Strides Pharma Science Ltd

Powering growth with strong momentum

I am delighted to share with you the remarkable performance of Strides Pharma Science Limited for FY 2023-24.

During the last couple of years, our teams have been relentlessly working on building the strategic and operational initiatives that we have set forth to recalibrate Strides on the path of growth and profitability.

The fiscal year just concluded signifies the successful completion of our reset strategy, initiated in FY 2021-22. We achieved all the key objectives outlined in the strategy, enabling us to rebound as a strong and resilient company. A particularly striking aspect of this transformation is the pace of our execution, reflecting our agility. These accomplishments empower us and position us strongly on the course of future growth worldwide.

FY 2023-24 saw us perform with steady grit across all fronts resulting in highest-ever full-year revenue and absolute EBITDA generation. Our outstanding performance was driven by the synergistic power of our well-defined strategies, robust execution capabilities, and the dedication of our team. We successfully completed the optimisation of our manufacturing infrastructure through network right-sizing.

In FY 2023-24, our revenue soared to a record high of 40,555 Million registering a year-on-year (YOY) growth of 14.4% from 35,458 Million. Our strategic expansions in the United States and Other Regulated Markets propelled this impressive surge. We also strategically improved the quality of our business owing to a superior portfolio mix.

Our EBITDA increased by 77.6% to 7,477 Million as compared to 4,210 Million in FY 2022-23. Our EBITDA margin expanded to 18.4% in FY 2023-24 compared to 11.9% in FY 2022-23, driven by our stable operating costs, accentuated by robust cost control measures and manufacturing efficiencies. We reduced our Net Debt by 3,131 Million during the year under review, resulting in a net debt to EBITDA ratio of 2.72x.

One of our most significant achievements this year was achieving one of the industry's leading cash to cash cycle times, which strongly affirms our commitment to operational efficiency. Notably, our Return on Capital Employed (ROCE) witnessed robust growth, increasing to 12.83% in FY 2023-24 from 4.48% in FY 2022-23. Additionally, our Fixed Asset turnover ratio stood at ~4.60x, representing one of the industry's top performances.

Looking ahead, we are firm in our objective to maximise the efficiency of our assets through strategic product selection, technological advancements, and automation initiatives, aimed at optimising our operational expenditure.

In the United States, we maintained our foothold across our product spectrum, fostering steady year-over-year growth. Our disciplined and calibrated approach to portfolio launches further enhanced profitability.

During the year, we secured ANDA approvals for 9 new products, successfully launching 6, enabling the tally of our commercialised products to reach 66. Our focus remains on optimum product selection, precise pricing strategies, and strategic timing for market entry, even as we receive numerous product approvals, to garner the best possible outcome. Additionally, we prioritised the launch of products with larger value and size into our portfolio. For instance, introduction of the generic Suprep effectively offset the impact of subdued flu season. Our industry-leading supply chain management has solidified our reputation, resulting in near-zero Failure-To-Supply penalties. This commendable precision reflects our dedication to maintaining high standards of service within the generic pharmaceutical industry.

Going forward, we firmly believe that the United States (US) market will continue to occupy a pivotal strategic position in our business trajectory as we aim to achieve an annual revenue milestone of US$400 Million within the next 2 to 3 years of time frame. Our primary focus remains on expediting the launch of products from our approved basket of ANDAs. Moreover, we persist to strategically invest in new segments as part of our comprehensive long-term growth strategy, aiming to surpass the US$400 Million mark. We anticipate our first filing from new segment in the next 12-15 months. Our active engagement in various activities, including in-licensing, partnering, and developing in-house capabilities further boost our capability to enrich our portfolio.

In Other Regulated Markets, consistent performance across quarters remained our hallmark, reflecting our commitment to ingrain stability before pursuing growth opportunities. Particularly within the European Union (EU) market, we experienced significant growth, primarily driven by robust demand for key products and the establishment of new long-term supply contracts. Our sustained focus on customer advocacy and reliable supply has enabled us to expand our customer base and strengthen our market presence.

Looking ahead, we seek to prioritise the expansion of our product portfolio to attract new customers. Simultaneously, we aim to capitalise on existing opportunities to further expand our reach in Other Regulated

Markets. Sustaining momentum in filings and approvals is crucial for accelerating growth processes and solidifying our competitive standing. Additionally, we emphasise on securing new product approvals in key markets to catalyse growth in the latter part of FY 2024-25.

In Emerging Markets, we achieved satisfactory growth, building from a modest starting point, and anticipate robust growth in the coming years. Our strategic emphasis on portfolio maximisation and expanding our network of channel partners is poised to propel this momentum forward. Furthermore, upcoming new filings are expected to bolster

Growth Markets, enabling them to surpass our Company's average growth rate.

Meanwhile, our Access Market segment (donor-led institutional business) encountered challenges stemming from limited tender allocations. However, a notable improvement in Delivery In Full On Time (DIFOT) has secured a more substantial allocation for FY 2024-25, enhancing our prospects for future growth.

During FY 2023-24, we reached a significant milestone with the announcement of OneSource (erstwhile Stelis BioPharma Ltd.), one of India's leading specialty pharma pure play Contract Development and Manufacturing Organisations (CDMOs).

OneSource is well-placed to offer an extensive array of pharmaceutical solutions, including biologics, high-end drug-devices combinations (previously part of Stelis), oral technologies like soft gelatin capsules (demerged from Strides Pharma), and sterile injectables (demerged from SteriScience).

During the year, OneSource achieved significant milestones, with its revenue soaring to US$21.5 Million, marking an impressive 4.4x growth over FY 2022-23. It attained positive EBITDA for the first time in Q4, adjusted to onetime expenses. Master Service Agreements (MSAs) surged from US$31.1 Million to US$72.9 Million, showcasing robust business expansion.

With 40 unique logos, including

15 for GLP-1 products, OneSource is well-positioned to make steady progress in specialty CDMO space OneSource is expected to be listed on Indian bourses by the end of FY 2024-25.

We are happy to share our EcoVadis rating, which climbed from 30 to 44 in our first year of review, a testament to our commitment. Our focus on environmental sustainability is unwavering, underscored by top-tier systems and practices aimed at minimising our carbon footprint. For instance, we have made significant investments in rooftop solar panels and other sustainable technologies.

Our talented team has been the cornerstone of our success, demonstrating a commitment that transcends the typical employee-employer relationship. We are pleased to share our steady progress in critical areas such as enhancing employee experience, empowering culture, and enabling business decisions through people analytics.

Our strong ethics and robust corporate governance framework are integral in shaping our business policies and strategies. Assimilated within our organisational culture, these principles play a pivotal role in the effective execution of our business objectives. Our commitment to robust governance practices positions us as a trustworthy partner, ensuring long-term growth and stability.

I extend my heartfelt gratitude to Mr. Bharat Shah and Mr. Sridhar, whose invaluable contributions as Independent Directors have significantly shaped our Company's journey as we bid them farewell.

Mr. Subir Chakraborty joins our Board as an Independent Director and we look forward to enhancing our governance and bolster our future, benefitting from his wealth of experience.

As we shape the future of Strides for the next decade, we are focussing on succession planning and nurturing internal talent. I am pleased to announce key leadership changes. Mr. Badree Komandur, our long-standing CFO and Executive Director, will step into the role of Managing Director and Group CEO. Mr. Vikesh Kumar, who began his career at Strides and has demonstrated consistency, brilliance, and strong executional acumen, will assume the role of Group CFO. Mr. Aditya Kumar, who headed our B2B division under synergICE, joins the Board as an Executive Director. His responsibilities will expand to larger parts of the organisation while continuing to lead synergICE B2B operations. Surabhi Loshali, currently Senior Vice President of HR, will now assume the role of Chief Human

Resources Officer (CHRO).

I will continue as the Executive Chairperson of our Company, focussing on both near-term and long-term strategies, as well as talent development and succession planning. My focus is to ensure we build a strong and resilient future for Strides.

We are committed to continuous investment in cutting-edge technologies, robust R&D, stringent compliance, and a diverse portfolio. Our strategically calibrated approach to pricing, market share acquisition, and product launch timing will remain steadfast. We anticipate the US market will continue to play a pivotal role in our business strategy, bolstered by our disciplined and unique go-to-market approaches across our other markets.

I would like to extend heartfelt gratitude to those whose contributions serve as our constant inspiration. My sincere appreciation goes to our shareholders, Board of Directors, the entire leadership team, stakeholders, and every member of team Strides for their unwavering confidence in our ability to create lasting value, driving our collective pursuit of excellence.