Wockhardt Ltd Management Discussions

Global Pharmaceutical Industry & Economies: Global GDP growth is projected to be 3.1% in 2024, unchanged from 2023, before edging up to 3.2% in 2025 helped by stronger real income growth and lower policy interest rates.

On the surface, the global economy remains remarkably resilient with growth holding steady as inflation returns to target. The journey has been quite eventful with supply chain disruptions in aftermath of the Pandemic, Unrest within nations like Russia-Ukraine, Middle East that has triggered global energy and food crisis and considerable surge in inflation followed by a globally synchronized monetary policy tightening. As countries are battered with grave challenges, on the other hand they have become self-reliant and explored new avenues and opportunities in various areas to sustain the growth. Climate change awareness gained traction globally with key powers injecting fresh urgency on need to undertake positive initiatives. Renewables energy had a record year with significant flow of investments which marked the commitment of nations to shift to a more sustainable model for the long run.

Tensions between the U.S and China have been rising over the years, ranging from trade and tariffs to tech rivalry and alleged spying. In recent years, tensions between the United States and China have introduced new challenges — especially related to economic and defense issues. China is a major trading partner for the United States but it is also developing its military capabilities, which poses challenges to the U.S. military. The ongoing Russia-Ukraine, Israel – Gaza conflict has severely strained relations to the point of triggering a wider conflict. As a result, tensions are likely to increase between the superpowers due to alliance security commitments. The conflict will also have broader rami_cations for future cooperation on critical issues like arms control; cybersecurity; nuclear nonproliferation; global economic stability; energy security; counterterrorism and destabilize the global energy and resource markets. The war has also compounded other global crises, with military operations and violence hindering the delivery and distribution of much-needed aid, including food, and exacerbating an already severe shortage of available global humanitarian assistance and resources. This has led economies on brink of "Perfect storm" of crisis. It has set in motion a three dimensional crisis on Food, Energy and Finance that is producing alarming cascading effects to an ecosystem which is already battered by COVID-19, Food Infiation & Shortages, Energy and commodity price increase, Debt distress, Blackouts and Climate change. Lingering concerns: The overall risks around the outlook are becoming better balanced, but substantial uncertainty remains. High geopolitical tensions remain a significant near-term adverse risk, particularly if the evolving conflicts in the Middle East were to intensify and disrupt energy and financial markets, pushing up inflation and reducing growth. Further reductions in inflation may also be slower than expected if cost pressures and margins remain elevated, particularly in services. This could result in slower-than-expected reductions in policy interest rates, exposing financial vulnerabilities and potentially generating a sharper slowdown in labour markets. Another key downside risk is that the future impact of higher real interest rates proves stronger than anticipated. Debt-service burdens are already high and could rise further as low-yielding debt is rolled over, or as fixed-term borrowing rates are renegotiated. Some sectors, particularly commercial real estate, remain hard pressed, and corporate bankruptcies and defaults are now above pre-pandemic levels in several countries, posing risks to financial stability. Growth could also disappoint in China, either due to the persistent weakness in property markets or smaller-than-anticipated fiscal support over the next two years.

GLOBAL USE OF MEDICINES AND PROJECTED TRENDS

Significant usage shifts and spending growth acceleration across geographies became apparent in 2023 and have contributed to an increase in the outlook for medicine spending through 2028 of two percentage points to 5-8% CAGR, bringing global spending on medicines at list prices to $2.3Tn. This is at the same time the COVID-19 pandemic has shifted to endemic and the outlook for vaccinations and therapeutic spending has been revised downward by nearly $200Bn, driven by lower usage and offset by rising prices.

The volume use of medicines globally plateaued in 2023 but is expected to grow at an average 2.3% rate through 2028, driven by China, India and other Asian markets all growing faster than 3%. Countries in Latin America have grown more rapidly than other regions in the last five years and are expected to grow further at 1.9% annually through the forecast. North America, Western Europe and Japan are expected to grow medicine usage more slowly, partly due to their already higher per capita use. In 2024, Eastern Europe volume growth is expected to return to trends present prior to the start of the Ukraine conflict. Medicine use for specific therapy areas has been growing since 2018, with notably high growth in immunology, endocrinology, and oncology. These areas of rising usage have been driven more by wider adoption of older therapies compared to newer medicines. Immunology treatments have seen a steady 12% rise in utilization but the rates of per capita usage have varied considerably even within wealthier developed countries. Overall, nearly half of immunology biologic volume is facing biosimilar competition in developed markets, which has led to an incremental 5% in usage as more patients use treatments as costs decline. GLP-1 agonist medicines have been approved for both diabetes and obesity indications and have seen rapid uptake since 2021, coinciding with U.S. obesity approvals. Another area of notable medicine use shifts has been the use of antibacterials, which was significantly disrupted by the COVID-19 pandemic but returned to historic levels in 2022 and 2023.

SPENDING AND GROWTH BY REGIONS AND KEY COUNTRIES

		Spending in USD Bn
	2023	2019-2023	2028	2024-2028
Regions		CAGR		CAGR
Global	1606.8	7.30%	2225-2255	6-9%
Developed	1275.5	7.20%	1775-1805	5-8%
10 Developed	1081.6	7.00%	1505-1535	5-8%
Other Developed	193.9	8.50%	255-285	5-8%
Pharmerging	303.7	7.80%	400-430	10-13%
Lower Income Countries	27.6	5.60%	33-37	3-6%

The global medicine market using list price levels is expected to grow at 5-8% CAGR through 2028, reaching about $2.3Tn in total market size. The growth outlook to 2028 is 2% higher than the previous forecast outlook to 2027 despite a significant downward revision in the expected spending on COVID-19 vaccines and therapeutics.

Spending and volume growth following diverging trends by region with larger established markets growing more rapidly, driven by new and existing branded products, while Pharmerging markets will grow more slowly and be driven more by volume than the mix of more expensive therapies.

The U.S. market, on a net price basis, is forecast to grow 2-5% CAGR over the next five years, down from 5.3% CAGR for the past five years, including projected effects of the Infiation Reduction Act.

Spending in Europe is expected to increase by $70Bn through 2028, driven by new brands and offset by generics and biosimilars.

Japan medicine spending growth is projected at -1 to 2% through 2028 as robust brand growth is offset by a shift annual price cuts and ongoing shifts to generics.

Spending growth in China is expected to slow, with positives driven by greater uptake and use of new original medicines and offset by pressures on off-patent and generic pricing.

KEY THERAPY AREAS – BASE BUILDING FOR FUTURE GROWTH

The key growth area for medicines in the next five years is biotech, which will represent 35% of global spending and will include many of the areas of greatest activity for novel medicines. Global biotech spending is set to exceed $890Bn by 2028, with growth slowing to 9.5–12.5% due to the impact of biosimilars.

Specialty medicines will represent 43% of global spending in2028 and more than 55% of total spending in developed markets, continuing the shift from more traditional medicines underway for over a decade.

The two leading global therapy areas — oncology and immunology — are forecast to grow 14–17% and 2–5% CAGR, respectively, through 2028, reflecting diverging trends with one still driven by novel medicines and the other facing biosimilar competition. Oncology is projected to add 100 new treatments over five years, contributing to an increase in spending of $224Bn to a total of more than $440Bn in 2028 and facing limiting new losses of exclusivity. Treatments for auto-immune disorders are forecast to reach $192Bn globally by 2028, driven by steadily increasing numbers of treated patients and new products, and offset after 2023 due to biosimilars.

Diabetes spending growth is slowing to low single digits in most developed markets and declining in some, especially net of rebates. New therapies contribute to growth of neurology markets, including greater use of novel migraine therapies, potential treatments for rare diseases, and the potential for therapies for Alzheimers and Parkinsons. The outlook for next generation biotherapeutics includes significantly uncertain clinical and commercial prospects for cell, gene, and RNA therapies, which will grow to $33Bn by 2028.

Source: IQVIA Market Prognosis, Sep 2023; IQVIA Institute, Dec 2023.

Company Performance

With the tightening of monetary condition across the globe and soaring inflation across economies, managing liquidity and smooth business operations has been the key priority during the year and your company has effectively managed its liquidity position and continued with its sustainable business model without compromising on the overall long term vision of the_organization.

Your Company started the year with focus on aligning operations with the long term goals and its vision statement. Primary objectives were to drive robust growth, de-leveraging the balance sheet to achieve operational efficiency, ensuring reasonable flow of working capital into the Business and gradually shifting away from acute to strengthen chronic presence in its portfolio mix, strengthening overall New chemical entity (NCE) and vaccines bucket. Amidst turbulent time your company stood steady and delivered its key priorities thus paving the way for long term sustainability. The below image represents the business ecosystem in which your company operates which can also be interpreted as the near to long term growth drivers for the Company.

Key developments that took place in your company during the year have been summarized below:

1) Successful completion of pivotal Phase 3 pneumonia study of its macrolide antibiotic Nafithromycin WCK 4873: Wockhardt NCE, WCK 4873 named as Nafithromycin was comparatively evaluated in multi-centre double blind Phase 3 pneumonia study employing the last-line respiratory antibiotic Moxi_oxacin. The results of the study showed that an ultrashort course of three-day treatment with Nafithromycin is as effective as seven-day therapy with Moxi_oxacin. The findings of Phase 3 study are in line with Phase 2 study conducted in the US and Europe. A human lung penetration study conducted in the US revealed that Nafithromycin possesses a remarkable feature of sustained high lung concentration built-up over five days following just three days of dosing. Human Lung exposure of Nafithromycin is 8 times higher than Azithromycin and potency being 10-100 times higher for certain respiratory pathogens. In Phase 3 study, three-day treatment with Nafithromycin resulted in clinical cure for 96.7% of patients as against clinical cure rate of 94.5% in Moxi_oxacin arm. The Phase 3 study outcome establishes broadspectrum efficacy of Nafithromycin against Gram-positive respiratory pathogens, fastidious Gramnegative pathogens as well as therapeutically challenging intracellular atypical pathogens such as Mycoplasma pneumoniae, which were recently implicated for the surge of hospitalisations in China due to pneumonia. A significant proportion of study patients were infected with pathogens showing resistance to Azithromycin, Amoxycillin+clavulanic acid and Levo_oxacin. The role of Nafithromycin in managing such patients would be of heightened interest to clinicians. Importantly, the study also establishes that Nafithromycin represents a first ever macrolide in 30 years which has successfully completed clinical development for the indication of community acquired bacterial pneumonia.

2) A leading European Journal reports Renal Transplant Patients unique Clinical Case of Successful use of Zidebactam/Cefepime (WCK 5222, ZaynichTM) to Treat Skull Bone Infection & Pneumonia caused by Extreme-drug Resistant Pseudomonas: A recent publication highlights the multidimensional nature of antimicrobial resistance challenges in India and the need for novel versatile antibiotics to tackle growing number of multi-drug resistant infections. A publication, which recently appeared in a peer reviewed journal, European Journal of Clinical Microbiology & Infectious Diseases (EJCMID) describes an exceptionally complex case of sino-pulmonary infection and skull base osteomyelitis in a renal transplant patient caused by an extreme-drug-resistant Gram-negative bacterial pathogen, Pseudomonas. As all the available antibiotics failed to treat the infection, the patient was successfully treated with Zidebactam/Cefepime (WCK 5222, ZaynichTM) under compassionate grounds following due approval from Drugs Controller General of India. We continue to receive the requests for Zidebactam/Cefepime for compassionate use for treating difficult-to-treat and complicated cases such as serious blood stream infections, hospital and ventilator-associated bacterial pneumonia, osteomyelitis and intra-abdominal infections in cancer and transplant patients. So far we have supplied Zidebactam/Cefepime to 30 patients for compassionate use with range of life-threatening infections. We are happy to report 100% clinical cure rate in all these 30 critically ill patients with diverse life-threatening, extreme-drug-resistant Gram-negative infections under compassionate use.

3) Successful completion of QIP of 480 Cr: During the year your organization successfully completed fund raising by QIP route an amount of INR 480 crores. The funds raised will be utilized largely to meet its Clinical R&D program and secondly to deleverage the balance sheet.

Amidst the challenging market dynamics, your company was focused on deployment of funds and setting its investments priorities to ensure maximum return. Secondly it dedicated focus on the expense side with cost containment measures. Significant efforts to identify new revenue streams and enhance profitability and cash flow also translated into new partnerships into international geographies.

Business Performance:

The Domestic Business contributed 22% of revenue from operations during the year. ROW business recorded healthy 14% growth as your company commits itself to new geographic expansion and strengthening of existing portfolio which is in line with near to long term vision of the organization. UK operations reflected healthy 17% growth mainly on account of robust volumes across its Business channels. EU operations reflected healthy 26% growth mainly driven by opportunities in new geographies and higher volumes.

During the year, the Companys research & development expenses continued to grow keeping in view its strategic focus in Pharma, Biotechnology & NCE segment and was approx. 9.8% of consolidated total revenue.

REVENUES

Revenue from Operations during the year was 2,798 crore compared to 2,651 crore in the previous year with a annual growth of 6%.

The revenue split of European Union Business contributed 13% (compared to 11% in FY 2023). UK operations contributed 37% (compared to 33% in FY 2023). India and Rest of the world contributed 44% (in line with FY 2023).

PROFITABILITY

On Y-o-Y basis EBITDA has been significantly higher vs previous year quarters due to growth in operations and improved business hygiene, thanks to the cost containment measures, rightful allocation of resources and impact of US business restructuring. Improved business mix accompanied with portfolio swings in favour of high margin segment continues to be of key focus for your organisation. The Companys strategic focus on R&D initiatives that are futuristic in nature, continue to impact the EBITDA as they are being expensed.

Particulars	FY 23	FY 24	Change %
Material Consumption	41.1%	40.4%	0.7%
Personnel Cost	21.9%	20.4%	1.5%
R&D	5.2%	4.6%	0.6%
Other Expenditure	26.5%	25.9%	0.6%
Interest	11.2%	10.6%	0.6%
Depreciation	9.3%	7.7%	1.6%
Impairment/Loss on Asset	0.0%	4.6%	-4.6%
Exchange loss/(Gain)	-3.0%	-0.1%	-2.9%
Exceptional Item Profit/(Loss)	-10.9%	-0.5%	-10.4%
Tax	-0.1%	1.8%	-1.9%
Profits (Before NCI)	-23.1%	-16.4%	6.7%
NCI	-2.3%	-0.3%	-2.0%
Profits (After NCI)	-20.8%	-16.1%	4.7%

Material consumption for FY 2024 stood at ~ 40% vs 41% for PY.

The companys emphasis on R&D continued during the year while adopting selective strategy for rationalizing R&D spends which is reflected in spends for FY 2024 at ~ 9.8% including Capital and Revenue expenditure vs 10.1% in PY. Personnel costs as % to sales was lower than PY by 1.5% and even in absolute terms. Other expenses for FY 2024 was lower than the previous year at ~ 26%. Interest cost as % to sales was lower by 0.6% compared to previous year.

Profit for the year was also impacted by ~4.6% due to impairment of non-core assets and loss on sale of US assets. Profits after Non-Controlling interest (NCI) improved from -20.8% in PY to -16.1% in FY 2024.

The EBITDA and corresponding margins (Exc UK Covid Vaccines) improved significantly. Outcome of cost rationalisation initiatives and revenue growth from high margin segments enabled to strike the appropriate balance while countering the market challenges in revenue growth. Expanding market and therapeutic presence, Realignment of portfolio mix to high margin segment, exploring new revenue generation streams and cost rationalisation measures remains the key focus in the near to mid-term.

DEBT AND LEVERAGE

The Net Debt to Equity ratio stood at 0.43 as on 31^st March, 2024.

DEBT POSITION

	FY 24	FY 23	Change	% Change
Secured	981	1,060	-80	-8%
Unsecured	1,001	764	237	31%
Total	1,981	1,824	157	9%

RESEARCH & DEVELOPMENT & NEW LAUNCHES: COMPANYS STRATEGIC CORE

The research and development pipeline remained slow in 2023. Oncology, immunology, metabolic/endocrinology, and neurology remained the areas of core R&D focus which declined less as compared to other therapeutic class. Rare disease focus continues with more than 1,800 molecules targeting one of the growing number of rare disorders for which there are often no or very limited therapeutics available. Half of these focus on oncology, and next-generation biotherapeutics account for at least a quarter of the rare-oncology products, with increased activity in CAR T and NK cell therapies, as well as gene editing and nucleic acid vaccines.

A total of 69 novel active substances (NAS) launched globally in 2023, a decline from 2020 and 2021 but representing a return to pre-COVID-19 levels. Declines were driven by fewer COVID-19 vaccines and therapeutics, fewer U.S. accelerated approvals, and fewer NAS launched only in China.

A growing share of new launches in 2023 were first-in class, reflecting the increasing availability of novel science for patients. 2023 also saw continued growth in number of specialty medicine launches. A total of 362 novel active substances have launched globally in the past five years, bringing the 20-year total to 942 and highlighting an increasing gap between countries such as the U.S., with 267 NAS launches, and the EU4+UK, with 182, and China, which becomes the second largest with 192. Emerging biopharma companies originated 56% of all new drugs in 2023 and launched 53% of them, less than in recent years but still more than in the first half of the decade.

Source: IQVIA Institute, Jan 2024.

Global biotech spending is set to exceed $890 Bn by 2028, with growth slowing to 9.5-12.5% due to the impact of biosimilars

Source: IQVIA Institute, Jan 2024.

Global spending on biotech drugs — those created through recombinant DNA technology — are expected to reach $892Bn by 2028, about 39% of global medicine spending. Biotech covers a range of therapies, including traditional therapies such as insulin analogues and more complex specialty medicines and cell and gene therapies.

Your company also believes that robust R&D spend is a key strategy to sustain in the long run and its continuous focus in complex research in Pharma, Biosimilars & NCEs for past couple of years have shown encouraging results particularly in the field of Break through Anti-infective space and Biotechnology.

GLOBAL ANTIBIOTIC MARKETS & ANTIMICROBIAL RESISTANCE LEVEL CRISIS

Antimicrobial resistant (AMR) or the ability of infections to resist antibiotics to work against it could negate many of the medical breakthroughs of the last century. Previously curable infectious diseases may become untreatable and spread throughout the world. The report "Antimicrobial resistance: Global report on surveillance" showed that antimicrobial resistance is prevalent everywhere and has the potential to affect anyone, of any age, in any country. Antimicrobial resistance is putting at risk the ability to treat even common infections both in the community and hospitals and without an urgent and coordinated action the world is heading towards a post-antibiotic era.

Antimicrobial resistance (AMR) is a major threat to human development as it affects our ability to treat a range of infections caused by bacteria, parasites, viruses and fungi. Treatments for a growing list of infections, including urinary tract infections, tuberculosis (TB), sepsis, gonorrhoea and food borne diseases, have become less effective in many parts of the world because of resistance. In the absence of an effective antibiotics modern medical procedures, such as major surgery, organ transplantation, diabetes management and cancer chemotherapy will become a very high risk^{1, 2}.

Antimicrobial resistance (AMR) and COVID-19 are the two pandemics the world is currently challenged with and that pose a significant threat to public health in a global scale. Infections resulting from antimicrobial resistant bacteria are expected to claim 10 million lives globally, per year by 2050 significantly higher than Cancer (8.2 million), Diabetes (1.5 million) (ONeill,_ 2014)¹⁴. COVID-19 and AMR are interacting health emergencies which can have mutual impact due to misuse of existing antimicrobials for the treatment of COVID-19 patients since a specific treatment is absent for the disease (Nieuwlaat et al., 2021)¹⁵. If the current trend of AMR goes unchecked, it would result in the shortage of available therapeutics in future and may even mark an end to the conventional drug discovery pipeline (Kaul et al., 2019)¹⁶. By the year 2050, infections caused by antimicrobial resistant bacteria are projected to cause 2 million deaths in India.

Burden of resistance to antibacterial drugs

The WHO declared that AMR is one of the top 10 global health threats and, although often more silent than the COVID-19 pandemic, it can have equally devastating consequences.¹⁷ The overlooked pandemic of antimicrobial resistance: We have seen around 5 million deaths in the last two years owing to Covid-19 pandemic. Over 98% Covid-19 patients were treated with antibiotics. However 50% mortality in Covid-19 cases were linked to bacterial infections. A recent study estimates 4.95 million deaths associated with bacterial AMR globally in 2019 alone¹⁸. This draws our attention to the often neglected silent pandemic of antimicrobial resistance in terms of unmet needs for novel antibiotics. The overall health and economic burden resulting from acquired AMR cannot be fully assessed with the presently available data, however some estimates of the economic effects of AMR have been attempted, and the findings are disturbing. In a WHO report on Antimicrobial Resistance: Global Report on Surveillance (2014), the yearly cost to the US health system alone has been estimated at US $21 to $34 billion³ dollars, accompanied by more than 8 million additional days in hospital⁴ Because AMR has effects far beyond the health sector, it was projected, nearly 10 years ago, to cause a fall in real gross domestic product (GDP) of 0.4% to 1.6%, which translates into many billions of todays dollars globally³.

The CDC in its 2019 report on Antibiotic Resistance Threats in the United States estimates that 2.8 million antibiotic-resistant infections occur each year in US alone⁴.

The evidence obtained shows that AMR has a significant adverse impact on clinical outcomes and leads to higher costs due to consumption of health-care resources. Infections caused by antimicrobial resistant strains of bacteria are unlikely to respond to standard treatments resulting in prolonged illness and a greater risk to health. For example, MRSA (Methicillin-resistant Staphylococcus aureus) is estimated to cause 64% more deaths than infections caused by a non-resistant strain of the bacteria⁵ as per a report published in 2015 (The Antibiotic Resistance Crisis- by C.Lee Ventola). Antimicrobial resistant strains of bacteria are also more likely to be passed on to other people because those infected are sick for longer. The ONeill Review (The Review on Antimicrobial Resistance, December 2014) estimated that the global impact of AMR could be 10 million deaths annually by 2050, and cost up to US $100 trillion in cumulative lost economic output⁶. The nature of this global problem emphasises the challenge that the UK faces when tackling AMR in the food supply chain.

The cost of health care for patients with resistant infections is higher than care for patients with non-resistant infections because of longer duration of illness, additional tests and the need for more expensive medicines. The rise in resistance not only impedes our ability to treat infections, but has broader societal and economic effects, and endangers the achievement of the Sustainable Development Goals^1,7. The direct and indirect impact of AMR will mostly fall on low and middle-income countries, which often lack the infrastructure, and human and financial resources to adequately counter drug resistance epidemics⁷. The consequences of AMR are aggravated in volatile situations such as civil unrest, violence, famine and natural disasters, as well as in settings with poor health care services or without access to health care^{2, 8}.

Antimicrobial resistance (AMR) is a widely recognised and growing global public health problem. Though there are no exact figures that capture the true global burden of AMR, let alone in low - and middle-income countries (LMICs), latest estimates from the Antimicrobial – Resistance – Benchmark 2018, show that AMR causes over 700,000 deaths annually worldwide⁵. At the same time, millions of people lack access to much needed antimicrobial medicines for curable infections, which is evident by the 445,000 community-acquired pneumonia deaths that occur in children under five⁹. The issue of AMR and lack of access must be addressed in tandem. Steps to increase access must include measures to prevent resistance, and steps to curb resistance must include measures to enable appropriate access. Addressing both requires a coordinated effort from various stakeholders, not least in government, but also across the healthcare and farming industries, and the development and global health communities.

The worst-case scenario in the coming would be, world might be left without any potent antimicrobial agent to treat bacterial infections. The global economic burden would be about US $120 trillion (US $3 trillion per annum), which is approximately equal to the total existing annual budget of the US health care. In general, the world population would be hugely affected as of the year 2050, and birth rates would rapidly decline in this scenario^{8, 10}. Organization for Economic Cooperation and Development (OECD) anticipates two fold surge in resistance to last resort antibiotics by 2035 as compared to 2005 levels²⁰

Growing Demand

The global antibiotic market was valued at USD 41 Bn in 2020 and is expected to grow at a compounded annual growth rate of 4.5% from 2021 to 202811. Between 2002 and 2010, global consumption of antibiotics increased by 36%, and three quarters of this increase was accounted for by Brazil, Russia, India, China and South Africa (BRICS) 5. Growing demand coupled with poor surveillance and stewardship is likely to further drive the emergence of resistant strains, particularly in high-burden areas. In addition to death and disability, AMR has significant economic costs. The World Bank estimates that AMR could result in US$ 1 trillion additional healthcare costs by 2050²⁰.

Significant Decline in Antibacterial Drug Approvals^3,12

There has been a steady decline in the number of the new antibacterial drugs approved and the decline in new antimicrobial agents along with the need to manage an increasingly complex health care environment may require even more robust activity and innovative solutions.

In the near future, the next challenge will be to identify newer agents for the treatment of multidrug-resistant Gram-negative pathogens which are emerging at a rapid rate.

It is essential to take appropriate measures to preserve the efficacy of the existing drugs so that common and life-threatening infections can be cured.

Facts about Antibiotic Resistance¹³ (Antibiotic Resistance Threats in the United States, 2013- by Centers for Disease Control and Prevention -USA)

• Antibiotic resistance is one of the most urgent threats to the publics health.

• Every time a person takes antibiotics, sensitive bacteria are killed, but resistant ones may be left to grow and multiply.

• Overuse of antibiotics is a major cause of increases in drug-resistant bacteria.

• Overuse and misuse of antibiotics threatens the usefulness of these important drugs. Decreasing inappropriate antibiotic use is a key strategy to control antibiotic resistance.

• Antibiotic resistance in children and older adults is of particular concern because these age groups have the highest rates of antibiotic use.

• Antibiotic resistance can cause significant su_ering for people who have common infections that once were easily treatable with antibiotics.

• When antibiotics do not work, infections often last longer, cause more severe illness, require more doctor visits or longer hospital stays, and involve more expensive and toxic medications. Some resistant infections can even cause death.

AMR is a global health security threat that requires concerted cross-sectional action by governments and society as a whole. The overuse of antibiotics clearly drives the evolution of resistance. Epidemiological studies have demonstrated a direct relationship between antibiotic consumption and the emergence and dissemination of resistant bacteria strains. In emerging economies like Middle East, Latin America, Asia – Pacific are important for the future growth drivers and one can expect the rising trend to continue for the next decade amidst unanimous shift in focus to put issues pertaining to AMR and Antibiotic access on the world priority list.

Reference:

1. WHO Antimicrobial resistance (WHO Fact sheet). Geneva: World Health Organization; February 2018 (http:// www.who. int/en/news-room/fact-sheets/detail/antimicrobial-resistance, accessed 25 September 2018).

2. Laxminarayan R, Duse A, Wattal C, Zaidi AK, Wertheim HF, Sumpradit N, et al. Antibiotic resistance-the need for global solutions. Lancet Infect Dis. 2013;13:1057– 98. doi:10.1016/S1473-3099(13)70318-9

3 World Health Organization. (2014). Antimicrobial resistance: global report on surveillance. World Health Organization. https://apps.who.int/iris/handle/10665/112642

4. Antimicrobial resistance: global report on surveillance.2014

5. CDC report "ANTIBIOTIC RESISTANCE THREATS IN THE UNITED STATES 2019"on https://www.cdc.gov/drugresistance/pdf/ threats-report/2019-ar-threats-report-508.pdf

6. The Antibiotic Resistance Crisis PMCID: PMC4378521; PMID: 25859123--

7. The Review on Antimicrobial Resistance, Chaired by Jim ONeill--

8. Ayukekbong JA, Ntemgwa M, Atabe AN. The threat of antimicrobial resistance in developing countries: causes and control strategies. Antimicrob Resist Infect Control. 2017;6:47. doi:10.1186/ s13756-017-0208-x

9. Gould IM, Bal AM. New antibiotic agents in the pipeline and how they can help overcome microbial resistance. Virulence. 2013;4(2):185–191. [PMC free article] [PubMed] [Google Scholar] 10. Anti-microbial – Resistance – Benchmark 2018—11. Bartlett JG, Gilbert DN, Spellberg B. Seven ways to preserve the miracle of antibiotics. Clin Infect Dis. 2013;56(10):1445–1450. [PubMed] [Google Scholar]--12. Overview on Antibiotics market on https://www.grandviewresearch.com/industry-analysis/antibiotic-market 13. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7086080/ 14. Antibiotic Resistance Threats in the United States, 2013- by Centers for Disease Control and Prevention (USA) 15. Antimicrobial resistance. Tackling a crisis for the health and wealth of nations- https://www.who.int/antimicrobial-resistance/news/amr-newsletter-no13-july2016.pdf (2014) 16. R. Nieuwlaat, L. Mbuagbaw, D. Mertz, L.L. Burrows, D.M. Bowdish, L. Moja, H.J. Sch?nemann Coronavirus Disease 2019 and antimicrobial resistance: parallel and interacting health emergencies- Clin. Infect. Dis., 72 (9) (2021), pp. 1657-1659 17. G. Kaul, M. Shukla, A. Dasgupta, S. Chopra Update on Drug-repurposing: Is it Useful for Tackling Antimicrobial Resistance? (2019), 10.2217/fmb-2019-0122 18. WHO. Global Action Plan on Antimicrobial Resistance. https://www.who.int/publications/i/item/9789241509763.

19. https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(22)00087-3/fulltext

20. https://www.who.int/news-room/fact-sheets/detail/antimicrobial-resistance#:~:text=It%20is%20estimated%20that%20 bacterial%2cdevelopment%20of%20drug resistant%20pathogens

OPPORTUNITIES

Global markets continue to offer opportunities because of transition in the form of lifestyle shift & related diseases in these countries. Because of the existing presence of operations in these economies your Company is well poised to capitalise and tap these growth opportunities. Your company is striving in all aspects to establish its brand and ramp up its presence and operations in larger GCC countries, Latam Countries and Asia.

Global crisis of antibiotics availability continues to pose threat and the gap in Anti Infective segment has widened as relatively few drugs have been discovered in the last decade. However your Companys relentless focus for almost two decades in the Anti-Infective space has started showing recognition with consecutive approvals for QIDP in quick successions as well as approval from US FDA by granting abridged clinical trial for Phase III for its Superdrug antibiotic WCK 5222. This was based on the evaluation by US FDA of its preclinical and clinical data of Phase I establishing safety and clinical scope of efficacy for the drug. Notably your company has 6 molecules (NCE) as on date which are at various stages of development including few at advanced stages.

The pandemic has gone long way to disrupt the global supply chain with too many countries focussed on single location for sourcing of supplies. As a result of the disruption in supplies, economies have realised the importance of localisation and decentralisation. This has increased considerable opportunities for countries with dominant API manufacturing capabilities as well as robust CMO infrastructure. Importantly such initiatives are being backed by government incentive schemes and investment back up.

The rising costs and regulatory pressure in developed markets are forcing many global pharmaceutical companies to reduce their internal capacities in research and development (R&D), and manufacturing, and turn to contract manufacturing and research services (CRAMS), and outsourcing of research and clinical trials to developing countries. These strategies help multinational companies reduce costs, increase development capacity, and focus on their core profit makings activities, such as drug discoveries and marketing, rather than on manufacturing. India, with a large patient population and genetic pool, is fast emerging as a preferred destination for such multinationals seeking efficiencies of cost and time. The countrys CRAM industry offers a significant cost-quality proposition, with potential savings of about 30-40 percent compared to western markets such as the US and Europe. Technology trends are driving a shift towards patient-centric healthcare, as evidenced by wearable biometric devices and telemedicine. This trend is resulting in more informed patients who are likely to take a more active role in any treatment plan their doctor may prescribe. Patient-centric care can provide challenges and rewards for the pharmaceutical industry. In the near future, the direct consumer may become the pharmaceutical companys most strategic partner. The rise of consumerism provides an interesting dynamic for competition in this industry. The pharmaceutical industry will be driven by three levels of integration: products and services as well as data and technology. These three aspects will have a positive impact on the patients experience, as they will allow to adapt the medicines and treatments to each patient. This will change the approach to Clinical R&D as it will be based on real time accurate information the result of which would not just be medicine but more than that.

Disruptive technologies and emerging trends such as robotics, artificial intelligence, 3D printing, precision medicine or patient design will impact the manufacturing and distribution of pharmaceuticals. In order to prepare successfully for a better future of healthcare, the pharma industry has to embrace new technologies and put a greater focus on prevention and digital health.

RISK & CONCERNS – OVERALL CHALLENGES – WAY AHEAD

Elevated inflation is expected to persist for longer than envisioned, with ongoing supply chain disruptions and high energy prices continuing in 2022. Assuming inflation expectations stay well anchored, inflation should gradually decrease as supply-demand imbalances wane in 2022 and monetary policy in major economies responds. Risks to the global baseline are tilted to the downside. Supply chain disruptions, energy price volatility, and localized wage pressures mean uncertainty around inflation and policy paths is high. As advanced economies lift policy rates, risks to financial stability and emerging market and developing economies capital flows, currencies, and fiscal positions—especially with debt levels having increased significantly in the past two years—may emerge. Other global risks may crystallize as geopolitical tensions remain high, and the ongoing climate emergency means that the probability of major natural disasters remains elevated. The emphasis on an effective global health strategy is more salient than ever. Monetary policy in many countries will need to continue on a tightening path to curb inflation pressures, while fiscal policy—operating with more limited space than earlier in the pandemic—will need to prioritize health and social spending while focusing support on the worst affected. In this context, international cooperation will be essential to preserve access to liquidity and expedite orderly debt restructurings where needed. Investing in climate policies remains imperative to reduce the risk of catastrophic climate change.

Even before the onset of this pandemic, the global economy was confronting turbulence on account of disruptions in trade flows and attenuated growth. The situation is no different as on today. The shape and speed of the recovery in the large economies will be key factors determining the nature and traction of global economic recovery.

While your Company has been focusing in India and the rest of world on securing the population from health hazards and on providing relief, especially to the poor, we also need to think long-term - to secure the health of the economy, the viability of businesses, and the livelihoods of people. Apart from providing robust safety nets for the vulnerable, ensuring job continuity and job creation is the key. And there is an urgent need to mobilize resources to stimulate the economies.

It would not be wrong to mention that customer expectations are rising and scientific productivity is lackluster and stagnant which poses bigger challenge as to how the mismatch would be addressed. There is dire need of developing and researching new medicines that can cure or prevent incurable complex diseases of the future. The ongoing pandemic is a perfect example of how unpreparedness for the worst could be disastrous in todays world. In the back drop of all the challenges and ongoing issues, there are seven ways in which the business landscape will shift, not only in India, but the world around. Leveraging these will certainly help navigate the economically and socially viable path to the next normal:

1) Continuous Innovations and think beyond the unexpected.

2) Shift towards localization

3) Push of Digital wave

4) Cash being new king for Businesses

5) Shift towards variable cost models

6) Supply Chain resilience

7) Building agility

Apart from the above, evolving cGMP regulations have become stringent and the industry is striving unanimously to create world class capabilities to adhere to the mandates. Corrective measures for US FDA clearance are still in process with significant automation, technology upgrades and rollout of best practices at the manufacturing facilities. Your Company is monitoring the situation closely and is working with best of class consultants for resolution. Risk of regulatory quality compliance shall continue to remain critical for your Company in future. Pricing pressures in India continue to impact several organizations with latest NPPA circulars to include many critical drugs under the scope of price fixation / reduction. This has impacted the earnings of many Indian companies including yours. Amidst such challenges the company has put remediation measures in place while ensuring growth and strengthening of its other business which consists of new product portfolio, new revenue streams and better brand management. Your company is a global player and is not insulated against such external risks despite wide range of measures being taken. This has also to some extent impacted the earnings w.r.t. to countries where your Company operates in the home currency of these nations or where it is exposed to international transactions. This inherent risk will continue to pose challenges to a Company like yours that has a significant share of revenues from cross border operations.

New Drug Discovery Programme of Wockhardt

Your Company continues to focus on New Drug Discovery Program to bring novel antibiotics to market for catering to unmet needs in the area of resistant Gram positive and Gram negative infections where there is dearth of medicine across the world. With the global rise in the prevalence of resistant strains, and the emergence of newer resistance mechanisms as well as new pathogenic organisms, where the existing antibiotics are having little impact, the overall infectious disease scenario is highly concerning. This is further buttressed by a recent publication in reputed journal the Lancet which estimated the annual global mortality touching to 4.95 million due to antibiotic resistant infections. The Company with its array of drugs under development in this space aims to counter these diseases in both regulated and unregulated markets.

Current status of QIDP products: Spurring Clinical development of NCEs in different territories:

WCK 5222 (ZAYNICH): The recruitment in the Global phase III study is ongoing and till date 392 patients have been enrolled. Clinical study is progressing in nine countries including US, Europe, India, China, Latin America. Study is estimated to get completed by end of FY25 and marketing application will be filed thereafter.

Meropenem Resistance Clinical Trial: For India, DCGI has advised to do a Clinical Trial of 60 patients study. Patient recruitment process has been initiated. This Clinical Trial would be completed within the next 8 to 9 months post which WCK 5222 (ZAYNICH) can be launched in India by early 2025.

WCK 4282: Based on an important feedback from the Key Opinion Leaders (KOLs) in India about the substantial unmet need for product such as WCK 4282, clinical development plan for WCK 4282 in India is amended to meet the Indian regulatory requirements. Accordingly, a combined Phase 2/3 study protocol for India has been developed. Post DCGI review, the study protocol is approved recently for conduct of study in India. The study will be start recruiting in May/June 2024.

WCK 4873 (MIQNAF): Phase III study in community acquired bacterial pneumonia (CABP) in India has been completed. Study topline results have been published. The product has been filed for DCGI approval which is expected in the Q3FY25. Commercial launch is expected in Q4FY25.

WCK 771 & WCK 2349: Filing for ten different countries of emerging markets has been completed so far. Kenya, Uganda and Tanzania have audited manufacturing sites of Emrok. Approval from these countries is expected in next 2-3 months. For Saudi Arabia, Emrok NDA would be filed based on ‘Breakthrough medicine program which could reduce the timeline for the launch of product to two-three months. In Russia, our licensing partner company has secured approval for the conduct of Emrok clinical trial which is required for marketing authorization. The supply of WCK 771 injection and WCK 2349 tablets for the proposed clinical study in Russia is being arranged from the respective manufacturing sites in Aurangabad.

WCK 6777: This is a combination of Ertapenem+Zidebactam to be administered intravenously. The US NIH sponsored Phase_ 1 study is progressing well, dosing has been completed and NIH team is preparing CSR which would be ready by July/August 2024.

Your Company has strong focus in developing intellectual property and filed 24 patents during the year under review. During the year 30 patents were granted of which 28 patents were for NCEs. As on 31^st March, 2024, combined pool of Companys patent has reached 3,263 filings and 840 grants.

Biotechnology Research of the Company

Development of Biosimilars and Biobetters is our Biotech R&D teams primary focus area. Biotechnology is viewed by global experts as the pharmaceutical technology of the future, and we have a very strong commitment to this field. Our highly accomplished multidisciplinary team of committed biotechnologists, biochemists, biophysicists, biochemical and chemical engineers as well as protein chemists is poised to develop biological drugs to address unmet clinical needs. Biotechnology R&D team of the Company has succeeded in developing and commercializing Recombinant Hepatitis-B Vaccine (Biovac-B), Recombinant Human Erythropoietin (WEPOX), Recombinant Human Insulin (WOSULIN), Recombinant Insulin Glargine (GLARITUS), which have all been well received in the market.

Your Company has a robust pipeline of recombinant therapeutic proteins for major healthcare needs. The overall focus is development and commercialization of antidiabetic Biosimilar products.

COMPANY OUTLOOK

The Companys long term outlook continues to be promising given the following: a. Overall growth in the global pharmaceutical industry b. Continued focus on R&D in regards to its biotechnology and NCE programs. c. Companys global reach in regulated market and continued efforts to enhance its reach in emerging markets. d. Increasing pipeline of niche & complex technology generic products e. Expanding Revenue streams by adding New Partnerships and tie-ups to manufacture Vaccines.

SEGMENT-WISE PERFORMANCE

The Company is exclusively into pharmaceutical business segment.

DETAILS OF RATIOS

a)	Interest coverage ratio	:	0.59 to 1.27	- Favorable
b)	Operating profit margin	:	5% to 9%	- Favorable
c)	Net profit margin	:	(23%) to (16%)	- Favorable
d)	Return on Net worth	:	(17%) to (13%)	- Favorable
e)	Debtors turnover ratio	:	3.09 to 3.95	- Favorable
f)	Inventory Turnover ratio	:	1.55 to 1.79	- Favorable
g)	Current Ratio	:	0.64 to 0.78	- Favorable

INTERNAL CONTROL SYSTEMS AND ADEQUACY

The Company has internal control procedures commensurate with its size and nature of the business. These business procedures strive to optimum use and protection of the resources and compliance to the policies and procedures. The internal control systems provide for well-defined policies, guidelines and authorizations and approval procedures. Internal audits are performed to test the adequacy and effectiveness of the internal controls laid down by management and to suggest improvements. Internal Financial Controls laid out by the Company in accordance with the requirement of the Companies Act, 2013, were tested by Management using a self-assessment Tool implemented with the assistance from M/s Ernst and Young.

The Company has adopted a co-sourced model for internal audit. The internal audit team is assisted by M/s. Ernst & Young who carried out internal audit reviews in accordance with the approved internal audit plan. Internal audit team reviews the status of implementation of internal audit recommendations. Summary of Critical observations, if any, and recommendations under implementation are reported at quarterly Audit Committee meetings.

RISK MANAGEMENT FRAMEWORK

During the year, your Company has transitioned to a "Risk Enabled Performance Management" with the help of Ernst & Young with an overall risk management practices across the organization integrated with business planning. The overall objective of the framework was:

• Assess the impact of changes that have occurred in the business landscape over the past one year including key events, revisit identified risks impacting the company, include emerging risks such as those arising out of COVID 19 and remove redundant ones.

• Assess importance and implication of applicable risks and identify key risks requiring attention and monitoring by leadership team. Strengthen the risk culture of the organization by enhancing awareness and shared understanding of the purpose of risk management across Wockhardt.

• Review the risk management structure, risk policy and framework for periodic review of risk events and mitigation plans.

• Satisfactorily meet compliance obligations relating to risk management that are applicable to the company.

HUMAN RESOURCES

Wockhardt Ltd,s talent base, as on March 31^st, 2024 stands at ~ 2400.

Wockhardt recognizes that Associates are the most valuable assets and always encourage them to meet business requirements while meeting their career aspirations. The Human Resource division mainly focus on supporting the business in achieving sustainable and responsible growth by building the right competencies and capabilities in the organization. It continues to emphasize on progressive Human Relations policies and building a high-performance ethos with a progressive mind-set where Associates are Empowered, Engaged, Efficient and Productive.

At Wockhardt, ‘Life Wins is a simple yet profound theme that defines our efforts, reflects our goals, highlights our aspirations and characterises our business.

Our ‘One Wockhardt motto creates a unique value driven, high performance and business driven work culture. At Wockhardt, HR plays a central role in implementing the organisations vision and strategy by aligning HR to the business. Better HR policies provide more innovative and forward looking HR focus and initiatives. Promoting diversity, learning environment and work-life balance establish a credible and integrated employee performance goal setting.

Our leadership values of Ownership, Respect, Trust, Integrity are the fundamental principles on which we have built our business. We truly believe that the progress of our associates and business are interlinked and thus created a work culture that offers a unique combination of our core values and functional pro_ciency.

At Wockhardt, we believe that associates are the key players in business success and sustainable growth. In order to provide meaningful opportunities to our associates for learning and growth, we have strengthened our internal talent pool by launching various career programs for our field associates, ‘Emerge, ‘Surge and ‘Upsurge which provides career visibility to development to our sales force.

Using psychometric tests for senior level hiring has helped companys understanding of employees, potential strengths and particular characteristics.

The companys "Whistle Blower Policy" encourages the Whistle Blower to report genuine concerns or grievances of illegal, unethical or inappropriate events (behaviour or practices) that affect Companys interest / image. It also provides adequate safeguard to the Whistle Blower against victimization. The policy is available on the companys website at www.wockhardt.com