Zim Laboratories Ltd

EMPOWERING PROGRESS WITH INNOVATION AND EXPERTISE

Dear Shareholders,

It is with great pleasure that I present the 40^th Annual Report of ZIM for Fiscal Year 2024. I hope this message finds you in good health.

In FY24, we made significant progress on our strategic goals, driven by the unwavering passion and hard work of our team. Despite facing headwinds in Q1, we remained committed and passionate about our vision throughout the year. The performance in Q4 helped us catch up with some of the slow business uptake we witnessed in the initial three-quarters of FY24.

We remain committed to our strategy, creating value for our stakeholders.

Business Overview

Our Pharmaceutical business contributed 81% of our Operating Income in FY24, up from 77% in the last fiscal year. The Finished Formulations business for the year contributed 45% which was higher than 35% in the last year. The overall contribution from New Innovative Products (NIP) and Oral Thin Films (OTF) business grew to12% of our Total

Operating Income, up from 5.0% in FY23. This business mix aligns with our initiatives to create a more value-added product pipeline.

During the year, our product mix improved with increased contributions from the Finished Formulations (FF) business and a greater revenue share from our innovative products: New Innovative Products (NIP) and Oral Thin Films (OTF).

Furthermore, we enhanced our Geographical mix, generating substantial revenues from Southeast Asia and Indian markets, while also witnessing revenue growth from regulated markets for OTF. Our EBITDA and PAT margins recovered due to improved performance across the quarters. Additionally, we received enhanced licensing fees in FY24 through various agreements signed with our partners for NIP and OTF in the EU & Brazil. We have prioritised higher value business and establishing long-term partnerships for our NIP and OTF products as well as filing several dossiers in the EU for NIP and OTF. Several filings across Pharmerging & RoW markets were also undertaken during the fiscal year.

Domestic business has increased due to the supply of higher value products to the government and collaborations with Indian Pharma companies for our NIP. The Pharmaceutical business remained the primary revenue driver, with Nutraceutical mix improving towards higher value Formulations. Backed by a diversified business mix, we have focussed on steadily establishing our presence in Stable markets, leading to increasing revenue contributions from Asia and India.

Our Pre-Formulation Intermediates (PFI) business, particularly covering some Nutraceutical products, witnessed a decline in revenues in the first three quarters, primarily due to currency issues across the MENA market. We maintained a prudent strategy of refraining from accepting orders for these products without adequate visibility of payments. The PFI business thereafter saw a notable recovery in Q4 owing to more innovative product offerings and market expansion.

Strategic Alliances

We established ZIM Laboratories Middle East DMCC, incorporated in September 2023 as a subsidiary of ZIM Laboratories FZE, Sharjah, during the fiscal to strengthen our market presence in the MENA region while focussing on the more stable markets of Saudi Arabia and UAE. Additionally, we entered into a joint venture with an Australian marketing company to launch our NIP and OTF products in the Oceania region.

Plant Upgradation and Technology

In pursuit of our strategic initiatives and preparation for regulated markets, we continued our investment toward Capex to expand and upgrade plant and equipment. This will ensure compliance with future audits and our readiness to supply potential NIP orders for the EU, Brazil, and other regulated markets. The projects include a warehouse, which has been completed during the fiscal, a dedicated suite for specialised Over the Counter (OTC) NIP, a small batch manufacturing unit for efficient production, and a new NIP Suite. With a continued focus on innovation, we invested in our R&D facility, equipment, and personnel along with BE studies and new product development. We are nearing completion of our exclusive pipeline of 10 complex NIP, with 6 - 8 more under development. This continued investment has resulted in the Company filing 3 more NIP under ZIM's name in the EU, in addition to the 2 already filed in FY23 bringing the total to 5 NIP filings. We expect Marketing Authorisations for some of these to come through in FY25.

During the fiscal year, we achieved a significant milestone with our first commercial order and supply for Sildenafil citrate 50 mg ODS in Europe, marking the initiation of commercial supply for our Pharmaceutical Oral thin films in the region.

Looking Forward

Moving ahead, we plan to strengthen our market presence in our target markets while expanding into Stable markets with our NIP and OTF. In FY25, we will also expand our marketing team and recruit experienced senior level leaders to facilitate our entry into the regulated markets and grow business in our RoW markets. We plan to build robust regional business development teams with dedicated resources for each region, under the leadership of a seasoned business development executive.

On behalf of the Board, I would like to express my gratitude to our shareholders for their continued support and confidence in our ability to deliver consistently year-on- year. I would like to especially thank all ‘ZIMians' for their unwavering commitment to exemplifying our Company values with zeal and optimism. I extend my sincere thanks to our customers, business partners, stakeholders, government, banks, and administration for their support and trust. We aim to soar to new heights of success by fostering collective dedication and collaboration, empowering progress along the way.

CHIEF FINANCIAL OFFICER'S (CFO) MESSAGE

NURTURING SUSTAINABLE GROWTH AND EXPANSION

Dear Shareholders,

It is my privilege to report on ZIM's progress in FY24 and share our plans for the year ahead.

In FY24, we maintained our strategic focus on developing innovative products in the NIP and OTF segments, optimising reach and profitability. We secured robust growth in our target markets, particularly in Asia (ex. India) and India regions, while also witnessing steady growth in our other Target Markets.

Our growth was driven by robust leadership and individual team competencies, with a focus on innovation, delivering differentiated, patient-centric solutions. Additionally, we focussed on strategic R&D and Capex investments, diversifying our product pipeline and technology, and implementing operational improvements for optimal productivity, cost efficiency, and overall business excellence to capitalise on increasing opportunities for future growth and expansion. Our collaborations with strategic partners and focus on expanding NIP registrations in new geographies, including the EU and Pharmerging markets, have also bolstered our growth.

Performance Highlights

Despite facing certain challenges during the initial part of the year, we delivered a sound performance in FY24.

Our Total Operating Income stood at ' 3,674 Mn in FY24 compared to ' 3,985 Mn in FY23. Additionally, we achieved an EBITDA of ' 465 Mn, maintaining strong financial performance despite a slight decrease of 20% compared to the ' 584 Mn generated in FY23.

Our FY24 EBITDA margin was 12.7%, compared to the 14.7% in the previous year.

For the fiscal year, our PAT stood at ' 172 Mn with a PAT margin of 4.7% in FY24. Despite a 29.4% decrease from FY23's ' 244 Mn, we recorded better Net Margins owing to better product mix and better region mix.

Maintaining a steady focus on expanding our global revenues, we continued to focus on our target markets while steadily increasing our presence across stable markets. Exports continued to contribute significantly to our overall revenues in FY24, with the Total revenue from exports being ' 2,870 Mn, contributing 78% of the Total Operating Income.

We reported substantial growth in the NIP and OTF segments, our key strategic areas, during FY24. Our NIP revenues, mainly from the manufacturing and sale of NIP products, stood at ' 241 Mn, reflecting a 200% year-on- year growth. We also made significant progress in our OTF revenues, which saw a 63% year-on-year surge, reaching ' 131 Mn in FY24. Licence fees revenue for FY24 was ' 65 Mn. Additionally, in FY24, our India business generated ' 127 Mn from NIP and ' 39 Mn from OTF.

Strengthening Capabilities for Long-Term Growth

The dedicated efforts of our marketing and distribution team resulted in significant revenue contributions from Regulated and Pharmerging Markets. The collaborative efforts in NIP and OTF accounted for 12% of the Total Operating Income. We also observed an increase in the contribution from license and co-development fees. The liquidation of escrow sales amounted to ' 306 Mn, maintaining robust financial health.

Our FY24 balance sheet recovered after Q1, with ROE (Return on Equity) at 7.9% and ROCE (Return on Capital Employed) of 10.1%. Additionally, our strategic expansion initiatives led to an increase in total borrowings to ' 1,064 Mn from ' 596 Mn in FY23, supporting our growth initiatives and EU / Developed market accreditations, resulting in a gearing ratio of 45% as of 31^st March, 2024.

With a consistent focus on developing innovative NIP and OTF products and diversifying our portfolio, we continue to invest in our in-house R&D infrastructure and team capabilities. In FY24, our R&D spend for BE studies and Registrations amounted to ' 103 Mn. Our persistent R&D efforts in recent years have resulted in an exclusive pipeline of 10 non-infringing NIP being completed, with 6-8 more products on the roadmap. Adapting to evolving customer and market needs, we have enhanced our manufacturing capabilities. In FY24, we invested ' 832 Mn in building a new warehouse and constructing new units for manufacturing NIP within our existing facility to meet growing RoW demands. In line with providing holistic healthcare and wellness, we continue to expand our Nutraceutical brand, ZimUNat, through innovative and transformative pharmaceutical technologies.

Our success hinges on our highly disciplined and focussed employees, who possess extensive skills and experience across diverse domains including pharmaceutical science, technology, marketing, legal, manufacturing, and intellectual property. We prioritise annual employee learning and development programs and engagement initiatives to keep our workforce motivated and ensure their overall well-being.

Outlook

As we step into fiscal 2025, we are excited to continue our transformative journey by exploring new markets where the competitive landscape is advantageous for us. Our focus will be on developing innovative and complex products.

By harnessing our R&D capabilities, domain expertise, manufacturing excellence, and innovative spirit, we aim to deliver value-added, patient-centric solutions.

I would like to extend my heartfelt thanks to our shareholders for their unwavering support during challenging times. My gratitude also goes out to all stakeholders for their confidence in us. I look forward to their continued support, insightful advice, and long-term partnership as we strive to provide accessible, high-quality drug delivery solutions.