put on dialysis.
Due to ill health, in July 2010 Narasimha took
voluntary retirement. His li e began to revolve
around our-hour sessions o dialysis twice a
week, and a monthly visit to the cardiologist
and nephrologist. Weakness set in; even
walking became an ordeal. A man o limited
means, he ound it extremely dicult to pay
or eight erythropoetin injections a month,
costing around`10,000 the dealers price.
Added to that was the cost o dialysis
`1,200 per session. It was hard to sustain
good health and well being.
In July 2010, Narasimhas nephrologistintroduced him to Cresp. As against
erythropoetin, Cresp had to be taken
only twice a month and immediately cut his
monthly expenditure by over`7,000. He
was also given a couple o injections, ree
o cost, under Dr. Reddys Sparsh program.
Narasimhas body also responded well to the
change and his lie began to return to near
normalcy. Today, Narasimha can aord to
eel better and even drive by himsel to the
dialysis center on his scooter.
pATIENT | S LAKSHmI NArASImHA mUrTHY | HYDErABAD | INDIA
Cresp is a wonderul
medicine. It has
helped me get back a
semblance o normalcy
to my lie. The best
part is that it is within
my reach.
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G V PRASAD
Vice-Chairman & CEO
Yes, it is a question o aordability.
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10/2208 D R . R E D D Y S L A B O R A T O R I E S L T D | K e y i n a n C i a L h i G h L i G h t s
over 12 millionsnew cancer cases are
detected and 7.6 millions cancer deaths
occur worldwide every year. 70% o those
happen in developing countries like India (IARC
Globocan 2002 data). According to the India
Pharma 2015 report by McKinsey & Company,
there is a long-awaited need o connecting
Oncologists and General Practitioners (GP).
ICON is extremely grateul
to Dr. Reddys or giving
an unrestricted educational
grant which has enabledPromOTE India to expand
across India over the last
three and a hal years.
It has helped doctors in
delivering better cancer
care to patients across the
country.
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Picture taken at BSES hospital, mubai
DoCTor | D r pUrVI SH pArI KH | Co N VEN o r | I N D I A N Co - o pErAT I VE o N Co Lo
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Dr. Parikh, Ph.D. and MBA, has served as proessor
and head o Medical Oncology at Tata Memorial
Hospital, Mumbai or 17 years. Also an expert in
hematology, he is ounder o Indian Co-operative
Oncology Network (ICON), a NGO that promotes
awareness about cancer in India.
Dr. Parikhs ICON, in association with Dr. Reddys
Foundation or Health Education (DRFHE), has
come up with a novel initiative called PromOTE
(Promotion o Oncology Training and Education).
PromOTE aims to change the cancer landscape
in India by promoting awareness, early detection,
diagnosis and prolonging the lie o the cancer
victims. It tries to empower proessionals like GPs
and other non-oncology doctors to enable early
detection o cancer.
So ar, over 110 programs have been conducted
across India by PromOTE involving more than 100
oncologists as aculty members. About 11,000
healthcare proessionals have benetted rom
this program and have learnt about the modern
advances in cancer care with which more than hal
o the cancer cases can be cured.
N ETWo rK ( I Co N ) | mUmBA I | I N D I A
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12/22010 D R . R E D D Y S L A B O R A T O R I E S L T D | K e y i n a n Ci a L h i G h L i G h t s
In 1992, armedwithan mba degree rom
Osmania University, Hyderabad, and his eyes
rmly set on working in the eld o Interna-
tional Marketing, a young man gate crashed into
Dr. Reddys oce one day. By then, Dr. Reddys
interest in internationalizing its business was in the
news, and the young man knew that this was his
best chance to live his dream. This is M V Ramana.
I can never orget the
excitement and pressure
I elt rom the moment
I got an internationalassignment. I was allowed
to explore unamiliar
territory. Dr. Reddys
trusted and empowered
me. It makes me behave
like an owner and not an
employee.
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EmpLoYEE | m V rA mA N A | SEN I o r Vp A N D HEA D o F EmErG I N G mA rKET
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Ramana accepted the oer Dr. Reddys made to
him, although it was only 50% o what a global
FMCG major had already oered to pay him. But
the rest, as they say, is history. He landed himsel a
job as a Management Trainee. Joining Dr. Reddys
gave him a sense o deep ownership along with
responsibility and a desire to excel. This paved
the way or Ramanas stellar growth within the
company.
Today, he is Senior Vice-President and Head
o Emerging Markets. His 19-year tenure is a
testament o the encouragement the company
provides to anyone with passion and a drive to do
something big or the organization. A major part
o Dr. Reddys international expansion has come
rom the Companys ability to spot raw talent and
give them opportunities.
Starting with support roles in API and ormulation
marketing, Ramana went on to play larger and
more important roles. He set up Dr. Reddys
operations in various countries South East Asia,
Arica, Middle East and Latin America China and
Russia being his most notable achievements. In his
role as the Head o Russia & CIS countries, Ramana
guided the business, growing it by over ve times
within six years.
D r. rED D Y S | mo SCo W | rUSS I A
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Yogitaramesh, at rst sight, appears
to be an ordinary girl. But she isnt. She
possesses extraordinary will power and
courage; she is also an alumnus o LABS. Today,
she works as a pre-seller with Coca-Cola India,
and unlike many other girls o her upbringing, she
draws an impressive monthly salary o`15,000.
Lie is looking up or Yogita and her amily.
My alma mater always
advised me to continue my
studies along with my job. It
has transormed my lie.
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CorporATE SoCIAL rESpoNSIBILITY | Yo G I TA rA mESH BHA LErA o | ULHA SN A
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But it wasnt always as easy as that. Yogitas
childhood was a challenging one. Ater passing
her Class 12 examinations, she got engaged. But
her anc subsequently called o their marriage.
At the same time, her ather who was the primary
bread winner o the amily, ell ill. Yogitas mother
did not have a choice she had to step out to earn
money to support the amily.
Yogita started accompanying her mother to work,
who worked as a domestic help. She had to
do her bit to help her mother make ends meet.
Together, they earned`3,000 per month. As
Yogita says, she did not have a choice she took
ull responsibility or her school-going siblings and
her parents. It was around this time that Yogitas
riends told her about LABS Dr. Reddys fagship
program on livelihood and skilling.
Yogita enrolled hersel in the Customer Relations
and Sales domain. On successul completion o
the program, she got placed in Coca-Cola as a
Market Developer with a starting salary o
`7,000 per month. At LABS, Yogita understood
the importance o education. Yogita was so
inspired that she has decided to help her siblings
study urther and now she aspires to get an MBA
degree.
mA HA rA SHTrA | I N D I A
Picture taken at a departental store
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16/22014 D R . R E D D Y S L A B O R A T O R I E S L T D | K e y i n a n Ci a L h i G h L i G h t s
mita agarwalis a Director o Priyam
Agencies Pvt. Ltd., a Carrying &
Forwarding (C&F) agent o Dr. Reddys.
But that is not what she had always wanted to
be. When Mita got married in 1984, lie was
perect or a while, especially with the birth o her
daughters. But her husbands sudden demise let
her with two young daughters, and a business she
knew very little about. Although her amily was
Being associated with
Dr. Reddys has helped
me turn my modest C&F
agency into a successul andproftable business.
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BUSINESS pArTNEr | mITA AGArWAL | DIrECT or | prIYAm AGENCIE S pVT.
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unhappy with her decision to run her husbands
business, Mita decided to continue with it. She
started as a C&F agent at Patna, located in the
state o Bihar, India or American Remedies Ltd.
When Dr. Reddys acquired American Remedies
Ltd. in 2001, Mita was at the oreront. She
pitched to become the C&F agent in Kolkata,
West Bengal. Ater a lot o time and hard work,
most o which went into setting up her agency,
Mita started taking care o the entire state o
West Bengal. Meanwhile, Dr. Reddys rapid growth
resulted in increased business or her. What started
o as a 3,000 square oot warehouse then, has
today more than doubled in size! The business
that initially clocked sales o`70 lakhs per month
has now grown to over`6 crores per month.
As Mita looks back on her years o evolution as a
C&F agent, the support she received rom
Dr. Reddys is evident at every stage o her growth.
Personally too, she is a happy woman. She was
able to provide well or her daughters, and gave
them a ne education. Today, Mitas younger
daughter, who has an MBA degree, has joined her
in managing the business.
oLKATA | INDIA
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18/22016 D R . R E D D Y S L A B O R A T O R I E S L T D | K e y i n a n Ci a L h i G h L i G h t s
From the momentyou step into Sangli a
small district town in western Maharashtra,
India, and ask or Gadgil, every one eagerly
points out in the direction o jewelry showrooms.
Prakash Shankar Gadgil, a jeweler by trade, is the
proud owner o a fourishing jewelry business. His
amily has been in the business since 1832, and
given his success at it, his two sons have chosen to
join him in the same proession.
Dr. Reddys manuactures
aordable medicines. It
also gives good returns to
its shareholders. Imaginesitting at home and making
money or nothing! All I
did was to buy the shares.
From then on, they went on
multiplying. I couldnt have
asked or more rom this
investment.
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INVESTor | prA KA SH SHA N KA r G A D G I L | SA N G LI | mA HA rA SHTrA | I N D I A
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But, Prakash is more than just a businessman.
He is one o Dr. Reddys esteemed shareholders.
In 1986, when Prakash was evaluating his
investment options, he was introduced to
the stock market by a broker riend. Upon
recommendation he bought 600 shares o
Dr. Reddys at the rate o`55 per share. Those
were the rst shares he had ever bought in his lie.
Thereater, Prakashs story o nancial and business
success got directly linked to the regular dividends
and bonuses that his shares got him as they grew
rom the initial 600 to 21,600 in the last 25 odd
years. Not an active stock trader, he even thought
o selling o Dr. Reddys shares. But he decided
against it because o the good perormance o the
company, and the kind o returns it was giving to
its shareholders.
Prakash maintains that his rst investment in
Dr. Reddys shares has remained his best
investment till date. Today, he is happy to earn in
every possible way rom Dr. Reddys, be it good
health or good returns.
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Startedin themid -1950s as a small
pharmacy called Santa Catarina in
the city o Santo Andre by Emiliano
Sanchez, EMS has now emerged as the largest
pharmaceutical company in Latin America.
EMS was the rst one to manuacture genericsor the Brazilian consumer and to prove the
reliability and saety o these drugs. Wilson
Zeerino Franco Filho is the Head o Business
Development at EMS a key customer o
Dr. Reddys Active Pharmaceutical Ingredient
(API) business or over 10 years. Today,
generics have changed the prole o the
Brazilian pharmaceutical market. The last
decade has seen a rise in the infuence o
Brazil, Russia, India & China (BRIC countries) in
the pharmaceutical sector. They have showed
continuous growth and have entered the radar
o many pharmaceutical giants. Brazil itsel
is experiencing the rise o generics and the
consolidations, steep quality and regulatory
requirements that go along with it.
According to Wilson, in such a scenario, the
role o API suppliers becomes very signicant.Dr. Reddys through its low-cost, high quality
manuacturing, strong chemistry, process
re-engineering and regulatory skills, provides a
solid oundation to sustain this kind o ervent
market growth.
Dr. Reddys has been a
valued API supplier to us
or a long time. It has a
solid structure that helpsin designing, developing,
producing and providing
unmatched assistance to API
customers worldwide.
CUSTomEr | WI LSo N ZEFErI N o FrA N Co F I LHo | EmS | Ho rTo LA N D I A | BrA Z
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Dr. Reddys Laboratories Ltd. is anintegrated global pharmaceutical
company, committed to providingaordable and innovative medicinesor healthier lives.
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During the year the organization took several steps
in integrating and aligning its people processes and
systems to ensure that it is not only able to meetthe current business growth but at the same time it
is prepared or the uture.
Hr moDEL
A new HR model was adopted which would largely
provide the guiding philosophy to the design
elements o people processes and systems. The
model has three elements:
~ Alignment o workorce to the overall purpose
o the organization and their respective business
units so that it brings long term value orthemselves and the organization.
~ Individual and team accountability, so that roles
and responsibilities are clear and there is clarity on
what is expected out o each, which in turn gets
regularly reinorced by reviews and consequence
management mechanisms.
~ Focus on ability and talent at all levels to help
employees nd their true calling in their respective
areas o interest and competence.
roLE BASED orGANIZATIoN
During the year we brought in the concept o role
based organization as part o our organization
renewal eort. The objective is to have a better
role-to-person t which will result in a more
engaged employee and a productive organization.
We examined the key HR processes such as
work level structure, manpower planning, talent
acquisition, perormance management, promotion,
leadership development and specialist tracks to
understand the gaps in each o them and makenecessary changes. We attempted to integrate all
these HR systems in a way that they can support
our growth journey and provide clarity to all
employees in terms o inter-linkages to all these
vital people, processes and systems.
In the ast-paced and competitive world o today, the
most signifcant dierentiating actor o business remains
unchanged: People. A highly engaged and motivated
employee-base along with adequate leadership, technical
knowledge and business skills remain the most attractive part
o an organization. At Dr. Reddys, we realize the importance o
both our people and their potential to contribute to the success
o our company. While our products, customers and innovation
will continue to be important enablers in stepping up the speed at
which we will grow, our people can be catalysts to our high growth
agenda.
harerce
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LEADErSHIp & SCIENTIFIC CApABILITY
DEVELopmENT
As we continue to grow, and encourage our people
to make a dierence to the organization, we ensure
that we have invested appropriately in developing
them as the uture leaders o the organization.
In this regard, we have urther ne-tuned our
leadership competencies to make them relevant
and meet the leadership demands o the current
and uture. A set o six leadership competencies
were dened and incorporated into our leadership
model. The new leadership model was a result o
an extensive work o interviewing high perormers
across levels, understanding top management
perspectives and the organizations strategicpriorities.
The Annual Leadership Summit was held
between 14-17 July 2010 at Boston, USA around
the theme o Building Towering Competence
in Science and Technology. The top leaders o
the organization anchored by the CEO and COO
participated in this event.
Specic leadership skill programs have
been initiated to complement our leadership
development eorts.
The rst o the series on Strategic Negotiation
by Dr. David Lax and Pro. James Sebenius rom
the Harvard Business School, USA was attendedby over 45 senior leaders.
We also invited eminent personalities as part o
our Leaders Talk series Sir Chris Bonington,
one o the worlds most successul expedition
leaders, talked on Leadership in Adversities and
Dr. Indra Chowdhury, Historian and Scholar-in-
Residence at Srishti school o Art, Design and
Technology, Bangalore, India delivered a talk on
Inspirational Leadership.
Our leaders participated in the Senior Leaders
Program (SLP) as part o an industry consortium
o Wipro, Aditya Birla, Genpact, HDFC, Mahindra
& Mahindra and Colgate Palmolive. Dr. Reddys also partnered with MIT (Pro. Greg
Fus lab) or building capability in chemo-
catalysis.
National and international conerences in the
area o Drug Delivery, Drug Design and Quality by
Design were popular destination or scientists rom
R&D groups.
Womens Day Celebration at Dr. reDDys
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TALENT ACqUISITIoN
Dr. Reddys global employee strength crossed
14,900 in 2010-11, o which over 2,400 were
based at our international locations. During the
year, around 4,100 new employees were hired,
including replacements. The highlights o the hiring
program were:
~ Critical talent was added in the areas o Saety
Health & Environment, Formulation Technology,
Development o Dierentiated Formulations,
Global Sales & Marketing, Project (Formulations),IPM Formulations, OTC Products, Strategy, Legal-
Patents, Quality, Corporate Development, Cell &
Molecular Biology.
~ India sales orce hires have contributed to
31% o the hiring while 43% o the hiring was
in manuacturing, quality, R&D and engineering
services.
~ We recruited 16 Management Trainees and
seven laterals rom prestigious B-Schools and about
119 technical trainees rom science, pharmaceutical
and engineering background which included a
number o IIT graduates as well.
~ There was a conscious eort at building
diversity in the workorce. We hired around 900
employees across international locations. We also
hired dierently-abled employees in various roles.
In FY11, almost 46% o the campus recruits were
women.
orGANIZATIoNAL HEALTH AND
EmpLoYEr BrANDING
During the year, we conducted Organizational
Climate Surveys to monitor the health o the
organization and more specically measure
employee engagement. We had commissioned
Gallup, a leading player in the area o employee
engagement. Over 10,000 employees participated
in the survey called The Beat.
a Workshop on organization Climate survey outComes
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We also participated in an Organization Health
Index survey by McKinsey and Best Employer
surveys by Aon-Hewitt and The Great Places
to Work Institute. In all the above surveys the
strengths that came out consistently were our open
& trusting culture, entrepreneurship and creativity,
great place to socially connect-mutual respect and
trust, alignment with the overall purpose and pride,
and customer ocus. We are also addressing the
areas or improvement by instituting ocused cross
unctional teams.
During the year some o the external
recognitions which strengthened our EmployerBrand was:
We received the Aon Hewitt Best Employers
award and were ranked 13th Best Employer in
India across all industries.
We were recognized as the Best Pharmaceutical
Company to Work or by Business Today.
Our company was ranked the Best Company
to work or in the biotech / pharmaceutical
industry in India or the third consecutive year in
Indias Best Companies to Work For 2010 list
produced by Great Place to Work Institute in
association with The Economic Times.
partiCipants at the strategiC negotiation program helD at the Companys
leaDership aCaDemy
Our company was ranked
the Best Company
to work or in the
biotech / pharmaceutical
industry in India or the third
consecutive year in Indias
Best Companies to Work For
2010 list produced by GreatPlace to Work Institute in
association with The Economic
Times.
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For us saety no longer is just a priority but a
business imperative. The year 2010-11 saw us
revisit many o our existing practices and lay downprocesses aimed at strengthening our SHE systems.
KEY HIGHLIGHTS
SAFETY AND HEALTH pErFormANCE
~ Cross-unit saety audits continued or the
second year across 16 manuacturing units with an
outcome o 425 recommendations which are being
tracked or closure.
~ Hazard identication and risk analysis were
completed or 276 manuacturing process stagesacross CTOs. A new guideline on SHE review or
FTO manuacturing processes was released during
the year. Key personnel were identied and trained
on the procedures that were applied or six new
process transers during FY11.
~ 2,155 internal training programs (equivalent
to 10,135 man days o training) on saety were
conducted. Apart rom these specialized external
training programs were also conducted on
industrial hygiene and process saety.
~ During the year, a Crisis Communication
workshop and various mock drills were conducted
to strengthen our ability to mitigate emergency
situations. A table top exercise simulating an osite
disaster to test our emergency preparedness was
conducted by the National Disaster Management
Authority (NDMA), the Medak District Collectorate,
Factory Inspectorate o Hyderabad Rural and other
authorities on a re and explosion scenario at one
o our units.
~ Saety toolbox talks were implemented or all
shop foor and construction personnel who areexposed to a majority o the risks. Saety toolbox
talks are less ormal, short saety meetings,
designed to reinorce saety inormation on a
particular topic and to oster sae behavior.
~ Occupational Health Surveillance was conducted
at the units. Quantitative exposure assessments
have also been done at various units during the
year to monitor industrial hygiene exposure levels.
Dr. Reddys today stands at the crossroads, poised or the
next wave o growth. Scaling up will increase challenges
in running our business. It will lead to more complex
business operations. With our growth ambition comes the need or
robust systems and processes backed by a secure and healthy work
environment that brings the best out o employees. At Dr. Reddys
we ully understand that impact o our saety and health practices
transcends our immediate workorce and aect their amily,
dependents and society.
aey adheah perrace
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~ National Saety Day and Saety Week
celebrations were observed at all manuacturing
units and oces to mark the way our employees
and contractors rededicate and pledge to work in
saer ways.
~ Monthly saety campaigns were carried out on
themes like Contractor Saety, Static Electricity,
Emergency Management and Work PermitsSystem to bring awareness and increased ocus to
various improvement areas.
~ A behavioral saety program was initiated
across the units to identiy and gradually eliminate
repeated unsae behaviors in the work places.
More than 2,000 Behavioral Based Saety (BBS)
observations were identied, personnel counseled
and corrected ater the launch.
~ SHE review or capital projects was carried out
or seven new process acilities. The objective o this
review mechanism is to establish an eective plant
saety concept and environmental discharge control
strategy during the early design phase o a project,
and ensure those broader concepts are considered
in the engineering design and implemented.
~ Improving the saety perormance at our
strategic Business Partners manuacturing acilities
has been a key agenda during the year. Various
initiatives taken in this regard were:
Statutory compliance tracking online.
SHE audits.
314 man days o SHE training on various topics
like static electricity, general saety awareness,
emergency mock drills, etc.
Facilitated mock drills to test their emergency
management capabilities.
ENVIroNmENTAL mANAGEmENT AND
SUSTAINABILITY
~ FTO 3 has entered into an agreement with
M/s. Honeywell to carry out energy audits
which will translate into reduction o grid power
consumption and carbon ootprint.
~ CTO SEZ project Environment Clearance was
obtained rom Ministry o Environment and Forests
and Consent or Establishment obtained rom
Andhra Pradesh Pollution control Board.
~ Solvent Recovery System using carbon
adsorption system commissioned at FTO 3 or
coating machines to recover Methylene dichloride
(MDC) and Isopropyl alcohol (IPA) to eliminate
ugitive emissions o MDC and IPA.
~ Zero Liquid Discharge (ZLD) Plant at FTO 3
commissioned last year is working at desired
eciency.
~ 3,500 MT o organic residue was disposed as
auxiliary uel to cement plants, which is a 100%
increase over last years alternate disposal. Rest o
the waste was sent to Treatment Storage Disposal
Facility (TSDF).
g v prasaD, viCe-Chairman anD Ceo inaugurating the national safety Day
aCtivitiesA Green Ratingsystem or companies
across India was
launched under the leadership
o G V Prasad, Vice-Chairman
and CEO, Dr. Reddys and
Chairman o the CII Green
Rating System. Two o
Dr. Reddys units will be taking
the pilot implementation in
the coming year.
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~ Environment license compliance audits
carried out in 14 manuacturing sites, with audit
observations tracked or closure.
~ Continuous Ambient Air Quality Station and
Stack Monitoring Analyzer installed at CTO 6 or
better monitoring o ambient air quality.
~Pilot studies regarding Membrane Bio Reactorsis being carried out at ZLD o CTO 2 to improve the
quality o the treated waste water.
~ At CTO 1 the coal red boiler was modied and
converted to use bagasse briquette as uel and the
same is being considered or Clean Development
Mechanism (CDM project registration at United
Nations Framework Convention on Climate Change
(UNFCCC)).
~ At our CTO SEZ in Vizag, India, a bagasse
red boiler is under installation, which is being
considered or CDM project registration at
UNFCCC. Prior inormation regarding the same is
already given to UNFCCC.
~ 67 energy conservation measures initiated
during the year resulting in annual saving o
2.0 million kWh.
~ Our FTO 7 unit was certied or ISO 14001 EMS
management system. With this three FTO units and
our Biologics center have been certied under EMS
management system
~ A green rating system or companies across
India was launched under the leadership oG V Prasad, Vice-Chairman and CEO, Dr. Reddys,
and Chairman o the CII Green Rating System.
Two o Dr. Reddys units will be taking the pilot
implementation the coming year.
As a recognized global pharmaceutical enterprise,
Dr. Reddys places great importance to product,
process and plant saety. Despite excellent saety
standards, the Company had two incidents in
2010-11 at its acilities, which led to the loss o
human lives. In December 2010, there were two
atalities due to accidental asphyxiation at CTO-3;
and in March 2011, there were two atalities dueto a re in the hoist area at CTO-1. Dr. Reddys has
done thorough investigation o these unortunate
accidents, and has put in place corrective and
preventive actions to avoid their recurrence.
CommuniCation on an organization WiDe Wellness Campaign
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At Dr. Reddys, saety is an important element
o our value systems. We strongly believe that a
sae and healthy work environment is essential in
running a business.
We have had one o the most challenging
year with respect to our saety practices. A ew
unortunate incidents have served as a stark
reminder o the necessity o investing greatertime and eort to embed saety deeply into our
operations, and to plan and execute our operations
responsibly. We are determined to learn rom the
incidents that occurred to prevent recurrence. It has
also helped us emerge much stronger.
Our leadership team has instituted suitable
review mechanisms to ensure that saety
perormance attains the highest standards. We are
evaluating various reputed external organizational
change management experts as strategic partners
or bringing in an organizational wide saety
transormation.
We believe our organizational perormance isdirectly linked to the good health and well being o
its employees. During the year, a ocused wellness
program backed by various activities was designed
to reinorce the importance o good health.
We are working at improving employee
behaviour towards saety. We want every person
at Dr. Reddys to believe that saety is core to our
work. We have reviewed our SHE management
systems and are repositioning strategy to mitigate
uture risks.
Saety perormance metrics today orm an
integral element o the business and Individualsperormance targets. For us at Dr. Reddys, saety is
non-negotiable and an integral part o the way we
run our business.
SATISH REDDY
Managing Director & COO
We are working at
improving employee
behaviour towards
saety. We want every person
at Dr. Reddys to believe that
saety is core to our work.
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India today is home to nearly one-sixth o
humanity and one o the astest growing
economies. Though it is on its way to economicprosperity, access to quality healthcare and good
living are a distant dream or many.
At Dr. Reddys, our endeavor is to contribute
to this cause in ways which we eel can really
address these challenges. We engage with the
community at two levels, one being in and around
our campuses with the active involvement o our
employees and the other where-in we channel our
wide network o social activities through Dr. Reddys
Foundation (DRF) the social arm o Dr. Reddys
Laboratories.
Activity o DRF spans two broad areas o
social intervention: Livelihoods and Education.We are also building the necessary capabilities
and sot skills among medical support
proessionals, through Dr. Reddys Foundation
or Health Education (DRFHE) programmes
with an aim to strengthen the healthcare delivery
system.
LIVELIHooD ADVANCEmENT BUSINESS
SCHooL (LABS) & SKILLING rUrAL INDIA
(SrI)
LIVELIHooDS UpDATE
DRF through its Livelihood Advancement
Business School (LABS) addresses the needs
o disadvantaged youth constrained by low
income, inadequate skills, irregular employment
and absence o opportunities or training and
development. LABS oers short-term vocational
training courses in various demand-driven sectors.
The aspirants are also put through essential
lie skills, communicative english, and a Work
Readiness Module that helps them prepare theirresume, ace interviews and cope with workplace
responsibilities. At the end o the course, the
aspirants are also assisted in nding suitable entry-
level placements in their respective domains. With a
view to adapting the LABS model to the prevailing
socio-economic conditions o rural areas, DRF
initiated the Skilling Rural India (SRI) program.
A total o 25,403 livelihoods were generated
by LABS and SRI in 2010-11 through various
partnerships. (Reer: Partnership table). Andhra
Social responsibility at Dr. Reddys transcends cheque-
book charity. It is about enhancing healthcare, imparting
education, developing skills, providing opportunities, and
unlocking the doors o progress. We research community needs,
develop and pilot new projects, scale them up, and once proven,
collaborate with the government and various Non-Governmental
Organizations (NGOs) to roll them out.
crprae carepby
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Pradesh in India accounted or 27.64% o the
total livelihoods generated ollowed by states oMaharashtra and Uttar Pradesh which accounts
or approximately 8.3% and 7.1% respectively.
78.2% o total youths trained were placed with an
average salary o`4,200. Since inception LABS has
generated over 232,000 livelihoods.
LABS pArTNErSHIpS INITIATED THIS
YEAr
Based on the experiences and results gained in the
pilot projects, DRF has been able to sign up or the
below sponsored projects:
~
acc: DRF has entered into a MoU withAccenture to create livelihoods or 2,250 aspirants
in the BPO domain across India.
~ Bht Petoleum Copoto Lmted (BPCL):
Two MoUs have been signed with BPCL at
Muzzaarpur (in the Indian state o Uttar Pradesh)
and Ranchi (in the Indian state o Bihar) to create
livelihoods or 300 and 250 aspirants respectively.
~ s G: A MoU has been signed between
Sesa Goa and DRFs SRI project.
~ nidhi: A MoU has been signed with Nidhi, a
non-prot organisation o Laarge India Pvt. Ltd. at
Himachal Pradesh, India or the SRI Project.
~ t Pw msd: DRF has signed a
tripartite MoU with Tata Projects and MSDF to
create 200 livelihoods at Mumbai.
~ a n K: DRF has also signed a MoU with
Hindustan Unilever Ltd. at Haridwar, India to create
75 livelihoods.
~ P w dbl (Pwd) Pjc: DRF
has signed a MoU with Wadhwani oundation to
create livelihoods or 150 aspirants with disabilities
at Ahmedabad and Chennai. DRF also signed a
MoU with Centre or PwD Livelihood (CPDL) and
Society or Elimination o Rural Poverty (SERP) in AP
to provide livelihoods to 100 aspirants with physica
disabilities.
Partnersip Table
Nae the Cate patneshi with Livelihds
Accenture LABS Accenture 97
WORLD VISION WORLD VISION 28
Total 125
Nae Gvenent Bdy patneshi with Livelihds
Grameen LABS MoRD, Government o India 5385
Skilling Rural India Laarge India Private LimitedDalmia Cements and ACCTata Power CompanyAshta No Kai
2984
EGMM IV EGMM, Government o AP 1269
EGMM V EGMM, Government o AP 56
MEPMA II MEPMA, Government o AP 2030
MEPMA III MEPMA, Government o AP 325
Corporation LABS Corporation o Chennai, Tamil Nadu 505
BPCL BPCL, Government o India 111
NABARD MoRD and NABARD 1310
SHG LABS WBSRDA, West Bengal 55
Total 14030
Nae Intenatinal NGos patneshi with Livelihds
Michael & Susan Dell Foundation (MSDF)LABS
MSDF 11248
Total 11248
Total Livelihoods Generated 25403
A total o 25,403livelihoods were
generated by LABS and SRI
in 2010-11 through various
partnerships.
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ExpLorING NEW LIVELIHooD opTIoNS
~ Pg ckg c: As
part o a larger mandate DRF has signed a MoU
with International Organization or Migration (IOM)
to train victims o interstate human tracking. 23
inmates were trained in Bed Side Patient Assistance
domain along with Livelihoods at a rescue home in
Hyderabad, India.
~ mu w nl i ub
a (niua): A MoU was signed with NIUA to
develop curriculum and trainers. Handbooks along
with necessary teaching tools and assessments
in our domains customer relations and sales,
hospitality, ITeS and consumer durable technicians
were created. Over 60 employers in Delhi,
Chandigarh and Hyderabad rom these domains
were interviewed to seek inputs to develop the
content.
A pilot was conducted at Hyderabad in Food &
Beverage services or 16 aspirants. Out o the 16
aspirants 12 o them have been placed at leading
hotels in Hyderabad. This domain will be scaled up
to multiple centers across India.
NEW LABS CUrrICULUm
~ dc sl: A 60-day pilot program on direct
sales was conducted at Hyderabad which dealt
with various aspects o direct marketing and sales
o products. Out o 13 aspirants trained in the pilot
batch 12 o them were placed in organizations such
as Hindustan Unilever and Godrej.
~ BPo: DRF conducted a market scan with
the help o its acilitators and updated its BPO
curriculum to include non-voice / voice curriculum
to ensure that our aspirants have a larger pool o
employers to choose rom.
~ i tclg oc
a: DRF has started IT oce automation
programs which include MS Oce and internet
concepts. A pilot was conducted at Hyderabad. This
program was scaled up pan India.
~ i tclg tll: A new
domain was piloted in Barrackpore, West Bengal, to
cater to the growing demand o trained accounts
proessionals on Tally sotware. This domain imparts
basic computer knowledge, undamentals o
accounts, tally sotware etc and the aspirants are
placed in various companies.
~ il BPo: Inspired by the success
o the BPO domain which caters to the domestic
call center sector, DRF launched a new domain,
International BPO to cater to the growing demand
o International BPO markets.
a labs program at hyDerabaD, anDhra praDesh, inDia
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EDUCATIoN UpDATE
~ Pudm neghbohood school: Pudami
schools address the rising demand or English
medium education rom marginalized / lower income
communities. The our schools in Hyderabad and
Ranga Reddy district, Andhra Pradesh have 120
teachers imparting education to a combined strength
o over 2,500 children drawn rom all sections.
~ P egl P: To make quality
English-medium education accessible to urban
children rom lower income groups, DRF set up 27
Pudami English Primaries in Hyderabad and Ranga
Reddy District, Andhra Pradesh where about 5500
students study.
~ y y Lg C: Community-
based adolescent youth learning centers established
in various urban slum areas around Hyderabad
help bring dropouts and working children into
the mainstream education system. These centers
help eligible students obtain ormal academic
certication, provide career counseling and job-
related training. Two Yuva Youth Learning Centers
were established in Hyderabad in 2010-11 with a
total strength o about 150 youth.
~ n-rl Bg C (nrBC)
rl Bg C (rBC): Bridge centre
are set up at construction sites to help provide
education to children o construction labours with
an aim o getting them into mainstream education.
In FY11, 31 non-residential bridge centres provided
education to over 800 students while two
residential bridge centres provided education to
over 100 students.
~ Kll aj r vl (Karv): The
Kallam Anji Reddy Vidyalaya at Hyderabad has
45 teachers providing education to about 1,200
students in both English and Telugu medium.
~ el Cl C & ec C
(eCCe): Early Childhood Care & Education (ECCE)
Center takes care o migrant children in the age
group o 0-5 years living on construction sites in
urban Hyderabad, India. 10 ECCE centers, unded
by the World Bank today support over 500 children
~ Jl h Gl B
hb: These juvenile homes house children
in three groups Juvenile delinquents in special
home, under-trials in observation home and
children who need care and protection in the
children home. A total o about 90 girls and 150
boys are housed in these homes.
stuDents at a yuva Center in hyDerabaD, anDhra praDes h, inDiaCommunity-based
adolescent youth
learning centers established
in various urban slum areas
around Hyderabad helpbring dropouts and working
children into the mainstream
education system.
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Dr. rEDDYS FoUNDATIoN For HEALTH
EDUCATIoN (DrFHE)
DRFHE aims to create proessionals who would work
with the medical raternity to oer an integrated,multi-disciplinary approach to good health. The
programs also aim at building the necessary
sot skills with an objective o strengthening the
healthcare delivery system or better patient care.
DRFHE signifcantly scaled up its activities rom 383
programs in FY10 to 807 programs this year.
EDUCATIoN INITIATIVES
poST GrADUATE DIpLomA IN
HEALTHCArE mANAGEmENT
DRFHE is successully running its seventh batch o the
Post Graduate Diploma in Health Care Management(PGDHM) at Hyderabad. 17 students were enrolled
or the academic year 2010-11. A PGDHM-certifed
Patient Educator would be a combination o a
physicians assistant, patient counselor, health
educator and a physicians associate.
TrAINING INITIATIVES
~ inner CirCLe:Introduced in 2007 to impart sot
skill training to resident doctors, 41 Inner Circle
programs were conducted in FY11, beneting over
900 resident doctors.
~ aBhiLasha:It is a one-year program aimed at
helping nurses understand the true importance otheir work, showing them how they can perorm
their work more eectively, and boosting their
sel-condence and motivation. 415 programs were
conducted during FY11, beneting over 10,700
Nurses.
~ sarathi: It is a training program that enables a
doctors assistant to emerge as a sharper, smarter and
motivated individual. 60 programs were conducted
during FY11, benefting about 1,500 assistants.
~ sanJeevani:This program was introduced
in the year 2008 with an objective to ensure thatthe pharmacists develop empathy towards their
customers and improve various skills or eective
prescription dispensation. During FY11, 42 programs
were conducted benefting about 700 pharmacists.
pATIENT INITIATIVES
~ living well:DRFHE conceived this program
in 2008 in partnership with the ART OF LIVING
FOUNDATION, an international NGO, with an
stuDents at a puDami sChool in hyDerabaD, anDhra praDesh, inDiaPudami schools
address the demand or
English medium education
rom marginalized income
communities. Today, our
schools provide education to
over 2,500 children.
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aim o helping people to reduce risk actors and
increase their resistance levels through awareness
and liestyle modication and to manage their
chronic condition through a sel management
support system. 10 Programs were conductedduring FY11 beneting about 200 patients.
~ liFe at YoUr doorsteP (laYd):Dr. Reddys
Oncology business in India and DRFHE launched
Lie at Your Doorstep in January 2008. This
Program ocuses on home care (related to Palliative
Care). It attempts to improve the quality o lie
orterminally ill patients with provision o access
to physical, psychological, emotional, social
and spiritual support in a culturally appropriate
manner. A well-equipped medical van with a team
consisting o a doctor, nurse and patient counselor
goes to the patients doorstep to provide the homecare service. DRFHE is also tying up with Dr. Reddys
Foundation through their LABS program to provide
livelihood to a member o a amily which has lost its
earning member to cancer.
During FY11, this service was also launched in
the Indian cities o Bangalore, Mumbai, Bhopal,
Jabalpur, Kolkata, Cochin and Coimbatore
beneting over 2,700 cancer patients.
NEW INITIATIVES
~ awareness For liFe:It is a program designed
or the beneft o employees in the corporate world
where interactive session by medical proessionals ondiseases take place. 107 programs were conducted
during FY11, benefting about 4,700 participants.
~ aastha:The objective o this program is toraise awareness levels o pain and palliative care
amongst doctors and nurses. It also talks about
end-o-lie care by encouraging and enabling an
open dialogue and service provision thereby hoping
to enhance the quality o lie o individuals acing
the last stages o lie. It is conducted in association
with the Indian Association or Palliative Care.
During FY11, Four programs were conducted
beneting about 160 participants.
~ disaster management:The program,conducted in association with AmeriCares India
Foundation and National Disaster Management
Authority is designed to introduce hospital sta to
the concept o disasters and disaster preparedness.
The workshop ocuses on response system and
communication capabilities giving hospitals an
opportunity to be prepared or such eventualities.
70 participants beneted rom the pilot program.
stuDents at a pgDhm Class in hyDerabaD, anDhra praDesh, inDia
The Aastha program is
conducted in association
with the Indian Association
or Palliative Care. DuringFY11, our programs were
conducted benefting about
160 participants.
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In 2011, Dr. Reddys became the only Indian
pharmaceutical company to celebrate the 10th
anniversary o listing at the New York StockExchange.
The Company enjoys some key strengths which
are listed below:
Industry leading chemistry skills and development
processes which have resulted in monetizing
several niche product opportunities.
A high degree o vertical integration with most o
the APIs being sourced internally to manuacture
ormulations. This has not only helped in speed
to market but also kept Dr. Reddys generic and
ormulation products cost competitive. The
Company ranks amongst the global leaders in
Drug Master Filings (DMF), with 486 global DMFsas o 31 March 2011.
The Company enjoys critical business mass in key
markets such as North America, Russia and India.
Creates and leverages value opportunities
through strategic partnerships.
Has established a presence in biosimilars through
Reditux, Dr. Reddys brand o rituximab, the
worlds rst biosimilar monoclonal antibody,
as well as three additional products, Graeel,
Cresp and Peg-Graeel.
KEY FINANCIAL HIGHLIGHTS
As per nancial reporting standards prescribedunder the International Financial Reporting
Standards (IFRS):
The Companys consolidated revenue or
2010-11 grew by 6% to`74,693 millions
(US$ 1.7 billion). As C a shows, Dr. Reddys
revenue has been rising at a CAGR o 21% over
the last ten years.
Prot ater tax (PAT) or 2010-11 was`11,040
millions versus`1,068 millions in 2009-10.
KEY EVENTS
BUILDING STrATEGIC pArTNErSHIpS
In 2010-11, Dr. Reddys acquired
GlaxoSmithKlines (GSK) oral penicillin
manuacturing acility located in Tennessee,
USA. This allows the Company to enter the
US penicillin-containing antibacterial market
segment through brands such as Augmentin
and Amoxil, and serve the needs o customers
through manuacturing and other capabilities
that did not previously exist within Dr. Reddys.
overview> Incorporated in 1984, Dr. Reddys
Laboratories (Dr. Reddys or the Company) is a
global pharmaceutical company with ootprints over 25
countries. The Companys purpose is to provide aordable
and innovative medicines or healthier lives, which we do through:
Pharmaceutical Services and Active Ingredients (PSAI),
comprising Active Pharmaceutical Ingredients (API) and Custom
Pharmaceuticals Services (CPS).Global Generics (GG) businesses, which includes branded
and unbranded prescription and over-the-counter (OTC)
pharmaceutical products.
Proprietary Products (PP), comprising o biosimilars,
dierentiated ormulations and New Chemical Entities (NCEs).
aagee dcad aay
Note: Unless otherwise stated,fnancial data given in this
Management Discussion andAnalysis is based on the Companysconsolidated IFRS fnancial
statements
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Promius Pharma, a subsidiary o Dr. Reddys,
collaborated with Valeant Pharma to market
Cloderm cream in the US market. Cloderm
is a well-tested product among dermatologists,
and is universally recognized or its saety prole
and unique non-sensitizing ormulation. It is used
or the relie o the infammatory and pruritic
maniestations o corticosteroid-responsive
dermatoses. This should bolster the PromiusPharmas eorts to build a successul prescription
branded ranchise in the US, and contribute
to the Companys goal to become a leader in
medical dermatology.
2010-11 saw an expansion o Over-the-counter
(OTC) and prescription portolio in Russia and
the Commonwealth o Independent States (CIS)
through various in-licensing deals with partners
or exclusive marketing rights. With strong
brands, increasing growth in the prescription,
OTC and hospital segments and the Companys
association with top tier distribution partners,
these deals should add to Dr. Reddys growth
ambitions in Russia and the CIS.
The Company entered into a settlement
with AstraZeneca in the US relating to the
Abbreviated New Drug Application (ANDA)
led or the generic versions o AstraZenecas
Nexium (esomeprazole). According to IMS,
Nexium is the second largest selling drug in US.
AstraZeneca has granted Dr. Reddys a license,
subject to regulatory approval, to launch generic
version o esomeprazole delayed-release capsules
in 2014, or earlier in certain circumstances.
The Company had entered the South Arican
market in 2003 through 60:40 Joint Venture (JV)
with a local partner, Calshel. During 2010-11,
the Company increased the stake in this JV to
100% ater acquiring the 40% stake o the
partner. South Arica is an important market and
the Company hopes to increase the presence
there, especially in the areas o the Central
Nervous System (CNS), oncology and womens
health.
BIoSImILArS: THE NExT WAVE oF
GroWTH
Dr. Reddys has sold approximately 1.4 million
units o biosimilar products and has treated
approximately 97,000 patients in 12 countries.
Launched three years ago, Reditux was the
rst and still the only biosimilar monoclona
antibody in the world. In 2010-11, Reditux
registered a growth o 75% over the previous
year and is now among the Companys Top Five
brands in India.
In 2010-11, Dr. Reddys launched Cresp in India
the rst biosimilar darbepoetin ala in the
world. This launch is a signicant achievement,
or it has again demonstrated the Companys
development capabilities in biosimilars. Cresp
oers patients with both nephrology and
oncology indications, an improved treatment
regimen at aordable prices.
In March 2011, the Company launched
Peg-graeelTM in India in the orm o an
aordable peglgrastim, which is used to
stimulate the bone marrow to produce more
neutrophils to ght inection in patients
undergoing chemotherapy. Peg-graeelTM
y 01 02 03 04 05 06 07 08 09 10 11
10, 97516, 498 18, 070
20,103 19, 519
24, 267
65, 095
50, 006
69, 441 70, 27774, 693
Germany and Mexico acquisitions
Authorised generic launches
c agr 21%
Dr. Reddys CAGR Consolidated Revenue Growt ro 2000-01 to 2010-11 `mi l l i on sChart
A
, 498
c agr
1%
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represents a breakthrough in the pricing o this
complex molecule. It is priced at approximately
25% o the originator brand in India, and 95%
lower than the US price. This pricing has been
enabled by the Companys vertically integrated
global manuacturing network. Peg-graeel is
manuactured using Dr. Reddys PEGtech brand
o activated mPEGs, which are synthesized at the
Companys acility in Mexico and the UK.
FoCUS oN r&D
Investments in R&D in 2010-11 grew by 33% to
`5,060 millions. This represents 7% o overall
sales, compared to 5% in 2009-10.
Dr. Reddys has led 21 ANDAs in 2010-11.
As o 31 March 2011, the Company has 179
cumulative ANDAs (including partnered ANDAs).
The Companys North America generics pipeline
comprises 76 ANDAs pending with the USFDA
as o 31 March 2011. O these, 38 are Para-IV
lings with 10 in the category o rst to le. The
value o rst to le represents approximately
US$ 3 billion o innovator sales.
The Company has led 56 DMFs in 2010-11
which includes 19 DMFs in the US, 7 in Europe,
and 30 in the rest o the world. As o 31 March
2011, Dr. Reddys has led 486 cumulative DMFs,
and is among the global leaders in DMF lings.
roBUST GroWTH IN EmErGING mArKETS
In 2010-11, Dr. Reddys continued to outperorm
the Russian market by reporting a growth o
24% versus a market growth o 7.5% (Source:
Pharmexpert). The Company is ranked 15th inRussia.
The branded ormulation business in India
continues to be one o the key markets or the
Company. In 2010-11, Dr. Reddys expanded the
eld orce by approximately 500 people to widen
the reach with doctors, and reported a growth o
15% in line with the market.
Dr. Reddys grew in other emerging markets as
well by 12% over the previous year. The major
countries include Ukraine, Venezuela, South
Arica and New Zealand.
CoNTINUED GroWTH IN NorTH AmErICA
GENErICS
In the US prescription market, 25 o Dr. Reddys
products eatured among the top three ranks
in terms o market share (Source: IMS Sales
Volumes, March 2011).
The Companys presence in the OTC segment
yielded good returns, with key products such as
ranitidine and omeprazole magnesium growing
well. Within three years o commencement,
Dr. Reddys OTC business in North America
generics is worth approximately US$ 60 millions.
In 2010-11, North America generics showed
a revenue growth o 13% over previous year.
Signicant portion o this growth was led by the
Companys presence in products with limited
competition.
11 new products were launched in the North
America generics market in 2010-11. O these,ve experienced limited competition. These were:
amlodipine benazepril, tacrolimus, lansoprazole,
zarlukast and exoenadine pseudoephedrine
180 / 240 mg.
pHArmACEUTICAL mArKET TrENDS
Note: Global market inormation reerred to
in this and subsequent sections are based on
latest available reports rom IMS Health Inc., and
Datamonitor.
According to IMS Health, the global pharmaceutical
market value is expected to be around $880 billion
in 2011, exhibiting a growth o 5% to 7%. This
growth is expected to be about one percentage
point higher than in 2010, and will be largely
driven by stronger overall contribution rom
emerging countries. In the regulated markets,
products with more than US$ 30 billion o sales are
expected to ace generic competition, including
iconic brands such as Lipitor, Plavix, and
Zyprexa.
KEY GLoBAL TrENDS
~ icg pc gcz. On
average, brands in the US the most mature oall generics markets experienced the greatest
degree o volume erosion ollowing patent expiry
and exposure to direct generic competition.
Between 2006 and 2009, brand sales declined by
72% ater six months o generic competition. Ater
the US, brand erosion was the most severe in the
UK, Germany, and France, with mean sales erosion
in the region o 44% ater six months o generic
competition. Brand erosion in Australia, Italy,
Russia, Spain, and Japan ranged rom 54% (in Italy)
to 6% (in Japan) in terms o value, ater two years
o generic competition.
~ K gw cg
lc p p. A number
o actors have and will continue to eect
pharmaceutical sales and prots going orward.
Ageing populations, the growing prevalence
o chronic disease, greater use o expensive
treatments, and expanding public healthcare
coverage in markets such as the US are stretching
existing healthcare resources. Both public and
private payers across the world are pursuing a
11 new products were
launched in the North America
generics market in 2010-11.
O these, fve experienced
limited competition. These
were: amlodipine benazepril,
tacrolimus, lansoprazole,
zafrlukast and exoenadinepseudoephedrine 180 / 240 mg.
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wave o budgetary control mechanisms that target
drug spending. For countries with publicly unded
healthcare, this is being implemented in the context
o restoring scal balance. Further, during 2010-15,
branded pharmaceutical is set to lose approximately
US$ 108 billion in sales due to patent clis and
the resultant generic erosion o branded sales.
However, the industry is implementing a number
o strategies to drive sales and protability goingorward: product innovation, diversication, and
cost-containment. It is dicult to estimate how
these will play out over time.
~ Glbl k bl pc
b 15 c z
. The global biosimilars market is
expected to grow rom US$ 243 millions in 2010 to
US$ 3.7 billion in 2015. This will be driven by patent
expirations o more than 30 biologic medicines,
with sales o US$ 51 billion in the next ve years.
~ rp Cns Ccl
tpc . CNS is the largest
therapeutic area across major markets ollowed by
cardiovascular drugs. However, these have become
increasingly saturated with me-too drugs, and are
suering rapid erosion rom generic competitors
ollowing patent expiry o key brands.
~ mblc, clg, g
lg f
wll pc g l gw
as these have between 2005 and 2009. The
growth is being driven by continued uptake o
novel biologic drugs. For the top 50 pharmaceutica
companies, sales across these three therapy areas
are orecasted to grow by 5.4%, 5.8% and 4.1%
CAGR during the period 2010-2015.
~ sgc w bkg
z. In 2011, the introduction and use
o new drugs a third o which are specialty
pharmaceutical products are poised to ulll
unmet patient needs and signicantly alter
treatment paradigms in several key therapeutic
areas. These include innovative treatment options
or stroke prevention, melanoma, multiple sclerosis,
breast cancer and hepatitis C. As these new drugs
are brought to market, patient access is expected
to expand and unding redirected rom other areas
where lower-cost generics are available. In total,
30 to 35 new chemical or biological entities are
expected to be launched globally in 2011.
Dr. reDDys CelebrateD 10 years of listing on the nyse on 15 april 2011
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KEY rEGIoNAL TrENDS
rEGULATED mArKET TrENDS
~ ip us k gw.In2011, the US market is expected to grow between
3% and 5% translating to a market value o
US$ 320 to US$ 330 billion up slightly rom
the growth in 2010.
~ Pk p p j
p gc.In 2011, products withsales o more than US$ 30 billion are expected to
ace the prospect o generic competition in the
major developed markets. In the US alone, Lipitor,
Plavix, Zyprexa and Levaquin which
together accounted or more than 93 millions
prescriptions dispensed in the past 12 months and
generated over US$ 17 billion in sales will likely
lose market exclusivity. The ull impact o patients
shiting to lower-cost generic alternatives or these
products, as well as out o other brands in their
therapeutic classes, will be mostly elt in 2012.
~ us lc w us
P kg cl
p blgc . Branded
biologics in the US are eligible to receive our years
data exclusivity and 12 years market exclusivity.
However, this is currently under debate in the US
House o Representatives. In February 2011, the
US President announced that he wishes to shorten
market exclusivity rom 12 years to seven. I it were
to pass, it will signicantly reduce the timescale or
biosimilars to enter the US market.
~ G bcg c k. Historically, Germanys
generics market has been highly branded. But
new wide ranging reorms in Germany have put
the negotiating power rmly in the hands o the
countrys sick unds. This has resulted in auctioning
o generics and in making the sales and marketing
orces obsolete, with price playing the most
important actor.
EmErGING mArKET TrENDS
~ Pgg c cb
l l l gw.The 17 Pharmerging1
countries are orecast to grow at a 15% to 17% in
2011, to somewhere between US$ 170 and
US$ 180 billion. Many o these are expected
to benet rom greater government spending
on healthcare and broader public and private
1 Pharmerging countries includes China, Brazil, Russia,
India, Mexico, Turkey, Venezuela, Poland, Argentina,
Thailand, Romania, Indonesia, S. Arica, Egypt,
Ukraine, Pakistan and Vietnam.
healthcare unding, thus driving greater demand
and access to medicines.
~ C gw pc r
G l p.The genericsindustry in Russia is complex and ragmented, and
dominated by a small number o international
generics manuacturers. These companies enjoy
preerential uptake driven thanks to their perceivedsuperiority in terms o saety and ecacy vis--vis
domestically manuactured generics. In Russia,
investment in healthcare is considered a long term
national priority as a means o reducing mortality
rates and increasing lie expectancy. Government
health expenditures per capita reached US$ 590 in
2010 compared to around US$ 360 in 2005. Their
continued growth is anticipated: estimates rom the
Federal Ministry o Health and Social Development
suggest US$ 1,400 in 2017, rising to US$ 1,800 by
2020.
~ ac pc g c
i. The Indian pharmaceutical
market has seen a CAGR o about 15% in the last
ve years. The domestic industry grew by 15%
in March 2011(MAT) versus 18% in March 2010.
Acute therapy dominates, with a share o 73%
o the total market value. The chronic segment
has registered a CAGR o 18%. Anti-diabetics
grew by 24%, cardiovascular by 16%, CNS and
gastro-intestinal grew 17%, anti-inectives by 14%,
respiratory by 10% and dermatology by 15%.
Dr. rEDDYS mArKET pErFormANCE
rEVENUES
The Companys consolidated revenues increased
by 6% to`74,693 millions (US$ 1.7 billion) in
2010-11. Revenues rom Global Generics increased
by 10% while PSAI revenues decreased by 4%.
In 2010-11, Dr. Reddys share o revenue rom
the international businesses stood at 81%. The
remaining 19% came rom India. North America
(US and Canada) contributed to 31% o total
revenues in 2010-11, versus 30% last year. Europe
accounted or 21% o total sales in 2010-11,
compared to 24% in 2009-10. Russia and other
CIS countries contributed to 15% o total revenues.
C B plots the data.tbl 1 gives Dr. Reddys consolidated nancial
perormance by businesses under IFRS.
GLoBAL GENErICS
Global Generics revenues were at`53,340 millions
in 2010-11, versus`48,606 millions in 2009-10.
C C gives the geographic distribution.
Dr. Reddys ConsolidatedRevenue and Sare omarkets
Chart
B
21%
31%
Europe
14%ROW
North America
RCIS
15%
India
19%
2010-11
24%
Europe
15%
ROW
30%
North America
RCIS
13%
India
18%
2009-10
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NorTH AmErICA
Over the previous year, revenues rom North
America increased by 13% to`18,996 millions in
2010-11. Signicant portion o this growth was
led by the Companys presence in products with
limited competition. As mentioned earlier, 11 new
products were launched in US in 2010-11, o which
ve experienced limited competition. These were
amlodipine benazepril, tacrolimus, lansoprazole,
zarlukast and exoenadine-pseudoephedrine.Dr. Reddys launched exoenadine-
pseudoephedrine on 31 January 2011 ater the
District Court o New Jersey lited the preliminary
injunction granted to Sano-Aventis.
The Company has led 21 ANDAs in
2010-11. As o 31 March 2011, the Company
has 179 cumulative ANDAs (including partnered
ANDAs). Dr. Reddys North America generics
pipeline comprises 76 ANDAs pending with the
USFDA. O these 38 are Para-IV lings, with 10 in
the category o rst to le.
INDIARevenues rom India grew by 15% to`11,690
millions in 2010-11driven by volume growth o
11% and new products led growth o 4%. During
the year, Dr. Reddys launched new products under
55 new brands including two biosimilarsCresp
and Peg-Graeel.
Dr. Reddys Top-10 brands accounted or
revenues o`4,317 millions (37% o India
ormulations revenue). Some o the details are:
Omez and Omez DR, the Companys brands
o omeprazole, grew by 15%. Omez now
accounts or 53% market