Performance Highlights & Growth

Net Turnover Net Worth (Rs. in million) (Rs. in million)

6,148

7,734

2,616 1,077 1,062 400

1998-99 2003-04 2008-09 1998-99 2003-04 2008-09

Growing Asset Base Growing Investment in R&D (Rs. in million) (Rs. in million)

Revenue 1,079 Capital 9,109 Total

578 501

148 1,482 101 79 396 33 46 47

1998-99 2003-04 2008-09 1998-99 2003-04 2008-09

Safe Harbour Statement This report contains forward-looking statements, which may be identified by their use of words like `plans', `expects', `will', `anticipates', 'believes', 'intends', 'projects', 'estimates' or other words of similar meaning. All statements that address expectations or projections about the future, including but not limited to statements about Company's future growth drivers, product development, market position and expenditures are forward looking statements. Forward-looking statements are based on certain assumptions and expectations of future events. The Company can not guarantee that these assumptions and expectations are accurate and will be realised. The Company's actual results, performance or achievements could thus differ materially from those projected in any forward-looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements, on the basis of any subsequent developments, information or events. Corporate Information (As on 30th July, 2009) Board of Directors R & D Centers Promoter-Directors • Ambala-Chandigarh Highway Lalru – 140 501, Punjab, India Mr. Soshil Kumar Jain Chairman B-1/E-12, Mohan Co-operative Indl. Estate Mr. Ravinder Jain Managing Director • Mathura Road, New Delhi – 110 044, India Dr. Rajesh Jain Joint Managing Director • A-224, Okhla Indl. Area, Phase – I Mr. Sandeep Jain Joint Managing Director New Delhi – 110 020, India

Mr. Sumit Jain Director - Operations & • Plot No. E-4, Phase II, Indl. Area Projects Mohali – 160 055, Punjab, India

Independent Directors • Plot No. 72/3, Gen Block, T.T.C. Indl. Area Mr. R.L. Narasimhan Mahape, Navi Mumbai – 400 710, India

Mr. N.N. Khamitkar Sales & Marketing Office

Mr. Sunil Kapoor 701, Sagar Tech Plaza, ‘A’ Wing, Saki Naka, Mr. Gurmeet Singh Andheri (East), Mumbai – 400 072, India

Mr. K.M. Lal Statutory Auditors Dr. A.N. Saksena M/s. S.R. Batliboi & Co. G.M. Legal & Company Secretary Chartered Accountants, Gurgaon, India Mr. Vinod Goel Cost Auditors

Registered Office M/s. J.P. Gupta & Associates Cost Accountants, New Delhi, India Ambala-Chandigarh Highway Lalru – 140 501, Punjab, India Registrar & Transfer Agents

Corporate Offices M/s. Skyline Financial Services Pvt. Ltd. 246, Sant Nagar, 1st Floor, Main ISKCON Temple Road, • B-1 Extn./G-3, Mohan Co-operative Indl. Estate East of Kailash, New Delhi – 110 065, India Mathura Road, New Delhi – 110 044, India Banks • B-1 Extn./A-27, Mohan Co-operative Indl. Estate Mathura Road, New Delhi – 110 044, India Axis Bank Ltd.

Works IDBI Bank Ltd. Indian Overseas Bank • Ambala-Chandigarh Highway Lalru – 140 501, Punjab, India State Bank of India

• Malpur, Baddi, Dist. Solan State Bank of Mysore Himachal Pradesh – 173 205, India State Bank of Travancore

• B-1/E-12, Mohan Co-operative Indl. Estate Union Bank of India Mathura Road, New Delhi – 110 044, India

• A-241/242, Okhla Indl. Area, Phase – I Website New Delhi – 110 020, India www.panaceabiotec.com

Chairman’s Message

It’s the time of the year when I look forward to speak completion. Responding quickly to the global to you all about your company’s performance. Our need, Panacea Biotec is partnering with WHO for principles and values continue to propel us towards manufacturing the vaccine candidate for protection our vision to become the largest and most admired against H1N1 virus (swine flu), a major global threat. health management company, leading the industry in developing brands and vaccines that preserve and The financial storm that swept across the world improve human life across the globe. impacted businesses across the globe. Uncharacteristic forex losses due to unprecedented international In February, 2009, your company completed 25 years currency imbalance, manifested in the aftermath of of spectacular growth & success. It is a significant global financial crisis. Forex losses were a bane for milestone. We have grown from a small establishment many Indian companies and Panacea Biotec too was located in Delhi to a major player in the health saddled with its fair share. management industry and have created a significant shareholders’ value. Risk has become an integral part of all business activities. It becomes our foremost responsibility to We have continuously introduced new brands and manage it effectively and to ensure that our business nourished our existing brands with appropriate focus activities are beneficial to our customers & other stake for growth. We have begun exploring alternative holders To mitigate it, we shall continue to focus on ways to create value and to infuse our products and rigorous investment discipline, operational excellence services with even better innovative technology. Going and pursuing all opportunities to enhance the forward, we intend to build our portfolio of brands in a underlying performance of our business. way that gives customers multiple reasons to continue their engagement with us. R & D is where we seed and On behalf of the Board, my sincere thanks to every nurture new growth platforms and this year too we member and employee of Panacea Biotec for their continued to invest in it. This will help our Company to commitment, enthusiasm and unstinting efforts as deliver sustainable growth for many years to come. well as to all our partners and associates for their encouragement & support, which we continue to Throughout the year, initiation of major and highly count on as we forge ahead. innovative projects highlighted our team’s ability to carry ambitious projects through to successful Best wishes to you all!!

Soshil Kumar Jain Managing Director’s Message

In the year under review, we have experienced both and strategies. We are committed to introducing a change and continuity. What remained unchanged steady flow of innovative health care and vaccine is our tradition - commitment to innovation, products to fulfill the unmet healthcare needs of the consistency and integrity - the distinct hallmarks of masses. Panacea Biotec. Our excellence lies in execution. On the basis of A strong financial standing, impressive and our strengths, a significant portfolio of projects, dedicated customer service and technological robust pipeline of products, solid financials and the progress at all levels reflect the steady and dynamic confidence of our stakeholders, your company is nature of your company. looking ahead to pursue steady and well balanced growth and exhibit significant global presence. Panacea Biotec has been focusing its R&D efforts on preventive as well as therapeutic healthcare Our goal remains to create long term wealth for solutions. We have launched world’s first fully liquid our shareholders. We’ll continue to build a multi- vaccines - EasyFour & EasyFive and have partnered specialty company with a goal to become a leading with WHO & UNICEF in their effort to maximize coverage of vaccines under the expanded program health management company across the world. on immunization. I express my heartily thanks and look forward to The day is not far away when Panacea Biotec would your continued support as stakeholders of the be known as a truly global organization. company. It is with your valuable support that we can achieve our vision to be a global health As a leading health management company, we management Company. can deal with future challenges most effectively by exhibiting innovation in all our systems, processes With best wishes!!

Ravinder Jain Financial Highlights

(Rs. in million) Particulars 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00 Financial Performance Summary Net Turnover 7,734.2 8,304.4 8,315.5 5,363.5 3,255.4 2,616.2 2,691.5 2,739.3 2,176.7 1,866.3 Total Income 7,993.9 8,676.2 8,615.1 5,434.5 3,309.9 2,686.7 2,733.0 2,763.4 2,251.7 1,873.8 EBITDA 2,444.6 2,177.6 2,298.8 1,233.8 652.3 389.2 520.5 547.0 480.0 412.7 PBT (923.7) 1,903.9 2,091.0 1,002.1 429.4 217.6 336.3 406.4 426.1 329.3 PAT (690.5) 1,331.7 1,468.1 609.4 300.7 164.5 214.2 249.3 228.8 259.3 Cash Accruals 2,001.4 1,802.2 1,823.2 791.6 463.1 283.2 310.5 314.5 287.6 291.0 Balance Sheet Summary Equity Share Capital 66.8 66.8 65.8 57.2 57.2 57.2 57.2 57.2 57.2 57.2 Preference Share Capital - - - 904.3 904.3 957.8 53.5 63.0 68.0 100.0 Reserves & Surplus 6,084.7 6,905.3 5,325.1 1,546.0 1,192.4 1,039.0 948.1 805.8 701.6 546.0 Net Worth 6,147.9 6,966.7 5,383.9 1,593.6 1,235.1 1,076.9 981.2 839.9 754.5 603.2 Loan Funds 7,002.9 3,982.4 2,134.2 5,866.5 1,610.4 1,680.2 1,292.2 1,060.1 719.8 681.3 Deferred Tax Liability 333.8 595.0 383.9 246.8 135.1 74.8 60.6 73.5 - - Total Liabilities 13,488.2 11,549.5 7,909.0 8,620.9 3,899.3 3,808.9 2,411.6 2,059.5 1,546.6 1,384.5 Net Fixed Assets 6,938.7 5,343.7 4,136.1 2,337.1 1,376.8 1,054.5 963.0 893.5 565.3 408.4 Investments 2,165.7 2,049.3 229.5 61.4 61.4 39.1 52.6 52.6 47.1 18.1 FCMITDA† 96.0 ------Net Current Assets 4,284.2 4,151.2 3,536.4 6,212.8 2,446.7 2,696.0 1,371.8 1,090.4 929.9 958.0 Miscellaneous Expenditure 3.6 5.3 7.0 9.6 14.4 19.3 24.1 23.1 4.3 - Total Assets 13,488.2 11,549.5 7,909.0 8,620.9 3,899.3 3,808.9 2,411.6 2,059.5 1,546.6 1,384.5 Key Performance Indicators Profitability Ratios EBITDA Margin 32% 26% 28% 23% 20% 15% 19% 20% 22% 22% PBT Margin (12%) 23% 25% 19% 13% 8% 12% 15% 20% 18% PAT Margin (9%) 16% 18% 11% 9% 6% 8% 9% 11% 14% Shareholders related Ratios Equity Dividend - 100% 100% 100% 150% 100% 100% 100% 100% 100% EPS (Basic)* (in Rs.) (10.3) 20.1 23.7 9.9 4.4 2.7 3.6 4.2 3.8 4.4 Cash EPS (Basic)* (in Rs.) 30.0 27.0 29.5 13.1 7.2 4.8 5.3 5.4 4.9 4.9 Book Value* (in Rs.) 92.1 104.3 81.9 27.9 21.6 18.8 17.2 14.7 13.2 10.6 Return on Net Worth (11%) 19% 27% 35% 19% 14% 20% 29% 28% 40% Other Ratios Current Ratio 1.6 2.8 3.0 2.8 1.4 1.7 1.3 1.3 1.3 1.4 Debt Equity Ratio 0.9 0.5 0.4 2.9 0.3 0.5 0.4 0.4 0.1 0.2 Return on Capital Employed (6%) 13% 20% 8% 10% 8% 14% 17% 19% 23% Interest Coverage Ratio 7.6 18.7 15.1 10.4 6.6 3.2 4.0 5.5 6.8 7.0 Debt Service Coverage Ratio 7.2 16.2 6.8 4.1 2.3 1.6 2.8 3.5 1.8 5.9

†Foreign Currency Monetary Item Translation Difference Account *Per Equity Share of Re.1 each. Contents

Setting the Scene 2 Financial Statements 68

• Balance Sheet

Management Discussion & 3 • Profit & Loss Account Analysis Report • Schedules to Balance Sheet and • Industry Structure & Developments Profit & Loss Account

• Panacea Biotec - Innovation in Support of Life • Cash Flow Statement

• Business Segments • Statement u/s 212 in respect of Subsidiary Companies • Pharmaceutical Formulations • Financial details of Subsidiary Companies • Vaccines

• Manufacturing Facilities Auditors’ Report on Consolidated 99 • Research & Development Financial Statements • Subsidiaries, Joint Ventures, Collaborations and Tie-ups Consolidated Financial Statements 100

• Financial Performance • Consolidated Balance Sheet

• Opportunities & Outlook • Consolidated Profit & Loss Account

• Future Growth Drivers • Schedules to Consolidated Balance Sheet and • Risks, Challenges & Threats Profit & Loss Account

• Corporate Social Responsibility • Consolidated Cash Flow Statement

Directors’ Report 43

Corporate Governance Report 53

Auditors’ Report 66

1 Panacea Biotec • Annual Report 2008-09 Setting the Scene

• Panacea Biotec is the 2nd Largest Vaccine • 1,158 patent applications filed, 325 granted/ producer in India accepted for grant globally as on 31.03.2009 • 3rd Largest Biotechnology Company in India • Company’s Products reach more than (ABLE Survey 2009) 35 countries globally • Panacea Biotec has been pre-qualified by • Played a key role in eradicating polio by supplying WHO to supply Oral Polio, Hepatitis B, Ecovac4 more than 6 billion doses of Oral Polio Vaccine to (DTwP-Hep B), Easyfour (DTwP-Hib) and Easyfive Govt. of India & UNICEF (DTwP-Hep B-Hib) Vaccines • Millions of patients enjoying happy & healthy • First Indian company to develop and launch life through our well established brands in niche innovative combination vaccines viz. Ecovac4, therapeutic areas like pain management, diabetes Easyfour and Easyfive in India management, organ transplant • Ranked 48th amongst Pharmaceutical Companies • Stupendous contribution to Shareholders’ value in India (ORG IMS MAT March’09) • Continuous investment in Research & • Pharmaceutical formulation facility at Baddi Development activities - around 14% of net certified as cGMP compliant by various regulatory turnover invested during fiscal 2009 authorities including the German Regulatory • Over 260 Scientists working in 5 state-of-the art Authority and ANVISA (Brazil) R&D Centers • 26 product patents valid in more than 60 countries • A family of around 3,200 people working world wide relentlessly in improving quality of life of billions of people across the globe Management Discussion and Analysis

Industry Structure & of them being, the Global Immunization The global Developments Vision and Strategy (GIVS), launched in market for 2005. In brief, GIVS aims to assist countries Global Vaccine Industry to immunize more people, from infants to vaccines is The global market for vaccines is expected seniors, with a greater range of vaccines. expected to to grow at a CAGR of more than 16% in the GIVS is the first ever global ten-year grow at a CAGR next five years and is expected to reach US$ framework to fight vaccine-preventable of more than 30 billion by 2012, as per various industry diseases through immunization and covers 16% in the next the period 2006 to 2015. estimates. The vaccine industry will emerge five years and is as the fastest growing therapeutic area. GIVS has four main aims: The US and Europe represents the two expected to reach • to immunize more people against more largest vaccine markets and will continue to US$ 30 billion by diseases, to reduce childhood morbidity experience healthy growth in future. and mortality; 2012. Presently, Paediatric vaccines dominate • to introduce a range of newly available the global vaccines market but the share vaccines and technologies; of adult and therapeutic vaccines is likely • to integrate other critical health to increase significantly and will fuel the interventions with immunization; and future growth in the global vaccines market. The cancer vaccine market, led by cervical • to manage vaccination programmes cancer vaccines, is presently one of the most within the context of global lucrative areas for vaccine manufacturers. interdependence. Overall, cancer vaccines are expected to account for nearly 27% of the total vaccine Indian Vaccine Market revenues by 2012. Successful development India represents one of the fastest of vaccines against pandemic flu, Pneumo, growing vaccine markets in the world. Dengue, HIV & TB in addition to the With the national immunization program Hexavalent paediatric combination vaccines (NIP) gaining more importance, several would add to the growth of the vaccine multinational companies now see India as industry. a key market for their vaccine business. As Immunization is the most important and per industry estimates, the Indian vaccine cost-effective way of eliminating child market was US$665 million in 2007-08 mortality. The development of combination and is growing at over 20%. This market is vaccines has resulted in lower cost of primarily driven by exports worth more than immunization and simplified the current US$360 million. The domestic market for immunization schedule as it offers an vaccines is around US$300 million with the opportunity of fighting against multiple private sector accounting for around half diseases with a single injection. of it.

WHO and UNICEF have taken a number Domestic companies presently dominate of measures to boost the awareness and this market with around seven out of top access to vaccines in their efforts to meet ten players being domestic companies. But the challenges in global immunization. One with India’s IPR (Intellectual Property Right)

3 Panacea Biotec • Annual Report 2008-09 laws improving considerably and healthcare Polio Eradication in India expenditure increasing, foreign companies The goal of Global Polio Eradication Initiative have started to acknowledge India’s (GPEI) is to ensure that no child will ever potential as a vaccine hub. again know the crippling effects of polio. Owing to the factors like increasing public Polio is a highly infectious disease which and private healthcare spending, birth of invades the nervous system and can cause around 25 million babies each year and total paralysis in a matter of hours. It can a large prevalence of both infectious and strike at any age, but affects mainly children chronic diseases, the domestic demand under five. Polio is mainly passed through for vaccines in India will continue to grow person-to-person (i.e. fecal-oral) contact, at double-digit growth rate, offering and infects those who do not have immunity vaccine players enough challenges and against the disease. There is no cure for opportunities to expand their horizon in the polio, but the disease can be prevented by country. immunization with polio vaccine. Apart from the domestic market, India is Polio Cases Data also emerging as a center for exports. Both Year No. of Polio Cases research and manufacturing of vaccines can 1998 1934 1999 1126 be undertaken in India at much lower cost 2000 265 than in the west. Exports presently account 2001 268 for more than 50% of the country’s vaccine 2002 1600 market and with growing investment by 2003 225 both domestic and international players, 2004 134 2005 66 India is expected to fulfill the vaccine 2006 676 demand of both developing and developed 2007 874 countries alike. 2008 559 2009 206* (Source: www.npspindia.org) *data as on July, 2009 As per WHO guidelines, a WHO region can be Vaccine to Inactivated Polio Vaccine (IPV). The global certified polio free only if it does not record In those countries, where polio has been pharmaceutical any case of polio during three consecutive eradicated, IPV is being used. The world years following the year in which zero case health regulatory bodies suggest that the market is is registered first time. Assuming that India vaccination against polio must continue even expected to grow achieves zero case for the first time in 2010 after achieving polio eradication. 4.5 - 5.5 percent and thereafter, if it does not record any case in 2009 (a pace of polio in 2011, 2012 and 2013, India can similar to 2008) achieve its target of becoming polio free and Global Pharmaceutical Market and will reach become eligible for being declared as a polio The global pharmaceutical market audited free nation by WHO. However, immunization sales grew by approximately 5.1% (at the level of more activities will continue until the entire region constant exchange rate) to reach US$726 than US$820 (Pakistan & Afghanistan) becomes polio free. billion in 2008. (Source: IMS MAT Sept.’08), billion and is Immunization against Polio to largely as a result of strong sales for new expected to reach Continue: In developing countries, low innovative products and high market growth US$929 billion in in emerging pharmaceutical markets such as OPV effectiveness in the highest-risk 2012. communities (believed to be caused by a India and China. combination of high incidence of diarrheal The global pharmaceutical market is diseases, malnutrition and the high force expected to grow 4.5 - 5.5 percent in 2009 (a of Wild Polio Virus infection attributed to pace similar to 2008) and reach the level of crowding) has been identified as the key more than US$820 billion and is expected to challenge to interrupting Wild Polio Virus reach US$929 billion in 2012. transmission. Responses being explored, North America, Europe and Japan continued include inactivated poliovirus vaccine as a to remain the key markets accounting for supplement to Oral Polio Vaccine (mOPV) & 85% of the global pharmaceutical market development of a bivalent OPV containing in 2008. The emerging economies further both type 1 and type 3 virus. consolidated their position in the global The immunization against polio will arena with growth in countries like India, continue in the post polio eradication China, Russia, Brazil and Turkey exceeding era. It is expected that the mode of the growth in developed markets and are immunization may change from Oral Polio expecting to continue with the trend.

Region-wise Global Pharmaceutical Sales, 2008 Audited Market 2008 Sales* % Growth US $ bn % Mkt Share (Constant US$) North America 312 43 1.5 Europe 242 33 6.2 Asia, Africa & Australia 72 10 15.0 Japan 65 9 4.4 Latin America 35 5 12.0 Total Audited 726 100 6.1 *Excludes unaudited markets and Russia, Ukraine and Belarus audited data. Sales cover direct and indirect pharmaceutical channel purchases in U.S. dollars from pharmaceutical wholesalers and manufacturers. The figures above include prescription and certain over-the-counter data and represent manufacturer prices. Total may not add due to rounding off.

As a result of the pharmaceutical industry’s increased focus on these high-growth markets, the developing countries are benefiting from greater government spending on healthcare and broader public and private healthcare funding - which is driving greater access to, and demand for, innovative medicines.

5 Panacea Biotec • Annual Report 2008-09 The cost of research and development is rich product pipeline under development & continuously increasing due to multiple the research capabilities of the innovator and reasons including the cost of failure but the innovator benefits from lower research in the year 2007 there is a decline in R&D & development cost and reach in emerging expenditure. The continuous R&D spending markets of the generic partner, hence has increased but the number of New realizing higher gains from existing portfolio. Molecular Entities (NMEs) and biologics With competitive advantages in terms of approved by FDA is down. R&D, manufacturing and marketing, Indian companies are today in a strong position to partner with innovator pharmaceutical companies.

Indian Pharmaceutical Market

The Indian pharmaceutical industry is one of the fastest growing and the safest sectors in Indian economy. It is one of the world’s The pharmaceutical industry has, in the largest and most developed, ranking 4th in recent past, seen a trend of alliances and volume terms and 13th in value terms. India deals between innovators and generic accounted for 8% of global production and companies creating a collaborative business 2% of world markets in pharmaceuticals. The model. The generic partner gets access to Indian Pharmaceutical market is valued at Rs.353.7 billion and growing at 10.1% as per diabetics category has recorded the highest The Indian ORG MAT Mar’09. growth at 16% adding an incremental pharmaceutical value of Rs.2.6 billion. Other categories The Indian Pharmaceutical Market is with substantial presence of the Company, industry is one expected to treble in the next decade and viz. Pain & Analgesic and GI & Respiratory of the fastest catapult the country into top 10 markets have shown decent growth of 9% and 8% in the World by 2015, overtaking Mexico, growing and the respectively. Turkey & South Korea. safest sectors in With higher per capita income, increasing Indian economy. access to modern medicines, the emergence It is one of the of an organised retail segment and the fast world’s largest growing area of medical insurance, this segment is expected to continue its strong and most growth momentum and is estimated to developed, be worth US$30 billion by 2020, growing ranking 4th in at about 8% annually as compared to an volume terms The chronic therapy segment recorded a increase of 6% in the world as a whole. and 13th in value growth of 13.1% and contributed 28.3% But, even then, India’s share in the world of the total market while acute therapy pharmaceutical market would only come to terms. segment grew at a rate of 8.6%. The slightly over 2%. overall market growth was a mix of higher volumes of existing products, new product Playing a key role in promoting and introductions and price increases with all sustaining development in the vital field of three witnessing a positive trend. Around medicines, Indian Pharma Industry boasts of 75% of the overall market growth was led by quality producers and many units approved volume increases in existing products. by regulatory authorities in USA and UK.

Semi-urban and rural markets are becoming The Indian Pharmaceutical sector is an important driver for growth in the Indian highly fragmented with more than market. Extra-urban markets accounted 20,000 registered units. The leading 250 for 40% of the total sales in 2008. Acute pharmaceutical companies control around therapies dominate the extra-urban markets 70% of the market with market leader with 80% contribution while chronic holding nearly 7% of the market share. It is therapies are also growing especially in an extremely fragmented market with severe cardiac therapy (8%). price competition and government price control. In the coming years, upcoming small cities and rural areas will contribute almost as The pharmaceutical industry in India meets much to the pharma market growth as around 70% of the country’s demand metros and top-tier towns. for bulk drugs, drug intermediates and pharmaceutical formulations. There are Amongst the markets where the Company about 250 large units and about 8,000 operates the highest contributing group is Small Scale Units, which form the core anti-biotics (contributing around 18% to IPM) of the pharmaceutical industry in India and growing at par as compared to IPM and (including 5 Central Public Sector Units). has added an incremental value of Rs.5.6 These units produce the complete range of billion last year. pharmaceutical formulations, i.e., medicines The second largest group in terms of ready for consumption by patients and value contribution to IPM, Cardio Vascular about 350 bulk drugs, i.e., chemicals having system has recorded 13% growth with an therapeutic value and used for production of incremental value of Rs.4.6 billion. The anti- pharmaceutical formulations.

7 Panacea Biotec • Annual Report 2008-09

Panacea Biotec – Innovation development and product registration. The Panacea Biotec in Support of Life current research strengths of Panacea Biotec occupies the are focused, inter-alia, on: Panacea Biotec occupies a distinct position of the • Drug delivery system design and position in the Indian pharmaceutical and optimization; 2nd largest biotechnology industry with its business vaccine producer • Discovery and synthesis of new chemical model focussing on innovation, collaboration and biological entities; in India and has and brand building. The Company has endeavoured to provide research based • Design and development of new been ranked as products to fulfil the unmet medical needs. generation prophylactic and therapeutic the 3rd largest The Company has established infrastructure vaccines; and biotechnology and capabilities in research & development, • Development of humanized and Company (ABLE manufacturing and marketing of vaccines, fully human therapeutic monoclonal Survey 2009). pharmaceuticals and biopharmaceuticals. antibodies.

Panacea Biotec occupies the position of the The Company has been granted 26 product 2nd largest vaccine producer in India and has patents worldwide valid in more than 60 been ranked as the 3rd largest biotechnology countries including the U.S., E.U. Member Company (ABLE Survey 2009). Based on State, Russia, Japan, China, South Korea, the finished pharmaceutical formulations Australia and Brazil. business, the Company is placed at 48th rank State-of-the-art manufacturing amongst pharmaceutical companies in India facilities: Panacea Biotec has state of the (ORG IMS MAT March 2009). art manufacturing facilities for vaccines The Company has also moved ahead towards and pharmaceuticals complying to cGMP diversification in the field of healthcare standards. The Company is setting up through its subsidiaries as part of its bulk vaccine manufacturing facility for cell corporate vision to become a leading Health culture based vaccines, biopharmaceuticals, Management Company. recombinant and viral vaccines at Lalru, Punjab. Core Strengths at a glance The vaccine formulation facility at New Delhi is approved by WHO for Oral Polio Panacea Biotec is well positioned and and Recombinant Hepatitis B vaccines and recognized as a leading, research based Combination vaccines Ecovac-4 (DTwP- Health Management Company with HepB), Easyfour (DTwP-Hib) and Easyfive an objective to discover, develop and (DTwP-HepB-Hib). The Pharmaceutical successfully market innovative products to Formulations facility at Baddi has been meet unmet medical needs. To achieve these audited and certified as cGMP compliant by objectives, Panacea Biotec has: various regulatory agencies, including the Established capabilities in R&D: Panacea German Regulatory Authority and ANVISA Biotec has established five state-of-the-art (Brazil). R&D Centers with each center dedicated WHO Pre-qualification Status: The to specific research areas, driven by the pre-qualified supplier status enables the intellectual capabilities of over 260 scientists. Company to participate in UN Organizations The research facilities are self-reliant with procurement process around the world. The cross-functional capabilities for research and Company has been pre-qualified by WHO to development of drugs starting right from supply Oral Polio (mOPV and tOPV), HepB, lead identification to pre-clinical and clinical Ecovac-4, Easyfour and Easyfive Vaccines.

9 Panacea Biotec • Annual Report 2008-09 The Company is currently supplying Oral has been supplying oral polio vaccines to Polio, Hepatitis B and Easyfive Vaccines to UNICEF since fiscal 2000 and has steadily UNICEF. The Company has also commenced expanded and grown on this relationship supplying Easyfive Vaccines to Pan American with the commencement of supply of Health Organization (PAHO) during fiscal Easyfive vaccines during fiscal 2009. In 2009. addition to long-standing relationship Established Brand Equity: Panacea Biotec with its customers, the relationships with has established brand equity in a number of key suppliers like Novartis Vaccines, Sanofi therapeutic areas like diabetes management, Pasteur and PT Bio Farma are also a source of pain management, organ transplantation its competitive strength. and paediatric immunization. Its leading Collaborations & Joint Ventures with Key brands including Glizid-M, Nimulid, Panimun Industry Players: Panacea Biotec has a Bioral, Pangraf and Mycept are amongst rich history of collaborations and ventures the top five positions in their respective therapeutic segments. Its flagship brand, with various industry players and has Glizid-M is ranked at 171 amongst the top several business relationships with various brands in Indian Pharmaceutical Market, national/international research institutes, according to the stockists secondary audit by academic universities and commercial ORG IMS (MAT Mar’09). corporations including National Institutes of Health (USA), Novartis Vaccines, Sanofi International Presence: In addition to the Aventis, Biotech Consortium India Ltd., strategic alliances with leading regional Nederland Vaccin Institut (NVI), PT Bio Farma, companies in Latin America, South East Asia, CIS and Africa; Panacea Biotec has created a etc. These collaborations, ventures and global presence through its wholly-owned relationships enable the Company to secure subsidiaries in strategic markets including in-licensing, out-sourcing and other business US, Germany, Switzerland and UAE. opportunities.

Relationship with Key Business Associates: Qualified & Experienced Manpower: Panacea Biotec has a long-standing Panacea Biotec has 3,196 employees relationship with its key customers and including 261 scientists engaged in R&D, business partners including successful 1,006 in production and 1,213 in sales & business record of 10 years with UNICEF. It marketing.

10 Panacea Biotec • Annual Report 2008-09 Business Segments Diacar Alpha & Diacar Delta Domestic Sales & Marketing Diacar Alpha & Diacar Delta together Network are the highest contributing SBU of the Company with dedicated marketing Panacea Biotec has successfully established and sales infrastructure for Diabetes and leading brands through a focused scientific Cardiovascular management. These SBUs marketing approach. To cater to the are committed to provide new therapies individual nuances of specific therapeutic and innovations in drug delivery and overall segments, Panacea Biotec operates through diabetes disease management. India’s seven strategic business units (SBUs). diabetic population is estimated to be The domestic pharmaceutical business around 41 million and growing rapidly. WHO is organised into three classes – Super- estimates that diabetes related mortality speciality i.e., Critical Care & OncoTrust, could increase to 35% by 2015. Speciality i.e., Diacar Alpha & Diacar Delta and Multi-specialty i.e., Procare & Growcare. These SBU promote the brands to To cater to the large and voluminous target specialists viz. Endocrinologists, bottom of the Indian Pharmaceutical Market Diabetologists, Cardiologists and Physicians pyramid, the Company has taken an initiative in a fiercely competitive scenario and have by launching a new SBU, viz. Value India achieved significant leadership position Healthcare. in oral anti-diabetic segment. Of late the SBU has also started focusing on the The aim of each SBU is to attain leadership Nephrologists. position in its chosen markets and establish brand equity in respective therapeutic To tap the growing cardiology segment segment by way of innovative products as the SBU now has sharpened its focus on well as innovative marketing approach with Cardiology by having an additional team differentiated products. The SBUs promote which would have a dual focus on Cardiology a portfolio of brands with a special focus on and Diabetology.

Orthopedicians, Cardiologists, Diabetologists, The flagship brand of the SBU, Glizid-M Physicians, Nephrologists, Chest Physicians, (Gliclazide + Metformin) is the No. 1 brand Surgeons, Dentists, Consulting Physicians, while Glizid (Gliclazide) is the no. 2 brand in Paediatricians and Gastro-enterologists. their respective categories. Glizid-M apart

11 Panacea Biotec • Annual Report 2008-09 from the above is ranked at 171st position (Tacrolimus) continued to be the amongst 30,000 odd pharmaceutical brands. most preferred and trusted brand of Apart from Glizid-M and Glizid, the brand Tacrolimus in the country. Panimun Bioral portfolio of this SBU includes: (Cyclosporine) maintained its position in the Cyclosporine market owing to the Oral Hypoglycemic agents: Glizid MR wealth of experience and confidence in (Gliclazide modified release), Betaglim it. Mycept-S (Mycophenolate sodium) (Glimepiride), Betaglim M (Glimepiride surging ahead, provided valuable support + Metformin), Metlong & Metlong DS to Mycept (Mycophenolate mofetil). Fosbait (Metformin), Pioryl (Pioglitazone + (Lanthanum carbonate) grew significantly in Glimepiride), Oglo (Pioglitazone), Gliben the year, as also did Siropan (Sirolimus). Total, Glizid Total, Glim Total and Myelogen Forte. The year under review was also a momentous year for the Critical Care SBU. Cardiovascular: Lower A (Atorvastatin), It entered into Rs.1.2 billion Erythropoietin Lower EZ (Atorvastatin + Ezetimibe), Lower market with EPOTrust, which since its TG (Atorvastatin + Fenofibrate), Kingbeta launch has been able to establish itself (Metoprolol) and Hitarget (Telmisartan) as a prominent player in the market. The range. introduction of K-Bait (Calcium Polystyrene New product launches during the year Sulphonate) a treatment for Hyperkalemia in include the Hitarget (Telmisartan) range of Chronic Kidney Disease (CKD) patients also Products. complemented the thrust in the Nephrology portfolio. Critical Care Standalone conferences like Renal Summit III and participation in various conferences Critical Care SBU consolidated and re-inforced the scientific image and strengthened its leadership status in enhanced the reputation of Critical Care Nephrology and Organ Transplantation in SBU throughout the year. Fully aware that the year 2008-09 by organic growth as well newer specialities like Rheumatology and as by entering newer markets with new Haematology provide opportunity for the brand introductions. growth of existing brands, it is consciously Aided by a dominant penetration in working on making these opportunities the Transplantation segment, PanGraf into viable business propositions. In the

12 Panacea Biotec • Annual Report 2008-09 coming years, Critical Care SBU proposes to Procare has taken definite steps towards launch molecules aimed at satisfying unmet making significant inroads in the medical needs, thereby aiming to grow faster Gastroenterology segment with two and become bigger in the Nephrology and important launches of Livoluk Fibre Transplantation market. (Lactulose + Isapghula) and Sitcom (Euphorbia Prostata) during the year.

Procare This SBU promotes a portfolio of brands with special focus on Orthopedicians, Surgeons, Procare SBU of the Company endeavours to Dentists & Gastroenterologists apart from consolidate and strengthen its image in the Consulting Physicians & General Physicians. field of chronic health care management Some of the major brands of Procare across with specific focus on Osteoarthritis, Pain different therapeutic segments are: management and Gastrointestinal disorders. Anti-arthritis: Willgo, Kondro OD, Pain is a frequent cause for clinical visits KondroAcute with around 45% of the population seeking medical help for pain at some point in their Pain relievers: Nimulid, Nimulid SP, Nimulid lives. Pain occurs across the life span, and MR, Nimulid HF it has been estimated that 4 out of every Gastrointestinals: Livoluk, Livoluk Fibre, 10 people with moderate or severe pain OD-pep, Sitcom do not get adequate relief. Chronic pain is Anti-osteoporosis: Alphadol, Alphadol-C, widely believed to represent a disease itself Kingcal. causing long-term detrimental changes in musculoskeletal and nervous system. Pain On the prescription front there has been gain interferes with sleep, activities of daily living in equity from Specialties like Gastro and and productivity. In order to help millions Ortho during the year under review. of patients suffering from various painful inflammatory disorders, Procare SBU is Growcare marching ahead to provide therapeutic modalities to these patients and has recently Growcare is the Multi-Specialty business launched JAIHO (Lornoxicam + Paracetamol) of Panacea Biotec with special focus in pain management segment. in Respiratory Disorders. The different

13 Panacea Biotec • Annual Report 2008-09 specialties covered are Chest physicians, Tumor and a supportive therapy for patients Consulting Physicians, General Physicians, suffering from bone metastases. ENT, Paediatricians, Surgeons and The Brand Portfolio includes PacliTrust Orthopedicians. 37 different products are (Paclitaxel Injection); DoceTrust (Docetaxel marketed by this SBU with presence in Injection); GemTrust (Gemcitabine injection); multiple therapy areas. TemoTrust (Temzolomide Capsules) and Some of the popular brands of Growcare are: ZoleTrust (Zoledronic Acid Injection). Two new brands, viz. GefiTrust (Gefitinib) and Anti-infective: Cefmentin (Cefixime+ OxiTrust (Oxaliplatin) were launched during Lactobacillus), Ocimix (Ornidazole+Ofloxacin) the year under review. The ‘Trust’ umbrella Anti-Allergic: Zomont Range branding has gained recognition amongst Cough, Cold and Fever: Toff MD, Toff DC & the oncologist community and is helping Toff expectorant, Orangemol Suspension build OncoTrust as a big brand.

Pain Management: Nimulid MD & Nimulid MD Kid (Mouth dissolving) tablets, Nimulid Value India Healthcare Suspension, Nimulid Transgel. Value India Healthcare is the SBU launched Anti TB: Xeed 2, Xeed 3E & Xeed 4 tablets to cater to mass markets. This SBU’s main fixed dose combinations, Myser (Cycloserine) aim is to provide a unique ‘value for money’ & Myobid (Ethionamide). proposition in its offering to the General Anti haemmorohidal: Thank OD Tablets. Physicians practicing mainly in semi-urban and rural set up.

This SBU is setting a trend in offering OncoTrust significant innovative brands to fight pain, Panacea Biotec made its maiden entry into allergy and gastro-intestinal disorders to the rapidly growing field of Oncology in the semi urban and rural markets. The fiscal 2008 with launch of a new SBU called main brands are TwoWks, Combipunch, ‘OncoTrust’. Oncology as a therapeutic Instanim MD, TwinEase ER, RojOD, Takecal, The overall size segment is rated as one of the fastest Kofzero and Koldzero. Anti-infectives as a of the domestic growing fields globally and in India also. class is a fast growing market. The Value oncology market The Oncology market is well poised for a range of anti-infectives offered by the SBU, promising future ahead with steady increase ValueCef, ValueOrni, ValueMox, ValueMentin, is around Rs.9.6 in cancer incidence rate, superior and more ValueLevo and ValueThral are steadily billion and is accessible diagnostic facilities, increased gaining acceptance. awareness about the disease and feverish growing at This SBU currently operates in Rest of pace of new molecule introduction. The around 22%. Maharashtra region, Madhya Pradesh and overall size of the domestic oncology market More than 50% Chattisgarh with plans for expansion to other is around Rs.9.6 billion and is growing at states in due course of time. of the world’s around 22%. More than 50% of the world’s cancer burden, cancer burden, in terms of both number in terms of of cases and deaths, occurs in developing Brands Review countries. both number Over the years, Panacea Biotec has of cases and The current product portfolio of OncoTrust established leading brands that enjoy top deaths, occurs comprises of Cytotoxic chemotherapy of the mind recall by the medical fraternity. in developing covering indications therapeutic segments The Company’s brands command excellent such as Breast Cancer, Lung Cancer, countries. market share in their therapeutic segments. Pancreatic Cancer, Ovarian Cancer and Brain By ORG (MAT Mar’09) Sales value, Panacea

14 Panacea Biotec • Annual Report 2008-09 Biotec is the 50th ranked company in International Pharmaceuticals The Company the Indian Pharmaceutical Market with Business is currently in Nephrologists, Dentists, Orthopaedicians and The year under review marked the the process of Diabetologists giving the best support. As achievement of landmark initiatives & per Stockist Secondary Audit of ORG (MAT accolades for the Company’s international registering its Mar’09), Glizid-M stands at 171st rank among formulations business. The Company clocked products in key Top brands in the Indian Pharmaceutical a robust sales growth of 27% over previous new markets market and retain number one position year and reached to a level of Rs.426.1 including US, within its category. million. The major markets continue to do European Union, well inspite of recessionary trends in the later The following table set forth the key Switzerland, brands of the Company across therapeutic part of the year. In addition to this, successful categories and their ranking/ market share in commercialization happened in newer South Africa, India as per ORG IMS audit: markets across Central America, Africa and Turkey, Brazil, Asia. Brand Standing and Market share Mexico, The Company has identified Organ Columbia, Brands Market Ranking Transplantation, Nephrology, Metabolic Share % Venezuela, Chile, Disorders, Pain management, Oncology, Diabetes and Cardiac Care: Philippines & Gastro-intestinal & Anti-infective products Glizid M 24 1 as major thrust areas for the future. The Malaysia. Glizid 80mg 23 1 Glizid 40 mg 31 1 Company is currently in the process of Glizid MR 60mg 13 2 registering its products in key new markets Glizid MR 30mg 16 2 including US, European Union, Switzerland, Glizid Total 21 2 South Africa, Turkey, Brazil, Mexico, Pain Management: Columbia, Venezuela, Chile, Philippines Willgo 60 1 Nimulid MD 28 1 & Malaysia. The Company has set-up Nimulid 100mg 7 2 international subsidiaries in US, Germany, Nimulid Suspension 14 2 Switzerland and UAE to steer product Nimulid Safeinject 15 2 registration. Nimulid Transgel 17 2 Nimulid Nugel 11 2 The Company focuses on brand building Nimulid SP 10 4 primarily leveraging its portfolio of novel Nimulid MR 12 4 patented products in key segments. The Softdiclo 11 3 major achievements in terms of international Kondro OD 21 3 formulation business during the year have Tuberculosis Management: Myser 19 3 been: Gastro-intestinal: • Supply of Kidney Transplant Livoluk 8 4 product, Mycept in the 1st year of • Source of the data is ORG IMS SSA audit MAR 2009. commercialization to Russian Ministry of • Market Share and rank is calculated within Health. its immediate operating market i.e the strength or the immediate market (wherever • Introduction of 10 products especially applicable). in the Nephrology & Organ Transplant

Critical care brands, Panimun Bioral, Mycept category in various markets. and Pangraf are also the leading brands in • Approval of Manufacturing facilities from the Organ Transplantation segment but have main regulatory agencies viz. German a poor reflection in ORG IMS audit, as ORG Regulatory Authority and ANVISA (Brazil), IMS SSA audit does not track institutional paving the way for entry into nearly US$ sales or Direct to patient sales. 600 million Nephrology space in the

15 Panacea Biotec • Annual Report 2008-09

represented markets. In addition, this Pertusis (DTwP)-Hepatitis B), Easyfour The Company approval allows the Company an entry (DTwP-Haemophilus Influenza type B (Hib)) has launched into markets of CIS (Ukraine), Africa and Easyfive (DTwP-Hepatitis B-Hib). The (Tanzania, Ethiopia, Uganda) and Middle Company has WHO pre-qualification for all PolProtec, an East (Syria). these vaccines and is currently supplying oral innovative polio, Hepatitis B and Easyfive Vaccines to In its efforts to build brands, Panacea Biotec injectable polio UNICEF for their global requirements. has continued to chase its commitment vaccine, in the of working closely with the leading The Company also received an award for Indian market Nephrologists & Transplant Surgeons in supply of Easyfive Vaccines from PAHO and in pre-filled represented/planned markets. Due to has initiated supplies of Easyfive vaccines syringe, NovoHib these efforts, the Company’s products are during the current year. being routinely procured & purchased by (monovalent The vaccines, Ecovac4, Easyfour and Easyfive the Ministries of Health in Asia (Sri Lanka, Hib) vaccine are also being marketed in India through Vietnam, Mongolia) and in CIS (Ukraine). its joint venture Company Chiron Panacea and PrimOpol, The Company has initiated a series of Vaccines Pvt. Ltd. (CPV). The Company triavalent Oral unique promotional activities in represented has gained significant market share in the Poliomyelitis markets; thereby re-affirming its credentials combination vaccine segment in domestic Vaccine in multi- as a scientifically focused company. Some of market. dose through them are “Free Blood level for patients taking During the year, the Company has launched Tacrolimus (in Sri Lanka)” and “Bone Mineral CPV. PolProtec, an innovative injectable polio Density (BMD) estimation for patients to vaccine, in the Indian market in pre-filled detect & manage early onset of Osteoporosis syringe, NovoHib (monovalent Hib) vaccine patients (in Sri Lanka & other markets)”. and PrimOpol, triavalent Oral Poliomyelitis In addition, the Company’s products are in Vaccine in multi-dose through CPV. the advanced stage of registration in majority As regards combination vaccines, developing of the potential markets viz: Latin America countries would need these vaccines to the (Brazil and other MERCOSUR markets), Africa tune of around 300 million doses annually. (South Africa, Nigeria, Kenya), Middle East The combined demand of all combination (Jordan, Egypt, Yemen) and Asia (Philippines, paediatric vaccines worldwide was valued at Malaysia, Singapore). These commercial US$ 600 million in 2005 and is estimated to realizations is expected to enable the grow to US$ 1.6 billion by 2012. Pentavalent Company to register quantum increases in vaccine market is estimated to cross a mark the business outlook in the coming 2-3 years. of US$ 1 billion out of which UN agencies are likely to procure this vaccine worth more Vaccines than US$ 350 million (around Rs.17 billion) by 2009 itself. Panacea Biotec has an excellent portfolio As regards Polio Vaccines, Panacea Biotec of innovative paediatric vaccines which has made dynamic progress in the field of protect children against dreadful diseases Polio protection with many new vaccines such as polio, hepatitis, diphtheria, tetanus, coming into medical practice in recent times. pertusis & haemophilus influenza. The Under current circumstances, it is imperative portfolio of vaccines includes the Trivalent for the Company to be in harmony with Oral Polio Vaccine (tOPV), Monovalent the Government’s policies & the medical (Type I and Type III) Oral Polio Vaccine fraternity. (mOPV), Enivac HB (Hepatitis B) Vaccine and innovative Combination Vaccines such Hence, the Company has adopted a unique as Ecovac4 (Diphtheria-Tetanus-wholecell strategy which harness with the government

17 Panacea Biotec • Annual Report 2008-09 in their fight against polio known as liquid vaccine & WHO stated high priority “Sequential dosing strategy”. This sequential vaccine, Polprotec (enhanced Inactivated dosing strategy is OPV followed by Polio vaccine, eIPV) & NovoHib (Haemophilus Inactivated Polio Vaccine (IPV). This strategy influenzae type b conjugate - mono Hib is intended to decrease the incidence of vaccine), in the emerging markets in years to Polio, while maintaining high levels of come. The International Vaccines Business is population immunity to poliomyelitis well poised for a promising future ahead with outbreaks. It is expected to remain until a steady increase in preventive healthcare further progress towards global eradication spending. is achieved.

Logistics Network International Vaccines Business Panacea Biotec has an advanced professional Immunization has become one of the most logistics network throughout the country. important & cost effective ways of reducing The Company has a nationwide sales and child mortality. keeping this trend in mind, marketing network covering approximately Panacea Biotec has adopted a strategy by 450 districts in India and targets more than the development of enhanced combination 1.1 million customers through a field force of vaccines; opening a whole new dimension more than 1000 trained marketing and sales towards protecting multiple diseases with professionals and 23 sales depots/carrying just single injection. and forwarding agents all over India. The The company is poised to make inroads into Company through its efficient sales force global Vaccine markets and has deployed reaches more customers more effectively. specialized team for its Vaccine Business in The Company has its Central Warehouse at emerging (ROW) markets. Delhi. Besides this the Company also has The Company has started establishing its expertise in cold chain management for ground work in various potential vaccine storage and distribution of Vaccines under markets & also obtained registration in Nepal monitored conditions using a system of & Pakistan. Vaccine Vial Monitors, Data Loggers, Ice Panacea Biotec is all set to launch Boxes, Coolant, Cold Rooms and Refrigerated GeneratioNext vaccines such as Easyfive - a Vehicles. This ensures that the Vaccines WHO pre-qualified pentavalent vaccine, remain safe and effective against changes in which is also amongst the world’s first fully the variant temperature conditions.

18 Panacea Biotec • Annual Report 2008-09 Manufacturing Facilities and cell culture based biopharmaceutical The Company is products following current Good Panacea Biotec has its manufacturing in the process of Manufacturing Practices (cGMPs) prescribed facilities for vaccines and pharmaceutical by WHO and US FDA with an investment setting up new formulations in India in Delhi, at Lalru in of around Rs.1 billion. One of the suites will manufacturing Punjab and at Baddi in Himachal Pradesh. cater to the biopharmaceutical / vaccine facilities for Cell The Company is in the process of setting on mammalian cell culture system with the up new manufacturing facilities for Cell Culture based option of conventional as well as disposable Culture based Vaccines in bulk form at Lalru, Vaccines in bulk bioreactors. The second facility would be which is expected to be completed in the form at Lalru, multi-product facility for microbial products current financial year. The manufacturing and the third facility will be for viral vaccines. which is expected facilities have been set up in compliance with The Company expects these facilities to be to be completed international regulatory standards including commissioned in the current financial year. WHO-cGMP, US-FDA, European Union in the current standards for GMP and Good Laboratory Two bulk vaccines manufactured at financial year. Practices (GLP). Company’s Lalru unit (Recombinant Hepatitis B Vaccine and Haemophilus The Company’s manufacturing expertise influenzae type b conjugate vaccine) are lies in various solid, semi solid & liquid oral WHO pre-qualified which are being used dosage forms and vaccines such as: for manufacture of innovative combination • Oral-solids - Conventional tablets/ vaccines for supply to UNICEF and PAHO. capsules, Controlled/delayed release/ Pharmaceutical Formulations facility at enteric coating tablets and capsules, Baddi Tablet in Tablet, Tablet in Capsule, Multi Layered Capsules, Hard gelatin/ Soft The Company’s state of the art Gelatin capsules, Mouth Dissolving/ pharmaceuticals formulations manufacturing Chewable Tablets, Beads Encapsulation, facility at Baddi, built in compliance with Coating: film, sugar & functional, Taste USFDA standards, received encouraging masking and fast-dissolving tablets. acclaim and numerous plant approvals from various regulatory authorities. The facility is • Semi-solids - Ointments/Creams/Gels, now approved for Brazil as well as for several Transdermal Drug Delivery System. other markets like Yemen, Syria, Ukraine • Liquids - Suspensions/Syrups/Solutions. & Ethiopia. The Company’s soft gelatin • Vaccines - Recombinant Vaccines, manufacturing facility is also approved for Combination Vaccines and Cell culture markets in European Union. The Company is Vaccines and live vaccines. expecting clearances from other regulatory agencies like MCC South Africa and UK Manufacturing Facilities for Vaccine MHRA in the current fiscal. The facility has Antigens at Lalru, Punjab annual capacity for producing 900 million The Company has three separate dedicated tablets, 120 million hard gelatin capsules, 12 bulk vaccine manufacturing facilities for million tubes and bottles each, 150 million Recombinant, Bacterial and Tetanus Vaccines soft gelatin capsules and 60 million herbal at Lalru in Punjab. In addition to the existing tablets. bulk vaccine manufacturing facilities, the Vaccines Formulation facility at Baddi Company is setting up one more state of the art bulk manufacturing facility comprising of The Vaccine Formulation plant (VFP) at Baddi three suites at Lalru in Punjab, which have in Himachal Pradesh, has two filling lines for been designed, constructed, adapted and bacterial and viral vaccines complying with maintained for production of bulk vaccines WHO-cGMP norms for liquid Vaccines in pre-

19 Panacea Biotec • Annual Report 2008-09 filled syringes, liquid & lyophilized Vaccines WHO cGMP approved facility with WHO Pre- in vials. The total production capacity of qualification for Oral Polio and Recombinant this facility is 600 million doses per annum Hepatitis B Vaccine and combination which is scheduled to be increased by the vaccines Ecovac-4, Easyfour & Easyfive. The addition of third line to one billion doses per facility has been designed, constructed annum by the end of current financial year. and maintained to suit production of This facility has increased the production vaccines following Good Manufacturing capacity of vaccines substantially in scale Practices. It has three vial filling lines - two and size. It would significantly improve our lines dedicated to Oral Polio Vaccines market presence globally and augment our both Trivalent & Monovalent and one line plans to become a global leader in this field. dedicated to Hepatitis B & Combination The three-storey main building consisting Vaccines. of production, quality control and quality Manufacturing Facility for Anti-Cancer assurance departments is spread over Products at Navi Mumbai approx. 2800 M² construction area at each floor. The plant also has a five-storey block The Company is setting up a manufacturing of Warehouse-cum-Cold Storage facility facility for anti-cancer products at Mahape, admeasuring approx. 2500 M² on each floor. Navi Mumbai. This manufacturing plant will have a state-of-the-art containment facilities Vaccines Formulation facility in Delhi for clinical / commercial production of high- Vaccines formulation facility in Delhi is a end anti-cancer range of products.

Production facility at Baddi, Himachal Pradesh Research & Development Company has plans to further strengthen The Company the R&D base to cater to more profitable Panacea Biotec has built a strong R&D has been granted and expanding niches in vaccine and base over the last decade to support its formulations segments, both in domestic as more than 300 business segments, vaccines, formulations well as international markets. patents in India and biopharmaceuticals. It has five highly and worldwide sophisticated ultra-modern R&D centers LAKSH Drug Discovery R&D Center at with 391 employees including 261 qualified Mohali in Punjab including major and experienced scientists for its various Laksh, the Company’s state-of-the art countries like research projects. The core area of research Research Center for development of New U.S., Europe, & development includes new Vaccine Chemical Entities (small molecules) at Australia, Development, Biopharmaceuticals, proteins, Mohali, Punjab is spread over 70,000 sq. Canada, China, peptides, monoclonal antibodies, Novel ft. of Laboratory Space and employs more Japan, Russia etc. Drug Delivery Systems projects, Advanced than 70 scientists including 9 PhDs. Laksh Drug Delivery System projects and Drug has expertise to carry out work on different Discovery (small molecules), in compliance aspects of drug discovery which include with international regulatory standards. All medicinal chemistry, in vitro and in vivo the five R&D Centers have been accorded biology, analytical & bio-analytical research, registration by Department of Scientific and pharmacokinetics and drug metabolism and Industrial Research, Ministry of Science & toxicology studies. The focus of research is Technology, New Delhi. on development of NCEs for the treatment As a result of its research efforts, the of metabolic disorders, CNS and infectious Company has been granted more than 300 diseases. patents in India and worldwide including Sampann R&D Center at Lalru in Punjab major countries like U.S., Europe, Australia, Canada, China, Japan, Russia etc. The R&D Centre at Lalru named as SAMPANN Drug Delivery is one of the major part of For carrying out pre-clinical research, the Panacea Biotec’s Pentagon of R&D centers Company has a state-of-the-art animal house which spread across 40,000 sq. ft. of and facilities for undertaking in-vitro and laboratory space with superior infrastructure, in-vivo microbiology, pharmacology, safety, specialized machinery, adequate resources efficacy, proof of concept and toxicology and skilled manpower to conduct research studies. in the areas of Formulation Development, The Company has been steadily increasing Novel Drug Delivery, Pharmacology, its expenditure on R&D, both revenue and Analytical Chemistry, Medicinal Chemistry capital expenditure, and has spent Rs.500.9 and Natural Products. The said research million (6.5% of net turnover) in fiscal 2009, facility also boasts of an in-house IPR as compared to Rs.410.5 million (4.9% of net Management Department and Information turnover) in fiscal 2008, an increase of around Science Department. 22% in value terms. Further, the Company The primary focus of the Sampann Drug has also invested an amount of Rs.578.42 Delivery is to develop value added drug million as capital expenditure on R&D as delivery products that would address unmet compared to Rs.666.2 million in previous medical needs, focus on patient convenience year. and compliance, augment the intellectual The total R&D Expenditure has been capital and contribute towards achieving Rs.1,079.3 million (14.0% of net turnover) the organizational business goals. A large as against Rs.1,076.7 million (13.0% of the number of high potential drug delivery net turnover) in previous financial year. The based projects have been selected for

21 Panacea Biotec • Annual Report 2008-09 development based on highly specialized space has been established with an objective drug delivery technologies including Site to develop novel, effective and affordable Specific Drug Delivery, Topical System, Depot vaccines against various epidemic /endemic Injectable Preparations, Nanoparticulate life threatening diseases for global market. Drug Delivery, Pulmonary Drug Delivery SVRC has the infrastructure and expertise and Oral Controlled Release Systems. These to take an ‘idea’ through different stages of projects are targeted towards both the product development towards a successful domestic and global markets. In addition commercialization. In view of company’s to above mentioned differentiated drug strategy for expanding its scientific strength delivery systems, biopharmaceutical product to innovate more vaccines, this center is development to deliver stable and robust carrying out extensive research in vaccines formulations, has been initiated. and biologicals using genetic engineering, In year 2008-09, Product development animal cell culture, fermentation, has been done for different categories of purification, serology, analytical and bio- drugs which include Anti-inflammatory, analytical development. Anti-allergics, Anti-tubercular, Anti- Specific areas in which Research & haemmorrhoidal, Anti-emetics, Development being carried out include: Anti-psychotics, Anti-bacterials, Anti- hypertensives, Anti-depressants, • Development of conjugate vaccine Immunosuppressants, Anti-arrhythmics, Anti- against Streptococcus pneumoniae and retrovirals, Anti-diabetics etc. and various Neisseria meningitides combinations thereof the above category of • Development of a novel recombinant drugs. protein based vaccine for Anthrax

Saha Vaccine Research Center in Delhi • Development of Vero cell derived The Saha Vaccine Research Center (SVRC) in inactivated Japanese encephalitis vaccine Delhi, spread across 24,000 Sq ft of laboratory using animal component free media

GRAND R&D Center at Navi Mumbai This R&D Centre is inter-alia, focused in • Generation of recombinant clones for Responding respect of: several biosimilars. The technology for to the threat one of the biosimilar molecule is ready • Development and improvement in for transfer to the production unit. of widespread existing conjugation technology for Several in vitro assays for determining deadly disease better yield and clinical application. bioactivity, binding and functionalities of of swine flu, • IND submission for recombinant Anthrax various biosimilars have been developed the Center vaccine to US FDA for initiation of clinical and validated. has expedited trials for providing a competitive edge • In an attempt to develop vaccine to based on quality and pricing. development control Dengue virus infection, a suitable of candidate • Further development of recombinant, cell line for the assay and amplification polysaccharide conjugate and cell culture technology of recombinant chimeric vaccine for H1N1 based vaccines. The candidate vaccines Dengue virus has been prepared. swine flu. would be taken forward for scale up, Appropriate Dengue viruses have been followed by pre-clinical and clinical amplified and immunogenicity of the studies. candidate virus has been planned.

• Initiating the development of vaccine for • A unique recombinant inactivated H5N1 pertussis using a genetically modified candidate vaccine has been designed. strain of B. pertussis. The immunogenicity of this candidate has shown promising results. Biopharmaceutical R&D Center in Delhi • In order to identify appropriate clone The Biopharmaceutical R&D center (BRC) has for fully human monoclonal antibodies, around 40 scientists working in the area of a library of human antibodies has been molecular biology, cell biology, immunology developed. The library is being screened and peptides. The centre has been working against various targets. on different discovery and developmental Further, responding to the threat of projects. Development of novel preventive widespread deadly disease of swine flu, & therapeutic vaccines, novel therapeutic the Center has expedited development of peptides and therapeutic fully human candidate vaccine for H1N1 swine flu. monoclonal antibodies for treating infectious diseases and life style related disorders are GRAND R&D Center at Navi Mumbai the focus of discovery projects. BRC is also Global Research and Development (GRAND) actively involved in developing different Center at Mahape, Navi Mumbai which biosimilar products. was inaugurated in February, 2008, is fully During the year 2008-09 the centre has made functional. There is a team of around 50 significant progress in the following fields: highly skilled and committed research scientists working relentlessly to discover • Optimisation of the process for the scale- better therapeutic alternates for unmet up production of hair growth peptide, medical needs of the society. Broadly, a technology for alopecia (hair loss) the Center is working on drug delivery management in-licensed from National technologies based on: Institute of Health, USA. A pre-clinical toxicological study has been planned. • Nano-particle systems for targeted delivery and reduced side effect with • Identification of a novel peptide for the improved bioavailability treatment of Rheumatoid Arthritis. Proof of concept has been established. The • Microparticulate systems for depot synthetic process for this molecule has injections with reduced frequency of been developed and optimized. dosing

23 Panacea Biotec • Annual Report 2008-09 • Micellar systems for bioactive targeting Quality Assurance and bioavailability enhancement, Quality is among the most important reasons specially for cancer targeted drug to persuade a customer to buy a product. delivery Total Quality Management has always been • Stealth liposomes for prolonged systemic the cornerstone of your Company which has circulation to achieve better therapeutic resulted in achieving greater milestones in effects the past couple of years. At Panacea Biotec, Quality is in-built in products & services and it • Controlled drug delivery for oral is integrated in each step of R&D, Production, application by utilizing the concept of Packaging, Storage, Marketing, Sales & Gastroretentive systems, zero order Distribution. Your Company is committed to release systems and site specific delivery adhere to the highest quality standards for system in gastrointestinal tract products it manufactures and is ensuring this • Nanoparticle for topical delivery with through a highly qualified, techno-innovative better patient compliance and reduced & dedicated team. frequency of application

Few concepts based on above mentioned Clinical Research Operations technology platforms have cleared proof of concept studies and are entering clinical Clinical Research plays a pivotal role in trials. Center has emerged as a strong the drug development process. Clinical intellectual property earning member of development establishes the safety and Panacea Biotec family with many patent efficacy of a new drug product involving filings last year and few are in process. significant expertise, time and investment. The Company also successfully completed applications relating to various drug delivery The Company clinical part of trial of bOPV, aimed towards technologies, synthetic processes, new has filed over the planned application for WHO pre- chemical entities, improved chemical entities, qualification. vaccines, pharmaceutical compositions and 1,150 patent natural product compositions out of which applications The year 2008-09 witnessed several 11 applications were filed through the PCT milestone achievements for Clinical Research worldwide route. Operations of the Company, including: including 189 Till date Panacea Biotec has been granted • a large randomized controlled trial Indian patent 10 patents in India and 26 product in ~1,800 subjects across 40 centers applications and patents worldwide for different products/ for a novel drug delivery product for 67 applications technologies during the year under review osteoarthritis; have been filed Some of the key patents granted to Panacea • a multinational trial, spread across two through the Biotec during the fiscal 2009 are: Euphorbia geographical regions (Asia/EU) & three Prostrata (Thank OD & Sitcom) granted in PCT (Patent countries (India/Germany/Poland) for a India, Mexico, New Zealand, South Africa & Cooperation GI product; USA; Nimesulide Controlled Release (Willgo) Treaty) route. • a long duration trial with a 2-year follow- granted in Indonesia & Israel; Domperidone & up to evaluate the relapse rate 24 months Pantoprazole Combination (OD-PEP) granted after the completion of therapy for an in New Zealand & South Africa; Nimesulide anti-infective product; Gel (Nimulid Transgel) two patents granted Panacea Biotec is the first Indian in India & one in Kenya; Nimesulide Injection pharmaceutical company to indigenously (Nimulid Safeinject) granted in India; implement the Oracle Remote Data Capture Amoxicillin (Modified Release) granted (RDC) enabling it to conduct e-clinical trials. in Australia & South Africa; Nimesulide Effervescent Tablets granted in India; and Paclitaxel granted in Morocco. Intellectual Property Besides this, the Company had filed Panacea Biotec has its full fledged Intellectual 123 applications for the registration of Property Rights department which manages Copyrights (41 applications in 2008-09) all the Intellectual Property from inception to of which 80 had been granted. So far the enforcement. company has filed over 566 applications for registration of Trade Marks (25 applications As at the end of fiscal 2009, the Company in 2008-09) of which 273 have been has filed over 1,150 patent applications registered. In addition to this, the Company worldwide including 189 Indian patent has also filed 55 International Trade Mark applications and 67 applications have been Applications in various countries of which 24 filed through the PCT (Patent Cooperation have been granted. The company has so far Treaty) route. filed 4 Design Applications (1 application in Out of the total number of patent 2008-09) and 3 of them have already been applications filed, 325 patents had been registered. granted / accepted for grant. Apart from this, the Company had in-licensed several patent applications, some of which are under Human Resources prosecution in different countries of the Human Resources have been a strategic world. partner in the organization in its endeavour During fiscal 2009, the Company had to lead market with its differentiated filed 17 new Provisional Indian patent products. Human resources have been taking

25 Panacea Biotec • Annual Report 2008-09 Scientists in a brainstorming session at Sampann, Lalru up challenges and initiatives for bringing in a in support functions. Panacea Biotec’s remarkable change in its mode of operation human capital constitutes a diverse pool of and decision making and to bring in a new knowledge & expertise, a judicious blend of paradigm to ensure a hassle free transaction youth, imagination, risk-taking ability and of HR services. Along with this, the Company experience. The Company enjoys excellent took great strides in strengthening industrial relations and there have been no connectivity with all the cross section of work disruptions, strikes, lock-outs or other employee. employee unrest.

The Company has 3,196 permanent In order to make its human capital as the employees which include corporate and differentiator for its long term business managerial staff, sales staff and staff located objectives, your Company has embarked at its manufacturing facilities. Of these upon number of initiatives, including: permanent employees, 391 are engaged Annual Day Celebration: 13th Annual in R&D Centers, 1,006 are engaged in Day Celebrations were organised on 25th manufacturing, around 1,213 are engaged September with a new innovative turn, in sales and marketing and rest are engaged where all employees of the Company at all

3,196 locations were involved. A video recording of 2,821

2,773 warm and inspiring messages voiced by Dr. Rajesh Jain, Joint Managing Director 2,220 2,162 and Mr. Sumit Jain, Director-Operations & Projects was created and shown to all the 1,318 1,220 1,213 1,200 1,105 1,105

1,029 employees at all locations, followed by our 1,006 612

661 corporate Anthem. 393 391 350 319 236 The audio-video presentation was followed 2004-05 2005-06 2006-07 2007-08 2008-09 R&D Manufacturing Sales Total by the awe-inspiring performances of our Manpower Strength employees made the day all the more

26 Panacea Biotec • Annual Report 2008-09 which successfully promotes the concept of having a paperless HR in the years to come.

Baddi Housing: To bring in a healthy work/life balance for employees of the Company at Baddi and to provide employees with quality accommodation in areas where there is a shortfall of rented accommodation, the Company has come up with its colorful and memorable across locations to own housing of 80 residential celebrate the “Spirit of Togetherness”. With flats with all modern amenities at moderate enthusiastic participation, the Annual Day rentals for its employees. was a great success. Learning and Performance management: Company Newsletter: A quarterly Company Continuous development of its human Newsletter has been launched with the resources has always been the focus of the main objective to internally connect the Company. Panacea Biotec continuously employees which can ignite the true spirit of strives to provides seminars and training togetherness and bring in a sense of pride for programs to meets of employees. Proper our achievements. training schedule was formed up during HR Buddy: HR4U to help employees with an the year including Creativity Retreat, People instant answer to their ‘pain area’, an email Leadership, Zero Defect and Cost Reduction based employee connect initiative has been to name a few. The leadership team of rolled out this year. The ‘HR4U’ mailbox is Panacea Biotec underwent a 3-day workshop an efficient and friendly channel to answer on the ‘7 Habits of Highly Effective People’ every query within a short span of time by as part of their Leadership Development the HR Buddy. Programme. HR SAP Blitz - Go Live and ESS Online: Information Technology Going Live on HR SAP across all business As a research based organization, your function was a major success during the year. It has helped the Company in way of having a time effective and cost effective operational process in HR. The launch of ESS has curtailed the manual processes and has taken the Company to an improved information edge

27 Panacea Biotec • Annual Report 2008-09 Company believes in accelerating value individual health record with investigations, realization and delivering operational diet, exercise, yoga & medication; knowledge efficiencies in healthcare. Panacea Biotec has base of Holistic healing with focus on been continuously investing in information Ayurveda, Homeopathy & Yoga apart technology to enhance communication from Allopathy; Health Calculators & ready facilities with a view to provide a strong reckoners; Path finders to various common knowledge base to its employees, enable illnesses and disease; Comprehensive health faster scanning & monitoring of external information with focus on children & elderly; environment and improve the knowledge and Neighborhood Resources for doctors, of best practices and relevant leading-edge labs, chemists etc. technologies. It also offers unique interactive facility for As an effort towards implementation Medical practitioners, including creation and leveraging of technology initiatives of their own Information & Resource to improve the efficiency of various Centre; tools to create and maintain patient departments, your Company has already records & interact with them online; latest implemented System Analysis and Product information on diseases & therapeutic areas in Data Processing (SAP) covering Financial of their interest; attend Continuing Medical Accounting, Controlling, Asset Management, Education (CME) programs online and in Materials Management, Production Planning person; interface with peers and specialists and Sales Distribution. SAP HR Module from related fields online; explore placement has also been successfully implemented. opportunities; opportunities for participation Implementation of some other modules in clinical trials; and holding patient/public like Project Systems, Plant Maintenance, awareness programs. Business process consolidation & Strategy As a member of BestOnHealth.com portal, management are in pipeline. one can also order disease-specific patient The Company has also adopted Oracle education corners and regular supply of The Company’s clinical trial software and SAS analysis tool offline material like brochures, leaflets, to manage, standardize and control clinical booklets etc. and can also keep a track health portal data for fast study set-up and consistent of events and appointments through “www. interpretation of data in compliance with interactive reminder service. regulatory requirements. bestonhealth. For Patients & Healthy individuals, this portal com” provides Microsoft Exchange and Share point is one of a kind, individualized management comprehensive portal solution is available for messaging tool in investigation, medication, diet, health related & collaboration, addressing the internal exercise, yoga. It offers information on & external communication and workflow information customized diets that compliment health as needs. The Company’s sales depots & well as the taste buds; different treatment & services to manufacturing facilities are well connected options and new diagnostic techniques; common man through secure and robust Virtual Private specific information about investigations, & medical Network (VPN) preparation required before hand and what practitioners and BestOnHealth Portal: The Company’s health the test reports mean. portal “www.bestonhealth.com”, developed offers a unique This Portal also provide a customized, and launched in the year 2002 with an interactive disease-specific bi-monthly newsletters objective to provide comprehensive health providing contemporary knowledge about ‘Individualized related information & services to common diseases & their treatment; information on man & medical practitioners. Health novel researches & seminars; information Management It offers a unique interactive ‘Individualized about the “BestOnHealth” patient education plan’. Health Management plan’ which links programs; schedulers to remind about daily

28 Panacea Biotec • Annual Report 2008-09 or important events; and interactive exercise • To show doctors achievement & the The number of & yoga plans. content they wanted to put about visitors who read themselves; and The portal also provides an interactive the content of Address book to keep track of contacts and • To be the online interface of the health portal is a common platform to share experiences in Company’s upcoming healthcare facility. tackling disease with other patient groups. more then 300/ day. The visitors The portal is becoming widely popular Internal Audit and Control and is being regularly accessed by healthy are coming from individuals, patients & medical practitioners The Company believes that its internal various parts from all across the globe. During last 4 control systems and procedures are of the world, months, the average number of hits (attempt in line with its size of operations and including 40% provide, among other things, a reasonable to access the site) is around 3000/day. The from US, 23% number of visitors who read the contents is assurance that transactions are executed more than 300/day. The visitors are coming with Management authorization and they from India, 17% from various parts of the world, including are recorded in all material respects to from China 40% from US, 23% from India, 17% from permit preparation of financial statements and rest from China and rest from UK, Korea, Japan, in conformity with established accounting UK, Korea, principles and that the assets of your Sweden, Singapore, France, Canada, etc. A Japan, Sweden, significant percentage of visitors are Medical Company are adequately safeguarded practitioners. against significant misuse or loss. The Singapore, internal control systems are supplemented France, Canada, Future Perspectives: It will continue to through an extensive internal audit address the needs of medical fraternity etc. programme and periodic review by Audit & patients and be an excellent source Committee. of patient education and furthering the ultimate objective of a healthy world. The M/s. Dass Gupta & Associates, Chartered Company has planned to enhance the Accountants, M/s. S.K. Badjatya & Co., coverage of the health portal in current Chartered Accountants and M/s. K.K. Garg financial year and expects the portal: & Associates, Chartered Accountants, continue to act as the Internal Auditors • To add value to Panacea Biotec’s of the Company. The internal auditors perception amongst doctors as a leading independently evaluate adequacy of health management company; internal controls and audit the majority of • To benefit doctors to enhance their the transactions in value terms. Post audit practice with IT enabled services & form reviews are carried out to ensure that audit closer ties with our organization recommendations have been implemented.

• To publish medical practitioner’s articles, The Audit Committee of the Board of quotes, photos in the portal periodically; Directors comprising of three non- • Information sharing regarding various executive independent Directors viz. healthcare/ medical conferences/ Mr. R.L. Narasimhan, Mr. N.N. Khamitkar exhibits calendar based; and Mr. Sunil Kapoor, reviews Internal Audit Reports and the adequacy of the Internal • To show patient’s opinion about the Controls. The Auditors, Joint Managing doctors; Director, Associate Director, Chief Financial • To include Specialty & city-wise contact Officer, D.G.M. (Accounts & Finance) and details database of our member medical other senior officials are invited to attend the practitioners; Audit Committee Meetings.

29 Panacea Biotec • Annual Report 2008-09

Subsidiaries, Joint Ventures, Company has remitted an amount of Rs.2.4 The Company Collaborations & Tie-ups million (US$ 50,000) as a capital contribution, is expanding during the current financial year. Subsidiaries its portfolio by Panacea Biotec FZE – This WOS was Best On Health Limited - The Company’s entering the incorporated in UAE to perform the activities wholly-owned subsidiary (WOS) namely relating to registration and marketing of the fast growing Best On Health Ltd. (“BOH”), which owns Company’s patented products worldwide healthcare a prime immovable property being used and an amount of Rs.5.5 million (AED sector and has by the Company as its Corporate Office, 500,000) had been remitted towards its has charted out a plan for diversification in entered into capital contribution. related health management space as part collaboration of its future growth plans. The Company Panacea Biotec GmbH - During the year with Umkal has so far invested Rs.2,013.9 million in BOH under review, your Company had remitted Group to set-up an amount of Rs.1.6 million (Euro 25,000) for including Rs.1,991 million as 0.5% optionally a multi super- convertible Non Cumulative Preference setting-up WOS in Germany, namely Panacea Shares to finance its foray into healthcare Biotec GmbH, with a view to perform specialty hospital industry. BOH has four WOS namely Radicura activities relating to registration of the with the modern & Co. Ltd, Panacea Hospitality Services Pvt Company’s products in European Union. equipments in Ltd., Sunanda Steel Company Ltd & Panacea Rees Investments Limited – It has been the NCR of Delhi Educational Institute Pvt. Ltd. set-up as a Company’s WOS in Islands at Gurgaon. Umkal Medical Institute Pvt. Ltd. - The of Guernsey with its main objects of Company is expanding its portfolio by manufacture, marketing and/or import/ entering the fast growing healthcare export of pharmaceutical formulations, sector and has entered into collaboration vaccines and other products, making with Umkal Group to set-up a multi strategic investments in other entities, super-specialty hospital with the modern entering into joint venture and equipments in the NCR of Delhi at Gurgaon. collaborations and/or for carrying out such With your Company’s leadership in other permissible activities. The Company providing innovative medical therapies and has given a loan of Rs.710.8 million (US$ 14 Umkal’s long term experience in providing million) to it. Rees Investments has further specialized healthcare, the collaboration established its WOS company namely, would be unique and one of its kind. Your Kelisia Holdings Limited, Cyprus whose Company has invested an amount of principal activity is holding of Investments. Rs.76.14 million for acquiring 75.2% stake Kelisia Investment Holding AG and Panacea (27% paid-up) in Umkal Medical Institute Biotec (International) SA had been set-up in Private Limited, during the year under Switzerland as step-down WOS companies review. Further, during the current fiscal, the of Rees Investments Ltd., with the purpose of Company has also paid second call money of carrying out investment activity as well as to Rs.24.0 million (representing 8.5% payment). engage in all other related activities.

Panacea Biotec Inc. - During the year under During the year, Kelisia Holdings Ltd. review, the Company has incorporated a has made a strategic equity investment wholly owned subsidiary (WOS), Panacea of US$13.1 million in PharmAthene, Inc., Biotec Inc. in US with its main objects Annapolis, MD, US, a biodefense company of, inter-alia, research, development, developing medical countermeasures manufacture, register, market, distribute, against biological and chemical threats, in import and export pharmaceutical and exchange for the purchase of common stock biological products etc. in United States. The and warrants in PharmAthene.

31 Panacea Biotec • Annual Report 2008-09 Joint Ventures & Associates by your Company. PanEra has become a specialized company focused on bulk Panacea Biotec has the following Joint manufacture of vaccines and plans to Venture and Associate Companies: venture into new products and technologies. Chiron Panacea Vaccines Pvt. Ltd. - Your It has also launched its web-site namely Company’s Joint Venture Company (JV www.panerabiotec.com. Company), Chiron Panacea Vaccines Pvt. Ltd. Lakshmi & Manager Holdings Limited (“CPV”), was incorporated in fiscal 2005 in - During the year under review, the India with Chiron Vaccines Holding Srl., Italy Company’s associate firm, viz. M/s Lakshmi (now Novartis Vaccines and Diagnostics), & The Manager, in which the Company a division of Novartis, world’s fifth largest had invested Rs.40.0 million (40% share), vaccines manufacturer, for marketing of has been taken over by a newly formed innovative combination and other vaccines company, Lakshmi & Manager Holdings in India. The Company has invested Rs.23.0 Limited. As a result of takeover of the said million in CPV for a 50% equity stake. With firm, the Company has been allotted Equity the launch of Hepatitis A vaccine HAVpur, Shares for an amount of Rs.41.26 million in a new generation vaccine with virosome the said company. technology in collaboration with Berna Biotech Ltd., Switzerland and the Company’s Injectable Polio Vaccine (PolProtec), Collaborations and Tie-ups monohib vaccine (novoHib), Triavalent Oral Poliomyelitis Vaccine (PrimOpol) in the Apart from the above, Panacea Biotec has Indian market, CPV has a strong portfolio of important business relationships with various innovative paediatric vaccines, which in short research institutes, academic universities & span has taken significant position at market commercial corporations, including: place. CPV achieved a turnover of Rs.538.4 National Institute of Immunology, India: million and net profit of Rs.41.6 million The Company has an exclusive ten-year during the year under review and commands license agreement with National Institute a significant market share in the paediatric of Immunology, India for in-licensing of combination vaccines segment in India. It has technology and processes for production of introduced innovative concepts like Peel off tissue culture derived formalin inactivated, stickers, Easy Track SMS service and Pre-filled Japanese encephalitis vaccine. The Syringes with Plastic Rigid Tip Cap. technology has been further modified Cambridge Biostability Ltd. - The Company’s significantly at our research center to yield a another JV Company, Cambridge Biostability commercially viable and safer vaccine.

Ltd. (CBL), a U.K. based Company, in which Biotech Consortium India Ltd.: The Company the Company acquired 10% stake and also has a ten-year in-licensing arrangement given a convertible loan of £ 1.5 million with Biotech Consortium India Ltd. for the during earlier years, has gone into creditors’ development, manufacture and marketing voluntary liquidation proceedings due to its of anthrax vaccine developed by Jawahar Lal adverse financial position. Nehru University, India. Phase I/IIa of human PanEra Biotec Private Limited - Your trials have been successfully completed Company’s associate Company, PanEra and the Phase-IIb clinical trials are to begin Biotec Pvt. Ltd. (PanEra) is continuing to shortly, subsequent to which the company meet the Company’s requirement of bulk plan to make IND submission to US FDA for vaccines and antigens for the manufacture initiation of clinical trials in US and supply the of Hepatitis B and Combination Vaccines anthrax vaccine to the U.S. Government.

32 Panacea Biotec • Annual Report 2008-09 National Institutes of Health (NIH), USA.: The National Research Development Corporation Company has an in-licensing arrangement (NRDC), India: The Company had in-licensing with NIH, USA, for use of a peptide based arrangement with NRDC for manufacturing product for generation of hair follicles the Foot and Mouth Disease (FMD) Vaccine and hair growth for alopecia (hair loss) developed by Indian veterinary Research management. Process for the scale-up Institute (IVRI). production of hair growth peptide has been optimized. A pre-clinical toxicological study PT BioFarma, Indonesia : The Company has has been planned. an agreement with PT BioFarma, Indonesia to manufacture & market the Measles Vaccine Dr. Reddy’s Laboratories Ltd.: The Company and plans to supply the vaccine to UNICEF, has a License and Supply Agreement with PAHO and CIS, African, LATAM and Asian Dr. Reddy’s for the supply of its patented Countries in furtherance to Global Measles product, Nimesulide Injection, for marketing Reduction Strategy of WHO and UNICEF. in India. The Company has another License and Supply Agreement with Dr. Reddy’s Punjab University, Chandigarh: The for another patented product, Nimesulide Company has a MoU with Punjab University, Transdermal Gel, for marketing, distribution Chandigarh for a Drug Discovery Project and sale in Russian Federation. to identify lead molecules with an aim to Nederlands Vaccine Institute (NVI), bring a New Chemical Entity (NCE) superior Netherlands: The Company has an to existing marketed products in the agreement with NVI for manufacturing therapeutic area of Psychiatric Disorders. and marketing of Inactivated Polio Vaccine Panacea Biotec will undertake their pre- (PolProtec) in global markets except clinical and clinical development leading to Netherlands, Denmark, Norway and Finland. their launch worldwide.

Dr. Rajesh Jain, Mr. Vinod Goel, Mr. Ankesh Jain (4th, 7th & 8th from left) with European Partners and competency team (from Left to Right) Dr. Konstanze Kral, Dr. Wolfgang Klotz, Mr. Gerd-Peter Heberling, Mr. Hartmurt Bannert, Mr. Klaus Manlik and Dr. Bernd G. Ruttger, during a recent meeting in Munich, Germany

33 Panacea Biotec • Annual Report 2008-09 Financial Performance Investments: The investments have increased to Rs.2,165.7 million from Rs 2,049.3 million Summarised Balance Sheet as at the end of previous year primarily on (Rs. in million) account of investment of Rs.200.0 million Particulars As on As on in its WOS Best on Health Ltd. and Rs.76.1 31.03.09 31.03.08 million in its subsidiary Umkal Medical Sources of Funds: Institute Pvt. Ltd. to finance its foray in Shareholders Funds 6,151.5 6,972.1 healthcare industry. Further, a provision Loan Funds 7,002.9 3,982.4 on account of permanent diminution in Deferred Tax Liability 333.8 595.0 value of investment of Rs.168.1 million in the Company’s joint venture Cambridge Total Liabilities 13,488.2 11,549.5 Biostability Ltd. was made during the year. Application of Funds: Net Fixed Assets 6,938.7 5,343.7 Net Current Assets: The Company’s net current assets have improved to Rs.4,284.2 Investments 2,165.7 2,049.3 million as against Rs.4,151.2 million as at FCMITDA† 96.0 - the end of previous financial year. The Net Current Assets 4,284.2 4,151.2 inventories have increased to Rs.4,478.0 Miscellaneous Expenditure 3.6 5.3 million from Rs.2,116.4 million and the Total Assets 13,488.2 11,549.5 inventories to net turnover ratio increased to

†Foreign Currency Monetary Item Translation Difference Account 58% from 25% during previous year mainly on account of postponement of deliveries Net Worth: The Net Worth of your Company of finished products and purchase of raw is Rs. 6,147.9 million during the year under materials as per commitments in the existing review as compared to Rs.6,966.7 million as agreements. The receivables decreased at the end of previous year. to Rs.1,238.8 million as against Rs.1,482.6 Loan Funds: The total loan funds as at 31st million as at the end of previous financial March, 2009, has increased to Rs.7,002.9 year and the receivables to net turnover ratio million as against Rs.3,982.4 million as a decreased to 16% from 18% during previous result of raising of Foreign Currency Term year. The Cash and bank balances declined to Loans to part finance its expansion projects Rs.594.8 million as against Rs.1,411.8 million including setting up of manufacturing as at the end of previous financial year. Other facilities at Baddi & Lalru and R&D Center at current assets increased to Rs.1,358.2 million Mumbai and other ongoing expansion/ New as against Rs.434.1 million due to advances projects. of Rs.710.8 million to the Company’s WOS, Deferred Tax Liability: The deferred tax Rees Investments Ltd. and advances of liability has decreased to Rs.333.8 million Rs.108.8 million to the Company’s Joint as at the end of fiscal 2009 as compared to Venture, CBL as against Rs. Nil and Rs.39.78 Rs.595.0 million as at the end of the previous million respectively as at the end of the The net fixed year. previous year. assets have Fixed Assets: The net fixed assets have grown The current liabilities increased to Rs.1,528.1 grown to to Rs.6,938.7 million as against Rs.5,343.7 million as compared to Rs.1,078.0 million Rs.6,938.7 million million as at the end of the previous year on as at the end of previous financial year. as against account of capital expenditure on ongoing Increase in current liabilities is mainly on account of increase in amount payable Rs.5,343.7 million expansion/ new projects and capitalization of forex exchange losses as per option given to vendors for vaccines raw material. The as at the end of by the Companies (Accounting Standards) Provisions increased to Rs.1,857.5 million as the previous year. Amendment Rules, 2009. against Rs.215.8 million mainly on account

34 Panacea Biotec • Annual Report 2008-09 of increase in provision for Open Derivative Pharmaceutical formulation products. The Contracts to Rs.1,743.1 million as compared Segment-wise Turnover pharmaceutical to Rs.40.5 million as at the end of previous financial year. Fiscal 2009 2008 formulations Rs. Million % Rs. Million % segment’s Vaccines 5,470.17 70.7 6,324.5 76.1 turnover grew Profit & Loss Account Pharmaceutical by 14% and Summarised Profit & Loss Account Formulations* 2,262.30 29.2 1,976.0 23.8 contributed Research & (Rs. in million) Rs.2,262.3 million Particulars As on As on Development 1.7 0.1 3.9 0.1 31.03.09 31.03.08 Total 7,734.17 100.0 8,304.4 100.0 or 29.2% of net Gross Turnover 7,753.0 8,342.2 * Net of excise duty of Rs.18.8 million and Rs.37.8 million turnover during Less : Excise Duty 18.8 37.8 during fiscal 2009 & 2008, respectively. fiscal 2009. Net Turnover 7,734.2 8,304.4 Vaccines Materials & Finished Goods Purchases 2,660.9 3,658.4 In fiscal 2009, the vaccines segment’s turnover Operating & Other Expenses 806.4 705.0 Personnel Expenses 916.1 924.9 contributed Rs.5,470.2 or 70.7% of net Selling & Distribution Expenses 434.5 451.1 turnover, as compared to Rs.6,324.5 million or Research & Development Expenses 500.9 410.5 76.1% of net turnover for fiscal 2008. (Excl. Depreciation) The institutional vaccine business contributed Misc. Expenses 1.7 1.7 Rs.5,186.9 million as against Rs.6,106.3 million Earnings Before Interest, Depreciation, 2,444.6 2,177.6 during the fiscal 2008. Taxes & Amortization (EBITDA) Foreign Exchange Fluctuation 2,260.4 40.5 The vaccine sales to JV company for domestic Financial Expenses 347.4 150.1 market increased by 11.4% to Rs.243.3 million Depreciation 705.1 430.0 as against Rs.218.3 million during fiscal 2008. Other Income 259.7 371.7 Despite having pricing pressure from entry of Provision for impairment 284.2 - generic players, the JV company continued to Profit/ (Loss) Before Tax (PBT) (923.7) 1,903.9 Provision for Taxes – current - 330.0 grow and maintained leadership position in Provision for Taxes – deferred (261.2) 211.2 the paediatric combination vaccine segment. Provision for FBT 28.0 31.0 Pharmaceutical formulations Profit/ (Loss) After Tax (PAT) (690.5) 1,331.7 The pharmaceutical formulations segment’s Turnover: The Company has achieved net turnover grew by 14% and contributed turnover of Rs.7,734.2 million during financial Rs.2,262.3 million or 29.2% of net turnover year 2008-09 as compared to Rs.8,304.4 during fiscal 2009, as compared to Rs.1,976.0 million during financial year 2007-08. million or 23.8% of the net turnover for fiscal The decline in Net Turnover is mainly on 2008. account of lower sales of vaccines due In the Pharmaceutical Formulations segment to postponement of supplies to UNICEF, the domestic net turnover increased by which is down by 15% as compared to 10.7% to Rs.1,815.3 million during fiscal 2009 previous year, whereas overall decline in Net from Rs.1,639.5 million during fiscal 2008. Turnover is by 7% as compared to previous The export turnover of formulations year. Balance growth comes from Pharma increased significantly by 26.7% to Rs.426.0 segment. In other words, the Company’s million during fiscal 2009 from Rs.336.5 dependence on vaccines in general and million during fiscal 2008. oral polio vaccine in particular is gradually shifting towards other vaccines and The following table sets forth the Company’s

35 Panacea Biotec • Annual Report 2008-09 gross turnover (inclusive of excise duty) million for fiscal 2008. As a percentage of net from pharmaceutical formulations in various turnover, these expenses increased to 5.6% categories: in fiscal 2009 from 5.4% in fiscal 2008.

Fiscal 2009 2008 Research & Development (R&D) Expenses: Rs. in Rs. in The R&D expenses, excluding depreciation million % million % Renal Disease 658.6 30% 487.6 24% on R&D assets, increased by 22.0% to Management Rs.500.9 million as against Rs.410.5 million Diabetes & Cardiovascular 619.6 28% 547.0 27% during fiscal 2008. The increase is mainly Management on account of expenses of new R&D Pain Management 397.9 18% 554.4 28% Centers which got operational during the Anti-Osteoporosis 144.9 7% 57.5 3% previous year and increase in personnel Gastro-Intestinal & 127.6 6% 105.4 5% constipation cost of existing R&D Centers and research Oncology 45.0 2% 29.6 1% related costs. Depreciation on R&D assets Anti-Tubercular 50.7 2% 54.0 3% increased by 28.7% at Rs.169.0 million as Other Segments 172.9 7% 178.2 9% against Rs.131.4 million during previous Total 2,217.2 100% 2,013.7 100% financial year. Total R&D expenses (including Expenditures: depreciation) increased to 8.7% of net turnover during fiscal 2009 as against 6.5% Materials & Finished Goods Purchases: during previous year. The raw and packing materials consumed and finished goods purchased during the Interest: Interest charges increased to year under review has decreased by 27.3% Rs.321.1 million during fiscal 2009 as against at Rs.2,660.9 million as against Rs.3,658.4 Rs.116.3 million during fiscal 2008. The million during the previous financial year. increase in interest charges is attributable The materials consumption ratio as a to overall increase in interest rates, higher percentage to net turnover has improved to utilization of borrowed funds on account 34.4% from 44.1% during previous year. of Foreign Currency Loan and utilisation of increased working capital limits from Banks. Operating & Other Expenses: The operating & other expenses increased by 14.4% to As a percentage of net turnover, the interest Rs.806.4 million for fiscal 2009 from Rs.705.0 charges increased to 4.1% from 1.4% in fiscal million for fiscal 2008. As a percentage of 2008. net turnover, the said expenses increased Finance & Miscellaneous Charges: Finance by 1.9% in fiscal 2009 to 10.4% from 8.5% in and miscellaneous charges decreased to fiscal 2008. The increase in these expenses Rs.28.0 million during fiscal 2009 from Rs.35.5 Total R&D was mainly on account of increase in various million during fiscal 2008. As a percentage of expenses operating expenses like power & fuel, net turnover, these expenses were at 0.4%. insurance, legal & professional charges and increased to Depreciation: Depreciation increased by travelling costs, etc. Rs.669.9 or 8.7% 64.0% to Rs.705.1 million as compared to of net turnover Personnel Expenses: The personnel expenses Rs.430.0 million during fiscal 2008 due to during fiscal decreased by 0.9% to Rs.916.1 million for capitalization of new production facilities fiscal 2009 from Rs.924.9 million for fiscal 2009 as against and R&D Centers, increase in other fixed 2008. As a percentage of net turnover, these assets and capitalization of exchange Rs.541.9 or 6.5% expenses marginally increased to 11.8% in fluctuation losses in terms of the Companies of net turnover fiscal 2009 from 11.1% in fiscal 2008. (Accounting Standards) Amendment Rules, during previous Selling & Distribution Expenses: The Selling & 2009. Depreciation as a percentage of net year. Distribution expenses decreased by 3.7% to turnover increased to 9.1% in fiscal 2009 Rs.434.5 million for fiscal 2009 from Rs.451.1 from 5.2% in fiscal 2008.

36 Panacea Biotec • Annual Report 2008-09 Profitability Margins: Cash Flow from Operating Activities: The The Company liquidity position of the Company remained Earnings Before Interest, Tax, Depreciation registered EBITDA almost constant with just 16.7% decline in & Amortisations (EBITDA): The Company Operating Cash Profit during fiscal 2009 to of Rs.2,444.6 registered EBITDA of Rs.2,444.6 million for Rs.1,917.7 million as compared to Rs.2,301.2 million for fiscal 2009 as compared to Rs.2,177.6 million million during fiscal 2008. for fiscal 2008. The EBITDA margin was 31.6% fiscal 2009 as during fiscal 2009 as against 26.2% during The net cash from operating activities compared to fiscal 2008. declined by 95.7% during fiscal 2009 Rs.2,177.6 million primarily on account of increase in Profit / (Loss) Before Tax (PBT): The Company for fiscal 2008. inventories, trade and other receivables and suffered a loss before tax of Rs.923.7 million The EBITDA decline in current liabilities. for fiscal 2009 as against profit before tax margin was of Rs.1,903.9 million for fiscal 2008, mainly Cash Flow from Investing Activities: Net 31.6% during on account of foreign exchange fluctuation cash used in investing activities amounting losses of Rs.2,260.4 million, provisioning to Rs.1,261.9 million was primarily used for fiscal 2009 as due to permanent diminution of investment acquiring fixed assets for various ongoing against 26.2% made and doubtful loans/ advances expansion/ new projects and loans/ during fiscal including interest thereon aggregating investment in subsidiaries/joint ventures 2008. Rs.284.2 million and also partially due to during the year under review. increase in depreciation and other expenses. Cash Flow from Financing Activities: The Profit/ (Loss) After Tax (PAT): The PAT turns Cash Flow from Financial Activities had to negative at Rs.690.5 million for fiscal year declined by 25.5% to Rs.1,571.3 million, 2009 from positive of Rs.1,331.7 million for which basically consists of funds raised by fiscal 2008. way of long term / working capital loans to fund various ongoing projects / working Earning per Share (EPS): The basic EPS and capital requirement. diluted EPS stood at negative Rs.10.35 per share of Re.1 as compared to Rs.20.14 and Rs.18.85 per share respectively during fiscal Consolidated Financial Statements 2008. The consolidated net turnover of the Company as a group has been Rs.7,881.7 Cash Flow Statement million during financial year 2008-09 as compared to Rs.8,413.4 million during The following table summarizes our financial year 2007-08. statements of cash flows: (Rs. in million) The consolidated EBITDA was Rs.2,473.0

Fiscal 2009 Fiscal 2008 million for fiscal 2009 as compared to Rs.2,175.0 million for fiscal 2008. On Cash Flows from: consolidated basis, the Company suffered - Operating Cash Profit 1,917.7 2,301.2 a loss before tax of Rs.866.7 million for fiscal - Changes in Working (1,632.6) (812.0) Capital 2009 as against profit before tax of Rs.1,876.0 - Net Direct Taxes Paid (235.2) (336.5) million for fiscal 2008, in line with the - Operating Activities 49.9 1,152.6 profitability on stand-alone basis. - Investing Activities (1,261.9) (4,270.8) The consolidated PAT also turned to negative - Financing Activities 1,571.3 2,109.0 at Rs.659.9 million for fiscal year 2009 from Net Cash Flows 359.3 (1,009.2) positive of Rs.1,289.8 million for fiscal 2008.

37 Panacea Biotec • Annual Report 2008-09 Opportunities and Outlook • Third largest English speaking scientific and technical manpower in the world India accounts for over one-third of drug • Strong marketing and distribution master files (DMFs) in biggest market, viz. network. US and ranks 2nd in approved Abbreviated New Drug Applications (ANDAs) with a major Weakness: share of 30% of total approvals in US. • Highly fragmented industry

Despite all hue and cries about financial • Low investments in innovative R&D turmoil across the globe in recent times, • High Price Regulation Indian Contract Research and Manufacturers • Production of spurious and low quality (CRAMS) with their ready infrastructure and drugs R&D capability in hand stands strong to • Strong linkages between industry and deliver better growth. academia is lacking

India has the highest number of US Opportunities: FDA approved plants outside the US. • Significant export potential Pharmaceutical production costs in India are • Marketing alliances with MNCs to sell almost 50% lower as compared with western their products in domestic market nations. • Opening up of the health insurance Cost of conducting clinical trials in India is sector also around 50-60% lower than the cost in • Potential for developing India as a centre the US. Hence, global Pharma Innovators for international clinical trials. who are already facing tremendous pressure to protect their profitability are focusing • Niche player in global pharmaceutical on cost rationalization activities and are R&D. switching for outsourcing facilities from India • Increased expenditure on healthcare which would boost the earning potential of due to inter-alia, the ageing population, Indian CRAMS. emergence of “life-style” drugs, a shift to newer and more expensive drugs, an The Indian Pharmaceutical sector is emerging increase in therapeutic coverage (i.e. new as one of the major contributors to Indian drugs for diseases that previously could exports with export earnings rising from a not be treated). negligible amount in early 1990s to Rs.291 Despite all hue • Innovation in Biotechnology billion (US$7.24 bn) by 2007-08. The exports and cries about have grown at a CAGR of 17.8% during the • Emerging geographical markets financial turmoil five-year period 2003-04 to 2007-08. • Huge unmet need for medication. • Rapidly increasing global population of across the globe At present, India is among the top 20 seniors and obese patients leading to in recent times, pharmaceutical exporters world-wide. As per higher risks for cardiovascular diseases, Indian CRAMS industry estimates, pharmaceutical exports certain types of cancer, diabetes and will continue to grow at a CAGR of 18.5% with their ready arthritis. infrastructure between 2008-09 and 2011-12. Threats, Risks and Concerns and R&D SWOT Analysis Risks, challenges and threats are inherent capability in Strengths: hand stands in any type of industry and needs to be • Cost competitiveness mitigated through well planned strategies. strong to deliver • Well Developed industry with strong The major risks associated to the industry as better growth. manufacturing base a whole are as under:

38 Panacea Biotec • Annual Report 2008-09 • Global meltdown – The recent global and collaborations with varied partners. With the rise meltdown has resulted in lower Any adverse developments in such in disposable investments both in existing business JVs and collaborations may impact the and new drug research. However, this has Company. income, not impacted your Company much. • The Company also faces competition tremendous • Pricing pressure imposed by DPCO from other players in the industry. growth in • Foreign Exchange fluctuations due to the • Delay in approvals from regulatory exports, edge in unprecedented international currency agencies in various international markets. CRAMS, stunning imbalances in the aftermath of the global Apart from these, other risks faced by the interest of global financial crisis. Company include rise in input costs, rise investors in • Increased competition from low cost in interest rates, loss of key personnel, manufacturing base such as China, Korea Indian pharma exchange rate fluctuations, environmental and Taiwan. and large liabilities, tax laws, litigation, labour relations • FDA Compliance – Rising audit burdens, and significant changes in the global political number of inspections and fines and economic environment. USFDA approved • Risk of Product failure Way Forward: plants, Indian Apart from the above, there are a few risk pharmaceuticals With a number of countries in recession factors that are relevant to the Company’s and drugs becoming almost a necessity industry’s growth operations and business. While the Company and Indian drug companies being generic is vast and is takes effective measures to minimize or manufacturers, export growth is unlikely to expected to eliminate the impact of these risks on its fall. business performance, they nonetheless materialize soon. exist. Domestic growth is expected to remain Some such risks, challenges or threats are healthy especially with the Government outlined below: expected to open more Jan Aushadhis (a new low-priced medicine store chain). The • The Company operates in a highly outbreak of swine flu is also expected to aid regulated industry and must comply with the sales growth of Indian drug companies. a broad range of dynamic regulatory controls. Further, this industry has witnessed a • In an industry where R&D is of critical tremendous growth in consumer spending importance, the Company faces a risk on healthcare and is expected to continue of all R&D initiatives not leading to the same. commercially viable and successful There is no doubt about the capacity of products. Indian pharmaceutical sector in taking the • Patent challenges or delay in receipt of big leap forward. Therefore, with the rise in regulatory approvals could delay product disposable income, tremendous growth in launch in key markets. Moreover, failure exports, edge in CRAMS, stunning interest of to obtain regulatory approval for new global investors in Indian pharma and large drugs under development could affect number of USFDA approved plants, Indian long term business opportunities. pharmaceuticals industry’s growth is vast • The Company has several joint ventures and is expected to materialize soon.

39 Panacea Biotec • Annual Report 2008-09 Future Growth Drivers laid strategy for its future growth with clearly identified growth drivers to sustain and boost Panacea Biotec aims to become a leading its revenues and profitability over the short, global research based health management medium to long term. The key growth drivers company with an established leadership in are as under: niche therapeutic areas. The Company has well

Short-term < 2 years Medium-term 2-5 years Long-term > 5 years

• Global launch of a NCE of • Launch of new combination • Global Launch of NCEs and herbal origin in GI segment. and other Vaccines currently NBEs. under development for • Launch of Vaccine for Swine flu pediatric and adults. • Launch of thermostable (H1N1) vaccines. • Supply of anti-TB and ARV • Launch of organ products to WHO/UNICEF. • Potential supply of Anthrax transplantation products in Vaccine to US for national ICH regions and key emerging • Launch of biosimilars stockpiling program. markets. • Expansion of healthcare • Launch of drug delivery based segment. products in anti-cancer, CVD, GI and Pain Management therapeutic segments in key markets across the world.

• Diversification in related healthcare segment.

In addition to above identified growth factors, the Company will continue to explore in- licensing of technologies/products from national/international research agencies/institutions to fasten its growth strategy

Corporate Social off as per the bio-waste management The key growth Responsibility system. All the bio-safety measures in R&D are periodically reviewed by Bio-safety drivers during Safety, Health and Environment Committee. short term inter- Protection The Company has installed Modern Fire alia, include Panacea Biotec undertakes all its operations Hydrant System with sprinkler system and global launch with a high concern for safety, health smoke detection & sensing devices at its all of a NCE of and environment and is committed to major facilities, for an early detection and maintaining high standards in these areas. extinguishing of accidental fire. Surprised herbal origin Substantial investments have been made in GI segment, mock fire-fighting drills are also undertaken in setting up Effluent Treatment Plants and to create awareness amongst the employees launch of Vaccine in developing a “Green Belt” and green to meet any challenge which may arise out of for Swine flu land scapping at the manufacturing sites at such incidents. Lalru & Baddi to prevent possible adverse (H1N1) and Regular training is also provided to the environmental impact on the community. launch of organ Company’s employees about the importance transplantation The vaccine R&D facility has been created of safety in day-to-day life in general products in ICH with classified laboratories including BL-3 and work in particular. The integration facility for carrying out certain R&D activities regions and of environment friendly measures and which require containment. All personnel cleaner production practices in the business key emerging working in R&D are vaccinated as per the process has resulted in better efficiency of markets. Vaccination Policy. Bio-waste is disposed operations.

40 Panacea Biotec • Annual Report 2008-09 Social Responsibility • Diacar SBU was vigorously involved in The Company spreading awareness and facilitating Panacea Biotec works closely towards the is regularly detection for diabetes and neuropathic development of society, in line with its complications of diabetes through providing philosophy of creating happier and healthier regular diabetes detection and financial society. Health, education, disaster relief and neuropathy screening initiatives. assistance/ patient awareness have been identified as the areas of priority. The emphasis has been • The company uses its BMD machines sponsorship to provide assistance on a need basis, and to conduct highly subsidized tests for pursuing that too, assistance at a local level. to measure bone mineral density of post graduates/ patients for facilitating early diagnosis of The Company is regularly providing financial doctorate studies, osteoporosis, which not only has a huge assistance/ sponsorship for pursuing post morbidity burden but also is a leading attending graduates/ doctorate studies, attending cause of death in older patients due to International International Conferences and carrying hip fractures. In last 12 months, Panacea Conferences out Research Projects being undertaken by Biotec has screened more than 1 lac Research Associates in various Institutes & and carrying patients. Universities. out Research • On the occasion of ‘World Piles Day‘ The Company regularly takes initiatives Projects. on November 20th, the Company towards fulfilling its corporate social conducted 145 Piles Detection Camps responsibility including: across geographies in India with a view • Patient Home delivery for Transplant to facilitate piles detection across all drugs. strata of patient population and to bring awareness for piles, which is highly under • Donation of life saving drugs to hospitals diagnosed in India. as per their need. • One of the first Indian companies to • Transplant Fortnight - Patient awareness successfully run a month long Breast activities spread across India covering Cancer Awareness Program to create 72 Organ Transplant centers and awareness on Importance of Early drawing more than 3500 patients. Major Detection in Breast Cancer. emphasis has been on ways and means to improve the Post-transplant life of • To keep pace with the rapidly advancing transplant recipients field of Oncology, 3 therapy specific symposiums were conducted on Breast • Organized a symposium on “Challenges Cancer, Lung Cancer and Radiation in Prevention and Management of Oncology. Dengue” at Delhi, which was well attended by Doctors, experts on this Doctor’s Day: Continuing the gesture of field and media personnel, with a view showing it’s gratitude towards the medical to provide a global snap shot of Dengue fraternity, your company wished all the to the medical fraternity and facilitate doctors a happy Doctor’s Day on 1st July. deep insights about prevention and Messages of good wishes from the Chairman management of Dengue. Mr. Soshil Kumar Jain for the doctors were released through Newspapers, SMS as well as • Organized various renal function FM Radio. detection camps as part of the awareness towards prevention of Chronic Kidney The patients were also encouraged to Disease on World Kidney Day. show their gratitude towards their doctors

41 Panacea Biotec • Annual Report 2008-09 CHINH: As in the past, during the current year, the Company continued to support CHINH to make a difference in lives of nomads in foothills of Aravali and began a tradition of development that must continue.

CHINH is an NGO’s initiative to support Nomadic communities in generating livelihood through harnessing their traditional wisdom, art and culture. Dedicated to nomads of India, this initiative’s prime focus is helping future generation of nomads in creating space for them in civil society and encouraging them to lead a life of dignity. by wishing them on the occasion. Many doctors responded to the message of the People for Animals: During the year under Chairman by sending e-mails and SMS. This review, the Company also supported People pioneering activity from Panacea Biotec for Animals an NGO based at Delhi to bring would strengthen the relationship between help and hope to thousands of needy the doctors and the people at large. animals around the Country.

Cautionary Note

Certain statements in the “Management Discussion and Analysis” and other sections in the Annual Report are forward-looking statements. These statements and expectations envisaged by the management are only estimates in nature and are based on current expectations and forecasts about future events. Such statements involve known/unknown risks, uncertainties and other factors and may cause and defer the actual results materially. Such factors include, but are not limited to, changes in local and global economic conditions, the Company’s ability to successfully implement its strategies, the market acceptance and demand of the Company’s products and services, the Company’s growth rates, expansion, technological changes and the Company’s exposure to market risks. By this nature, these indications and forecasts/projections are only estimates and actual results could differ from these in future. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date hereof.

Note: As a result of rounding-off adjustments, the figures/percentages in a column in various sections in the Annual Report may not add up to the total for such column.

42 Panacea Biotec • Annual Report 2008-09 Directors’ Report

Dear Members,

We are pleased to present the 25th Annual Report on a growth of 12%. The PBT and PAT for the year business and operations together with the audited under review turned negative at Rs.923.7 million financial statements and the auditors’ report of your and Rs.690.5 million respectively as compared to Company for the financial year ended March 31, 2009. The profits of Rs.1,903.9 million and Rs.1,331.7 million financial highlights for the year under review are given respectively inter-alia, on account of drastic reduction below: of exchange rate of Indian Rupee vis-a-vis US dollar from Rs.40.11 per dollar as on 31.03.2008 to Rs.50.72 Financial Results per dollar as at 31.03.2009, provisioning of unrealized foreign exchange loss of Rs.1,702.6 million on (Rs. in million) open forward contracts for the unexpired period of Particulars For the For the contracts and provisioning of Rs.168.0 million on year ended year ended account of permanent diminution of investment March 31, 09 March 31, 08 (representing 10% stake) in Cambridge Biostability Ltd. (CBL) and of Rs.116.2 million as doubtful on Net Turnover 7,734.2 8,304.4 account of Convertible Loan and interest accrued Other Income 259.7 371.7 thereon due from CBL. Total Income 7,993.9 8,676.1 In terms of revised AS-11, the Company has opted Profit before Interest, 2,444.6 2,177.6 for change in accounting policy in respect of Depreciation, Exceptional foreign exchange fluctuation difference relating to items & Tax (EBITDA) translation of long term foreign currency monetary Depreciation 705.1 430.0 liabilities. Consequently foreign exchange fluctuation Financial Expenses 347.4 150.1 gain of Rs.131.7 million up to March 31, 2008 and Unrealised Foreign 1,750.7 40.5 foreign exchange fluctuation loss of Rs.994.7 million Exchange Fluctuation Loss during the year under review, has been adjusted to the cost of depreciable asset or transferred to Profit/(Loss) before (639.5) 1,903.9 the Foreign Currency Monetary Item Translation Exceptional items & Tax Difference Account, depending upon nature of Exceptional item 284.2 - utilization. This has resulted into reduction in losses Profit/(Loss) before Tax (PBT) (923.7) 1,903.9 during the year by Rs.850.1 million. Provision for Taxation (233.2) 572.2 Nevertheless, the Company was still able to earn Profit/ (Loss) after Tax (PAT) (690.5) 1,331.7 operating profit of Rs.1,244.6 million during financial Dividend Paid/Proposed - 66.7 year 2008-09 as against Rs.1,836.7 million during the on Equity Shares corresponding previous financial year. Tax on Dividend - 11.3 Transfer to General Reserve - 133.1 Your Company continues to focus on sustaining growth in emerging markets, cost optimization and Balance in Profit & Loss 2,155.2 2,845.7 efficient management of working capital. Account Basic EPS (Rs.)* (10.3) 20.1 A detailed discussion on operations for the year Cash EPS (Rs.)* 30.0 27.0 ended 31st March, 2009 is given in the Management Book Value per Share (Rs.)* 92.1 104.3 Discussion and Analysis section. Dividend per Equity Share (Rs.) - 1.0 Dividend * Face value Re.1/- per share In view of non-availability of profits during the Operations Review year under review, the Board of Directors has not recommended any dividend on the Equity Shares of During the year ended March 31, 2009, the Company the Company. registered net turnover of Rs.7,734.2 million as against Rs.8,304.4 million during the corresponding financial Share Capital year. The Company registered EBITDA of Rs.2,444.6 million as compared to Rs.2,177.6 million during the During the year under review, the Issued Equity Share corresponding previous financial year, registering Capital of the Company remained unchanged at

43 Panacea Biotec • Annual Report 2008-09 Rs.66.8 million consisting of 66,842,746 Equity Shares Joint Ventures of Re.1 each. Chiron Panacea Vaccines Pvt. Ltd. - During the Corporate Governance year under review, your Company’s Joint Venture Company (JV Company), Chiron Panacea Vaccines The Company has duly complied with the provisions Pvt. Ltd. (“CPV”), set-up for marketing of innovative of the Corporate Governance Code as prescribed combination and other vaccines in India has launched under Clause 49 of the listing agreement with the Hepatitis A vaccine HAVpur, a new generation vaccine Stock Exchanges. A separate section on Corporate with virosome technology in collaboration with Berna Governance Report along with a certificate from M/s. Biotech Ltd., Switzerland and the Company’s Injectable Dass Gupta & Associates, Chartered Accountants Polio Vaccine “PolProtec” and monohib Vaccine confirming the level of compliance is annexed and (novoHib) in the Indian market. With these launches, forms a part of the Directors’ Report. CPV has a strong portfolio of innovative paediatric vaccines and in short span has taken significant Management Discussion & Analysis position at market place. CPV achieved a turnover of Rs.538.4 million and net profit of Rs.41.6 million during As required by Clause 49 of the Listing Agreement the year under review. CPV continues to maintain a with the Stock Exchanges, a detailed Management significant market share in the pediatric combination Discussion and Analysis Report forms part of the vaccines segment in India. Annual Report. Cambridge Biostability Ltd. - The Company’s another Subsidiaries JV Company, Cambridge Biostability Ltd. (CBL), a U.K. based Company, in which the Company acquired 10% The Company, as on March 31, 2009, has 5 wholly stake and also lent a Convertible Loan of £ 1.5 million during earlier years, has gone into Creditors’ Voluntary owned subsidiaries (WOS), viz. Best On Health Ltd., Liquidation proceedings during current fiscal, due to Panacea Biotec, Inc., Panacea Biotec FZE, Panacea its adverse financial position. Biotec GmbH and Rees Investments Ltd. and a subsidiary, viz Umkal Medical Institute Pvt. Ltd., in Associates terms of Section 4(1)(b)(ii) of the Companies Act, 1956. Besides, Radicura & Co. Ltd., Panacea Hospitality Your Company’s Associate Company, PanEra Biotec Services Pvt. Ltd., Sunanda Steel Company Ltd. & Pvt. Ltd. is continuing to meet requirement of bulk Panacea Educational Institute Pvt. Ltd. are the WOS of vaccines and antigen for the manufacture of Hepatitis Best On Health Ltd.; Kelisia Holdings Limited, Cyprus B and Combination Vaccines by your Company. PanEra is the WOS of Rees Investments Ltd. and Kelisia has become a specialised company focused on bulk Investment Holdings AG, Switzerland & Panacea manufacture of vaccines and plans to venture into new Biotec (International) SA, Switzerland are step-down product and technologies. subsidiaries of Rees Investments Ltd. In terms of Section 4(1)(c) of the Companies Act, 1956, these 7 During the year under review, the Company’s associate companies are the subsidiaries of the Company. firm, viz. M/s Lakshmi & The Manager, in which the Company had invested Rs.40.0 million (40% share), has In terms of the approval granted by the Central been taken over by a newly formed company, Lakshmi Government under Section 212(8) of the Companies & Manager Holdings Limited. As a result of takeover of Act, 1956, copies of the Balance Sheet, Profit and Loss the said firm, the Company has been allotted Equity Account and Reports of the Board of Directors and Shares for an amount of Rs.41.3 million in the said Auditors of the Subsidiaries have not been attached company. with the Balance Sheet of the Company. However, these documents will be made available upon request Consolidated Financial Statements by any investor of the Company/ subsidiary, interested in obtaining the same. As directed by the Central As required under clause 41 of the Listing Agreement Government, the financial data of the subsidiaries has with the stock exchanges, a consolidated financial been furnished elsewhere in the Annual Report. The statement of the Company and its subsidiaries, joint annual accounts of the subsidiary companies will be venture and associates, as prepared in accordance kept for inspection by any investor at the Company’s with the Accounting Standard AS-21 on ‘Consolidated Corporate Office at B-1 Extn./G-3, Mohan Co-operative Financial Statements’ read with Accounting Standard Industrial Estate, Mathura Road, New Delhi – 110044, AS-27 on ‘Financial Reporting of Interest in Joint India and at the office of the respective subsidiary Ventures’ and Accounting Standard AS-23 on companies during business hours of the Company. ‘Accounting for Investments in Associates’, as issued

44 Panacea Biotec • Annual Report 2008-09 by the Institute of Chartered Accountants of India, Mr. R. L. Narsimhan, Mr. N. N. Khamitkar and Mr. Sunil is attached herewith and the same together with Kapoor, Directors of the Company, are liable to retire Auditors’ Report thereon forms part of the Annual by rotation and being eligible, offer themselves for Report of the Company. re-appointment.

Listing of Equity Shares / Bonds A brief resume, expertise, shareholding in the Company and details of other directorships of these The Equity Shares of the Company continue to be directors as stipulated under clause 49 of the Listing listed on National Stock Exchange of India Ltd. (NSE) Agreement with the Stock Exchange forms part of the and Bombay Stock Exchange Ltd. (BSE). The Foreign Notice of ensuing Annual General Meeting. Currency Convertible Bonds (FCCBs) are listed at Singapore Stock Exchange. The annual listing fees for The Board recommends the appointment of Mr. R. L. the year 2009-10 have been paid to these Exchanges. Narsimhan, Mr. N. N. Khamitkar and Mr. Sunil Kapoor.

Public Deposits Auditors

During the year under review, your Company has As per the provisions of the Companies Act, 1956, not invited or accepted any deposits from the public M/s. S.R. Batliboi & Co., Chartered Accountants, hold pursuant to the provisions of Section 58A of the office as Statutory Auditors of your Company till the Companies Act, 1956 and no amount of principal or conclusion of the ensuing Annual General Meeting interest was outstanding in respect of deposits from and have shown their willingness to be re-appointed the public as of the date of Balance Sheet. However, as the Auditors of the Company. during the year under review, the Company has continued to accept deposits from the Company’s Based on the recommendation of the Audit Directors, their relatives, associates and the Company’s Committee, the Board of Directors of the Company employees without inviting deposits from them. proposes the re-appointment of M/s. S.R. Batliboi & Co., Chartered Accountants, as the Auditors of the Insurance Company. Further, as required under Section 224(1B) of the Companies Act, 1956, they have confirmed that the The Company’s properties and insurable assets like said appointment, if made, will be within the limits as building, plant & machinery, stocks and upcoming prescribed under the provisions thereof. projects have been adequately insured, against major risks. The Company has also taken appropriate product Auditors’ Report liability insurance policies for conducting clinical trials and for insuring its products (manufactured & sold) With regard to the matters of emphasis and with an add on cover of pollution liability and limited observations contained in the Auditors’ Report, unnamed vendor extension liability to cover the risk management’s explanations are given below: on account of claims, if any, filed against the company. a. Non-provision of proportionate premium on Internal Control System redemption of ‘US$ 50 million Zero Coupon Convertible Bonds due 2011’ amounting to The Company has a sound Internal Control System, Rs.470,992,269: The Board of directors are of the which ensures that all assets are protected against opinion that since the bonds are redeemable loss from unauthorized use and all transactions are only if there is no conversion of bonds earlier, recorded and reported correctly. The internal control the probability of which cannot be presently systems are further supplemented by internal audit ascertained, hence, the payment of premium on carried out by independent firms of Chartered redemption is contingent in nature, the outcome Accountants and periodical review by management. of which is dependent upon uncertain future The Audit Committee of the Board addresses events. Therefore, the same has been disclosed significant issues raised by both, the internal Auditors as a contingent liability. Moreover, in case of and the Statutory Auditors. redemption, the redemption premium will be offset against the Securities Premium Account, thus Directors having no impact on the Profit & Loss Accounts.

There was no change in the composition of the Board b. Capitalization of expenditure on clinical trials of Directors of the Company during the year under amounting to Rs.123,978,449 for the purpose review. of registration of Company’s products in US and/or Europe: The expenditure is not towards In accordance with the provisions of the Companies basic research and there is no experience to Act, 1956 and Articles of Association of the Company, suggest that the studies conducted by CRO on

45 Panacea Biotec • Annual Report 2008-09 behalf of the Company would lead to or make Companies Act, 1956, M/s J.P. Gupta & Associates, it difficult for the Company to obtain regulatory Cost Accountants, have been appointed as the Cost approval. Hence, the management believes that Auditors to conduct the audit of the Company’s Cost these products would be commercially viable Records in respect of formulations for the year ended and there is no reason to believe that there is 31st March, 2009 with the approval of the Central any uncertainty that may lead to not securing Government. The cost audit is under process and registration for the products from regulatory the Company will submit the Cost Auditors’ Report authorities in US and/or Europe. to the Central Government in time. M/s J.P. Gupta & Associates, have also been appointed by the Board as c. Payment of managerial remuneration of the Cost Auditors for the financial year 2009-10 subject approximately Rs.38,169,706 for the current year to the approval of Central Government. in excess of limits prescribed as per Part II of Schedule XIII to the Companies Act, 1956, without Disclosures under Section 217 of the Companies Central Government approval: The Company had Act, 1956 adequate profits for past many years and thus has been paying remuneration to its managerial Except as disclosed elsewhere in the report, there personnel as per shareholders approval within have been no material changes and commitments, overall limits as specified under the Companies which can affect the financial position of the Company Act, 1956. However, since in view of the reasons between the end of financial year and the date of explained elsewhere in this Report the Company report. has incurred losses during the year under review, the managerial remuneration paid during the As required under Section 217(2) of the Companies year amounting to Rs.63,035,463 exceeded the Act, 1956, the Board of Directors inform the members limits prescribed under the Act by Rs. 38,169,706. that during the financial year there has been no The Company has sought approval of the Central material changes, except as disclosed elsewhere in this Government for protection of such remuneration. report: d. Slight delay in deposition of Value Added Tax • in the nature of Company’s business, (VAT), Employees’ State Insurance (ESI) and Service Tax in few cases: The amount involved was • in the Company’s subsidiaries or in the nature of not significant and the said delays were due to business carried out by them, normal operational difficulties. The total amount • in the classes of business in which the Company of such VAT, ESI and Service Tax was Rs.2,163,478, has an interest. Rs.379,832 and Rs.436,256, respectively only and the Company had already deposited the said Energy Conservation, Technology Absorption & amount. Interest amounting to Rs.447,675 was also Foreign Exchange paid in respect of delay in payment of Service Tax for the delayed period. Particulars required under Section 217(1)(e) of the Companies Act, 1956, read with the Companies Further, with regard to the matter of emphasis and (Disclosure of Particulars in the Report of Board of observation contained in the Auditors’ Report on Directors) Rules, 1988, regarding conservation of the Consolidated Financial Statement as regards energy, technology absorption and foreign exchange Unaudited Annual Accounts of Subsidiaries – Panacea earnings & outgo, is given in Annexure A, forming part Biotec GmbH, Germany, Kelisia Investment Holdings of this Report. AG, Switzerland and Panacea Biotec (International) SA, Switzerland, though the Annual Accounts of Information regarding Employees these subsidiaries were prepared by their respective Board of Directors but the audit thereof could not be completed till the date on which the Company’s The information required to be furnished under Accounts were finalised. The audit exercise had since section 217(2A) of the Companies Act, 1956, read with been completed and there is no change in the assets, Companies (Particulars of Employees) Rules,1975 revenues and cash flows thereof. as amended, the names and other particulars of employees covered under these Rules are set out in The notes to the accounts and other observations, if Annexure B, forming part of this Report. any, in the Auditors’ Report are self-explanatory and, therefore, do not call for any further comments. Directors’ Responsibility Statement

Cost Auditors The Directors hereby confirm: i. that in the preparation of the annual accounts, Pursuant to the provisions of Section 233B of the the applicable accounting standards had been

46 Panacea Biotec • Annual Report 2008-09 followed along with proper explanation relating continued co-operation, patronage and trust reposed to material departures; on the Company and its products. The Directors place on record their gratitude to the government, ii. that the directors had selected such accounting other statutory bodies, our strategic partners, policies and applied them consistently and made business associates, banks, financial institutions and judgments and estimates that are reasonable shareholders for their assistance, co-operation and and prudent so as to give a true and fair view of encouragement they extended to the Company. the state of affairs of the Company at the end of the financial year and of the profit or loss of the Your Directors also place on record their sincere Company for that period; appreciation for significant contribution made by iii. that the directors had taken proper and sufficient the employees at all levels through their dedication, care for the maintenance of adequate accounting hard work and commitment and look forward to their records in accordance with the provisions of the continued support and unstinting efforts in ensuring Companies Act, 1956 for safeguarding the assets an excellent all round operational performance. It is of the Company and for preventing and detecting this unity of purpose that breeds success and your fraud and other irregularities; and Directors look forward to receiving similar support and encouragement from the larger Panacea family in the iv. that the directors had prepared the annual years ahead. accounts on a going concern basis. For and on behalf of the Board Acknowledgments New Delhi Soshil Kumar Jain Your Directors take this opportunity to express sincere thanks to the medical fraternity and patients for their 30th July, 2009 Chairman

Annexure to the Directors’ Report Annexure A Statement of Particulars pursuant to the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988.

I. Conservation of Energy • Installed Variable Frequency Drive (VFD) on Chilled Water Transfer Pump of 1. Energy Conservation measures taken Refrigeration Plant at Pharma Formulation The Company accords highest priority to Plant, Baddi. energy conservation and is committed for • Discontinued the operation of Primary energy conservation measures including Chilled water circulation pumps of regular review of energy consumption and Refrigeration plants by taking Secondary effective control on utilization of energy. The Chilled water transfer pumps also in the Company had devised its production lines and Primary Circuit by carrying out the Chilled other facilities keeping in view the objective of water line modification. minimum energy losses. • Stoppage of Electrical Heaters as well as The following are the major energy Hot Water Circulation to Dehumidifiers conservation measures implemented during of Pharma Formulation Plant, Baddi by the financial year 2008-09 with an objective to maintaining the required RH (Relative substantially reduce power consumption: Humidity) with the help of Chilled Brine • Stoppage of Chilled Brine Refrigeration only. plants during night shifts at Pharma • Operating Hours of AHUs have been Formulation Plant, Baddi and maintaining optimized at various sections at Lalru and the required Facility conditions by Baddi. running them in day shift operations. Also • Started stopping of hot water circulation increased Cut off Set point temperature. pump for HVAC operations during night • Increased Chilled Water Evaporator hours at Vaccine Formulation Plant, Baddi. temperature and reduced Air Compressor • Started stoppage of Cooling Tower Working Pressure for Vaccine Formulation dedicated pumps to Air Compressors Plant, Baddi to reduce the Power and Diesel Gen Sets and the same was consumption. optimized with Cooling Tower pumps of

47 Panacea Biotec • Annual Report 2008-09 Refrigeration plants of Pharma Formulation for controlling street lamps so that it Plant, Baddi. automatically gets off in the morning. • Optimized Air Compressor running hours • Installed PRV for oxygen generation at Vaccine Block-1, Lalru by providing lower plant and there running of only one air capacity Air Compressor during Night compressor in place of 2 Air Compressors. Hours. • Modified the Brine water lines and • Optimized Hot Water circulation by removed the primary pump concept. replacing Pump set with lower capacity at • Effective running of Air Compressor and Vaccine Block-2, Lalru. removed all air leakages. • Optimized Lighting circuits at Lalru. • Throttling of Chilled water discharge valves • Provided Timer Circuit to Animal House and decreased the motor loads. Exhaust Air Units, Lalru Plant. • Ensure switching off all corridors lights in • Started stopping Raw Water Boosting day time. Pump during night hours at Lalru Plant. • Close monitoring of FO consumption in • Installed Temperature controllers for all Boilers and reduced its working pressure Cooling Tower Fans with respect to Wet • Close Monitoring of HSD consumption for Bulb Temperatures. DG • Installed Level Controller on Soft Water storage tank to prevent the overflow of • Hot water system replaced the 3.7 KW water and atomized the Soft Water Pump. motor with 2.2 KW for HVAC system • Started stoppage of Split Air Conditioning 2. Additional Investments/ Proposals, if any, for Units during winter season at various reduction of Energy Consumption sections in Vaccine Formulation Plant at Continuous efforts are being made to further Okhla, New Delhi. reduce the expenditure on power & fuel in the • Optimized running hours of AHUs of non time to come. Continuous Energy Conservation critical areas of Okhla Vaccine Formulation Campaign is going on at all locations and plant. based on that steps are being taken related to • Optimized running hours of Machine optimization in existing as well as new system Room AHUs of GRAND, Mumbai. implementation. Many Techniques have already • Optimized Lift working hours at GRAND, been introduced during the financial year Mumbai. 2008-09: • Installed Motion sensors for lighting at all • Modification of Cold rooms so as to Toilets of GRAND, Mumbai. increase the efficiency of the cold rooms & • Increased the Power Factor across to reduce the electrical load. all locations to reduce the Power • Installation of the ETP to comply the Consumption. statutory compliance against Pollution • Reduced Boiler working pressure and control board norms. Compressed Air Pressure at vaccine facility • New central dispatch facility to carry out at Okhla. the dispatch activities includes secondary • Reusing the R.O. reject water for non packing material storage. critical use like feed for cooling towers. Further, a few new Energy Conservation • Incorporated temp. controller in CT fan for technologies including Earth Air Tunnel, the Chiller. Thermal Refrigeration Storage, Side Stream • Reduced/replaced the GLS, flouroscent Cooling Tower Water Cleaning on-line tube lights with CFL at all locations. Technology etc. are in pipeline for future implementation. • De-scaled indoor & outdoor units of AC’s so as to reduce the electrical load. 3. Impact of measures taken and impact on • Modified the needles of Vial washing M/c cost of production of goods OPV & Line III reducing the consumption of The energy conservation measures indicated DM water. above have helped the Company to restrict the • Inbuilt battery charger installed in the D.G. impact of increase in the cost of energy thereby sets. reducing the cost of production of goods to • Introduction of light control device that extent.

48 Panacea Biotec • Annual Report 2008-09 FORM A The particulars of consumption of energy, are given below: Current Year Previous Year A. Power and Fuel Consumption 1. Electricity (a) Purchased Units (Nos.) 15,011,387 8,624,456 Total Amount (Rs.) 67,830,374 38,257,058 Rate/Unit (Rs.) 4.52 4.44 (b) Own generation (i) Through Diesel Generator Units (Nos.) 3,397,584 2,827,525 Unit per litre of Diesel Oil 3.49 3.49 Cost/Unit (Rs.) 8.91 8.07 (ii) Through Steam/Turbine Generator Nil Nil Units (Nos.) Unit per litre of Fuel Oil/ Gas Cost/Unit 2. Coal Nil Nil Quantity (tonnes) Total Cost Average Rate 3. Furnace Oil Quantity (Litres) 505,115 - Total Amount 11,824,571 - Average Rate/litre 23.41 - 4. Others/Internal generation Nil Nil Quantity Total Cost Rate/Unit B. Consumption per unit of production Tablets Production (Nos. in thousand) 504,389 420,871 Electricity Consumption (Units per thousand) 4.52 3.67 Capsules Production (Nos. in thousand) 61,027 51,414 Electricity Consumption (Units per thousand) 24.33 66.55 Syrups Production (in litres) 283,921 246,057 Electricity Consumption (Units per thousand) 0.76 1.41 Gels Production (in kilograms) 23,475 65,586 Electricity Consumption (Units per thousand) 2.62 3.05 Vaccines Production (No. of vials in thousand) 50,554 69,507 Electricity Consumption (Units per thousand) 65.44 46.52 Pre-filled Syringe (PFS) Production (Ml. in thousand) 1,680 - Electricity Consumption (Units per thousand) 244.15 - Granules Production (Packs in thousand) 17,639 - Electricity Consumption (Units per thousand) 17.07 -

II. Technology Absorption FORM B Form for disclosure of particulars with respect to Technology Absorption Research & Development (R&D) The areas of research being pursued by the Company include: 1. Specific areas in which R & D carried out by the • Development of novel preventive & therapeutic Company vaccines, novel therapeutic peptides and The Company is a research focused & IPR oriented therapeutic fully human monoclonal company whose one of the end objectives is antibodies. innovation and development of patentable • Development of advanced drug delivery products and technologies. technologies.

49 Panacea Biotec • Annual Report 2008-09 • Discovery & synthesis of new chemical and Development activities for growing the revenues & biological entities. profitability, inter-alia, in the following areas: • Development of recombinant clones for • Development and improvement in existing biosimilars. conjugation technology for better yield and • Product development for different categories of quality. drugs. • Drug Discovery Research 2. Benefits derived as a result of above R&D • Advanced Drug Delivery Research • Improved product quality leading to customer • Research for development of novel preventive satisfaction & therapeutic vaccines, therapeutic fully • Vaccine against bioterrorism human monoclonal antibodies and therapeutic • Safe and environment friendly process peptides. • Novel drug delivery products • Development of thermostabilised vaccines. • Competitively priced products • Natural Products Research • Waste minimisation • Chemical Research & Development • Grant of Product/Process Patents 4. Expenditure on R&D (Rs. in million) • Import substitution leading to lower cost of 2008-09 2007-08 goods a) Revenue 500.9 410.5 • Enhanced global presence b) Capital 578.4 666.2 • Export of Quality Products c) Total 1,079.3 1,076.7 3. Future plan of Action d) Total (as a % of net sales) 14.0% 13.0% The Company will continue to focus its Research &

Technology absorption, adaptation and Innovation 1. Efforts, in brief, made towards technology adaptation and innovation: The Company has built a strong R&D base to support its business segments, vaccines, formulations and biopharmaceuticals. It has five highly sophisticated ultra-modern R&D centers with 391 employees including 261 qualified and experienced scientists for its various research projects. The core area of research & development includes new Vaccine Development, Biopharmaceuticals, proteins, peptides, monoclonal antibodies, Novel Drug Delivery Systems projects, Advanced Drug Delivery System projects and Drug Discovery (small molecules), in compliance with international regulatory standards. The Company has developed indigenous technologies in respect of various products being manufactured by it and at present working on several novel products and technologies. Further, the Company has made in-licensing arrangements for technologies and development of (a) Vero cell adapted Japanese encephalitis (JE) Vaccine, (b) Peptide based product for generation of hair follicles and hair growth, and (c) Recombinant Chimeric Dengue Vaccine, during earlier financial years. The technology in-licensed for JE Vaccine, has been further modified significantly at our research center to yield a commercially viable and safer product. The candidate vaccine is in trial stages of development and should enter preclinical/clinical development by next year. 2. Benefit derived as a result of the above efforts, e.g., product improvement, cost reduction, product development, import substitution, etc.: Competitive products, Product quality improvement, Product Development and Import Substitution and with in-licensing arrangements, the Company will be able to commercialize these products in domestic and international markets. 3. In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year), following information may be furnished; Technology imported Year of Has technology If not fully absorbed, areas where this import been fully has not taken place, reasons thereof absorbed and future plan(s) of action (a) (b) (c) (d) 1. Technology for use of 2004-05 No The technologies are being worked upon. The process peptide based products for the scale-up production of hair growth peptide has for generation of hair been optimized. A pre-clinical toxicological study follicles and hair growth has been planned. 2. Tetravalent Dengue 2006-07 No The technologies are being worked upon. A suitable cell Virus Vaccine line for the assay and amplification technology of recombinant chimeric Dengue virus has been prepared. Appropriate Dengue viruses have been amplified and immunogenicity of candidate virus has been planned. 3. Technology for 2007-08 Yes NA manufacture of Hep B Antigen & Bulk Vaccines

50 Panacea Biotec • Annual Report 2008-09 III. Foreign Exchange Earnings and Outgo 3. Development of new export markets for products and Export Plans 1. Activities relating to exports With a view to increase opportunities, the efforts The total export turnover of the Company was on international marketing have been further Rs.5,612.9 million (including deemed exports of intensified. The Company has been adopting a Rs.3,708.4 million) during the year under review strategy of increasing its international brand image as against Rs.6,442.8 million (including deemed and is actively exploring opportunities for launching exports of Rs.5,797.3 million) during fiscal 2008. as well as licensing out some of its patented The Company is supplying Oral Polio and products for manufacture/ marketing in key new Combination Vaccines to various countries through markets including US, European Union, Switzerland, UNICEF against its global tenders and achieved South Africa, Turkey, Brazil, Mexico, Columbia, an export turnover of Rs.1,478.4 million by way of Venezuela, Chile, Philippines & Malaysia. supplies of vaccines to various countries including The company is also poised to make inroads into Afghanistan, Central Africa, Kenya, Sudan, Myanmar, global vaccine markets by deploying specialized Namibia, Nigria, Pakistan, Russia, Tanzania, Uganda team for its Vaccine Business in emerging (ROW) Uzbekistan through UNICEF, as against Rs.309 markets. The Company has started establishing its million during the previous year, achieving an ground work in various potential vaccine markets & excellent growth of more than 370%. also obtained registration in Nepal & Pakistan. The As regards formulations, the Company is Company is all set to launch GeneratioNext vaccines continuously expanding its global aspirations by in the emerging markets in years to come. improving its international marketing efforts into 4. Total foreign exchange earned and used various markets across the globe and is currently (Rs. in million) exporting its branded formulations in CIS countries, Asia, Eastern Europe and African region. Today the 2008-09 2007-08 Company’s products are available to people in Foreign Exchange Earned various countries across the globe. F.O.B. value of Exports 5,589.0 6,414.1 The export turnover of formulations during fiscal (including deemed export of 2009 increased by 27% to Rs.426.0 million from Rs.3,708.4 million (Previous Rs.336.5 million during fiscal 2008. Year Rs.5,797.3 million)) The major markets continue to do well inspite of R & D Services (Know-how) income 1.7 3.9 recessionary trends in the later part of the year. Interest on Exchange Earners’ In addition to this, successful commercialization Foreign Currency Deposits - 0.6 happened in newer markets across Central America, Interest received on loan from 16.9 2.0 Africa and Asia. The exports to Russia & Thailand Joint Venture Company have shown excellent growth of 77% & 53%, Interest accrued but not due on 28.9 - respectively over the previous fiscal. loan from subsidiary company 2. Initiatives taken to increase export Total 5,636.5 6,420.6 Foreign Exchange Used The year under review marked the achievement of landmark initiatives & accolades for the Company’s Raw Materials & Packing 4,571.3 2,743.0 international formulations business. Materials Capital Goods 457.2 193.1 The company has identified Organ Transplantation, Know-how Fee 12.8 8.6 Nephrology, Metabolic Disorders, Pain management, Oncology, Gastro-intestinal, Anti-infectives products Royalty 0.0 0.3 as major thrust areas for the future. The Company Interest 206.2 59.4 has been adopting a strategy of increasing its Professional & Consultation Fees 54.7 29.8 international brand image and is rapidly expanding Other Expenses to reach out to more and more countries. It has - Patents, Trade marks & 26.3 23.4 also obtained brand registration for various brands Product registration in different countries and is actively exploring - Advertising and Sales Promotion 5.3 33.2 opportunities for launching as well as licensing out - Printing & Stationary 0.1 3.3 some of its patented products for manufacture/ - Commission on Sales 65.8 44.7 marketing in Europe, North America, Latin America, - Market Research 30.3 - etc. - Others 39.6 27.5 The Company is also currently in the process Total 5,469.6 3,166.3 of registering its products in key new markets For and on behalf of the Board including US, European Union, Switzerland, South Africa, Turkey, Brazil, Mexico, Columbia, Venezuela, New Delhi Soshil Kumar Jain Chile, Philippines & Malaysia. 30th July, 2009 Chairman

51 Panacea Biotec • Annual Report 2008-09 Annexure B Statement pursuant to Section 217(2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 and forming part of the Directors’ Report for the year ended 31st March, 2009. S. Name Designation and Remuneration Qualifications Experience Date of Age Particulars of Last Employment No. Nature of Duties (Rs.) (Years) Commencement (Yrs.) Name of Employer, Designation, of Employment Period of Service (Years) A. Persons employed throughout the Financial Year ended 31st March, 2009, who were in receipt of remuneration for the year in which the aggregate was not less than Rs.2,400,000. 1. Mr. Soshil Kumar Jain Chairman 17,673,850 Pharmacist 54 02.02.1984 76 None, NA, NA 2. Mr. Ravinder Jain Managing Director 21,770,429 Matriculate 29 15.11.1984 52 None, NA, NA 3. Dr. Rajesh Jain Joint Managing Director 14,688,440 B. Sc., PGDBM & 25 15.11.1984 45 None, NA, NA Advanced Mgmt. Diploma in Market Research, Ph.D. 4. Mr. Sandeep Jain Joint Managing Director 14,688,440 B. Com 24 15.11.1984 43 None, NA, NA 5. Mr. Sumit Jain Director - Operations & Projects 3,520,582 B. Com, MBA 6 16.05.2003 28 None, NA, NA 6. Mr. Narayan B. Gad Chief Executive 7,950,003 B. Sc, D. Pharma, MBA 33 26.10.2005 58 Nicholas Piramal India Ltd. Formulations (Marketing) President Mktg. & Org. Dev., 4 years 7. Dr. V.K. Vinayak President BRC- (R&D) 3,735,453 Ph.D., M. Sc, FICAI, 38 01.10.2005 66 Dept. of Biotechnology, Govt. of India, FRSTMH (London) Sr. Advisor, 11 years 8. Dr. Sanjay Trehan Sr. Vice President - 6,535,395 Ph.D., M.Sc. (H) 21 01.07.2004 50 Dr. Reddy’s Laboratories Ltd., Drug Discovery Research Research Director, 3 years 9. Mr. R.K. Suri Sr. V.P. - New Initiative 3,409,552 M.Sc. (Hons) 31 12.11.2007 54 Sanofi Aventis, Sr. Dir.-Bus. Effect., 9 years 10. Dr. M. Sitaram Kumar Vice President - 5,589,053 M. Sc, Ph.D. 33 17.06.2005 59 Dr. Reddy’s Laboratories Ltd. Drug Discovery Research Sr. Director, 4.5 years 11. Mr. Kallol Chakraborty Vice President (HR) 4,746,091 PG Dip. In Pers. Mgmt., LLB 19 19.11.2007 45 Federal Mogul Goetze (India) Ltd. Director HR, 8 months 12. Mr. Sukhjeet Singh Vice President (R&D) 4,136,027 Post Graduate 15 17.08.2006 40 Strides Acrolabs Ltd., VP - Formulations & Development, 1 year 13. Dr. Ashok Panwar Vice President - Quality & 3,999,329 M. Sc., Ph.D. 15 01.05.2001 41 Dishman Pharmaceuticals & Chemicals Compliance Ltd., AGM-Q.C., 2 years 14. Mr. Kulvinder Sarao V.P. - Audit & Compliance (HR) 3,967,750 PGDPMIR 24 14.01.2005 47 Hero Honda Motors Ltd, DGM-HR, 5 Mths 15. Dr. Arani Chatterjee V.P. - Clinical Research 3,942,092 MBBS, M. Phil. 18 24.07.2004 41 Dr. Reddy’s Labs Ltd., Principal Physician, 6 yrs. 16. Mr. Sunil K. Bajaj Vice President - Sales & Mkg. 3,688,850 B.Sc. 29 15.09.2004 48 Novartis India Ltd., NSM, 20 years 17. Mr. Ganesh R. Kumraj Vice President Bio. Oper. 3,529,921 Post Graduate 21 15.01.1992 42 National Facility for Animal Tissue & Cell, DGM, 3 years 18. Dr. Jagattaran Das G.M. (R&D) 3,397,241 M.Sc., Ph.D. 15 01.07.2005 45 Dr. Reddy’s Labs Ltd., Sr. Scientist, 6 years 19. Ms. Neeta S. Sanghi Head-Value India Healthcare 4,038,198 B.Sc. (Hons) 24 01.06.2007 50 Nicholas Piramal (I) Ltd. V.P. Dom. Form. Supply Chain, 11 years 20. Mr. Syed Sadir Ahmed Head - International 3,424,243 B Pharma, MBA 15 14.01.2006 39 Nicholas Piramal India Ltd.., GM. S&M, Vaccine Business 2 years 21. Mr. Karunakar J. Shetty Head of Operations-India 4,963,887 B.Com 24 01.01.2006 50 Nicholas Piramal India Ltd. (Marketing) President Mktg. & Org. Dev., 4.5 years B. Persons employed for a part of the Financial Year ended 31st March, 2009, who were in receipt of remuneration for any part of the year, at the rate which in the aggregate was not less than Rs.200,000 per month. 22. Dr. Lallan Giri President & Chief Operating 7,752,060 B.S., M.S., Ph.D. 26 01.07.2008 63 Oshiva Enterprise LLC, USA. CEO/ M.D., Officer 3 years 23. Mr. S. C. Marwah CEO - Healthcare Venture 3,248,822 MBBS, Dip. Av. PGADHM, MBA 38 16.06.2008 62 Fortis Health Care Ltd., Head Medical Edu. & Facility Planning, 4.5 Months 24. Mr. Partha Sarathi De C.F.O and Head IT & BPR 4,702,177 B.Sc. (Econ.), ACA, AICWA 21 02.06.2008 47 Gujarat Glass Ltd., President Finance Glass Group, 2.5 years 25. Dr. Goutam Ghosh V.P. - Tech Mgmt Group 2,284,676 M.Tech, Ph.D. 23 02.06.2008 48 The Pearey Lal Group, CEO., 1 year 26. Dr. Sanjiv Sharma Vice President-Regulatory 3,389,186 Ph.D. Org. Chem. 20 30.06.2008 43 Orchid Chemicals & Pharma Ltd., VP-RA., Affairs 4 years 27. Mr. Abhay N. Lonkar Country Head - India 3,940,026 B.Sc., MMS 20 11.06.2008 49 Unichem Labs Ltd., VP, 5 years 28. Dr. S. Mahender Rao Vice President-CRD 1,323,978 Ph.D. - Doctor of Philosophy 13 08.12.2008 43 Orchid Chemicals & Pharma Ltd., Vice President, 4.5 years 29. Dr. Amarjit Singh President R&D 1,920,275 M. Pharma, Ph.D. 29 01.03.2005 51 Sun Pharmaceutical Industries Ltd., CSO & EVP (R&D), 2 years 30. Mr. Mahesh Shrihari Head - Strategy 1,786,861 B.Pharma, MMS 17 01.07.2008 38 ORG - IMS Research Pvt. Ltd., Kalsekar Manager- Engagement, 11.5 years 31. Mr. Govind Pandey V.P.- Pharma Operations 1,728,805 M.Pharma 18 10.05.2007 42 Alkem Labs Ltd, VP Operations, 2 years 32. Mr. S. Anuj Readdy Head Sales & Marketing 1,616,563 MBA 12 02.05.2007 36 Novo Nordisk Pharma India Ltd., Mktg. Dir., 10 years 33. Dr. Anil Chawla Vice President (R&D) 1,540,021 Ph.D. 22 15.01.1992 41 Bharat Immunological & Biological Corporation Ltd., DGM, 4.5 years 34. Mr. Maheshh Jain G.M. - Accounts, Finance, 391,523 CA, CS 20 04.12.2007 45 Jubilant Organosys Ltd., GM Accounts, Budget & Cost 4.5 years.

Notes: 1. Remuneration includes salary, commission on profits, house rent allowance, bonus, Company’s contribution to Provident Fund, Leave Travel Allowance, Medical Assistance and all allowances paid in cash and monetary value of taxable perquisites wherever applicable and also includes Gratuity/ Retirement Benefit. 2. There was no employee who was employed either throughout the financial year or part thereof, who was holding either by himself or along with the spouse and dependent children 2% or more of the Shares of the Company and drawing remuneration in excess of the remuneration drawn by Managing Director / Joint Managing Director / Whole-time Director. 3. The terms and conditions of employees at Sl. No. 1 to 5 are as approved by the Board of Directors and Shareholders. The employees at Sl. No. 6 to 34 are paid remuneration as per the policy/ rules of the Company. 4. All the above said appointments are contractual. 5. None of the above employees is related to any of the Directors except that Mr. Soshil Kumar Jain, Mr. Ravinder Jain, Dr. Rajesh Jain, Mr. Sandeep Jain and Mr. Sumit Jain are related to each other. 6. The nature of duties of Chairman, Managing Director and Joint Managing Directors is as under: Mr. Soshil Kumar Jain, Chairman - Strategic planning, vision and formulation of strategies. Mr. Ravinder Jain, Managing Director - Overall supervision of day-to-day operations with emphasis on strategic planning and business development. Dr. Rajesh Jain, Joint Managing Director - Overall supervision of day-to-day operations with emphasis on R&D, business development and marketing. Mr. Sandeep Jain, Joint Managing Director - Overall supervision of day-to-day operations with emphasis on finance, international marketing and regulatory affairs. For and on behalf of the Board

New Delhi Soshil Kumar Jain 30th July, 2009 Chairman

52 Panacea Biotec • Annual Report 2008-09 Report on Corporate Governance

1. Philosophy on Corporate Governance The Company’s philosophy on Corporate Governance originates from its belief that attainment of the highest levels of transparency, disclosure, financial controls, accountability and equity are the pillars of any good system of corporate governance. Panacea Biotec is committed to continuously evolving and adopting corporate governance’s best practices in all facets of its operations and in all interactions with its stakeholders including shareholders, employees, consumers, lenders and the community at large. At Panacea Biotec, good Corporate Governance process includes independence, integrity, commitment to values, ethical business conduct and a high degree of transparency directing the intellectual capabilities and moral authority of its independent Board that go a long way in preserving stakeholders trust while maximizing long- term corporate values. 2. Board of Directors Composition & size of the Board Panacea Biotec’s Board consists of an optimal combination of Executive Directors and Independent Non-executive Directors which represents a mix of professionalism, thorough knowledge and experience. The Directors bring in expertise in the fields of human resource development, strategy, management, finance and economics among others. The Board provides leadership, strategic guidance, objective and independent view to the Company’s management while discharging its fiduciary responsibilities, thereby ensuring that the management adheres to high standards of ethics, transparency and disclosure. At present, the Board comprise of 5 (Five) Executive Directors and 6 (Six) Non-Executive Directors. All the Executive Directors are promoter-directors (1 Executive Chairman, 1 Managing Director, 2 Joint Managing Directors and 1 Whole-time Director). The non-executive Directors bring external and wider perspective in the Board’s deliberations and decisions. The size and composition of the Board exceeds the requirements of the Clause 49 of the Listing Agreement (Corporate Governance Guidelines) with the Stock Exchanges. Board Functioning & Procedure Panacea Biotec’s board is committed to ensuring good governance. Its style of functioning is self-governing. The members of the Board always have complete liberty to express their opinion and decisions are taken on the basis of consensus arrived at after detailed discussion. They are also free to bring up any matter for discussion at the Board Meetings. Panacea Biotec’s Board meets at least once in every quarter to discuss and review the quarterly results and other items of agenda including the information required to be placed before the Board as required under Annexure 1A of Clause 49 of Listing Agreement and additional meetings are held as and when required. Dates for the Board Meetings are decided well in advance and communicated to the Directors. The Chairman of the Board and the Company Secretary discuss the items to be included in the agenda and the agenda is sent in advance to the Directors along with the draft of relevant documents and explanatory notes. During the financial year 2008-09, 5 (Five) Board Meetings were held on 30th April, 2008, 26th June, 2008, 28th July, 2008, 31st October, 2008 (which was originally called on 17th October, 2008 but was adjourned due to lack of quorum) and 29th January 2009. Attendance of Directors at the Board Meetings & last Annual General Meeting and number of other Directorships & Committee membership as on 31st March, 2009 Sl. Name of Director Category of No. of No. of Attendance No. of other Directorships$ No. Directorship Board Board at last & Committee Memberships/ Meetings Meetings AGM Chairmanships* held attended Other Committee Committee Directorships Memberships Chairmanships 1. Mr. Soshil Kumar Jain Promoter – 5 5 No 1 - - WTD Chairman 2. Mr. Ravinder Jain Promoter – MD 5 4 No 3 1 Nil 3. Dr. Rajesh Jain Promoter –JMD 5 3 No - - - 4. Mr. Sandeep Jain Promoter –JMD 5 4 Yes 1 - - 5. Mr. Sumit Jain Promoter –WTD 5 3 No 1 - - 6. Mr. Sunil Kapoor Non–Executive–ID 5 5 Yes 6 - - 7. Mr. R.L. Narasimhan - do - 5 4 Yes 1 - - 8. Mr. N.N. Khamitkar - do - 5 5 Yes 1 - - 9. Mr. Gurmeet Singh - do - 5 0 Yes - - - 10. Mr. K.M. Lal - do - 5 4 No 7 5 Nil 11. Dr. A.N. Saksena - do - 5 5 Yes - - - Note: WTD = Whole-time Director, MD = Managing Director, JMD = Joint Managing Director, ID = Independent Director. $ Excludes directorships in Private Limited Companies, Foreign Companies, membership of managing committees of various chambers/bodies/ section 25 companies. * Membership in Audit and Shareholders’ Grievance Committees.

53 Panacea Biotec • Annual Report 2008-09 None of the Directors on the Board is a member in more than ten committees and/or acts as chairman of more than five committees across all the companies in which he is a Director. Brief information on Directors proposed for re-appointment The brief resume, experience and other details pertaining to the Directors seeking appointment / re-appointment in the ensuing Annual General Meeting, to be provided in terms of Clause 49 of the Listing Agreement with the Stock Exchanges, are furnished below: a) Mr. R.L. Narasimhan Age : 68 Years Qualification : Post Graduate degree in Science from Madras University Professional Expertise : He retired as the Deputy Director General, Central Statistical Organization, to the Government’s Ministry of Statistics & Programme Implementation in New Delhi and has held various senior and middle level positions in various Government ministries. Prior to his positions with the Government, Mr. R.L. Narasimhan has also worked with Hoechst Pharmaceuticals Ltd., Chennai, a multinational pharmaceutical company. His expertise lies in the field of budgeting, data management, programme evaluation & research and marketing. Directorships : He is a director of Best On Health Ltd. Shareholding in : Nil the Company b) Mr. N.N. Khamitkar Age : 68 Years Qualification : B.E. – Electrical and Mechanical (Pune University), MBA (University of District of Columbia, Washington DC, USA) and Post Graduate Diploma in Public Administration, Indian Institute of Public Administration. Professional Expertise : He is a retired Govt. Official belonging to Indian Engineering Service and retired as Dy. Director General, Ministry of Home Affairs, Govt. of India, New Delhi. He has held various senior and middle level positions in various Govt. Ministries and Offices before his retirement. His expertise lies in the field of administration, planning & procurement. Directorships : He is a director of Best On Health Limited. Shareholding in : Nil the Company c) Mr. Sunil Kapoor Age : 52 Years Qualification : Commerce graduate from Shri Ram College of Commerce, University of Delhi and holds a LL.B. degree from Law Faculty, University of Delhi. Professional Expertise : He practices as an advocate and is a member of the Delhi High Court Bar Association and Bar Association Income Tax, New Delhi. Directorships : He is a director of Golden Peakock Overseas Ltd., Stross Crystals Ltd., Residency Resorts Pvt. Ltd., Indo-dan Lamp Shade Ltd., GPL Exports Ltd, Hitkari Industries Ltd., Best On Health Ltd., Residency Hospitality Services (P) Ltd., Reis Magos Fort Restors (Pvt.) Ltd. and Raihl Estate (Pvt.) Ltd. Shareholding in : Nil the Company Information supplied to the Board In addition to the regular business items, the Company provides the following information to the Board and Board Committees as and when required. Such information is submitted either as part of the agenda papers in advance of the meetings or by way of presentations and discussions material during the meetings: 1. Annual operating plans and budgets and any updates. 2. Capital budgets and any updates. 3. Quarterly results for the company and its operating divisions or business segments. 4. Minutes of meetings of audit committee and other committees of the Board. 5. The information on recruitment and remuneration of senior officers just below the Board level, including appointment or removal of Chief Financial Officer and the Company Secretary. 6. Show cause, demand, prosecution notices and penalty notices which are materially important. 7. Fatal or serious accidents, dangerous occurrences, any material effluent or pollution problems. 8. Any material default in financial obligations to and by the company, or substantial non-payment for goods sold by the company.

54 Panacea Biotec • Annual Report 2008-09 9. Any issue, which involves possible public or product liability claims of substantial nature, including any judgement or order which, may have passed strictures on the conduct of the company or taken an adverse view regarding another enterprise that can have negative implications on the company. 10. Details of any joint venture or collaboration agreement. 11. Transactions that involve substantial payment towards goodwill, brand equity or intellectual property. 12. Significant labour problems and their proposed solutions. Any significant development in Human Resources/ Industrial Relations front like signing of wage agreement, implementation of Voluntary Retirement Scheme, etc. 13. Sale of material nature of investments, subsidiaries, assets, which is not in normal course of business. 14. Quarterly details of foreign exchange exposures and the steps taken by management to limit the risks of adverse exchange rate movement, if material. 15. Non-compliance of any regulatory, statutory or listing requirements and shareholders service such as non- payment of dividend, delay in share transfer etc., if any. Statutory Compliance of Laws The Board periodically reviews the compliance report of the laws applicable to the Company as well as steps taken by the Company to rectify the instances of non-compliances, if any. Code of Conduct The Board has laid down a code of conduct for all Board Members and senior management of the Company. The said Code has been communicated to the Directors and Senior Management Personnel and is also posted on the web-site of the company viz. www.panaceabiotec.com. Declaration from the Managing Director confirming that the Company has received affirmations from the Board Members and the Senior Management Personnel regarding compliance of Code of conduct during the year under review, is attached as Annexure-I. 3. Audit Committee Composition & Terms of Reference The Audit Committee of the Company has been constituted as per Section 292A of the Companies Act, 1956 and the guidelines set out in the Listing Agreements with the Stock Exchanges. The Audit Committee of the Company comprises of three non-executive directors, all of them being independent Directors viz. Mr. R.L. Narasimhan, Mr. N.N. Khamitkar and Mr. Sunil Kapoor. Mr. R.L. Narasimhan is the Chairman of the Committee. All the members are financially literate and one member is having requisite accounting and financial management expertise. The management is responsible for the Company’s internal controls and the financial reporting process while the statutory auditors are responsible for performing independent audits of the Company’s financial statements in accordance with generally accepted auditing practices and for issuing reports based on such audits. The Board of Directors has entrusted the Audit Committee to supervise these processes and thus ensure accurate and timely disclosures that maintain the transparency, integrity and quality of financial control and reporting. The terms of reference and scope of the activities of the Audit Committee is as set out in Clause 49 of the Listing Agreements with the Stock Exchanges as well as in Section 292A of the Companies Act, 1956, including the following: • To review compliance with internal control systems; • To review the findings of the Internal Auditor relating to various functions of the Company; • To hold periodic discussions with the Statutory Auditors and Internal Auditors of the Company concerning the accounts of the Company, internal control systems, scope of audit and observations of the Auditors/Internal Auditors; • To review the quarterly, half-yearly and annual financial results of the Company before submission to the Board; • To make recommendations to the Board on any matter relating to the financial management of the Company, including Statutory & Internal Audit Reports; • Recommending the appointment of statutory auditors and internal auditors and fixation of their remuneration. Review of information by Audit Committee Apart from other matters, as per Clause 49 of the Listing Agreement the Audit Committee reviewed, to the extent applicable, the following information: i) Management discussion and analysis of financial condition and results of operations; ii) Statement of significant transactions, submitted by the Management; iii) Management letters/letters of internal control weakness issued by statutory auditors; iv) Internal Audit Reports relating to internal control weakness; v) The appointment, removal and terms of remuneration of the Internal Auditors; vi) Related party transactions. Meetings of Audit Committee and attendance of members during the year During the year, 5 (five) Audit Committee meetings were held on 29th April, 2008, 25th June, 2008, 28th July, 2008, 16th October, 2008 and 28th January, 2009.

55 Panacea Biotec • Annual Report 2008-09 The attendance of members of the Audit Committee at these meetings were as follows: Sl. Name of the Member Designation Category of Directorship No. of No. of No. Meetings Meetings held attended 1. Mr. R. L. Narasimhan Chairman Independent Director 5 5 2. Mr. N. N. Khamitkar Member Independent Director 5 5 3. Mr. Sunil Kapoor Member Independent Director 5 5 The Statutory Auditors, Internal Auditors, Cost Auditors, Chief Financial Officer, DGM (Accounts & Finance), AGM (Finance), AGM Audit & Compliances are the permanent invitees of the meetings of Audit Committee. Apart from them, Joint Managing Director(s), Director (Operations and Projects), Associate Director, General Manager (HR), V.P. (HR), V.P. Audit & Compliance (HR) etc. attended one or more of the Audit Committee Meetings. The Company Secretary is acting as the Secretary to the Audit Committee. The Chairman of the Audit Committee, Mr. R.L. Narasimhan, was present at the Annual General Meeting of the Company held on 27.09.2008. Subsidiary Companies During the year, the Company’s wholly owned subsidiary, Best On Health Limited acquired the status of a material non-listed Indian subsidiary of the Company as its net worth (i.e. paid-up capital and free reserves) exceeded 20% of the consolidated net worth of the Company and its subsidiaries in the immediately preceding accounting year i.e. financial year 2007-08. The Company’s independent Directors, Mr. R.L. Narasimhan, Mr. N.N. Khamitkar and Mr. Sunil Kapoor are directors on the Board of Directors of Best on Health Limited w.e.f. 1st January 2008. The Audit Committee of the Company reviewed the financial statements, in particular, the investments made by all unlisted subsidiary companies except the financial statements of two of its subsidiaries namely Kelisia Investment Holdings AG & Panacea Biotec (International) SA as the first financial year of these companies will end on 31st March 2010. The Board minutes of unlisted subsidiary companies are placed at the Board Meeting of the Company and the significant transactions or arrangements entered into by the unlisted subsidiary companies are periodically informed to the Board. 4. Remuneration Committee Brief description of terms of reference The Company has constituted a Remuneration Committee. The terms of reference of the Committee include: - to decide elements of remuneration package of all the directors; - to decide the service contracts, notice period and severance fees of executive directors. Composition Remuneration Committee comprises of three non-executive independent Directors viz. Mr. R.L. Narasimhan, Mr. N.N. Khamitkar and Mr. Sunil Kapoor, Mr. R.L. Narasimhan is the Chairman of the Committee. The Company Secretary is acting as the Secretary to the Remuneration Committee. No meeting of the Remuneration Committee was held during the year. Remuneration Policy The Directors’ Remuneration Policy of your Company is in conformity with the provisions under the Companies Act, 1956. Subject to the approval of the Company’s shareholders in general meeting and such other approvals as may be necessary, the Managing/Joint Managing Directors and the Whole-time Directors are paid remuneration as per the terms of remuneration decided by the Board/ Remuneration Committee and approved by the Shareholders. The remuneration payable to the executive Directors is decided from time to time keeping in view the overall performance of the Company, the performance of the concerned Director and the industry trends. The key components of the Company’s Remuneration Policy are: • Compensation will be a major driver of performance. • Compensation will be competitive and benchmarked with a select group of companies from the pharmaceutical sector. • Compensation will be fully transparent and tax compliant. Directors’ remuneration In view of the loss incurred by the Company for the financial year ended 31st March 2009, the Company has applied to the Central Government for protection of the remuneration paid for the financial year 2008-09 to Mr. Soshil Kumar Jain, Chairman, Mr. Ravinder Jain, Managing Director, Dr. Rajesh Jain, Joint Managing Director and Mr. Sandeep Jain, Joint Managing Director and the approval is awaited. The details of the remuneration of Executive Directors for the year ended 31st March, 2009 are as under:

56 Panacea Biotec • Annual Report 2008-09 i) Executive Directors (Managing/Joint Managing/Whole-time Directors) (Rs. in Lac) S. No. Name Salary Allowances Perquisites Total 1. Mr. Soshil Kumar Jain 144.00 6.46 1.09 151.55 2. Mr. Ravinder Jain 144.00 6.46 42.76 193.22 3. Dr. Rajesh Jain 120.00 5.38 1.10 126.48 4. Mr. Sandeep Jain 120.00 5.38 1.10 126.48 5. Mr. Sumit Jain 27.00 1.21 4.75 32.96 Notes: 1. The tenure of office of Mr. Soshil Kumar Jain, Chairman, Mr. Ravinder Jain, Managing Director, Dr. Rajesh Jain and Mr. Sandeep Jain, Joint Managing Directors of the Company is for 5 years w.e.f.1st April, 2006.The tenure of office of Mr. Sumit Jain, Director (Operations and Projects) is for 5 years w.e.f. 22nd July, 2005. 2. Notice period for termination of appointment of Managing/Joint Managing/ Whole time Directors is three months by either party or a shorter period decided mutually. No severance fee is payable on termination of contract. 3. The Company does not have any Stock Option Scheme. 4. All elements of remuneration of the Managing/Joint Managing/ Whole-time Directors, i.e., Salary, Perquisites and other benefits, etc. are given in Schedule XX C annexed to and forming part of Balance Sheet and Profit & Loss Account of the Company. 5. Provision for Gratuity and Leave Encashment amounting to Rs.60.08 Lac and Rs.32.64 Lac respectively, made during the year, has not been included above. ii) Non-Executive Directors Payment Criteria: The Board of Directors determines the remuneration of the non-executive Directors within the limits approved by the shareholders. Apart from the sitting fees for attending meetings of the Board or Committee thereof, the remuneration is paid to the non-executive Directors (other than Mr. Gurmeet Singh) by way of monthly allowances for telephone, mobile, conveyance expenses, etc. @ Rs.15,500 p.m. (with the confirmation obtained from Central Government) to enable them to meet their expenses for attending to their responsibilities as non-executive director. As approved by the Board in their Meeting held on 31st October 2008, the sitting fees payable to the Independent Directors of the Company for attending meetings of the Board and Audit Committee was increased to Rs.10,000 per meeting from Rs.5,000 payable earlier for meetings held on or after 1st November 2008. Such increase is within the statutory limits prescribed under rule 10-B of the Companies (Central Govt.’s) General Rules & Forms, 1956. The details of remuneration paid to the non-executive directors during financial year ended 31st March, 2009 are as under: (Rs. in Lac) Sl. No. Name Allowances Sitting Fees Total 1 Mr. R.L. Narasimhan 1.86 0.60 2.46 2. Mr. N.N. Khamitkar 1.86 0.65 2.51 3. Mr. Sunil kapoor 1.86 0.60 2.46 4. Mr. Gurmeet Singh - 0.50 0.50 5. Mr. K.M. Lal 1.86 0.20 2.06 6. Dr. A.N. Saksena 1.86 0.90 2.76 None of the non-executive Directors hold any shares/ convertible securities of the Company. 5. Share Transfer cum Investors’ Grievance Committee The Investors Grievance Committee aims at redressal of shareholder complaints and overseeing investor services. The Board of Directors of the company has, with a view to expedite the process of share transfers, delegated the power of share transfer to the Company Secretary who attends to share transfer formalities on weekly basis. Terms of reference The terms of reference of Share Transfer cum Investors’ Grievance Committee include transfer or transmission of shares, dematerialisation of shares, issue of duplicate share certificates, review or redressal of investors’ grievances and other areas of investor service. Composition The Share Transfer-cum-Investors’ Grievance Committee comprises of three Directors viz. Dr. A.N. Saksena, Mr. Ravinder Jain and Mr. Gurmeet Singh. Dr A.N. Saksena, an independent non-executive Director acts as Chairman of the Committee. The Company Secretary is acting as the Secretary to the Committee as well as the Compliance Officer pursuant to Clause 47(a) of the Listing Agreement with Stock Exchanges: Sl. Name of the Member Designation Category of Directorship No. of No. of No. Meetings Meetings held attended 1. Dr. A. N. Saksena Chairman Independent Director 12 12 2. Mr. Ravinder Jain Member Promoter Director 12 9 3. Mr. Gurmeet Singh Member Independent Director 12 10

57 Panacea Biotec • Annual Report 2008-09 Details of investors’ complaints received during the year 2008-09: Sl. No. Nature of Complaints Received Resolved Pending 1. Non-receipt of Dividend 2 2 0 Warrants in respect of Shares 2. Non-receipt of share certificate(s) lodged 4 4 0 for transfer/sub-division/duplicate etc. 3. Total 6 6 0 The Company put utmost priority to the satisfaction of its shareholders which is evident from the fact that only very few complaints were received by the Company. The Company addresses all complaints, suggestions and grievances expeditiously and replies have been sent/issues have been resolved expeditiously except in case of dispute over facts or other legal constraints. There were no share transfers lying pending as on 31st March, 2009. 6. CEO/CFO Certification The Managing Director and DGM (Accounts & Finance) have certified in terms of revised clause 49 of the Listing Agreement to the Board that the financial statements present a true and fair view of the Company’s affair and are in compliance with existing accounting standards. The CEO and CFO certification of the financial statements and the cash flow statement for the year is enclosed as Annexure – II to this report. 7. General Body Meetings The last three Annual General Meetings were held as under: Financial Date Time Venue Special Resolutions passed Year 2007-08 27.09.08 11:00 AM Regd. Office at Ambala- No Special Resolution was passed. Chandigarh Highway, Lalru 140501, Punjab. 2006-07 29.09.07 10:30 AM - do - • Approval for promotion of Mr. Shagun Jain, as Deputy General Manager Systems and increase in remuneration w.e.f. 1st April 2007 under section 314 of the Companies Act, 1956(“Act”). • Approval for promotion of Mrs. Radhika Jain as Sr. Manager w.e.f 1st April 2007 under section 314 of the Act. • Approval for increase in remuneration to Ms. Shilpy Jain, as Manager- Food & Beverages, under section 314 of the Act. 2005-06 30.09.06 12.00 - do - • Approval for payment of remuneration to Dr. Aditya Narain Noon Saksena, non-executive independent Director. • Approval for payment of monthly remuneration to Non-Executive Directors. • Re-appointment of Mr. Soshil Kumar Jain as Whole-Time Director designated as Chairman. • Appointment of Mr. Ashwani Jain as Associated Director (Corporate Affairs) w.e.f. 1st October, 2006. • Appointment of Mr. Shagun Jain as Manager Systems w.e.f. 1st October, 2006. • Approval for appointment of Ms. Radhika Jain as Scientific Officer w.e.f. 2nd June, 2006. • Approval for appointment of Ms. Shilpy Jain as Manager Food & Beverages w.e.f. 1st August, 2006. Postal Ballot During the year, the Company had conducted voting through two Postal Ballots on 14th July 2008 & 27th September 2008 respectively. The Company complied with the procedures for the postal ballot in terms of the Companies (Passing of Resolution by Postal Ballot) Rules, 2001 and the amendments thereto. Mr. Umesh Singhal of M/s U.S. & Associates, Company Secretaries acted as scrutinizer for first Postal Ballot whose results were announced on 14th July 2008 and voting pattern of the same was as under: S. Item Votes cast No. For Against 1 Special Resolution under Section 17 of the Companies Act, 1956 seeking 34,607,503 1,783 members consent for alteration in the object clause by way of inserting new sub-clauses 39, 40 and 41 after the existing sub-clause 38 of Clause III-C (Other Objects); 2 Special Resolution under Section 149(2A) seeking members’ consent for 34,595,863 1,783 commencement of business as specified in the said sub-clauses 39, 40 and 41 of Clause III-C (Other Objects).

58 Panacea Biotec • Annual Report 2008-09 Mr. U. K. Singhal of M/s Singhal Law Associates, Advocates acted as scrutinizer for second postal ballot and the results of the same were announced on 27th September, 2008 and voting pattern for the resolutions was as under: S. Item Votes cast No. For Against 1 Ordinary Resolution under Section 293(1)(d) of the Companies Act ,1956 for 34,247,228 1,720 increase in borrowing powers of Board upto Rs.1500 Crore; 2 Ordinary Resolution under Section 293(1)(a) of the Companies Act, 1956 34,240,774 3,720 authorizing the Board of Directors to mortgage and/or charge/hypothecate any of its movable and/or immovable properties or the whole or substantially the whole of an undertaking or undertakings of the Company. Thus, all the resolutions were passed with overwhelming majority. Procedure for voting by Postal Ballot: The Postal Ballot Forms and the draft Resolution(s) along with the Explanatory Statement pertaining the said Resolution(s) explaining in detail the material facts and the self-addressed, postage prepaid envelope, are sent to all the members, under Certificate of Posting. The members are required to carefully read the instructions printed in the Postal Ballot Form, give their assent or dissent on the resolution(s) at the end of the Form and sign the same as per the specimen signatures available with the Company or Depository Participant, as the case may be, and return the form duly completed in the attached self-addressed postage prepaid envelope so as to reach the scrutinizer before the close of working hours of the last date fixed for the purpose. Postal Ballot Forms received after this date are strictly treated as if the form has not received from the member. The scrutinizer appointed for the purpose scrutinizes the postal ballots received and submit his report to the Company. Voting rights are reckoned on the basis of number of shares and paid-up value of shares registered in the name of the shareholders as on the date of dispatch of the postal ballot notice. A resolution is deemed to have been passed as special resolution if the votes cast in favour are at least three times than the votes cast against and in case of ordinary resolution, the resolution is deemed to have been passed, if votes cast in favour are more than the votes cast against. 8. Disclosure a) Related Party Transactions – During the year, there were no materially significant related party transactions with the promoters, the directors or the management, their subsidiaries or relatives, etc. that may have potential conflict with the interests of the Company at large. The other related party transactions are given in Note No.9 of Schedule XXC annexed to and forming part of Balance Sheet and Profit & Loss Account of the Company. b) Disclosure of Accounting Treatment - There has not been any change in accounting policies of the Company during the year except as stated in Note No.2 of Schedule XXB annexed to and forming part of Balance Sheet and Profit & Loss Account of the Company. c) Risk Management - The Company has a procedure to inform the Board about the risk assessment and minimization procedures. The Board of Directors periodically reviews the risk management framework of the Company. d) Compliances by the Company - During the last three years, there were no strictures or penalties imposed by either SEBI or the Stock Exchanges or any other statutory authority for non-compliance of any matter related to the capital markets. e) The Company has complied with all the mandatory requirements of clause 49 of the listing Agreement. As regards, the adoption of non-mandatory requirements as contained in Annexure I-D to clause 49 of the listing agreement, the Company has implemented the requirements as per details give below: i) Chairman of the Board - The Chairman of Panacea Biotec is an Executive Director and he maintains the Chairman’s Office at the Company’s expenses. ii) Remuneration Committee - The Board of Directors has constituted a Remuneration Committee, which is composed of independent Directors. The details of the Remuneration Committee and its powers have already been discussed in this Report. iii) Shareholders rights - The quarterly/ half-yearly results, after they are approved by the Board of Directors, are sent forthwith to the Stock Exchanges where the Company’s shares are listed, published in the newspapers as mentioned under the heading “Means of Communication” at Sl. No. 10 hereinbelow and also displayed on the Company’s web-site www.panaceabiotec.com. The results are not separately circulated to the shareholders. iv) Training of Board Members - No specific training programme was arranged for Board members. However,

59 Panacea Biotec • Annual Report 2008-09 at the Board/Committee meetings detailed presentations are made by Professionals, Consultants as well as Senior Executives of the Company on the business related matters, risk assessment, strategy, effect of the regulatory changes, etc. v) Mechanism for evaluating non-executive Board members - The Company has not adopted any mechanism for evaluating individual performance of Non- Executive Directors. vi) Whistle Blower Policy - The Company has implemented a Whistle Blower Policy in the Company and no personnel is denied access to the Audit Committee of the Company. 9. Prohibition of Insider Trading In compliance with the SEBI Regulations on Prevention of Insider Trading, the Company has instituted a comprehensive Code of Conduct for its management, staff and relevant business associates. The Code lays down guidelines, which advises them on procedures to be followed and disclosures to be made, while dealing with Shares of the Company. 10. Means of communication 1. The Quarterly and Half-Yearly results are published in one or more of the prominent daily newspapers, viz. Business Line and Business Standard, All editions, Hindustan Times, New Delhi, Chandigarh, Lucknow, Kolkata, Patna, Ranchi and Bhopal; DNA Money, Mumbai; Financial Express, Delhi, Mumbai and in Punjabi Tribune, Chandigarh, the local newspaper published in the language of the region in which Registered Office is situated. 2. The Company also intimate the Stock Exchanges all price sensitive matters or such matters which in its opinion are material and of relevance to the shareholders and subsequently issues a Press Release on the matter, wherever necessary. 3. The Annual Results (Annual Report containing Balance Sheet etc.) are posted to every shareholder of the Company. 4. The Company’s web-site, viz. www.panaceabiotec.com, is regularly updated with the financial results, annual report and other important events. 5. Pursuant to clause 51 of the listing agreement, financial information like annual and quarterly financial statements, segment-wise results, shareholding pattern(s) and annual report(s) are made available on the SEBI’s web-site www.sebiedifar.nic.in. 6. Management’s Discussion and Analysis Report has been included in the Annual Report being sent to the shareholders of the Company. 11. General Shareholder Information i) Date of AGM The Annual General Meeting is proposed to be held on Friday, the 25th day of September, 2009, at 11:00 A.M. at the registered office of the Company at Ambala-Chandigarh Highway, Lalru - 140 501, Punjab. Posting of Annual Report On or before 1st September, 2009 Last date of receipt of Proxy Form 23rd September, 2009 before 11.00 A.M. ii) Financial Calendar 2009-10 (tentative) S. No. Tentative Schedule Tentative Date 1. Financial reporting for the quarter ended 30th June, 2009 30th July, 2009 (Actual) 2. Financial reporting for the half year ending 30th September, 2009 End of October, 2009 3. Financial reporting for the quarter ending 31st December, 2009 End of January, 2010 4. Financial reporting for the quarter ending 31st March, 2009 End of April, 2010* 5. Annual General Meeting for the year ending 31st March, 2010 End of September, 2010 *As provided in clause 41 of Listing Agreement, Board may also consider publishing Audited Results for the year 2009-10 in lieu of Unaudited Results for fourth quarter, by 30th June, 2010 (or such other period as may be stipulated from time to time). iii) Date of Book Closure The Share Transfer Books and Register of Members of the Company will remain closed from Wednesday, 23rd September, 2009 to Friday, 25th September, 2009 (both days inclusive). iv) No Dividend In view of non-availability of profits during the current financial year, the Board of Directors has not recommended any dividend on the Equity Shares of the Company. v) Unclaimed Dividends As provided in Section 205A and 205C of the Companies Act, 1956, dividend for the financial year ended 31st March, 2002 and thereafter, which remain unpaid or unclaimed for a period of 7 years, will be transferred to the

60 Panacea Biotec • Annual Report 2008-09 Investor Education and Protection Fund (IEP Fund) established by the Central Government and no payments shall be made in respect of any such claims by the IEP Fund. During the year, the Company had transferred Rs.143,640 lying unclaimed in Unpaid Dividend Account in respect of Dividend for the Year 2000-2001 to the said Fund on 18th October, 2008. Information in respect of other unclaimed dividend when due for transfer to the said Fund is given below: Financial Year Date of declaration Last date for claiming Due date for of Dividend unpaid Dividend transfer to IEP Fund 2001-02 24.08.2002 21.09.2009 20.10.2009 2002-03 20.09.2003 18.10.2010 16.11.2010 2003-04 18.09.2004 16.10.2011 14.11.2011 2004-05 20.08.2005 17.09.2012 16.10.2012 2005-06 30.09.2006 29.10.2013 28.11.2013 2006-07 29.09.2007 28.10.2014 27.11.2014 2007-08 27.09.2008 26.10.2015 25.11.2015 Shareholders who have not yet encashed their dividend warrant(s) for the above said financial year(s) may send their request for revalidation of Dividend Warrant(s) or issue of duplicate Dividend Warrant(s), as the case may be, to the Company’s Corporate Office immediately. Shareholders are requested to note that no claims shall lie against the Company or the said Fund in respect of any amounts, which were unclaimed or unpaid for a period of 7 years from the dates on which they first became due for payment and no payment shall be made in respect of any such claims. vi) Listing on Stock Exchange The Company’s Equity Shares are listed on the following Stock Exchanges: • National Stock Exchange of India Ltd. (NSE), Bandra Kurla Complex, Bandra (E), Mumbai. • Bombay Stock Exchange Ltd. (BSE), P J Tower, Dalal Street, Fort, Mumbai. The Foreign Currency Convertible Bonds (FCCBs) of the Company are listed on Singapore Exchange Ltd. (SGX), 2 Shenton Way, #19-00 SGX Centre 1, Singapore 068804, under the BONDS Sector. The Company has paid listing fees to all the above stock exchanges and there is no outstanding payment as on date. vii) Stock Code of Equity Shares / FCCBs Trade symbol at National Stock Exchange is PANACEABIO. Stock Code at Bombay Stock Exchange is 531349. ISIN No. for Dematerialisation : INE922B01023. Stock Code of FCCBs : XS0243888830

61 Panacea Biotec • AnnualPanacea Report Biotec 2008-09 • Annual Report 2008-09 viii) Market Price data: The High and Low prices of the shares of the Company at Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Ltd. (NSE) for the year ended 31st March, 2009 are as under: Month Share Prices (Rs.) at BSE Share Prices (Rs.) at NSE High Low High Low April,2008 405.00 340.05 400.00 330.05 May, 2008 413.00 345.00 412.00 368.00 June, 2008 392.00 292.00 395.60 295.00 July, 2008 363.40 273.05 363.60 270.25 August, 2008 340.00 247.50 365.00 269.00 September, 2008 308.50 214.50 310.00 216.10 October, 2008 249.00 144.00 248.50 141.00 November, 2008 197.00 123.20 198.00 123.45 December, 2008 151.00 126.00 147.00 124.20 January,2009 138.95 51.95 139.50 51.70 Februray,2009 77.20 51.00 78.40 50.00 March,2009 62.10 52.00 62.30 51.10 ix) Registrar and Transfer Agents Skyline Financial Services Pvt. Ltd., are acting as Registrar & Transfer Agents (RTA) for handling the shares related matters both in physical as well as dematerialised mode. All works relating to Equity Shares are being done by them. The Shareholders are therefore, advised to send all their correspondence to the RTA. However, for the convenience of shareholders, documents relating to shares received by the Company are forwarded to the RTA for necessary action thereon. x) Nomination Facility The shareholders holding shares in physical form may, if they so want, send their nominations in prescribed Form 2B of the Companies (Central Government’s) General Rules and Forms, 1956, (which can be either obtained from the Company’s RTA or downloaded from the Company’s website www.panaceabiotec.com under the section ‘Investor Zone’) to the Company’s RTA. Those holding shares in dematerialised form may contact their respective Depository Participant (DP) to avail the nomination facility. xi) Share Certificates in respect of sub-divided Shares After the sub-division of the Company’s Equity Shares of Rs.10 each into shares of Re.1 each, in the year 2003, the Company had sent letters to all shareholders holding shares of the face value of Rs.10 in physical form, requesting them to exchange their share certificates into new share certificate(s) in respect of shares of face value of Re.1 each. All the shareholders who have not yet sent their request for exchange of share certificates, are requested to forward their old share certificates in respect of shares of face value of Rs.10 each (which are no longer tradable) to the Company, along with a request letter duly signed by all the joint holders. xii) Elimination of Duplicate Mailing The shareholders who are holding Shares in more than one folio in identical name or in joint holders’ name in similar order, may send the share certificate(s) along with request for consolidation of holding in one folio to avoid mailing of multiple Annual Reports. xiii) Share Transfer System The Company’s shares transfer authority has been delegated to the Company Secretary. The delegated authority generally attends the share transfer formalities on weekly basis and as and when required to expedite all matters relating to transfer, transmission, transposition and dematerialisation of shares and redressal of Investors’ grievance, etc., if any. The shares received by the Company/ RTA for registration of transfers, are processed by RTA (generally within a week of receipt) and transferred expeditiously and the Share Certificate(s) are returned to the shareholder(s) by registered post.

62 Panacea Biotec • Annual Report 2008-09 As per the requirement of clause 47 (c) of the Listing Agreement with the Stock Exchanges, the Company has obtained the half yearly certificates from a Company Secretary in Practice for due compliance of share transfer/ consolidation/ exchange formalities. The Securities and Exchange Board of India (SEBI) vide circular ref. no. MRD/DoP/Cir-05/2009 dated 20th May, 2009 directed that for securities market transactions and off-market/private transactions involving transfer of shares in physical form of listed companies, it shall be mandatory for the transferee(s) to furnish copy of PAN card to the Company/ RTA for registration of such transfer of shares. xiv) Secretarial Audit A Practising Company Secretary carries out secretarial audit in each of the quarter to reconcile the total admitted capital with National Securities Depository Limited (NSDL) and Central Depository Services (India) Ltd. (CDSL) and total issued and listed capital. The audit reports confirm that the total issued/ paid up capital is in agreement with the total number of shares in physical form and the total number of dematerialised shares held with NSDL and CDSL. The Secretarial Audit Reports for each quarter of the Financial Year ended March 31, 2009 has been filed with Stock Exchanges within one month of end of each quarter. xv) Dematerialisation of Shares and its liquidity The Company has been among the few top-most companies in India in which maximum number of shares have been dematerialised. As on 31st March, 2009, 99.05% of the Company’s total Equity Share Capital representing 66,204,985 Equity Shares were held in dematerialised form and only 637,761 Equity Shares were in paper/physical form. The shareholders holding shares in physical form are requested to get their shares dematerialised at the earliest, as the Company’s Shares are required to be compulsorily traded at Stock Exchanges in dematerialised form only. The shares of the Company are regularly traded at the National Stock Exchange and the Bombay Stock Exchange. xvi) Share Dematerialisation System The requests for dematerialisation of shares are processed by RTA expeditiously and the confirmation in respect of dematerialisation of shares is entered by RTA in the depository system of the respective depositories, by way of electronic entries for dematerialisation of shares generally on weekly basis. In case of rejections, the documents are returned under objection to the Depository Participant with a copy to the shareholder and electronic entry for rejection is made by RTA in the Depository System. xvii) Distribution of Shareholding as on 31st March, 2009 No. of Shares No. of Shareholders No. of Shares 0-2500 8,190 2,021,221 2501-5000 111 407,293 5001-10000 29 215,713 10001-100000 42 1,323,499 100001 and above 39 62,875,020 Total 8,411 66,842,746

xviii) Pattern of Shareholding as on 31st March, 2009 S. No. Category No. of Shares % Shareholding Pattern 1. Promoters, Relatives & 45,451,699 68.00 Associates 2. Institutional Investors (FIIs, 11,554,491 17.29 Banks & Mutual Funds) 3. Domestic Companies 5,403,079 8.08 4. Indian Public 2,876,080 4.30 5. NRIs / OCBs / Foreign 1,527,450 2.29 Corporate Bodies 6. Others 29,947 0.04 Total 66,842,746 100.00

63 Panacea Biotec • Annual Report 2008-09 xix) GDRs / ADRs / Warrants or other convertible instruments No GDRs/ADRs/Warrants were outstanding as on 31st March, 2009. However, Foreign Currency Convertible Bonds (FCCBs) (US$ 50,000,000 Zero coupon Convertible Bonds due 2011) aggregating US$ 36.8 million (Rs.1,866,496,000) were outstanding as on 31st March, 2009. xx) Plant Locations • Bulk Vaccine facilities at Village Samalheri, Ambala-Chandigarh Highway,Lalru-140 501, Punjab. • Pharmaceutical Formulations facility at Malpur, Baddi, Dist. Solan, Himachal Pradesh-173 205. • Vaccines Formulations facility at Malpur, Baddi, Dist. Solan, Himachal Pradesh-173 205. • Vaccines Formulations facility at A-241/242, Okhla Indl. Area, Phase I, New Delhi - 110 020. • Pharmaceutical Formulations facility at B-1/E-12, Mohan Co-operative Indl. Estate, Mathura Road, New Delhi - 110 044. xxi) Address for correspondence For transfer/ Skyline Financial Services Pvt. Ltd. dematerialisation of shares, 246, Sant Nagar, 1st Floor, ISKCON Temple Road, payment of dividend and any East of Kailash, New Delhi – 110 065, India. other query relating to shares Phone : +91-11-26292681-84 Tele-fax : +91-11- 26292681 E-mail : [email protected], [email protected] For investors assistance The Company Secretary Panacea Biotec Limited B-1 Extn./G-3, Mohan Co-operative Indl. Estate, Mathura Road, New Delhi - 110 044, India. Phone : +91-11-41679000 Extn. 2081 (D) 41578024 Fax : +91-11-41679075, 41679070 E-mail : [email protected] [email protected] Contact Person : Mr. Vinod Goel, G.M. Legal & Company Secretary/ Ms. Sangeeta Nagpal, Deputy Manager-Secretarial. For query relating to : Mr. Chandresh Ohri financial matters Manager - Banking & Treasury Phone : +91-11-41679000 Fax : +91-11-41679066, 41679070 E-mail : [email protected] For and on behalf of the Board

Place : New Delhi Soshil Kumar Jain Date : 30th July, 2009 Chairman

Annexure - I Declaration under Clause 49-I (D) of the Listing Agreement To The Members of Panacea Biotec Ltd. I hereby declare that all the Board Members and the Senior Management Personnel of the Company have affirmed the compliance with the provisions of the Code of Conduct for the period ended 31st March, 2009. For Panacea Biotec Ltd.

Date : 27th May, 2009 Ravinder Jain Place : New Delhi Managing Director

64 Panacea Biotec • Annual Report 2008-09 Annexure - II Certificate from Managing Director & Chief Financial Officer To The Board of Directors Panacea Biotec Limited We do hereby confirm and certify that: (a) We have reviewed financial statements and the cash flow statement for the year and that to the best of our knowledge and belief: i) These statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading; ii) These statements together present a true and fair view of the company’s affairs and are in compliance with existing accounting standards, applicable laws and regulations. (b) There are, to the best of our knowledge and belief, no transactions entered into by the company during the year which are fraudulent, illegal or violative of the company’s code of conduct. (c) We accept responsibility for establishing and maintaining internal controls and that we have evaluated the effectiveness of the internal control systems of the company and we have disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of internal controls, if any, of which we are aware of and the steps we have taken or propose to take to rectify these deficiencies. (d) We have indicated to the auditors and the Audit committee: i) significant changes in internal control during the year; ii) significant changes in accounting policies during the year and that the same have been disclosed in the notes to the financial statements; and iii) instances of significant fraud of which we are aware and the involvement therein, if any, of the management or an employee having a significant role in the company’s internal control system. For Panacea Biotec Ltd. Date : 27th May, 2009 Ravinder Jain I.K. Sharma Place : New Delhi Managing Director DGM (Accounts & Finance)

AUDITORS’ CERTIFICATE To The Members of Panacea Biotec Limited We have examined the compliance of conditions of Corporate Governance by Panacea Biotec Limited, for the year ended on 31st March 2009, as stipulated in clause 49 of the Listing Agreement of the said Company with stock exchange(s). The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above-mentioned Listing Agreement. We state that no investor’s grievance is pending for a period exceeding one month against the Company as per the records maintained by the Shareholders/ Investors’ Grievance Committee. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company. Dass Gupta & Associates Chartered Accountants Per Raaja Jindal Place : New Delhi Partner Date : 30th July, 2009 Membership No. 504111

65 Panacea Biotec • Annual Report 2008-09 AUDITORS’ REPORT

To the Members of Panacea Biotec Limited directors, as on March 31, 2009, and taken on record by the 1. We have audited the attached balance sheet of Panacea Biotec Board of Directors, we report that none of the directors is Limited (“the Company”) as at March 31, 2009 and also the disqualified as on March 31, 2009 from being appointed profit and loss account and the cash flow statement for the year as a director in terms of clause (g) of sub-section (1) of ended on that date annexed thereto. These financial statements section 274 of the Companies Act, 1956; are the responsibility of the Company’s management. Our vi) In our opinion and to the best of our information and responsibility is to express an opinion on these financial according to the explanations given to us, the said statements based on our audit. accounts give the information required by the Companies 2. We conducted our audit in accordance with auditing standards Act, 1956, in the manner so required and give a true and generally accepted in India. Those Standards require that we fair view in conformity with the accounting principles plan and perform the audit to obtain reasonable assurance generally accepted in India: about whether the financial statements are free of material a) in the case of the balance sheet, of the state of the misstatement. An audit includes examining, on a test basis, affairs of the Company as at March 31, 2009; evidence supporting the amounts and disclosures in the b) in the case of the profit and loss account, of the loss financial statements. An audit also includes assessing the for the year ended on that date; and accounting principles used and significant estimates made c) in the case of the cash flow statement, of the cash by management, as well as evaluating the overall financial flows for the year ended on that date. statement presentation. We believe that our audit provides a reasonable basis for our opinion. For S.R. Batliboi & Co. 3. As required by the Companies (Auditors’ Report) Order, 2003 Chartered Accountants (as amended) issued by the Central Government of India in per Manoj Gupta terms of sub-section (4A) of Section 227 of the Companies Act, New Delhi Partner 1956, we enclose in the Annexure a statement on the matters May 27, 2009 Membership No. 83906 specified in paragraphs 4 and 5 of the said Order. 4. Without qualifying our opinion, we draw attention to: Annexure referred to in paragraph [3] of our report of even date, Re: Panacea Biotec Limited a) Note 3(ii) of Schedule XXC to the financial statements regarding non-provision of proportionate premium on i) a) The Company has maintained proper records showing full redemption of ‘US$ 50 Million Zero Coupon Convertible particulars, including quantitative details and situation of Bonds due 2011’ amounting to Rs.470,992,269. The same fixed assets. has been disclosed as a contingent liability. Management b) All fixed assets have not been physically verified by the has represented, that the redemption premium will be management during the year but there is a regular offset against the securities premium account and, hence, program of verification, which in our opinion, is reasonable no adjustments have been considered in the accounts. having regard to the size of the Company and the nature b) Note 17 of Schedule XXC to the financial statements of its assets. As informed, no material discrepancies were regarding capitalization of expenditure on clinical trials noticed in respect of the fixed assets physically verified amounting to Rs.123,978,449. The ultimate approval of during the year. such products, which has been considered as highly likely c) There was no substantial disposal of fixed assets during by the management, is not within direct control of the the year. Company. Pending such final approval, no adjustments ii) a) The management has conducted physical verification of have been made to the accompanying financial inventory at reasonable intervals during the year. statements. b) The procedures of physical verification of inventory c) Note 5(b) of Schedule XXC to the financial statements, followed by the management are reasonable and The Company has incurred managerial remuneration of adequate in relation to the size of the Company and the Rs.63,035,463 during the year, which is in excess of the nature of its business. limits specified by the relevant provisions of the Companies c) The Company is maintaining proper records of inventory Act, 1956, by Rs.38,169,706. The Company has made an and no material discrepancies were noticed on physical application to the appropriate regulatory authorities in verification. this regard, for payment of such excess remuneration to iii) a) The Company has granted loan to three companies managerial personnel. Pending the final outcome of the covered in the register maintained under section 301 Company’s application, no adjustments have been made of the Companies Act, 1956. The maximum amount to the accompanying financial statements in this regard. involved during the year was Rs.819,644,921 and the 5. Further to our comments in the annexure referred to in para 3 year-end balance of loans granted to such parties was above, we report that: - Rs.819,644,921. i) we have obtained all the information and explanations b) In our opinion and according to the information and which, to the best of our knowledge and belief, were explanations given to us, the rate of interest and other necessary for the purposes of our audit; terms and conditions for such loans are not prima facie ii) in our opinion, proper books of account as required by prejudicial to the interest of the Company. law, have been kept by the Company, so far as appears c) The loans granted are re-payable on demand. As informed, from our examination of the books; the company has not demanded repayment of any such iii) The balance sheet, profit and loss account and cash flow loan during the year, thus, there has been no default on statement dealt with by this report are in agreement with the part of the parties to whom the money has been lent. the books of account; The payment of interest (whenever due) for loans has iv) in our opinion, the balance sheet, profit and loss account been regular. and cash flow statement dealt with by this report, comply d) There is no overdue amount of loans granted to companies, with the accounting standards referred to in sub-section firms or other parties listed in the register maintained (3C) of section 211 of the Companies Act, 1956; under section 301 of the Companies Act, 1956. v) on the basis of written representations received from the e) The Company has taken loan from one partnership

66 Panacea Biotec • Annual Report 2008-09 ANNEXURE TO THE AUDITORS’ REPORT

firm covered in the register maintained under Section outstanding of income-tax, sales-tax, wealth-tax, service 301 of the Companies Act, 1956. The maximum amount tax, customs duty, excise duty and cess on account of any involved during the year was Rs.533,428,059 and the dispute, are as follows: year-end balance of loans taken from such parties was Rs.300,000,000. Name of Nature Amount (Rs.) Period to Forum where f) In our opinion and according to the information and the statute of dues which the dispute explanations given to us, the rate of interest and other amount relates is pending terms and conditions for such loans are not prima facie Income Tax Demand raised by 50,000 Assessment Appeal pending prejudicial to the interest of the Company. Act, 1961 Assessing Officer Year 2005-06 with CIT (Appeals) g) In respect of loans taken, repayment of the principal Income Tax Demand raised by 60,557 Assessment Appeal pending amount is as stipulated and payment of interest has been Act, 1961 Assessing Officer Year 2006-07 with CIT (Appeals) regular. The Finance Demand raised by 29,789,842 Financial Year Pending with iv) In our opinion and according to the information and Act, 1994 Assessing Officer 2003-04 to 2007-08 Assessing Officer explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the x) The Company has no accumulated losses at the end of the nature of its business, for the purchase of inventory and fixed financial year and it has not incurred cash losses in the current assets and for the sale of goods and services. During the course and immediately preceding financial year. of our audit, no major weakness has been noticed in the internal xi) Based on our audit procedures and as per the information and control system in respect of these areas. explanations given by the management, we are of the opinion v) a) According to the information and explanations provided that the Company has not defaulted in repayment of dues to a by the management, we are of the opinion that the financial institution, bank or debenture holders. particulars of contracts or arrangements referred to in xii) According to the information and explanations given to us section 301 of the Act that need to be entered into the and based on the documents and records produced to us, the register maintained under section 301 have been so Company has not granted loans and advances on the basis entered. of security by way of pledge of shares, debentures and other b) In our opinion and according to the information and securities. explanations given to us, the transactions made in xiii) In our opinion, the Company is not a chit fund or a nidhi/ mutual pursuance of such contracts or arrangements exceeding benefit fund / society. Therefore, the provisions of clause 4(xiii) value of Rupees five lakhs have been entered into during of the Order are not applicable to the Company. the financial year at prices which are reasonable having xiv) In our opinion, the Company is not dealing in or trading in shares, regard to the prevailing market prices at the relevant securities, debentures and other investments. Accordingly, the time. provisions of clause 4(xiv) of the Companies (Auditor’s Report) vi) In respect of deposits accepted, in our opinion and according to Order, 2003 (as amended) are not applicable to the Company. the information and explanations given to us, directives issued xv) According to the information and explanations given to us, the by the Reserve Bank of India and the provisions of sections 58A, Company has not given any guarantee for loans taken by others 58AA or any other relevant provisions of the Companies Act, from banks or financial institutions. 1956 and the rules framed there under, to the extent applicable, have been complied with. We are informed by the management xvi) Based on information and explanations given to us by the that no order has been passed by the Company Law Board, management, term loans were applied for the purpose for National Company Law Tribunal or Reserve Bank of India or any which the loans were obtained. Court or any other Tribunal. xvii) According to the information and explanations given to us vii) In our opinion, the Company has an internal audit system and on overall examination of the balance sheet and cash flow commensurate with the size and nature of its business. statement of the Company, we report that no funds raised on short-term basis have been used for long term investments. viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central xviii) The Company has not made any preferential allotment of shares Government for the maintenance of cost records under section to parties or companies covered in the register maintained 209(1)(d) of the Companies Act, 1956, and are of the opinion under Section 301 of the Companies Act, 1956. that prima facie, the prescribed accounts and records have xix) The Company has unsecured ‘Zero Coupon Convertible Bonds been made and maintained. due 2011’ outstanding during the year on which no security or ix) a) Undisputed statutory dues including provident fund, charge is required to be created. investor education and protection fund, employees’ xx) We have verified that the end use of money raised by public state insurance, income-tax, sales-tax, wealth-tax, service issues is as disclosed in the notes to the financial statements tax, custom duty, excise duty, cess have generally been (Refer Note 3(iii) of Schedule XXC to Financial Statements). regularly deposited with the appropriate authorities xxi) Based upon the audit procedures performed for the purpose except for slight delay in few cases, where amount involved of reporting the true and fair view of the financial statements is not significant, in the depositing of Value added tax (VAT), and as per the information and explanations given by the employees’ state insurance and service tax. management, we report that no fraud on or by the Company b) According to the information and explanations given to has been noticed or reported during the course of our audit. us there are no undisputed amounts payable in respect of provident fund, investor education and protection For S.R. Batliboi & Co. fund, employees’ state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and Chartered Accountants other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the per Manoj Gupta date they became payable. New Delhi Partner c) According to the records of the Company, the dues May 27, 2009 Membership No. 83906

67 Panacea Biotec • Annual Report 2008-09 BALANCE SHEET AS AT 31st MARCH, 2009 Amount in Rs. Schedule As at As at No. 31st March, 2009 31st March, 2008 SOURCES OF FUNDS 1 Shareholders’ Funds Share Capital I 66,786,312 66,786,312 Reserves and Surplus II 6,084,706,629 6,151,492,941 6,905,260,347 6,972,046,659 2 Loan Funds Secured Loans III 4,835,939,044 2,070,352,415 Unsecured Loans IV 2,166,996,000 7,002,935,044 1,912,075,828 3,982,428,243 3 Deferred Tax Liability (Net) 333,785,665 595,029,653 (Refer note no.7 of Schedule XXC) Total 13,488,213,650 11,549,504,555 APPLICATION OF FUNDS 1 Fixed Assets V Gross Block 7,411,174,436 4,658,106,038 Less : Depreciation/Amortisation 2,170,081,361 1,476,040,319 Net Block 5,241,093,075 3,182,065,719 Capital Work-in-Progress (including Capital Advances) 1,697,610,032 6,938,703,107 2,161,628,242 5,343,693,961 2 Investments VI 2,165,697,596 2,049,308,818 3 Foreign Currency Monetary item Translation 95,961,134 - Difference Account (net of amortisation) (Refer note no.2 of Schedule XXB and note no.19 of Schedule XXC) 4 Current Assets, Loans & Advances VII Inventories 4,478,012,741 2,116,423,533 Sundry Debtors 1,238,801,509 1,482,608,423 Cash and Bank Balances 594,809,396 1,411,802,807 Other Current Assets 54,409,736 29,548,820 Loans and Advances 1,303,765,120 404,505,998 Sub-total (A) 7,669,798,502 5,444,889,581 Less : Current Liabilities and Provisions VIII Current Liabilities 1,528,090,478 1,077,957,657 Provisions 1,857,508,130 215,764,467 Sub-total (B) 3,385,598,608 1,293,722,124 Net Current Assets (A)-(B) 4,284,199,894 4,151,167,457 5 Miscellaneous Expenditure IX 3,651,919 5,334,319 (To the extent not written off or adjusted) Total 13,488,213,650 11,549,504,555 Significant Accounting Policies and Notes XX to Accounts

The Schedules referred to above and notes thereon form an integral part of the Balance Sheet. As per our attached report of even date S.R. Batliboi & Co. For and on behalf of the Board Chartered Accountants Ravinder Jain Managing Director per Manoj Gupta Partner I.K. Sharma Dr. Rajesh Jain Membership No. 83906 D.G.M. (Accounts & Finance) Joint Managing Director

Place : New Delhi Vinod Goel Dated : May 27, 2009 G.M. Legal & Company Secretary

68 Panacea Biotec • Annual Report 2008-09 PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED ON 31st MARCH, 2009 Amount in Rs. Schedule For the year ended For the year ended No. 31st March, 2009 31st March, 2008 INCOME Turnover (Gross) X 7,753,017,108 8,342,198,952 Less: Excise Duty 18,845,112 7,734,171,996 37,756,574 8,304,442,378 Other Income XI 259,677,471 371,741,692 Total 7,993,849,467 8,676,184,070 EXPENDITURE Purchases of Traded Goods 155,870,989 172,969,336 Raw and packing material consumed XII 2,951,977,608 3,463,719,981 Operating and other expenses XIII 3,350,885,603 745,519,847 (Increase)/ Decrease in inventories XIV (446,904,922) 21,787,534 Personnel Expenses XV 916,095,844 924,897,239 Selling and Distribution Expenses XVI 434,544,751 451,093,211 Research and Development Expenses XVII 669,944,045 541,856,120 Financial Expenses XVIII 347,420,187 150,139,383 Depreciation/ Amortisation V 536,073,835 298,660,739 Miscellaneous Expenditure written off IX 1,682,400 1,682,400 during the year Total 8,917,590,340 6,772,325,790 Profit / (Loss) before tax (923,740,873) 1,903,858,280 Provision for Income Tax - 330,000,000 Deferred Income Tax (Credit)/ Charge (261,243,988) 211,160,506 (Refer note no.7 of Schedule XXC) Provision for Fringe Benefit Tax 28,000,000 31,000,000 Profit / (Loss) after Tax (690,496,885) 1,331,697,774 Add : Balance brought forward from previous year 2,845,720,793 1,725,221,144 Profit available for Appropriations 2,155,223,908 3,056,918,918 APPROPRIATIONS Dividend Equity Shares - Proposed (not liable to TDS) - 66,693,746 Dividend Distribution Tax - 11,334,602 Transfer to General Reserve - 133,169,777 Balance carried to Balance Sheet 2,155,223,908 2,845,720,793 Basic Earnings per Share XIX (10.35) 20.14 Diluted Earnings per Share XIX (10.35) 18.85 Face/ Nominal Value per Share 1.00 1.00 Significant Accounting Policies and Notes XX to Accounts The Schedules referred to above and notes thereon form an integral part of the Profit & Loss Account. As per our attached report of even date S.R. Batliboi & Co. For and on behalf of the Board Chartered Accountants Ravinder Jain Managing Director per Manoj Gupta Partner I.K. Sharma Dr. Rajesh Jain Membership No. 83906 D.G.M. (Accounts & Finance) Joint Managing Director

Place : New Delhi Vinod Goel Dated : May 27, 2009 G.M. Legal & Company Secretary

69 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT Amount in Rs. As at As at 31st March, 2009 31st March, 2008 Schedule I - Share Capital Authorised Comprising of i. 125,000,000 (Previous Year 125,000,000) Equity Shares of Re.1 each 125,000,000 125,000,000 ii. 110,000,000 (Previous year 110,000,000) Preference Shares of Rs.10 each 1,100,000,000 1,100,000,000 1,225,000,000 1,225,000,000 Issued and Subscribed 66,842,746 (Previous Year 66,842,746) Equity Shares of Re.1 each 66,842,746 66,842,746 66,842,746 66,842,746 Paid up 66,693,746 (Previous Year 66,693,746) Equity Shares of Re.1 each fully paid up 66,693,746 66,693,746 Add: Forfeited Shares (14,900 Shares @ Rs.10 each forfeited on May 15, 1999, which were later on sub-divided into 149,000 Equity Shares of Re.1 each on February 12, 2003) 92,566 66,786,312 92,566 66,786,312 (149,000 Forfeited Shares have been allotted on 24th August, 2005 in the name of employees of the Company (in their capacity as Company’s nominees/trustees) for sale thereof at the prevailing market prices through recognised Stock Exchanges on the terms & conditions as specified by Managing/ Joint Managing Directors or Director of the Company and reimbursement of net sales proceeds to the company account) (Out of the above shares, 1,814,240 Equity Shares of Rs.10 each were issued as fully paid up bonus shares by capitalisation of General Reserves in earlier years, which were later on sub-divided into 18,142,400 Equity Shares of Re.1 each on February 12, 2003) 66,786,312 66,786,312

Schedule II - Reserves and Surplus Capital Redemption Reserve 1,016,849,140 1,016,849,140 Securities Premium Amount as per last Balance Sheet 2,762,712,068 2,436,230,310 Add: Credited Upon Issue of Equity Shares on - 2,762,712,068 326,481,758 2,762,712,068 conversion of FCCBs General Reserve Amount as per last Balance Sheet 279,978,346 146,808,569 Add: Transfer from Profit & Loss Account - 133,169,777 Less: Exchange Differences of earlier years capitalised to 37,586,515 - Fixed Assets (Net of Depreciation Rs.1,609,882) (Refer note no. 2 of Schedule XXB and note no. 19 of Schedule XXC) Less: Exchange Differences of Earlier Years Transferred to 92,470,318 149,921,513 - 279,978,346 the “Foreign Currency Monetary Item Translation Difference Account” (Refer note no. 2 of Schedule XXB and note no. 19 of Schedule XXC) Balance in Profit & Loss Account 2,155,223,908 2,845,720,793 6,084,706,629 6,905,260,347

70 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT Amount in Rs. As at As at 31st March, 2009 31st March, 2008 Schedule III - Secured Loans 1. Foreign Currency Term Loans (from Banks) i) State Bank of India 2,028,800,000 802,100,000 (Due within one year Rs. nil (Previous Year Rs. nil)) Interest Accrued and Due 12,416,668 4,974,265 ii) State Bank of Travancore 1,272,932,614 1,006,525,285 (Due within one year Rs. nil (Previous Year Rs. nil)) 2. Working Capital Loans from Scheduled Banks 1,521,789,762 256,752,865 4,835,939,044 2,070,352,415

Notes: 1. Foreign Currency Term Loans from State Bank of India and State Bank of Travancore are secured by way of first pari-passu charge by hypothecation of the Company’s entire movables fixed assets, both present and future and mortgage of immovable properties of the Company beingland admeasuring 96 bighas, 19 biswas & 93 bighas 12 biswas & 10 Biswasi situated at Village Samalheri, Tehsil Dera Bassi, District S.A.S. Nagar (Mohali) (formerly Tehsil Rajpura, District Patiala), Punjab.The process for creation of first pari-passu charge by way of mortgage of immovable properties situated at Baddi, Himanchal Pradesh is in progress. Foreign Currency Term Loans from State Bank of India is also collaterally secured by personal guarantees of the Promoter-Directors of the Company, viz. Mr. Soshil Kumar Jain, Mr. Ravinder Jain, Dr. Rajesh Jain and Mr. Sandeep Jain. 2. Working Capital Loans from Scheduled Banks are secured by way of first pari-passu charge by hypothecation of all current assets and also by way of 2nd pari-passu charge on all the movable fixed assets(including machinery and spares) of the company and existing immovable fixed assets of the Company being land admeasuring 96 bighas, 19 biswas & 93 bighas 12 biswas & 10 Biswasi situated at Village Samalheri, Tehsil Dera Bassi, District S.A.S. Nagar (Mohali) (formerly Tehsil Rajpura, District Patiala), Punjab. The process for creation of second pari-passu charge by way of mortgage of immovable properties situated at Baddi, Himanchal Pradesh is in progress. These are also collaterally secured by personal guarantees of the Promoter-Directors of the Company, viz. Mr. Soshil Kumar Jain, Mr. Ravinder Jain, Dr. Rajesh Jain and Mr. Sandeep Jain.

Schedule IV - Unsecured Loans Fixed Deposits* 300,500,000 436,110,000 (Due within one year Rs.55,000,000 (Previous year Rs.432,500,000)) Interest accrued and due - 101,828 Other Loans: Foreign Currency Convertible Bonds** US$ 36,800,000 (Previous Year US$ 36,800,000) 1,866,496,000 1,475,864,000 Zero Coupon Convertible Bonds due 2011 (Due within one year Rs. nil (Previous Year Rs. nil)) 2,166,996,000 1,912,075,828

Note: * includes Rs.300,000,000 (Previous Year Rs.432,500,000) from partnership firm in which some directors and their relatives are partner. ** Unless previously converted, redeemed or repurchased & cancelled, the remaining FCCBs of US $ 36,800,000,which were issued on 13.02.2006, will be redeemed on Feb 14, 2011 at 142.80% of their outstanding principal amount.

71 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT - As At As At 15,934,492 12,482,076 60,984,522 45,047,286 10,227,908 36,466,709 33,233,467 79,928,084 60,415,045 211,268,961 739,957,799 126,106,395 114,736,380 431,214,135 (Amount in Rs.) (Amount 31/03/2008 1,775,619,724 3,102,137,635 1,730,414,107 2,712,813,837 3,182,065,719 2,161,628,242 2,773,228,882

-

NET BLOCK

7,136,913 As At 53,999,615 66,551,612 44,496,052 11,781,518 31,285,734 38,791,222 81,858,474 79,928,084 293,490,945 152,856,871 120,718,374 647,718,926 31/03/2009 1,422,343,997 2,997,640,222 5,159,234,601 1,049,891,106 3,102,137,635 5,241,093,075 1,697,610,032 3,182,065,719

-

832,615 9,202,695 As At 72,260,310 84,268,914 46,421,326 54,118,990 21,789,294 71,346,031 311,371,615 135,028,371 122,410,114 131,532,305 104,901,290 31/03/2009 1,241,031,086 2,038,549,056 1,371,139,029 2,170,081,361 1,476,040,319

------

(56) (8,424) (8,497) (32,556) (59,326) Other (155,294)

(1,345,729) (1,609,882) (1,609,882) Movements**

------

22,185 51,289 (3,105) (3,105) 112,023 (60,741) 3,865,000 5,461,667 9,451,423 7,302,792 9,448,318 7,302,792 Sale / Adjustments during the Year during the

- -

DEPRECIATION/AMORTISATION 371,417 during 7,062,586 3,030,790 the Year the Provided 33,141,324 19,119,952 19,191,198 24,392,965 13,254,435 10,342,685 26,627,910 24,929,330 116,147,313 459,044,577 678,471,332 405,079,585 705,099,242 430,008,915

-

461,198 9,202,695 As At 64,283,501 58,610,449 65,137,502 98,188,498 43,390,536 40,861,450 11,446,609 79,971,960 195,401,781 787,197,238 101,858,862 973,362,236 104,901,290 01/04/2008 1,371,139,029 1,476,040,319 1,053,334,196

9,202,695 As At 54,832,230 78,482,944 58,202,844 85,404,724 60,580,516 293,490,945 287,885,242 138,811,922 204,987,288 166,906,166 213,390,779 184,829,374 31/03/2009 1,733,715,612 4,238,671,308 7,197,783,657 4,473,276,664 7,411,174,436 4,658,106,038

------

(556) (45,339) (32,538) (61,083) Other (179,870) (148,314) (1,552,944) (9,674,542) (11,695,186) (11,695,186) Movements**

------

76,076 196,666 1,299,258 7,260,437 8,429,476 27,529,975 44,791,888 15,069,558 44,791,888 15,069,558 during the Year the Sale/Adjustment GROSS BLOCK

-

1,717,923 4,584,400 8,076,565 during 38,436,540 60,175,931 27,678,965 25,174,489 24,015,362 15,900,440 28,561,405 44,442,369 the Year* the Additions 109,797,298 801,208,234 802,170,149 846,612,518 1,692,789,325 2,780,994,067 2,809,555,472

9,202,695 As At 16,395,690 76,765,577 53,618,444 77,328,159 44,680,076 211,268,961 935,359,580 227,965,257 119,594,971 179,873,882 143,235,784 184,829,374 140,387,005 01/04/2008 2,562,816,962 4,473,276,664 3,686,176,073 4,658,106,038 3,826,563,078

Fixed Assets Fixed

-

V

Freehold Land includes Land amounting to Rs.17,285,690 (Previous Year Rs. 17,285,690) pending registration in the name of Company. 17,285,690) pending registration Rs. Year Rs.17,285,690 (Previous to Land includes amounting Freehold Company. in the name of registration 1,429,032) pending Year Rs. 155,892,400(Previous to Rs. amounting Premises Building includes Office parties. Rs.5,277,132 ) (Net Block) lying with third Year & Machinery Plant & Machinery includes Plant Rs.4,543,083 (Previous to amounting Rs.131,348,176). Year Rs.169,025,407 (Previous to Assets amounting & Development on Research includes Depreciation for the year Depreciation of schedule XX C. No.4 Refer Note expenditure. includes pre-operative in Progress Work Capital assets. Intangible generated internally are Softwares) assets (except All Intangible

Notes: DESCRIPTION Assets Tangible A. Land - Freehold Buildings & MachineryPlant & Fittings Furniture Equipments Office TOTAL in Progress Work Capital YEAR PREVIOUS Intangible Assets B. & Designs Trademarks Patents, Softwares Website TOTAL in Progress Work Capital (A+B) TOTAL in Progress Work Capital YEAR PREVIOUS Land - Leasehold Improvement Leasedhold Vehicles Equipments Computer Development Product YEAR PREVIOUS Schedule 1. 2. 3. 4. 5. 6. NIL). Rs. year 764,477(Previous 730, Rs. during the year capitalized Differences * Includes Exchange during the year. capitalized / (Gain) of earlier years Loss differences ** Exchange

72 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT Amount in Rs. As at As at 31st March, 2009 31st March, 2008 Schedule VI - Investments Long Term Investments (at cost) Trade - Unquoted 1) Subsidiary Companies : a) 1,902,160 (Previous Year 1,902,160) Equity Shares of Re.1 each fully paid in Best On Health Ltd. 22,883,050 22,883,050 b) 6,636,666 (Previous Year 5,970,000), 0.5% Optionally Convertible Non-Cumulative Redeemable Preference Shares of Re.1 each fully paid in Best On Health Ltd. 1,990,999,800 1,791,000,000 c) 5 (Previous Year Nil) Equity Shares of AED 100,000 each fully paid in Panacea Biotec FZE. 5,474,520 - d) 3,765,701(Previous Year Nil) Equity Shares of Rs.10 each Rs.2.70 paid up in Umkal Medical Institute Pvt. Ltd. 76,143,604 - e) Investment in Equity Shares (Previous Year Nil) of Panacea Biotec GmbH 1,582,250 - f) 1,000 (Previous Year Nil) Equity Shares of US $0.01 each fully paid up in Rees Investments Limited 476 2,097,083,700 - 1,813,883,050 2) Joint Venture Companies : a) 2,295,910 (Previous Year 2,295,910) Equity Shares of Rs.10 each fully paid up in Chiron Panacea Vaccines Pvt. Ltd. 22,959,100 22,959,100 b) 4,608,608 (Previous Year 4,608,608) Ordinary Shares of GBP 0.01 (Face Value) each fully paid up in Cambridge Biostability Limited, U.K. 168,068,998 168,068,998 Less : Provision for Permanent Diminution in the value of Investments [Refer note no.13 (e) of Schedule XX C] 168,068,998 22,959,100 - 191,028,098 3) 419,767 (Previous Year 419,767) Equity Shares of Rs.10 each fully paid in PanEra Biotec Pvt. Ltd. (formerly known as Panheber Biotec Pvt. Ltd.) 4,197,670 4,197,670 4) 20,000 (Previous Year 20,000) Equity Shares of Rs.10 each fully paid up in Shivalik Solid Waste Management Ltd. 200,000 200,000 Non-Trade - Unquoted 1) Investment in Capital of Partnership Firm - 40,000,000 Lakshmi & The Manager 2) 41,257,126 (Previous Year Nil) Equity Shares of Re.1 each fully paid up in Lakshmi & Manager Holdings Ltd* 41,257,126 - 2,165,697,596 2,049,308,818 *Company under the same management as defined under section 370 (1B) of the Companies Act, 1956

Notes: 1. The aggregate amount of unquoted investments is Rs.2,165,697,596 (net of Provision for Permanent Diminution in the value of Investments of Rs.168,068,998) (Previous year Rs.2,049,308,818). 2. The Company has formed a new subsidiary Panacea Biotec Inc. in USA. Even though the subsidiary has been incorporated, no investment has yet been made as on March 31, 2009. 3. The names of all the partners of the Partnership Firm, ‘Lakshmi & The Manager’, total capital of the firm and the share of each partner was as under: Partners Capital Sharing Ratio Panacea Biotec Ltd. 40,000,000 40% Mr. Ravinder Jain 19,000,000 19% Mrs. Radhika Jain 20,000,000 20% Mrs. Sunanda Jain 18,000,000 18% Mrs. Meena Jain 2,000,000 2% Mrs. Shilpy Jain 1,000,000 1% Total 100,000,000 100%

73 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT Amount in Rs. As at As at 31st March, 2009 31st March, 2008 Schedule VII - Current Assets, Loans & Advances Inventories i) Raw Materials (including Packing Materials) 3,206,780,619 1,320,981,788 (Including lying with third parties Rs.34,062,940 (Previous Year Rs.57,098,748)) ii) Finished Goods 985,858,105 684,208,806 (Including goods in transit of Rs.1,192,568 (Previous Year Rs. Nil) & lying with third parties Rs.844,654 (Previous Year Rs.187,528) iii) Work in Progress (Including lying with third parties 202,833,537 57,577,914 Rs.67,135,348 (Previous Year Rs.9,268,214)) iv) Stores & Spare Parts 82,540,480 4,478,012,741 53,655,025 2,116,423,533 Sundry Debtors (Refer note no 8 (i) & (iii) of Schedule XX C) (Unsecured, Considered good, unless otherwise stated) Over six months (including Rs.3,108,712 considered doubtful of recovery (Previous year Rs.2,858,916)) 83,409,270 9,572,864 Others Debts 1,158,500,951 1,475,894,475 1,241,910,221 1,485,467,339 Less : Provision for Bad & Doubtful Debts 3,108,712 1,238,801,509 2,858,916 1,482,608,423 Cash and Bank Balances i) Cash balance on hand 579,589 1,449,297 ii) Balance with scheduled banks a) On Current Accounts 25,557,539 33,723,242 b) On Unpaid Dividend Accounts* 1,583,956 1,536,608 c) On Fixed Deposits** 70,467,843 1,250,968,300 d) On Exchange Earner Foreign Currency 496,620,469 594,809,396 124,125,360 1,411,802,807 Current Accounts *Not available for use by the company as they represent corresponding unpaid dividend liabilities **Fixed Deposits amounting to Rs.1,024,123 (previous year Rs.968,300) are pledged with Banks and various Government Authorities. Other Current Assets Export Benefits receivable 25,521,973 19,402,794 Interest accrued but not due on Loans & Deposits 36,163,233 10,146,026 Less : Provision for doubtful of recovery (Refer note no.13 (e) 7,275,470 54,409,736 - 29,548,820 of Schedule XX C)) Loans and Advances (Unsecured, considered good, unless otherwise stated) Advances recoverable in cash or in kind or for value to 116,431,593 103,463,997 be received (Including Rs.818,322 (Previous Year Rs.818,322 ) considered doubtful)) Due from PanEra Biotec Pvt. Ltd. (Formerly known as 153,950,194 135,532,654 Panheber Biotec Private Ltd.) * (Including Rs.135,532,654 (Previous Year Rs.135,532,654) considered doubtful)) Balance with Excise, Custom etc. 15,027,362 24,870,402 Loans & Advances to Subsidiary Company ** 710,811,071 - Loan to Joint Venture Company 108,833,850 39,778,050 Staff Loans & Advances (including Rs.4,191,959 16,333,010 18,245,508 (Previous Year Rs.4,191,959) considered doubtful)) 1,121,387,080 321,890,611 Less : Provision for Doubtful Loans & Advances (Refer note 108,833,850 - no.13 (e) of Schedule XX C) Less : Provision for Bad & Doubtful Advances 140,542,935 140,542,935 872,010,295 181,347,676 Security Deposits 20,534,409 21,892,190 Advance Income Tax (Net of Provision of Rs.1,168,500,000 411,220,416 1,303,765,120 201,266,132 404,505,998 (Previous year Rs.1,168,500,000)) 7,669,798,502 5,444,889,581 *Company`s two Directors are also directors in PanEra Biotec Private Limited (Formerly Known as Panheber Biotec Pvt. Ltd.). **Advances include due from Company under the Same Management (wholly owned subsidiary company) as defined under section 370(1B) of the Companies Act, 1956. Refer note no.8(i) & (ii) of Schedule XX C.

74 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT Amount in Rs. As at As at 31st March, 2009 31st March, 2008 Schedule VIII - Current Liabilities & Provisions A. Liabilities i) Acceptances 1,115,093,540 336,979,264 ii) Sundry Creditors a) Dues to Micro & Small Enterprises 1,274,843 1,177,455 (Refer note no.6 of Schedule XX C) b) Dues to other than Micro & Small Enterprises 358,326,378 631,043,756 iii) Payable to Subsidiary Company 202,620 3,079,105 iv) Advances from Customers 5,367,817 7,595,465 v) Deposits from C & F Agents 15,195,000 15,158,000 vi) Unpaid dividend on Equity Shares* 1,585,056 1,536,608 vii) Other Liabilities 31,002,816 81,388,004 viii) Interest accrued but not due on Loans / Deposits 42,408 1,528,090,478 - 1,077,957,657 * This amount does not include amount due/outstanding to be credited to Investor Education & Protection Fund, same shall be credited as and when due

B. Provisions i) Provision for Wealth Tax 913,479 832,746 ii) Provision for Fringe Benefit Tax (Net of Advance 5,045,455 2,349,330 payment of Rs.100,954,545 (Previous year Rs.75,650,670)) iii) Proposed Dividend on Equity Shares - 66,693,746 iv) Provision for Dividend Distribution Tax - 11,334,602 v) Provision for Gratuity 56,754,771 57,679,075 vi) Provision for Leave Encashment 51,690,425 36,374,968 vii) Provision for Open Derivative Contracts 1,743,104,000 1,857,508,130 40,500,000 215,764,467 3,385,598,608 1,293,722,124

Schedule IX - Miscellaneous Expenditure (To the extent not written off or adjusted) i) License fees As per last Balance Sheet 5,334,319 7,016,719 Less: Written off during the year 1,682,400 3,651,919 1,682,400 5,334,319 3,651,919 5,334,319

Amount in Rs. For the year ended For the year ended 31st March, 2009 31st March, 2008 Schedule X - Turnover Sales 7,730,417,599 8,338,331,922 Services (R&D Income) 1,699,562 3,867,030 Income from Contract Manufacturing 20,899,947 - 7,753,017,108 8,342,198,952

75 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT Amount in Rs. For the year ended For the year ended 31st March, 2009 31st March, 2008 Schedule XI - Other Income Interest received - - from Banks (Tax deducted at source Rs.25,897,168 (Previous year Rs.8,955,419)) 121,771,587 42,725,158 - from Inter Company Loans / Deposits (Tax deducted at 45,756,516 3,093,565 source Rs. Nil (Previous year Rs.226,646)) - on Income Tax Refund - 6,527,472 - from others* (Tax deducted at source Rs. Nil (Previous year Rs. Nil)) 534,417 189,117 Export Incentives 30,855,454 24,814,711 Miscellaneous Balances/ Provisions written back - 123,151,118 Sale of Scrap 1,779,942 1,769,296 Lease Rent 17,823,031 1,138,945 Profit on Sale of Fixed Assets (Net of loss Rs.2,039,733 7,171,144 22,887,632 (Previous year Rs.770,491)) Foreign Exchange Fluctuation Gain (Net of loss Rs. Nil (Previous year Rs.125,552,613)) - 124,807,357 Profit on Sale of Long Term Trade Investments - 8,062,060 Share of Profit From Partnership Firm, in which Company was Partner 1,257,126 - Insurance Claim Received 4,430,371 8,283,596 Royalty Income 9,266,380 1,235,464 Dividend Received From Long Term Trade Investments (Joint Venture) 18,367,280 - Miscellaneous Income 664,223 3,056,201 259,677,471 371,741,692 *Interest from others includes Rs.87,800 (Previous year Rs.64,500) from employees, Rs.188,248 (Previous year Rs.124,617) from debtors Rs.258,369(Previous year Rs. Nil) from Excise department. Schedule XII - Raw & Packing Material Consumed Raw & Packing Materials consumed Opening Stock 1,320,981,788 1,256,131,191 Add : Material purchased during the year 4,857,397,558 3,561,460,905 6,178,379,346 4,817,592,096 Less : Closing Stock 3,206,780,619 1,320,981,788 2,971,598,727 3,496,610,308 Less: Material consumed for Research & Development 19,621,119 32,890,327 2,951,977,608 3,463,719,981 Schedule XIII - Operating and other Expenses Processing Charges 35,289,443 5,843,974 Analytical Testing & Trial Charges 6,995,652 11,026,412 Stores & Spare Parts consumed (Refer note no.4 of Schedule XX C) 57,939,559 45,981,822 Power & Fuel (Refer note no.4 of Schedule XX C) 112,167,409 96,918,851 Repair & Maintenance (Refer note no.4 of Schedule XX C) -Buildings 16,628,948 19,041,472 -Plant & Machinery 22,609,114 23,277,261 -Others 28,139,583 67,377,645 26,284,547 68,603,280 Rent (Refer note no.4 of Schedule XX C) 53,248,013 51,749,980 Royalty 14,742,764 4,385,550 Directors’ Sitting Fees 345,000 340,000 Printing & Stationery 40,206,382 31,434,720 Postage & Communication expenses 45,366,215 39,061,671 Insurance 41,379,420 42,761,472 Travelling & Conveyance expenses (Refer note no.4 of Schedule XX C) 103,288,987 101,364,603 Books & Periodicals 2,240,467 1,505,062 Legal & Professional charges (Refer note no.4 of Schedule XX C) 108,984,641 72,094,552 Vehicle Running & Maintenance 17,147,781 14,765,877 Auditors’ Remuneration: (Refer note no.14 of Schedule XX C) -Statutory Audit Fee 3,309,000 3,400,060 -Limited Review Fees 1,685,400 1,348,320 -Out of pocket expenses 161,721 69,317 -Others 134,832 5,290,953 113,217 4,930,914 Rates & Taxes (Refer note no.4 of Schedule XX C) 15,252,931 9,486,175 Donation 3,408,970 6,550,004 Subscription 13,700,941 12,226,353 Staff Training & Recruitment 31,477,974 29,976,294 Bad Debts & Advances written off 72,285 - Provision for Doubtful Debts & Advances 116,494,114 27,044,708 Wealth Tax 936,368 832,746 Foreign Exchange Fluctuation Loss {Net of Gain 557,888,608 - Rs.214,791,328 (Previous year Rs. Nil)} Provision for Loss on Open Derivative Contracts 1,702,604,000 40,500,000 Provision for Permanent Diminution in the value of 168,068,998 - Investments (Refer note no.13 (e) of Schedule XX C)) Miscellaneous expenses (Refer note no.4 of Schedule XX C) 28,970,083 26,134,827 3,350,885,603 745,519,847

76 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT Amount in Rs. For the year ended For the year ended 31st March, 2009 31st March, 2008 Schedule XIV - (Increase)/ Decrease In Inventories Closing Stock: Finished Goods 985,858,105 684,208,806 Work in Progress 202,833,537 1,188,691,642 57,577,914 741,786,720 Less: Opening Stock Finished Goods 684,208,806 713,506,988 Work in Progress 57,577,914 741,786,720 50,067,266 763,574,254 (446,904,922) 21,787,534 Schedule XV - Personnel Expenses Salary, Wages and Bonus* (Refer note no.4 of Schedule XX C) 837,086,165 834,390,802 Contribution to Provident and other Funds 26,949,018 22,070,028 Workmen/Staff Welfare expenses 39,995,607 35,339,196 Gratuity 12,065,054 33,097,213 916,095,844 924,897,239 * For Director’s Remuneration refer note no.5(a) of Schedule XX C Schedule XVI - Selling & Distribution Expenses Advertising & Sales Promotion 226,910,009 238,368,058 Meetings & Conferences 62,306,063 93,088,068 Freight & Cartage 64,098,422 61,294,777 Commission on Sales (other than sole selling agents) 81,230,257 58,342,308 434,544,751 451,093,211 Schedule XVII - Research & Development Expenses Raw Material & Packing Material consumed 19,621,119 32,890,327 Stores & Spare Parts consumed 134,104,256 91,423,646 Salary, Wages and Bonus 182,045,564 155,895,586 Contribution to Provident & other Funds 4,096,340 3,607,381 Workmen/Staff Welfare expenses 9,504,657 7,046,234 Gratuity 1,062,491 3,287,690 Analytical Testing & Trial charges 26,736,975 15,803,303 Rent 6,401,077 7,569,467 Printing & Stationery 2,212,425 2,591,736 Postage & Communication 3,151,204 2,794,844 Travelling expenses 15,897,191 12,638,102 Books & Periodicals 6,317,043 3,966,683 Legal & Professional expenses 12,052,167 9,158,686 Vehicle Running & Maintenance 2,424,344 2,044,023 Donation 30,251 1,880,651 Repair & Maintenance : - Buildings 5,726,552 2,386,093 - Plant & Machinery 14,628,824 17,360,639 - Others 3,728,604 24,083,980 1,740,037 21,486,769 Rates, Fees & Taxes 622,995 335,366 Subscription 9,467,437 4,980,114 Electricity & Water charges 33,714,494 22,390,252 Meeting & Conferences 2,460,794 4,191,618 Staff Training & Recruitment 765,564 815,807 Bank charges - 65,407 Depreciation 169,025,407 131,348,176 Sundry expenses 4,146,270 3,644,252 669,944,045 541,856,120

77 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT Amount in Rs. For the year ended For the year ended 31st March, 2009 31st March, 2008 Schedule XVIII - Financial Expenses Interest on: a) Fixed Loans 206,237,568 88,284,701 b) Others (Including interest on Working Capital Loans) 114,833,232 321,070,800 28,039,320 116,324,021 Bank charges 26,349,387 33,815,362 347,420,187 150,139,383 Schedule XIX - Earning Per Share Calculation of Profit/ (Loss) for Basic EPS Net profit/ (Loss) before Tax (923,740,873) 1,903,858,280 Less: Adjustment for Tax Expense (233,243,988) 572,160,506 Net profit/ (Loss) for calculation of Basic EPS (690,496,885) 1,331,697,774 Weighted average number of Equity Shares in 66,693,746 66,115,919 calculating basic EPS Calculation of Profit/ (Loss) for Diluted EPS Net profit/ (Loss) for calculation of basic EPS (690,496,885) 1,331,697,774 Adjusted Net Profit/ (Loss) for calculating Diluted EPS (690,496,885) 1,331,697,774 No. of Equity Shares resulting from conversion of Foreign Currency Convertible Bonds ‘US$50 Million Zero Coupon Convertible Bonds due 2011’ 4,542,752 4,542,752 (Outstanding US$36.8 Million) at conversion price Rs.357.57 Add: Weighted average number of Equity Shares in 66,693,746 66,115,919 calculating basic EPS Weighted average number of Equity Shares in 71,236,498 70,658,671 calculating diluted EPS Basic Earnings per Share (10.35) 20.14 Diluted Earnings per Share (10.35) 18.85 Face / Nominal Value per Share 1.00 1.00

Schedule XX - Significant Accounting Policies and Notes on Accounts A. Nature of Operations Panacea Biotec Limited is one of the India’s leading research based companies engaged in the business of research, development, manufacture and marketing of Vaccines and Branded Pharmaceutical Formulations. The Company has products for various segments, which include paediatric vaccines, pain management, diabetes management and organ transplantation. B. Significant Accounting Policies 1. Basis of Preparation The financial statements have been prepared to comply in all material respects with the Notified Accounting Standards pursuant to Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis except in case of assets for which provision for impairment is made and revaluation is carried out. The accounting policies have been consistently applied by the Company and except for the changes in accounting policies discussed more fully below, are consistent with those used in the previous year. 2. Change in Accounting Policy For the financial year ended 31st March, 2008, the Company was charging off exchange differences arising on foreign currency monetary assets and liabilities to profit and loss account. Pursuant to Companies (Accounting Standards) Amendments Rules, 2009, the Company has exercised the option of deferring the charge of exchange difference to the Profit and Loss Account, in respect of accounting periods commencing on or after 7th December, 2006, on long-term foreign currency monetary items (i.e. monetary assets or liabilities expressed in foreign currency and having a term of 12 months or more at the date of origination). As a result, such exchange differences so far as they relate to the acquisition of a depreciable capital asset have been adjusted with the cost of such asset and are being depreciated over the balance life of the asset, and in other cases, have been accumulated in Foreign Currency Monetary Item Translation Difference Account and are being amortized over the balance period of such long term asset/liability but not beyond, accounting period ending on or before 31st March 2011. In the current year, such exchange differences, pertaining to accounting periods commencing on 1st April, 2007 and ending on 31st March, 2008 are transferred from General Reserve, to the extent they related to acquisition of depreciable capital assets are adjusted with the cost of such assets Rs.24,810,859 (net of depreciation of Rs.1,609,882) (net of tax of Rs.12,775,656) and in other cases, are transferred to the Foreign Currency Monetary Item Translation Difference Account Rs.61,039,657 (net of tax of Rs.31,430,661).

78 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT

Had the Company continued to use the earlier basis of accounting for exchange differences arising on long-term foreign currency monetary items, the loss after tax for the current period would have been higher by Rs.561,174,198 (net of tax of Rs.288,960,930), the net block of fixed assets would have been lower by Rs.624,117,162 (net of depreciation of Rs.94,952,131) and general reserve would have been higher by Rs.130,056,833. 3. Use of Estimates The presentation of financial statements in conformity with the Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date on the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognized in the period in which the results are known/ materialized. 4. Revenue Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Sale of Goods - Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer and is stated net of trade discounts, returns and Sales Tax /VAT but includes Excise Duty. Excise Duty deducted from turnover is the amount that is included in the amount of turnover (gross) and not the entire amount of liability arisen during the year. Research & Development - Income from Research & Development Services is accounted for as per the stage of completion. Contract Manufacturing - Revenue is recognized on an accrual basis in accordance with the term of the relevant agreement. Interest - Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. Dividends - Revenue is recognized when the shareholders’ right to receive payment is established by the balance sheet date. Dividend from subsidiaries is recognized even if same are declared after the Balance Sheet date but pertains to the period on or before the date of Balance Sheet, as per the requirements of Schedule VI to the Companies Act, 1956. Royalties - Revenue is recognized on an accrual basis in accordance with the term of the relevant agreement. Export Benefits - Export entitlements under Duty Entitlement Pass Book Schemes and Advance Licenses are recognized in the Profit & Loss Account when the right to receive credit as per terms of scheme is established in respect of export made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds. 5. Fixed Assets Fixed assets are stated at cost less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use. As a result of change in Accounting Policy during the year (refer note no. 2 above) in respect of accounting periods commencing on or after 7th December, 2006, exchange differences arising on reporting of the long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in the previous financial statements are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, if these monetary items pertain to the acquisition of a depreciable fixed asset. 6. Impairment of Fixed Assets The carrying amounts of assets are reviewed at each Balance Sheet date as to whether if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life. 7. Intangibles Patents, Trademarks & Designs - Costs relating to patents, trademarks and designs, which are acquired, are capitalized. Research and Development Costs - Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured. Product Development – Product Development is capitalized on successful completion of development activities and commercial launch of developed products. Technical Know how - Technical Know how is being capitalized on successful transfer of technology when its future recoverability can reasonably be regarded as assured. Software and Website - Software and website is stated at cost of acquisition and includes all attributable costs of bringing them to their working condition for their intended use. The carrying value of intangible assets is reviewed for impairment annually when the asset is not yet in use, and otherwise when events or changes in circumstances indicate that the carrying value may not be recoverable. 8. Depreciation / amortization a) Depreciation on fixed assets is provided on written down value method as per the rates based on the useful life of the assets estimated by the management, or as per rates prescribed in Schedule XIV to the Companies Act, 1956 whichever is higher. Depreciation is provided on the following rates:

79 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT

Tangibles Assets WDV % Building – Factory 10.00 Building – Office Premises 5.00 Plant & Machinery 13.91 Furniture & Fittings 18.10 Vehicles 25.89 Office Equipments 13.91 Computer Equipments 40.00 b) Amortization on intangibles is provided on the basis of the estimated useful lives as follows:- Software - Amortized on straight line basis over a period of 5 years. Websites - Amortized on straight line basis over a period of 2 years. Patents, Trade Marks & Designs - Amortized on straight line basis over a period of 7 years. Product Development - Amortized on straight line basis over a period of 5 years. Technical Know-how - Amortized on straight line basis over a period of 5 years. c) Leasehold Land is depreciated over the period of lease or useful life, whichever is shorter. d) Leasehold Improvements are amortized over the initial period of lease or useful life, whichever is shorter. 9. Borrowing Costs Borrowing costs attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Borrowing costs, which are not relatable to qualifying assets, are recognized as an expense in the period in which they are incurred. 10. Leases Where the Company is the Lessee Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the Profit and Loss account on a straight-line basis over the lease term. Where the Company is the Lessor Assets subject to operating leases are included in fixed assets. Lease income is recognized in the Profit and Loss Account on a straight-line basis over the lease term. Costs, including depreciation are recognized as an expense in the Profit and Loss Account. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Profit and Loss Account. 11. Deferred Revenue Expenditure Expenditure incurred prior to April 1, 2003 towards procuring license for new products is written off over the period of agreement or ten years whichever is shorter. Expenditure of the similar nature incurred during the year is charged off to revenue. 12. Investments Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution, if any, in value is made to recognize a decline other than temporary in the value of the investments. 13. Inventories Finished Goods, Work in Progress, Goods held for Resale, Raw Materials, Packing Materials and Stores & Spares are stated at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished goods in which they will be incorporated are expected to be sold at or above cost. ‘Cost’ of Finished Goods, Work in progress, Raw Materials, Packing Materials and Stores & Spares is arrived at by using ‘Moving Average Price’ method. Cost of Work in Progress and Finished Goods is determined by considering direct material cost and appropriate portion of manufacturing overheads based on normal operating capacity. Cost of traded goods is arrived at by using ‘Moving Average Price’ method. Cost of finished goods includes Excise Duty. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and to make the sale. 14. Retirement and Other Benefits a) Retirement benefits in the form of Provident Fund are defined contribution scheme and the contributions are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective funds. b) The contribution to Gratuity Fund, which is a defined benefit plan, is expensed on the basis of funding claims of the fund manager, Life Insurance Corporation of India. At the end of the accounting year, actuarial valuation is done as per projected unit credit method by an independent Actuary and any shortfall in the fund balance is further provided for. c) Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation done as per projected unit credit method. Leave encashment payable /adjustable during the year is provided on the basis of last salary drawn by employees. Actuarial gains/losses are adjusted in Profit & Loss Account and are not deferred.

80 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT

15. Foreign Currency Transactions Initial Recognition Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount, the exchange rate between the reporting currency and the foreign currency at the date of the transaction. Conversion Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined. Exchange Differences Exchange differences arising on the settlement of monetary items or on reporting such monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise except those monetary items as mentioned below. Exchange differences, in respect of accounting periods commencing on or after 7th December, 2006, arising on reporting of long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, in so far as they relate to the acquisition of a depreciable capital asset, are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, and in other cases, are accumulated in a “Foreign Currency Monetary Item Translation Difference Account” in the financial statements and amortized over the balance period of such long-term asset/liability but not beyond accounting period ending on or before 31st March, 2011. Exchange differences arising on a monetary item that, in substance, form part of company’s net investment in a non-integral foreign operation is accumulated in a foreign currency translation reserve in the financial statements until the disposal of the net investment, at which time they are recognized as income or as expenses. Forward Exchange Contracts not intended for trading or speculation purposes The premium or discount arising at the inception of forward exchange contracts is amortized as an expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of Profit and Loss Account in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the year. 16. Income Taxes Tax expense comprises of current, deferred and fringe benefit tax. Current Income Tax and Fringe Benefit Tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961, enacted in India. Deferred Income Taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred Income Tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. If the Company has unabsorbed depreciation or carry forward tax losses, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realized against future taxable profits. At each Balance Sheet date the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized. The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes down the carrying amount of a deferred tax assets to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax assets can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available. 17. Earnings Per Share Basic Earnings per Share are calculated by dividing the net profit or loss for the period attributable to Equity Shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of Equity Shares outstanding during the period. Partly paid Equity Shares, if any are treated as a fraction of an Equity Share to the extent that they were entitled to participate in dividends relative to a fully paid Equity Share during the reporting period. The weighted average number of Equity Shares outstanding during the period is adjusted for events of bonus issue, bonus element in a rights issue to existing shareholders, share split, and reverse share split (consolidation of shares), if any. For the purpose of calculating diluted Earnings per Share, the net profit or loss for the period attributable to Equity Shareholders and the weighted average number of Shares outstanding during the period are adjusted for the effects of all dilutive potential Equity Shares. 18. Provisions A provision is recognized when the company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.

81 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT

19. Segment Reporting Policies (a) Identification of Segments: Primary Segment Business Segment: The Company’s operating businesses are organized and managed separately according to the nature of products, with each segment representing a strategic business unit that offers different products. The identified segments are Vaccines, Formulations and Research & Development Activities. Secondary Segment Geographical Segment: The analysis of geographical segment is based on the geographical location of the customers. The geographical segments considered for disclosure are as follows: • Revenue from domestic market includes sales to customers located within India. • Revenue from overseas market includes sales to customers located outside India. (b) Allocation of Common Costs: Common allocable costs are allocated to each segment on a rational basis based on nature of each such common cost. (c) Unallocated Items: Corporate income and expenses are considered as a part of unallocable income & expense, which are not identifiable to any business segment. 20. Derivative Instruments As per announcement of Institute of Chartered Accountants of India, accounting for derivative contracts, other than those covered under AS-11, are marked to market on a portfolio basis, and the net loss after considering the offsetting effect on the underlying hedge item is charged to the Profit & Loss Account. Net Gains are ignored. 21. Cash & Cash Equivalent Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term investments with an original maturity of three months or less. 22. Expenditure on new projects and substantial expansion Expenditure directly relating to construction activity is capitalized. Indirect expenditure incurred during construction period is capitalized as part of the indirect construction cost to the extent to which the expenditure is indirectly related to construction or is incidental thereto. Other indirect expenditure (including borrowing costs) incurred during the construction period which is not related to the construction activity nor is incidental thereto is charged to the Profit and Loss Account. Income earned during construction period is deducted from the total of the indirect expenditure. All direct capital expenditure on expansion are capitalized. As regards indirect expenditure on expansion, only that portion is capitalized which represents the marginal increase in such expenditure involved as a result of capital expansion. Both direct and indirect expenditure are capitalized only if they increase the value of the asset beyond its original standard of performance.

C. Notes to Accounts (All amounts are in Rs. unless otherwise stated) 1. Contingent Liabilities (to the extent not provided for) Particulars Current Year Previous Year Disputed demands/ show-cause notices under:- a) Sales Tax Cases - 13,809 b) Income Tax Cases 110,557 2,863,251 c) Customs Duty Cases 3,999,923 3,999,923 d) Central Excise Duty Cases 6,596,620 6,596,620 e) Service Tax 29,789,842 - Total 40,496,942 13,473,603 Labour cases (in view of large number of cases, it is impracticable to 2,803,586 4,143,107 disclose each of them) Other claims against the Company not acknowledged as debts - 64,000 Premium on Redemption of ‘US$ 50 Million Zero Coupon 470,992,269 243,706,599 Convertible Bonds due 2011’ (Refer note 3(ii) below)

Notes: a) Sales Tax liability of Rs.13,809 was on account of non-receipt of C forms from customers for inter-state sales. No provision was required for the same as the management was hopeful of receiving the forms before the due date of filing of Sales Tax Returns. b) In respect of Income Tax, in Assessment Year 2005-06 the department disallowed ‘Club Expenses’ of Rs.255,800 on the ground that these expenses were incurred in the personal names and not in the name of the company, hence not related to the business of the company in the order under section 143(3) of the Act. The company preferred appeal before the CIT (Appeals). The CIT (Appeals) restricted the disallowance to Rs.50,000 from Rs.2,55,800. In Assessment Year 2006-07 the department disallowed depreciation on LAN of Rs.60,557 on the ground that depreciation on the same is allowable @25% and not @60% in the order under section 143(3) of the Act. No provision is considered necessary in this regard since the Company believes it has a good case based on nature of the case and legal advice obtained by it.

82 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT

c) In respect of Customs Duty demand of Rs.3,999,923 towards Customs Duty on certain items imported as exempted by the Company, the Company has deposited the entire amount under protest. The matter is pending before the Honorable Supreme Court of India. No provision is considered necessary in this regard since the Company believes it has a good case based on nature of the case and legal advice obtained by it. d) In respect of Central Excise Duty demand of Rs.6,596,620 towards Excise Duty on common inputs used in manufacture of exempted and taxable products, the Company has deposited the entire amount under protest. The matter is pending before Central Excise and Customs Tribunal. No provision is considered necessary in this regard since the Company believes it has a good case based on nature of the case and legal advice obtained by it. e) In respect of service tax demand of Rs.29,789,842/- relating to foreign services rendered & delivered outside India & others services, which were brought in service tax net w.e.f. 18.04.06 and against which numerous decisions/ judgments have been pronounced by the competent courts/judicial authorities, the Company has sent suitable reply to the concerned authority. No provision is considered necessary in this regard since the Company believes it has a good case based on nature of the demand and legal advice obtained by it.

2. Estimated amount of contracts remaining to be executed on Capital Account, net of advances and not provided in the books are as follows:- S. No. Particulars Current Year Previous Year 1. Tangibles Assets 420,258,712 306,726,108 2. Intangible Assets 21,946,833 90,701,180 Total 442,205,545 397,427,288 3. Foreign Currency Convertible Bonds i) Conversion price of ‘US$ 50 Million Zero Coupon Convertible Bonds due 2011’ (FCCBs) has already been fixed at Rs.357.57 per Share. This Rate is used to determine dilutive Equity Shares against outstanding Bonds. ii) ‘US$ 50 Million Zero Coupon Convertible Bonds due 2011’ amounting to US$ 36,800,000 are pending for redemption as on 31st March 2009. Unless these Bonds have been previously converted, redeemed, repurchased and cancelled, the Company will redeem these Bonds at a price equal to 142.80% of the outstanding principal amount on the maturity date i.e. February 14, 2011 (including premium amounting to Rs.798,860,288). Since the redemption of bonds is contingent upon its non- conversion into Equity Shares and the probability of redemption cannot presently be ascertained, the Company has not provided for the proportionate premium on redemption for the period upto 31st March, 2009 amounting to Rs. 470,992,269 (Previous Year Rs.243,706,599). Such premium has been disclosed as contingent liability. These Bonds are considered a monetary liability and are redeemable only if there is no conversion before maturity date. iii) The Company has fully utilized the issue proceeds of ‘US$ 50 Million Zero Coupon Convertible Bonds due 2011’ in earlier years. 4. Details of pre-operative expenses (included in Capital Work in Progress) relating to Fixed Assets are as follows:

Particulars As at Additions during Capitalised during As at April 1, 2008 the year the year March 31, 2009 Legal & Professional 3,681,923 168,360 3,850,283 - (2,941,783) (2,059,204) (1,319,064) (3,681,923) Store & Spares consumed 22,419,030 50,376 22,469,406 - (2,325,569) (22,126,744) (2,033,283) (22,419,030) Power & Fuel 31,254,050 357,323 31,529,249 82,124 (4,219,189) (27,922,199) (887,338) (31,254,050) Rates & Taxes 9,857,569 - 9,572,561 285,008 (285,008) (9,572,561) - (9,857,569) Repair & Maintenance : - Plant & Machinery 4,452,852 - 4,452,852 - (120,255) (4,362,741) (30,144) (4,452,852) - Others 5,861,464 773,882 6,545,065 90,281 (157,267) (5,713,075) (8,878) (5,861,464) Salary & Wages 13,191,507 - 13,191,507 - (2,335,791) (10,906,537) (50,821) (13,191,507) Office Expenses 2,733,205 73,934 2,807,139 - - (2,733,205) - (2,733,205) Travel & Conveyance Expenses 3,736,531 764,537 3,731,531 769,537 (1,003,717) (2,732,814) - (3,736,531) Rent 25,800 - 25,800 - - (25,800) - (25,800) Miscellaneous Expenses 4,444,120 4,310,572 8,754,693 - (347,310) (4,311,298) (214,488) (4,444,120) Total 101,658,051 6,498,984 106,930,086 1,226,949 (13,735,889) (92,466,178) (4,544,016) (101,658,051) Note: Figures in brackets represent previous year figures (2007-08)

83 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT

5. a) Directors’ Remuneration: Particulars Current Year Previous Year Managing / Joint Managing Directors/ Whole-time Directors Salary and Allowances* 58,346,813 57,990,386 Commission on Profits to Chairman/Managing Director/Joint Managing Directors - 132,000,000 Perquisites (taxable value) 4,679,290 12,154,671 Contribution to Provident Fund 9,360 9,360 Total 63,035,463 202,154,417 Non Whole-time Directors Allowances 930,000 1,072,000 Sitting Fees 345,000 340,000 Total 1,275,000 1,412,000 Grand Total 64,310,463 203,566,417 * Provision for leave encashment and gratuity amounting to Rs.3,263,596 (Previous year Rs.3,741,971) and Rs.6,007,834 (Previous year Rs.18, 499,505) respectively, made during the year, is not included above. b) Computation of net profit in accordance with Section 198 read with section 309(5) of the Companies Act, 1956 (“the Act”) and maximum amount permissible for managerial remuneration. Particulars Current year Previous Year Profit/ (Loss) as per Profit & Loss Account (before taxes & extraordinary items) (923,740,873) 1,903,858,280 Add: Directors’ Remuneration 64,310,463 203,566,417 Loss/ (Profit) on sale of fixed assets (net) (7,171,144) (22,887,632) Provision/ (Write back) for Doubtful Debts and Advances 384,794 27,044,708 Loss/ (Profit) on Sale of Investment - (8,062,060) Net profit/ (Loss) in accordance with Section 198 of the Act (866,216,760) 2,103,519,713 Maximum amount permissible under Section 309 read with Section II of Part II of 24,865,757 210,351,971 Schedule XIII to the Act for payment to Managing/Joint Managing Directors and Whole-time Directors Maximum amount permissible under Section 309 of the Act for payment to 930,000* 21,035,197 Non Whole-time Directors Total Allowable to Managing/ Joint Managing/ Whole-time and 25,795,757 231,387,168 Non Whole-time Directors *This amount is as per the approvals of Ministry of Corporate Affairs , New Delhi vide their letters no. 12/301/2006-CL.VII dated 08.02.2007, F.No. 2/119/2005-CL.VII dated 16.01.2005 and 12/304/2006-CL.VII dated 08.02.2007 6. Disclosure of Micro & Small Enterprises Details of dues to Micro, Small and Medium Enterprises as per Micro Current Year Previous Year Small and Medium Enterprise Development Act, 2006 (MSMED Act) Principal Interest Principal Interest Principal amount and interest due thereon remaining unpaid to any supplier as at year end. 1,274,843 Nil 1,177,455 Nil Interest paid by the Company in terms of section 16 of the MSMED Act along with the amounts of the payment made to the supplier beyond the appointed day during accounting year 3,552,413 68,868 4,703,195 78,680 Interest due and payable for the period of delay in making payment (which have been paid but beyond the appointed day during the year) but without adding the interest specified under MSMED Act Nil Nil Nil Nil Interest accrued and remaining unpaid at the end of the year. Nil Nil Nil Nil Further interest remaining due and payable in succeeding years, until such date when the interest dues as above are actually paid to the small enterprises for the purpose of disallowance as a deductible expenditure under section 23 of the MSMED Act Nil Nil Nil Nil

84 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT

7. Deferred Tax Liabilities (Net): The break-up of deferred tax liability is as follows:- Current Year Previous Year Deferred Tax Liabilities: Differences in depreciation and amortization in block of fixed assets as 498,736,734 373,239,618 per Income Tax Act and books of accounts Deferred revenue expenditure 1,241,287 1,813,135 Capital expenditure on research & development 267,365,739 262,159,287 Forex Loss (revenue) deferred as per notification on AS-11 (Revised) 50,254,492 - Gross Deferred Tax Liabilities 817,598,252 637,212,040 Deferred Tax Assets: Effect of expenditure debited to Profit and Loss Account in the current year but 47,441,741 42,182,387 allowed for tax purposes in following years Loss as per Income Tax Act carried forward 364,509,363 - Unabsorbed Depreciation as per Income Tax Act carried forward 71,861,483 - Gross Deferred Tax Assets 483,812,587 42,182,387 Net Deferred Tax Liability 333,785,665 595,029,653 Note: The Company has recorded a loss before tax of Rs.923,740,873 in year ended March 2009 which is mainly on account of foreign currency loss of Rs.1,702,604,000 on open derivative contracts. The Company is otherwise earning good operating margin and based on orders on hand, it is virtually certain that it will earn sufficient margins to generate income to reverse book losses and will generate taxable profits to set-off the unabsorbed depreciation and carry-forward losses and other timing differences resulting into deferred tax assets. Hence, the Company has recognised deferred tax asset as at March 31, 2009 on carry-forward losses component also. 8. i) Amounts due from/ payable to group companies (including companies under the same management as defined under section 370 (1B) of the Companies Act, 1956), are as follows– Particulars Current Year Previous Year a) Loans and Advances to wholly owned subsidiaries - Best On Health Ltd. Balance recoverable - - Maximum amount due at any time during the year - 1,791,000,000 - Panacea Educational Institute Pvt. Ltd. Balance recoverable - - Maximum amount due at any time during the year - 320,000,000 - Panacea Hospitality Services Pvt. Ltd. Balance recoverable - - Maximum amount due at any time during the year - 320,000,000 - Sunanda Steel Company Ltd. Balance recoverable - - Maximum amount due at any time during the year - 140,000,000 - Radicura & Co. Ltd. Balance recoverable - - Maximum amount due at any time during the year - 620,000,000 - Rees Investments Ltd. Balance Recoverable 710,717,916 Maximum amount due at any time during the year 716,413,472 - Accrued Interest on loan but not due 28,887,763 - - Panacea Biotec, Inc. Balance Recoverable 93,154 - Maximum amount due at any time during the year 93,154 - b) Dues from associates - PanEra Biotec Pvt. Ltd. (Previously known Panheber Biotec Pvt. Ltd. ) Balance Recoverable (including Rs.41,137,053 on account of sale of raw material grouped as sundry debtors under Schedule VII ) 195,087,247 135,532,654 Maximum amount due at any time during the year 195,087,247 135,532,654 c) Amount payable to wholly owned subsidiaries - Best On Health Ltd. Balance Payable - 3,079,105 Maximum amount due at any time during the year 3,079,105 3,079,105 - Radicura & Co. Ltd. Balance Payable - - Maximum amount due at any time during the year - 5,214,925 - Panacea Biotec GmbH Balance Payable 202,620 - Maximum amount due at any time during the year 202,620 - ii) Loans and advances include Rs.116,109,320 (Previous Year Rs.40,312,505) due from Joint Venture Company, in which Company’s director was inter alia director till 1st December, 2008.

85 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT

iii) Debtors include Rs.78,154,432 (Previous Year Rs.55,117,691) receivable from Joint Venture Company in which company’s directors are, inter-alia, directors. iv) Details of Loans and advances to subsidiaries, associates and parties in which directors are interested (as required by clause 32 of listing agreement): Particulars Current Year Previous Year a) Loans and Advances to wholly owned subsidiaries (Refer note no. 8 (i) above) - - b) Loan to Joint Venture Company - Cambridge Biostability Ltd. 108,833,850 39,778,050 Maximum amount due at any time during the year 133,075,781 41,784,182 Accrued interest receivable on loan 7,275,470 534,455 c) Dues from associates (Refer note no. 8 (i) above) - - 9. Related Party Disclosures A. Names of Related Parties Names of related parties where control exists irrespective of whether transactions have occurred or not (a) Joint Ventures Chiron Panacea Vaccines Private Limited; Cambridge Biostability Limited (b) Subsidiaries BestOnHealth Ltd. (BOH) (Wholly-owned subsidiary (WOS)); Radicura & Co. Ltd. (Indirect WOS through BOH); Panacea Hospitality Services Pvt. Ltd. (Indirect WOS through BOH); Panacea Educational Institute Pvt. Ltd. (Indirect WOS through BOH); Sunanda Steel Company Ltd. (Indirect WOS through BOH); Rees Investments Ltd. (Rees) (Guernsey): (WOS w.e.f. 16th September 2008); Kelisia Holdings Ltd. (Cyprus): (Indirect WOS w.e.f 18th September 2008 through Rees); Kelisia Investment Holding AG (KIH) (Switzerland):(Indirect WOS w.e.f. 22nd October 2008 through Kelisia Holdings Ltd); Panacea Biotec (International) SA (Switzerland) (Indirect WOS w.e.f. 19th Feb. 2009 through KIH); Panacea Biotec FZE, (UAE) ( WOS w.e.f. 16th March 2008); Panacea Biotec GmbH (Germany) ( WOS w.e.f. 11th June 2008); Panacea Biotec, Inc. (USA) (WOS w.e.f. 15th July 2008); Umkal Medical Institute Pvt. Ltd. (Subsidiary w.e.f. 30th June 2008); (c) Associates PanEra Biotec Private Limited; Lakshmi & The Manager (upto 30th June 2008); Lakshmi & Manager Holdings Ltd. (LMH) (w.e.f. 1st July 2008); Best General Insurance Co.Ltd (Indirect associate- subsidiary of LMH) (d) Key Management Mr. Soshil Kumar Jain - Chairman and Whole-time Director Personnel Mr. Ravinder Jain - Managing Director Dr. Rajesh Jain - Joint Managing Director Mr. Sandeep Jain - Joint Managing Director Mr. Sumit Jain - Whole-time Director

(e) List of Persons having controlling interest together with their relatives*: Key Father Mother Wife Brother Sister Son Daughter Management Personnel Soshil Kumar Jain - - Nirmala Jain - - Ravinder Jain, - Rajesh Jain, Sandeep Jain - Ravinder Jain Soshil Kumar Jain Nirmala Jain Sunanda Jain Rajesh Jain, - Sumit Jain, Radhika Jain Sandeep Jain Nipun Jain Rajesh Jain Soshil Kumar Jain Nirmala Jain Meena Jain Ravinder Jain, - Ankesh Jain, - Sandeep Jain Harshet Jain

Sandeep Jain Soshil Kumar Jain Nirmala Jain Pamilla Jain Ravinder Jain, - Priyanka Jain Rajesh Jain Sumit Jain Ravinder Jain Sunanda Jain Nipun Jain Radhika Jain - - *Relatives holding Equity shares in the Company have been disclosed (f) Relatives of Key Management personnel having transactions with the Company: Mr. Ashwani Jain, Son-in-law of Mr. Soshil Kumar Jain Mr. Shagun Jain, Son-in-law of Mr. Ravinder Jain Mrs. Radhika Jain, Daughter of Mr. Ravinder Jain Mrs. Shilpy Jain, Wife of Mr. Sumit Jain (g) Enterprises over which Person(s) having control or significant influence over the Company / Key management personnel(s), along with their relatives, are able to exercise significant influence: i) Neophar Alipro Ltd.; ii) All India S. L. Jain Charitable Foundation; iii) First Lucre Partnership Co.*; iv) Second Lucre Partnership Co.*; v) Radhika Associates; vi) Sumit Nipun & Co.; vii) Rattan Sons; viii) Tahir & Co.; ix) Best On Health Foods Ltd. ; x) Soshil Kumar Jain (HUF)*; xi) Ravinder Jain (HUF)*; xii) Rajesh Jain (HUF)*; xiii) Sandeep Jain (HUF)*. *These enterprises are also holding Shares in the Company.

86 Panacea Biotec • Annual Report 2008-09 - - (-) (-) (-) (-) (-) 200 12,089 12,089 45,000 202,620 300,000 202,620 (534,455) (500,000) (690,000) 5,385,040 (208,705) 36,163,233 16,868,753 (3,079,105) 41,257,126 43,641,600 35,893,714 67,879,348 17,772,031 (3,093,565) 67,236,019 33,049,175 300,000,000 819,551,766 135,532,654 (1,138,945) 273,334,833 Total Total (39,778,050) 324,457,776 432,500,000 300,000,000 747,318,029 (20,128,500) (43,641,600) 284,415,023 (26,081,308) 126,185,379 (12,274,200) (52,845,255) (41,244,079) (432,500,000) (135,532,654) (190,650,345) 2,333,566,594 (353,490,000) (612,500,000) (206,996,554) (218,345,905) (2,049,108,818) (1,612,000,000) (1,831,700,000) (1,652,325,291)

-

-

-

-

------0 - - -

(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 300,000 (500,000) 35,893,714 300,000,000 432,500,000 300,000,000 (25,935,713) (432,500,000) (348,390,000) (612,500,000) Enterprises over Enterprises which Person(s) which Person(s) having control or control having Key Management Management Key are able to exercise exercise able to are over the Company/ the Company/ over Personnel(s), along Personnel(s), with their relatives, with their relatives,

significant influence influence significant influence significant

-

-

-

-

-

------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-)

(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (Amount in Rupees) (Amount

(590,000)

4,843,885 24,137,900 (4,842,137) of Key (24,137,900) Relatives Personnel Management Management

-

-

-

-

-

------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-)

(-) (-)

(100,000)

19,503,700 63,035,463 Key (19,503,700) (202,154,417) Personnel Management

-

-

-

-

-

------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Manager 41,257,126 Lakshmi & Lakshmi 41,257,126 Holdings Ltd. Holdings Ltd.

-

-

-

-

-

------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-)

and The and Lakshmi Manager

41,257,126 (40,000,000) (40,000,000) Associates

-

-

-

------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) PanEra 4,197,670 21.11.07) Ltd. (w.e.f Ltd. Biotec Pvt. Pvt. Biotec (4,197,670) 17,772,031 66,962,822 25,157,135 41,137,053 135,532,654 (1,082,945) 195,087,247 126,185,379 (19,289,725) (25,648,721) (135,532,654) (135,532,654)

-

-

-

-

------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Ltd. (534,455) 7,275,470 7,892,040 16,868,753 Cambridge 79,790,000 Biostability (1,993,346) 108,833,850 168,068,998 (39,778,050) (40,325,291) (168,068,998)

-

-

-

-

------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-)

Chiron Chiron

Pvt. Ltd. Pvt. Panacea Vaccines

78,154,432 22,959,100 (55,117,691) Joint (22,959,100) 243,277,970 Ventures (218,345,905)

-

-

-

-

-

------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (56,000) 20.11.07 Ltd. Upto Ltd. Panheber Biotec Pvt. Pvt. Biotec (7,078,680) (33,555,530) (15,595,358)

-

-

-

-

-

------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) FZE Biotec Panacea 5,474,520 5,474,520

-

-

-

-

-

------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Umkal Pvt.Ltd. Medical Institute 76,143,604 76,143,604

-

-

-

-

------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Biotec GmbH 202,620 202,620 Panacea 1,582,250 1,582,250

-

-

-

-

------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) INC 93,154 Biotec 79,322 Panacea

-

-

-

-

- - - - 0 ------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 476 476 Ltd. Rees 28,887,763 Investment 710,717,916 667,448,507

-

-

-

-

-

------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Subsidiaries Limited Company (500,000) (352,000,000) (352,000,000) Sunanda Steel

-

-

-

-

-

------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Pvt. Ltd. Pvt. Services Panacea (100,000) Hospitality (320,000,000) (320,000,000)

-

-

-

-

-

------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Pvt. Ltd. Pvt. Panacea Panacea Institute Institute (100,000) Educational Educational (320,000,000) (320,000,000)

-

-

-

-

-

------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 45,000 Radicura & Co. Ltd. & Co. (145,595) (5,100,000) (620,000,000) (620,000,000)

-

-

-

-

-

------(-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 200 200 12,089 12,089 Best On 273,197 5,385,040 (208,705) (3,079,105) Health Ltd. (1,100,219) (5,195,520) 199,999,800 (20,128,500) 2,013,882,850 (1,813,883,050) (1,791,000,000)

Particulars

Figures in brackets represent previous year figures figures year previous in brackets represent Figures 2 of Schedule III. no. Note refer Promoters-Directors by given In respect of personal guarantee into Share Capital Share into

Outstanding payable Outstanding Fixed deposits Outstanding Fixed Outstanding Loan Provision for bad and doubtful advances Provision Outstanding receivable Outstanding receivable Interest accrued but not receivable accrued Interest Interest accrued and due on Loan accrued Interest Year end balances Year Investments Insurance claim paid Insurance Insurance claim received Insurance Donation Interest received Interest Repayment of Loan/Advance given of Loan/Advance Repayment Sale of Investment/Conversion of Loan Sale of Investment/Conversion Purchase of Share Purchase Investments made Investments Dividend Shares paid - Equity Interest paid on Deposits / loans Interest Loans/Fixed Deposits repaid Loans/Fixed Loans/Fixed Deposits received Loans/Fixed Loan / Advance given / Advance Loan Remuneration Rent received Rent Rent paid Rent Reimbursement on Account of Expenses on Account Reimbursement Recovery of dues on Account of Expenses Recovery of dues on Account Processing Charges paid Charges Processing Purchase of Fixed Assets of Fixed Purchase Sale During the Year During the materials of raw Purchase

B.

A. B. Detail of transactionsparties with the Related B. Notes: 1. 2.

87 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT

3. Material related party transactions (More than 10% of aggregate) with individual parties are as follows: Unsecured Loans/ Fixed Interest Managerial Remuneration Equity Dividend Deposit received/(repaid) Current Year Previous Year Current Year Previous Year Current Year Previous Year Current Year Previous Year Key Management personnel Mr. Soshil Kumar Jain - - - - 15,155,738 48,153,429 5,000,000 5,000,000 Mr. Ravinder Jain - - - - 19,321,956 59,771,725 4,646,200 4,646,200 Dr. Rajesh Jain - - - - 12,648,046 45,645,737 4,706,900 4,706,900 Mr. Sandeep Jain - - - - 12,648,046 45,645,737 4,792,100 4,792,100 Enterprises over which Person(s) having control or significant influence over the Company / Key management personnel(s), along with their relatives, are able to exercise significant influence First Lucre Partnership Co. 300,000,000 612,500,000 35,893,714 25,405,853 - - - - (432,500,000) (330,000,000) ------All India S.L. Jain Charitable Foundation - - - 415,993 - - - - Year end Balances First Lucre Partnership Co. 300,000,000 432,500,000 ------10. Derivative Instruments and Hedged/Unhedged Foreign Currency Exposure i) Forward contract outstanding as at Balance Sheet date Sell - Nil; Buy - Nil ii) Particulars of Hedged Export Receivables at applicable exchange rates in respect of Options Contracts outstanding as at Balance Sheet date Currency Exchange Amount in Foreign Amount in Amount in Amount in Purpose rates Currency Indian Rupees Foreign Currency Indian Rupees Current Year Current Year Previous Year Previous Year USD 41.00 - - 28,000,000 1,148,000,000 To hedge USD 40.55 - - 30,000,000 1,216,500,000 Export USD 40.00 58,000,000 2,320,000,000 84,000,000 3,360,000,000 Receivables USD 39.00 48,000,000 1,872,000,000 48,000,000 1,872,000,000 USD 39.60 36,000,000 1,425,600,000 36,000,000 1,425,600,000 142,000,000 5,617,600,000 226,000,000 9,022,100,000 Accordingly, exchange fluctuation loss on marking them to market as of year end amounting to Rs.1,702,604,000 Previous Year Rs.40,500,000) has been accounted for and included in “Provision for Loss on Open Derivative Contracts” under Schedule XIII - Operating and Other Expenses. iii) Particulars of Hedged Foreign Currency Exposure as at Balance Sheet date Particulars Amount as at Currency Closing Amount as at Amount as at Currency Closing Amount as at 31st March’09 Exchange 31st Mar’09 31st March’08 Exchange 31st Mar’08 (in Foreign Currency) Rate* (INR) (in Foreign Currency) Rate* (INR) Export Debtors 15,038,066 USD 50.71 762,580,345 28,387,626 USD 40.12 1,138,769,629 iv) Particulars of Unhedged Foreign Currency Exposure as at Balance Sheet date Particulars Amount as at Currency Closing Amount as at Amount as at Currency Closing Amount as at 31st March’09 Exchange 31st Mar’09 31st March’08 Exchange 31st Mar’08 (in Foreign Currency) Rate* (INR) (in Foreign Currency) Rate* (INR) Import Creditors 5,542,275 USD 50.72 281,104,206 5,332,130 USD 40.11 213,845,059 12,841,668 Euro 67.54 867,327,519 887,098 Euro 63.35 56,197,580 33,538 CHF 44.56 1,494,481 35,692 CHF 39.89 1,423,840 12,289 GBP 72.60 892,159 17,355 GBP 79.52 1,380,106 1,217,220 JPY / 100 51.55 627,521 2,576,200 JPY / 100 39.99 1,030,086 16,820 SEK 6.13 103,140 16,820 SEK 6.74 113,399 1,010 CAD 40.47 40,856 - - - - Export Debtors 2,990,037 Euro 67.50 201,827,823 2,589,747 Euro 63.38 164,142,548 Foreign Currency Loans 65,097,252 USD 50.72 3,301,732,614 45,221,166 USD 40.11 1,813,599,550 Balance with Banks 9,652,566 USD 50.71 489,481,613 874,867 USD 40.12 35,095,290 105761 Euro 67.50 7,138,856 1,404,665 Euro 63.38 89,030,070 FCCBs 36,800,000 USD 50.72 1,866,496,000 36,800,000 USD 40.11 1,475,864,000 Investment in Subsidiary 10 USD 47.62 476 - - - - 137,000 USD 39.96 5,474,520 - - - - 25,000 Euro 63.29 1,582,250 - - - - Investment in JV 1,935,615 GBP 86.83 168,068,998 1,935,615 GBP 86.83 168,068,998 Loan to JV 1,500,000 GBP 72.56 108,833,850 500,000 GBP 79.56 39,778,050 Loan to Subsidiaries 14,015,340 USD 50.71 710,717,916 - - - - *Closing Exchange rate has been rounded off to two decimal places.

88 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT

11. Segmental Information A. Information about Primary Segments Particulars Vaccines Formulations Research & Development Total 2008 – 09 2007 – 08 2008 – 09 2007 – 08 2008 – 09 2007 – 08 2008 – 09 2007 – 08 Revenue Segment Revenue 5,470,170,035 6,324,557,852 2,262,302,399 1,976,017,496 1,699,562 3,867,030 7,734,171,996 8,304,442,378 Other Income 5,952,196 40,218,416 24,950,226 32,517,814 - - 30,902,422 72,736,230 Total 5,476,122,231 6,364,776,268 2,287,252,625 2,008,535,310 1,699,562 3,867,030 7,765,074,418 8,377,178,608 Segment Result 2,661,847,455 2,861,717,201 466,882,428 220,394,689 (668,244,483) (537,989,091) 2,460,485,400 2,544,122,799 Unallocated Corporate Expenses 3,291,930,523 792,637,757 Operating Profit / (Loss) (831,445,123) 1,751,485,042 Interest & Finance charges (321,070,800) (146,632,224) Other Income 228,775,049 299,005,462 Income Taxes 233,243,988 (572,160,506) Net Profit / (Loss) (690,496,886) 1,331,697,774 Other Information Segment Assets 8,164,022,933 4,555,500,911 1,757,286,755 1,914,995,988 2,143,579,827 1,944,924,347 12,064,889,515 8,415,421,246 Unallocated Corporate Assets 4,808,922,747 4,427,805,432 Total Assets 8,164,022,933 4,555,500,911 1,757,286,755 1,914,995,988 2,143,579,827 1,944,924,347 1,6873,812,262 12,843,226,678 Segment Liabilities 812,019,662 469,524,505 391,402,477 257,279,313 65,696,536 88,134,533 1,269,118,675 814,938,351 Unallocated Corporate Liabilities 9,453,200,641 5,056,241,670 Total Liabilities 812,019,662 469,524,505 391,402,477 257,279,313 65,696,536 88,134,533 10,722,319,316 5,871,180,021 Capital Expenditure – Additions 1,948,866,420 372,154,760 123,752,797 82,121,704 578,593,601 175,826,431 Depreciation 350,826,118 111,412,186 125,068,119 129,116,679 169,025,407 131,348,176

B. Information about Secondary Segments a) Revenue as per Geographical Markets Segment Domestic* Overseas Current Year Previous Year Current Year Previous Year Vaccines 3,991,735,243 6,015,579,612 1,478,434,793 308,978,240 Formulations 1,798,741,628 1,604,484,560 463,560,771 371,532,936 R & D - - 1,699,562 3,867,030 Total 5,790,476,871 7,620,064,172 1,943,695,126 684,378,206 * Domestic revenue includes revenue from deemed exports of Rs.3,708,466,456 (Previous Year Rs.5,797,333,245) b) Sundry debtors as per Geographical Markets Segment Domestic Overseas Current Year Previous Year Current Year Previous Year Vaccines 336,012,170 1,190,336,164 536,329,974 - Formulations 140,405,116 112,388,470 226,054,249 179,883,789 Total 476,417,286 1,302,724,634 762,384,223 179,883,789 c) The Company has common fixed assets for producing goods for Domestic Market and Overseas Markets. Hence, separate figures for segment assets / additions to segment assets cannot be furnished. 12. Leases i. For assets given under Operating Lease agreements: a) The Company has leased out the assets situated at Lalru, Punjab on operating lease to its Associate, PanEra Biotec Private Limited. Particulars Gross Block Accumulated Depreciation Depreciation charged to P&L Account Current Year Previous Year Current Year Previous Year Current Year Previous Year Building 89,955,066 18,352,562 33,159,226 6,605,854 5,327,263 1,305,186 Furniture and Fixture 10,659,476 6,750,149 5,639,670 3,861,199 1,151,292 638,461 Office Equipment 1,904,239 512,602 769,438 244,331 270,436 43,346 Plant & Machinery 663,486,845 316,043,799 247,986,666 146,532,544 66,307,911 27,388,797 Computer Equipment 5,950,080 671,976 1,549,742 557,752 688,492 76,149 Total 771,955,706 342,331,088 289,104,742 157,801,680 73,745,394 29,451,939

89 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT

The total of Minimum Future Lease Payments under non-cancelable operating lease for various periods for assets stated above is as follows: As at As at March 31, 2009 * March 31, 2008 a) Receivable within 1 year 67,600,000 9,600,000 b) Later than 1 year but not later than 5 years 67,600,000 - c) Later than 5 years - - * The Lease term for the assets given on lease vide Agreement for providing Manufacturing Facility, Utilities and Services of Employees with PanEra Biotec Pvt. Ltd. is valid till 31.03.2011. As per the said Agreement, during the period of usage, if any, Facility is used for manufacture of the Company’s Vaccines other than those mentioned therein or the facility remains idle due to insufficiency of orders from the Company, no lease rental shall be payable by PanEra Biotec Pvt. Ltd. during the relevant period. b) The Company has also given an office space in its building situated at B-1 Extn./A-27, Mohan Co-operative Industrial Estate, New Delhi on operating lease to PanEra Biotec Pvt. Ltd. Total of future minimum lease payments under operating lease mentioned above: As at As at March 31, 2009 March 31, 2008 a) Receivable within 1 year 14,000 21,000 b) Later than 1 year but not later than 5 years - - c) Later than 5 years - - ii. For assets taken on Lease a) The Company has taken various residential, office and godown premises under operating lease agreements. These are generally not non-cancelable and are renewable by mutual consent on mutually agreed terms. There is no sublease payments expected to be received under non-cancellable subleases at the balance sheet date and no restrictions is imposed by lease arrangements. b) Lease payments for the year are Rs.59,649,090 (Previous Year Rs.59,319,447). c) Total of future minimum lease payments under Non Cancelable operating lease: As at As at March 31, 2009 March 31, 2008 a) Payable within 1 year 4,796,232 4,578,616 b) Later than 1 year but not later than 5 years 402,737 5,198,969 c) Later than 5 years - - 13. a) The Company’s interest in Joint Venture Companies is as follows: S. No. Name of the Company Nature of Country of (%) Holding as on relationship Incorporation March 31, 2009 1. Chiron Panacea Vaccines Private Limited Joint Venture India 50 2. Cambridge Biostability Limited* Joint Venture UK 10 * Cambridge Biostability Limited, UK has not been considered while giving the disclosures relating to joint ventures in the current year as the investee company is in the process of filing for liquidation. b) Aggregate interest of the Company in Assets, Liabilities, Revenue & Expenses in the jointly controlled entities are as follows: Particulars Current Year Previous Year Audited Audited Fixed Assets 3,209,287 16,434,549 Current Assets 143,485,483 122,905,261 Secured Loans 163,121 406,220 Current Liabilities 78,995,574 53,831,022 Revenue 274,923,479 254,384,438 Expenses 241,498,029 244,192,539 c) Following are reimbursement of expenses from PanEra Biotec Pvt. Ltd. (formerly known as Panheber Biotec Pvt. Ltd.) which have been netted off with related expense head: Particulars Current Year* Previous Year Salaries, Wages & Bonus - 21,834,225 Power & Fuel etc. - 20,392,622 Repair & Maintenance – Plant & Machinery - 1,635,498 Repair & Maintenance – Others - 8,982,910 Total - 52,845,255 * Current year figures have not been furnished since PanEra Biotec Pvt. Ltd. ceased to be joint venture company w.e.f. 20th Nov. 2007.

90 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT

d) The purchase commitments for fixed assets incidental to the ordinary course of business of companies with which the Company has a joint venture, are as follows : Name of Company Current Year Previous Year Chiron Panacea Vaccines Pvt. Ltd. (50% interest) - - Cambridge Biostability Ltd. (10% interest) - - Total - - e) Subsequent Event: The Company’s Joint Venture Cambridge Biostability Limited (CBL), having regard to its financial position, has initiated steps to place it into creditors’ voluntary liquidation, subsequent to the Balance Sheet date. Due to the financial position of CBL, the Company considers its investments in CBL as well as loan given to it, doubtful of recovery. Accordingly, the following have been provided for in the books of accounts of current year. Particulars Amount Investment made 168,068,998 Loan given 108,833,850 Interest accrued on above Loan 7,275,470 Total 284,178,318 14. Auditors` Remuneration includes the following Particulars Current Year Previous Year Statutory Auditors - Statutory Audit 3,309,000 3,400,060 - Quarterly Limited Reviews 1,685,400 1,348,320 - Certificates 134,833 113,217 - Out of Pocket Expenses 161,720 69,317 5,290,953 4,930,914 Tax Auditors* 140,450 140,450 Cost Auditors* 44,944 33,708 * included in Legal & Professional charges given in Schedule XIII. 15. Additional information as required under Para 3 & 4 of Part II of Schedule VI of the Companies Act, 1956. A. Particulars of Licensed Capacity, Installed Capacity & Production. a) Licensed Capacity per annum Recombinant Bulk Vaccine – 180 lac doses Others – Not Applicable b) Installed Capacity per annum* Products Units of Measurement Current year Previous Year Tablets Nos./ Million 1,684.0 1,684.0 Capsules Nos. / Million 370.0 370.0 Syrups/Liquids Bottles / Million 15.8 15.8 Gels Tubes / Million 21.2 21.2 Vaccines (Finished Doses) Doses / Million 861.5 820.0 Pre-filled Syringes Doses/ Million 17.0 - Recombinant Bulk Vaccines** Doses / Million 12.5 12.5 Tetanus Bulk Vaccines*** Doses/ Million 75.0 75.0 Bacterial Bulk Vaccines*** Doses/ Million 68.75 50.0 * As Certified by the management ** This facility has been leased to Associate Company, PanEra Biotec Pvt. Ltd. and is capable of manufacturing various bulk vaccines including Hep B, Hib TT and Anthrax. *** These facilities have been leased to Associate Company, PanEra Biotec Pvt. Ltd. Bacterial Bulk Vaccines Plant is capable of manufacturing various bulk vaccine including Diphtheria, Whole Cell Pertussis (wP), Acellular Pertussis(aP) and its capacity will come down by 5 million doses to 63.75 million doses in case of production of Acellular Pertussis (aP). c) Actual Production during the year. Products Units of Measurement Current Year * Previous Year* Tablets Nos. 504,389,489 ** 425,555,706 ** Capsules Nos. 64,354,858 55,436,411 Syrups / Liquids Ml 283,920,530 246,056,820 Gels Gms 23,474,760 65,585,870 Vaccines Vials 50,553,815 69,507,387 Pre Fill Syringe PFS 1,679,769 - Injection Nos. 456,656 588,105 Other Products Gms. 17,638,965 - * Actual Production includes production at Loan Licensee locations meant for sale by the Company. ** Actual Production includes 155,993,730 (Previous Year 8,104,220) Tablets manufactured for others under Loan License basis.

91 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT

B. Particulars of Stocks & Sales Units Opening Stock Closing Stock Sample / Destroyed / Sales Expired / Shortages Current Previous Current Previous Current Previous Current Previous Year Year Year Year Year Year Year Year a) Own Manufacturing Tablets Nos. 78,301,586 116,699,523 59,005,305 78,301,586 4,550,993 9,204,439 519,134,777 454,749,204 Rs. 63,382,524 74,352,761 46,940,103 63,382,524 - - 1,210,177,962 1,051,472,608 Capsules Nos. 14,547,473 11,841,247 9,873,246 14,547,473 2,091,314 4,122,595 66,937,771 48,607,590 Rs. 63,436,317 96,557,062 40,651,005 63,436,317 - - 557,856,427 453,957,048 Syrups/ Liquids Ml 50,579,060 90,520,100 66,737,470 50,579,060 2,183,150 13,309,190 265,578,970 272,688,670 Rs. 15,939,607 16,910,186 17,837,248 15,939,607 - - 110,582,967 125,338,987 Gels Gms 16,354,230 28,407,220 8,458,210 16,354,230 1,132,500 1,144,810 30,238,280 76,494,050 Rs. 7,689,660 13,877,073 3,873,051 7,689,660 - - 35,179,463 76,635,951 Vaccines Vials 9,372,994 8,006,588 14,913,671 9,372,994 295,038 576,035 44,718,100 67,564,946 Rs. 477,630,816 469,048,675 733,972,132 477,630,816 - - 5,277,342,364 6,324,557,847 Pre Fill Syringe PFS - - 723,796 - 46,492 - 909,481 - Rs. - - 92,961,982 - - - 142,003,221 - Injections Vials 122,833 278,932 66,104 122,833 45,449 182,731 467,936 561,473 Rs. 309,429 715,923 23,805 309,429 - - 3,278,010 6,050,327 Husk Gms 9 13,249 - 9 85 13,736 (76) (496) Rs. 203 402,623 - 203 - - (2,097) (15,465) Kit Nos. - 5,663 - - - 5903 - (240) Rs. - 1,400,800 - - - - - (56,165) Granules Nos. - - 4,244,340 - 102,225 - 13,292,400 - Rs. - - 4,872,951 - - - 16,494,980 - Total Rs. 628,388,556 673,265,103 941,132,277 628,388,556 - - 7,352,913,297 8,037,941,138 b) Trading Activities Tablets Nos. 12,708,601 14,955,314 14,665,408 12,708,601 4,149,231 5,928,120 49,202,158 42,365,574 Rs. 27,372,156 27,768,077 23,835,584 27,372,158 - - 240,420,372 208,427,041 Capsules Nos. 3,449,624 3,770,084 2,454,871 3,449,624 1,404,069 1,085,246 6,654,519 7,600,364 Rs. 12,941,050 9,383,668 6,923,483 12,941,050 - - 35,693,185 43,880,361 Syrups / Liquids Ml 23,796,760 12,302,790 11,143,960 23,796,760 4,201,200 9,460,820 39,995,770 35,583,300 Rs. 3,171,290 1,985,763 1,559,658 3,171,290 - - 12,547,652 11,218,568 Gels Gms 89,460 - 1,830 89,460 5,700 5,520 (80,880) 1,329,420 Rs. 48,430 - 876 48,430 - - (102,920) 1,681,810 Injections Vials 15,422 10,272 58,533 15,422 2,819 1,129 105,112 84,006 Rs. 12,210,592 1,075,732 11,716,770 12,210,592 - - 47,473,275 33,496,655 Biscuits Nos. 3,659 1,431 - 3,659 7,867 60,066 (4,208) 30,375 Rs. 76,730 28,645 - 76,730 - - (162,354) 1,314,545 Granules Nos. - - 1,330,725 - - - 505,005 - Rs. - - 689,458 - - - 1,640,666 - Total Rs. 55,820,248 40,241,885 44,725,829 55,820,250 - - 337,509,876 300,018,980 c) Others* Nos. ------Rs. ------39,994,426 3,71,804 Total Rs. ------39,994,426 3,71,804 Grand Total Rs. 684,208,804 713,506,988 985,858,106 684,208,806 - - 7,730,417,599 8,338,331,922 *Sales of Raw Material C. Purchase of Finished goods Products Units Current Year Previous Year Tablets Nos. 55,308,196 46,046,980 Rs. 100,757,694 104,564,041 Capsules Nos. 7,063,835 8,365,150 Rs. 19,211,568 28,797,661 Syrups/Liquids Ml. 31,544,170 56,538,090 Rs. 4,920,952 8,599,667 Gel Gms. (162,810) 1,424,400 Rs. (75,949) 663,533 Injections Vials 151,042 90,285 Rs. 29,913,166 29,088,706 Biscuits Nos. - 92,668 Rs. - 1,255,728 Others Gms. 1,835,730 - Rs. 1,143,558 - Total Rs. 155,870,989 172,969,336

92 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT

D. Consumption of Raw materials & Packing materials Products Current Year Previous Year Oty. (In doses) Value Oty. (In doses) Value Polio Virus 879,425,400 1,824,633,064 1,355,217,338 2,729,473,985 Others* 1,146,965,663 767,136,323 Total 2,971,598,727 3,496,610,308 * Items comprised in others are individually less than 10% of total value E. Value of Imports on CIF basis (on accrual basis) Particulars Current Year Previous Year Raw Materials & Packing Materials 4,571,336,927 2,742,992,185 Capital Goods 457,267,055 193,149,620 F. Expenditure in Foreign Currency (on accrual basis) Particulars Current Year Previous Year Know-how Fee 12,847,257 8,619,193 Royalty 38,025 272,321 Interest 206,189,558 59,439,075 Professional & Consultation Fees 54,682,275 29,761,306 Other Expenses - Patents, Trade Marks & Product Registration 26,319,097 23,392,134 - Advertising and Sales Promotion 5,258,076 33,165,756 - Printing & Stationery 110,588 3,337,007 - Commission on Sales 65,806,641 44,655,446 - Market Research 30,286,500 - - Others 39,604,033 27,471,615 G. Earnings in Foreign Exchange (on accrual basis) Particulars Current Year Previous Year F.O.B. value of Exports (including deemed export of Rs.3,708,466,456 5,588,991,868 6,414,111,800 (Previous Year Rs.5,797,333,245) R & D Services (Know-how) Income 1,699,562 3,867,030 Interest on Exchange Earners Foreign Currency Deposits - 637,893 Interest received on loan from Joint Venture Company 16,868,753 1,993,346 Interest accrued but not dueon loan from subsidiary company 28,887,763 - H. Value of Imported/Indigenous Raw Materials & Packing Materials consumed Particulars Current Year Previous Year Amount in Rs. % age Amount in Rs. % age Indigenous 605,547,690 20.38 493,086,486 14.10 Imported 2,366,051,037 79.62 3,003,523,822 85.90 Total 2,971,598,727 100.00 3,496,610,308 100.00

I. Value of Imported/Indigenous Stores & Spares consumed Particulars Current Year Previous Year Amount in Rs. % age Amount in Rs. % age Indigenous 163,479,798 85.13 117,958,440 86.00 Imported 28,564,016 14.87 19,447,028 14.00 Total 192,043,814 100.00 137,405,468 100.00

J. Remittance in foreign currency on account of dividend Particulars Current Year Previous Year Dividend on Equity Shares * 1,045,000 1,045,000 Number of Non-resident Equity Shareholders 1 1 No. of Equity Shares held by them 1,045,000 1,045,000 * Dividend of Rs.1,045,000 pertains to 2007-08 (Previous year Rs.1,045,000 pertains to 2006-07).

93 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT

16. The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service subject to maximum of Rs.350,000 (except in case of Managing/ Joint Managing/ Whole-time Director). The scheme is funded with an insurance company in the form of a qualifying insurance policy. The following tables summarize the components of net benefit expense recognized in the Profit & Loss Account and the funded status and amounts recognized in the Balance Sheet for the respective plans: Profit and Loss Account Net employee benefit expense - Gratuity (recognized in Employee Cost) 2008-09 2007-08 Current service cost 13,052,834 8,588,570 Interest cost on benefit obligation 65,18,123 4,289,016 Expected return on plan assets (27,03,704) (1,969,518) Net actuarial (gain)/loss recognized in the year on account of return on plan assets (3,739,708) 25,476,835 Net benefit expense* 13,127,545 36,384,903 Actual return on plan assets (3,501,808) (2,320,968) *Includes Gratuity expense of Rs.1,062,491 (Previous Year Rs.3,287,690) accounted under Research & Development Expenses. Balance Sheet Details of Provision for gratuity 2008-09 2007-08 Defined benefit obligation 99,512,513 86,908,312 Fair value of plan assets 42,757,742 29,229,237 56,754,771 57,679,075 Less: Unrecognized past service cost Plan (liability) (56,754,771) (57,679,075) Changes in the present value of the defined benefit obligation for gratuity are as follows: 2008-09 2007-08 Opening defined benefit obligation 86,908,312 53,612,703 Interest cost 6,518,123 4,289,016 Current service cost 13,052,834 8,588,570 Actual return on plan assets - - Benefits paid (4,025,152) (5,410,262) Actuarial (Gain)/losses on obligation (2,941,604) 25,828,285 Closing defined benefit obligation 99,512,513 86,908,312 Changes in the fair value of plan assets for gratuity are as follows: 2008-09 2007-08 Opening fair value of plan assets 29,229,237 21,292,086 Expected return 2,703,704 1,969,518 Contributions by employer 14,051,849 11,026,445 Benefits paid (4,025,152) (5,410,262) Actuarial Gain /(losses) 798,104 351,450 Closing fair value of plan assets 42,757,742 29,229,237 The Company has since contributed Rs.14,809,973 to the gratuity fund. The major categories of plan assets as a percentage of the fair value of total plan assets for gratuity are as follows: 2008-09 2007-08 Investments with insurer 100.00% 100.00% Cash and bank balance with the insurer - - The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled. There has been significant change in expected rate of return on assets due to the improved debt market scenario. The principal assumptions used in determining gratuity for the Company’s plans are shown below: 2008-09 2007-08 Discount rate 7.50% 8.00% Expected rate of return on plan assets 9.25% 9.25% Increase in compensation cost 5.00% 5.50% Employee turnover upto 30 years 10.00% 10.00% above 30 years but upto 44 years 5.00% 5.00% above 44 years 1.00% 1.00%

94 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. Gratuity amounts for the current and previous three periods are as follows: 2008-09 2007-08 2006-07 Defined benefit obligation 99,512,513 86,908,312 53,612,703 Plan assets 42,757,742 29,229,237 21,292,086 Deficit 56,754,771 57,679,075 32,320,617 Experience adjustments on plan liabilities - (gain)/Loss (3,269,245) - - Experience adjustments on plan assets - (gain)/Loss (798,104) - - Note: The revised accounting standard AS-15 – Employee Benefits which provides for Actuarial Valuation of Gratuity Liability was adopted in the year 2006-07. In the earlier years, actuarial valuation was done in accordance with the pre-revised Accounting Standard, AS-15. Accordingly, comparative numbers of two years earlier than the year 2006-07 have not been furnished. Defined Contribution Plan: 2008-09 2007-08 Contribution to Provident Fund Charged to Profit and Loss Account 31,045,359 25,677,410 The Company expects to contribute Rs.17,500,000 to gratuity fund in the year 2009-10. 17. The Company has incurred expenditure on Pre-Clinical Development studies amounting to Rs.123,978,449 during the year (Previous Year Rs.185,575,387). This expenditure relates to studies carried out by Clinical Research Organization (CRO) towards obtaining registration of Company’s products in US and / or Europe. The expenditure incurred has been capitalized and carried in Capital Work in Progress. Management believes that it is in the nature of development expenditure and meets the capitalization criteria set out in Accounting Standard 26 on Intangible Assets notified by the Companies (Accounting Standards) Rules, 2006 due to the following reasons: • the expenditure is not towards basic research and therefore no New Chemical Entity comes into being. Basic research is conducted by the Company in its own R&D centers, but such developmental work is performed through external agencies (CROs). Safety profile of the basic molecule is well established in several countries in Europe and in India and the product is being marketed successfully in several countries under different brand names. • there is no experience to suggest that the studies conducted by CROs on behalf of the Company would lead to or make it difficult for the Company to obtain regulatory approvals in US and / or Europe. The management believes that these products would be commercially viable and there is no reason to believe that there is any uncertainty that may lead to not securing registration for the products from regulatory authorities in US and / or Europe. 18. In accordance with Accounting Standard 9 on ‘Revenue Recognition’ notified by the Companies (Accounting Standards) Rules, 2006, Excise Duty on turnover amounting to Rs.18,845,112 (Previous year Rs.37,756,574) has been reduced from turnover in Profit & Loss Account and differential Excise Duty on opening and closing stock of finished goods amounting to Rs. Nil (Previous year Rs. Nil) has been adjusted from Raw Materials, Finished Goods, Work in Progress and Job Processing charges in Schedule XIII. 19. The Company has exercised the option as per the Companies (Accounting Standards) Amendment, Rules, 2009. As per the option exchange differences related to long term foreign currency monetary items so far as they relate to the acquisition of a depreciable capital assets are capitalized and depreciated the same over the useful life of the assets and in other cases, have transferred to Foreign Currency Monetary Item Translation Difference Account and amortized over the balance period of such long term assets/ liabilities but not beyond accounting period ending on or before 31st March 2011, the unamortized balance in this account is Rs.95,961,134 (Previous year Rs. Nil). 20. The Company is in the process of appointing independent consultants for conducting a Transfer pricing study to determine whether the transactions with associated enterprises were undertaken at “arms length basis”. The management confirms that all international transactions with associated enterprises are undertaken at negotiated contracted prices on usual commercial terms. Further there has been no change in the terms of such international transactions till March 31, 2009. 21. Previous year’s figures have been rearranged and reclassified wherever necessary to make them comparable with the current year’s figures.

As per our attached report of even date S.R. Batliboi & Co. For and on behalf of the Board Chartered Accountants Ravinder Jain Managing Director per Manoj Gupta Partner I.K. Sharma Dr. Rajesh Jain Membership No. 83906 D.G.M. (Accounts & Finance) Joint Managing Director

Place : New Delhi Vinod Goel Dated : May 27, 2009 G.M. Legal & Company Secretary

95 Panacea Biotec • Annual Report 2008-09 ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956

1. Registration Details Registration No. 22350 State Code 16 Balance Sheet Date 31/03/2009 2. Capital raised during the year (Amount in Rs. Thousand) Public Issue Nil Right Issue Nil Bonus Issue Nil Private Placement Nil 3. Position of mobilization and deployment of Funds (Amount in Rs. Thousand) Total Liabilities 13,488,214 Total Assets 13,488,214 Source of Funds Paid up Capital 66,786 Reserves & Surplus 6,084,707 Secured Loans 4,835,939 Unsecured Loans 2,166,996 Deferred Tax Liability 333,786 Application of Funds Net Fixed Assets 6,938,703 Investments 2,165,698 Net Current Assets 4,284,200 Foreign Currency Monetary Misc. Expenditure 3,652 Item Translation Difference Account 95,961 (to the extent not W/off) Accumulated Losses Nil 4. Performance of Company (Amount in Rs. Thousand) Turnover (Including Other Income) 7,993,849 Total Expenditure 8,917,590 Profit/Loss Before Tax 923,741 Profit/Loss after Tax 690,497 Earnings per share (Rs.) 10.35 Dividend @ Nil 5. Generic Name of Three Principal Products/ Services of Company Item Code No. (ITC Code) 3002 20 14 Product Description Vaccine-Polio Item Code No. (ITC Code) 3004 20 99 Product Description Gliclazide Tab Item Code No. (ITC Code) 3004 90 67 Product Description Nimesulide Tab

For and on behalf of the Board

Ravinder Jain Managing Director

I.K. Sharma Dr. Rajesh Jain D.G.M. (Accounts & Finance) Joint Managing Director

Place : New Delhi Vinod Goel Dated : May 27, 2009 G.M. Legal & Company Secretary

96 Panacea Biotec • Annual Report 2008-09 CASH FLOW STATEMENT ANNEXED TO BALANCE SHEET FOR THE YEAR ENDED 31ST MARCH, 2009 Amount in Rs. Current Year Previous Year

A. Cash Flow from Operating Activities: Net Operating Profit/(Loss) before Tax & Extraordinary Items (923,740,873) 1,903,858,280 Adjustments for: Depreciation 705,099,242 430,008,915 Interest Expenses 321,070,800 116,324,021 Provision for Doubtful Debts & Advances 384,794 27,044,708 Interest Income (168,062,520) (46,007,840) Dividend Income (18,367,280) - (Profit)/ Loss on sale of Fixed Assets (Net) (7,171,144) (22,887,632) (Profit)/ Loss on sale of Investments (1,257,126) (8,062,060) Intangibles written off - 2,103,721 Unrealized foreign exchange loss/(gain) (net) 1,675,903,989 (102,855,667) Amortised exchange differences 47,980,567 - Deferred Revenue Expenditure written off during the year 1,682,400 1,682,400 Provision for Impairment & Doubtful Loan 284,178,318 2,841,442,040 - 397,350,566 Operating Profit before Working Capital changes 1,917,701,167 2,301,208,846 (Increase)/ Decrease in Trade and Other Receivables 221,686,892 (489,944,478) (Increase)/ Decrease in Inventories (2,361,589,208) (34,819,396) Increase/ (Decrease) in Current Liabilities & Provisions 507,284,405 (1,632,617,911) (287,252,490) (812,016,364) Cash generated from Operations 285,083,256 1,489,192,482 Net Income Taxes Paid 235,177,426 336,539,746 Net cash from Operating Activities 49,905,830 1,152,652,736 B. Cash flow from Investing Activities: Purchase of Fixed Assets (1,614,772,785) (1,647,516,871) Proceeds of deposits matured (with maturity 1,250,968,300 402,060,214 more than three months) Deposits (with maturity more than three months) (70,467,843) (1,250,968,300) Trade Investment in Shares of Joint Venture/ Subsidiary Companies (283,200,650) (1,791,200,000) Non-trade Investment in Shares of Associate (41,257,126) (40,000,000) Loan to Joint Venture & Subsidiary Companies (747,317,829) (39,778,050) Sale of Non-trade Investments in Partnership Firm 41,257,126 19,428,500 Sale of Fixed Assets 42,514,714 30,654,398 Interest Received 142,045,313 46,499,370 Dividends received 18,367,280 - Net cash used in investing activities (1,261,863,500) (4,270,820,739) Net cash from Operating and Investing Activities (1,211,957,670) (3,118,168,003) C. Cash flow from Financing Activities: Net increase / (Decrease) in Working Capital Borrowings 1,265,036,897 251,094,912 Long Term Borrowings raised 840,998,055 1,787,500,000 Fixed Deposits received 300,500,000 436,110,000 Fixed Deposits repaid (436,110,000) (169,390,000) Interest paid (321,130,220) (119,446,466) Dividend paid (66,693,746) (65,706,192) Tax paid on Dividend Distribution (11,334,602) (11,166,767) Net Cash from Financing activities 1,571,266,384 2,108,995,487 Net Cash from Operating, Investing & Financing Activities 359,308,714 (1,009,172,516) Net increase in Cash & Cash equivalent 359,308,714 (1,009,172,516) Opening balance of Cash & Cash equivalent 160,834,507 1,169,181,050 Closing balance of Cash & Cash equivalent 520,143,221 160,008,534 Components of cash and cash equivalents: i) Cash Balance on Hand 579,589 1,449,297 ii) Balance with Scheduled Banks : a) In Current Accounts 25,557,539 33,723,242 b) In Unpaid Dividend Accounts* 1,583,956 1,536,608 c) On Fixed Deposits 70,467,843 1,250,968,300 d) In Exchange Earner Foreign Currency Current Accounts 496,620,469 124,125,360 Cash & Bank Balances as per Schedule VII 594,809,396 1,411,802,807 Less: Fixed deposits for maturity period more than 3 months (70,467,843) (1,250,968,300) 524,341,553 160,834,507 Less: Effect of Exchange Differences on Cash & Cash Equivalents held in foreign currency (4,198,332) (825,973) Cash & Cash Equivalents in Cash Flow Statement 520,143,221 160,008,534 * These balances are not available for use by the Company as they represent corresponding unpaid dividend liabilities. As per our attached report of even date S.R. Batliboi & Co. For and on behalf of the Board Chartered Accountants Ravinder Jain Managing Director per Manoj Gupta Partner I.K. Sharma Dr. Rajesh Jain Membership No. 83906 D.G.M. (Accounts & Finance) Joint Managing Director Place : New Delhi Vinod Goel Dated : May 27, 2009 G.M. Legal & Company Secretary

97 Panacea Biotec • Annual Report 2008-09 STATEMENT U/S 212 OF THE COMPANIES ACT, 1956 RELATING TO SUBSIDIARY COMPANIES

1. Name of the Company Best On Radicura & Panacea Panacea Sunanda Umkal Panacea Panacea Panacea Rees Kelisia Kelisia Panacea Health Ltd. Co. Ltd.* Hospitality Educational Steel Medical Biotec Biotec, Biotec Investments Holdings investment Biotec Pvt. Ltd.* Institute Co. Ltd.* Institute GmbH# Inc. FZE Ltd. Ltd.† Holdings (International) Pvt. Ltd.* Pvt. Ltd. AG† †$ SA† † †$ 2. Date from which they became subsidiary company 15th March, 16th July, 23rd Aug, 23rd Aug, 5th Sep, 30 June, 11th June, 15th July, 16th March, 16th Sep., 18th Sep., 22nd Oct., 19th Feb., 2000 1999 2007 2007 2007 2008 2008 2008 2008 2008 2008 2008 2009 3. Financial Year of the subsidiary ended on 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, - - 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 4. Shares of the subsidiary held by Panacea Biotec Ltd. on the above dates i) Number & 1,902,160 1,98,250 100,000 100,000 500,000 3,765,701 Nil Nil 5 1,000 1000 1000 1000 Face Value Re.1 Rs.10 Re.1 Re.1 Re.1 Rs.10 - - AED 100000 US $ 0.01 € 1 CHF 100 CHF 100 ii) Extent of holding 100% 100% 100% 100% 100% 75.2% 100% 100% 100% 100% 100% 100% 100% 5. Net aggregate Profit or (Loss) for the current year (in Rs.) 23,257,105 (373,584) (95,257) (94,101) (46,368) 812,693 59,639 (485,926) (82,560) (1,706,647) (41,380,725) (817,345) (312,976) 6. Net aggregate amounts of the Profits or (Losses) of the subsidiary so far as it concerns the members of the holding company and is dealt with in the accounts of holding company: a. for the financial year of the subsidiary ------b. for the previous financial years of the subsidiary since it became its subsidiary ------7. Net aggregate amounts of the Profits or (Losses) of the subsidiary so far as it concerns the members of the holding company and is not dealt with in the accounts of holding company a. for the financial year of the subsidiary 23,257,105 (373,584) (95,257) (94,101) (46,368) 812,693 59,639 (485,926) (82,560) (1,706,647) (41,380,725) (817,345) (312,976) b. for the previous financial years of the subsidiary since it became its subsidiary 11,613,577 222,031 - - (126,440) ------* Wholly owned subsidiary till 24.01.08 and became indirect subsidiary through Best On Health Ltd. from 25.01.08. † Indirect Subsidiary through Rees Investments Ltd. † † Indirect Subsidiary through Kelisia Holdings Ltd. † † † Indirect Subsidiary through Kelisia Investment Holdings AG. # Unaudited. $ The first financial year shall and on 31st March, 2010. For consolidation purposes the unaudited management accounts for the period upto 31st March, 2009 has been taken into account. For and on behalf of the Board Ravinder Jain Managing Director

I.K. Sharma Dr. Rajesh Jain D.G.M. (Accounts & Finance) Joint Managing Director

Place : New Delhi Vinod Goel Dated : May 27, 2009 G.M. Legal & Company Secretary

FINANCIAL DETAILS OF SUBSIDIARY COMPANIES:

Name of the Company Best On Radicura & Panacea Panacea Sunanda Umkal Panacea Panacea Panacea Rees Kelisia Kelisia Panacea Health Ltd. Co. Ltd.* Hospitality Educational Steel Medical Biotec Biotec, Biotec Investments Holdings investment Biotec Pvt. Ltd.* Institute Co. Ltd.* Institute GmbH# Inc. FZE Ltd. Ltd.† Holdings (International) Pvt. Ltd.* Pvt. Ltd. AG† †$ SA† † †$ As on 31st March, 2009 Capital 8,538,826 1,982,500 100,000 100,000 500,000 16,984,817 1,688,503 5,072 6,947,930 507 67,525 4,450,198 4,450,197 Reserves & Surplus 2,029,644,520 8,481,818 (95,257) (94,101) (172,808) 50,184,267 61548 (542,704) (92,209) (1,906,108) (42,574,383) (854,903) (332,354) Total Assets 2,068,018,228 324,467,400 299,018,440 319,630,000 213,235,206 67,169,084 1,817,591 532,741 7,007,767 738,063,847 716,433,985 5,540,015 4,804,013 Total Liabilities 2,068,018,228 324,467,400 299,018,440 319,630,000 213,235,206 67,169,084 1,817,591 532,741 7,007,767 738,063,847 716,433,985 5,540,015 4,804,013 Details of Investment - 100,000 - - - 76,354 - 649,777,352 - (except in case of Investment in Subsidiary) For the year/ period ended 31st March, 2009 Turnover (including other 43,159,027 86,061 13,653 13,160 3,144 1,516,249 198,969 - 25,020,017 - - 9,306 income) Profit/ (Loss) before tax 36,917,373 (373,217) (91,038) (90,034) (40,345) 1,293,940 59,639 (485,926) (82,560) (1,706,647) (41,380,725) (810,538) (314,915) Provision for Tax 13,660,268 (367) 4,219 4,067 6,023 481,247 - - 0 6,807 (1,939) Profit after Tax 23,257,105 (373,584) (95,257) (94,101) (46,368) 812,693 59,639 (485,926) (82,560) (1,706,647) (41,380,725) (817,345) (312,976) Proposed Dividend - - - - * Wholly owned subsidiary till 24.01.08 and became indirect subsidiary through Best On Health Ltd. from 25.01.08. † Indirect Subsidiary through Rees Investments Ltd. † † Indirect Subsidiary through Kelisia Holdings Ltd. † † † Indirect Subsidiary through Kelisia Investment Holdings AG. # Unaudited. $ The first financial year shall and on 31st March, 2010. For consolidation purposes the unaudited management accounts for the period upto 31st March, 2009 has been taken into account. Note: In terms of approval granted by the Central Government under section 212(8) of the Companies Act,1956, a copy of the Balance Sheet, Profit & Loss Account , Report of the Board of Directors and the report of the Auditors of the subsidiary companies have not been attached with the annual report of the Company. The Company will make available these documents and the related details upon request by any investor of the Company and of its subsidiary. These documents will also be available for inspection by any investor at the Head office of the Company and subsidiary company concerned.

98 Panacea Biotec • Annual Report 2008-09 AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

To Interests in Joint Ventures, notified pursuant to the The Board of Directors of Panacea Biotec Limited on Companies (Accounting Standards) Rules 2006. Consolidated Financial Statements of Panacea Biotec 5. Without qualifying our opinion, we draw attention to Limited, its Subsidiaries, Associates and Joint Venture. Note 3(ii) of Schedule XX B to the financial statements 1. We have audited the attached consolidated balance regarding non-provision of proportionate premium on sheet of Panacea Biotec Limited (“the Company”), its redemption of ‘US$ 50 Million Zero Coupon Convertible Subsidiaries, Associates and Joint Ventures (“the Group”), Bonds due 2011’ amounting to Rs.470,992,269. The same as at March 31, 2009 and also the consolidated profit and has been disclosed as a contingent liability. Management loss account and the consolidated cash flow statement has represented, that the redemption premium will be for the year ended on that date annexed thereto. These offset against the securities premium account and, hence, financial statements are the responsibility of the Panacea no adjustments have been made to the accompanying Biotec Limited’s management and have been prepared statement of results. by the management on the basis of separate financial 6. Without qualifying our opinion, we draw attention to statements and other financial information regarding Note 14 of Schedule XX B to the financial statements components. Our responsibility is to express an opinion regarding capitalization of expenditure on clinical trials on these financial statements based on our audit. amounting to Rs.123,978,449. The ultimate approval of 2. We conducted our audit in accordance with auditing such products, which has been considered as highly likely standards generally accepted in India. Those Standards by the management, is not within direct control of the require that we plan and perform the audit to obtain entity. Pending such final approval, no adjustments have reasonable assurance about whether the financial been made to the accompanying financial statements. statements are free of material misstatements. An audit 7. Without qualifying our opinion, we draw attention that includes examining, on a test basis, evidence supporting the Company has incurre managerial remuneration the amounts and disclosures in the financial statements. of Rs.63,035,463 during the year, which is in excess of An audit also includes assessing the accounting principles the limits specified by the relevant provisions of the used and significant estimates made by management, Companies Act, 1956, by Rs.38,169,706. The Company as well as evaluating the overall financial statement has made an application to the appropriate regulatory presentation. We believe that our audit provides a authorities in this regard, for payment of such excess reasonable basis for our opinion. remuneration to managerial personnel. Pending the final 3. a) We have not audited the financial statements outcome of the Company’s application, no adjustments of the Subsidiaries, Associates & Joint Ventures, have been made to the accompanying financial whose financial statements reflect Group’s share statements in this regard. of total assets of Rs.3,148,633,765 as at 31st March 8. Based on our audit on consideration of reports of other 2009, the total revenue of Rs.193,833,144 and net auditors on separate financial statements and on the cash outflows of Rs.12,648,424 for the year then other financial information of the components, and to the ended as considered in the consolidated financial best of our information and according to the explanation statements. These financial statements and other given to us, we are of the opinion that the attached financial information of the Subsidiaries, Associates consolidated financial statements, subject to matter and Joint Ventures have been audited by other referred to para 3(b), the effect of which is not currently auditors whose report have been furnished to us,, ascertainable; give a true and fair view in conformity with and our opinion, in so far as it relates to the amount the accounting principles generally accepted in India: included in respect of these Subsidiaries, Associates a) in the case of the consolidated balance sheet, of the and Joint Ventures, is based solely on the report of state of the affairs of the Panacea Biotec Limited, other auditors. its Subsidiaries, Associates and Joint Ventures as at b) The consolidated financial statements of Panacea March 31, 2009; Biotec Limited include assets, revenues and cash b) in the case of the consolidated profit and loss flows of Rs.6,065,292, Rs.209,361 and Rs.6,056,017 account, of the loss for the year ended on that date; respectively in relation to Group’s share in certain and Subsidiaries (Panacea Biotec GmbH, Germany, Kelisia Investment Holding S.A.-Switzerland and Panacea c) in the case of the consolidated cash flow statement, Biotec (International) S.A.-Switzerland), based of the cash flows for the year ended on that date. on unaudited financial statements. The effect of adjustments, if any, that may have been required to be made to the accompanying consolidated financial statements, had those component been audited, is not For S. R. Batliboi & Co. currently ascertainable. Chartered Accountants 4. We report that the consolidated financial statements have been prepared by the Company’s management in accordance with the requirements of Accounting per Manoj Gupta Standard (AS) 21, Consolidated financial statements, Partner Accounting Standard (AS) 23, Accounting for Investments Membership No.: 83906 in Associates in Consolidated Financial Statements, and Place : New Delhi Accounting Standard (AS) 27, Financial Reporting of Date : May 27, 2009

99 Panacea Biotec • Annual Report 2008-09 CONSOLIDATED BALANCE SHEET AS AT 31st MARCH, 2009 Amount in Rs. Schedule As at As at No. 31st March, 2009 31st March, 2008 SOURCES OF FUNDS 1. Shareholders’ Funds Share Capital I 66,786,312 66,786,312 Reserves & Surplus II 6,100,715,573 6,167,501,885 6,894,296,288 6,961,082,600 2. Minority Interest 28,968,930 - 3. Loan Funds Secured Loans III 4,836,102,165 2,073,841,714 Unsecured Loans IV 2,193,996,000 7,030,098,165 1,912,075,828 3,985,917,542 4. Deferred Tax Liability (Net) 334,786,544 595,503,862 (Refer note no. 7 of Schedule XX B) Total 13,561,355,524 11,542,504,004 APPLICATION OF FUNDS 1. Fixed Assets Gross Block V 9,025,576,963 6,064,572,427 Less : Depreciation/ Amortisation 2,213,043,241 1,561,222,398 Net Block 6,812,533,722 4,503,350,029 Capital Work-in-Progress (including Capital Advances) 1,777,023,749 8,589,557,471 2,221,722,544 6,725,072,573 2. Investments VI 700,599,288 152,667,042 3. Foreign Currency Monetary item Translation Difference Account (net of amortisation) 95,961,134 - (Refer note no.2 of Schedule XXA and note no.16 of Schedule XXB) 4. Current Assets, Loans & Advances VII Inventories 4,513,037,066 2,145,753,362 Sundry Debtors 1,201,730,208 1,458,848,178 Cash & Bank Balances 748,422,730 1,546,803,344 Other Current Assets 28,502,889 32,033,240 Loans and Advances 1,233,020,316 932,108,380 Sub-Total (A) 7,724,713,209 6,115,546,504 Less : Current Liabilities & Provisions VIII Current Liabilities 1,692,582,309 1,237,386,042 Provisions 1,861,052,904 218,862,398 Sub-Total (B) 3,553,635,213 1,456,248,440 Net Current Assets (A)-(B) 4,171,077,996 4,659,298,064 5. Miscellaneous Expenditure IX 4,159,635 5,466,325 (To the extent not written off or adjusted) Total 13,561,355,524 11,542,504,004 Significant Accounting Policies and Notes to Accounts XX

The Schedules referred to above and notes thereon form an integral part of the Balance Sheet. As per our attached report of even date S.R. Batliboi & Co. For and on behalf of the Board Chartered Accountants Ravinder Jain Managing Director per Manoj Gupta Partner I.K. Sharma Dr. Rajesh Jain Membership No. 83906 D.G.M. (Accounts & Finance) Joint Managing Director

Place : New Delhi Vinod Goel Dated : May 27, 2009 G.M. Legal & Company Secretary

100 Panacea Biotec • Annual Report 2008-09 CONSOLIDATED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH, 2009 Amount in Rs. Schedule For the Year Ended For the Year Ended No. 31st March, 2009 31st March, 2008 INCOME Turnover (Gross) X 7,900,564,192 8,451,191,934 Less: Excise Duty 18,845,112 7,881,719,080 37,756,574 8,413,435,360 Other Income XI 311,956,924 382,935,788 Total Income 8,193,676,004 8,796,371,148 EXPENDITURE Purchases of Finished Goods 186,401,696 183,130,827 Raw and packing material consumed XII 2,952,548,877 3,469,053,324 Operating and other expenses XIII 3,393,917,326 780,786,184 (Increase) in inventories XIV (452,622,474) (4,589,126) Personnel Expenses XV 956,778,484 980,414,224 Selling & Distribution Expenses XVI 458,230,492 482,787,420 Research & Development Expenses XVII 669,944,045 541,856,123 Financial expenses XVIII 348,181,812 150,677,689 Depreciation/ Amortisation V 545,172,635 334,533,723 Miscellaneous Expenditure written off during the year IX 1,787,071 1,695,701 Total Expenditure 9,060,339,964 6,920,346,089 Profit Before Tax (866,663,960) 1,876,025,059 Provision for Income Tax 24,396,207 340,994,978 Provision for Income Tax for earlier years 89,323 - Deferred Income Tax (Credit)/Charge (260,618,147) 212,707,641 (Refer note no.7 of Schedule XX B) Provision for Fringe Benefit Tax 29,393,489 32,505,702 Profit After Tax (659,924,832) 1,289,816,738 Add: Balance brought forward from previous year 2,806,000,020 1,675,618,296 Add: Share of Profit in Partnership Firm - 699,983 Add: Share of Profit/ (Loss) in Associate 5,306,590 (939,432) Add: Share of Minority Interests in (Profit)/ Losses (188,030) - Add: (Profit)/ Losses on the date of closure of Joint Venture - 52,002,560 Profit available for Appropriations 2,151,193,748 3,017,198,145 APPROPRIATIONS Dividend - Equity Shares-Proposed (not liable to TDS) - 66,693,746 - Preference Shares - Interim (not liable to TDS) 33,184 - Dividend Distribution Tax 3,127,240 11,334,602 Transfer to General Reserve 2,300,000 133,169,777 Balance carried to Balance Sheet 2,145,733,324 2,806,000,020 Basic Earnings per Share XIX (9.90) 19.51 Diluted Earnings per Share XIX (9.90) 18.25 Face value per Share 1.00 1.00 Significant Accounting Policies and Notes to Accounts XX

The Schedules referred to above and notes thereon form an integral part of the Profit & Loss Account. As per our attached report of even date S.R. Batliboi & Co. For and on behalf of the Board Chartered Accountants Ravinder Jain Managing Director per Manoj Gupta Partner I.K. Sharma Dr. Rajesh Jain Membership No. 83906 D.G.M. (Accounts & Finance) Joint Managing Director

Place : New Delhi Vinod Goel Dated : May 27, 2009 G.M. Legal & Company Secretary

101 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT Amount in Rs. As at As at 31st March, 2009 31st March, 2008 Schedule I - Share Capital Authorised Comprising of i . 125,000,000 Equity Shares of Re.1 each (Previous 125,000,000 125,000,000 Year 125,000,000 Equity Shares of Re. 1 each) ii. 110,000,000 (Previous year 110,000,000) Preference Shares of Rs.10 each 1,100,000,000 1,100,000,000 1,225,000,000 1,225,000,000 Issued and Subscribed 66,842,746 Equity Shares of Re.1 each (Previous Year 66,842,746 66,842,746 66,842,746 Equity Shares of Re.1 each) 66,842,746 66,842,746 Paid up 66,693,746 (Previous Year 66,693,746) Equity Shares 66,693,746 66,693,746 of Re.1 each fully paid-up Add: Forfeited Shares (14,900 Shares @ Rs.10 each forfeited on May 15, 1999, which were later on sub-divided into 149,000 Equity Shares of Re.1 each on February 12, 2003) 92,566 66,786,312 92,566 66,786,312 (149,000 Forfeited Shares have been allotted on 24th August, 2005 in the name of employees of the company for sale thereof at the prevailing market prices through recognised Stock Exchanges on the terms & conditions as specified by Managing / Joint Managing Directors or Director of the company and reimbursement of net sales proceeds to the company account) (Out of the above shares, 1,814,240 Equity Shares of Rs.10 each were issued as fully paid up bonus shares by capitalisation of General Reserves in earlier years, which were later on sub-divided into 18,142,400 Equity Shares of Re.1/- each on February 12, 2003) 66,786,312 66,786,312 Schedule II - Reserves and Surplus 1) Capital Redemption Reserve Amount as per last Balance Sheet 1,016,849,140 1,016,849,140 2) Securities Premium Amount as per Last Balance Sheet 2,785,103,626 2,456,358,602 Add : Credited Upon Issue of Equity Shares on - 326,481,758 conversion of FCCBs Add : Credited Upon Issue of Equity Shares - 2,785,103,626 2,263,266 2,785,103,626 3) General Reserve Amount as per last Balance Sheet 279,334,119 146,164,342 Add : Transfer from Profit & Loss Account 2,300,000 133,169,777 Less: Exchange Differences of Earlier Years capitalised 37,586,515 - to Fixed Assets (Net of Depreciation Rs.1,609,882) (Refer note no.2 of Schedule XX A and note no.16 of Schedule XX B) Less: Exchange Differences of Earlier Years Transferred 92,470,318 151,577,286 - 279,334,119 to the “Foreign Currency Monetary item Translation Differences Account” (Refer note no.2 of Schedule XX A and note no.16 of Schedule XX B) 4) Foreign Currency Translation Reserve Amount as per last Balance Sheet 7,009,383 1,394,060 Less : Transfer to P&L Account 7,009,383 - Add : Additions during the year 1,452,197 1,452,197 5,615,323 7,009,383 5) Balance in Profit & Loss Account 2,145,733,324 2,806,000,020 6,100,715,573 6,894,296,288

102 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT Amount in Rs. As at As at 31st March, 2009 31st March, 2008 Schedule III - Secured Loans 1. Foreign currency term loans (from banks) i) State Bank of India 2,028,800,000 802,100,000 (Due within one year Rs. nil (Previous year Rs. nil) Interest Accrued & Due 12,416,668 4,974,266 ii) State Bank of Travancore 1,272,932,614 1,006,525,285 (Due within one year Rs. nil (Previous year Rs. nil) 2. Working Capital Loans from Scheduled Banks 1,521,789,762 256,752,865 3. Finance Lease Obligation - 3,083,078 4. Loan against Hypothecation of Car 163,121 406,220 4,836,102,165 2,073,841,714

Notes: 1. Foreign Currency Term Loans from State Bank of India and State Bank of Travancore are secured by way of first pari-passu charge by hypothecation of the Company’s entire movables fixed assets, both present and future and mortgage of immovable properties of the Company beingland admeasuring 96 bighas, 19 biswas & 93 bighas 12 biswas & 10 Biswasi situated at Village Samalheri, Tehsil Dera Bassi, District S.A.S. Nagar (Mohali) (formerly Tehsil Rajpura, District Patiala), Punjab. The process for creation of first pari-passu charge by way of mortgage of immovable properties situated at Baddi, Himachal Pradesh is in progress. Foreign Currency Term Loan from State Bank of India is also collaterally secured by personal guarantees of the Promoter-Directors of the Company, viz. Mr. Soshil Kumar Jain, Mr. Ravinder Jain, Dr Rajesh Jain and Mr. Sandeep Jain. 2. Working Capital Loans from Scheduled Banks are secured by way of first pari-passu charge by hypothecation of all current assets and also by way of 2nd pari-passu charge on all the movable fixed assets (including machinery and spares) of the company and existing immovable fixed assets of the Company being land admeasuring 96 bighas, 19 biswas & 93 bighas 12 biswas & 10 Biswasi situated at Village Samalheri, Tehsil Dera Bassi, District S.A.S. Nagar (Mohali), Punjab. The process for creation of second pari-passu charge by way of mortgage of immovable properties situated at Baddi, Himachal Pradesh is in progress. These are also collaterally secured by personal guarantees of the Promoter-Directors of the Company, viz. Mr. Soshil Kumar Jain, Mr. Ravinder Jain, Dr Rajesh Jain and Mr. Sandeep Jain.

Schedule IV - Unsecured Loans Fixed Deposits* 300,500,000 436,110,000 (Due within one year Rs.55,000,000 (Previous year Rs.432,500,000)) Interest accrued & due - 101,828 Other Loans: Foreign Currency Convertible Bonds** US$ 36,800,000 (Previous Year US$ 36,800,000) 1,866,496,000 1,475,864,000 Zero Coupon Convertible Bonds due 2011 (Due within one year nil (Previous Year nil) Loan from Lakshmi & Manager Holdings Ltd. 27,000,000 - (Due within one year Rs. nil (Previous Year Rs. nil)) 2,193,996,000 1,912,075,828 Note: * Includes Rs.300,000,000 (Previous Year Rs.432,500,000) from partnership firm in which some directors and their relatives are partners. ** Foreign Currency Convertible Bonds. - Unless previously converted, redeemed or repurchased & cancelled, the remaining FCCBs of US $ 36,800,000,which were issued on 13.02.2006, will be redeemed on Feb 14, 2011 at 142.80% of their outstanding principal amount.

103 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT - 8,865,991 As At As At 15,934,492 61,635,372 46,059,065 13,485,974 36,973,726 33,233,467 797,910,202 130,148,884 117,886,903 112,272,904 195,966,071 431,214,135 209,050,065 31/03/2008 (Amount in Rs.) (Amount 1,350,607,657 1,778,335,392 4,307,383,958 1,790,508,410 2,740,180,110 4,503,350,029 2,221,722,544 2,949,230,175

-

NET BLOCK

3,520,827 As At 53,999,615 70,426,213 45,417,360 13,347,699 11,188,844 31,553,059 38,791,222 94,880,824 157,295,118 123,615,070 647,718,926 195,966,071 31/03/2009 1,482,600,216 2,998,369,496 6,717,652,898 1,129,304,823 4,307,383,958 6,812,533,722 1,777,023,749 4,503,350,029 1,782,408,983

-

832,615 As At 9,202,695 77,518,595 74,191,606 85,807,456 22,901,279 46,865,796 55,193,414 21,789,294 321,039,401 132,123,747 125,005,147 155,952,478 172,089,812 31/03/2009 1,240,572,196 2,057,090,763 1,389,132,586 2,213,043,241 1,561,222,398

------

(56) (8,424) (8,497)

Other (32,556) (59,326) (155,294) (1,345,729) (1,609,882) (1,609,882) Movements**

- - - - -

6,223 22,185 12,437 177,162 (60,741) during 6,921,701 5,807,349 1,527,245 8,033,705 1,442,207 8,039,928 the Year the Sale/Adj. 14,394,901 44,917,772 46,372,416 60,767,317

- -

DEPRECIATION/AMORTISATION 371,417 during 7,062,587 3,336,925 3,030,790 the Year the Provided 33,355,906 20,211,662 19,747,579 24,910,458 13,524,682 10,342,685 30,235,082 56,999,178 119,234,498 459,068,853 683,962,960 408,882,721 714,198,042 465,881,899

-

461,198 9,202,695 As At 70,456,064 98,739,656 59,795,717 67,595,619 64,482,126 45,277,213 41,681,169 11,446,609 201,982,382 789,770,773 100,331,177 988,283,570 172,089,812 115,096,857 01/04/2008 1,389,132,586 1,561,222,398 1,103,380,427

9,202,695 As At 54,832,230 81,039,422 36,248,978 58,054,640 86,746,473 60,580,516 289,418,865 144,617,819 209,422,526 170,422,507 250,833,302 368,055,883 31/03/2009 1,782,408,983 1,803,639,617 4,238,941,692 8,774,743,661 5,696,516,544 9,025,576,963 6,064,572,427

------

(556) (45,339) (32,538) (61,083) Other (179,870) (148,314) (1,552,944) (9,674,542) (11,695,186) (11,695,186) Movements**

- - - -

9,800 76,076 19,987 272,991 1,299,258 8,933,733 1,749,903 5,292,947 during the Year the 27,529,975 12,443,034 52,304,970 16,503,504 16,513,304 Sale/Adj. 166,723,422 172,036,356 224,341,326 GROSS BLOCK

-

1,717,923 4,584,400 8,111,565 during 38,436,540 60,786,271 32,153,001 25,750,990 24,453,570 26,217,370 15,900,440 54,813,775 43,918,761 the Year* the Additions 459,376,640 806,599,235 1,692,953,103 3,142,227,273 1,984,556,368 3,197,041,048 2,028,475,129

9,202,695 As At 16,395,690 79,322,055 58,763,187 78,654,895 44,680,076 999,892,584 228,888,540 121,431,089 185,482,522 146,390,242 176,755,030 368,055,883 324,146,922 01/04/2008 1,350,607,657 2,568,106,165 5,696,516,544 3,728,463,680 6,064,572,427 4,052,610,602

Fixed Assets Fixed

-

V

Freehold Land includes Land amounting to Rs.17,285,690 (Previous Year Rs.17,285,690) pending registration in the name of Company. Rs.17,285,690) pending registration Year Rs.17,285,690 (Previous to Land includes amounting Freehold Company. in the name of registration Year Rs.1,429,032) pending to Rs.155,892,400 (Previous amounting Premises Building includes Office parties. 5,277,132 ) (Net Block) lying with third Year & Machinery Plant & Machinery includes Plant Rs.4,543,083 (Previous to amounting Rs.131,348,176). Year Rs.169,025,407 (Previous to Assets amounting & Development on Research includes Depreciation for the year Depreciation of schedule XX B. No.4 Refer Note expenditure. includes pre-operative in Progress Work Capital (Rs.556,105)}. Year Rs.641,013 {Previous to amounting adjustment exchange Assets includes foreign Fixed to Addition assets. Intangible generated internally are Softwares) assets (except All Intangible

Assets Tangible A. Land - Freehold Land - Leasehold Buildings Improvement Leasehold & MachineryPlant & Fittings Furniture Vehicles Equipments Office Equipments Computer (A) TOTAL in Progress Work Capital Year Previous Intangible Assets B. Goodwill & Designs Trademarks Patents, Softwares Website Development Product (B) TOTAL in Progress Work Capital Year Previous (A+B) TOTAL in Progress Work Capital Year Previous Notes: DESCRIPTION Schedule 1. 2. 3. 4. 5. 6. 7. Nil). Rs. year 764,477(Previous Rs.730, during the year capitalized differences * Includes exchange during the year. capitalized / (Gain) of earlier years Loss differences ** Exchange

104 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT Amount in Rs. As at As at 31st March, 2009 31st March, 2008 Schedule VI - Investments Long Term Investments (at cost) A. Non-Trade - Quoted a) 10,000 Equity Shares of Rs.10 each 100,000 100,000 fully paid of Medicamen Biotec Ltd. - Unquoted a) Investment in Capital of Partnership Firm - 40,000,000 “Lakshmi & The Manager” * Add: Profit for the year - - 699,983 40,699,983 b) 41,257,126 (Previous Year Nil) Equity Shares 41,957,109 - of Re.1 each fully paid up in Lakshmi & Manager Holdings Ltd. Add: Profit/ (Loss) for the year (2,103,929) 39,853,180 - - B. Trade - Quoted 3,733,334 (Previous Year Nil) Equity Shares of 649,777,351 - US $ 0.0001 each fully paid up in PharmAthene Inc. - Unquoted a) 419,767 (Previous Year 419,767) Equity Shares of 3,258,238 4,197,670 Rs.10 each fully paid in PanEra Biotec Pvt. Ltd. (formerly known as Panheber Biotec Pvt. Ltd.) Add : Profit / (Loss) for the year 7,410,519 10,668,757 (939,432) 3,258,238 b) Investment in Shivalik Solid Waste Management 200,000 200,000 Ltd. 20,000 (Previous year 20,000) Equity Shares of Rs.10 each c) 4,608,608 (Previous Year 4,608,608) Ordinary 168,068,998 - Shares of GBP.0.01 (Face Value) each fully paid of Cambridge Biostability Limited Less : Provision for Permanent Diminution in the 168,068,998 - value of Investments (Refer note no. 12(b) of Schedule XX B) - - Current Investment (at lower of cost or market value) a) Nil Units (Previous Year 6,202,072.225) of - 62,216,088 Rs.10.0315 NAV in HDFC CMF - Savings Plus Plan - Whole Sale - Daily Dividend b) Nil Units (Previous Year 45,885.50) of - 46,192,733 Rs.1,001.1364 NAV in Reliance Liquid Plus Fund - Inst - Daily Dividend 700,599,288 152,667,042 Notes: *The names of all the partners of the Partnership Firm, ‘Lakshmi & The Manager’, total capital of the firm and the share of each partner was as under: Partners Capital Sharing Ratio Panacea Biotec Ltd. 40,000,000 40% Mr. Ravinder Jain 19,000,000 19% Mrs. Radhika Jain 20,000,000 20% Mrs. Sunanda Jain 18,000,000 18% Mrs. Meena Jain 2,000,000 2% Mrs. Shilpy Jain 1,000,000 1% Total 100,000,000 100% Aggregate value of Unquoted Investments 50,721,937 152,567,042 (net of Provision for Permanent Diminution in the value of Investments of Rs.168,068,998) Aggregate value of Quoted Investments 649,877,351 100,000 (Market value of Quoted Investment) 466,069,086 161,500

105 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT Amount in Rs. As at As at 31st March, 2009 31st March, 2008 Schedule VII - Current Assets, Loans & Advances Inventories i) Raw & Packing Materials 3,206,936,066 1,321,160,291 (Including lying with third parties Rs.34,062,940 (Previous Year Rs.57,098,748)) ii) Finished Goods 1,020,726,983 713,360,132 (Including goods in transit of Rs.1,192,568 (Previous Year Rs. Nil)) & lying with third parties Rs.844,654 (Previous Year Rs.187,528) iii) Work in Progress 202,833,537 57,577,914 (Including lying with third parties Rs.67,135,348 (Previous Year Rs.9,268,214)) iv) Stores & Spare Parts 82,540,480 4,513,037,066 53,655,025 2,145,753,362 Sundry Debtors (Unsecured, Considered good, unless otherwise stated) Over six months (including Rs.3,146,023 considered 83,446,581 9,640,735 doubtful of recovery (Previous year Rs.2,858,916)) Others Debts 1,121,429,650 1,452,066,359 1,204,876,231 1,461,707,094 Less : Provision for Bad & Doubtful Debts 3,146,023 1,201,730,208 2,858,916 1,458,848,178 Cash and Bank Balances i) Cash balance on hand 9,243,607 2,653,554 ii) Balance with Scheduled Banks a) On Current Accounts 100,130,657 104,179,993 b) On Unpaid Dividend Accounts* 1,583,956 1,536,608 c) On Fixed Deposits** 140,844,041 1,314,307,829 d) On Exchange Earner Foreign Currency 496,620,469 748,422,730 124,125,360 1,546,803,344 Current Accounts *Not available for use by the company as they represent corresponding unpaid dividend liabilities **Fixed Deposits amounting to Rs.1,024,123 (previous year Rs.9,718,300) are pledged with Banks and various Government Authorities. Other Current Assets Export Benefits Receivable 25,521,973 19,402,794 Interest accrued but not due on Loans & Deposits 10,256,386 12,630,446 Less: Provision for doubtful of recovery 7,275,470 28,502,889 - 32,033,240 (Refer note no. 12(b) of Schedule XX B) Loans and Advances (Unsecured, Considered good, unless otherwise stated) Advances recoverable in cash or in kind or for value to be 749,656,508 611,875,467 received (Including Rs.818,322 (Previous Year Rs.818,322 ) considered doubtful Due from PanEra Biotec Pvt. Ltd. (Formerly known as 153,950,194 135,532,654 Panheber Biotec Private Ltd.)** (Including Rs.135,532,654 (Previous Year Rs.135,532,654) considered doubtful) Balance with Excise, Custom etc. 15,042,362 24,870,402 Loan to Joint Venture Company 108,833,850 35,746,800 Staff Loans & Advances (including Rs.4,191,959 16,357,286 18,245,508 (Previous Year Rs.4,191,959) considered doubtful) 1,043,840,200 826,270,831 Less : Provision for Doubtful Loans & Advances 108,833,850 - (Refer note no. 12(b) of Schedule XX B) Less : Provision for Bad & Doubtful Advances 140,542,935 140,542,935 794,463,415 685,727,896 Security Deposits 23,446,850 43,242,929 Advance Income Tax (Net of Provision of Rs.1,180,600,195 415,110,051 1,233,020,316 203,137,555 932,108,380 (previous year Rs.1,166,163,348)) 7,724,713,209 6,115,546,504 **Company’s two Directors are also directors in PanEra Biotec Private Limited (Formerly known as Panheber Biotec Pvt. Ltd.).

106 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT Amount in Rs. As at As at 31st March, 2009 31st March, 2008 Schedule VIII - Current Liabilities & Provisions A. Liabilities i) Acceptances 1,140,108,339 345,202,563 ii) Sundry Creditors a) Dues to Micro & Small Enterprises 1,274,843 1,177,455 (Refer note no.6 of Schedule XX B) b) Dues to other than Micro & Small Enterprises 482,859,566 750,328,794 iii) Advances from Customers 7,060,675 8,155,762 iv) Deposits from C & F Agents 15,195,000 15,158,000 v) Unpaid Dividend on Equity Shares* 1,291,245 1,536,608 vi) Other Liabilities 44,401,611 115,478,633 vii) Book Overdraft - 345,960 vii) Interest accrued but not due on loans/ Deposits 391,030 1,692,582,309 2,267 1,237,386,042 * This amount does not include amount due/outstanding to be credited to Investor Education & Protection Fund, same shall be credited as and when due. B. Provisions i) Provision for Wealth Tax 1,371,020 832,746 ii) Provision for Fringe Benefit Tax (Net of Advance 5,174,455 2,349,330 Payment of Rs.72,954,545 (Previous year Rs.75,650,670)) iii) Proposed Dividend on Preference Shares 33,184 - iv) Proposed Dividend on Equity Shares - 66,693,746 v) Provision for Dividend Distribution Tax 5,640 11,334,602 vi) Provision for Gratuity 57,056,954 58,693,758 vii) Provision for Leave Encashment 54,307,651 38,458,216 viii) Provision for open Derivative Contracts 1,743,104,000 1,861,052,904 40,500,000 218,862,398 3,553,635,213 1,456,248,440 Schedule IX - Miscellaneous Expenditure (To the extent not written off or adjusted) i) License Fees As per last Balance Sheet 5,334,319 7,016,719 Less : Written off during the Year 1,682,400 3,651,919 1,682,400 5,334,319 ii) Preliminary Expenses As per last Balance Sheet 132,006 5,960 Add : Addition during the year 480,381 126,046 Less : Written off during the year 104,671 507,716 - 132,006 4,159,635 5,466,325

Amount in Rs. For the year ended For the year ended 31st March, 2009 31st March, 2008 Schedule X - Turnover Sales 7,877,964,683 8,447,324,904 Services (R&D Income) 1,699,562 3,867,030 Income from Contract Manufacturing 20,899,947 - 7,900,564,192 8,451,191,934

107 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT Amount in Rs. For the year ended For the year ended 31st March, 2009 31st March, 2008 Schedule XI - Other Income Interest Received - - from Banks (Tax deducted at source Rs.27,038,973 127,865,846 49,217,313 (Previous year Rs.9,029,244)) - from Inter Company Loans/ Deposits (Tax deducted at source Rs. Nil (Previous year Rs. Nil)) 16,878,059 - - from Others (Tax deducted at source Rs.7,455,603 (Previous year Rs.2,323,740)) 35,037,872 7,268,691 - on Income Tax Refund - 6,527,472 Export Incentives 30,855,454 24,814,711 Dividend on other than Trade Investments Long Term (Gross) 5,453,494 3,468,309 Miscellaneous Balances/Provisions written back 123,707 123,151,118 Sale of Scrap 1,779,942 1,769,296 Lease Rent 17,823,031 180,133 Profit on Sale of Fixed Assets {Net of loss Rs.2,039,733 (Previous year Rs.845,313)} 6,937,487 22,830,661 Foreign Exchange Fluctuation Gain {Net of loss Rs. Nil (Previous year Rs.160,515,539} - 124,897,841 Profit on Sale of Investment 1,257,126 - Insurance Claim Received 4,430,371 8,283,596 Royalty Income 9,266,380 1,235,464 Income from Derecognition of JV company 46,263,349 - Foreign Currency Translation Account 7,009,383 - Miscellaneous Income 975,422 9,291,183 311,956,924 382,935,788 Schedule XII - Raw & Packing Material Consumed Raw Materials & Packing Materials Consumed Opening Stock 1,321,160,291 1,261,054,515 Add : Material purchased during the Year 4,857,945,771 3,562,049,427 6,179,106,062 4,823,103,942 Less : Closing Stock 3,206,936,066 1,321,160,291 2,972,169,996 3,501,943,651 Less: Material consumed for Research & Development 19,621,119 2,952,548,877 32,890,327 3,469,053,324 Schedule XIII - Operating and Other Expenses Processing Charges 35,289,443 5,843,974 Analytical Testing & Trial Charges 6,995,652 11,135,528 Ancillary Expenses - 7,473,173 Stores & Spare Parts consumed (Refer note no.4 of Schedule XX B) 57,939,559 46,559,069 Power & Fuel (Refer note no.4 of Schedule XX B) 112,861,694 100,327,742 Repair & Maintenance (Refer note no.4 of Schedule XX B) Building 16,628,948 19,041,472 Plant & Machinery 22,609,114 23,646,625 Others 28,492,441 67,730,503 26,633,304 69,321,401 Rent (Refer note no.4 of Schedule XX B) 53,624,943 50,223,655 Royalty 14,742,764 4,385,550 Directors’ Sitting Fees 345,000 350,000 Printing & Stationery 40,222,731 31,487,310 Postage & Communication Expenses 47,716,557 39,073,273 Insurance 42,835,287 44,074,361 Travelling & Conveyance expenses (Refer note no.4 of Schedule XX B) 116,933,775 114,284,121 Books & Periodicals 2,240,467 3,448,613 Legal & Professional charges (Refer note no.4 of Schedule XX B) 113,140,386 75,067,398 Vehicle Running & Maintenance 17,155,503 14,853,710 Auditors’ Remuneration: (Refer note no.5 of Schedule XX B) Statutory Audit Fee 4,093,231 3,972,119 Limited Review Fees 1,685,400 1,348,320 Others 136,332 376,394 Out of pocket expenses 251,124 6,166,087 78,074 5,774,907 Rates & Taxes (Refer note no.4 of Schedule XX B) 15,615,884 11,260,858 Donation 3,420,245 6,669,274 Subscription 13,700,941 12,226,353 Staff Training & Recruitment 31,477,974 29,976,294 Miscellaneous expenses (Refer note no.4 of Schedule XX B) 33,473,390 28,592,166 Bad Debts & Advances written off 115,891 - Provision for doubtful debts & doubtful advances 116,531,425 27,044,708 Wealth Tax 1,393,909 832,746 Foreign Exchange Fluctuation Loss (Net of Gain Rs.214,791,328 (Previous year Rs. Nil)) 571,574,318 - Provision for Loss on Open Derivative Contracts 1,702,604,000 40,500,000 Provision for Permanent Diminution in the value of Investments (Refer note no.12(b) of Schedule XX B) 168,068,998 - 3,393,917,326 780,786,184

108 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT Amount in Rs. For the year ended For the year ended 31st March, 2009 31st March, 2008 Schedule XIV - (Increase)/Decrease In Stocks Closing Stock Finished Goods 1,020,726,983 713,360,132 Work in Progress 202,833,537 1,223,560,520 57,577,914 770,938,046 Less: Opening Stock Finished Goods 713,360,132 716,281,654 Work in Progress 57,577,914 770,938,046 50,067,266 766,348,920 (452,622,474) (4,589,126) Schedule XV - Personnel Expenses Salary, Wages and Bonus 874,951,893 884,576,690 Contribution to Provident and other Funds 27,589,020 23,749,623 Workmen Staff Welfare Expenses 42,098,929 38,990,698 Gratuity 12,138,642 33,097,213 956,778,484 980,414,224 Schedule XVI - Selling & Distribution Expenses Advertising & Sales Promotion 242,016,163 263,157,227 Meetings & Conferences 62,306,063 93,088,068 Freight & Cartage 67,411,807 63,494,250 Commission on Sales (Other than Sole Selling Agents) 86,496,459 63,047,875 458,230,492 482,787,420 Schedule XVII - Research & Development Expenses Raw Material & Packing Material Consumed 19,621,119 32,890,327 Stores & Spare Parts Consumed 134,104,256 91,423,646 Salary, Wages & Bonus 182,045,564 155,895,586 Contribution to Provident & other Funds 4,096,340 3,607,381 Workmen/Staff Welfare expenses 9,504,657 7,046,234 Gratuity 1,062,491 3,287,690 Analytical Testing & Trial Charges 14,959,224 15,803,303 Rent 6,401,077 7,569,470 Printing & Stationery 2,212,425 2,591,736 Postage & Communication 3,151,204 2,794,844 Travelling Expenses 15,897,191 12,638,102 Books & Periodicals 6,317,043 3,966,683 Legal & Professional Expenses 12,052,167 9,158,686 Vehicle Running & Maintenance 2,424,344 2,044,023 Donation 30,251 1,880,651 Repair & Maintenance : - Buildings 5,726,552 2,386,093 - Plant & Machinery 14,628,824 17,360,639 - Others 3,728,604 24,083,980 1,740,037 21,486,769 Rates, Fees & Taxes 622,995 335,366 Subscription 9,467,437 4,980,114 Electricity & Water Charges 33,714,494 22,390,252 Meeting & Conferences 2,460,794 4,191,618 Staff Training & Recruitment 765,564 815,807 Bank Charges - 65,407 Depreciation 169,025,407 131,348,176 Sundry Expenses 15,924,021 3,644,252 669,944,045 541,856,123

109 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT Amount in Rs. For the year ended For the year ended 31st March, 2009 31st March, 2008 Schedule XVIII - Financial Expenses Interest on: a) Fixed Loans 206,260,720 88,760,734 b) Others (Including interest on working capital loans) 115,282,862 321,543,582 27,694,390 116,455,124 Bank Charges 26,638,230 34,222,565 348,181,812 150,677,689 Schedule XIX - Earning Per Share Calculation of Profit for Basic EPS: Net Profit/(Loss) before Tax (866,663,960) 1,876,025,059 Less: Adjustment for Tax Expense (206,739,128) 586,208,321 Less: Dividend on Redeemable Preference Shares 33,184 - Less: Dividend Distribution Tax on Redeemable Preference Shares 5,640 - Net Profit/(Loss) for calculation of Basic EPS (659,963,656) 1,289,816,738 Weighted average number of equity shares in calculating basic EPS 66,693,746 66,115,919 Calculation of Profit for Diluted EPS Net Profit/(Loss) for calculation of basic EPS (659,963,656) 1,289,816,738 Adjusted Net Profit/(Loss) for calculating Diluted EPS (659,963,656) 1,289,816,738 No. of Weighted Equity Shares resulting from conversion of Foreign Currency Convertible Bonds - ‘US$ 50 Million Zero Coupon Convertible Bonds due 2011’ 4,542,752 4,542,752 (outstanding US$36.8 million) at conversion price Rs.357.57 Add: Weighted average number of Equity Shares in 66,693,746 66,115,919 calculating basic EPS Weighted average number of Equity Shares in calculating 71,236,498 70,658,671 diluted EPS Basic Earnings per Share (9.90) 19.51 Diluted Earnings per Share (9.90) 18.25 Face/ Nominal Value Per Share 1.00 1.00

Schedule XX - Significant Accounting Policies and Notes on Accounts (Consolidated Financial Statements) A. Significant Accounting Policies 1. i) Basis of Preparation The Consolidated Financial Statements relate to Panacea Biotec Limited (Parent Company), its Subsidiary Companies, Joint Ventures and Associates (hereinafter collectively referred as the “Group”). The Consolidated Financial Statements (CFS) have been prepared to comply in all material respects with the notified Accounting Standards by Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis except in case of assets for which provision for impairment is made and revaluation is carried out. The accounting policies have been consistently applied by the Company and except for the changes in accounting policies discussed more fully below, are consistent with those used in the previous year. ii) Principles of Consolidation The Consolidated Financial Statements have been prepared on the following basis: a) The financial statements of the Parent Company and its Subsidiary Companies have been combined on a line by line basis by adding together the book values of like items of assets, liabilities, income and expenses after fully eliminating intra group balances and intra group transactions resulting in unrealized profits or losses, if any, as per Accounting Standard – 21, Consolidated Financial Statements. b) Interest in assets, liabilities, income and expenses of the Joint Ventures have been consolidated using proportionate consolidation method. Intra group balances, transactions and unrealized profits/losses have been eliminated to the extent of Company’s proportionate shares as per Accounting Standard – 27, Financial reporting of interests in Joint Venture.

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c) In case of Associates, where the company directly or indirectly through subsidiaries holds more than 20% of equity, investment in associate is accounted for by Equity Method in accordance with Accounting Standards 23, Accounting for Investment in Associates. d) The financial statements of the Subsidiary Companies, Joint Ventures and Associates used in the consolidation are drawn for the same period as that of the Parent Company i.e. year ended March 31, 2009. Also, the Company’s Associate in earlier years, Lakshmi and the Manager, ceased to be an Associates w.e.f. June 30, 2008 the same has been accounted for as an Associates till the date of cessation. e) Minorities’ interest in net profit/(loss) of consolidated Subsidiary Companies for the year has been identified and adjusted against the income in order to arrive at the net income attributable to the shareholders of the Parent Company. Minorities’ share of net assets has been identified and presented in Consolidated Balance Sheet separately. Where accumulated losses attributable to the minorities are in excess of their equity, in the absence of the contractual obligation on the minorities, the same is accounted for by the Parent Company. f) List of Subsidiaries, Joint Ventures and Associates considered for Consolidation: S. No. Name of the Company Nature of Country of Extent of Holding/ relationship Incorporation Voting Power (%) as on March 31, 2009 1 Best On Health Ltd. Subsidiary India 100.0 2 Panacea Educational Institute Pvt. Ltd. Indirect Subsidiary* India 100.0 3 Radicura & Co. Ltd. Indirect Subsidiary* India 100.0 4 Panacea Hospitality Services Pvt. Ltd. Indirect Subsidiary* India 100.0 5 Sunanda Steel Company Ltd. Indirect Subsidiary* India 100.0 6 Umkal Medical Institute Pvt. Ltd. Subsidiary India 75.2 (w.e.f. June 30, 2008) 7 Panacea Biotec GmbH Subsidiary Germany 100.0 (w.e.f. June 11, 2008) 8 Panacea Biotec, Inc. (w.e.f. July 15, 2008) Subsidiary USA 100.0 9 Panacea Biotec FZE Subsidiary UAE 100.0 (w.e.f. March 16, 2008) 10 Rees Investments Ltd. Subsidiary Guernsey 100.0 (w.e.f. September 16, 2008) 11 Kelisia Holdings Ltd. Indirect Subsidiary† Cyprus 100.0 (w.e.f. September 18, 2008) 12 Kelisia Investment Holdings AG Indirect Subsidiary†† Switzerland 100.0 (w.e.f. October 22, 2008) 13 Panacea Biotec (International) SA Indirect Subsidiary††† Switzerland 100.0 (w.e.f. February 19, 2009) 14 Chiron Panacea Vaccines Pvt. Ltd. Joint Venture India 50.0 15 PanEra Biotec Pvt. Ltd. (Earlier Associate India 50.0 known as Panheber Biotec Pvt. Ltd.) 16 Lakshmi & the Manager Associate India 40.0 (up to June 30, 2008) 17 Lakshmi & Manager Holdings Ltd. Associate India 40.0 (w.e.f. July 1, 2008) 18 Best General Insurances Co. Ltd Indirect Associate** India 32.0 (w.e.f. September 19, 2008) *Wholly Owned Subsidiary of Best on Health Ltd. **Subsidiary of Lakshmi & Manager Holdings Ltd. †Wholly Owned Subsidiary of Rees Investments Ltd. ††Wholly Owned Subsidiary of Kelisia Holdings Ltd. †††Wholly Owned Subsidiary of Kelisia Investment Holdings AG g) Goodwill represents the difference between the Parent Company’s shares in the net worth of the Subsidiary / Joint Venture Company and the cost of acquisition at the time of making the investment in the Subsidiary / Joint Venture Companies. For this purpose, the Parent Company’s share of net worth of the Subsidiary/ Joint Venture Company is determined on the basis of the latest financial statements of the Subsidiary/ Joint Venture Company prior to acquisition, after making the necessary adjustments for material events between the date of such financial statements and the date of respective acquisition. h) The Consolidated Financial Statements have been prepared using uniform accounting policies to the extent possible for like transactions and other events in similar circumstances and are presented in the same manner as the Parent Company’s separate financial statements. 2. Change in Accounting Policy For the Financial Year ended 31st March, 2008, the Company was charging off exchange differences arising on foreign currency monetary assets and liabilities to profit and loss account. Pursuant to Companies (Accounting Standards) Amendments Rules, 2009, the Company has exercised the option of deferring the charge of exchange difference to the Profit and Loss Account, in respect of accounting periods commencing on or after 7th December, 2006, on long-term foreign currency monetary items (i.e.

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monetary assets or liabilities expressed in foreign currency and having a term of 12 months or more at the date of origination). As a result, such exchange differences so far as they relate to the acquisition of a depreciable capital asset have been adjusted with the cost of such asset and are being depreciated over the balance life of the asset, and in other cases, have been accumulated in Foreign Currency Monetary Item Translation Difference Account and are being amortized over the balance period of such long term asset/liability but not beyond, accounting period ending on or before 31st March 2011. In the current year, such exchange differences, pertaining to accounting periods commencing on 1 April, 2007 and ending on 31 March, 2008 are transferred from General Reserve, to the extent they related to acquisition of depreciable capital assets are adjusted with the cost of such assets Rs.24,810,859 (net of depreciation of Rs.1,609,882) (net of tax of Rs.12,775,656) and in other cases, are transferred to the Foreign Currency Monetary Item Translation Difference Account Rs.61,039,657 (net of tax of Rs.31,430,661). Had the Company continued to use the earlier basis of accounting for exchange differences arising on long-term foreign currency monetary items, the Loss after tax for the current period would have been higher by Rs.561,174,198 (net of tax of Rs.288,960,930), the net block of fixed assets would have been lower by Rs.624,117,162 (net of depreciation of Rs.94,952,131) and general reserve would have been higher by Rs.130,056,833. 3. Uses of Estimates The presentation of financial statements in conformity with the Generally Accepted Accounting Principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual result and estimates are recognized in the period in which the results are known/materialized. 4. Revenue Recognition Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Sale of Goods - Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer and is stated net of trade discounts, free quantities, returns and sales tax but includes excise duty. Excise Duty deducted from turnover is the amount that is included in the amount of turnover (gross) and not the entire amount of liability arise during the year. Research & Development - Income from Research & Development Services is accounted for as per the stage of completion. Contract Manufacturing- Revenue is recognized on an accrual basis in accordance with the term of the relevant agreement. Interest - Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. Dividends - Revenue is recognized when the shareholders’ right to receive payment is established by the Balance sheet date. Dividend from subsidiaries is recognized even if same are declared after the balance sheet date but pertains to the period on or before the date of balance sheet as per the requirements of schedule VI of the Companies Act, 1956. Royalties - Revenue is recognized on an accrual basis in accordance with the term of the relevant agreement. Export Benefits - Export entitlements under Duty Entitlement Pass Book Schemes and Advance Licenses are recognized in the Profit & Loss Account when the right to receive credit as per terms of scheme is established in respect of export made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds. 5. Fixed Assets Fixed assets are stated at cost less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use. In respect of accounting periods commencing on or after 7th December, 2006, exchange differences arising on reporting of the long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in the previous financial statements are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, if these monetary items pertain to the acquisition of a depreciable fixed asset. 6. Impairment of Fixed Assets The carrying amounts of assets are reviewed at each Balance Sheet date as to whether if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life. 7. Expenditure during Construction Period Expenditure directly relating to construction activity is capitalized. Indirect expenditure incurred during construction period is capitalized as part of the indirect construction cost to the extent to which the expenditure is indirectly related to construction or is incidental thereto. Income earned during construction period is deducted from the total of the indirect expenditure. 8. Intangibles Patents and Trademarks - Costs relating to patents and trademarks, which are acquired, are capitalized. Research and Development Costs - Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured. Product Development – Product Development is capitalized on successful completion of development activities and commercial

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launch of developed products. Technical Know how - Technical Know how is being capitalized on successful transfer of technology when its future recoverability can reasonably be regarded as assured. Software and Website - Software is stated at cost of acquisition and includes all attributable costs of bringing the software to its working condition for its intended use. Goodwill – Goodwill on consolidation is amortized over a period of 5 years. The carrying value of intangible assets is reviewed for impairment annually when the asset is not yet in use, and otherwise when events or changes in circumstances indicate that the carrying value may not be recoverable. 9. Depreciation/ Amortization a) Depreciation on fixed assets is provided on written down value method as per the rates based on the estimated useful life or as per rates prescribed in Schedule XIV to the Companies Act, 1956 whichever is higher. Depreciation is provided on the following rates: Tangibles Assets WDV % Building – Factory 10.00 Building – Office Premises 5.00 Plant & Machinery 13.91 Furniture & Fittings 18.10 Vehicles 25.89 Office Equipments 13.91 Computer Equipments 40.00 b) Depreciation on intangibles is provided on the basis of the estimated useful lives as follows:- Software - Depreciated on Straight Line basis over a period of 5 years. Websites - Depreciated on Straight Line basis over a period of 2 years. Patents, Trade Mark & Designs - Depreciated on Straight Line basis over a period of 7 years. Product Development - Depreciated on Straight Line basis over a period of 5 years. Technical Know-how - Amortized on straight line basis over a period of 5 years. c) Leasehold Land is depreciated over the period of lease or useful life, whichever is shorter. d) Leasehold Improvements are amortized over the initial period of lease or useful life, whichever is shorter. 10. Borrowing Costs Borrowing costs attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Borrowing costs, which are not relatable to qualifying assets, are recognized as an expense in the period in which they are incurred. 11. Leases Where the Company is the Lessee Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the Profit and Loss account on a straight-line basis over the lease term. Where the Company is the Lessor Assets subject to operating leases are included in fixed assets. Lease income is recognized in the Profit and Loss Account on a straight-line basis over the lease term. Costs, including depreciation are recognized as an expense in the Profit and Loss Account. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Profit and Loss Account. 12. Deferred Revenue Expenditure Expenditure incurred prior to April 1, 2003 towards procuring license for new products is written off over the period of agreement or ten years whichever is shorter. Expenditure of the similar nature incurred during the year is charged off to revenue. 13. Investments Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution, if any, in value is made to recognize a decline other than temporary in the value of the investments. 14. Inventories Finished Goods, Work in Progress, Goods held for Resale, Raw Materials, Packing Materials and Stores & Spares are stated at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished goods in which they will be incorporated are expected to be sold at or above cost. ‘Cost’ of Finished Goods, Work in progress, Raw Materials, Packing Materials and Stores & Spares is arrived at by using ‘Moving Average Price’ method. Cost of Work in Progress and Finished Goods is determined by considering direct material cost and appropriate portion of manufacturing overheads based on normal operating capacity. Cost of traded goods is arrived at by using ‘Moving Average Price’ method and for one of the Joint Ventures as first in first out basis. Cost of finished goods includes Excise Duty. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and to make the sale.

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15. Retirement and Other Employees Benefits a) Retirement benefits in the form of Provident Fund and Pension Schemes are defined contribution schemes andthe contributions are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective funds. b) The contribution to Gratuity Fund, which is a defined benefit plan, is expensed on the basis of funding claims of the fund manager, Life Insurance Corporation of India. At the end of the accounting year, actuarial valuation is done as per projected unit credit method by an independent Actuary and any shortfall in the fund balance is further provided for. c) Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation done as per projected unit credit method. d) Leave encashment payable/ adjustable during the year is provided on the basis of last salary drawn by employees. e) Actuarial gains/losses are adjusted in Profit & Loss Account and are not deferred. 16. Foreign Currency Transaction Initial Recognition Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount, the exchange rate between the reporting currency and the foreign currency at the date of the transaction. Conversion Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined. Exchange Differences Exchange differences arising on the settlement of monetary items or on reporting such monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise except those monetary items as mentioned below. Exchange differences, in respect of accounting periods commencing on or after 7th December, 2006, arising on reporting of long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, in so far as they relate to the acquisition of a depreciable capital asset, are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, and in other cases, are accumulated in a “Foreign Currency Monetary Item Translation Difference Account” in the financial statements and amortized over the balance period of such long-term asset/liability but not beyond accounting period ending on or before 31st March, 2011. Exchange differences arising on a monetary item that, in substance, form part of company’s net investment in a non-integral foreign operation is accumulated in a foreign currency translation reserve in the financial statements until the disposal of the net investment, at which time they are recognized as income or as expenses. Forward Exchange Contracts not intended for trading or speculation purposes The premium or discount arising at the inception of forward exchange contracts is amortized as an expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of Profit and Loss Account in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the year. 17. Income Taxes Tax expense comprises of current, deferred and fringe benefit tax. Current Income Tax and Fringe Benefit Tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961, enacted in India. Deferred Income Taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years. Deferred Income Tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. If the Company has unabsorbed depreciation or carry forward tax losses, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realized against future taxable profits. At each Balance Sheet date the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized. The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes down the carrying amount of a deferred tax assets to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax assets can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available. 18. Earnings Per Share Basic Earnings per Share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. Partly paid equity shares, if any, are treated as a fraction of an equity share to the extent that they were entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of

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equity shares outstanding during the period is adjusted for events of bonus issue, bonus element in a rights issue to existing shareholders, share split and reverse share split (consolidation of shares), if any. For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of Shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares. 19. Provisions A provision is recognized when the Company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on management’s best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. 20. Segment Reporting Policies (a) Identification of Segments: Primary Segment Business Segment: The Company’s operating businesses are organized and managed separately according to the nature of products, with each segment representing a strategic business unit that offers different products. The identified segments are Vaccines, Formulations, Research & Development and Healthcare Activities. Secondary Segment Geographical Segment: The analysis of geographical segment is based on the geographical location of the customers. The geographical segments considered for disclosure are as follows: • Revenue from domestic market includes sales to customers located within India. • Revenue from overseas market includes sales to customers located outside India. (b) Allocation of Common Costs: Common allocable costs are allocated to each segment on a rational basis based on nature of each such common cost. (c) Unallocated Items: Corporate income and expenses are considered as a part of unallocable income & expense, which are not identifiable to any business segment. 21. Derivative Instruments As per announcement of Institute of Chartered Accountants of India, accounting for derivative contracts, other than those covered under AS-11, are marked to market on a portfolio basis and the net loss after considering the offsetting effect on the underlying hedge item is charged to the Profit and Loss Account. Net gains are ignored. 22. Cash & Cash Equivalent Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term investments with an original maturity of three months or less. 23. Preliminary Expenses Costs incurred are amortized equally over a period of 5 years after the commencement of commercial operations.

B. Notes To Accounts (All amounts are in Rs. unless otherwise stated) 1. Contingent Liabilities (to the extent not provided for) Particulars Current Year Previous Year Disputed demands/ show-cause notices under:- a) Sales Tax Cases - 13,809 b) Income Tax Cases 110,557 2,863,251 c) Customs Duty Cases 3,999,923 3,999,923 d) Central Excise Duty Cases 6,596,620 6,596,620 e) Service Tax 29,789,842 - Total 40,496,942 13,473,603 Labour cases (in view of large number of cases, it is impracticable to 2,803,586 4,143,107 disclose each of them) Other claims against the Company not acknowledged as debts - 64,000 Premium on Redemption of ‘US$ 50 Million Zero Coupon 470,992,269 243,706,599 Convertible Bonds due 2011’ (Refer note 3(ii) below) Notes: a) Sales Tax liability of Rs.13,809 was on account of non-receipt of C forms from customers for inter-state sales. No provision was required for the same as the management was hopeful of receiving the forms before the due date of filing of Sales Tax Returns. b) In respect of Income Tax, in Assessment Year 2005-06 the department disallowed ‘Club Expenses’ of Rs.255,800 on the ground that the these expenses were incurred in the personal names and not in the name of the company, hence not related to the business of the company in the order under section 143(3) of the Act. The company preferred appeal before the CIT (Appeals). The CIT (Appeals) restricted the disallowance to Rs.50,000 from Rs.255,800. In Assessment Year 2006-07 the department disallowed depreciation on LAN of Rs.60,557 on the ground that depreciation on the same is allowable @25% and not @60% in the order under section 143(3) of the Act. No provision is considered necessary in this regard since the Company believes it has a good case based on nature of the case and legal advice obtained by it. c) In respect of Customs Duty demand of Rs.3,999,923 towards Customs Duty on certain items imported as exempted by the Company, the Company has deposited the entire amount under protest. The matter is pending before the Hon’ble Supreme Court of India. No provision is

115 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT

considered necessary in this regard since the Company believes it has a good case based on nature of the case and legal advice obtained by it. d) In respect of Central Excise Duty demand of Rs.6,596,620 towards Excise Duty on common inputs used in manufacture of exempted and taxable products, the Company has deposited the entire amount under protest. The matter is pending before Central Excise and Customs Tribunal. No provision is considered necessary in this regard since the Company believes it has a good case based on nature of the case and legal advice obtained by it. e) In respect of service tax demand of Rs.29,789,842 relating to foreign services rendered & delivered outside India & others services, which were brought in service tax net w.e.f. 18.04.06 and against which numerous decisions/ judgments have been pronounced by the competent courts/judicial authorities, the Company has sent suitable reply to the concerned authority. No provision is considered necessary in this regard since the Company believes it has a good case based on nature of the demand and legal advice obtained by it. 2. Estimated amount of contracts remaining to be executed on capital account, net of advances and not provided in the books are as follows:- S. No. Particulars Current Year Previous Year 1. Tangibles Assets 529,633,712 306,726,108 2. Intangible Assets 21,946,833 90,701,180 Total 551,580,545 397,427,288 3. Foreign Currency Convertible Bonds i) Conversion price of ‘US$ 50 Million Zero Coupon Convertible Bonds due 2011’ (FCCBs) has already been fixed at Rs.357.57 per Share. This Rate is used to determine dilutive Equity Shares against outstanding Bonds. ii) ‘US$ 50 Million Zero Coupon Convertible Bonds due 2011’ amounting to US$ 36,800,000 are pending for redemption as on 31st March 2009. Unless these Bonds have been previously converted, redeemed, repurchased and cancelled, the Company will redeem these Bonds at a price equal to 142.80% of the outstanding principal amount on the maturity date i.e. February 14, 2011 (including premium amounting to Rs.798,860,288). Since the redemption of bonds is contingent upon its non- conversion into Equity Shares and the probability of redemption cannot presently be ascertained, the Company has not provided for the proportionate premium on redemption for the period upto 31st March, 2009 amounting to Rs.470,992,269 (Previous Year 243,706,599). Such premium has been disclosed as contingent liability. These Bonds are considered a monetary liability and are redeemable only if there is no conversion before maturity date. iii) The Company has fully utilized the issue proceeds of ‘US$ 50 Million Zero Coupon Convertible Bonds due 2011’ in earlier years. 4. Details of pre-operative expenses (included in Capital Work in Progress) relating to Fixed Assets are as follows: Particulars As at Additions Capitalised As at April 1, 2008 during the year during the year March 31, 2009 Legal & Professional 53,548,946 11,434,122 3,862,283 61,120,785 (2,941,783) (51,926,227) (13,190,164) (53,548,946) Store & Spares consumed 22,419,030 50,376 22,469,406 - (2,325,569) (22,126,744) (2,033,283) (22,419,030) Power and Fuel 31,254,050 357,323 31,529,249 82,124 (4,219,189) (27,922,199) (887,338) (31,254,050) Rates & Taxes 9,860,525 4,872 9,575,517 289,880 (285,008) (9,575,517) (-) (9,860,525) Repair & Maintenance: Plant and Machinery 4,452,852 - 4,452,852 - (120,255) (43,627,41) (30,144) (4,452,852) Others 6,222,930 7,73,882 6,545,065 451,747 (157,267) (60,74,541) (8,878) (6,222,930) Salary and Wages 14,399,373 4,580,192 13,191,507 5,788,058 (2,335,791) (12,114,403) (50,821) 14,399,373 Office Expenses 2,733,205 73,934 2,807,139 - (-) (2,733,205) (-) (2,733,205) Travel and Conveyance 3,855,848 1,857,383 3,731,531 1,981,700 (1,003,717) (2,852,131) (-) (3,855,848) Rent 1,038,300 3,081,945 25,799 4,094,446 (-) (1,038,300) (-) (1,038,300) Miscellaneous Expenses 4,595,999 7,215,152 8,802,924 3,008,227 (347,310) (4,463,177) (214,488) (4,595,999) Total 154,381,058 29,429,181 106,993,272 76,816,967 (13,735,889) (145,189,185) (4,544,016) (154,381,058)

Note: Figures in brackets represent previous year figures (2007-08)

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5. Auditor’s Remuneration: Particulars Year ended March 31, 2009 Year ended March 31, 2008 Parent Subsidiaries Joint Parent Subsidiaries Joint Company Ventures Company Venture Statutory Auditors - Statutory Audit 3,309,000 382,919 4,68,762 3,400,060 57,304 514,755 - Quarterly Limited Reviews 1,685,400 - - 1,348,320 - - - Certificates 134,832 1,500 - 113,217 - - - Other Advisory - 15,000 - - 15,000 248,177 - Out of Pocket Expenses 161,721 - 6,953 69,317 - 8,757 5,290,953 399,419 475,715 4,930,914 72,304 771,689 Tax Auditor* 140,450 - 93,038 140,450 - 84,270 Cost Auditor* 44,944 - 33,708 - -

* included in the Legal & Professional charges given in Schedule XIII

6. Disclosure of Micro & Small Enterprises

Details of dues to Micro, Small and Medium Enterprises as per Micro, Small and Medium Enterprise Development Act, 2006 (“MSMED Act”).

Current Year Previous Year

Principal Interest Principal Interest

Principal amount and interest due thereon 1,274,843 Nil 1,177,455 Nil remaining unpaid to any supplier as at 31st March 2009. Interest paid by the Company in terms of 3,552,413 68,868 4,703,195 78,680 section 16 of the MSMED Act along with the amounts of the payment made to the supplier beyond the appointed day during accounting year Interest due and payable for the period of Nil Nil Nil Nil delay in making payment (which have been paid but beyond the appointed day during the year) but without adding the interest specified under MSMED Act Interest accrued and remaining unpaid at the Nil Nil Nil Nil end of the year Further interest remaining due and payable in Nil Nil Nil Nil succeeding years, until such date when the interest dues as above are actually paid to the small enterprises for the purpose of disallowance as a deductible expenditure under section 23 of the MSMED Act

117 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT

7. Deferred Tax Liabilities (Net): The break-up of deferred tax liability is as follows:- Current Year Previous Year Deferred Tax Liabilities: Differences in depreciation and amortization in block of fixed assets as per tax books 501,434,945 375,059,972 and financial books Deferred Revenue Expenditure 1,241,287 1,786,309 Capital expenditure on Research & Development 267,365,738 262,159,287 Forex Loss (revenue) deferred as per notification on AS-11 (Revised) 50,254,492 - Gross Deferred Tax Liabilities 820,296,462 639,005,568 Deferred Tax Assets: Effect of expenditure debited to Profit and Loss Account in the current year but 49,139,072 43,501,706 allowed for tax purposes in following years Loss as per Income Tax Act carried forward 364,509,363 - Unabsorbed Depreciation as per Income Tax Act carried forward 71,861,483 - Gross Deferred Tax Assets 485,509,918 43,501,706 Net Deferred Tax Liability 334,786,544 595,503,862 Note: The Group has recorded a loss before tax of Rs.877,492,204 in year ended March 2009 which is mainly on account of foreign currency loss of Rs.1,702,604,000 on open derivative contracts. The group is otherwise earning good operating margin and based on orders on hand, it is virtually certain that it will earn sufficient margins to generate income to reverse book losses and will generate taxable profits to set-off the unabsorbed depreciation and carry-forward losses and other timing differences resulting into deferred tax assets. Hence, the group has recognised deferred tax asset as at March 31, 2009 on carry-forward losses component also. 8. Related Party Disclosures A. Names of Related Parties (a) Key Management Personnel: Mr. Soshil Kumar Jain - Chairman and Whole-time Director Mr. Ravinder Jain - Managing Director Dr. Rajesh Jain - Joint Managing Director Mr. Sandeep Jain - Joint Managing Director Mr. Sumit Jain - Whole-time Director (b) List of Persons having controlling interest together with their relatives* Key Management Father Mother Wife Brother Sister Son Daughter Personnel Soshil Kumar Jain - - Nirmala Jain - - Ravinder Jain, - Rajesh Jain, Sandeep Jain Ravinder Jain Soshil Kumar Jain Nirmala Jain Sunanda Jain Rajesh Jain, - Sumit Jain, Radhika Jain Sandeep Jain Nipun Jain Rajesh Jain Soshil Kumar Jain Nirmala Jain Meena Jain Ravinder Jain, - Ankesh Jain, - Sandeep Jain Harshet Jain * Relatives/associates holding Equity Shares in the Company have been disclosed Sandeep Jain Soshil Kumar Jain Nirmala Jain Pamilla Jain Ravinder Jain, - - Priyanka Jain Rajesh Jain Sumit Jain Ravinder Jain Sunanda Jain - Nipun Jain Radhika Jain - - * Relatives holding Equity shares in the Company have been disclosed

(c) Relatives of Key Management personal having transactions with the Company Mr. Ashwani Jain, Son-in-law of Mr. Soshil Kumar Jain Mr. Shagun Jain, Son-in-law of Mr. Ravinder Jain Mrs. Radhika Jain, Daughter of Mr. Ravinder Jain Mrs. Shilpy Jain, Wife of Mr. Sumit Jain

(d) Enterprises over which person(s) having controlling interest in Company / Key management personnel(s) along with their relatives are able to exercise significant influence; (i) Neophar Alipro Limited, (ii) All India S. L. Jain Charitable Foundation, (iii) First Lucre Partnership Co.* , (iv) Second Lucre Partnership Co.* , (v) Radhika Associates, (vi) Sumit Nipun & Co., (vii) Rattan Sons, (viii) Tahir & Co., (ix) Best On Health Foods Ltd. , (x) Soshil Kumar Jain (HUF)*, (xi) Ravinder Jain (HUF)*, (xii) Rajesh Jain (HUF)*, (xiii) Sandeep Jain (HUF)* * These enterprises are also holding Shares in the Company.

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B. Details of Transactions with the Related Parties Particulars Joint Ventures Associates Key Relatives and Total PanEra Biotec Chiron Panacea PanEra Biotec Lakshmi & Lakshmi & Management Associates of Key Pvt. Ltd. (Upto Vaccines Pvt. Ltd. (w.e.f. The Manager Manager Personal Management 20.11.2007) Pvt. Ltd. 21.11.2007) Holdings Ltd. Personal A. During the year Purchase of - - 63,092,690 - - - - 63,092,690 raw materials (7,797,679) (-) (12,824,361) (-) (-) (-) (-) (20,622,040) Sale - 121,638,985 20,568,527 - - - - 142,207,512 (-) (109,172,953) (-) (-) (-) (-) (-) (109,172,953) Processing Charges paid - - 12,578,568 - - - - 12,578,568 (-) (-) (-) (-) (-) (-) (-) (-) Recovery of dues on - - 33,481,411 - - - - 33,481,411 Account of Expenses (16,777,765) (-) (9,644,863) (-) (-) (-) (-) (26,422,628) Rent paid ------(3,539,340) (-) (-) (-) (-) (-) (-) (3,539,340) Rent received - - 8,886,016 - - - - 8,886,016 (28,000) (-) (541,473) (-) (-) (-) (-) (569,473) Investments made - - - - 24,754,276 - - 24,754,276 (-) (-) (-) (24,000,000) (-) (-) (-) (24,000,000) Sale of Investment - - - 24,754,276 - - - 24,754,276 (-) (-) (-) (-) (-) (-) (-) (-) Remuneration - - - - - 63,035,463 4,843,885 67,879,348 (-) (-) (-) (-) (-) (202,154,417) (4,842,137) (206,996,554) Loan/Fixed Deposits Received ------300,000,000 300,000,000 (-) (-) (-) (-) (-) (-) (612,500,000) (612,500,000) Loan/Fixed Deposits Repaid ------432,500,000 432,500,000 (-) (-) (-) (-) (-) (-) (348,390,000) (348,390,000) Interest Paid on Deposits/Loans ------35,893,714 35,893,714 (-) (-) (-) (-) (-) (-) (25,935,713) (25,935,713) Dividend Paid- Equity Shares - - - - - 19,503,700 24,137,900 43,641,600 (-) (-) (-) (-) (-) (19,503,700) (24,137,900) (43,641,600) Purchase of Shares ------(-) (-) (-) (-) (-) (100,000) (590,000) (690,000) Donation made ------300,000 300,000 (-) (-) (-) (-) (-) (-) (500,000) (500,000) B. Year end balances Investments - 11,479,550 2,098,835 - 24,754,276 - - 38,332,661 (-) (11,479,550) (2,098,835) (24,000,000) (-) (-) (-) (37,578,385) Outstanding receivable - 39,077,216 97,543,624 - - - - 136,620,840 (-) (27,558,846) (67,766,327) (-) (-) (-) (-) (95,325,173) Provision for bad and - - 67,766,327 - - - - 67,766,327 doubtful advances (-) (-) (67,766,327) (-) (-) (-) (-) (67,766,327) Outstanding Fixed ------300,000,000 300,000,000 Deposits/Loan (-) (-) (-) (-) (-) (-) (432,500,000) (432,500,000) Notes: 1. Figures in Brackets represent previous year figures. 2. In respect of personal guarantee given by Promoter-Directors refer Note no 2 of Schedule III. 3. In respect of Joint Venture & Associates figures represents other than Panacea Biotec Ltd.’s share. 4. Material related party transactions (More than 10% of aggregate) with individual parties are as follows:

Particulars Unsecured Loans/ Fixed Interest Managerial Remuneration Equity Dividend Deposits received/(repaid) During the year Current Year Previous Year Current Year Previous Year Current Year Previous Year Current Year Previous Year Key Management personnel Mr. Soshil Kumar Jain - - - - 15,155,738 48,153,429 5,000,000 5,000,000 Mr. Ravinder Jain - - - - 19,321,956 59,771,725 4,646,200 4,646,200 Dr. Rajesh Jain - - - - 12,648,046 45,645,737 4,706,900 4,706,900 Mr. Sandeep Jain - - - - 12,648,046 45,645,737 4,792,100 4,792,100 Enterprises over which Person(s) having control or significant influence over the Company / Key management personnel(s), along with their relatives, are able to exercise significant influence First Lucre Partnership Co. 300,000,000 612,500,000 35,893,714 25,405,853 - - - - (432,500,000) (330,000,000) ------All India S.L. Jain Charitable Foundation - - 415,993 - - - - Year end Balances First Lucre Partnership Co. 300,000,000 432,500,000 ------

119 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT

9. Derivative Instruments and Hedged/Unhedged Foreign Currency Exposure i) Forward contract outstanding as at Balance Sheet date Sell - Nil Buy - Nil ii) Particulars of Hedged Export Receivables at applicable exchange rates in respect of Options Contracts outstanding as at Balance Sheet date Currency Exchange Amount in Amount in Amount in Amount in Purpose rates Foreign Currency Indian Rupees Foreign Currency Indian Rupees Current Year Current Year Previous Year Previous Year USD 41.00 - - 28,000,000 1,148,000,000 To USD 40.55 - - 30,000,000 1,216,500,000 hedge USD 40.00 58,000,000 2,320,000,000 84,000,000 3,360,000,000 Export USD 39.00 48,000,000 1,872,000,000 48,000,000 1,872,000,000 Receivables USD 39.60 36,000,000 1,425,600,000 36,000,000 1,425,600,000 142,000,000 5,617,600,000 226,000,000 9,022,100,000 Accordingly, exchange fluctuation loss on marking them to market as of year end amounting to Rs.1,702,604,000 (Previous Year Rs.40,500,000) has been accounted for and included in “Provision for Loss on Open Derivative Contracts” under Schedule XIII - Operating and Other Expenses

iii) Particulars of Hedged Foreign Currency Exposure as at the Balance Sheet date Particulars Amount as at Currency Closing Amount as at Amount as at Currency Closing Amount as at 31st March’09 Exchange 31st Mar’09 31st March’08 Exchange 31st Mar’08 (in Foreign Currency) Rate* (INR) (in Foreign Currency) Rate* (INR) Export Debtors 15,038,066 USD 50.71 762,580,345 28,387,626 USD 40.12 1,138,769,629

iv) Particulars of Unhedged Foreign Currency Exposure as at the Balance Sheet date Particulars Amount as at Currency Closing Amount as at Amount as at Currency Closing Amount as at 31st March’09 Exchange 31st Mar’09 31st March’08 Exchange 31st Mar’08 (in Foreign Currency) Rate* (INR) (in Foreign Currency) Rate* (INR) Import Creditors 6,035,469 USD 50.72 306,119,006 5,332,130 USD 40.11 213,845,059 - - - - 203850 USD 40.34 8,223,309 12,841,668 EURO 67.54 867,327,519 887,098 Euro 63.35 56,197,580 33,538 CHF 44.56 1,494,481 35,692 CHF 39.89 1,423,840 12,289 GBP 72.60 892,159 17,355 GBP 79.52 1,380,106 1,217,220 JPY/100 51.55 627,521 2,576,200 JPY/100 39.99 1,030,086 16,820 SEK 6.13 103,140 16,820 SEK 6.74 113,399 1,010 CAD 40.47 40,856 - - - - Export Debtors 2,990,037 EURO 67.50 201,827,823 2,589,747 Euro 63.38 164,142,548 Foreign Currency Loans 65,097,252 USD 50.72 3,301,732,614 45,221,166 USD 40.11 1,813,595,469 Balance with Banks 9,652,566 USD 50.71 489,481,613 874,867 USD 40.12 35,095,289 10,5761 EURO 67.5 7,138,856 1,404,665 Euro 63.38 89,030,070 FCCBs 36,800,000 USD 50.72 1,866,496,000 36,800,000 USD 40.11 1,475,864,000 *The amount converted in INR is being round off to two decimal places.

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10. Segmental Information A. Information about Primary Segments

Particulars Vaccines Formulations Research & Development Healthcare Total 2008-09 2007-08 2008-09 2007-08 2008-09 2007-08 2008-09 2007-08 2008-09 2007-08 Revenue Segment Revenue 5,617,717,120 6,432,222,552 2,262,302,398 1,976,017,495 1,699,562 5,195,312 - - 7,881,719,080 8,413,435,359 Other Income 5,952,196 40,218,416 24,950,226 32,517,814 - - - - 30,902,422 72,736,230 Total 5,623,669,316 6,472,440,968 2,287,252,624 2,008,535,309 1,699,562 5,195,312 - - 7,912,621,502 8,486,171,589 Segment Results 2,689,749,974 2,874,003,726 466,882,428 220,745,751 (668,244,483) (587,118,431) (5,658,514) - 2,482,729,405 2,507,631,046 Unallocated Corporate - 3,308,904,285 (744,741,593) Expenses Operating Profit - (826,174,880) 1,762,889,453 /(Loss) Interest & Finance - 321,543,582 (152,290,601) Charges Other Income - 281,054,503 266,258,952 Income Taxes - (206,739,127) (587,041,067) Net Profit/(Loss) - (659,924,832) 1,289,816,737 Other Information Segment Assets 8,242,804,702 4,673,939,748 1,757,286,755 1,914,995,988 2,143,579,827 1,961,794,070 2,305,499,096 1,967,257,711 14,449,170,380 10,517,987,517 Unallocated Corporate 2,680,016,136 2,483,391,743 Assets Total Assets 8,242,804,702 4,673,939,748 1,757,286,755 1,914,995,988 2,143,579,827 1,961,794,070 2,305,499,096 1,967,257,711 17,129,186,516 13,001,379,260 Segmental Liabilities 852,101,141 469,524,505 391,402,477 257,279,313 65,696,536 95,572,596 167,893,005 140,880,983 1,477,093,159 963,257,397 Unallocated Corporate 9,455,622,542 5,077,039,261 Liabilities Total Liabilities 852,101,141 469,524,505 391,402,477 257,279,313 65,696,536 95,572,596 167,893,005 140,880,983 10,932,715,701 6,040,296,658 Capital Expenditure- 1,950,193,086 372,154,760 123,752,797 82,121,704 578,593,601 175,826,431 375,658,708 1,185,014,759 Additions Non Cash Expenses Depreciation 351,933,819 112,965,480 125,068,119 129,116,679 169,025,407 131,914,637 7,991,099 2,315,094

B. Information about Secondary Segments a) Revenue as per Geographical Markets Segment Domestic* Overseas Current Year Previous Year Current Year Previous Year Vaccines 4,139,282,326 6,123,244,312 1,478,434,793 308,978,240 Formulation 1,798,741,628 1,604,484,560 463,560,771 371,532,936 Healthcare - - - - R&D - - 1,699,562 5,195,312 Total 5,938,023,954 7,727,728,872 1,943,695,126 685,706,488 * Domestic revenue includes revenue from deemed exports of Rs.3,708,466,456 (Previous Year Rs.5,797,333,245) b) Debtors as per Geographical Segment Segment Domestic Overseas Current Year Previous Year Current Year Previous Year Vaccines 298,940,869 1,163,295,364 536,329,974 Formulation 140,405,116 109,309,365 226,054,249 179,883,788 Healthcare - - - - R&D - 6,359,660 Total 439,345,985 1,272,604,729 762,384,223 186,243,448 c) The Company has common fixed assets for producing goods for Domestic Market and Overseas Market. Hence, separate figures for fixed assets / additions to fixed assets cannot be furnished.

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11. Leases i) For assets given under Operating Lease agreements: a) The Company has leased out the assets situated at Lalru, Punjab on operating lease to its Associate, PanEra Biotec Private Ltd. Gross Block Accumulated Depreciation Depreciation charged to P&L Account Particulars Current Previous Current Previous Current Previous Year Year Year Year Year Year Building 89,955,066 18,352,562 33,159,226 6,605,854 5,327,263 1,305,186 Furniture and Fixture 10,659,476 6,750,149 5,639,670 3,861,199 1,151,292 638,461 Office Equipment 1,904,239 512,602 769,438 244,331 270,436 43,346 Plant & Machinery 663,486,845 316,043,799 247,986,666 146,532,544 66,307,911 27,388,797 Computer Equipment 5,950,080 671,976 1,549,742 557,752 688,492 76,149 Total 771,955,706 342,331,088 289,104,742 157,801,680 73,745,394 29,451,939

The total of Minimum Future Lease Payments under non-cancelable operating lease for various periods for assets stated above is as follows: As at March 31, 2009* As at March 31, 2008 a) Receivable within 1 year 67,600,000 9,600,000 b) Later than 1 year but not later than 5 years 67,600,000 - c) Later than 5 years - - * The Lease term for the assets given on lease vide Agreement for providing Manufacturing Facility, Utilities and Services of Employees and transfer of raw material with PanEra Biotec Pvt. Ltd. is valid till 31.03.2011. As per the said Agreement, during the period of usage, if any, Facility is used for manufacture of the Company’s Vaccines other than those mentioned therein or the facility remains idle due to insufficiency of orders from the Company, no lease rental shall be payable by PanEra Biotec Pvt. Ltd. during the relevant period.

The Company has also given an office space in its building situated at B-1 Extn./A-27, Mohan Co-operative Industrial Estate, New Delhi on operating lease to PanEra Biotec Pvt. Ltd. b) Total of future minimum lease payments under operating lease mentioned above: As at March 31, 2009 As at March 31, 2008 a) Receivable within 1 year 14,000 21,000 b) Later than 1 year but not later than 5 years - - c) Later than 5 years - -

ii. For assets taken on Lease a) The Company has taken various residential, office and godown premises under operating lease agreements. These are generally not non-cancelable and are renewable by mutual consent on mutually agreed terms. . There is no sublease payments expected to be received at the balance sheet date and no restrictions is imposed by lease arrangements. b) Lease payments for the year are Rs.63,107,965 (Previous Year Rs.63,056,022). c) Total of future minimum lease payments under Non Cancelable operating lease: Particulars As at March 31, 2009 As at March 31, 2008 a) Payable within 1 year 9,714,882 9,357,368 b) Later than 1 year but not later than 5 years 12,721,625 28,116,760

122 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT

12. (a) Details of Company’s share in Joint Ventures included in the Consolidated Financial Statements are as follows: As at As at March 31, 2009 March 31, 2008 Sources of Funds 1. Shareholders’ Funds a) Share Capital b) Reserves & Surplus 46,571,024 53,137,540 2. Loan Funds a) Secured Loans 163,121 7,813,063 b) Unsecured Loans - - Application of Funds 1. Fixed Assets a) Gross Block 11,000,281 20,522,254 Less : Depreciation 7,790,995 11,459,002 Net Block 3,209,287 90,63,252 b) Capital Work-in-Progress - 7,371,297 2. Deferred Tax Assets 1,994,049 1,723,371 3. Current Assets, Loans & Advances A. Current Assets 143,485,483 122,905,261 B. Current Liabilities & Provisions 78,995,574 53,485,062 Net Current Assets (A)-(B) 64,489,909 69,420,199 4. Miscellaneous Expenditure - -

Year ended Year ended March 31, 2009 March 31, 2008 Income Turnover 269,186,069 238,787,974 Other Income 5,737,410 15,596,464 Total Income 274,923,479 254,384,438 Expenditure Manufacturing & Administrative Expenses 175,809,060 192,195,864 Personnel Expenses 40,530,528 48,998,905 Interest & Finance Expenses 289,382 878,015 Selling & Distribution Expenses 23,761,359 2,119,755 Total Expenditure 240,390,329 244,192,539 b) Subsequent Event: The Company’s Joint Venture Cambridge Biostability Limited (CBL), having regard to its financial position, has initiated steps to place it into creditors’ voluntary liquidation, subsequent to the balance sheet date. Due to the financial position of CBL, the Company considers its investments in CBL as well as loan given to it, doubtful of recovery. Accordingly, the following have been provided for in the books of accounts of current year: Particulars Amount (INR) Investment made 168,068,998 Loan given 108,833,850 Interest accrued on above Loan 7,275,470 Total 284,178,318 In view of the above development and consequent inability of the Joint Venture Company with regard to transfer of funds to the Venturer, the Company has discontinued proportionate consolidation of the Joint Venture Company. Consequently, net assets and goodwill amounting to Rs.9,532,746 and Rs.157,190,676 respectively has been adjusted in the books of accounts in the current year. Also due to discontinuation of non-integral foreign operations, cumulative amount of gain on exchange differences (Foreign Currency Translation Reserve) on these operations amounting to Rs.7,009,383 have been recognized as income in the current year. 13. The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service subject to maximum of Rs.3,50,000. The scheme is funded with an insurance company in the form of a qualifying insurance policy. The following tables summarize the components of net benefit expense recognized in the Profit & Loss Account and the funded status and amounts recognized in the Balance Sheet for the respective plans.

123 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT

Profit and Loss Account Net employee benefit expense - Gratuity (recognized in Employee Cost) Particulars 2008-09 2007-08 Current service cost 13,648,636 9,196,529 Interest cost on benefit obligation 6,643,369 4,381,877 Expected return on plan assets (2,770,184) (2,026,934) Net actuarial gain recognized in the year on account of return on plan assets (4,275,782) - Net actuarial loss recognized in the year - 25,240,147 Net benefit expense* 13,246,040 36,791,619 Actual return on plan assets (3,452,434) (2,265,802) * Includes Gratuity expense of Rs.3,439,471 (Previous Year Rs.3,287,690) accounted under Research & Development Expenses. Balance sheet Details of Provision for Gratuity: Particulars 2008-09 2007-08 Defined benefit obligation 100,695,065 87,922,995 Fair value of plan assets 43,638,111 30,002,106 57,056,954 57,920,889 Less: Unrecognized past service cost Plan (liability) (57,056,954) (57,920,889)

Changes in the present value of the defined benefit obligation are as follows: Particulars 2008-09 2007-08 Opening defined benefit obligation 87,922,995 54,165,505 Interest cost 6,643,369 4,381,877 Current service cost 13,648,636 9,196,529 Actual return on plan assets Benefits paid (4,025,152) (5,410,262) Actuarial losses on obligation (3,494,783) 25,589,347 Closing defined benefit obligation 100,695,065 87,922,996

Changes in the fair value of plan assets are as follows: Particulars 2008-09 2007-08 Opening fair value of plan assets 30,002,106 21,981,664 Expected return 2,770,184 2,026,934 Contributions by employer 14,109,975 11,054,570 Benefits paid (4,025,152) (5,410,262) Actuarial Gain /(losses) 780,999 349,200 Closing fair value of plan assets 43,638,111 30,002,106 The Company has since contributed Rs.14,809,973 to the gratuity fund.

The major categories of plan assets as a percentage of the fair value of total plan assets are as follows: Particulars 2008-09 2007-08 Investments with insurer 100% 100% The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled. There has been significant change in expected rate of return on assets due to the improved debt market scenario.

The principal assumptions used in determining gratuity obligations for the Company’s plans are shown below: Particulars 2008-09 2007-08 Discount rate 6.50% to 7.50% 8.00% Expected rate of return on plan assets 8.00% to 9.25% 8.00 to 9.25% Increase in compensation cost 5.00% to 12.00% 5.50 to 10.00% Employee turnover upto 30 years 10.00% 10.00% above 30 years but upto 44 years 5.00% 5.00% above 44 years 1.00% 1.00% The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

124 Panacea Biotec • Annual Report 2008-09 SCHEDULES TO CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT

Gratuity amounts for the current and previous periods are as follows: Particulars 2008-09 2007-08 2006-07 Defined benefit obligation 100,695,065 87,922,995 54,165,505 Plan assets 43,638,111 30,002,106 21,981,664 Deficit 5,705,6954 57,920,889 32,183,841 Experience adjustments on plan liabilities (3,286,351) (236,689) (21,981) Experience adjustments on plan assets (743,588) (238,939) (7,984) Defined Contribution Plan: 2008-09 2007-08 Contribution to Provident Fund Charged to Profit and Loss Account 31,045,359 25,677,410 The Company expects to contribute Rs.17,575,000 to gratuity fund in the year 2009-10. 14. The Company has incurred expenditure on Pre-Clinical Development studies amounting to Rs.123,978,449 during the year (Previous Year Rs.185,575,387). This expenditure relates to studies carried out by Clinical Research Organization (CRO) towards obtaining registration of Company’s products in US and / or Europe. The expenditure incurred has been capitalized and carried in Capital Work in Progress. Management believes that it is in the nature of development expenditure and meets the capitalization criteria set out in Accounting Standard 26 on Intangible Assets issued by the Institute of Chartered Accountants of India due to the following reasons: • the expenditure is not towards basic research and therefore no New Chemical Entity comes into being. Basic research is conducted by the Company in its own R&D centers, but such developmental work is performed through external agencies (CROs). Safety profile of the basic molecule is well established in several countries in Europe and in India and the product is being marketed successfully in several countries under different brand names. • there is no experience to suggest that the studies conducted by CROs on behalf of the Company would lead to or make it difficult for the Company to obtain regulatory approvals in US and / or Europe. The management believes that these products would be commercially viable and there is no reason to believe that there is any uncertainty that may lead to not securing registration for the products from regulatory authorities in US and / or Europe. 15. In accordance with Accounting Standard 9 on ‘Revenue Recognition’ notified by the Companies (Accounting Standards) Rules, 2006, Excise Duty on turnover amounting to Rs.18,845,112 (Previous year Rs.37,756,574) has been reduced from turnover in Profit & Loss Account and differential Excise Duty on opening and closing stock of finished goods amounting to Rs.Nil (Previous year Rs.Nil) has been adjusted from Raw Materials, Finished Goods, Work in Progress and Job Processing charges in Schedule XII. 16. The Company has exercised the option as per the Companies (Accounting Standards) Rules, 2009. As per the option exchange differences related to long term foreign currency monetary items so far as they relate to the acquisition of a depreciable capital assets are capitalized and depreciated the same over the useful life of the assets and in other cases, have transferred to Foreign Currency Monetary Item Translation Difference Account and amortized over the balance period of such long term assets/ liabilities but not beyond accounting period ending on or before 31st March 2011, the unamortized balance in this account is Rs. 95,961,134 (Previous year Rs. Nil). 17. The Company is in the process of appointing independent consultants for conducting a Transfer pricing study to determine whether the transactions with associated enterprises were undertaken at “arms length basis”. The management confirms that all international transactions with associated enterprises are undertaken at negotiated contracted prices on usual commercial terms. Further there has been no change in the terms of such international transactions till March 31, 2009. 18. Details of Loans and Advances to Associates and Parties in which directors are interested (as required by clause 32 of listing agreement) to the extent of the share of balances outside group: Particulars Current Year Previous Year Dues from Associates - PanEra Biotec Pvt. Ltd. (Previously known as Panheber Biotec Pvt. Ltd.) Balance Recoverable (including Rs. 20,568,527 on account of sale of raw material 97,543,624 67,766,327 grouped as sundry debtors under Schedule VII) Maximum amount due at any time during the year 97,543,624 67,766,327 19. Previous year’s figures have been rearranged and reclassified wherever necessary to make them comparable with the current year’s figures. As per our attached report of even date S.R. Batliboi & Co. For and on behalf of the Board Chartered Accountants Ravinder Jain Managing Director per Manoj Gupta Partner I.K. Sharma Dr. Rajesh Jain Membership No. 83906 D.G.M. (Accounts & Finance) Joint Managing Director Place : New Delhi Vinod Goel Dated : May 27, 2009 G.M. Legal & Company Secretary

125 Panacea Biotec • Annual Report 2008-09 CASH FLOW STATEMENT ANNEXED TO CONSOLIDATED BALANCE SHEET FOR THE YEAR ENDED 31ST MARCH, 2009 Amount in Rs. Current Year Previous Year A. Cash Flow from Operating Activities: Net operating profit before tax (866,663,960) 1,876,025,059 Depreciation 714,198,042 465,881,899 Interest Expenses 321,543,582 116,455,124 Provison for Doubtful Debts & Advances 422,105 27,044,708 Interest Income (179,781,777) (56,486,004) (Profit)/Loss on sale of Fixed Assets (6,937,487) (22,830,661) Intangibles written off (46,263,349) 2,103,721 Provision for Impairment & doubtful Loans 284,178,318 - Unrealized Foreign Exchange (Gain)/Loss 1,689,589,699 (102,855,667) Amortised exchange differences 47,980,567 - Deferred Revenue Expenditure written off during the year 1,306,690 2,826,236,390 1,556,353 430,869,473 Operating profit before working capital changes 1,959,572,430 2,306,894,532 (Increase) / Decrease in Trade and Other Receivables 74,223,324 (1,052,606,073) (Increase)/Decrease in Inventories (2,367,283,704) (53,828,110) Increase / (Decrease) in Current Liabilities & Provisions 527,604,285 (1,765,456,095) (148,473,118) (1,254,907,301) Cash generated from operations 194,116,335 1,051,987,231 Net Direct Taxes paid (262,488,116) (349,052,477) Net cash from operating activities (68,371,781) 702,934,754 B. Cash flow from investing activities: Purchase of Fixed Assets (2,025,133,881) (2,926,138,709) Proceeds of deposits matured (with maturity more than three months) 1,250,968,300 402,060,214 Deposits (with maturity more than three months) (70,376,198) (1,250,968,300) Sale of Fixed Assets 52,261,957 31,304,037 Interest Received 182,155,836 57,774,295 Invetsment made (691,734,460) (152,806,491) Invetsments sold 149,108,804 (1,152,749,642) - (3,838,774,954) Net cash used in investing activities (1,221,121,423) (3,135,840,200) Net cash from operating and investing activities C. Cash flow from financing activities: Net increase in Working Capital Borrowings 1,292,036,897 256,194,912 Long Term Borrowings raised 837,914,977 2,057,104,157 Fixed Deposits received 300,500,000 - Fixed Deposits repaid (436,110,000) - Long Term Borrowings repaid (243,100) - Movement in Securities Premium Account - 2,263,266 Portion of (profit)/ loss in Associates - 52,002,560 Interest paid (313,814,246) (114,515,280) Dividend & Tax on Dividend paid (81,149,949) (76,872,959) Net Cash from Financing activities 1,599,134,579 2,176,176,656 Net cash from operating, investing & financing activities 378,013,156 (959,663,544) Net increase/ (decrease) in Cash & Cash equivalent 378,013,156 (959,663,544) Opening balance of Cash & Cash equivalent 295,835,044 1,254,672,615 Closing balance of Cash & Cash equivalent 673,848,200 295,009,071 Note: Components of Cash and cash equivalent: i) Cash Balance on Hand 9,243,607 2,653,554 ii) Balance with Scheduled Banks : a) In Current Accounts 100,130,657 104,179,993 b) In Unpaid Dividend Accounts* 1,583,956 1,536,608 c) In Fixed Deposits 140,844,041 1,314,307,829 d) In Exchange Earner Foreign Currency Current Accounts 496,620,469 124,125,360 Cash & Bank Balances as per Schedule VI 748,422,730 1,546,803,344 Less: Fixed deposits for maturity period more than 3 months 70,376,198 1,250,968,300 678,046,532 295,835,044 Less: Effect of Exchange Differences on Cash and Cash 4,198,332 825,973 Equivalents held in foreign currency Cash & Bank Balances as per Cash Flow Statements 673,848,200 295,009,071

* These balances are not available for use by the Company as they represent corresponding unpaid dividend liabilities. As per our attached report of even date S.R. Batliboi & Co. For and on behalf of the Board Chartered Accountants Ravinder Jain Managing Director per Manoj Gupta Partner I.K. Sharma Dr. Rajesh Jain Membership No. 83906 D.G.M. (Accounts & Finance) Joint Managing Director

Place : New Delhi Vinod Goel Dated : May 27, 2009 G.M. Legal & Company Secretary

126 Panacea Biotec • Annual Report 2008-09

Panacea Biotec Ltd. Corporate Office B-1 Extn./G-3, Mohan Co-op. Indl. Estate, Mathura Road, New Delhi - 110 044, India