Dear Shareholders,

In my first letter to you as the Chief Executive Officer, I take great pride in reporting on the progress Alkem has made during FY 2023-24. Alongside delivering strong financial results, we achieved several operational milestones, including successful new product launches, market expansion, advancements in research and development, and improved manufacturing efficiencies, all of which have contributed to our overall growth trajectory.

Financial Review

Driven by growth in both Indian and international businesses, operating revenues for FY 2023-24 grew by 9.2% year-on-year. Our EBITDA margins registered significant improvements, reaching 17.7% compared to 13.9% in the previous year, supported by lower raw material costs, better geography and product mix, reduced price erosion in the US market, and ongoing cost optimization efforts. This solid margin performance led to a 82.5% increase in net profits during the year. We once again demonstrated our disciplined approach to cash management and commitment to maintaining a robust balance sheet, adding ₹ 14.1 billion in net cash and ending the year with a net cash balance of ₹ 35.5 billion. We remain focused on deploying our strong cash reserves to fund new investments, including inorganic opportunities, which align with our return expectations.

India Business

After a sluggish start to the year due to seasonal factors affecting the demand for acute therapies in key markets, we recorded sales growth of 5.4% for FY 2023-24. This growth was largely driven by our gastrointestinal and vitamins & minerals segments in the acute portfolio, and by the anti-diabetic and Derma segment in the chronic portfolio. Additionally, we announced our entry into ophthalmology with the launch of an extensive portfolio of affordable and high-quality eye care products.

Subdued growth in certain acute therapies impacted our full-year secondary sales performance. According to IQVIA, our secondary sales grew by 6.2%, compared to the Indian Pharmaceutical Market (IPM) growth of 7.6%. While our sales growth was lower than market, there were notable positives. Most segments in our chronic portfolio continued to outperform the IPM, reflecting the growing preference for our products and the effectiveness of our market outreach strategies. Additionally, during the year, we advanced by 1 rank in the anti-diabetic segment, and 1 rank in cardiac therapy segments. We remain confident that we have the right focus and strategy to achieve a strong turnaround in our acute therapy segment in the upcoming period.

In addition to being a leading manufacturer of prescription medicines, we have emerged as one of the largest players in the trade generics segment. During the year, trade generics contributed around 20% of our total domestic business. Better pricing and an improved product mix enabled us to enhance margins in our trade generics business.

International Business

Healthy demand and single-digit price erosion, in contrast to the previous year’s high double-digit price erosion, enabled our US business to achieve steady growth of 10.2%. During the year, we received 19 ANDA approvals, including 3 tentative approvals. As of 31 March 2024, we have filed 176 ANDAs and 2 new drug applications (NDAs) with the US FDA, and have received approvals for 145 ANDAs (including 13 tentative approvals) and 2 NDAs. Supported by this consistent pace of drug filings and approvals, we remain confident in advancing our growth trajectory.

Strong revenue growth of 33% in non-US markets has been a major highlight of the year. All our major markets, including Latin America, Europe, have demonstrated impressive performance. Growth in the European market was supported by the launch of limited competition products, while robust government tender business enhanced our performance in Latin America. Looking ahead, we are confident in the sustainability of our growth momentum as we increase our focus on non-US markets. This strategic emphasis is driven by the promising growth opportunities and higher profitability these markets offer, as well as the need to insulate ourselves from uncertainties in the US market.

Biosimilar Business

During the year, Enzene Biosciences, Alkem’s biological arm, launched Cetuxa in India, the world’s first biosimilar of Cetuximab for head and neck cancer. This affordable biologic, backed by indigenous research and production, aims to address unmet healthcare needs in India. Other launches in India included Ranibizumab, bringing our biosimilar portfolio to seven products. All these products are gaining impressive market traction. We have a robust innovation pipeline and plan to introduce several biosimilars internationally. By investing in this field, we aim to provide affordable, accessible treatment options for complex diseases and contribute to sustainable healthcare systems.

Enzene Biosciences also serves as a contract development and manufacturing organisation (CDMO), providing services to biotechnology companies aiming to bring new therapies to market. We are experiencing significant growth in the CDMO business, with the US market offering particularly exciting opportunities. To capitalize on these prospects, we have established a CDMO facility for biosimilars in the US, which is slated to be operational by end of FY 2024-25. This strategic location enables us to serve key markets efficiently and effectively, enhancing our global competitiveness.

Quality Focus

Our products are used by millions of patients every day, and we recognize the immense responsibility that entails for product safety and quality. During the year, the US FDA conducted inspections at our three manufacturing facilities namely Ankleshwar, Mandva and Baddi. We have received an Establishment Inspection Report (EIR) for Ankleshwar and Mandva facilities. However, Baddi received Form 483 with 10 observations which are procedural in nature with no data integrity issues. We have addressed these observations and have received EIR on 25 June, 2024. Our Indian facilities have undergone more than 25 US FDA inspections without receiving any Official Action Indicated (OAI) or warning letters, underscoring our long-standing commitment to quality over the past 15 years.

Other Business Enablers

We are committed to investing in Research and Development (R&D) to drive innovation and accelerate the launch of new products. Our R&D expenditure constitutes around 4-4.5% of our overall sales, with a strategic shift towards biosimilars and other complex molecules to align with evolving industry dynamics and opportunities.

We are spearheading digital transformation across the Company, to build a future-ready enterprise wherein each function has a digitization roadmap, and we will continue to invest in IT infrastructure based on business priorities and needs.

Enhancing efficiency across all operations is a key focus. By improving productivity at every stage of the value chain – from research and development to manufacturing, distribution, and sales & marketing – we are strengthening our business to deliver consistent and sustainable value to stakeholders.

Our cost optimization program, in collaboration with leading consultants, aims to identify and implement cost reduction opportunities. This includes minimizing manufacturing overheads, improving yields, and securing better raw material prices through continuous vendor development. The monetization of our idle assets in St. Louis was part of these measures. As we continue to explore various cost-saving initiatives, we are confident these efforts will lead to enhanced margins in the future.

Talent and Culture

At Alkem, our people are central to our success. We are committed to attracting, retaining, and developing the right mix of talent to support our growing operations. During the year, we onboarded new senior-level talent, bringing fresh insights and driving greater professionalism. We also placed significant emphasis on building the capabilities needed to transform our organization and implemented measures to reduce attrition. Our culture is integral to the way we conduct business, and this year, we reinforced it by training our employees on our updated code of conduct. Additionally, we are focusing on enhancing diversity across all functions, recognizing that a diverse workforce strengthens our organization.

Closing Remarks

The business outlook remains optimistic, supported by our strong product portfolio, robust pipeline, strategic market expansion initiatives, and focus on operational excellence. In the domestic market, investing in the chronic portfolio and driving productivity-led growth are key focus areas. Our trade generic franchise continues to be a significant growth driver in India, strengthening each year. Internationally, we plan to launch more products in non-US markets to diversify growth and reduce dependency on the US. Despite some supply chain challenges in the US over the past year, we are steadily overcoming them. Biosimilars have also emerged as a promising growth driver in the medium term.

I would like to extend my gratitude to our employees, customers, partners, suppliers, healthcare providers, shareholders, and all other stakeholders for their constant support and trust. Alkem’s journey has been exciting, and the future holds even more promise. As we chart new growth horizons, we will leverage the momentum generated and the lessons learned over the years to create sustainable value.

Warm regards,

Dr. Vikas Gupta Chief Executive Officer