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Sun Pharmaceuticals Industries Ltd Pharmaceuticals - Indian - Bulk Drugs & Formln
BSE Code
524715
ISIN Demat
INE044A01036
Book Value
64.51
NSE Symbol
SUNPHARMA
Div & Yield %
0.60156
Market Cap (Rs Cr.)
60251.208
P/E
37.68135
EPS
15.44
Face Value
1
SUN PHARMACEUTICALS INDUSTRIES LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

Your Directors take pleasure in presenting the Eighteenth Annual Report and 
Audited Accounts for the year ended March 31, 2010.

Financial Results                                 
                                           (Rs. in million except dividend
                                                 per share and book value)

                                                  Year ended    Year ended   
                                                   March 31,     March 31, 
                                                        2010          2010

Total Income                                           26467         40437

Profit after tax                                        8987         12653

Dividend on Equity Shares                               2848          2848

Corporate Dividend tax                                   473           484

Transfer to various Reserves                            3000          4500

Amount of dividend per equity 
share of Rs. 5/- each                                  13.75         13.75

Book value per equity share of Rs. 5/- each              276           249

Dividend:

Your Directors are pleased to recommend an equity dividend of Rs. 13.75 per 
equity share of face value Rs. 5/- each (previous year Rs. 13.75 per equity 
share of face value Rs. 5/- each) for the year ended March 31, 2010.

Management Discussion and Analysis:

The management discussion and analysis on the operations of the Company  is 
provided in a separate section and forms part of this report.

Human Resources:

A  dedicated  team of over 8000 multicultural employees have  been  pushing 
boundaries  of  your  organisation to  maximize  opportunities  across  our 
corporate  office,  Company's various R&D Centres &  19  plants  (including 
associate  companies)  spread across three continents.  The  potential  and 
ability  to  deliver consistently is established by  our  remarkable  team, 
evident  from our consistent growth. The Company recognises the  importance 
and contribution of our people. Performance orientation and ethics are high 
priority  areas.  The  supportive work environment  and  opportunities  for 
career  advancement  within the Company itself, helps retain  talent.  Your 
Directors  recognise the team's valuable contribution and places on  record 
their appreciation for Team Sun Pharma.

Information  as per Section 217(2A) of the Companies Act, 1956,  read  with 
the  Companies  (Particulars  of  Employees) Rules,  1975  as  amended,  is 
available  at  the registered office of your Company. However, as  per  the 
provisions  of  Section  219(1)(b)(iv)  of the said  Act,  the  Report  and 
Accounts  are  being  sent to all shareholders of the  Company  and  others 
entitled  thereto  excluding  the aforesaid  information.  Any  shareholder 
interested  in obtaining a copy of this statement may write to the  Company 

Secretary/Compliance  Officer at the Corporate Office or Registered  Office 
address of the Company.

Information  on  Conservation  of Energy,  Technology  Absorption,  Foreign 
Exchange Earning and Outgo.

The  additional  information relating to  energy  conservation,  technology 
absorption,  foreign  exchange  earning  and  outgo,  pursuant  to  Section 
217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of 
Particulars in the Report of the Board of Directors) Rules, 1988, is  given 
in Annexure and forms part of this Report.

Corporate Governance:

Report  on  Corporate Governance and Certificate of the  auditors  of  your 
Company  regarding compliance of the conditions of Corporate Governance  as 
stipulated in Clause 49 of the listing agreement with stock exchanges,  are 
enclosed.

Consolidated Accounts:

In accordance with the requirements of Accounting Standard AS-21 prescribed 
by  the  Institute  of Chartered Accountants  of  India,  the  Consolidated 
Accounts of the Company and its subsidiaries is annexed to this Report.

Subsidiaries:

The  Ministry  of  Corporate  Affairs, Government  of  India,  has  granted 
approval  that  the requirement to attach various documents in  respect  of 
subsidiary  companies, as set out in sub-section (1) of Section 212 of  the 
Companies  Act,  1956,  shall not apply to the  Company.  Accordingly,  the 
Balance  Sheet,  Profit  and  Loss  Account  and  other  documents  of  the 
subsidiary  companies are not being attached with the Balance Sheet of  the 
Company. Financial information of the subsidiary companies, as required  by 
the  said order, is disclosed in the Annual Report. The Company  will  make 
available  the Annual Accounts of the subsidiary companies and the  related 
detailed information to any member of the Company and its subsidiaries  who 
may  be  interested  in  obtaining the same. The  annual  accounts  of  the 
subsidiary companies will also be kept open for inspection by any  investor 
at the Registered Office & Corporate / Head Office of the Company and  that 
of   the  respective  subsidiary  companies.  The  Consolidated   Financial 
Statements  presented  by  the Company include  financial  results  of  its 
subsidiary companies.

Finance:

CRISIL continued to reaffirm its highest rating of 'AAA/ Stable' and 'P1+', 
for  your  Company's Banking Facilities throughout the year  enabling  your 
Company  to  avail facilities from banks at attractive rates.  The  Company 
does not offer any Fixed Deposit scheme.

Corporate Social Responsibility:

Your organization continued to support activities in two areas-- health and 
education. Other areas of support were disaster relief and civic  utilities 
around the plants and research centers, where assistance was provided on  a 
need basis.

Directors:

Shri Sudhir V. Valia, Shri Hasmukh S. Shah and Shri Ashwin S.Dani retire by 
rotation and being eligible offer themselves for re-appointment.

Shri  Subramanian Kalyanasundaram was appointed as an Additional  Director, 
and  Chief  Executive Officer & Whole-time Director of the  Company  for  a 
period of five years from April 1, 2010 to March 31, 2015, by the Board  of 
Directors by way of circular resolution passed on March 31, 2010, and holds 
the  office  as a director up to the ensuing Annual  General  Meeting.  The 
Company  has received requisite notice under Section 257 of  the  Companies 
Act,  1956,  from  a member to propose his name for being  appointed  as  a 
Director of the Company.

Directors' Responsibility Statement:

Pursuant  to the requirement under Section 217(2AA) of the  Companies  Act, 
1956,  with  respect to Directors' Responsibility Statement, it  is  hereby 
confirmed:-

(i)  that in the preparation of the annual accounts for the financial  year 
ended  March  31,  2010,  the applicable  accounting  standards  have  been 
followed along with proper explanation relating to material departures;

(ii)  that the Directors have selected appropriate accounting policies  and 
applied  them  consistently  and made judgements and  estimates  that  were 
reasonable  and prudent so as to give a true and fair view of the state  of 
affairs  of the Company at the end of the financial year and on the  profit 
of the Company for the year under review;

(iii)  that  the Directors have taken proper and sufficient  care  for  the 
maintenance   of  adequate  accounting  records  in  accordance  with   the 
provisions  of the Companies Act, 1956 for safeguarding the assets  of  the 
Company  and for preventing and detecting fraud and  other  irregularities; 
and,

(iv) that the Directors have prepared the annual accounts for the financial 
year ended March 31, 2010 on a 'going concern' basis.

Auditors:

Your   Company's  auditors,  M/s.  Deloitte  Haskins  &  Sells,   Chartered 
Accountants,  Mumbai,  retire at the conclusion of the  forthcoming  Annual 
General Meeting. Your Company has received a letter from them to the effect 
that  their  re-appointment,  if  made, will  be  in  accordance  with  the 
provisions of Section 224(1-B) of the Companies Act, 1956.

Acknowledgements:

Your  Directors wish to thank all stakeholders and business partners,  your 
Company's bankers, financial institutions, medical profession and  business 
associates  for  their  continued support and  valuable  co-operation.  The 
Directors  also wish to express their gratitude to investors for the  faith 
that they continue to repose in the Company.

                              For and on behalf of the Board of Directors


                              Dilip S. Shanghvi
                              Chairman & Managing Director
June 14, 2010 Mumbai

Annexure (1) to Directors' Report                    2009-10       2008-09

CONSERVATION OF ENERGY

A. Power and Fuel Consumption

1. Electricity (a) Purchased
Unit (in '000 KWH)                                    43,396        48,104
Total Amount (Rs. in Millions)                         245.8         260.0
Rate (Rs./Unit)                                          5.7           5.4

(b) Own Generation through Diesel Generator

Units (in '000 KWH)                                    2,783         2,421
Units per Litre of Diesel Oil                            3.0           3.2
Cost (Rs./Unit)                                         11.1          11.6

(c) Own Generation through Gas

Units (in '000 KWH)                                   24,852        13,059
Units per M3 of Gas                                     10.6           3.8
Cost (Rs./Unit)                                          4.2           5.1

2. Furnace Oil:

Quantity (in '000 Litres)                              2,591         5,223
Total Amount (Rs. in Millions)                          62.7         130.6
Average Rate                                            24.2          25.0

3. Gas (for Steam):

Gas Units (in '000 M3)                                 7,334         3,661
Total Amount (Rs. in Millions)                          68.2          38.6
Average Rate (Rs./Unit)                                  9.3          10.5

4. Wood/Briquitte:

Quantity (in '000 Kgs)                                 8,852             -
Total amount (Rs. in Millions)                          19.9             -
Average rate (Rs./Unit)                                  2.2             -

B. Consumption per unit of production:

It  is  not feasible to maintain product category-wise  energy  consumption 
data,  since  we manufacture a large range of formulations and  bulk  drugs 
having different energy requirements.

C. Energy conservation measures:

1.  Internal  and External Energy Audits for improvisation  and  continuous 
monitoring of Power Factor.

2.  Alternative energy sources like Gas & Steam have been used in place  of 
electricity  for  heating  of De-mineralized water, fluid  bed  dryers  for 
producing  hot air systems for coating department and for  maximisation  of 
condensate recovery of biomass to improve efficiency.

3.  Installation  of Cogeneration Power Plants including biomass  based  at 
various  locations  to generate electricity and use waste heat  from  power 
plant to achieve overall best efficiency of electricity generation.

4.  Using refrigerated type air dryer instead of desiccant type  to  reduce 
air  losses  and installation of evaporative cooling units for  AC  outdoor 
units to improve efficiency.

5.  Replaced  LRP insulation to Puff insulation in all  chilled  water  and 
brine pipe lines for waste heat recovery to improved chilling efficiency.

6. Maximization of Condensate recovery of Boilers to improve efficiency.

TECHNOLOGY ABSORPTION A. Research and Development:

1. Specific areas in which R&D is carried out by the Company:-

We  continue to be one of the most aggressive investors and  developers  of 
generic-related pharmaceutical research and technology in the country, with 
research programs to support our generic business pursued at our modern R&D 
centres.  Our  expert scientist team is engaged  in  complex  developmental 
research projects in process chemistry and dosage forms, including  complex 
generics  based  on drug delivery systems at these research  centres.  This 
research  activity supports the short, medium and long term business  needs 
of  the  company,  in India and all the other  markets  that  your  company 
invests in.

Projects in formulation development and process chemistry help us introduce 
a  large  number of new and novel products to the Indian  market  including 
products with complexity or a technology edge. Process chemistry enables us 
to  be  integrated right up to the API stage for important  products.  This 
helps  us  maintain  our  leadership position in  the  Indian  market  with 
specialty  formulations  and derive market and cost  advantage  from  API's 
developed  and scaled up In-house. Further, it helps us to compete  in  the 
international regulated markets across US / Europe.

The team also works on projects involving complex drug delivery systems for 
India Complex API like steroids, sex hormones, peptides, carbohydrates  and 
taxanes  which  require special skills and technology,  are  developed  and 
scaled up for both API and dosage forms. This complete integration for some 
products works to the company's advantage. These projects may offer  higher 
value addition and sustained revenue streams.

2. Benefits derived as a result of the above R & D:

In  2009-10,  about  39  formulations  were  introduced  across   marketing 
divisions, (not including line extensions, but including complex products). 
All of these were based on technology developed in house. Technology for 16 
API  was  commercialised.  For some of the important API  that  we  already 
manufacture, processes were streamlined so as to have more energy efficient 
or  cost effective or environment friendly processes. A large part  of  our 
API  sales  is  to  the regulated market of US /  Europe,  and  this  earns 
valuable   foreign  exchange  and  also  a  reputation  for   quality   and 
dependability.  The  company's  formulation  brands  are  exported  to   40 
international markets where a local field force promotes the same.

The  Department of Scientific and Industrial Research,Ministry  of  Science 
and Technology of Government of India has granted approval to the in  house 
research  and development facility of your Company under the  provision  of 
the Income Tax Act, 1961.

3. Future plan of action:

A  state of the art bioequivalence facility with a functional  capacity  of 
220  beds  with  a  well  equipped, Phase 1  Clinical  unit  and  ECG  Core 
Laboratory  for clinical studies and safety studies and the same  is  being 
expanded  to  more  than  300 beds.  Eighteen  high  capacity  LCMS,  fully 
computerised  blood  chemistry labs capable of comprehensive  analysis  are 
being used extensively for biostudies. This facility has been inspected for 
India and for the US.

                                                             Rs in Million 
4. Expenditure on R & D                           Year ended    Year ended
                                                 31st March,   31st March, 
                                                        2010          2009

a) Capital                                             159.0         221.7

b) Revenue                                            1440.8        1313.3

c) Total                                              1599.8        1535.0

d) Total R&D expenditure as % of Total Turnover         8.5%          5.4%

B. Technology Absorption, Adaptation and Innovation

1.  Efforts  in brief, made towards technology absorption,  adaptation  and 
innovation

Year after year, your company continues to invest on R&D revenue as well as 
capex. A large part of the spend is for complex products, ANDA filings  for 
the  US,  and API technologies that are complex and may  require  dedicated 
manufacturing  sites.  Investments  have been  made  in  creating  research 
sites,employing  scientifically  skilled and experienced  manpower,  adding 
equipment   and   upgrading   continuously  the   exposure   and   research 
understanding of the scientific team in the therapy areas of our interest.

2.  Benefits  derived  as  a  result of  the  above  efforts  e.g.  product 
improvement, cost reduction, product development, import substitution:

(a) Market leader for several complex products. Offers complete baskets  of 
products under speciality therapeutic classes. Strong pipeline of  products 
for  future  introduction  in India, emerging markets, as well  as  US  and 
European generic market.

(b)  Not  dependent  on imported technology, can make  high  cost  products 
available   at   competitive  prices  by   using   indigenously   developed 
manufacturing processes and formulation technologies.

(c)  Offer  products which are convenient and safe  for  administration  to 
patients, products with a technology advantage.

(d)  We  are among the few selected companies that have set  up  completely 
integrated  manufacturing  capability  for the  production  of  anticancer, 
hormones, peptide, cephalosporins and steroidal drugs.

(e)  The  Company  has  benefited from reduction  in  cost  due  to  import 
substitution and increased revenue through higher exports.

3.  Your  company  has  not imported technology during  the  last  5  years 
reckoned from the beginning of the financial year.

C. Foreign Exchange Earnings and Outgo:

                                                         Rs in Million
                                                  Year ended    Year ended
                                                 31st March,   31st March,
                                                        2010          2009

1. Earnings                                           8508.3        8281.1
2. Outgo                                              4629.0        4258.9

MANAGEMENT DISCUSSION AND ANALYSIS

Operational review:

2009-10  was  an unusual year in that for the time in  our  listed  history 
there  was a decline in sales - 9%. Profit before interest and tax  reduced 
29%  and  profit after tax stood at Rs. 13,511 million  compared  with  Rs. 
18,177 million in 2008-09.

As  we had previously indicated, the primary reason for this shortfall  was 
that Caraco, our 75% US-based subsidiary, stopped manufacturing  operations 
from June 2009, resulting in a sales decline to US$ 22 million compared  to 
US$  112  million from manufactured products in the previous full  year  of 
operations.

Our  ex-US business segments continued to perform well,  delivering  strong 
sales  and  profit  growth,  while increasing  their  market  share  across 
geographies.  Excluding Caraco, our 2009-10 sales were Rs.  27,978  million 
with a growth of 3% over the previous year.

Key performance indicators for 2009-10:

* Annual consolidated sales for 2009-10 of Rs. 39,040 million, a decline of 
9% over the previous year

* Sales in India were Rs. 19,334 million, down 6%.

*  International  branded  generic  sales across 40  markets  grew  29%  to 
Rs.4,883  million.  This remains one of the fastest growing  parts  of  our 
business.

* Sales at Caraco were down 31% to US$ 234 million.

*  We continue to hold reserves in excess of Rs. 77,200 million,  earmarked 
for suitable acquisition opportunities.

*  Our  R  & D expense was Rs. 2,242 million,  taking  our  cumulative  R&D 
expense to Rs. 18,073 million.

*  Between  Sun  Pharma and Caraco, 84 ANDAs are  approved  and  123  await 
approval by the USFDA. Fifteen more ANDAs received approval this year.

* Branded generic registrations received crossed 1,500.

*  246  patents were filed so far, of which 81 were received based  on  the 
work by our research team

Business overview:

Indian  Branded  Generics continued to be the largest  contributor  to  our 
revenue,  at 45%, followed by US Generics (28%) and  International  Branded 
Generics  (13%).  API sales contributed 14%, a larger number  than  in  the 
previous  years, largely on account of APIs that would usually be  consumed 
by Caraco but are now available for sale.

Our  international business contributed 52% of our total turnover.  By  the 
year-end,  the  total  ANDA approvals stood at 84  with  123  more  filings 
pending  approval with the US FDA. During the year, we invested  Rs.  2,242 
million  in R&D. Our investments in capital expenditure were at  Rs.  2,956 
million,  including our Sikkim formulations plant, which  was  commissioned 
during the year under review.

Industry outlook:

IMS  Health estimates the global pharmaceutical market in 2010 at over  US$ 
825  billion, expected to grow 4-6%. Emerging markets, which accounted  for 
US$ 84 billion in 2008, are estimated to reach US$ 155-185 billion in 2013, 
with  a CAGR of 13-15% (IMS Health and Morgan Stanley estimates). In  2009, 
the  US generics market was valued by IMS at US$ 31 billion.  BCC  Research 
estimates  the  US  generics  market in 2009 at US$  34  billion.  All  the 
business  areas that we are present in offer attractive opportunities,  and 
we  are  well  positioned to maximise sales and profit  growth  that  these 
opportunities offer.

India:

The Indian pharmaceutical market continued to register a healthy growth  of 
18%  during  2009-10 to Rs. 417 billion (IMS MAT March 2010).  While  acute 
care still dominates the market with over 60% share, chronic care continues 
to  outgrow  the acute care segment and gain  market  share.  Prescriptions 
written  by General Practitioners (GPs) account for 40% of the  overall  Rx 
and are growing at 2%. In contrast, specialist Rx are growing at more  than 
5-6% per annum (Source: Morgan Stanley).

It is anticipated that India's specialty and super specialty therapies  are 
likely  to  account for 45% of the market by 2015 (36%  in  2006)  (Source: 
India  Pharma  2015,  McKinsey).  Socio-economic  factors  such  as  rising 
incomes,  increasing affordability of quality health care, steady  increase 
in  health insurance penetration and a continued rise in  chronic  diseases 
will drive the growth of the pharmaceutical market in India. IMS  forecasts 
suggest  that  the Indian pharmaceutical market will continue  to  register 
double-digit  growth  and  has high potential to double its  size  in  five 
years.

In  addition,  the government's emphasis on providing  healthcare  for  the 
under privileged with initiatives like the health insurance policy for  the 
poor,  the  Rashtriya Swasthya Bima Yojana and emphasis  on  improving  the 
delivery  mechanism  is  expected to result in better  volumes  across  the 
industry.

The  Indian pharmaceutical industry continues to witness  a  consolidation, 
with  MNCs continuing to acquire some Indian companies to benefit from  the 
attractive  growth that this market offers. On the other end of the  scale, 
some  of the regional companies are also gaining share, albeit from  a  low 
base. Together with attractive market opportunities, competitive  intensity 
will increase.

Companies  with capabilities to launch innovative medicines  at  affordable 
prices,  build  strong brands, offer high quality  medical  information  to 
doctors  and  assist  patients  to manage  their  conditions  better,  will 
continue to perform well.

While  product  patent protection offers newer opportunities  to  innovator 
pharmaceutical companies, the Indian pharmaceutical market will continue to 
be  substantially  dominated  by branded generics  across  the  foreseeable 
future.

The US:

Total market: At an estimated US$ 300 billion dollars in size (January 2010 
MAT),  the US pharmaceutical market remains the world's largest, though  it 
registered only 6% growth. U.S. market growth in 2010 is expected to be 3-5 
%.  With  US$ 74 billion worth products (sales) forecast to  go  off-patent 
between  2009  and 2012, the US pharmaceutical market is likely  to  remain 
sluggish across the foreseeable future.

Generics market: With an estimated size of US$ 34 billion, the US  generics 
market is one of the largest in the world. In terms of prescription  share, 
generics continued to increase their share and accounted for 72% at the end 
of  2009  (from 55% in 2004). The growing preference for generics  is  also 
reflected in the increase in generic drug penetration in the US from 47% in 
1999 to 72% in 2009.

However, generics still only account for 17% of total sales by value.

In  2009, the US government implemented policy changes that extended  cost-
effective  healthcare  coverage and are expected to  be  pro-generic.  More 
affordable  insurance  will reduce premium costs and enable  more  than  31 
million  previously uninsured Americans to afford healthcare. In  addition, 
the new competitive health insurance market will provide Americans a  wider 
insurance choice. Greater healthcare accountability is expected to keep the 
premia down.

Emerging markets:

The  estimated  size  of  the pharmaceutical  market  in  emerging  markets 
(excluding USA, Canada, EU, Japan and Australasia) is over US$ 90  billion, 
registering double-digit growth and accounting for a majority of the global 
pharmaceutical  market growth in 2009. China stands out with a size of  US$ 
32 billion and forecasted growth of 20-23%. All these markets are  expected 
to sustain a double digit-growth across the foreseeable future on the  back 
of   a  strong  economic  growth,  rising  population  and  an   increasing 
affordability  for  quality healthcare in these  countries.  IMS  forecasts 
suggest that the pharmaceutical market in emerging market countries will be 
US$ 155-185 billion in 2013 (CSFB, Morgan Stanley and IMS data).

Japan:  Japan's stringent quality standards tend to deter global  entrants. 
On the other hand, it is a fast-emerging generic market at US$ 3.5 billion, 
with  generic  penetration at 15% by volume and likely to rise  to  30%  by 
volume by 2012 (CSFB Pharma far marts, March 2010).

Europe:  The European market for generics in 2009 was US$ 33  billion  (IMS 
data).  Although generic medicines now fulfill over 50% of the  demand  for 
medicines  in Europe, they still only represent 18% of the  total  medicine 
bill.

APIs:

India  is  a  significant  player  in  the  global  active   pharmaceutical 
ingredient   (API)   market,  being  one  of  the   world's   largest   API 
manufacturers.  It  ranks fourth by volume and thirteenth by value.  It  is 
expected to generate sales worth US$ 6 billion in 2010, growing around 19%. 
A  bulk  of the API production is exported to Europe  (Source:  Pharmabiz). 
India is also recognised as one the world's lowest-cost producers of  small 
molecule APIs.

With  an  increasing  pressure on  global  economies,  especially  advanced 
nations,  to  reduce healthcare costs, India is set to play  a  significant 
role in this space.

Business performance

1. Indian branded generics:

Overview:

Sun Pharma is India's sixth largest branded generics player, with a product 
basket  comprising 537 formulations and covering chronic therapy  segments. 
Several  of our products are technically complex products  with  relatively 
lower competition. We commanded a market share of 3.7% in 2009-10.

In  1995, we pioneered a therapy-focused marketing strategy where  products 
from  different therapeutic segments were marketed by  separate  divisions. 
Currently we market products through 18 divisions, facilitated by a  strong 
field  force  of  more  than  2,500  members  covering  more  than  130,000 
specialist doctors.

Almost  50%  of  our brands feature among the top  three  brands  in  their 
specific  spaces  in India. Our top 10 brands contributed 20%  to  domestic 
revenues while the top 50 brands contributed 53% in 2009-10, de-risking our 
growth  from an excessive dependence on a handful of blockbuster  products. 
Besides,  our  growth was balanced between  established  products  launched 
before  2006  accounting for 67% of our growth, and a continued  launch  of 
differentiated products in the therapy areas of our focus.

Business realities in 2009-10:

Our  domestic  business revenues decreased 7% from Rs.  19,597  million  in 
2008-09 to Rs. 18,301 million.

According to IMS, we were ranked sixth with a 3.7% market share and 18% GR.

According to AWACS, a market audit firm at the wholesaler level, we  ranked 
fifth with a 4.3% market share and 15% GR.

A  total  of  48 new products were  introduced  across  various  divisions. 
Technically  complex  products  like  Exapride  (exenatide  injection)  and 
Cardivas CR (carvedilol phosphate extended release) that differentiated our 
product  offering were launched during the year, as also Lambin  (liposomal 
amphotericin).

Major  brands  like Pantocid, Glucored, Susten, Aztor,  Strocit  and  Gemer 
registered  double-digit growth in a competitive market, strengthening  our 
topline.

Pantocid,  an antiulcerant along with combinations, emerged as the  largest 
selling product group in India from our portfolio.

We continued efforts in prescription generation for existing products,  and 
introduced new products.

We intensified our focus on building brands based on complex technologies.

In therapeutic segments, where we are a significant player, we strengthened 
our  leadership with strong execution and strategies. Similarly,  in  other 
segments where we are late entrants, we continued to build our prescription 
share.

We  enriched  doctor relationships and built trust through  the  scientific 
promotions  like PG CME meets and symposia where world-class speakers  were 
invited to share experiences with Indian doctors, etc.

We  launched the antidiabetic injectable Exapride (Exenatide), a  39  amino 
acid-based  peptide  in  a patient-friendly  delivery  system  device.  Our 
product  can  handle multiple doses and be reused, reducing  the  patient's 
spend on the repeated purchase of the device.

> Octride, the peptide-based treatment for variceal bleeding, became one of 
our largest GI products.

>  Technically  complex  drugs  like  Gliotem  (Temozolamide)  and   Gemtaz 
(Gemcitabine) helped us differentiate and earn the trust of oncologists.

We  launched  Lambin  (Liposomal amphetericin), a  targeted  treatment  for 
systemic fungal infections in immunocompromised patients.

2. US operation:

Overview:

Our presence in the US generic market accounts for around 28% of our  total 
sales,   with  formulation  manufacturing  facilities  spread  across   six 
locations,   including  several  sites  in  India.  This   combination   of 
manufacturing sites with facilities -on mainland US and offshore - gives us 
the flexibility to manufacture where it is most economical.

Our  product  basket  comprises a prudent mix of generics  and  complex  or 
limited  competition products. We have the flexibility to  manufacture  all 
dosage  forms ranging from tablets to injectables, eye drops and sprays.  A 
large number of products that we make are integrated into APIs and offer us 
an effective control on costs.

We  introduced  products  such as Amifostine,  Lupreolide,  Octreotide  and 
Vecuronium,  which  are  technically  complex,  face  a  lower  competitive 
intensity and offer reasonable profitability.

Historical performance

Brand name               2007-08                  2008-09

Net sales (US$ million)  350                      337

Net sales (Rs. million)  14,139                   15,460

ANDAs filed              47                       35

ANDAs approved           24                       16

Complex products         Octreotide injection     Amifostine injection
                                                  Irinotecan injection 
                                                  Lupreolide injection 
                                                  Pamidronate injection


Brand name               2009-10                                                 
                        
Net sales (US$ million)  234 
                        
Net sales (Rs. million)  11,062 
                        
ANDAs filed              30 
                        
ANDAs approved           15 
                        
Complex products         Azelastine Rivastigmine Nicardipine injection 
                         Vecuronium injection


Business realities, 2009-10:

Despite  the halting of production at Caraco, we reported a good growth  of 
distributed products.

* Began to build sales of the first few controlled substance ANDAs from our 
Cranbury facility.

*  Entered the oncology therapeutic segment; launched 10 products; built  a 
strong CNS product range (29 products) and CVS range (13 products).

*  Received  exclusivity for generic Eloxatin; continued  to  sell  generic 
Protonix  at  risk  (we discontinued sales of both products  in  the  first 
quarter of 2010-11).

-  Received a settlement fee from Forest Labs and Lundbeck for the  Lexapro 
patent dispute, with likely milestones should our process be used by them.

-   Built   credibility  with  customers   by   continually   communicating 
developments  on  the FDA issue with Caraco. Our team  convinced  customers 
that  the  issue  was ring-fenced only around Caraco,  even  as  our  other 
operations for the US remained dependable and compliant.

The US generic market continues to be demanding, with extensive competition 
from  equivalently placed companies now extending to products even  in  the 
exclusivity period. The FDA has been raising the bar on regulations, and at 
times there have been significant delays for generic approvals at the  FDA. 
The FTC has also been keeping a close watch on generic-innovator deals as a 
part of its mandate.

ANDAs approvals in 2009-10 and 2008-09

                       2009-10  2008-09  Cumulative 

CNS                       3        5        26
Pain                      1        3        11
CVS                       2        2        13
Oncology                  2        3        11
Metabolism                1        -         7
Cough and cold            2        3         6
Antibiotic                -        1         2
Allergy                   3        -         5
Urology                   1        -         1
Gastro                    -        -         1
Endocrine                 -        -         1

At Caraco, as required by the USFDA, the team is working closely with  cGMP 
consultants  to  identify  and implement corrections  to  comply  with  FDA 
requirements.  Caraco has taken FDA approval on its work plan, and  is  now 
working  to  put these corrections in place. Caraco has created  a  partial 
reserve of US$ 15.9 million to account for losses due to inventory  seizure 
worth US$ 24 million by US FDA. It has drawn up a roadmap for  transferring 
some  products  to alternative manufacturing sites and has  also  begun  to 
market  several  products  from Forest's Inwood business,  as  part  of  an 
agreement.

Acquisition of Taro

One  of the challenges in 2009-10 was the continuing dispute regarding  the 
acquisition of Taro, which is now pending ruling by Israel's Supreme Court. 
However,  there were three clearly positive developments that we  are  glad 
about:

In  December 2009, Templeton, which holds a 10% equity stake in Taro,  (the 
third-largest    and    largest-minority    shareholder)    withdrew    its 
appeal/opposition  and  came  out  strongly  in  favour  of  the  takeover. 
Templeton had opposed Sun Pharma's acquisition for about 30 months.

>  At  Taro's  annual general meeting, the minority  shareholders  (78%  of 
minority  votes polled) voted against the continued service of  the  Levitt 
Board of Directors and the election of Taro's External Director nominees.

> In July 2010, the United States District Court for the Southern  District 
of  New  York dismissed the complaint filed by Taro seeking  to  block  the 
Tender  Offer  by  Sun's subsidiary Alkaloida. The  Court  rejected  Taro's 
claims  based  on  allegations that Sun and Alkaloida had  failed  to  make 
adequate  disclosures concerning the offer. The Court also rejected  Taro's 
request  for discovery, remarking that Taro had not explained  any  purpose 
that  discovery would serve. The Court also dismissed Taro's other  claims, 
including  breach  of contract and misappropriation of trade  secrets,  for 
lack of subject matter jurisdiction.

3. Rest of the world

Overview:

Our  global  footprint  now spans 40  pharmaceutical  markets  across  four 
continents, some 1,578 products already registered and nearly 900  products 
in the regulatory pipeline in these countries. The emerging markets part of 
our  business grew by over 40% over the last seven years and we expect  the 
momentum  to  continue. Our key high-potential markets are  Russia,  China, 
Brazil, Mexico, ex-CIS nations and South Africa. Considering the size,  the 
potential opportunities and to strengthen our competitive capabilities,  we 
established  manufacturing operations in Mexico and Brazil. The  regulatory 
filing of products from these facilities has commenced.

Regulatory  demands  are becoming progressively stringent,  increasing  the 
cost  and  timelines  to  register the products in  a  number  of  emerging 
markets.  In  the  last  few years, some  emerging  markets  amended  their 
regulatory  requirements to match those of regulated markets with the  need 
to   have   detailed  plant  inspections  and  local   bio-studies.   These 
developments  have a potential to stagger our new product registrations  in 
these countries. However, we will aim to increase our footprint and augment 
our product offerings across emerging market regions in a phased manner.

                                   2005-06 2006-07 2007-08 2008-09 2009-10

Contribution to turnover (%)           8.0     9.0     7.0     9.0      13

Europe:  Initiated  exports to Europe for the first time  in  our  history; 
received  11  product  approvals  in Europe up to March  2010.  At  US$  33 
billion,  key generic markets in Europe present an attractive  opportunity. 
We expect to create a meaningful EU presence with generics, building a line 
of select hospital products that offer decent returns over the medium-term.

4. API business 

overview:

Our backward integration into speciality APIs for key products  strengthens 
our  position  against  competing global pressures. Several  of  our  eight 
world-class  facilities  are ISO 14001 and ISO 9002-approved. Many  of  our 
plants hold approvals from the US FDA as well as regulatory authorities  of 
various developed countries

Our  API basket currently comprises 170 products, of which a vast  majority 
are complex APIs. A large proportion of APIs manufactured are consumed  in-
house.

We have standalone facilities in Panoli and Ahmednagar for peptides,  anti-
cancers,   steroids  and  sex  hormones.  Our  Hungary  unit   manufactures 
controlled substances from the basic stages, while the other  manufacturing 
facilities  can handle multiple products. Our Tennessee plant holds  quotas 
for controlled substance API manufacture in the US. We add more than 25 API 
processes annually, enriching our product basket.

In 2009-10, our API business grew 13% from Rs. 4,846 million in 2008- 09 to 
Rs.  5,491 million in 2009- 10 and registered a 19% CAGR (last  five  years 
leading  to  2009-10).  Our API revenues accrue  from  a  global  footprint 
covering  56 countries. In the regulated markets, our business  is  largely 
conducted   with   end-users.  For  a  large  number   of   products   like 
Pentoxifylline, Clomipramine and Mesalazine, we are a dominant, if not  the 
leading, international producer.

>  Received approvals for eight APIs from various  regulatory  authorities; 
this took the total regulated market-approved APIs to 89 out of 155 filings 
made  for  DMF  and CEP Enhanced our  equipment  productivity  by  reducing 
process  steps,  improving  chemistry and  optimising  manufacturing  costs 
through value engineering

                                                   2007-08 2008-09 2009-10

Contribution to turnover (%)                            10      11      14

We intend to strengthen our presence in Japan and China, as also in the API 
hubs of Germany and Italy.

Research and development:

Research  and  development lies at the heart of our  success.  Research  is 
undertaken  at various R&D centres including two state-of-the-art  centres, 
accommodating 600 qualified scientists. Over the years, we developed  sound 
capabilities ranging from complex APIs to formulating complex,  technology-
intensive products. Our research initiatives offer complex products to  our 
customers and patients.

Our  Baroda  research  centre develops complex APIs and  dosage  forms  for 
India, US and Europe. Our Mumbai research centre focuses on the development 
of differentiated dosage forms and generics for developed markets like  the 
US  and Europe. The work at these research centres ensures that we  have  a 
robust pipeline to feed all the markets that we operate in.

Our  state-of-the-art  research laboratories are  equipped  with  extensive 
facilities   for   pharmacokinetics,   formulation   development,   organic 
synthesis, clinical research and analytical development.

R&D commitment:

                                   2005-06 2006-07 2007-08 2008-09 2009-10

Investment in R&D (Rs. million)      2,015   2,787   2,859   3,320   2,242

R & D investment as percentage
of net revenue                          12      13       9       8       6

Our R&D focus:

Our R&D team focuses on creating difficult-to-replicate molecules/ products 
involving complex technologies at competitive costs. This focus helped grow 
the basket from five products in 1983 to 537 products in India (as on March 
31, 2010).

Generic  process  research: We focus on developing complex  APIs  entailing 
multiple-step  chemistry  in  a  cost-effective  and  environment  friendly 
manner. Our expertise covers complex products like steroids,  anti-cancers, 
peptides  and hormones. This expertise reinforces our  backward  integrated 
business model.

In 2009-10, our team added 28 APIs.

Generic  formulation  research: Our formulations research team  focused  on 
developing  niche and complex finished products, creating a  differentiated 
product pipeline and capitalising on first-to-file opportunities. In  2009-
10, our team launched 48 new products in India and filed 30 ANDAs in the US 
taking  the total to 207 ANDAs. In all, close to 900 dossiers  are  pending 
approvals  in  other  regulated  and  semi-regulated  geographies.  Complex 
delivery systems: Our team developed delivery systems such as metered  dose 
inhalers,  osmotic release formulations and nasal sprays, among others.  In 
2009-10, we introduced 26 products based on novel delivery platforms.

Intellectual property:

We  possess  a  rich patent library. The cumulative filings  stood  at  246 
filings, of which 81 were approved. We filed 13 new patent applications  in 
2009-10.

Regulatory Affairs:

Every  step  in  the  pharmaceutical value  chain  -  product  development, 
manufacture  and  marketing  -  is marked by  an  adherence  to  regulatory 
compliance.  The  regulatory  norms vary widely across  countries  and  are 
periodically upgraded to meet increasing quality expectations.

The result is that with competition increasing, it is not merely enough to

meet  regulatory compliance; it is now imperative to do so with  speed  and 
emerge as a first-mover in a particular product or geography.

Our regulatory compliance is a competitive advantage that has enabled us to 
establish a global footprint across 40 countries. Our regulatory team helps 
strengthen  (through  increased  product filings) and  expand  (by  meeting 
regulatory requirements of new geographies) this global presence.

Over  the years, our team reduced the time for filing regulatory  documents 
despite growing regulatory complexities.

Highlights, 2009-10:

>  Filed 14 DMFs in the US; received six DMF approvals during the year.  We 
emerged among the few Indian pharmaceutical companies with the maximum  DMF 
filings in the US - 99 (with 43 approvals) as on March 31, 2010.

>  Filed seven Certificate of Suitability with the  European  Pharmacopoeia 
(CEP)  for  strengthening our European presence; this took  the  total  CEP 
filings to 28, with 21 approvals in all.

>  Filed  30 ANDAs for approval with US  regulatory  authorities;  received 
approval  for 15 ANDAs; the total tally of ANDAs stood at 207 filed and  84 
approved as on March 31, 2010.

Filed dossiers in 40 countries, including Taiwan, Japan, Canada,  Australia 
and China.

> Received approval for Sumatriptan prefilled injections from UK MHRA,  the 
Company's first device approval. 

Approvals in 2009-10

DMF/CEPs approved   ANDAs approved    Products approved in 
                                       rest of the world


        8                15                 394

In 2009-10, we filed eight DCPs in Europe for complex products and received 
approvals  for five. We received our fastest DCP approval (as yet) in  only 
12   months  for  Olanzapine.  As  filing  procedures  and  approvals   get 
increasingly complex, we are working to strengthen our regulatory team.

Quality:

Consistent quality is critical in the pharmaceutical sector, especially for 
companies  like  ours  that  are  present  in  quality-conscious  regulated 
markets.

We focus on high product quality standards, ensured by a 14-member  quality 
management  team.  The vindication of our quality focus is evident  in  our 
manufacturing  facilities holding certifications from some of  the  world's 
most demanding regulatory bodies.

Intellectual capital:

The  contribution of our team is critical to our performance.  Intellectual 
capital  is  the  strongest driver of our growth. Our  success  is  largely 
derived  from our ability to attract the best talent, create  opportunities 
to  identify  potential  and groom our team  for  leadership  positions  by 
providing   a  congenial  environment  to  perform,  lead  and   grow   the 
organisation.

We  practice  a  policy  of creating tomorrow's  leaders  from  within  the 
organisation,  providing a clear growth path to team members. This  process 
is  facilitated  through  an institutionalised  promotional  system  called 
Career Progression Program (CPP).

A  key  challenge  is  protecting  and  retaining  junior  level  employees 
operating in the plants and factories. Our team is also replicating its CPP 
programme across all manufacturing facilities.

Internal control:

Sun Pharma's defined organizational structure, documented policy guidelines 
and adequate internal controls ensure efficiency of operations,  compliance 
with  internal  policies, applicable laws and  regulations,  protection  of 
resources and assets, and accurate reporting of financial transactions.

Moreover, the Company continuously upgrades these systems in line with  the 
best available practices.

The  internal control system is supplemented by extensive internal  audits, 
conducted  by independent firms of Chartered Accountants to  cover  various 

operations on a continuous basis.