CHAPTER 1; OVERVIEW OF DIVIS LAB

1.1: INTRODUCTION TO DIVIS LAB

Established in the year 1990, with Research & Development as its prime fundamental, Divis Laboratories focused on developing new processes for the production of Active Pharma Ingredients (APIs) & Intermediates. The company in a matter of short time expanded its breadth of operations to provide complete turnkey solutions to the domestic Indian pharmaceutical industry.

With five years of experience, expertise and a proven track-record of helping many companies with its turn-key and consulting strengths, Divis Laboratories established its first manufacturing facility in 1995.

Built on a 500 acre site at Hyderabad (Unit-I). the plant comprises of 13 multi-purpose production blocks and has space for further growth and expansion.

Divis Laboratories set up its second manufacturing facility at Visakhapatnam (Unit-II). in the year 2002 on a 350 acre site. The site has 14 multipurpose production blocks.

Both the facilities are primarily engaged in the manufacture of: Active Pharmaceutical Ingredients (APIs) & Intermediates for Generics Custom Synthesis of API's and Advanced intermediates for discovery compounds for pharma giants Building blocks for Peptides Building blocks for Nucleotides Carotenoids Chiral ligands

Complete cGMP guidelines are complied with in both the plants. Our Unit-1 at Hyderabad was successfully inspected by the US FDA during September 2000, in April 2004 and in February 2008. Our Unit-2 at Visakhapatnam was successfully inspected by the US FDA during November 2006 and in April 2009. Divis also undertakes FTE/Contract Research on process development for discovering new compounds for leading MNCs across the world and partners with them for the supply of APIs. The company is global in its outlook and benchmarks its quality standards to the best in the world.

VISION AND MISSION

A Vision To Excel To maintain leadership in custom synthesis of APIs and Intermediates for health care and life sciences industry and to be one of the top companies world-wide in the domain. To develop generic APIs for the late life cycle needs of the Industry.

A Mission To Serve To be a good corporate citizen and not only add value in our core competency areas of Pharma but also serve the community at large through social, educational and environmental initiatives that would establish strong foundations for a better tomorrow.

1.2 COMPANY PROFILE

Divi operates from its Headquarters and Registered Office at Hyderabad. The company has four multi-purpose manufacturing facilities with all support infrastructures like Utilities, environment management and safety systems.

Divi is engaged in manufacture of generic APIs, custom synthesis of active ingredients for innovator companies and other specialty chemicals like peptides and nutraceuticals. The company constantly reviews its policies and procedures to adhere to conformity to the various regulatory approvals for its manufacturing facilities and its Commitment to IPR.

Business Areas

The product portfolio of the company comprises of two broad segments: Generic APIs (active pharma ingredients) and Nutraceuticals and Custom Synthesis of APIs, intermediates and specialty ingredients for innovator pharma giants.

The company operates predominantly in export markets and has a broad product portfolio under generics and custom synthesis. Business has been growing decently across both these segments & is broadly equal distributed.

R&D Centers

The company has 4 Research Centers with the well defined functional focus on custom synthesis, contract research for MNC companies as also future generics involving processes like route design, route selection, establishing gram scale process and structural confirmation, process optimization, impurity profile, pilot studies,

prevalidation batches, validation of process and transfer of technology to Plant, review efficiency of processes and ongoing process.

Regulatory Filings/Approvals

Divi has triple Certifications ISO-9001 (Quality Systems), ISO-14001 (Environment Management Systems) and OHSAS-18001 (Occupational Health and Safety systems) for its manufacturing facilities and adheres to cGMP and standard operating practices in its manufacturing/operating activities and these certifications are renewed from time to time. All the manufacturing sites have been inspected by US-FDA, barring the recently implemented DSN SEZ Unit which expects an inspection next year. Divi has a total of 37 drug master files (DMFs) with US-FDA and 204 EDMFs and 16 CoS (Certificates of Suitability) with various European Union authorities. Divi has filed a total number of 8 patents for generic products.

Subsidiaries:

The company has two wholly owned subsidiaries for marketing its nutracutical products and greater reach to customers within this region. Divis Laboratories (USA) Inc. New Jersey, USA. Divis Laboratories Europe AG Basel, Switzerland.

1.3: MILESTONES
1990 19911993 1994 Divis Research Center (DRC) established. DRC successfully develops several commercial processes for

intermediates and bulk actives and supplies to manufacturing majors. Divis Research Center changes its name to Divis Laboratories Limited to reflect its growing area of operations and its plans to enter the manufacturing sector in the following year.

1995

Manufacturing Facility (Unit-1) at Choutuppal near Hyderabad starts operations.

1997 1999

SGS-Yarsley of U.K certifies Divis Laboratories as ISO-9002 compliant. European Directorate gives a "Certificate of Suitability" (CoS) for Naproxen produced at Divis Laboratories.

2000

US-FDA inspects Divis Laboratories successfully SGS-Yarsley of U.K awards Divis the ISO 9001 Certification SGS International AG of Switzerland awards Divis the ISO-14001 Certification (for its efficient Environment Management Systems).

2001

BVQI of London awards Divis the OHSAS-18001 Certification (for its Occupational Health and Safety Management Systems).

2002

Divis commences the setting up of its 2nd Manufacturing Facility (Unit2) at Chippada near Visakhapatnam.

2003

Divis opens a new research center christened "DRC-Vizag" for fundamental research in selected niche business core segments.

2003 2004 2006 2008 2008 2009 2009

Went for IPO and listed on stock exchanges BSE, NSE and HSE. US-FDA inspects the Choutuppal (Unit-1) for a second time. No 483. US-FDA inspects the Visakhapatnam(Unit-2) for the first time. Third US-FDA inspection for Choutuppal(Unit-1). KFDA inspects the Visakhapatnam(Unit-2) for the first time. KFDA inspects the Visakhapatnam(Unit-2) for the second time. US-FDA inspects the Visakhapatnam(Unit-2) for the second time.

1.4: KEY PEOPLE

Dr Murali K Divi, Chairman and Managing Director

Dr. Divi holds a doctorate degree in Pharmaceutical Sciences from Kakatiya University, Warangal. He is a member of American Institute of Chemical Engineers, American Chemical Society, American Cosmetic Society and American Pharmaceutical Association. He has extensive experience of over 30 years in the Active pharmaceutical ingredients industry.

Dr. Divi has considerable expertise in implementing and managing bulk fine chemical manufacturing facilities conforming to GMP/ US-FDA standards. He has led R&D teams and developed efficient processes for speciality chemicals, pharmaceutical intermediates, herbicides and rodenticides and custom synthesis.

Mr N. V. Ramana, Executive Director

Mr. Ramana is a graduate in chemistry from Osmania University, Hyderabad and is a Member of American Chemical Society. Mr Ramana has over 20 years of experience in Pharmaceutical Industry and handled varied functions in the active pharmaceutical ingredients industry including Custom Manufacturing and Contract research.

Mr Madhusudana Rao Divi, Director (Projects)

Mr. Rao Divi is a post-graduate in Structural Engineering from Mysore University and had executed several off-shore and onshore construction projects in India and abroad. Mr Rao Divi is incharge of material procurement, project implementation and production planning.

Mr. Kiran S Divi, Director (Business Development)

Mr. Kiran S Divi is a Bachelor of Pharmacy from College of Pharmacy, Manipal and was involved in understanding the markets in USA on active ingredients and intermediates for about two years before joining the Board. He is Director (Business Development) and supports export marketing development by Dr.Murali K. Divi and N.V. Ramana.

1.5: MANAGEMENT TEAM

Name Chandra S Divi G Hemanth Kumar G Suresh Kumar K Satyanarayana Kiran S Divi L Kishore Babu L Ramesh Babu M Ramesh Babu Madhusudana Rao Divi Murali K Divi Murali K Divi N V Ramana P Srinivasa Rao P V Lakshmi Rajani P V Lakshmi Rajani R Ranga Rao S Devendra Rao S Ramakrishna S Vasudev Y T S Prasad Designation General Manager General Manager Director Director President & Director Chief Financial Officer Chief Information Officer Chief Technologist Director Projects CEO Chairman & Managing Director Executive Director Chief Technologist Co. Secretary & Compl. Officer Secretary Director General Manager General Manager Director General Manage

1.6: PRODUCTS
Generics

Divis manufacture API's (Active Pharma Ingredients) for the Generics. As a company Divis understand that sustained development is not possible without respecting IPR. Divis takes great care to ensure that its products or processes do not infringe valid patents.

Divis is actively involved in developing alternate, patent non-infringing processes for APIs, for the inventors to manage late life cycle and leading generic drug manufacturers.

Intermediates

Divis supplies advanced intermediates for generic APIs that are already out of patent, as also for APIs which are about to enter generic status shortly. Here again, Divis has tie-ups with both original inventors and generic API manufacturers.

Protected Amino Acids

Divis has built up a strong base in the manufacture of BOC, FMOC and CBZ protected amino acids, the protecting reagents themselves, peptide condensing agents, totally synthetic, natural and novel unnatural amino-acids and oligopeptides.

Divis has invested heavily in knowledge, equipment and man-power to expand in this technology area which is sophisticated, challenging and of course rewarding. Currently, Divis is a major manufacturer of protected amino-acids.

Chiral Synthesis

Divis has an established and proven expertise in stereo selective synthesis using chiral ligands, high yield resolutions using chirally active resolving agents, recovery of resolving agents and ligands, recycling of undesirable isomers, resolutions involving enzymes and manufacture of novel ligands like binol, binap and so on.

Carotenoids (Synthetic) and Nutraceuticals

Divis has succeeded in developing multistep total synthesis of important carotenoids like Apocarotenal, Betacarotene, Lycopene, Astaxanthin, Canthaxanthin etc.

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1.7: MARKET TREND OF DIVIS LAB

Divis Research Center (Divis Laboratories Ltd) starting as a Research Center and focused on developing new process for the production of Active Pharma Ingredients and Intermediates in India, reported its financial results for the quarter ended 30 JUNE, 2013.

Investment highlights JUNE-13 5171.50 1747.10 13.16 2506.00 JUNE-12 4695.10 1673.80 12.61 2322.00 % CHANGE 10.15% 4.38% 4.38% 7.92%

E-13 JUNE-12 % Change

MONTHS NET SALES PAT EPS EBITDA

The companys net profit increased to Rs. 1747.10 million against Rs. 1673.80 million in the corresponding quarter ending of previous year, a increase of 4.38%. Revenue for the quarter rises by 10.15% to Rs. 5171.50 million from Rs. 4695.10 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 13.16 a share during the quarter, registering 4.38% increase over previous year period. Profit before interest, depreciation and tax is Rs. 2506.00 millions as against Rs. 2322.00 millions in the corresponding period of the previous year.

Expenditure

Break up of Expenditure Rs. Million Q1 FY14 Q1 FY13

BREAK UP OF EXPENDITURE

RS. MILLION Q1 FY14 Q1 FY13 1725.70 174.80 484.50

Cost of Material Consumed Depreciation & Amortization Expense Employee Benefit Expenses

2838.90 208.80 530.30

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Other Expenditure

894.50

686.90

BREAK UP OF EXPENDITURE

other expenditure 20%

employee benefit expense 12% cost of material 63%

depreciation and amortization expense 5%

Latest Updates

Exports constituted around 90% of gross sales during the year as against 89% in the previous year. Exports to advanced markets comprising Europe and America accounted for 77% of business.

Divis well distributed products range, some of the components of the business is given below:

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PARTICULARS 2012-13 2011-12

PARTICULARS Exports Imports (% of material consumption) Largest Product Top 5 Products Top 5 Customers Exports in $ terms Exports in Pounds Exports in Euro

2012-13 90% 41% 17% 48% 45% 79% 16% 5%

2011-12 89% 39% 19% 51% 46% 82% 14% 4%

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CHAPTER 2: OVERVIEW OF SWOT ANALYSIS

2.1: INTRODUCTION TO SWOT ANALYSIS

SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. SWOT analysis (alternatively SWOT Matrix) is a structured planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. A SWOT analysis can be carried out for a product, place, industry or person. A SWOT analysis is a simple tool to help it work out the internal and external factors affecting its business. It is one of the most commonly used business analysis and decision-making tools. A SWOT analysis helps organization to:

Build on strengths (S)

Minimize weakness (W)

Seize opportunities (O)

Counteract threats (T).

To get the most out of a SWOT analysis, organizations need to conduct it with a particular business objective in mind. For example, a SWOT analysis can help it to decide if they should introduce a new product or service or change its processes.

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A SWOT analysis is often part of strategic planning. It can help to better understand its business and work out what areas need improving. It can also help to understand its market, including competitors, and predict changes that it will need to address to make sure their business is successful.

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2.2: USES OF SWOT ANALYSIS

A SWOT (strengths, weaknesses, opportunities and threats) analysis looks at internal and external factors that can affect business. Internal factors are organizations strengths and weaknesses. External factors are the threats and opportunities.

Strategic planning, brainstorming and decision making

A SWOT analysis is a useful tool for brainstorming and strategic planning. It will get more value from a SWOT analysis if organizations conduct it with a specific objective or question in mind. For example, organization can use a SWOT analysis to help it to decide if and how it should: take advantage of a new business opportunity respond to new trends implement new technology Deal with changes to your competitors' operations.

Building on strengths

A SWOT analysis will help organization to identify areas of business that are performing well. These areas are its critical success factors and they give its competitive advantage to business.

Identifying these strengths can help it to make sure that organization maintain it so it doesnt lose competitive advantage. Growing business involves finding ways of using and building on its strengths.

Minimising weaknesses

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Weaknesses are the characteristics that put business at a disadvantage. Conducting a SWOT analysis can help it to identify these characteristics and minimise or improve them before they become a problem. When conducting a SWOT analysis, it is important to be realistic about the weaknesses of business so organization can deal with them adequately.

Seizing opportunities

A SWOT analysis can help it to identify opportunities that business could take advantage of to make greater profits. Opportunities are created by external factors, such as new consumer trends and changes in the market.

Conducting a SWOT analysis will help to understand the internal factors (business's strengths and weaknesses) that will influence its ability to take advantage of a new opportunity. If business doesn't have the capability to seize an opportunity but decides to anyway, it could be damaging. Similarly, if they have the capability to seize an opportunity and don't, it could also be damaging.

Counteracting threats

Threats are external factors that could cause problems for business, such as changes to the market, a competitor's new advertising campaign, or new government policy. A SWOT analysis can help it to identify threats and ways to counteract them, depending on its strengths and weaknesses.

Addressing individual issues

Organization can conduct a SWOT analysis to address individual issues, such as: staffing issues business culture and image organizational structure advertising financial resources Operational efficiency

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2.3: BENIFITS AND LIMITATION OF SWOT ANALYSIS BENIFITS

SWOT Analysis is instrumental in strategy formulation and selection. It is a strong tool, but it involves a great subjective element. It is best when used as a guide, and not as a prescription. Successful businesses build on their strengths, correct their weakness and protect against internal weaknesses and external threats. It needs to keep a close watch on their overall business environment and recognize and exploit new opportunities faster than its competitors.

SWOT Analysis helps in strategic planning in following manner

It is a source of information for strategic planning. Builds organizations strengths. Reverse its weaknesses. Maximize its response to opportunities. Overcome organizations threats. It helps in identifying core competencies of the firm. It helps in setting of objectives for strategic planning. It helps in knowing past, present and future so that by using past and current data, future plans can be chalked out.

Limitations of SWOT Analysis

SWOT Analysis is not free from its limitations. It may cause organizations to view circumstances as very simple because of which the organizations might overlook certain key strategic contact which may occur. Moreover, categorizing aspects as strengths, weaknesses, opportunities and threats might be very subjective as there is great degree of uncertainty in

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market. SWOT Analysis does stress upon the significance of these four aspects, but it does not tell how an organization can identify these aspects for itself.

There are certain limitations of SWOT Analysis which are not in control of management. These include

Price increase; Inputs/raw materials; Government legislation; Economic environment; Searching a new market for the product which is not having overseas market due to import restrictions; etc.

Internal limitations may include Insufficient research and development facilities; Faulty products due to poor quality control; Poor industrial relations; Lack of skilled and efficient labour; etc

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CHAPTER 3: SWOT ANALYSIS OF DIVIS LAB

3.1: STRENGTHS

It has four Research & Development centers. Each plant has its own R&D center. Divis R&D has evaluated more than 500 product opportunities and developed processes for more than 200 products, out of which 80 are already at commercial scale.

R &D facilitates in Optimizing production efficiency and economy of scale without sacrificing quality and Development of environment friendly effluent and/or waste by products.

Processes, systems, operations and decisions are aligned to ensure that the end product is of high quality. Divis has all the equipment required to monitor and ensure the production of quality products.

Cost competitive and faster delivery structure.

Transparency in operation

Strong ties with innovator companies and currently partners with 20 of the Top 25 global pharmaceutical companies

DIVI has the strongest CRAMS model in India

DIVI has the strongest balance sheet, with almost zero debt and a strong stream of positive cash flow.

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Strong financials

14000 skilled workforces

Largest distribution networks-2500+skilled field force.

Increasing liberalization of government policies.

Efficient technologies for large number of generic drugs.

Strong brand image.

Certificatation

Divi has triple Certifications ISO-9001 (Quality Systems), ISO- 14001 (Environment Management Systems) and OHSAS-18001 (Occupational Health and Safety systems) Divi has a total of 37 drug master files (DMFs) with US-FDA and 204 EDMFs and 16 CoS (Certificates of Suitability) with various European Union authorities. Divi has filed a total number of 8 patents for generic products.etc.

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3.2: WEAKNESSES
Lack of experience to exploit efficiently the new patent regime.

Stricter registration procedures.

Alternatives are easily available.

L ow or NO switching over costs for the customers.

Large amount of money spent for research and development.

Higher employee cost

More expenditure on power fuel The economic slowdown during the past years had a large impact on DIVIs custom synthesis revenues.

Projects are likely to be costly.

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3.3: OPPORTUNITIES Growing income Growing attention to health. Globalization. New therapy approaches. New diagnoses and new social diseases. Saturation point of the market is far away. Ageing of the world organization.

To drive growth, DIVI is working on over 20 generic opportunities, which are likely to unfold gradually in the coming years.

More exports in European and American countries.

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3.4: THREATS High entry costs in new markets High costs of sales and marketing. High competition in the market.

Competitors have a similar product

High costs of discovering new products, Few discoveries

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REFERENCE
www.divislabs.com

www.business.qld.gov.au Annual report of divis lab 2012-13

www.moneycontrol.com

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