Mylan Laboratories Ltd.
|BSE: 524794||Sector: Health care|
|NSE: MATRIXLABS||ISIN Code: INE604D01023|
|BSE 05:30 | 01 Jan||Mylan Laboratories Ltd|
|NSE 05:30 | 01 Jan||Mylan Laboratories Ltd|
|BSE: 524794||Sector: Health care|
|NSE: MATRIXLABS||ISIN Code: INE604D01023|
|BSE 05:30 | 01 Jan||Mylan Laboratories Ltd|
|NSE 05:30 | 01 Jan||Mylan Laboratories Ltd|
Your Directors are pleased to present their Report for the financial year ended March31, 2013, along with the Balance Sheet and Profit and Loss Account.
The financial performance of your Company on both a stand-alone and a consolidatedbasis for the financial year ended March 31, 2013, is summarised below:
Review of Operations
Your Company posted yet another impressive year of performance. During the year underreview, the turnover, on a stand-alone basis, increased by 37%, while on a consolidatedbasis, the sales increased by 36% over the previous year. The increase in sales was mainlydue to the increase in the sales of Active Pharmaceutical Ingredients (APIs) and FinishedDosage Form (FDF) products. The net profit before tax and exceptional items also showed animpressive growth of 53% on a stand-alone basis, while on a consolidated basis, theincrease was 51% over the previous year.
During the year, the Management has assessed the operations of its subsidiary group ofcompanies in China, Matrix Pharma Group (Xiamen) Ltd and its subsidiaries (held by globalholding company Matrix Laboratories (Singapore) Pte Ltd, to identify indication ofdiminution, other than temporary, in the value of investment recorded in the books ofaccount and, accordingly, has made a gross provision of Rs. 1, 914. 80 Millions. Theinvestment in the China Group of Companies was made by the Company in 2006 as part of abackward-integration strategy of the Company to secure supply of Active Pharmaceuticals(APIs) and API intermediates. The China operations consist of an API and FDF manufacturingfacility and an API Intermediates manufacturing facility. The API intermediatesmanufacturing operations were shut down in December 2011. The API manufacturing operationshad been shut down since January 2013. Given the substantial scale-down in operations, asthe API manufacturing is closed down and FDF manufacturing activity is currently verysmall, the cash flows from future operations are insufficient and accordingly the entirecarrying value of investment has been written down.
During the year under review, your Company filed 7 U. S. Drug Master Files (DMFs) and18 EU DMFs/Certificates of Suitability to European Pharmacopoeia (CEPs). With thesefilings, as on March 31, 2013, the cumulative number of DMFs filed by your Company,together with its subsidiaries and associates is 174 U. S. DMFs and 180 EU DMFs/CEPs.
During the year, your Company has filed 20 abbreviated new drug applications (ANDAs)with the U. S. Food and Drug Administration (FDA), 18 with European regulatory agencies,four with the World Health Organization (WHO), 16 with Canada regulatory agencies, 11 withAustralian regulatory agencies, 10 with New Zealand regulatory agencies and 18 with SouthAfrican regulatory agencies. Aggregate filings covering Finished Dosage Forms during theyear were 97 in numbers.
Cumulatively, your Company made the filings of 151 ANDAs with the FDA, 99 regulatoryfilings with European regulatory agencies, 36 filings with the WHO, 58 with Canadianregulatory agencies, 50 with Australian regulatory agencies, 31 with New Zealand, and 74with RSA aggregating to 499 regulatory submissions. During the year under review, yourCompany secured approvals for 16 ANDAs from the FDA, 21 from Canadian regulatory agencies,16 from the European regulatory agencies, six from Australian regulatory agencies, fivefrom New Zealand regulatory agencies and 15 from South African regulatory agencies.
During the year 2012-2013, the Company was selected as a leading supplier ofantiretroviral (ARV) drugs to India's National AIDS Control Organization (NACO).
During the year 2012-2013, the Company entered into the South African market byparticipating in the South African ARV tender and was selected as one of the leadingsuppliers of ARV drugs to the South African National Department of Health for the tenderperiod Jan. 1, 2013, to Dec. 31, 2014.
Manufacturing Facility Acquisitions
During the year 2012-2013, your Company entered into following agreements:
(a) a business transfer agreement on Oct. 16, 2012, to purchase an oncologymanufacturing facility (the "Facility") from SMS Pharmaceuticals Limited. TheFacility is located in Vizag, India (Parwada, Vishakhapatnam in Andhra Pradesh), andcomprises both oncology API and FDF manufacturing. The Facility would support several ofMylan's strategic growth drivers, particularly expansion of our Institutional business.The transaction was closed on Feb. 14, 2013.
(b) an asset purchase agreement on Dec. 28, 2012, to purchase an injectables finishedmanufacturing facility (the "Facility") from Vivin Life Sciences Ltd. TheFacility is located at Jaggaiahpet Mandal, Krishna District, Andhra Pradesh. The Facilitywould be utilized as a pilot plant to support Research and Development (R&D) filings.The site can be expanded for commercial operations at a later date as appropriate. Thetransaction was closed on June 10, 2013.
(c) a business transfer agreement on Feb. 1, 2013, to purchase an oral solid finisheddosage forms manufacturing facility (the "Facility") from Glochem IndustriesLimited. The Facility is located in the Green Industrial Park SEZ, Jadcherla Mandal,Mehaboobnagar District, Andhra Pradesh (approx. 60 kms from Hyderabad). The acquisition ofthis Facility would support Mylan's continued expansion of its manufacturing footprint asthe company executes on its plan to double its manufacturing capacity over the nextseveral years. The transaction was closed on Aug. 13, 2013.
(d) a business transfer agreement on March 11, 2013, to purchase an oral solid finisheddosage forms manufacturing facility (the "Facility") from Unichem LaboratoriesLimited. The Facility is located in the Pharma Zone of Indore Special Economic Zone inPithampur District, Indore, Madhya Pradesh, India. The acquisition of this Facility willsupport Mylan's continued expansion of its manufacturing footprint as the company executeson its plan to double its manufacturing capacity over the next several years. Thetransaction is expected to be closed by the end of August, 2013.
Acquisition Agila Specialties Private Limited
Mylan Inc., U. S. (Mylan), your Company's parent company, entered into Share PurchaseAgreements ("SPAs") on Feb. 27, 2013, for the acquisition of the AgilaSpecialties Business ("Agila Business"), from Strides Arcolab Limited("SAL"). In terms of these SPAs, SAL would be selling Agila Specialties PrivateLimited, India ("Agila India Company") and simultaneously its overseasspecialties subsidiary, Agila Specialties Global Pte Ltd, Singapore ("Agila GlobalCompany"), to Mylan.
The purchase price for the Agila Business was agreed at USD 1. 6 billion by theparties. The SPAs also provides for up to an additional USD 250 million in potentialpayments subject to the satisfaction of certain conditions by SAL. The transaction isexpected to close in the fourth quarter of 2013, subject to regulatoy approvals andcertain closing conditions.
The Agila Business comprises the development, manufacturing, distribution, marketingand sale of generic drugs and specialty pharmaceutical drug products in the domains ofinjectables, betalactams, cephalosporins, penems, oncology and ophthalmic for human use.
Agila is a developer, manufacturer and marketer of high quality generic injectablesproducts. Agila would bring Mylan a broad product portfolio of more than 300 filingsapproved globally and marketed through a network covering 70 countries, including 61abbreviated new drug applications ("ANDAs") approved by the U. S. FDA. It hasnine manufacturing facilities in India, Poland and Brazil, and Mylan believes that Agilahas a strong presence in emerging markets like Brazil. Agila's manufacturing capabilitiesinclude vials, pre-filled syringes, ampoules, lyophilization, cytotoxics and antibiotics.Agila's manufacturing base represents one of the largest steriles capacity in India andone of the largest lyophilization capacities in the world. The addition of Agila toMylan's existing injectables platform will immediately create a new, powerful globalleader in this fast-growing market segment and accelerate Mylan's target of becoming atop-three global player in injectables. With the deal, Mylan would have a combinedportfolio of more than 700 marketed injectables and a global pipeline of more than 350injectables products pending approval. In addition, Agila will further expand Mylan'sgeographic footprint, providing us with entry into key growth markets, such as Brazil, andposition us to leverage our global portfolio in these exciting markets.
The purchase price of USD 1. 6 billion has been apportioned between Agila India Companyand Agila Global Company for purchase of Agila Business. USD 960 million was apportionedfor purchase of Agila India Company and the balance USD 640 million was apportioned forpurchase of Agila Global Company.
Mylan has assigned the SPA pertaining to Agila India Company, comprising of sixmanufacturing facilities in India, in favour of your Company. The acquisition of AgilaIndia Company is consistent with your Company's India's growth strategy of entering intothe injectables business in India and enhancing export opportunities to markets outsideIndia.
The Competition Commission of India has approved the proposed acquisition of AgilaIndia Company by your Company. Your Company also has approached the Foreign Investmentpromotion Board ("FIPB"), seeking its approval for the acquisition of AgilaIndia Company and is presently awaiting the approval from FIPB. Subject to receipt of thesaid approval, the acquisition of Agila India Company by your Company is expected to closein the fourth quarter of 2013.
Your Company intends to fund the Agila India Company acquisition through a mix ofequity and debt raised from Mylan by issuing equity shares and compulsory convertibledebentures to the tune of rupee equivalent of USD 960 million.
Your Company will remain committed to execute all opportunities to accelerate thelong-term growth targets and continue to maximize the shareholder value.
The Manufacturing Facility acquisitions during the year were funded by your Companythrough internal accruals. Considering the said acquisitions and keeping in view thesignificant capital expenditure programmes under implementation to augment the productioncapacities of the facilities, your Directors have, after due deliberations, decided toplough back profits and hence, do not recommend any dividend lor the financial year2012-2013.
Notes on Subsidiaries
Your Company has six subsidiaries (including step down subsidiaries) as on March 31,2013.
As per Section 212 of the Companies Act, 1956 ('the Act'), your Company is required toattach a Directors' Report, Balance Sheet and Profit and Loss Account of each of itssubsidiaries. The Ministry of Corporate Affairs, Government of India vide its circular No.2/2011 dated Feb. 8, 2011, has provided an exemption to companies from complying withsection 212 of the Act, provided such companies publish audited consolidated financialstatements in their annual reports. Accordingly, the annual report 2012-2013 does notcontain the financial statements of the subsidiaries. A statement containing certainparticulars of the subsidiaries are attached to the annual report. Copies of the annualaccounts of the Company's subsidiaries can be sought by any investor of the Company onmaking a written request to the Company at the registered office of the Company in thisregard. The annual accounts of the subsidiary companies are available for inspection toany investor at the Company's registered office.
The China operations comprise API and FDF manufacturing facilities. During the yearunder review, the API manufacturing operations had been shut down since January, 2013 andFDF manufacturing activities have been scaled down. Further, as part of the restructuringactivities in China, your Company had:
(a) completed the sale of Xiamen Beacon Pharmaceutical Manufacturing Co., Ltd., duringMay 2013; and
(b) entered into an agreement for sale of Jiangsu Matrix Pharmaceutical ChemicalCompany Limited ("Matrix Dafeng") during June 2013. The sale is expected to becompleted by the end of September 2013.
Consolidated Financial Statements
In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements,the audited Consolidated Financial Statements are attached to this annual report.
Your Company has not accepted/renewed any fixed deposits under Section 58A of theCompanies Act, 1956 during the year 2012-2013.
Re-appointments of Directors by rotation
In accordance with the provisions of the Companies Act, 1956, Mr. Susanto Banerjee willretire by rotation at the ensuing Annual General Meeting of your Company and, beingeligible, offers himself for re-appointment.
Your Board of Directors recommends the appointment of Mr. Susanto Banerjee as aDirector of the Company.
M/s. Deloitte Haskins & Sells, Chartered Accountants, Statutory Auditors of theCompany, hold office until the conclusion of ensuing Annual General Meeting and areeligible for re-appointment. The Company has received a certificate from M/s. DeloitteHaskins & Sells, Chartered Accountants, under Section 224 (1) of the Companies Act,1956, confirming their eligibility and willingness to accept the office of the StatutoryAuditors for the financial year 2013-2014, if re-appointed. The Audit Committee and theBoard of Directors of the Company recommends the appointment of M/s. Deloitte Haskins& Sells, as Statutory Auditors of the Company for the financial year 2013-2014.
Pursuant to Section 233B of the Companies Act, 1956, the Central Government hasprescribed a Cost Audit for pharmaceutical business of the Company. Based on therecommendation of the Audit Committee and subject to the approval of the CentralGovernment, the Board has appointed M/s. Sagar & Associates as Cost Auditors of theCompany for the financial year 2013-2014. The cost audit reports shall be submitted to theCentral Government as per timeline required under the provisions of the Companies Act,1956. The relevant cost audit reports for the financial year 2011-2012 were filed withinthe due date.
Directors' Responsibility Statement
As required under Section 217 (2AA) of the Companies Act, 1956, your directors confirmhaving:
i) Followed the applicable accounting standards with proper explanation relating tomaterial departures in the preparation of the annual accounts;
ii) Selected such accounting policies and applied them consistently and made judgmentsand estimates that are reasonable and prudent so as to give a true and fair view of thestate of affairs of your Company at the end of the financial year 2012-2013 and of theprofit of your Company for that period;
iii) Taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act, 1956 for safeguarding theassets of your Company and for preventing and detecting fraud and other irregularities;and
iv) Prepared the annual accounts on a going-concern basis.
Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1985
Information in accordance with the provisions of Section 217(l)(e) of the CompaniesAct, 1956, read with Companies (Disclosure of Particulars in the Report of Board ofDirectors) Rules, 1988 relating to the conservation of energy, technology' absorption andforeign exchange earnings and outgo is given in the annexure-I forming part of thisreport.
Particulars of Employees
The details of the employees drawing remuneration exceeding the limits prescribed underthe provisions of Section 217 (2A) of the Companies Act, 1956 is given in the annexure-IIforming part of this Report.
Transfer of Unpaid/Unclaimed dividend to investor Education Protection Fund
Pursuant to the provisions of Section 205A (5) of the Companies Act, 1956, the dividenddeclared for the financial year 2004-2005, which remained unclaimed for a period of sevenyears has been transferred by the Company to the Investor Education and Protection Fundestablished by the Central Government.
Your Directors wish to express their grateful appreciation for the co-operation andsupport received from the Government of India, Governments of Andhra Pradesh andMaharashtra, Banks, the vendors, customers, consultants, auditors and others who have beenassisting your Company in the various facets of its operations. Your Directors also wishto place on record their sincere appreciation to its parent company Mylan Inc., for itssupport in implementing the organizational goals.
The Directors also wish to place on record their sincere appreciation of the employeesat all levels for their dedicated contribution towards the growth of your Company.
Annexure-I to the Directors' Report
Information required under the Companies (Disclosure of Particulars in the Report ofthe Board of Directors) Rules, 1988.
A. Conservation of Energy
Your Company continued periodic auditing of all the installations internally to findnew opportunities for reducing the wastage of electrical and thermal energy.
Your Company, in addition to the measures implemented last year, has identified andcommissioned the following energy saving devices/equipment, during the year under review:
1. Replacement of existing reactor-based distillation units in the effluent treatmentplants by an energy-efficient multiple effect evaporator.
2. Replacement of existing high-vacuum steam ejector systems with electrical dry-vacuumpumps, thereby reducing the operating cost by almost 50%.
3. Recycling water from the effluent treatment plants into cooling towers, therebyavoiding usage of fresh water. Particulars of Power & Fuel consumption for the year2012-2013
B. CONSUMPTION PER UNIT OF PRODUCTION
Disclosures of particulars with respect to Technology Absorption
A. RESEARCH AND DEVELOPMENT
Mylan has been focusing on intellectual property-based R&D activity,with theobjective of developing novel routes and noninfringing processes to facilitate theCompany's first-mover advantage across markets. Mylan is equipped with a strong API andFDF R&D teams.
Specific areas in R&D carried out by the Company:
New product development by organic synthesis.
Improvement in process for existing products.
Development of new patent non-infringing processes.
Development of polymorphs or generic drug substances.
Impurity profiling of drug substances.
Analytical method development of intermediates and finished products.
Minimizing the effluent generation with the development of suitable processes.
Development of generic FDFs.
Benefits derived as a result of the above R&D
Yield improvement resulting in cost reduction for existing products.
Introduction of new products in the markets - both APIs and FDFs.
Meet the stringent needs of international customers and Regulatory authorities.
B. EXPENDITURE ON RESEARCH & DEVELOPMENT
C. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION
Efforts, in brief, made towards technology absorption, adaptation and innovation:
a) Technology developed in-house has been scaled up and commercial productionsuccessfully established.
b) Various novel processes/products have been developed in-house for some generic drugmolecules, which are different from the existing processes/products so far patented.
Benefits derived as a result of the above:
Capabilities in developing technology for new products and novel processes/productshave helped entry into advanced markets such as U. S., Canada and Europe.
No technology has been imported
D. FOREIGN EXCHANGE EARNINGS AND OUTGO