Strides Arcolab Ltd

1
Strides Arcolab Ltd

• April 21, 2004
• Bangalore
• Presentation to Press

2
Agenda

• Business overview
• Positioning and Strategy
• Aberration
• Financial highlights- Q2 ended March 2004
• Road Ahead
• Background

3
Business Overview- Strides Arcolab today

• An Indian multinational
• Focus on Generics, OTC, Nutraceuticals and
  Hospital Specialties space
• Niche strengths in Softgels and Steriles
• World class manufacturing capabilities
• Global scale of capacities
• Proven RD capabilities
• Exceptional regulatory skill sets
• Headcount of 1200
• Listed company
• Marquee investors

4
Focussed player in defined space

• Generics
• Non-infringing process management
• N D D S using softgel technologies
• OTCs and Nutraceuticals
• RD based OTCs
• Nutraceuticals in a pharma environment
• Specialties
• Hospital segment
• Hormones
• Contract research and manufacturing
• Leveraging chemistry skill-sets
• Lo-volume, non-infringing APIs

5
Niche strengths

• Softgels..
• Global size
• Amongst top 5 in the world
• Multi-location
• Meeting global regulatory standards (current
  and upcoming)
• Only global dedicated softgel facility for
  hormones
• Patented niche technology
• Out-licensed to global majors
• Steriles
• Dedicated areas for Penicillin, Cephalosporin and
  SVPs
• Specialised manufacturing in Prefill Syringes,
  Lyophilisation
• Peptides capabilities targeted in 2004
• All 3 facilities targeted to achieve EU
  approvals mid-2004
• Significant product pipeline

6
Strong FD and Regulatory skills

• Proven FD capabilities
• Patented Niche Technology in Soft gelatins
• Non-infringing development capabilities across
  all dosage forms
• Development of products for global majors
• Tech transfers with alternative API sources
• Cost effective manufacturing
• Exceptional regulatory skills
• Strong product registrations pipeline
• 442 registrations received
• 735 registrations awaited

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Manufacturing facilities
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Our Positioning

• Regulated markets
• Back-end hi-end processes
• Partner, not compete
• Semi-regulated markets
• Regional leadership
• Latin America
• Unregulated markets
• Be the regulated player
• Build relationships and brands

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Regulated markets

• Focus on US, Japan, Europe, UK, ANZ and SA
• Partner with strong local players
• Leverage Strides development, manufacturing
  and regulatory skill sets with alliance partners
  distribution reach and market penetration
• Benefit from
• Reduced threat perception (vis-à-vis other
  larger Indian players)
• Greater customer leverage as developer
• Currency stability
• Localised US Strategy
• - Local manufacturing
• - ANDA pipeline- Filings targeted in 2004

10
Semi-regulated and other markets

• Semi-Regulated Markets
• Regional leadership in LatAm (USD 20bn market)
• Largest Indian player with local manufacturing
• Coverage of key Mexico and Brazil markets
• Strong local financial partner with significant
  distribution reach
• Custom-built product pipeline and over 100
  registrations
• Unregulated Markets
• Amongst the Largest Indian player in Africa
• Largest Indian pharma supplier to Aid
  organizations like UNICEF
• Leverage on strong relationships and brand
  loyalty
• Global Disease Management Group
• Initiatives by WHO and leading agencies
• AIDS, TB, Malaria (ATM) identified as potential
  disease management groups
• Large market opportunity
• Strides plants pre-qualified

11
Financial performance- two year aberration

• Brazilian currency devaluation
• The company faced severe cycle time lines in
  the unregulated markets.
• The under capitalization of the Latam
  operations
• The Brazilian Fx exposure / crisis derailed the
  growth plans.
• Contribution of the above factors resulted
  in.....
• Build up of the inventory, debtors and interest
• Impacted cash flow and operational costs
• Delayed US Softgel Strategy
• Opportunity loss of sales

12
Course corrections

• Latam markets
• - Curtailed production to rationalise
  operational costs and rationalised low margin
  products
• - Supply linked to liquidation of past dues
• - Held course in Brazil while marginal players
  exited
• Realigned market focus
• Entered regulated markets
• Consolidated and trimmed exposure in
  unregulated markets
• Capitalised on early mover advantage in the ATM
  (AIDS-TB-Malaria) space
• Strengthened Top Management team

13
Financial turnaround from June 2003 quarter

• Margins started improving from quarter ended June
  2003. PBIDT up from 13 in June 03 to 17 in Sep
  03
• All financial provisions completed during 18
  month period ended September 2003
• First quarter ended December 2003 shows dramatic
  turnaround in profitability
• Financial performance of subsidiaries stabilise
• Developing and marketing tie-up with Aspen, South
  Africa and Sorm, Japan. Shipments commenced from
  November 2003

14
Second quarter results- Robust growth continues

• Consolidated Results
• Sales up 48 over corresponding year
• PBIDT up by 296
• Net profit up 214
• Q-on-Q growth
• Sales up 13
• PBIDT up 31
• Net Profit up 34

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Second Quarter- highlights

• Positive contributions from subsidiaries in US,
  Brazil, Mexico
• Positive impact of supplies to Aspen and SORM
• Interest savings from reduced working capital
• Business in regulated market registers more than
  22 of the total sales compared to 6 in the
  first quarter.
• Added 4 new customers in the regulated market and
  signed 2 new development contracts.
• Granted Patent Pending Status by USPTO for a
  significant technology based softgel product.

16
New Partnership- MOU with Akorn, US

• MOU with Akorn Inc, US to market products for the
  hospital and retail market in the US.
• Setting up a 5050 joint venture company (JVC)
  between Akorn and Strides.
• Contribution from Akorn USD 5 million
• The JVC will outsource from Strides an exclusive
  product pipeline of grandfathered and ANDA
  products in finished dosage forms
• Akorn to provide sales, marketing and
  distribution capabilities for the US market.

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Road ahead-An emerging Generics Strategy

• Market potential- USD 42 Billion, to reach USD
  60 Bio by 2005.
• Strides well placed to ride the significant
  opportunities of outsourcing in its niche
  softgels and steriles.
• Regional Leadership in Latin America
• Strides on course to submit ANDA's and CTD
  dossiers for the EU, ANZ and Japanese markets in
  2004.
• Changing OTC and Rx Business to benefit Strides
• Partnership with strong players- Aspen, Sorm,
  Ribbon and Akorn
• First mover advantage in Japan

18

• Thank you