Glenmark Pharma

Its been an exciting decade and an eventful year for all of us
 associated with Glenmark. As we look back from the threshold of 2010,
 we see the company growing from strength to strength over the past
 decade, exceeding expectations and constantly delivering on its promise
 of performance. Glenmark established its identity as a research led,
 fully integrated, global pharmaceutical company. However, FY 0809 was a
 mixed year- the excitement of a rapidly progressing innovative pipeline
 clouded by a below par business performance.
 
 The global economy is still reeling under the effect of the financial
 crisis and few saw it coming. We too started the year with an
 aggressive revenue guidance and were confronted mid-year by a
 nose-diving global economy Iconic companies went down under and
 trillions of dollars have been pumped into the system by leading
 governments trying to bail out global giants.
 
 Factors impacting specialty business: Currencies in key markets
 decreased sharply vis-a-vis the dollar. With a substantial part of the
 specialty business coming from these markets, the impact on revenues
 was sudden and severe. Devalued currencies and troubled financial
 conditions impacted distributors in emerging markets leading to large
 scale trade de-stocking and extended cash cycles. At the same time the
 market witnessed a severe lack of liquidity in the system and tight
 credit availability, leading to a spike in cost of borrowing whereby
 rapidly expanding companies like ours were adversely affected.
 
 On the R&D side the company was also impacted by the inability to
 monetize any portion of its pipeline in FY 0809. A financially
 conservative and cautious Big Pharma caused delays in out-licensing
 from our New Chemical Entity (NCE)/ New Biological Entity (NBE)
 portfolio. Further, the setback on GRC 6211 (part of TRPV1 portfolio
 out-licensed to Eli-Lilly) was the first reversal we faced on a fairly
 advanced NCE. Though disappointing, I must also comment that in the
 discovery domain true innovation is circumspect without occasional
 set-backs.
 
 On the generics front, delays by the US Food & Drug Administration
 (FDA) in generic Abbreviated New Drug Applications (ANDA) approvals in
 the US led to below expected growth. Glenmark Generics was also hit by
 price erosion on Trileptal (Oxcarbazepine) in the US market. These
 factors had a significant impact on the generics business.
 
 In the last two quarters of FY 0809. These ranged from re-structuring
 of operations in emerging markets such as Brazil & Russia in order to
 consolidate business, to stalling operations in new markets such as
 Australia & China where near-term payback would have been untenable. We
 deferred major capital spend and scaled back plans for any merger &
 acquisition in the near term. Steps were taken to enhance operational
 efficiency, improve working capital cycle, tighten fiscal discipline
 and maximize cash flow from operations. These corrective measures will
 positively impactfinancials in FY 0910.
 
 we have steered our rich, innovative pipeline further towards fruition.
 The strength of our intent to carry out high quality research has been
 proven by the steady progress of our NCEs and NBEs. The recently
 completed Phase II B trials of Melogliptin (DPP IV inhibitor indicated
 in Type II diabetes) demonstrated potential for offering class leading
 improvements in glycemic control and metabolic function. Global phase
 HI trials are likely to start by end 2009. In addition to Melogliptin,
 we also expect Oglemilast (PDEIV inhibitor indicated in Asthma/ COPD)
 to enter phase 111 trials, subject to successful Phase II B results, in
 FY 0910. Of the other four molecules currently in clinics, two are
 likely to enter Phase II B in FY 0910. Notably, we became the first
 Indian company to get IND approval of an NBE from the USFDA, when we
 received the nod for Phase I for our novel biologic GBR500 (VLA-2
 Antagonist).
 
 Crofetemer, a molecule in-licensed by us from Napo Pharmaceuticals,
 USA, is also progressing well in Phase III trials in US and Phase IIB
 in India. This is a potential first-in-class anti-secretory
 anti-diarrheal agent for multiple indications including HIV-associated
 diarrhoea. It has received fast-track designation from the FDA and we
 holds rights to 140 Rest of the World (RoW) countries, where the
 launches could begin in CY2010.
 
 We continue to be passionate about innovation, working on best-in-class
 targets as well as novel target areas. The near-term possibility of
 being part of the first Indian company to discover and take a new
 molecule to market keeps the team impassioned,driving them tosurpass
 their own standards in discovery research.
 
 This was the year of implementation of a first-of-its- kind business
 re-organisation in the Indian pharma market. FY 0809 witnessed both
 Glenmark Pharmaceuticals Ltd (GPL) and Glenmark Generics Ltd (GGL)
 progress well on their paths towards becoming future forces in their
 respective domains of proprietary and generic business. The
 reorganization has helped to promote sharper focus on specialty and
 generics as separate businesses with distinctive skill-set needs,
 objectives and growth imperatives, driven by aligned management teams.
 
 And made a concerted effort to strengthen business fundamentals in key
 GPL markets. We grew the base business (excluding the out-licensing
 revenues) by 20% over FY 0708. All major markets registered strong
 secondary growth and new regions like Central & Eastern Europe (C EE)
 rapidly expanded business and grew the generics business by 25% over FY
 0708.  Despite a slowdown in ANDA approvals and Oxcarbazepine price
 erosion, we grew the US business by 30% over the previous year Glenmark
 Generics Europe launched its first product, Perindopril, in Western
 Europe and continues to grow well.
 
 Despite the mixed year Glen-Tark has faced in FY 0809, it gives me
 great pride to affirm that we have not dithered from the path we chose
 tor ourselves nearly a decade back.
 
 We have not wavered from our commitment to high quality discovery
 research ana our ambition of pioneering cutting-edge innovation out of
 India.
 
 We have always worked towards growing our base business to a size and
 scale that enables us to fund our research activities ourselves, and we
 are close to realizing our aspirations. We are recognised as one of the
 leaders in innovation amongst Indian Pharma and for the first time
 harbour plans to invest a significant amount in the R&D effort in FY
 0910, out of our own accruals, with a comfortable profit margin on the
 base business. This moves us several notches closer to being a
 self-reliant innovator who can carry a new molecule from ideation to
 fruition.
 
 We are also sure that with expected improvement in working capital
 management & strong cash flows from base business, the financial
 profile and debt levels of the company will improve multifold in FY
 0910.
 
 We are steadily gaming an identity as a serious innovator and in
 December 2008, Glenmark bagged the prestigious SCRIP wards for the
 Best Pharma Company in the World SME and the Best Company in
 Emerging Markets at the 2008 award function at London. Glenmark is the
 only Indian company to have receciveu this prestigious recognition.
 
 As we step into a new financial year, I re-affirm that the path we have
 chosen for Glenmark may be the one lesser taken, but is undoubtedly our
 passage to greater heights. We are well on our way to being an
 innovator at par with the biggest and the best. With you reposing your
 faith in us, we are sure to achieve what we set out to do
 
 - Challenge old dogmas and discover a new way for a new world.
 
 Glenn Saldanha