UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

OR

For the Fiscal Year Ended March 31, 20192020

OR

OR

Commission File Number: 1-15182

DR. REDDY’S LABORATORIES LIMITED

(Exact name of Registrant as specified in its charter)

8-2-337, Road No. 3, Banjara Hills

Hyderabad, Telangana 500 034, India

+91-40-49002900

(Address of principal executive offices)

Saumen Chakraborty,Chief Financial Officer,+91-40-49002004, saumenc@drreddys.com

8-2-337, Road No. 3, Banjara Hills, Hyderabad, Telangana 500 034, India

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Equity Shares*

Securities registered or to be registered pursuant to Section 12(g) of the Act. None.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None.

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

166,065,948166,172,082 Equity Shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

YesþNo¨

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes¨Noþ

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YesþNo¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YesþNo¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See the definitions of “accelerated filer”, “large accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filerþ   Accelerated filer¨Non-accelerated filer¨   Emerging growth company¨

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.¨

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17¨Item 18¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

Yes¨Noþ

Currency of Presentation and Certain Defined Terms

In this annual report on Form 20-F, references to “$” or “U.S.$” or “dollars” or “U.S. dollars” are to the legal currency of the United States and references to “Rs.” or “rupees” or “Indian rupees” or “INR” are to the legal currency of India, references to “MXN” are to the legal currency of Mexico, references to “ZAR” are to the legal currency of South Africa, references to “UAH” are to the legal currency of Ukraine, references to “GBP” are to the legal currency of the United Kingdom and references to “EUR” or “euros” are to the legal currency of the European Union. Our financial statements are prepared in accordance with International Financial Reporting Standards, or “IFRS”, as issued by the International Accounting Standards Board, or “IASB”. These standards include International Accounting Standards, or “IAS”, and their interpretations issued by the International Financial Reporting Interpretations Committee, or “IFRIC”, or its predecessor, the Standing Interpretations Committee, or “SIC”. References to a particular “fiscal” year are to our fiscal year ended March 31 of such year. References to our “ADSs” are to our American Depositary Shares.

References to “U.S. FDA” are to the United States Food and Drug Administration, to “ANDS” are to Abbreviated New Drug Submissions, to “NDAs” are to New Drug Applications, and to “ANDAs” are to Abbreviated New Drug Applications.

References to “U.S.” or “United States” are to the United States of America, its territories and its possessions. References to “India” are to the Republic of India. References to “EU” are to the European Union. All references to “we,” “us”, “our”, “DRL”, “Dr. Reddy’s” or the “Company” shall mean Dr. Reddy’s Laboratories Limited and its subsidiaries. “Dr. Reddy’s” is a registered trademark of Dr. Reddy’s Laboratories Limited in India. Other trademarks or trade names used in this annual report on Form 20-F are trademarks registered in the name of Dr. Reddy’s Laboratories Limited or are pending before the respective trademark registries, unless otherwise specified. Market share data is based on information provided by IQVIA Holdings Inc. (formerly Quintiles IMS Holdings Inc.) (“IQVIA”), a provider of market research to the pharmaceutical industry, unless otherwise stated.

Our financial statements are presented in Indian rupees and translated into U.S. dollars for the convenience of the reader. Except as otherwise stated in this report, all convenience translations from Indian rupees to U.S. dollars are at the certified foreign exchange rate of U.S.$1 = Rs.69.16,Rs.75.39, as published by Federal Reserve Board of Governors on March 29, 2019.31, 2020. No representation is made that the Indian rupee amounts have been, could have been or could be converted into U.S. dollars at such a rate or any other rate. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding.

Our main corporate website address ishttps://www.drreddys.com. Information contained in our website,www.drreddys.com, is not part of this Annual Report and no portion of such information is incorporated herein.

Forward-Looking Statements

In addition to historical information, this annual report contains certain forward-looking statements within the meaning ofsection 27a of thesecuritiesact of 1933, as amended andsection 21e of thesecuritiesexchangeact of 1934, as amended (the “exchangeact”). In addition to statements which are forward-looking by reason of context, the words “may”, “will”, “should”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, or “continue” and similar expressions identify forward-looking statements. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause such a difference include, but are not limited to:

Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis and assumptions only as of the date hereof. In addition, readers should carefully review the other information in this annual report and in our periodic reports and other documents filed with and/or furnished to thesec from time to time.

TABLE OF CONTENTS

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

3.A.Selected financial data

You should read the selected consolidated financial data below in conjunction with our consolidated financial statements and the related notes, as well as the section titled “Operating and Financial Review and Prospects,” which are included elsewhere in this Annual Report on Form 20-F. The selected consolidated financial data presented below as of March 31, 2019, 2018 and 2017 has been derived from our consolidated financial statements, included herein, which have been prepared in conformity with IFRS as issued by the IASB. The selected consolidated financial data presented below as of March 31, 2016,2020 and 2015 has been derived from our consolidated financial statements, which also have been prepared2019 and for the years ended March 31, 2020, 2019 and 2018 are included in conformity with IFRS as issued by the IASB, and which have not been included elsewhere inItem 18 of this Annual Report.annual report on Form 20-F.

The consolidated financial statements as of March 31, 2020 and 2019 and for the yearyears then ended March 31, 2020 and 2019 have been audited by Ernst & Young Associates LLP (EY)(“EY”), Hyderabad, India, our independent registered public accounting firm, and included elsewhere in this Annual Report.firm. The consolidated financial statements as of March 31, 2018, 2017 2016 and 20152016 and for the years then ended March 31, 20162018, 2017 and 20152016 were audited by KPMG, Hyderabad, India or KPMG,(“KPMG”), our former independent registered public accounting firm.

The selected consolidated financial data below has been presented for the five most recent fiscal years. Historical results are not necessarily indicative of future results.

Income Statement Data

* Excludes corporate dividend tax.

Statement of Financial Position Data

Convenience translation

For the convenience of the reader, our consolidated financial statements as of March 31, 20192020 have been translated into U.S. dollars at the certified foreign exchange rate of U.S.$1 = Rs.69.16,Rs.75.39, as published by the Federal Reserve Board of Governors on March 29, 2019.31, 2020. No representation is made that the Indian rupee amounts have been, could have been or could be converted into U.S. dollars at such a rate or any other rate.

3.B.Capitalization and indebtedness

Not applicable.

3.C.Reasons for the offer and use of proceeds

Not applicable.

3.D.Risk factors

You should carefully consider all of the information set forth in this Form 20-F and the following risk factors that we face and that are faced by our industry. The risks below are not the only ones we face. Additional risks not currently known to us or that we presently deem immaterial may also affect our business operations. Our business, financial condition or results of operations could be materially or adversely affected by any of these risks. This Form 20-F also contains forward-looking statements that involve risks and uncertainties. Our results could materially differ from those anticipated in these forward-looking statements as a result of certain factors, including the risks we face as described below and elsewhere. See “Forward-Looking Statements.”

RISKS RELATED TO PANDEMICS

A pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, and the resulting restrictive measures and economic impacts may materially and adversely impact our business and results of our operations.

In recent months, a new strain of coronavirus (COVID-19) has spread to many countries in the world and the outbreak has been declared a pandemic by the World Health Organization. Considerable uncertainty still surrounds the COVID-19 virus and its potential effects, and the extent of and effectiveness of responses taken on international, national and local levels. Measures taken to limit the impact of COVID-19, including shelter-in-place orders, social distancing measures, travel bans and restrictions, and business and government shutdowns, have already resulted in significant negative economic impacts on a global basis.

As the coronavirus pandemic continues to rapidly evolve, we cannot at this time accurately predict the effects of these conditions on our operations. Uncertainties remain as to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length and scope of the travel restrictions, business closures and other restrictions imposed by the governments of impacted countries. The continued outbreak of COVID-19 may lead to the implementation of further responses, including additional travel restrictions, government-imposed quarantines or stay-at-home orders, and other public health safety measures. The COVID-19 continuing outbreak, or a similar health pandemic, epidemic or infectious disease outbreak, may have several adverse effects on our business, results of operations and financial condition.

The following are the key actual or potential impacts on our operations that could have an adverse impact on our business, financial condition and results of operation:

Manufacturing, sourcing of material, logistics, sales and marketing

Health and safety initiatives:

We are taking various protective measures to ensure the health and safety of our employees, such as by following physical distancing norms, sanitization and using protective gear. Various initiatives have been undertaken to ensure that our manufacturing related operations continue unabated, enabling us to serve our patients. We are also using digital channels to enable work from home and for other business purposes, such as reaching out to our business partners.

Clinical trials:

We have taken necessary steps to comply with the evolving guidance from various regulatory authorities to manage clinical trials during COVID-19 pandemic. We have been working closely with the clinical trial investigators to protect the safety and wellbeing of clinical trial participants. There is no material impact to our clinical trials, however patient recruitment could face delays, if pandemic continues for an extended period of time.

Other considerations:

Despite the foregoing and certain other measures that we continue to undertake in order to transact business, it is difficult to forecast the broad economic downturn and unemployment rate increase that could be associated with the COVID-19 pandemic, which may itself materially affect our business. While it is not possible to predict the economic impact and the magnitude of the ongoing COVID-19 pandemic, a prolonged economic slowdown in any of our key markets could reduce our sales and impact our business operations.

Our business is also affected by decisions and actions of our customers, and there are a number of factors relating to our customers that are outside of our control. Financial difficulties for a customer including limited access to the credit markets, insolvency or bankruptcy could have a negative impact on our financial condition and results of operations. The COVID-19 pandemic and a resulting prolonged economic downturn heighten the risk that certain of our customers find it difficult to maintain liquidity and may reduce their expenditure which could in turn affect our growth and profitability.

The global pandemic of COVID-19 continues to rapidly evolve, and its ultimate impact is highly uncertain and subject to change. We do not know the full extent of potential delays or impacts on our business or the global economy as a whole. These effects, or a similar health pandemic, epidemic or infectious disease outbreak along with any escalation in geo-political conflicts and related political interventions, could have a material impact on our operations, results of operations and financial condition. We will continue to monitor the COVID-19 situation closely.

RISKS RELATING TO OUR COMPANY AND OUR BUSINESS

If we fail to comply fully with government regulations or to maintain continuing regulatory oversight applicable to our research and development activities or regarding the manufacture of our products, or if a regulatory agency amends or withdraws existing approvals to market our products, it may delay or prevent us from developing or manufacturing our products.

Our research and development activities are heavily regulated. If we fail to comply fully with applicable regulations, then there could be a delay in the submission or approval of potential new products for marketing approval. In addition, the submission of an application to a regulatory authority does not guarantee that approvals required to market the product will be granted. Each authority may impose its own requirements and/or delay or refuse to grant approval, even when a product has already been approved in another country. In many of the international markets into which we sell our products, including the United States, the approval process for a new product is complex, lengthy and expensive. The time taken to obtain approval varies by country but generally takes from six months to several years from the date of application. This approval process increases the cost to us of developing new products and increases the risk that we will not be able to successfully sell such new products.

Regulatory agencies may at any time reassess the safety and efficacy of our products based on new scientific knowledge or other factors. Such reassessments could result in the amendment or withdrawal of existing approvals to market our products, which in turn could result in a loss of revenue and could serve as an inducement to bring lawsuits against us. In our biosimilar business, due to the intrinsic nature of biologics, our bio-similarity claims can always be contested by our competitors, the innovator company and/or the applicable regulators.

Delays in the receipt of, or failure to obtain approvals for, future products, or new indications and uses, could result in delayed realization of product revenues, reduction in revenues and substantial additional costs. For example, in the years ended March 31, 2017, 2018 and 2019, we experienced delays in obtaining approvals from the U.S. Food and Drug Administration (“U.S. FDA”) for various generic and specialty products as anticipated, principally as a result of the warning letter referenced below.

Additionally, governmental authorities, including among others the U.S. FDA, and the U.K. Medicines and Healthcare Products Regulatory Agency (“MHRA”), heavily regulate the manufacturing of our products, including manufacturing quality standards. Periodic audits are conducted on our manufacturing sites, and if the regulatory and quality standards and systems are not found adequate, it could result in an audit observation (on Form 483, if from the U.S. FDA), or a subsequent investigative letter which may require further corrective actions. In recent years, a number of Indian generic pharmaceutical companies were issued import alerts and warning letters by the U.S. FDA. A significant proportion of our manufacturing base of active pharmaceutical ingredients and formulations plants servicing the United States and other markets of our Global Generics business is based out of India. There has been an increasing trend by the U.S. FDA and governmental regulators in other developed countries towards Indian manufacturing site audits.

While our quality practices and quality management systems are conducted in a manner designed to satisfy these types of audits, we cannot guarantee that our efforts will prevent adverse outcomes such as audit observations, corrective action requests, warning letters or import bans.

For example, in November 2015, we received a warning letter from the U.S. FDA relating to cGMP deviations at three of our manufacturing facilities - two API manufacturing facilities and one injectable oncology formulations manufacturing facility in India. Currently none of our sites are under warning letter. Refer to Note 3334 of our consolidated financial statements under “Receipt of“Update on the warning letter from the U.S.FDA”U.S. FDA” for further details.

More generally, unless and until an issue raised in a warning letter from the U.S. FDAa regulatory agency is resolved to the U.S. FDA’sagency’s satisfaction, the U.S. FDAthey may withhold approvals of our new products and new drug applications, refuse admission of products manufactured at the facilities noted in the warning letter into the United States, and/or take additional regulatory or legal action against us. The delay in approvals due to moving to an alternate site or alternate vendor, or the cost incurred in connection with remedial actions, can have significant adverse impacts on our ongoing business, financial results and routine operations.

In recent years, there has been increasing regulatory scrutiny of pharmaceutical manufacturers, resulting in product recalls, plant shutdowns and other required remedial actions. We have been subject to increasing scrutiny of our manufacturing operations, and in previous years severalthe event that any of our facilities have been the subject ofis subjected to significant regulatory actions, requiringit will require substantial expenditures of resources to ensure compliance with more stringently applied production and quality control regulations. These regulatory actions also adversely affected our ability to supply various products worldwide and to obtain new product approvals at such facilities. If any regulatory body were to require one or more of our significant manufacturing facilities to cease or limit production, our business could be adversely affected. In addition, because regulatory approval to manufacture a drug is site-specific, the delay and cost of remedial actions, or of obtaining approval to manufacture at a different facility also could have a material adverse effect on our business, financial position and results of operations.

Furthermore, we deal with numerous third party manufacturers and despite our oversight, any lapse in their quality practices and quality management systems could lead to similar adverse outcomes in the event of an audit.

If we or our third party suppliers fail to comply fully with applicable regulations or to take corrective actions that are mandated, then there could be a government-enforcedan enforced shutdown of our production facilities or an import ban, which in turn could lead to product shortages that delay or prevent us from fulfilling our obligations to customers, or we could be subjected to government fines.fines and penalties from customers.

Further, while physicians may prescribe products for uses that are not described in the product labeling and that differ from those approved by the U.S. FDA or other similar regulatory authorities (an "off label" use), we are permitted to market our products only for the indications for which they have been approved. The U.S. FDA and other regulatory agencies actively enforce regulations prohibiting promotion of off-label uses, and significant liability can be imposed on manufacturers found to be engaged in off-label marketing violations, including fines in the tens or hundreds of millions of dollars, as well as criminal sanctions. If some of our products are prescribed off label, regulatory authorities such as the U.S. FDA could take enforcement actions if they conclude that we or our distributors have engaged in off label marketing.

An increasing portion of our portfolio are “biologic” products. Unlike traditional “small-molecule” drugs, biologic drugs cannot be manufactured synthetically, but typically must be produced from living animal cells or micro-organisms. As a result, the production of biologic drugs that meet all quality and regulatory requirements is especially complex and is more susceptible to batch failures.

Typically, biological therapeutics face third party intellectual property rights, otherwise known as freedom to operate (“FTO”) issues, more than small molecule therapeutics because of the types of patents allowed by national patent offices. Further, our ability to successfully challenge third party patent rights is dependent on the laws of the applicable countries.

The regulatory requirements are still evolving in many markets where we sell or manufacture products, including our biosimilar products, and regulatory requirements may be unclear due to lack of precedents, among other reasons, which may lead to delays in product approvals or other sanctions. In the United States, the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”) created a statutory pathway and abbreviated approval processes for the approval of biosimilar versions of branded biological products. While the U.S. FDA has issued guidelines, the regulatory policies in this area are still evolving. Further, while a number of legal challenges concerning the requirements of the abbreviated biosimilar pathway, patent exchange and other provisions of BPCIA have been adjudicated in U.S. courts, legal challenges concerning FTO, patent exchange and trade matters, among others, continue.

We operate in a highly competitive and rapidly consolidating industry which may adversely affect our revenues and profits.

Our products face intense competition from products commercialized or under development by competitors in all of our business segments based in India, the United States and other markets. Many of our competitors have greater financial resources and marketing capabilities than we do. Our competitors may succeed in developing technologies and products that are more effective, more popular or cheaper than any we may develop or license, thus rendering our technologies and products obsolete or uncompetitive, which would harm our business and financial results.

Further, inIn recent years the goals established under the Generic Drug User Fee Act,China has introduced numerous reforms and increased funding of the U.S. FDA’s Office of Generic Drugs, have led to more and faster generic approvals, and consequently increased competition. The U.S. FDA has established new steps to enhance competition, promote access and lower drug prices and is approving record-breaking numbers of generic applications. While these improvements are expected to benefit our generic product pipeline, they will also benefit competitorsproposals that seek to launch products in established generic markets where we currently offer products.

Our generics business is also facing increasing competition from brand-name manufacturers who do not face any significant regulatory approvals or barriers to enter into the generics market. These brand-name companies sell generic versions of their products to the market directly or by acquiring or forming strategic alliances with our competitor generic pharmaceutical companies or by granting them rights to sell “authorized generics.” Moreover, brand-name companies continually seek new ways to delay the introduction of generic products and decrease the impact of generic competition, such as filing new patents on drugs whose original patent protection is about to expire, developing patented controlled-release products, changing product claims and product labeling, or developing and marketing as over-the-counter products those branded products that are about to face generic competition, or pricing the branded product at a discount equivalent to generic pricing.

Our competitors, which include major multinational corporations, are consolidating, and the strength of the combined companies could affect our competitive position in all of our business areas. Furthermore, if one of our competitors or their customers acquires any of our customers or suppliers, we may lose business from the customer or lose a supplier of a critical raw material. In addition, our increased focus on innovative and specialty pharmaceuticals requires much greater use of a direct sales force than does our core generic business.

In our generics business, to the extent that we succeed in being the first to market a generic version of a significant product, and particularly if we obtain the 180-day period of market exclusivity in the United States provided under the Hatch-Waxman Act of 1984, as amended, our sales and profit can be substantially increased in the period following the introduction of such product and prior to a competitor’s introduction of the equivalent product or the launch of an authorized generic. Prices of generic drugs typically decline, often dramatically, especially as additional generic pharmaceutical companies receive approvals and enter the market for a given product. Consequently, our ability to sustain our sales and profitability of any product over time is dependent on both the number of new competitors for such product and the timing of their approvals.

In our proprietary products business, many of our competitors have greater experience than we do in clinical testing, human clinical trials, obtaining regulatory approvals and commercialization. They may be able to respond more quickly to new or emerging market preferences or to devote greater resources to the development of new products and/or technologies than we can. As a result, any products and/or innovations that we develop may become obsolete or non-competitive before we can recover the expenses incurred in connection with their development. Since these products are designedattempt to address unmet or inadequately met medical needs, there is an increased needrequirements for our sales organization to emphasize to physicians, patientsdrug development and third-party payorsregistration, including greater adoption of international technical guidelines and practices by the benefits of our products relative to competing products which are often more familiar or otherwise better established. If competitors introduce new products or new variations on their existing products, our proprietary products, even those protected by patents, may experience substantial reductions in market shares and may require substantial price reductions in order to remain competitive.

We have concentrations of sales to certain customers and consolidation among distributors and pharmaceutical companies could increase the concentration risk and also adversely impact our business prospects.

In the United States, similar to other pharmaceutical companies, we sell our products through wholesale distributors and large retail chains in addition to hospitals, pharmacies and other groups. During the year ended March 31, 2019, our ten largest customers accounted for approximately 77% of our North America Global Generics segment’s revenues. Consolidation and integration of the drug wholesalers, retail drug chains, private insurers, managed care organizations and other purchasing organizations maygovernment. However, its unique regulatory requirements continue to adversely affect pharmaceutical manufacturers. Such consolidations has resulted in these groups gaining additional purchasing leverage and, consequently, increasing the product pricing pressures facing our business. We expect this trend of increased pricing pressures to continue. Such pressures have reduced, and could continue to reduce, our revenue, margins and profitability.pose challenges for multinational companies.

Additionally, the emergence of large buying groups representing independent retail pharmacies, and the prevalence and influence of managed care organizations and similar institutions, creates competition among pharmaceutical companies to have their products included in the formulary of those groups and enables those groups to extract price discounts on our products.

If pharmaceutical companies are successful in limiting the use of generics through their legislative, regulatory and other efforts, sales of our generic products may be adversely impacted.

Many pharmaceutical companies increasingly have used state and federal legislative and regulatory means to delay or eliminate generic competition. These efforts have included:

If we improperly handle any of the dangerous materials used in our business and accidents result, we could face significant liabilities that would lower our profits.

We handle dangerous materials including explosive, toxic and combustible materials. If improperly handled or subjected to the wrong conditions, these materials could hurt our employees, cause damage to our properties and harm the environment. Also, increases in business and operations in our plants, from new products or increased demand for existing products, can pose increased safety hazards. Such hazards need to be addressed through training, industrial hygiene assessments and other safety measures and, if not carried out, can lead to industrial accidents.

Any of the foregoing could subject us to significant litigation or adversely impact our other litigation matters then outstanding, which could lower our profits in the event we were found liable, and could also adversely impact our reputation.

In a worst case scenario, this could also result in a government forced shutdown of our manufacturing plants, which in turn could lead to product shortages that delay or prevent us from fulfilling our obligations to customers and would adversely affect our business and results of operations.

Increasing scrutiny and changing expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.

Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance (“ESG”) practices. Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, supply chain management, diversity and human rights.

We are subject to various laws and regulations concerning, among other things, the environment, climate change, regulation of chemicals, employee safety and product safety. These requirements include regulation of the handling, manufacture, transportation, storage, use and disposal of materials, including the discharge of regulated materials and pollutants into the environment.

In the normal course of our business, our operations are also exposed to risks relating to (i) increased severity of extreme weather events, such as cyclones and floods; (ii) regulatory changes which can require us to transition to newer forms of energy sources like renewable energy; and (iii) increased water scarcity and water stress, apart from water contamination. Failure to adapt to or comply with regulatory requirements, or investor or stakeholder ESG expectations and standards, could negatively impact our reputation or harm our business.

Our success depends on our ability to successfully develop and commercialize new pharmaceutical products.

Our future results of operations depend, to a significant degree, upon our ability to successfully develop and commercialize additional products in our Global Generics and Pharmaceutical Services and Active Ingredients segments.

Our research and development efforts are also dependent on collaborating with third party partners and contract research organizations which have the capability to handle complex technologies and products. Lack of effective project management at our end, or any failure to manage collaboration arrangements among multiple partners, may pose significant risks to product development, to our ability to obtain requisite regulatory approvals in a timely manner, and to our ability to successfully and profitably produce and market such products.

Additionally, if we fail to adequately protect critical proprietary or confidential information or associated intellectual property rights or fail to manage third party partners and contract research organizations that our business depends on, it might have a material adverse impact on our product development execution.

From time to time we also acquire in-process research and development assets, which require significant resources and expenses to continue to develop, both through our own efforts and through collaborations. Because of the inherent risk associated with research and development efforts in our industry, including the high cost and uncertainty of conducting clinical trials (where required), such efforts may not result in the successful introduction of new pharmaceutical products approved by the relevant regulatory bodies.

Refer to Note 13 of our consolidated financial statements for details of impairment of intangible assets. Our results of operations may suffer if these products are not timely developed, approved or successfully commercialized.

We must develop, test and manufacture generic products as well as prove that our generic products are bio-equivalent or biosimilar to their branded counterparts, either directly or in partnership with contract research organizations. The development and commercialization process, particularly with respect to complex molecules and biosimilars, is both time consuming and costly and involves a high degree of business risk.

Our products currently under development, if and when fully developed and tested, may not perform as we expect or meet our standards of safety and efficacy. Necessary regulatory approvals may not be obtained in a timely manner, if at all, and we may not be able to successfully and profitably produce and market such products. Our approved products may not achieve expected levels of market acceptance.

If we are unable to obtain robust patents or otherwise protect our intellectual property rights or proprietary information, or if we infringe on the intellectual property rights of others, our business may be materially and adversely impacted.

Our overall profitability depends, among other things, on our ability to continuously and timely introduce new generic as well as proprietary products. Our success in doing so depends, in large part, on two important factors:

IfWe have been successful in obtaining multiple patents claiming our innovative products and processes. Recently, we are unablehave filed several patent applications seeking to defend ourselvesprotect our newly developed technologies and products in patent challenges,various countries, including the United States, and we could be subjectplan to injunctions preventingcontinue making such filings. Any existing or future patents issued to or licensed by us from sellingmay not provide us with any competitive advantages for our products or may even be challenged by competitors. In addition, sometimes such patent rights may not prevent our competitors from developing, using or commercializing products that are similar or functionally equivalent to our products.

We also rely on trade secrets, unpatented proprietary know-how and continuing technological innovation that we could be subjectseek to substantial liabilities that could adversely affect our profits. Further, our patent settlementprotect, in part, by confidentiality agreements with the innovatorslicensees, suppliers, employees and consultants. It is possible that these agreements may face government scrutiny, exposing us to significant damages.

There has been substantial patent related litigation in the pharmaceutical industrybe breached and we may not have adequate remedies for any such breach. Disputes may arise concerning the manufacture, useownership of intellectual property or the applicability of the confidentiality or other relevant clauses of these agreements. Furthermore, our trade secrets and sale of various products. In the normal course of business, we are regularly subjectproprietary technology may otherwise become known to lawsuits and the ultimate outcome of litigation could adversely affect our results of operations, financial condition and cash flow. Regardless of regulatory approval, lawsuits are periodically commenced against us with respect to alleged patent infringements by us, such suits often being triggeredor be independently developed by our filingcompetitors. Therefore, despite all of an application for governmental approval,our information security systems and practices, we may still not be able to ensure the confidentiality of information relating to such as an ANDA or NDA. The expense of any such litigation and the resulting disruption to our business, whether or not we are successful, could harm our business. The uncertainties inherent in patent litigation make it difficult for us to predict the outcome of any such litigation.

If we are unsuccessful in defending ourselves against these suits, we could be subject to injunctions preventing us from selling our products, resulting in a decrease in revenues, or to damages, which may be substantial. An injunction or substantial damages resulting from these suits couldmaterially and adversely affect our consolidated financial position, results of operations or liquidity.

Further, we have been involved in various litigations involving challenges to the validity or enforceability of registered patents and therefore settling such patent litigations has been and is likely to continue to be an important part ofimpact our business.

PartiesResearch and development efforts invested in our complex generics, differentiated formulations and biologics products may not achieve expected results.

Our business model focuses on building a pipeline in various therapies targeted at both emerging markets and more regulated markets. We must invest increasingly significant resources to patent litigation settlement agreementsdevelop complex generics, differentiated products and biosimilars, both through our own efforts and through collaborations, in-licensing and acquisition of products from or with third parties. In our Proprietary Products segment, our business model focuses on building a pipeline in the therapeutic areas of neurology and dermatology. In our biologic segment, our business model focuses on building a pipeline in various therapies targeted at both emerging markets and highly regulated markets. The development of complex generics, differentiated products and biosimilars involves processes and expertise significantly more complex, which increases the risks of failure. During each stage, we may encounter obstacles that delay the development process and increase expenses, leading to significant risks that we will not achieve our goals and may be forced to abandon a potential product in which we have invested substantial amounts of time and money.

These obstacles may include: preclinical failures; difficulty enrolling patients in clinical trials; delays in completing formulation and other work needed to support an application for registration; adverse reactions or other safety concerns arising during clinical testing; insufficient clinical trial data to support the safety or efficacy of the product candidate; and failure to obtain, or delays in obtaining, the required regulatory approvals for the product candidate or the facilities in which it is manufactured.

Because of the amount of capital required to be invested in augmenting our differentiated products and biosimilar pipeline, in some cases we are reliant on partnerships and joint ventures with third parties, and consequently face the risk that some of these third parties may fail to perform their obligations, or fail to reach the levels of success that we are relying on to meet our revenue and profit goals.

Our Proprietary Products segment, particularly our Specialty businesses in the United States, including us,faces intense competition from companies that are required by law to file themmore entrenched than we are or have greater resources than ours.

Our risk profile for our Proprietary Products segment is lower than the comparable risk profile of companies working with completely novel entities. Nevertheless, the Federal Trade Commission (“FTC”) andrisk that the Antitrust Divisionbusinesses in this segment face is higher than that of the Departmentgenerics business due to several factors outlined below.

Success in our Proprietary Products segment requires the ability to strategically differentiate our offerings from those of Justiceour competitors.

Even if we are able to successfully develop a differentiated version, the desired potential can only be unlocked if we partner with a wholesaler who is able to get favorable unrestricted reimbursement from payors (i.e. the managed care plan). Typically, a managed care plan relies on a committee comprised of physicians and other decision makers and influencers to decide which drugs will appear on its formulary. The randomized clinical trial data generated to obtain U.S. FDA approval will no longer be sufficient to gain a favorable access decision. Typically, all managed care plans attempt to aggressively direct their patients towards generic medicines due to their lack of belief in differentiation or overall cost improvement. Thus it is imperative for review. The FTC has publicly statedthe specific product profile to satisfy the committee that in its view, somethere is sufficient evidence that the impact of the brand-generic settlement agreements violatedifferentiation and/or incremental innovation of our products is significantly higher, in order to persuade them to list it on their respective formularies. Without these specific products attaining a reasonable position on the antitrust lawsformulary of managed care plans, patients will not be able to obtain access to our products and has brought actions against some brand and generic companiesphysicians become less likely to prescribe our products.

Additionally, because the Specialty business of our Proprietary Products segment works primarily with known active molecules, there remains a risk that have entered into such agreements. Accordingly, such settlement agreementsthese products are easier to engineer around than products possessing composition of matter patents. Although we strive to create a robust intellectual property “ring fence” to protect these assets, the products in our U.S. Specialty business portfolio may expose us to antitrust violation claims.nonetheless enjoy fewer years of exclusivity than traditional innovative products. This may cause a decline in the commercial value potential of the portfolio.

Reforms in the health care industry and the uncertainty associated with pharmaceutical pricing, reimbursement and related matters could adversely affect the marketing, pricing and demand for our products.

Our businesses are operating in an ever more challenging environment, with significant pressures on the pricing of our products and on our ability to obtain and maintain satisfactory rates of reimbursement for our products by governments, insurers and other payors.

For example, in the United States, Congress continues to consider drug pricing legislation that, if passed and signed into law, could impact companies’ ability to increase prices for prescription drugs, even in case of increase in our input costs, to maintain our margins. The current U.S. administration has also focused on lowering drug prices through, for instance, the U.S. Department of Health and Human Services and U.S. FDA’s Safe Importation Action Plan announced in July 2019. Following this framework, the U.S. FDA proposed a draft rule in December 2019 that would allow importation of certain lower-cost prescription drugs from Canada. If the rule is finalized as proposed, states or certain other non-federal governmental entities would be able to submit importation program proposals to the U.S. FDA for review and authorization of two-year programs (with the opportunity to extend for two more years). The public comment period on the proposed rule ended on March 9, 2020, and the U.S. FDA is in the process reviewing and finalizing its proposal. If the proposed rule is adopted, it likely will be some time before states or other parties can actually submit and implement importation plans in compliance with the rule. Certain states have also proposed measures that are designed to control the costs of pharmaceuticals for which they provide reimbursement.

The growth of overall healthcare costs as a percentage of gross domestic product in many countries means that governments and payors are under intense pressure to control healthcare spending even more tightly than in the past.

These pressures are particularly strong given the persistently weak economic and financial environment in many countries and the increasing demand for healthcare resulting from the aging of the global population and associated increases in non-communicable diseases. These pressures are further compounded by consolidation among distributors, retailers, private insurers, managed care organizations and other private payors, which can increase their negotiating power. In addition, these pressures are augmented by intense publicity regarding the pricing of pharmaceuticals by our competitors, as well as government investigations and legal proceedings regarding pharmaceutical pricing practices. In many countries in which we currently operate, pharmaceutical prices are increasingly subject to regulation.

Our products continue to be subject to increasing price and reimbursement pressure that can limit the revenues we earn from our products in many countries due to, among other things:

We expect these efforts to continue as healthcare payors around the globe, in particular government-controlled health authorities, insurance companies and managed care organizations, step up initiatives to reduce the overall cost of healthcare.

In addition, there has been legislation and legislative proposals concerning drug prices and related issues, including the perceived need to bring more transparency to drug pricing, reviewing the relationship between pricing and manufacturer patient programs, and reforming government program reimbursement methodologies for drugs.

The use of tender systems and other forms of price control could reduce prices for our products or reduce our market opportunities.

A number of markets in which we operate have implemented or may implement tender systems in an effort to lower prices. Under such tender systems, manufacturers submit bids which establish prices for generic pharmaceutical products. Upon winning the tender, the winning company will receive a preferential reimbursement for a period of time. The tender system often results in companies underbidding one another by proposing low pricing in order to win the tender.

For example, this has resulted in more than 90% of generic products currently sold in German retail outlets“pharmacies” being supplied through contracts procured in competitive bidding tenders, thereby causing significant pressure on product margins.

Certain other countries may consider the implementation of a tender system or other forms of price controls. Even if a tender system is ultimately not implemented, the anticipation of such a system could result in price reductions. Failing to win tenders, or the implementation of similar systems or other forms of price controls in other markets leading to further price declines, could have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or share price.

Class action lawsuits could expose us to significant liabilities, result in negative publicity, harm our reputation and have a material adverse effect on the price of our ADSs.

Shareholders of a public company sometimes bring securities class action lawsuits against the company following periods of instability in the market price of that company’s securities. As a public company grows in size, the risk of such litigations may increase. If we were to be sued in any such class action suit, irrespective of the merits of the underlying case, it could have adverse effects on us, including among other things: (a) a diversion of management’s time and attention and other resources from our business and operations, which could harm our results of operations; (b) negative publicity, which could harm our reputation and restrict our ability to raise capital in the future; (c) require us to incur significant expenses to defend the suit; and (d) if a claim against us is successful, we may be required to pay significant damages and, in certain circumstances, to indemnify our directors and officers if they are named as defendants in the class action suit. Any of the foregoing could, individually or in the aggregate, have a material adverse effect on our financial condition and results of operations and/or the price of our ADSs.

Significant disruptions of information technology systems, breaches of data security or other cyber-attacks could adversely affect our business.

Our business is dependent upon increasingly complex and interdependent information technology systems, including internet and cloud based systems, to support our business processes as well as internal and external communications. In addition, our businesses and operating models increasingly depend on outsourcing and collaboration, which requires exchanging data and information. The size and complexity and interconnectivity of our computer systems make them potentially vulnerable to breakdown, malicious intrusion, computer viruses and other cyber-attacks.

Like many companies, we may experience certain of these events given that the external cyber-attack threat continues to grow and although we and our third party service providers have invested in measures to reduce these risks, we cannot be assured that these measures will be successful in preventing the compromise and/or disruption of our information technology systems and related data. Any such compromise or disruption may result in the loss, theft or unauthorized disclosure of key information and/or disruption of production and business processes, such as the conduct of scientific research and clinical trials, the submission of the results of such efforts to regulatory authorities in support of requests for product approvals, the functioning of our manufacturing and supply chain processes, our compliance with legal obligations and other key business activities, any of which could materially and adversely affect our business. We maintain cybersecurity insurance to further mitigate these risks, but there can be no assurance that a policy exclusion will not apply, or that our insurance coverage limits will be sufficient to protect us against the financial, legal, business or reputational losses that may result from an interruption or breach of our systems, or that any such insurance proceeds will be paid to us in a timely manner.manner.

In addition, our systems are potentially vulnerable to data security breaches, whether by employees or others that may expose sensitive data to unauthorized persons. Such data security breaches could lead to the loss of trade secrets or other intellectual property, or could lead to the public exposure of personal information (including sensitive personal information) of our employees, clinical trial patients, customers and others. Such breaches of security could result in reputational damage and could otherwise have a material adverse effect on our business, financial condition and results of operations. Further, increasing use of information technology (“IT”) systems in manufacturing processes would require us to manage issues arising out of human error and/or sabotage.

In our pursuit of operational excellence, several change management initiatives across our organization are ongoing, including but not limited to information technology automation in the areas of manufacturing, research and development, supply chain and shared services. We have outsourced our IT hardware and applications in order to improve IT capability and performance. Any failure by such outsourced service providers to deliver timely and quality services and to co-operate with one another could create disruption, which could materially adversely affect our business or results of operations. Further, any failure by us to effectively manage such change initiatives or implement adequate controls in automation, security or availability of information technology systems could have a material adverse effects on our business.

Increased outsourcing or use of cloud services for conducting our business requires highly secure controls to ensure adequate security of information, considering potential for sabotage as well as availability. Data integrity, confidentiality and data privacy requirements are increasingly concerning regulators, and are incorporated into legal contracts. While we have invested heavily in the protection of data and information technology to reduce these risks, there can be no assurance that our efforts or those of our third-party service providers would be sufficient to protect against data deterioration or loss in the event of a system malfunction, or prevent data from being stolen or corrupted in the event of a security breach.

WeWhile many of our personnel are subjectworking remotely due to data privacy and security laws and regulations in many different jurisdictions and countries where we do business,the COVID-19 pandemic, the risk of cyber incidents may be increased and our dependence on network availability is increased. If our information systems are unsuccessfully implemented, fail, suffer errors or our partners’ failure to comply could result in fines, penalties, reputational damage, and couldinterruptions, or become unavailable, that might have a materially adverse impact the way we operate our business.

We are subject to laws and regulations governing the collection, use and transmission of health information, including personal data. As the legislative and regulatory landscape for data privacy and protection continues to evolve around the world, there has been an increasing focus on privacy and data protection issues that may affect our business. For example, the European Union’s General Data Protection Regulation (“GDPR”) that became fully effective in May 2018, requires Companies to satisfy new requirements regarding the handling of personal and sensitive data and includes significant new penalties for non-compliance, with fines up to the higher of EUR 20 million or 4% of total annual worldwide revenue.

Additionally, California recently enacted the California Consumer Privacy Act (“CCPA”), which creates new individual privacy rights for consumers and places increased privacy and security obligations on entities handling personal data of consumers or households. When it goes into effect on January 1, 2020, the CCPA will require covered companies to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of personal information, and allow for a new cause of action for data breaches.

Other countries in which we do business have, or are developing, laws governing the collection, use and transmission of personal information as well that may affect our business or require us to adapt our technologies or practices. Some countries, including India, are considering legislation implementing data protection requirements or requiring local storageoperations and processing of data or similar requirements.

These and similar initiatives could increase the cost of developing, implementing or maintaining our IT systems and require us to allocate more resources to compliance initiatives thereby increasing our costs. In addition, a failure by us, or our third-party vendors, to comply with applicable data privacy and security laws could result in financial, legal, business, and reputational harm to us and could have a material adverse effect on the way we operate our business, our financial condition andposition or results of operations.

Increasing use of social media could give rise to liability or breaches of data security.

We and our business associates are increasingly relying on social media and mobile tools as a means of communications. To the extent that we seek as a company to use these tools as a means to communicate about our products or about the diseases our products are intended to treat, there are significant uncertainties as to either the rules that apply to such communications, or as to the interpretations that health authorities will apply to the rules that exist. As a result, despite our efforts to comply with applicable rules, there is a significant risk that our use of social media and mobile tools for such purposes may cause us to nonetheless be found in violation of them. In addition, because of the universal availability of social media tools, our associates or third parties may make use of them in ways that may not be sanctioned by us, and that may give rise to liability, or that could lead to the loss of trade secrets or other intellectual property, or could lead to the public exposure of personal information (including sensitive personal information) of our employees, clinical trial patients, customers and others. Such uses of social media could have a material adverse effect on our business, financial condition and results of operations. Social media posts could also contain information purported to be disclosed by us that is false or otherwise damaging, which could have a material adverse effect on our reputation and the price of our equity shares and ADSs.

Our success depends onWe are subject to data privacy and security laws and regulations in many different jurisdictions and countries where we do business, and our abilityor our partners’ failure to successfully developcomply could result in fines, penalties, reputational damage, and commercialize new pharmaceutical products.could impact the way we operate our business.

Our future resultsWe are subject to laws and regulations governing the collection, use and transmission of operations depend,health information, including personal data. As the legislative and regulatory landscape for data privacy and protection continues to aevolve around the world, there has been an increasing focus on privacy and data protection issues that may affect our business. For example, the European Union’s General Data Protection Regulation (“GDPR”) that became fully effective in May 2018, requires Companies to satisfy new requirements regarding the handling of personal and sensitive data and includes significant degree, upon our abilitynew penalties for non-compliance, with fines up to successfully develop and commercialize additional products in our Global Generics, Pharmaceutical Services and Active Ingredients, and Proprietary Products segments. We must develop, test and manufacture generic products as well as prove that our generic products are bio-equivalentEUR 20 million or biosimilar to their branded counterparts, either directly or in partnership with contract research organizations. The development and commercialization process, particularly with respect to proprietary products and biosimilars,4% of global turnover of the preceding fiscal year, whichever is both time consuming and costly and involves a high degree of business risk. Our products currently under development, if and when fully developed and tested, may not perform as we expect or meet our standards of safety and efficacy. Necessary regulatory approvals may not be obtained in a timely manner, if at all, and we may not be able to successfully and profitably produce and market such products. Our approved products may not achieve expected levels of market acceptance.

Our research and development efforts are increasingly dependent on collaborating with third party partners and contract research organizations which have the capability to handle complex technologies and products. Lack of effective project management at our end, or any failure to manage collaboration arrangements among multiple partners, may pose significant risks to product development, to our ability to obtain requisite regulatory approvals in a timely manner, and to our ability to successfully and profitably produce and market such products.higher.

Additionally, ifthe California Consumer Privacy Act (“CCPA”) became effective on January 1, 2020, creating new individual privacy rights forCalifornia consumers and placing increased privacy and security obligations on entities handling personal data of consumers or households. TheCCPA requires covered companies to provide new disclosures to California consumers, provides such consumers new ways to opt-out of certain sales of personal information, and allows for a new cause of action for data breaches.

Other countries in which we fail to adequately protect critical proprietarydo business have, or confidentialare developing, laws governing the collection, use and transmission of personal information or associated intellectual property rights or fail to manage third party partners and contract research organizationsas well that may affect our business depends on, it mightor require us to adapt our technologies or practices. Some countries, including India, are considering legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements.

The European Data Protection Board (“EDPB”) has asserted that data protection laws do not cause any hindrance to the measures taken in the fight against the coronavirus pandemic, noting that the GDPR authorizes employers and health authorities to process personal data without consent in the context of epidemics.

Legal requirements relating to the collection, storage, handling, and transfer of personal information and personal data continue to evolve and may result in ever-increasing public scrutiny and escalating levels of enforcement, sanctions and increased costs of compliance.

These data protection laws and similar initiatives could increase the cost of developing, implementing or maintaining our information technology systems and require us to allocate more resources to compliance initiatives thereby increasing our costs. In addition, a failure by us, or our third-party vendors, to comply with applicable data privacy and security laws could result in financial, legal, business, and reputational harm to us and could have a material adverse impacteffect on the way we operate our product development execution.

From time to time we also acquire in-process researchbusiness, our financial condition and development assets, which require significant resources and expenses to continue to develop, both through our own efforts and through collaborations. Because of the inherent risk associated with research and development efforts in our industry, including the high cost and uncertainty of conducting clinical trials (where required), such efforts may not result in the successful introduction of new pharmaceutical products approved by the relevant regulatory bodies.

For example, during the year ended March 31, 2017, we acquired eight Abbreviated New Drug Applications in the United States from Teva Pharmaceutical Industries Limited (“Teva”) and an affiliate of Allergan plc. The consideration for such purchase was U.S.$350 million in cash at closing, which was funded through borrowings from certain institutional lenders. Our results of operations may suffer if these products are not timely developed, approved or successfully commercialized.

Opposition to free trade agreements and changes in trade policies of countries in which we operate could adversely affect the pricing and demand for our products.

Opposition to free trade agreements was an important component of the campaign platform of the new U.S. administration, and there are ongoing efforts to achieve that goal. For example, the United States withdrew from the Trans-Pacific Partnership (“TPP”) free trade agreement and recently announced that it will end preferential trade treatment for India, currently being extended under its Generalized System of Preferences (“GSP”). In the current scheme, there might not be any direct impact on U.S. imports of pharmaceutical products due to this withdrawal. However, any such changes in free trade agreements could, among other things, interfere with free trade in goods, impose additional customs duties or tariffs, increase the costs and difficulties of international transactions and potentially disturb the international flow of goods and, in particular, trade between the United States and other countries, and thus may have a adverse effect on our financial performance.

Any new tariffs or other changes in U.S. trade policy could trigger retaliatory actions by affected countries, potentially escalating and resulting in “trade wars”. For example, in March and April 2018, the U.S. government announced new tariffs on steel and aluminum from China, as well as more than 1,300 other Chinese exports. In response, the Chinese government announced that it would enact retaliatory tariffs on more than 100 American products. Trade policy changes or internal policy changes such as these can result in increased costs for goods, which may reduce customer demand for these products if the parties having to pay those tariffs increase their prices, or in increased costs to trading partners. If these consequences are realized, they may materially and adversely affect our sales and our business.operations.

We may be susceptible to significant product liability claims that are not covered by insurance.

Our business inherently exposes us to potential product liability claims, and the severity and timing of such claims are unpredictable. Notwithstanding pre-clinical and clinical trials conducted during the development of potential products to determine the safety and efficacy of products for use by humans following approval by regulatory authorities, unanticipated side effects may become evident only when drugs are introduced into the marketplace. Due to this fact, our customers and participants in clinical trials may bring lawsuits against us for alleged product defects. In other instances, third parties may perform analyses of published clinical trial results which raise questions regarding the safety of pharmaceutical products, and which may be publicized by the media. Even if such reports are inaccurate or misleading, in whole or in part, they may nonetheless result in claims against us for alleged product defects.

Under the current regulatory scheme in the United States, branded drug manufacturers can independently update product labeling through the “changes being effected” (“CBE”) supplement process, but a generic manufacturer is only permitted to use the CBE process to update its label if the branded drug manufacturer changes its label first. This can prevent generic manufacturers from complying with state law warning requirements and, as a result, state product liability suits based on failure-to-warn and design defect claims against generics manufacturers have generally been determined to be preempted by Federal law.

FollowingHowever, emerging developments in various countries laws relating to the United States Supreme Court’s June 2013 ruling in Mutual Pharmaceutical Co. v. Bartlett upholding such preemption and immunityliability of generic pharmaceutical manufacturers the U.S. FDA had proposed a new rule in November 2013 that would have allowed generic manufacturers to independently updatefor certain product labeling through the CBE supplement process. If the U.S. FDA’s proposed new rule was adopted, it may have eliminated this preemption and increasedliability claims could increase our potential exposure to lawsuits relating to product safety, side effectslitigation costs and warnings on labels.damages. This new potential exposure to lawsuits would also have increased the risk that, in the future, we would not be able to obtain the type and amount of insurance coverage we desire at an acceptable price and self-insurance may become the sole commercially reasonable means available for managing the product liability risks of our business. After twice delaying publication of a final rule, the U.S. FDA withdrew its proposed rule during 2017.

The risk of exposure to lawsuits is likely to increase as we develop our own new patented products, or limited competition/complex products, such as injectable or biosimilar products, in addition to making generic versions of drugs that have been in the market for some time. In addition, the existence or even threat of a major product liability claim could also damage our reputation and affect consumers’ views of our other products, thereby negatively affecting our business, financial condition and results of operations.

If we fail to comply with environmental lawsThere has been a trend of increased regulatory review of over-the-counter products for safety and regulations, or face environmental litigation, our costs may increase or our revenues may decrease.

We may incur substantial costs complying with requirements of environmental laws and regulations. In addition, we may discover currently unknown environmental problems or conditions. In all countries where we have production facilities, we are subject to significant environmental laws and regulations that govern the discharge, emission, storage, handling and disposal of a variety of substances that may be used in or result from our operations. In the normal course of our business, we are exposed to risks relating to possible releases of hazardous substances into the environment,efficacy questions, which could cause environmental or property damage or personal injuries, and that could require remediation of contaminated soil and groundwater, which could cause us to incur substantial remediation costs that could adverselypotentially affect our consolidated financial position, results of operations or liquidity.over-the-counter products business.

If any of our plants or the operations of such plants are shut down, it may severely hamper our ability to supply our customers and we may continue to incur costs in complying with regulations, appealing any decision to close our facilities, maintaining production at our existing facilities and continuing to pay labor and other costs, which may continue even if the facility is closed.

Increasing scrutiny and changing expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.

Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance practices. Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, supply chain management, diversity and human rights. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation or harm our business and financial results.

If we improperly handle any of the dangerous materials used in our business and accidents result, we could face significant liabilities that would lower our profits.

We handle dangerous materials including explosive, toxic and combustible materials. If improperly handled or subjected to the wrong conditions, these materials could hurt our employees, cause damage to our properties and harm the environment. Also, increases in business and operations in our plants, and the consequent hiring of new employees, can pose increased safety hazards. Such hazards need to be addressed through training, industrial hygiene assessments and other safety measures and, if not carried out, can lead to industrial accidents. Any of the foregoing could subject us to significant litigation or adversely impact our other litigation matters then outstanding, which could lower our profits in the event we were found liable, and could also adversely impact our reputation.

In a worst case scenario, this could also resultrecent years, significant questions have arisen regarding the safety, efficacy and potential for misuse of certain over-the-counter medicine products. Litigation, particularly in a government forced shutdown of our manufacturing plants, which in turn could lead to product shortages that delay or prevent us from fulfilling our obligations to customers and would adversely affect our business and results of operations.

We have operations in certain countries susceptible to political and economic instability that could lead to disruption or other adverse impact on such operations.

We expect to derive an increasing portion of our sales from regions such as Latin America, Russia and other countries of the former Soviet Union, Central Europe, Eastern Europe and South Africa, all of which may be more susceptible to political and economic instability. For example, as a result of severe political instability and conflict in Ukraine, the United States, sometimes gives rise to these questions. As a result, health authorities around the world have begun to re-evaluate some important over-the-counter products, leading to restrictions on the sale of some of them and even the European Union havebanning of certain products. Any bans or restrictions imposed sanctionsby the government or regulatory agencies on certain individuals and companies in Ukraine and Russia, including sanctions targeted at the Crimea region of Ukraine which was annexed by Russia. Political instability in the region, combined with low worldwide oil prices, resulted in significant devaluation of the Russian rouble

We monitor significant political, legal, regulatory and economic developments in these regions and attempt to mitigate our exposure where possible. However, mitigation is not always possible, and our international operations could be adversely affected by political, legal, regulatory and economic developments, such as changes in capital and exchange controls; expropriation and other restrictive government actions; intellectual property protection and remedy laws; trade regulations; procedures and actions affecting approval, production, pricing and marketing of, reimbursement for and access to our products; and intergovernmental disputes, including embargoes and/or military hostilities.

Significant portionssome of our manufacturing operations are conducted outside the markets in whichover-the-counter products would have an adverse effect on our products are sold, and accordingly we often import a substantial number of products into such markets. We may, therefore, be denied access to our customers or suppliers or denied the ability to ship products from any of our sites as a result of closing of the borders of the countries in which we sell our products, or in which our operations are located, due to economic, legislative, political and military conditions, including hostilities and acts of terror, in such countries.

From time to time we enter new markets, and face risks arising out of our limited knowledge of the market and the customs, laws and regulatory systems that may apply.

From time to time we enter new markets in which we have limited knowledge of the market and the customs, laws, regulatory, political and social systems that may apply. Our success in these new markets is dependent upon the acceptability of our product and brand, the ease of doing business in such market and various other social and economic factors that may be specific to such market. Further, limitations by the local authorities of repatriation of generated funds may pose a risk to our success in these new markets. Our sales and, profit margins may be adversely affected if we fail to provide competitive options in the market orthus, our brands fail to gain acceptability in the market.overall profitability.

We are subject to the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws, which impose restrictions and may carry substantial penalties.

The U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to public officials or otherwise for the purpose of obtaining or retaining business. These laws may require not only accurate books and records, but also sufficient controls, policies and processes to ensure business is conducted without the influence of bribery and corruption. Our policies mandate compliance with these anti-bribery laws, which often carry substantial penalties including fines, criminal prosecution and potential debarment from public procurement contracts. Failure to comply may also result in reputational damages.

We operate in certain jurisdictions that experience governmental corruption to some degree or are found to be low on the Transparency International Corruption Perceptions Index and, in some circumstances, anti-bribery laws may conflict with some local customs and practices. In many less-developed markets, we work with third-party distributors and other agents for the marketing and distribution of our products. Although our policies prohibit these third parties from making improper payments or otherwise violating these anti-bribery laws, any lapses in complying with such anti-bribery laws by these third parties may adversely impact us. Business activities in many of these markets have historically been more susceptible to corruption.

If our efforts to screen third-party agents and detect cases of potential misconduct fail, we could be held responsible for the non-compliance of these third parties under applicable laws and regulations, including the U.S. Foreign Corrupt Practices Act. Compliance with the U.S. Foreign Corrupt Practices Act and other anti-bribery laws has been subject to increasing focus and activity by regulatory authorities in recent years.

We may be subject to injunctions or limitations on future conduct, be required to modify our business practices and compliance programs and/or have a compliance monitor imposed on us, or suffer other criminal or civil penalties or adverse impacts, including lawsuits by private litigants or investigations and fines imposed by local authorities.

We need to constantly review and update our compliance program to keep it current and active. If we fail to do so, our vulnerabilities may increase and our controls may be found to be inadequate.

Actions by our employees, or third-party intermediaries acting on our behalf, in violation of such laws, whether carried out in the United States or elsewhere, may expose us to liability for violations of such anti-bribery laws and accordingly may have a material adverse effect on our reputation and our business, financial condition or results of operations.

IfOur industry has been increasingly challenged by the world economyvulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet. Third parties may illegally distribute and sell counterfeit versions of our products, which do not meet the rigorous manufacturing and testing standards that our products undergo. Counterfeit products are frequently unsafe or ineffective, and can be potentially life-threatening.

Counterfeit medicines may contain harmful substances, the wrong dose of the API or no API at all. However, to distributors and patients, counterfeit products may be visually indistinguishable from the authentic version.

Reports of adverse reactions to counterfeit drugs or increased levels of counterfeiting could materially affect patient confidence in the authentic product, and harm the business of companies such as ours. Additionally, it is affected duepossible that adverse events caused by unsafe counterfeit products would mistakenly be attributed to actsthe authentic product. In addition, there could be thefts of terrorism, warsinventory at warehouses, plants or epidemics, itwhile in-transit, which are not properly stored and which are sold through unauthorized channels.

We operate in a highly competitive and rapidly consolidating industry which may adversely affect our businessrevenues and results of operations.profits.

Several areas of the world, including India, have experienced terrorist acts and retaliatory operationsOur products face intense competition from products commercialized or under development by competitors in recent years. Local disturbances, terrorist attacks, riots, social disruption, wars, or regional hostilities in the countries in which we or our partners and suppliers operate could affect the economy, our operations and employees by disrupting operations and communications, making travel and the conductall of our business segments based in India, the United States and other markets. Many of our competitors have greater financial resources and marketing capabilities than we do. Our competitors may succeed in developing technologies and products that are more difficult, and/effective, more popular or causingcheaper than any we may develop or license, thus rendering our technologies and products obsolete or uncompetitive, which would harm our business and financial results. It is also possible that alternate therapies or substitutable products that we developed for the same indication would lead to cannibalization of revenues from our products.

Further, in recent years the goals established under the Generic Drug User Fee Act, and increased funding of the U.S. FDA’s Office of Generic Drugs, have led to more and faster generic approvals, and consequently increased competition. The U.S. FDA has established new steps to enhance competition, promote access and lower drug prices and is approving record-breaking numbers of generic applications. While these improvements are expected to benefit our generic product pipeline, they will also benefit competitors that seek to launch products in established generic markets where we currently offer products. The U.S. FDA’s efforts to increase the pace at which generics enter the market has also resulted in a trend of many first time generic manufacturers entering the market, which is further increasing competition in the market.

Our generics business is also facing increasing competition from brand-name manufacturers who do not face any significant regulatory approvals or barriers to enter into the generics market. These brand name manufacturers have devised numerous strategies for example, sell generic versions of their products directly or by forming strategic alliances with our competitor generic pharmaceutical companies or by granting them rights to sell “authorized generics”. Moreover, brand companies continually seek new ways to delay the introduction of generic products and decrease the impact of generic competition, such as filing new patents on drugs whose original patent protection is about to expire, developing patented controlled-release products, change the dosage form or dosing regimen of the brand product prior to generic introduction while the generic applicant seeks to amends its ANDA dossier to match the changes in the brand product, changing product claims and product labeling, or developing and marketing as over-the-counter products those branded products that are about to face generic competition, or pricing the branded product at a discount equivalent to generic pricing.

Our competitors, which include major multinational corporations, are consolidating, and the strength of the combined companies could affect our competitive position in all of our business areas. Furthermore, if one of our competitors or their customers to be concerned about our ability to meet their needs.If the economy ofacquires any of our key markets (including but not limited to the United States, the United Kingdom, Germany, India and Russia) is affected by such acts, ourcustomers or suppliers, we may lose business and results of operations may be adversely affected as a consequence.

Uncertainty and volatility in relation to the UK’s planned exit from the EU

On June 23, 2016, the United Kingdom (“U.K.”) heldcustomer or lose a remain-or-leave referendum on its membership within the European Union (“EU”), the outcome of which was a decision for the U.K. to exit from the EU (the “Brexit”).This was meant to be effective as of March 29, 2019 after the U.K. invoked Article 50 of the Treaty on European Union. A process of negotiation will likely determine the future terms of the U.K.’s relationship with the EU, as well as whether the U.K. will be able to continue to benefit from the EU’s free trade and similar arrangements. As pharmaceutical legislation in the U.K. is largely derived from the EU law and relies on mutual recognition of decision making, implementationsupplier of a number of practical steps is required before the U.K. exits the EU.critical raw material.

In November 2018,our generics business, to the U.K.extent that we succeed in being the first to market a generic version of a significant product, and E.U. agreed upon a draft agreement that set outparticularly if we obtain the terms of the U.K.'s withdrawal. In January 2019, the draft withdrawal agreement was rejected by the U.K. parliament, creating significant uncertainty about the terms (and timing) under which the U.K. will exit the EU. The departure date has now been extended to October 31, 2019, although it could be earlier if the U.K. Parliament approves the draft withdrawal agreement. If the U.K. leaves the EU with no withdrawal agreement, it will likely have an adverse impact on trade, in addition to creating further short-term uncertainty and currency volatility. Brexit could also lead to legal uncertainty and potentially divergent national laws and regulations in the U.K. and E.U.

Given the uncertainty surrounding the terms of the U.K.'s withdrawal and its consequences, until the Brexit negotiation process is completed, it is difficult to anticipate the potential impact on our market share, sales, profitability and operations. For example, in the immediate aftermath of the Brexit, it is possible that the capacity at major ports both in the U.K. and the EU is materially reduced for an indeterminate180-day period of time. This could adversely affect our ability to transport medicines, raw materials and intermediates to the U.K and/or the EU with a consequential adverse impact. The Brexit could also result in restrictions on the movement of persons, deterioration in market access or trading terms, delay or restrictions to the movement of goods, potential changes to intellectual property rights, regulatory approval requirements and pharmaceutical regulations, or increased cost and burdens arising from other new or diverging rules and regulations, any of which may have a significant adverse impact on our operations, profitability and business model.

In addition, following the Brexit vote in the U.K., the EU has decided to move the headquarters of the EU's health authority, the EMA, from the U.K. to the Netherlands by March 2019. It is expected that a significant percentage of the current employees of the EMA will decide not to make the move to the Netherlands. This raises the possibility that new drug approvals in the EU could be delayed as a result.

The longer-term effects of the Brexit are difficult to predict but could include further financial instability and slower economic growth or an economic downturn in the U.K., the EU and/or the global economy. Furthermore, uncertainty around the form and timing of any withdrawal agreement and the form and timing of any post-withdrawal trading arrangements (whether with the EU or third parties) could increase instability and volatility and lead to adverse effects on the economy of the U.K., the EU and the rest of the world. Any of the foregoing could, in turn have an adverse economic impact on our operations. As the process of Brexit evolves, we will continue to assess its impact on us.

Our Proprietary Products segment, particularly our Specialty businessesexclusivity in the United States faces intense competition from companies that are more entrenched than we areprovided under the Hatch-Waxman Act of 1984, as amended, our sales and profit can be substantially increased in the period following the introduction of such product and prior to a competitor’s introduction of the equivalent product or have greater resources than ours.the launch of an authorized generic.

Our risk profilePrices of generic drugs typically decline, often dramatically, especially as additional generic pharmaceutical companies receive approvals and enter the market for a given product. Consequently, our Proprietary Products segment is lower than the comparable risk profile of companies working with completely novel entities. Nevertheless, the risk that the businesses in this segment face is higher than that of the Generics business due to several factors outlined below.

Market penetration requires successful commercial positioning in relation not only to past therapies but also new competitors. All of the therapeutic areas in which we compete have many active competitors, each vying for market share in similar indications with products that may have some similar attributes. As such, success in our Proprietary Products segment requires the ability to strategically differentiatesustain our offerings from thosesales and profitability of our competitors. .any product over time is dependent on both the number of new competitors for such product and the timing of their approvals.

Even if we are able to successfully develop a differentiated version, favorable unrestricted reimbursement from payors for our products is necessary in order to realize the desired potential. Typically, a managed care plan relies on a committee comprised of physicians and other decision makers and influencers to decide which drugs will appear on its formulary. The randomized clinical trial data generated to obtain U.S. FDA approval will no longer be sufficient to gain a favorable access decision. Typically, all managed care plans attempt to aggressively direct their patients towards generic medicines due to their lack of belief in differentiation or overall cost improvement. Thus it is imperative to satisfy the committee that there is sufficient evidence that the impact of the differentiation and/or incremental innovation of our products is significantly higher, in order to persuade them to list it on their respective formularies. Without our products having a reasonable position on the formulary of managed care plans, patients will not be able to obtain access to our products and physicians become less likely to prescribe our products.

Additionally, because the Specialty business of our Proprietary Products segment works primarily with known active molecules, there remains a risk that these products are easier to engineer around than products possessing composition of matter patents. Although we strive to create a robust intellectual property “ring fence” to protect these assets, the products in our U.S. Specialty business portfolio may nonetheless enjoy fewer years of exclusivity than traditional innovative products.

Research and development efforts invested in our differentiated formulations and biologics products may not achieve expected results.

In our Proprietary Products segment,business, many of our business model focuses on building a pipelinecompetitors have greater experience than we do in the therapeutic areas of neurologyclinical testing, human clinical trials, obtaining regulatory approvals and dermatology. In our biologic segment, our business model focuses on building a pipeline in various therapies targeted at bothcommercialization. They may be able to respond more quickly to new or emerging markets and highly regulated markets. We must invest increasingly significantmarket preferences or to devote greater resources to develop differentiated products and biosimilars, both through our own efforts and through collaborations, in-licensing and acquisition of products from or with third parties. The development of differentiated products and biosimilars involves processes and expertise significantly more complex than those used in the development of generic drugs, which increases the risks of failure. During each stage,new products and/or technologies than we may encounter obstacles that delay the development process and increase expenses, leading to significant riskscan. As a result, any products and/or innovations that we will not achieve our goals anddevelop may be forced to abandon a potential productbecome obsolete or non-competitive before we can recover the expenses incurred in which we have invested substantial amounts of time and money. These obstacles may include: preclinical failures; difficulty enrolling patients in clinical trials; delays in completing formulation and other work needed to support an application for registration; adverse reactions or other safety concerns arising during clinical testing; insufficient clinical trial data to support the safety or efficacy of the product candidate; and failure to obtain, or delays in obtaining, the required regulatory approvals for the product candidate or the facilities in which it is manufactured.

Because of the amount of capital required to be invested in augmenting our differentiated products and biosimilar pipeline, in some cases we are reliant on partnerships and joint venturesconnection with third parties, and consequently face the risk that some of these third parties may fail to perform their obligations, or fail to reach the levels of success that we are relying on to meet our revenue and profit goals.development.

If we electcompetitors introduce new products or new variations on their existing products, our Proprietary Products, even those protected by patents, may experience substantial reductions in value.

If pharmaceutical companies are successful in limiting the use of generics through their legislative, regulatory and other efforts, sales of our generic products may be adversely impacted.

Many pharmaceutical companies increasingly have used state and federal legislative and regulatory means to selldelay or eliminate generic competition. These efforts have included:

Any failure to comply with the complex reporting and payment obligations under the Medicare and Medicaid programs or other laws regulating marketing practices may result in litigation or sanctions and adversely impact our business.

The U.S. laws and regulations regarding Medicare and/or Medicaid reimbursement and rebates and other governmental programs are complex. Some of the applicable laws may impose liability even in the absence of a generic product priorspecific intent to the final resolution of outstanding patent litigation, we could bedefraud. The subjective decisions and complex methodologies used in making calculations under these programs are subject to liabilities for damages.

At times we seek approval to market generic products before the expiration of patents for those products, based upon our beliefreview and challenge, and it is possible that such patents are invalid, unenforceable, or would not be infringed by our products. As a result, we are involved in patent litigation, the outcome of which could materially adversely affect our business. Based upon a complex analysis of a variety of legal and commercial factors, we may elect to market a generic product even though litigation is still pending. This could be before any court decision is rendered or while an appeal of a lower court decision is pending. To the extent we elect to proceed in this manner, if the final court decision is adverse to us, we could be required to cease the sale of the infringing products and face substantial liability for patent infringement. These damages may be significant as they may be measured by a royalty on our sales or by the profits lost by the patent owner and not by the profits we earned.

Because of the discount pricing typically involved with generic pharmaceutical products, patented brand products generally realize a significantly higher profit margin than generic pharmaceutical products. In the case of a willful infringer, the definition of which is unclear, these damages may even be trebled.

Furthermore, there may be risks involved in entering into in-licensing arrangements for products, which are often conditioned upon the licensee’s sharing in the patent-related risks.

For business reasons, we continue to examine such product opportunities (i.e., involving non-expired patents) going forward and thisreviews could result in patent litigation,material changes in the outcomescalculation outcomes.

The Patient Protection and Affordable Care Act, as amended, continues to face uncertainty due to administrative efforts to repeal, substantially modify or invalidate some or all of its provisions, as well as challenges to its constitutionality. In addition, government authorities have significant leverage to persuade pharmaceutical companies to enter into corporate integrity agreements, which may havecan be expensive and disruptive to operations.

If any of the above queries and/or investigations were to result in a material adverse effect on our results of operations, financial condition andlawsuit that was determined adversely to us or in a large cash flows.settlement, it could require us to pay significant amounts.

Failure to maintain supply of compliant, quality product.

If there is delay and/or failure in supplies of materials, services and finished goods from third parties or failure of finished goods from our key manufacturing sites, it may adversely affect our business and results of operations.

In some of our businesses, we rely on third parties for the timely supply of active pharmaceutical ingredients (“API”), specified raw materials, equipment, formulation or packaging services and maintenance services, and in some cases there could be a single source of supply. Although, we actively manage these third party relationships to ensure continuity of supplies and services on time and to our required specifications, events beyond our control could result in the complete or partial failure of supplies and services or in supplies and services not being delivered on time.

In the event that we experience a shortage in our supply of raw materials, we might be unable to fulfill all of the API needs of our Global Generics segment, which could result in a loss of production capacity for this segment. Moreover, we may continue to be dependent on vendors, strategic partners and alliance partners for supplies of some of our existing products and new generic launches.

Any unanticipated capacity or supply related constraints affecting such vendors, strategic partners or alliance partners can adversely affect our business or results of operations. Our key generics manufacturing sites also may have capacity constraints and, at times, we may not be able to generate sufficient supplies of finished goods.

Any failureFailure to comply with the complex reporting and payment obligations under the Medicare and Medicaid programs or other laws regulating marketing practices may result in litigation or sanctions and adversely impact our business.maintain supply of compliant, quality product.

The U.S. lawsWe may experience difficulties, delays and regulations regarding Medicare and/or Medicaid reimbursement and rebates and other governmental programs are complex. Some of the applicable laws may impose liability eveninterruptions in the absencemanufacturing and supply of a specific intent to defraud. The subjective decisions and complex methodologies used in making calculations under these programs are subject to review and challenge, and it is possible that such reviews could result in material changes in the calculation outcomes. In addition, government authorities have significant leverage to persuade pharmaceutical companies to enter into corporate integrity agreements, which can be expensive and disruptive to operations.

If any of the above queries and/or investigations were to result in a lawsuit that was determined adversely to us or in a large cash settlement, it could require us to pay significant amounts.

If we have difficulty in identifying candidatesour products for or consummating acquisitions and strategic alliances, our competitiveness and our growth prospects may be harmed.

In order to enhance our business, we frequently seek to acquire or make strategic investments in complementary businesses or products, or to enter into strategic partnerships or alliances with third parties. It is possible that we may not identify suitable acquisition, strategic investment or strategic partnership candidates, or if we do identify suitable candidates, we may not complete those transactions on terms commercially acceptable to us. We compete with others to acquire companies, and we believe that this competition has intensified and may result in decreased availability or increased prices for suitable acquisition candidates. Even after we identify acquisition candidates and/or announce that we plan to acquire a company, we may ultimately fail to consummate the acquisition. For example, we may be unable to obtain necessary regulatory approvals,various reasons, including the approval of antitrust regulatory bodies.

All acquisitions involve known and unknown risks that could adversely affect our future revenues and operating results. For example:among other reasons;

There has been a trend of increased regulatory review of over-the-counter products for safety and efficacy questions, which could potentially affect our over-the-counter products business.

In recent years, significant questions have arisen regarding the safety, efficacy and potential for misuse of certain over-the-counter medicine products. Litigation, particularly in the United States, sometimes gives rise to these questions. As a result, health authorities around the world have begun to re-evaluate some important over-the-counter products, leading to restrictions on the sale of some of them and even the banning of certain products. If the U.S. FDA or another regulator were to review one or more of our over-the-counter products for such purposes, and if such review resulted in the U.S. FDA or another regulator charging us with violations applicable to such product, it could have a significant adverse effect on our sales of such over-the-counter products and, thus, our overall profitability.

Impairment charges or write downs in our books could have a significant adverse effect on our results of operations and financial results.

A substantial portion of the value of our assets pertains to various intangible assets and goodwill. The proportion of the intangible assets and goodwill to our total assets could increase significantly as we pursue various growth strategies. The value of these intangible assets and goodwill could be substantially impaired upon indications of impairment, with adverse effects on our financial condition and the value of our assets.

A relatively small group of products may represent a significant portion of our net revenues, gross profit or net earnings from time to time.

In certain markets, sales of a limited number of products may represent a significant portion of our net revenues, gross profit and net earnings. If the volume or pricing of such products declines in the future, our business, financial position and results of operations could be materially adversely affected.

If we are unable to patent new products and processes or to protect our intellectual property rights or proprietary information, or if we infringe on the patents of others, our business may be materially and adversely impacted.

Our overall profitability depends, among other things, on our ability to continuously and timely introduce new generic as well as proprietary products. Our success depends, in part, on our ability in the future to obtain patents, protect trade secrets, intellectual property rights and other proprietary information and operate without infringing on the proprietary rights of others. Our competitors may have filed patent applications, or hold issued patents, relating to products or processes that compete with those we are developing, or their patents may impair our ability to successfully develop and commercialize new products.

Our success with our proprietary products depends, in part, on our ability to protect our current and future innovative products and to defend our intellectual property rights. If we fail to adequately protect our intellectual property, competitors may manufacture and market products similar to ours. We have been issued patents covering our innovative products and processes and have filed, and expect to continue to file, patent applications seeking to protect our newly developed technologies and products in various countries, including the United States. Any existing or future patents issued to or licensed by us may not provide us with any competitive advantages for our products or may even be challenged, invalidated or circumvented by competitors. In addition, such patent rights may not prevent our competitors from developing, using or commercializing products that are similar or functionally equivalent to our products.

We also rely on trade secrets, unpatented proprietary know-how and continuing technological innovation that we seek to protect, in part by confidentiality agreements with licensees, suppliers, employees and consultants. It is possible that these agreements may be breached and we may not have adequate remedies for any such breach. Disputes may arise concerning the ownership of intellectual property or the applicability of confidentiality agreements. Furthermore, our trade secrets and proprietary technology may otherwise become known or be independently developed by our competitors. Therefore, despite all of our information security systems and practices, we may still not be able to ensure the confidentiality of information relating to such products.

Counterfeit versions of our products could harm our patients and reputation.

Our industry has been increasingly challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet. Third parties may illegally distribute and sell counterfeit versions of our products, which do not meet the rigorous manufacturing and testing standards that our products undergo. Counterfeit products are frequently unsafe or ineffective, and can be potentially life-threatening. Counterfeit medicines may contain harmful substances, the wrong dose of the API or no API at all. However, to distributors and patients, counterfeit products may be visually indistinguishable from the authentic version.

Reports of adverse reactions to counterfeit drugs or increased levels of counterfeiting could materially affect patient confidence in the authentic product, and harm the business of companies such as ours. Additionally, it is possible that adverse events caused by unsafe counterfeit products would mistakenly be attributed to the authentic product. In addition, there could be thefts of inventory at warehouses, plants or while in-transit, which are not properly stored and which are sold through unauthorized channels.

Fluctuations in exchange rates and interest rate movements may adversely affect our business and results of operations.

A significant portion of our revenues are in currencies other than the Indian rupee, especially in the U.S. dollar, the Euro, the Russian rouble, and the U.K. pound sterling, while a significant portion of our costs are in Indian rupees. As a result, if the value of the Indian rupee appreciates relative to these other currencies, our revenues measured in Indian rupees may decrease and our financial performance may be adversely impacted.

Further, we may also be exposed to credit risks in some of the emerging markets from our customers on account of adverse economic conditions.

We use derivative financial instruments to manage interest rate fluctuations and some of our net exposure to currency exchange rate fluctuations in certain key foreign currencies. We do not use derivative financial instruments or other hedging techniques to cover all of our potential exposure.

A significant portion of our borrowing costs are linked to U.S. dollar London Interbank Offered Rate (“LIBOR”), and hence any increase in U.S. dollar LIBOR adversely impacts our financial performance.

In July 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. It is unclear if LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist. As such, depending on the future of LIBOR, a comparable or successor reference rate as determined under our credit agreements may apply, or we may need to renegotiate certain terms of our credit agreements to replace U.S. dollar LIBOR with a new standard. In either case, our interest rates and interest expense could increase, which could adversely affect our financial condition, operating results and cash flows.

If we have difficulty in identifying candidates for or consummating acquisitions and strategic alliances, our competitiveness and our growth prospects may be harmed.

In order to enhance our business, we frequently seek to acquire or make strategic investments in complementary businesses or products, or to enter into strategic partnerships or alliances with third parties. It is possible that we may not identify suitable acquisition, strategic investment or strategic partnership candidates, or if we do identify suitable candidates, we may not complete those transactions on terms commercially acceptable to us. We compete with others to acquire companies, and we believe that this competition has intensified and may result in decreased availability or increased prices for suitable acquisition candidates. Even after we identify acquisition candidates and/or announce that we plan to acquire a company, we may ultimately fail to consummate the acquisition. For example, we may be unable to obtain necessary regulatory approvals, including the approval of antitrust regulatory bodies.

All acquisitions involve known and unknown risks that could adversely affect our future revenues and operating results. For example:

Our success depends on our ability to retain and attract qualified personnel and, if we are not able to retain them or recruit additional qualified personnel, we may be unable to successfully develop our business.

We are highly dependent on the principal members of our management and scientific staff, the loss of whose services might significantly delay or prevent the achievement of our business or scientific objectives. In India, it is not our practice to enter into employment agreements with our executive officers and key employees that are as extensive as are generally used in the United States, and each of those executive officers and key employees may terminate their employment upon notice and without cause or good reason. Currently, we are not aware of any executive officer’s or key employee’s departure that has had, or planned departure that is expected to have, any material impact on our operations. Competition among pharmaceutical companies for qualified employees is intense, and the ability to retain and attract qualified individuals is critical to our success. There can be no assurance that we will be able to retain and attract such individuals currently or in the future on acceptable terms, or at all, and the failure to do so would have a material adverse effect on our business, financial condition and results of operations. In addition, we do not maintain “key person” life insurance on any officer, employee or consultant.

Since a large part of our business centers around the United States, changes to the U.S. immigration laws could make it more difficult to obtain nonimmigrantnon-immigrant work authorizations in the United States. There have been and will continue to be calls for extensive changes to U.S. immigration laws regarding the admission of highly-skilled temporary and permanent workers.

There are some legislative proposals which, if passed and signed into law, could add further costs and/or restrictions to some of the high-skilled temporary worker categories and, in turn, our cost of doing business in the United States may increase. This could have a material and adverse effect on our business, revenues and operating results.

Compliance with new and changing corporate governance and public disclosure requirements adds uncertainty to our compliance policies and increases our costs of compliance.

Changing laws, regulations and standards relating to accounting, corporate governance and public disclosure, including the Sarbanes Oxley Act of 2002, new SEC regulations, New York Stock Exchange rules, provisions of India’s Companies Act 2013, Securities and Exchange Board of India rules and Indian stock market listing regulations, create uncertainty for our company. These new or changed laws, regulations and standards may lack specificity and are subject to varying interpretations. Their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs of compliance as a result of ongoing revisions to such governance standards.

We are committed to maintaining high standards of corporate governance and public disclosure, and our efforts to comply with evolving laws, regulations and standards in this regard have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. continue.

In addition, the new laws, regulations and standards regarding corporate governance may make it more difficult for us to obtain director and officer liability insurance. Further, our board members, chief executive officer, chief operating officer, and chief financial officer could face an increased risk of personal liability in connection with the performance of their duties. As a result, we may face difficulties attracting and retaining qualified board members and executive officers, which could harm our business. If we fail to comply with new or changed laws or regulations and standards differ, our business and reputation may be harmed.harmed.

If we are unable to defend ourselves in patent challenges, we could be subject to injunctions preventing us from selling our products, or we could be subject to substantial liabilities that could adversely affect our profits. Further, our patent settlement agreements with the innovators may face government scrutiny, exposing us to significant damages.

There has been substantial patent related litigation in the pharmaceutical industry concerning the manufacture, use and sale of various products. In the normal course of business, we are regularly subject to lawsuits and the ultimate outcome of litigation could adversely affect our results of operations, financial condition and cash flow. Regardless of regulatory approval, lawsuits are periodically commenced against us with respect to alleged patent infringements by us, such suits often being triggered by our filing of an application for governmental approval, such as an ANDA or NDA. The expense of any such litigation and the resulting disruption to our business, whether or not we are successful, could harm our business. The uncertainties inherent in patent litigation make it difficult for us to predict the outcome of any such litigation.

California recently passed the Preserving Access to Affordable Drugs (AB-824), legislation that could adversely impact our ability to settle patent litigations. The law, which took effect on January 1, 2020, creates a presumption that a patent settlement has anti-competitive effects, and thus violates California's state antitrust law, if it provides for the generic pharmaceutical company to receive “anything of value” from the branded pharmaceutical company and if the generic pharmaceutical company agrees to delay the launch of a generic product for any period of time. The law specifically identifies exclusive licenses and agreements by the branded pharmaceutical company “not to launch an authorized generic version” of its branded product as things of value that would trigger the presumption. Such presumption may make it more difficult to negotiate settlement agreements which are subject to this new law.

If we are unsuccessful in defending ourselves against these suits, we could be subject to injunctions preventing us from selling our products, resulting in a decrease in revenues, or to damages, which may be substantial. An injunction or substantial damages resulting from these suits could adversely affect our consolidated financial position, results of operations or liquidity.

Further, we have been involved in various litigations involving challenges to the validity or enforceability of registered patents and therefore settling such patent litigations has been and is likely to continue to be an important part of our business.

Parties to patent litigation settlement agreements in the United States, including us, are required by law to file them with the Federal Trade Commission (“FTC”) and the Antitrust Division of the Department of Justice for review. The FTC has publicly stated that, in its view, some of the brand-generic settlement agreements violate the antitrust laws and has brought actions against some brand and generic companies that have entered into such agreements. Accordingly, such settlement agreements may expose us to antitrust violation claims.

If we elect to sell a generic product prior to the final resolution of outstanding patent litigation, we could be subject to liabilities for damages.

At times we seek approval to market generic products before the expiration of patents for those products, based upon our belief that such patents are invalid, unenforceable, or would not be infringed by our products. As a result, we are involved in patent litigation, the outcome of which could materially adversely affect our business. Based upon a complex analysis of a variety of legal and commercial factors, we may elect to market a generic product even though litigation is still pending. This could be before any court decision is rendered or while an appeal of a lower court decision is pending. To the extent we elect to proceed in this manner, if the final court decision is adverse to us, we could be required to cease the sale of the infringing products and face substantial liability for patent infringement. These damages may be significant as they may be measured by a royalty on our sales or by the profits lost by the patent owner and not by the profits we earned.

Because of the discount pricing typically involved with generic pharmaceutical products, patented brand products generally realize a significantly higher profit margin than generic pharmaceutical products. In the case of a willful infringer, the definition of which is unclear, these damages may even be trebled.

Furthermore, there may be risks involved in entering into in-licensing arrangements for products, which are often conditioned upon the licensee’s sharing in the patent-related risks.

For business reasons, we continue to examine such product opportunities (i.e., involving non-expired patents) going forward and this could result in patent litigation, the outcomes of which may have a material adverse effect on our results of operations, financial condition and cash flows.

Class action lawsuits could expose us to significant liabilities, result in negative publicity, harm our reputation and have a material adverse effect on the price of our ADSs.

Shareholders of a public company sometimes bring securities class action lawsuits against the company following periods of instability in the market price of that company’s securities. As a public company grows in size, the risk of such litigations may increase. If we were to be sued in any such class action suit, irrespective of the merits of the underlying case, it could have adverse effects on us, including among other things: (a) a diversion of management’s time and attention and other resources from our business and operations, which could harm our results of operations; (b) negative publicity, which could harm our reputation and restrict our ability to raise capital in the future; (c) require us to incur significant expenses to defend the suit; and (d) if a claim against us is successful, we may be required to pay significant damages and, in certain circumstances, to indemnify our directors and officers if they are named as defendants in the class action suit. Any of the foregoing could, individually or in the aggregate, have a material adverse effect on our financial condition and results of operations and/or the price of our ADSs.

We enter into various agreements in the normal course of business which periodically incorporate provisions whereby we indemnify the other party to the agreement.

In the normal course of business, we periodically enter into agreements with vendors, customers, alliance partners, innovators and others that incorporate terms for indemnification provisions. Our indemnification obligations under such agreements may be unlimited in duration and amount. We maintain insurance coverage that we believe will effectively mitigate our obligations under certain of these indemnification provisions (for example, in the case of outsourced clinical trials). However, should our obligations under an indemnification provision exceed our coverage or should coverage be denied, it could have a material adverse impact on our business, financial position and results of operations.

If we fail to comply with environmental laws and regulations, or face environmental litigation, our costs may increase or our revenues may decrease.

We may incur substantial costs complying with requirements of environmental laws and regulations. In addition, we may discover currently unknown environmental problems or conditions. In all countries where we have production facilities, we are subject to significant environmental laws and regulations that govern the discharge, emission, storage, handling and disposal of a variety of substances that may be used in or result from our operations. In the normal course of our business, we are exposed to risks relating to possible releases of hazardous substances into the environment, which could cause environmental or property damage or personal injuries, and that could require remediation of contaminated soil and groundwater, which could cause us to incur substantial remediation costs that could adversely affect our consolidated financial position, results of operations or liquidity.

If any of our plants or the operations of such plants are shut down, it may severely hamper our ability to supply our customers and we may continue to incur costs in complying with regulations, appealing any decision to close our facilities, maintaining production at our existing facilities and continuing to pay labor and other costs, which may continue even if the facility is closed.

If the world economy is affected due to acts of terrorism, wars or epidemics, it may adversely affect our business and results of operations.

Several areas of the world, including India, have experienced terrorist acts and retaliatory operations in recent years. Local disturbances, terrorist attacks, riots, social disruption, wars, or regional hostilities in the countries in which we or our partners and suppliers operate could affect the economy, our operations and employees by disrupting operations and communications, making travel and the conduct of our business more difficult, and/or causing our customers to be concerned about our ability to meet their needs. If the economy of any of our key markets (including but not limited to the United States, the United Kingdom, Germany, India, China and Russia) is affected by such acts, our business and results of operations may be adversely affected as a consequence.

Epidemics and other public health crises, such as the ongoing novel coronavirus (COVID-19) and the restrictive measures to control the outbreak, could significantly impact our business operations and supply chain. See “A pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, and the resulting restrictive measures and economic impacts may materially and adversely impact our business and results of our operations” above.

Risks from disruption to production, supply chain or operations from natural disasters could adversely affect our business and operations and cause our revenues to decline.

If flooding, droughts, earthquakes, volcanic eruptions or other natural disasters were to directly damage, destroy or disrupt our manufacturing facilities, it could disrupt our operations, delay new production and shipments of existing inventory or result in costly repairs, replacements or other costs, all of which would negatively impact our business. A significant portion of our manufacturing facilities are situated around Hyderabad, India, a region that has experienced earthquakes, floods and droughts in the past. Even if we take precautions to provide back-up support in the event of such a natural disaster, the disaster may nonetheless affect our facilities, harming production and ultimately our business. And, even if our manufacturing facilities are not directly damaged, a large natural disaster may result in disruptions in distribution channels or supply chains. The impact of such occurrences depends on the specific geographic circumstances but could be significant.

In addition, there is increasing concern that climate change is occurring and may have dramatic effects on human activity without aggressive remediation steps. A modest change in temperature may cause a rising number of natural disasters. We cannot predict the economic impact, if any, of natural disasters or climate change.

We have concentrations of sales to certain customers and consolidation among distributors and pharmaceutical companies could increase the concentration risk and also adversely impact our business prospects.

In the United States, similar to other pharmaceutical companies, we sell our products through wholesale distributors and large retail chains in addition to hospitals, pharmacies and other groups. During the year ended March 31, 2020, our ten largest customers accounted for approximately 80% of our North America Global Generics segment’s revenues. Consolidation and integration of the drug wholesalers, retail drug chains, private insurers, managed care organizations and other purchasing organizations may continue to adversely affect pharmaceutical manufacturers. Such consolidations has resulted in these groups gaining additional purchasing leverage and, consequently, increasing the product pricing pressures facing our business. We expect this trend of increased pricing pressures to continue. Such pressures have reduced, and could continue to reduce, our revenue, margins and profitability.

Additionally, the emergence of large buying groups representing independent retail pharmacies, and the prevalence and influence of managed care organizations and similar institutions, creates competition among pharmaceutical companies to have their products included in the formulary of those groups and enables those groups to extract price discounts on our products.

We have operations in certain countries susceptible to political and economic instability that could lead to disruption or other adverse impact on such operations.

We expect to derive an increasing portion of our sales from regions such as China, Latin America, Russia and other countries of the former Soviet Union, Central Europe, Eastern Europe and South Africa, all of which may be more susceptible to political and economic instability.

We monitor significant political, legal, regulatory and economic developments in these regions and attempt to mitigate our exposure where possible. However, mitigation is not always possible, and our international operations could be adversely affected by political, legal, regulatory and economic developments, such as changes in capital and exchange controls; expropriation and other restrictive government actions; intellectual property protection and remedy laws; trade regulations; procedures and actions affecting approval, production, pricing and marketing of, reimbursement for and access to our products; and intergovernmental disputes, including embargoes and/or military hostilities.

Significant portions of our manufacturing operations are conducted outside the markets in which our products are sold, and accordingly we often import a substantial number of products into such markets. We may, therefore, be denied access to our customers or suppliers or denied the ability to ship products from any of our sites as a result of closing of the borders of the countries in which we sell our products, or in which our operations are located, due to economic, legislative, political and military conditions, including hostilities and acts of terror, in such countries.

While it is not possible to predict the economic impact and the magnitude of the ongoing coronavirus pandemic and the restrictive measures to control the outbreak, it could significantly impact our business operations and supply chain. See “A pandemic, epidemic or outbreak of an infectious disease, such as COVID-19, and the resulting restrictive measures and economic impacts may materially and adversely impact our business and results of our operations” above.

Uncertainty and volatility in relation to the U.K.’s planned exit from the EU

On June 23, 2016, the United Kingdom (“U.K.”) held a remain-or-leave referendum on its membership within the European Union (“EU”), the outcome of which was a decision for the U.K. to exit from the EU (the “Brexit”).

The U.K. formally withdrew from the EU on January 31, 2020 with status quo arrangements through a transition period. The transition period began on February 1, 2020 and is expected to last until December 31, 2020. During this transition period, the U.K. and the EU will negotiate a final agreement to govern their long-term relationship, as well as whether the U.K. will be able to continue to benefit from the EU’s free trade and similar arrangements. However, if no agreement is reached before December 31, 2020 and no extension to the transition period is agreed to, a no-deal Brexit will occur on December 31, 2020.

There is uncertainty around the form and timing of any withdrawal agreement and the form and timing of any post-withdrawal trading arrangements (whether with the EU or third parties). The situation could potentially result in changes to intellectual property rights, regulatory approval requirements and pharmaceutical regulations, or increased cost and burdens arising from other new or diverging rules and regulations, any of which may have an adverse impact on our operations. As the process of Brexit evolves, we will continue to assess its impact on us.

Opposition to free trade agreements and changes in trade policies of countries in which we operate could adversely affect the pricing and demand for our products.

Opposition to free trade agreements was an important component of the campaign platform of the new U.S. administration, and there are ongoing efforts to achieve that goal. For example, the United States withdrew from the Trans-Pacific Partnership (“TPP”) free trade agreement and recently announced that it will end preferential trade treatment for India, currently being extended under its Generalized System of Preferences (“GSP”). In the current scheme, there might not be any direct impact on U.S. imports of pharmaceutical products due to this withdrawal. However, any such changes in free trade agreements could, among other things, interfere with free trade in goods, impose additional customs duties or tariffs, increase the costs and difficulties of international transactions and potentially disturb the international flow of goods and, in particular, trade between the United States and other countries, and thus may have an adverse effect on our financial performance.

Any new tariffs or other changes in U.S. trade policy could trigger retaliatory actions by affected countries, potentially escalating and resulting in “trade wars”. For example, in March and April 2018, the U.S. government announced new tariffs on steel and aluminum from China, as well as more than 1,300 other Chinese exports. In response, the Chinese government announced that it would enact retaliatory tariffs on more than 100 American products. Trade policy changes or internal policy changes such as these can result in increased costs for goods, which may reduce customer demand for these products if the parties having to pay those tariffs increase their prices, or in increased costs to trading partners. If these consequences are realized, they may materially and adversely affect our sales and our business.

From time to time we enter new markets, and face risks arising out of our limited knowledge of the market and the customs, laws and regulatory systems that may apply.

From time to time we enter new markets in which we have limited knowledge of the market and the customs, laws, regulatory, political and social systems that may apply. Our success in these new markets is dependent upon the acceptability of our product and brand, the ease of doing business in such market and various other social and economic factors that may be specific to such market. Further, limitations by the local authorities of repatriation of generated funds may pose a risk to our success in these new markets. Our sales and profit margins may be adversely affected if we fail to provide competitive options in the market or our brands fail to gain acceptability in the market.

Current economic conditions may adversely affect our industry, financial position and results of operations.

In recent years, the global economy has experienced volatility and an unfavorable economic environment, and these trends may continue in the future. Reduced consumer spending, reduced funding for national social security systems or shifting concentrations of payors and their preferences, may force our competitors and us to reduce prices. The growth of our business may be negatively affected by high unemployment levels and increases in co-pays, which may lead some patients to delay treatments, skip doses or use less effective treatments to reduce their costs.

We have exposure to many different industries and counterparties, including our partners under our alliance, research and promotional services agreements, suppliers of raw materials, drug wholesalers and other customers, who may be unstable or may become unstable in the current economic environment. We run the risk of delayed payments or even non-payment by our customers, which consist principally of wholesalers, distributors, pharmacies, hospitals, clinics and government agencies.

Significant changes and volatility in the consumer environment and in the competitive landscape may make it increasingly difficult for us to predict our future revenues and earnings.

Impairment charges or write downs in our books could have a significant adverse effect on our results of operations and financial results.

A substantial portion of the value of our assets pertains to various intangible assets and goodwill. The proportion of the intangible assets and goodwill to our total assets could increase significantly as we pursue various growth strategies. The value of these intangible assets and goodwill could be substantially impaired upon indications of impairment, with adverse effects on our financial condition and the value of our assets.

Fluctuations in our quarterly revenues, operating results and cash flows may adversely affect the trading price of our shares and ADSs.

Our quarterly revenues, operating results and cash flows have fluctuated significantly in the past and may fluctuate substantially from quarter to quarter in the future. Such fluctuations result from a variety of factors, including but not limited to changes in demand for our products, timing of regulatory approvals and of launches of new products by us and our competitors (particularly where we obtain the 180-day period of market exclusivity in the United States provided under the Hatch-Waxman Act of 1984), timing of our retailers’ promotional programs and successful development and commercialization of limited competition and complex products. Such fluctuations may result in volatility in the price of our equity shares and our ADSs. In such an event, the trading price of our shares and ADSs may be adversely affected.

Changes in tax regulations of the countries we operate in may increase our tax liabilities and thus adversely affect our financial results.

Currently, we are entitled to various tax benefits and exemptions under Indian tax laws, such as tax benefits on research and development spending and exemptions applicable to income derived from manufacturing facilities located in certain tax exempted zones. Any changes in these laws or their application may increase our tax liability and thus adversely affect our financial results.

For instance, presently under Indian tax laws, weighted deduction on research and development activities is available at 150% which will be reduced to 100% commencing April 1, 2020. Further, Special Economic Zone (“SEZ”) units commencing manufacture or production of article and things after April 1, 2020 will not be eligible for SEZ tax deductions currently available.

India’s Finance Act, 2016 amended the test of residence for foreign companies. While a non-resident company is generally taxed only on its Indian sourced income, a resident company is taxed on its global income. Under the amended rule, a company not formed under the laws of India would be considered a resident in India if its place of effective management in the previous year was in India. The term “place of effective management” (or “PoEM”) has been defined to mean a place where key management operates and commercial decisions that are necessary for the conduct of the business of an entity as a whole are in substance made.

Effective July 1, 2017, a Goods and Services Tax (“GST”) was introduced in India, replacing various taxes such as central excise duty, service tax, octroi, value added tax, sales tax and entry tax, thus avoiding the multiple layers of taxation that had previously existed in India. The GST rate applicable to finished dosages is generally 12%, whereas API are subject to a GST rate of 18%. Taxing finished dosages at lower rates than API reduces the competitiveness of domestically manufactured finished dosages as compared to imported finished dosages - sometimes referred to as an “inverted duty structure”. Relevant procedures have been prescribed in the GST legislation relating to tax credits allowing for refunds to offset the adverse impact of such inverted duty structure. Accumulation of tax credits is likely to persist at any point of time owing to the lag between the time the tax credit arises and the time that the refund is received.

Further, the effective rate ofThe corporate dividend distribution tax (“DDT”) has, which had previously been increased several times since 2013. Effectiveat a 20.5553% rate, was abolished on April 1, 2018,2020. Accordingly, any dividend declared by our company on or after April 1, 2020 will not be subject to DDT. However, such dividend is taxable in the effective ratehands of DDT increased from 20.3576%the shareholders at the respective rates applicable to 20.5553%.

In December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “TCJA”). The TCJA made broad and complex changes to theU.S. Internal RevenueCode, including, but not limited to, reducing the U.S. federal corporate income tax rate from 35% to 21% effective for tax years beginning after December 31, 2017. The TCJA also put in place new tax laws that may impact our taxable income for tax years beginning after December 31, 2017, which include, but are not limited to (i) expanded limitations on the deductibility of interest, (ii) immediate expensing of capital expenditures, (iii) the migration from a “worldwide” system of taxation to a territorial system, (iv) the creation of an anti-base erosion minimum tax system; and (v) the modification or repeal of many business deductions and credits.them.

Changes in tax regimes in countries other than India, such as the TCJA,Tax Cuts and Jobs Act of the United States, could result in a material impact on our cash tax liabilities and tax charges, resulting in either an increase or a reduction in financial results depending upon the nature of the change.

We operate in jurisdictions that impose transfer pricing and other tax-related regulations on our intercompany arrangements, and any failure to comply could materially and adversely affect our profitability.

We are required to comply with various transfer pricing regulations in India and other countries. Failure to comply with such regulations may impact our effective tax rates and consequently affect our net margins. Additionally, we operate in numerous countries and our failure to comply with the local and municipal tax regimes may result in additional taxes, penalties and enforcement actions from such authorities.

Although our intercompany arrangements are based on accepted tax standards, tax authorities in various jurisdictions may disagree with and subsequently challenge the amount of profits taxed in such jurisdictions, which may increase our tax liabilities and could have a material adverse effect on the results of our operations. Further, the base erosion and profit shifting (“BEPS”) project undertaken by the Organization for Economic Cooperation and Development (“OECD”) contemplates changes to numerous international tax principles. Various countries have incorporated such tax principles into their domestic legislations by way of enactment. These enactments are significant in nature and require compliance on a regular basis. Although we will continue to adhere to such compliance, significant uncertainties remain as to the outcome of these efforts.

We enter into various agreements in the normal course of business which periodically incorporate provisions whereby we indemnify the other party to the agreement.

In the normal course of business, we periodically enter into agreements with vendors, customers, alliance partners, innovators and others that incorporate terms for indemnification provisions. Our indemnification obligations under such agreements may be unlimited in duration and amount. We maintain insurance coverage that we believe will effectively mitigate our obligations under certain of these indemnification provisions (for example, in the case of outsourced clinical trials). However, should our obligations under an indemnification provision exceed our coverage or should coverage be denied, it could have a material adverse impact on our business, financial position and results of operations.

Current economic conditions may adversely affect our industry, financial position and results of operations.

In recent years, the global economy has experienced volatility and an unfavorable economic environment, and these trends may continue in the future. Reduced consumer spending, reduced funding for national social security systems or shifting concentrations of payors and their preferences, may force our competitors and us to reduce prices. The growth of our business may be negatively affected by high unemployment levels and increases in co-pays, which may lead some patients to delay treatments, skip doses or use less effective treatments to reduce their costs.

We have exposure to many different industries and counterparties, including our partners under our alliance, research and promotional services agreements, suppliers of raw materials, drug wholesalers and other customers, who may be unstable or may become unstable in the current economic environment. We run the risk of delayed payments or even non-payment by our customers, which consist principally of wholesalers, distributors, pharmacies, hospitals, clinics and government agencies.

Significant changes and volatility in the consumer environment and in the competitive landscape may make it increasingly difficult for us to predict our future revenues and earnings.

Risks from disruption to production, supply chain or operations from natural disasters could adversely affect our business and operations and cause our revenues to decline.

If flooding, droughts, earthquakes, volcanic eruptions or other natural disasters were to directly damage, destroy or disrupt our manufacturing facilities, it could disrupt our operations, delay new production and shipments of existing inventory or result in costly repairs, replacements or other costs, all of which would negatively impact our business. A significant portion of our manufacturing facilities are situated around Hyderabad, India, a region that has experienced earthquakes, floods and droughts in the past.

Even if we take precautions to provide back-up support in the event of such a natural disaster, the disaster may nonetheless affect our facilities, harming production and ultimately our business. And, even if our manufacturing facilities are not directly damaged, a large natural disaster may result in disruptions in distribution channels or supply chains. The impact of such occurrences depends on the specific geographic circumstances but could be significant.

In addition, there is increasing concern that climate change is occurring and may have dramatic effects on human activity without aggressive remediation steps. A modest change in temperature may cause a rising number of natural disasters. We cannot predict the economic impact, if any, of natural disasters or climate change.

Our principal shareholders have significant control over us and, if they take actions that are not in the best interests of our minority shareholders, the value of their investment in our ADSs may be harmed.

Our full time directors and members of their immediate families, in the aggregate, beneficially owned 26.77%26.75% of our issued shares as at March 31, 2019.2020. As a result, these people, acting in concert, are likely to have the ability to exercise significant control over most matters requiring approval by our shareholders, including the election and removal of directors and significant corporate transactions. This significant control by these directors and their family members could delay, defer or prevent a change in control, impede a merger, consolidation, takeover or other business combination involving us, or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us. As a result, the value of the equity shares and/or ADSs of our minority shareholders may be adversely affected or our minority shareholders might be deprived of a potential opportunity to sell their equity shares and/or ADSs at a premium.

RISKS RELATING TO INVESTMENTS IN INDIAN COMPANIES

We are an Indian company. Our headquarters are located in India, a substantial part of our operations are conducted in India and a significant part of our infrastructure and other assets are located in India. In addition, a substantial portion of our total revenues for the year ended March 31, 20192020 continued to be derived from sales in India. As a result, the following additional risk factors apply that are not specific to our company or industry.

We may be subjected to additional compliance and litigation risks as a result of introduction of the Companies Act, 2013 in India and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

As a company that is incorporated in India, we are governed by the rules and regulations covered under the Indian Companies Act, 1956. Significant amendments to the Companies Act were adopted in 2013 and 2014 and a majority of the provisions of the new Act (called the “Companies Act, 2013") were implemented beginning in April, 2014. Some of the significant changes were in the areas of board and governance processes, boardroom responsibilities, disclosures, compulsory corporate social responsibility, audit matters, initiation of class action suits by shareholders or depositors, fraud reporting and whistle-blower mechanisms.

In addition, on September 2, 2015, the Securities and Exchange Board of India (“SEBI”) issued the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the “Listing Regulations”) that must be followed by all listed Indian public companies effective December 1, 2015. These Listing Regulations were intended to consolidate and streamline the provisions of the existing listing agreements for different segments of the capital markets (e.g., equity securities, debt securities, Indian depository receipts, etc.). The Listing Regulations have thus been structured to provide ease of reference by consolidating into one single document across various types of securities listed on the stock exchanges.

Key features of the Listing Regulations include:

However, certain provisions of the Companies Act, 2013 and the new Listing Regulations provisions are subject to varying interpretations and their application in practice may evolve over time as additional guidance is provided by regulatory and governing bodies. Further, the Companies Act, 2013, the rules made thereunder and the new Listing Regulations have been and are subjectbeing amended from time to various ongoing changes. In 2017, certain amendments to the Companies Act, 2013 were implemented through the Companies (Amendment) Act, 2017 in the areas of related party transactions, financial reporting, audit and auditors, board matters and others. Certain of such amendments are yet to be effective.time.

In 2018, certain amendments toEffective as of April 1, 2019, the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 were amended through the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018. These amendments relate to, among other things, governance, related party transactions, financial reporting, audits and auditors, and board matters. Such amendments are primarily effective from April 1, 2019.

All of the foregoing may collectively result in continuing uncertainty regarding compliance matters and higher costs of compliance as a result of ongoing revisions.

A slowdown in economic growth in India may adversely affect our business and results of operations.

Our performance and the quality and growth of our business are necessarily dependent on the health of the overall Indian economy. The Indian economy has grown significantly over the past few years. Any future slowdown in the Indian economy could harm us, our customers and other contractual counterparties. In addition, the Indian economy is in a state of transition. The share of the services sector of the Indian economy is rising while that of the industrial, manufacturing and agricultural sector is declining. It is difficult to gauge the impact of these fundamental economic changes on our business.

If wage costs or inflation rise in India, it may adversely affect our competitive advantages over higher cost countries and our profits may decline.

Wage costs in India have historically been significantly lower than wage costs in developed countries and have been one of our competitive strengths. However, wage increases in India may increase our costs, reduce our profit margins and adversely affect our business and results of operations.

Due to various macro-economic factors, the rate of inflation has recently been volatile in India. If the inflation rises, we may not be able to pass these inflationary costs on to our customers by increasing the price we charge for our products.

Stringent labor laws may adversely affect our ability to have flexible human resource policies; labor union problems could negatively affect our production capacity and overall profitability.

Labor laws may restrict our ability to have human resource policies that would allow us to react swiftly to the needs of our business. Approximately 3.54%4.5% of our employees belong to a number of different labor unions. If we experience problems with our labor unions that may adversely affect our production capacity and our overall results and operations.

Risks Relating to our ADSs THAT ARE NOT SPECIFIC TO OUR COMPANY OR INDUSTRY

The market price of our ADSs may be volatile, and the value of your investment could materially decline.

Investors who hold our ADSs may not be able to sell their ADSs at or above the price at which they purchased such ADSs. The price of our ADSs fluctuate from time to time, and we cannot predict the price of our ADSs at any given time. The risk factors described herein could cause the price of our ADSs to fluctuate materially. In addition, the stock market in general, including the market for generic and specialty pharmaceutical companies, has experienced price and volume fluctuations. These broad market and industry factors may materially harm the market price of our ADSs, regardless of our operating performance. In addition, the price of our ADSs may be affected by the valuations and recommendations of the analysts who cover us, and if our results do not meet the analysts’ forecasts and expectations, the price of our ADSs could decline as a result of analysts lowering their valuations and recommendations or otherwise.

Negative media coverage and public scrutiny may adversely affect the prices of our equity shares and ADSs.

Media coverage, including social media coverage such as blogs, of us has increased dramatically over the past several years. Any negative media coverage, regardless of the accuracy of such reporting, may have an adverse impact on our reputation and investor confidence, resulting in a decline in the share price of our equity shares and our ADSs.

Indian law imposes certain restrictions that limit a holder’s ability to transfer the equity shares obtained upon conversion of ADSs and repatriate the proceeds of such transfer, which may cause our ADSs to trade at a premium or discount to the market price of our equity shares.

Under certain circumstances, the Reserve Bank of India must approve the sale of equity shares underlying ADSs by a non-resident of India to a resident of India. The Reserve Bank of India has given general permission to effect sales of existing shares or convertible debentures of an Indian company by a resident to a non-resident, subject to certain conditions, including the price at which the shares must be sold. Additionally, except under certain limited circumstances, if an investor seeks to convert the Indian rupee proceeds from a sale of equity shares in India into foreign currency and then repatriate that foreign currency from India, he or she will have to obtain an additional approval from the Reserve Bank of India for each such transaction. Required approval from the Reserve Bank of India or any other government agency may not be obtained on terms favorable to a non-resident investor or at all.

Investors who exchange our ADSs for our underlying equity shares may be subject to the provisions of the Companies Act, 2013 and to the disclosure obligations that may be necessary pursuant to the Deposit Agreement with our depositary. The Companies Act, 2013 requires that, where the registered owner of shares does not hold the beneficial interest in such shares, both the registered owner and the beneficial owner of such equity shares are required to disclose to the company the nature of their interest, particulars of the registered owner and certain other details.

There are limits and conditions to the deposit of shares into the ADS facility.

Indian legal restrictions may limit the supply of our ADSs. The only way to add to the supply of our ADSs will be through a primary issuance because the depositary is not permitted to accept deposits of our outstanding shares and issue ADSs representing those shares. However, an investor in our ADSs who surrenders an ADS and withdraws our shares will be permitted to redeposit those shares in the depositary facility in exchange for our ADSs. In addition, an investor who has purchased our shares in the Indian market will be able to deposit them in the ADS program, but only in a number that does not exceed the number of underlying shares that have been withdrawn from and not re-deposited into the depositary facility. Moreover, there are restrictions on foreign institutional ownership of our equity shares as opposed to our ADSs.

The persistently weak global economic and financial environment in many other countries, particularly emerging market countries,and increasing political and social instabilitycouldhave a material adverse effect on our business and the price and liquidity of our shares and our ADSs.

Many of the world's largest economies and financial institutions continue to be impacted by a weak ongoing global economic and financial environment, with some continuing to face financial difficulty, liquidity problems and limited availability of credit. It is uncertain how long these effects will last, or whether economic and financial trends will worsen or improve. In addition, these issues may be further impacted by the difficult conditions existing in parts of the Middle East, anti-immigrant activities, social unrest and fears of terrorism that have followed in many countries.

If U.S. investors in our ADSs are unable to exercise preemptive rights available to our non-U.S. shareholders due to the registration requirements of U.S. securities laws, the investment of such U.S. investors in our ADSs may be diluted.

A company incorporated in India must offer its holders of shares preemptive rights to subscribe and pay for a proportionate number of shares to maintain their existing ownership percentages prior to the issuance of any shares, unless these rights have been waived by at least 75% of its shareholders present and voting at a shareholders’ general meeting.

U.S. investors in our ADSs may be unable to exercise preemptive rights for the shares underlying our ADSs unless a registration statement under the Securities Act of 1933 is effective with respect to the rights or an exemption from the registration requirements of the Securities Act is available. Our decision to file a registration statement will depend on the costs and potential liabilities associated with a registration statement as well as the perceived benefits of enabling U.S. investors in our ADSs to exercise their preemptive rights and any other factors we consider appropriate at the time. We might choose not to file a registration statement under these circumstances. If we issue any of these securities in the future, such securities may be issued to the depositary, which may sell them in the securities markets in India for the benefit of the investors in our ADSs. There can be no assurances as to the value, if any, the depositary would receive upon the sale of these securities. To the extent that U.S. investors in our ADSs are unable to exercise preemptive rights, their proportional interests in us would be reduced.

Our equity shares and our ADSs may be subject to market price volatility, and the market price of our equity shares and ADSs may decline disproportionately in response to adverse developments that are unrelated to our operating performance.

Market prices for the securities of Indian pharmaceutical companies, including our own, have historically been highly volatile, and the market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies.

Factors such as the following can have an adverse effect on the market price of our ADSs and equity shares:

There may be less company information available in Indian securities markets than securities markets in developed countries.

ThereWe are incorporated in India, and there are certain differences in the rights and protections of shareholders under the laws of India as compared to the laws of the United States and other developed economies.

For example, there is a difference between the level of regulation and monitoring of the Indian securities markets over the activities of investors, brokers and other participants, as compared to the level of regulation and monitoring of markets in the United States andsuch other developed economies.countries. The Securities and Exchange Board of India is responsible for improving disclosure and other regulatory standards for the Indian securities markets. The Securities and Exchange Board of India has issued regulations and guidelines on disclosure requirements, insider trading and other matters. There may, however, be less publicly available information about Indian companies than is regularly made available by public companies in developed countries, which could affect the market for our equity shares and ADSs.

Indian stock exchange closures, broker defaults, settlement delays, and Indian Government regulations on stock market operations could affect the market price and liquidity of our equity shares.

The Indian securities markets are smaller than the securities markets in the United States and Europe and have experienced volatility from time to time. The regulation and monitoring of the Indian securities market and the activities of investors, brokers and other participants differ, in some cases significantly, from those in the United States and some European countries. Indian stock exchanges have at times experienced problems, including temporary exchange closures, broker defaults and settlement delays and if similar problems were to recur, they could affect the market price and liquidity of the securities of Indian companies, including our shares. Furthermore, any change in Indian Government regulations of stock markets could affect the market price and liquidity of our equity shares and ADSs.

Sale of our equity shares may adversely affect the prices of our equity shares and ADSs.

The Government of India enacted the Depository Receipts Scheme, 2014, effective as of December 15, 2014. This law permits liberalized rules for sponsored and unsponsored secondary market issue of depository receipts, subject to the existing sectorial cap on foreign investment. Once the regulations are implemented, an Indian company’s equity shares can be freely issued to a depository for the purpose of issuing depository receipts through any mode permissible for the issue of such securities to other investors. This would enable us to more readily issue shares to the depositary for our ADSs and conduct U.S. securities issuances of our ADSs, which would impact the share price and available float in Indian stock exchanges as well as the price and availability of our ADSs on the NYSE. Refer to Item 10.D. “Exchange controls – ADS guidelines” for further details.

The Securities and Exchange Board of India (“SEBI”) issued a circular dated October 10, 2019 which notified a detailed framework for issuance of Depository Receipts (“DRs”) by a company incorporated and listed on a recognized stock exchange in India. The new framework, which was immediately effective, inter alia sets out eligibility requirements, permissible jurisdictions, international exchanges, permissible holder of DRs, as well as certain other obligations to be complied with by issuers of DRs, the Indian depository, the foreign depository and the domestic custodian.

ITEM 4. INFORMATION ON THE COMPANY

4.A.4.A.History and development of the company

Dr. Reddy’s Laboratories Limited was incorporated in India under the Companies Act, 1956, by its promoter and our former Chairman, the late Dr. K. Anji Reddy, as a Private Limited Company on February 24, 1984. We were converted to a Public Limited Company on December 6, 1985 and listed on the BSE Limited (formerly known as the Bombay Stock Exchange Limited), the National Stock Exchange of India Limited and certain other Indian stock exchanges in August 1986 and on the New York Stock Exchange on April 11, 2001. We are registered with the Registrar of Companies, Hyderabad, Telangana, India as Company No. 4507 (Company Identification No. L85195TG1984PLC004507). Our registered office is situated at 8-2-337, Road No. 3, Banjara Hills, Hyderabad, Telangana 500 034, India and the telephone number of our registered office is +91-40-49002900. The name and address of our registered agent in the United States is Dr. Reddy’s Laboratories, Inc., 107 College Road East, Princeton, New Jersey 08540. Our main corporate website address ishttps://www.drreddys.com.

The SEC maintains an Internet website (at www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. This annual report on Form 20-F and other information filed by us with or furnished by us to the SEC can be accessed via such website. Certain (but not all) of such materials are also available on our website, at www.drreddys.com, as soon as reasonably practicable after having been electronically filed with or furnished to the SEC. Information contained in our website, www.drreddys.com, is not part of this annual report on Form 20-F and no portion of such information is incorporated herein or any other materials filed with or furnished to the SEC.

Key business developments:

Re-Audit of the Warning letter impacted sites

The U.S. FDA completed its audit of our API manufacturing facility at Srikakulam on January 28, 2020, and issued a Form 483 with 5 observations. We responded to the observations in February 2020. In May 2020, we received the U.S. FDA’s Establishment Inspection Report (“EIR”) for the above-referred facility, indicating closure of the audit and classifying the inspection of this facility as Voluntary Action Indicated (“VAI”).

With this, all facilities under the November 2015 warning letter from the U.S. FDA are now determined as VAI.

Refer to Note 3334 of our consolidated financial statements under “Receipt of“Update on the warning letter from the U.S. FDA” for further details.

In response to the warning letter and subsequent reinspections, we implemented various global corrective actions, as well as some specific corrective actions. Additionally, a detailed response was submitted to the U.S. FDA which included root cause assessments, corrective actions and preventive actions and impact assessment. We remain fully committed to following high standards of quality and strive towards further strengthening of our quality management systems and processes for sustainability. Our plans to enhance our quality management systems and operations include improvements in rigor of investigations and document control systems, standardization of instrument calibrations, strengthening controls with respect to information technology, strengthening shop floor training programs, and simplifying and standardizing standard operating procedures and batch records at the shop floor.

Further, we have initiated additional operational improvements with respect to areas such as shop floor supervision and Gemba walks (also known as process walks) into the shop floor, engineering, implementation of electronic batch records to eliminate manual errors, and focus on robustness of processes.

Throughout the process of remediating issues raised in the Warning Letter, we have been continually engaged with the U.S. FDA in conveying the progress we have made. We are fully committed to produce safe and efficacious products for our patients.  

Asset purchaseDefinitive agreement with Teva Pharmaceutical Industries LtdUpsher-Smith Laboratories, LLC

During the year ended March 31, 2017,2020, we acquired from Teva Pharmaceutical Industries Limitedentered into a definitive agreement with Upsher-Smith Laboratories, LLC for the sale of our U.S. and select territory rights for ZEMBRACE^® SYMTOUCH^® (sumatriptan injection) 3 mg and TOSYMRA^® (sumatriptan nasal spray) 10 mg (formerly referred to as “DFN-02”), which formed part of our Proprietary Products segment. License fees includes an affiliateamount of Allergan plc a portfolio of eight ANDAs for our North American Generics business. Rs.7,486 million (U.S.$108.7 million) associated with this sale transaction.

Refer to Note 3237 of our consolidated financial statements for further details.

Business Transfer Agreement with Wockhardt Limited

In February 2020, we signed a Business Transfer Agreement (“BTA”) with Wockhardt Limited (“Wockhardt”) to acquire select divisions of its branded generics business in India and the territories of Nepal, Sri Lanka, Bhutan and Maldives for a consideration of Rs.18,500 million.

The business comprises of a portfolio of 62 brands in multiple therapy areas, such as respiratory, neurology, venous malformations, dermatology, gastroenterology, pain and vaccines. This entire portfolio would be transferred to us, along with related sales and marketing teams, the manufacturing plant located in Baddi, Himachal Pradesh and all plant employees (together the “Business Undertaking”).

As of March 31, 2020, the acquisition of this Business Undertaking was subject to certain closing conditions, such as approval from shareholders and lenders of Wockhardt and other requisite approvals under applicable statutes. Hence, the transaction was not accounted for the year ended March 31, 2020.

The transaction was completed on June 10, 2020.

In view of the COVID-19 pandemic and the consequent government restrictions, there has been a reduction in the revenue from the sales of the products forming part of the Business Undertaking during March and April 2020. Subsequently, through an amendment to the BTA, it has been agreed that the deal consideration shall now be upto Rs.18,500 million, to be paid as per the following terms:

Principal capital expenditures:

During the years ended March 31, 2020, 2019 2018 and 2017,2018, we invested Rs.5,725 million, Rs.8,376 million Rs.8,894 million and Rs.12,234Rs.8,894 million (net of sales of capital assets), respectively, in capital expenditures for manufacturing, research and development facilities and other assets. We believe that these investments will create the capacity to support our strategic growth agenda. As of March 31, 2019,2020, we also had contractual commitments of Rs.2,495Rs.4,888 million for capital expenditures. We currently intend to finance our additional capital expansion plans entirely through our operating cash flows and through cash and other investments.

4.B.Business overview

Established in 1984, we are an integrated global pharmaceutical company committed to providingaccelerating access to affordable and innovative medicines through our three core business segments:

Global Generics.This segment consists of our business of manufacturing and marketing prescription and over-the-counter finished pharmaceutical products ready for consumption by the patient, marketed under a brand name (branded formulations) or as generic finished dosages with therapeutic equivalence to branded formulations (generics). This segment includes the operations of our biologics business.

Pharmaceutical Services and Active Ingredients.. This segment primarily consists of our business of manufacturing and marketing active pharmaceutical ingredients and intermediates, also known as “API”, which are the principal ingredients for finished pharmaceutical products. Active pharmaceutical ingredients and intermediates become finished pharmaceutical products when the dosages are fixed in a form ready for human consumption such as a tablet, capsule or liquid using additional inactive ingredients. This segment also includes our contract research services business and ourthe manufacture and sale of active pharmaceutical ingredients and steroids in accordance with the specific customer requirements.

Proprietary Products.This segment consists of the Company’sour business that focuses on the research development, and commercializationdevelopment of differentiated formulations. These novel products fall within the dermatologyThe segment is expected to earn revenues arising out of monetization of such assets and neurology therapeutic areas and are marketed and sold through Promius® Pharma, LLC.subsequent royalties, if any.

Others.This includessegment consists of the operations of our wholly-owned subsidiary, Aurigene Discovery Technologies Limited (“ADTL”), a discovery stage biotechnology company developing novel and best-in-class therapies in the fields of oncology and inflammation and whichinflammation. ADTL works with established pharmaceutical and biotechnology companies in early-stage collaborations, bringing drug candidates from hit generation to pre-clinical development.through customized models of drug-discovery collaborations.

We have a strong presence in highly regulatedOur key markets such asinclude the United States, the United Kingdom and Germany, as well as other key markets such as India, Russia Romania, South Africa and certain countriesother Countries of the former Soviet Union.Union, and Europe.

OUR STRATEGY

Our strategy is guided by our core purpose of accelerating access to affordable and innovative medicines, because “Good Health Can’t Wait”.

Spiraling health care costs across the world have put many medicines out of the reach of millions of people who desperately need them. As a global generic pharmaceutical company, we take very seriously our responsibility to offer affordable alternatives to expensive medicines and help patients manage their disease better.

We deliver on our purpose through a set of promises we make to our customers and partners:

Our business strategyIn order to maximize our impact and operating priorities strive to fulfill these promises. They are carefully chosen to enable us to deliver the maximum positive impact on the livesreach a greater number of patients, aroundwe are committed to delivering on three themes:

Further, the world. The key elementscore of our business strategy is to focus on portfolio, patient centricity, people & quality, to achieve sustained growth.

The operational aspects and sources of competitive advantage for achieving these promises include the following:us are discussed below.

Strengths in science and technology

Our strengths in science and technology range from synthetic organic chemistry, formulation development and biologics development to small molecule based drug discovery. Furthermore, our wholly owned subsidiary, Aurigene Discovery Technologies Limited, is a specialized biotechnology company engaged in discovery and early clinical development of novel, best in class therapies to treat cancer and inflammatory diseases. Such expertise enables us to deliver first-to-market, difficult-to-make products with an industry leading intellectual property and technology leveraged product portfolio.

Product Offerings

Global Generics: Through our branded and unbranded drug products, we aim to offer affordable alternatives to highly-priced innovator brands, both directly and through key partnerships.

Our vertical integration and process innovation helps to ensure that quality products are available to patients in need at all times.

Pharmaceutical Services and Active Ingredients: Our PSAI segment is comprised of our API business and our Custom Pharmaceutical Services (“CPS”) business. Through our API and CPS businesses, we aim to offer technologically advanced product lines and niche product services through partnerships internally and externally.

Proprietary Products: Our Proprietary Products segment is comprised of our differentiated formulations business in the therapeutic areas of dermatology and neurology.business. In this segment, we work to improve patient outcomes by identifying unmet and under-met medical needs and addressing them through innovative products and services that are affordable and accessible. We also have an internal pipeline of differentiated products in dermatology and neurology products in various stages of development.

Operating priorities

Execution excellence provides the framework to create sustainable customer value across all of our activities. We have been investing in the following to achieve this:

OUR PRINCIPAL AREAS OF OPERATIONS

The following table shows our revenues and the percentage of total revenues of our business segments for the years ended March 31, 2020, 2019 2018 and 2017,2018, respectively:

Revenues by country and by therapeutic area for the years ended March 31, 2020, 2019 2018 and 20172018 are discussed in Note 5 to our consolidated financial statements.

Global Generics Segment

Revenues from our Global Generics segment were Rs.138,123 million for the year ended March 31, 2020, an increase of 12% as compared to Rs.122,903 million for the year ended March 31, 2019, an increase of 8% as compared to Rs.114,014 million for the year ended March 31, 2018.2019. The revenue increase was largely attributable toin all the four business geographies of this segment’s operations insegment: North America (the United States and Canada), Europe, India and “Emerging Markets” (which is comprised of Russia, other countries of the former Soviet Union, Romania and certain other countries from our “Rest of the World” markets, including South Africa, China, Brazil and Australia) and India..

The production processes for finished dosages of generics are similar, to a certain extent, regardless of whether the finished dosages are to be marketed to highly regulated or less regulated markets. In many cases, the processes share common and interchangeable facilities and employee bases, and use similar raw materials. However, differences remain between highly regulated and less regulated markets in terms of manufacturing, packaging and labeling requirements and the intensity of regulatory oversight, as well as the complexity of patent regimes.

While the degree of regulation in certain markets may impact product development, we are observing increasing convergence of development needs throughout both highly regulated and less regulated markets. As a result, when we begin the development of a product, we may not necessarily target it at a particular market, but will instead target the product towards a cluster of markets that will include both highly regulated and less regulated markets.

Today, we are one of the leading generic pharmaceutical companies in the world. With the integration of all the markets where we are selling generic pharmaceuticals into our Global Generics segment, our front-end business strategies in various markets and our support services in India are increasingly being developed with a view to leverage our global infrastructure.

The following is a discussion of the key markets in our Global Generics segment.

India

During the year ended March 31, 2019,2020, India accounted for 21% of our total Global Generics segment sales. In India, our key therapeutic categories include gastro-intestinal, cardiovascular and anti-diabetic, dermatology, oncology, respiratory, stomatology, urology and nephrology.

As of March 31, 2019,2020, we had a total of 300318 branded products in India. Our top ten branded products together accounted for 28%26% of our revenues in India in the year ended March 31, 2019.2020. According to IQVIA, a provider of market research to the pharmaceutical industry, in its moving annual total report for the twelve month period ended March 31, 2019,2020, our secondary sales in India grew by 11.3%11.4%. In comparison, the Indian pharmaceutical market experienced growth of 10.5%10.8% during such period. Strategic Marketing Solutions and Research Center Private Limited (“SMSRC”), a prescription market research firm, in its report measuring pharmaceutical prescriptions in India for the twelve month period from January 2019 to February 2019,ended March 2020, ranked us 11^th in terms of the number of prescriptions generated in India during such period.

Sales, marketing and distribution network

We generate demand for our products through our 5,0505,997 sales representatives (which include representatives engaged by us on a contract basis through a service provider) and front line managers, who frequently visit doctors to detail our related product portfolio. They also visit various pharmacies to ensure that our brands are adequately stocked.

We sell our products primarily through clearing and forwarding agents to approximately 3,000 wholesalers who decide which brands to buy based on demand. The wholesalers pay for our products within an agreed credit period and in turn sell these products to retailers. Our clearing and forwarding agents are responsible for transporting our products to the wholesalers. We pay our clearing and forwarding agents on a commission basis. We have insurance policies that cover our products during shipment and storage at clearing and forwarding locations.

Competition

We compete with different companies in the Indian formulations market, depending upon therapeutic and product categories and, within each category, upon dosage strengths and drug delivery. On the basis of sales, we were the 13^th largest pharmaceutical company in India, with a market share of 2.2%, according to IQVIA in its moving annual total report for the twelve month period ended March 31, 2019.2020.

Our competitors in the Indian market include Cipla Limited, GlaxoSmithKline Pharmaceuticals Limited, Zydus Cadila Healthcare Limited, Sun Pharmaceutical Industries Limited, Alkem Limited, Pfizer Limited, Abbott India Limited, Lupin Limited, Aristo Pharma Limited, Intas Pharmaceuticals Limited, Sanofi India Limited, Glenmark Pharmaceuticals Limited and Emcure Pharmaceuticals Limited.

Government regulations

The manufacturing and marketing of drugs, drug products and cosmetics in India is governed by many statutes, regulations and guidelines, including but not limited to the following:

These statutes, regulations and guidelines govern the manufacturing, testing, packaging, labeling, storing, record-keeping, safety, approval, pricing, advertising, promotion, sale and distribution of pharmaceutical products.

An approval is required from the Ministry of Health before a generic equivalent of an existing or referenced brand drug can be marketed. When processing a generics application, the Ministry of Health usually waives the requirement of conducting complete clinical studies, although it generally requires bio-availability and/or bio-equivalence studies. “Bio-availability” indicates the rate and extent of absorption and levels of concentration of a drug product in the blood stream needed to produce a therapeutic effect. “Bio-equivalence” compares the bioavailability of one drug product with another, and when established, indicates that the rate of absorption and levels of concentration of the active drug substance in the body are equivalent for the generic drug with the previously approved drug. A generic application may be submitted for a drug on the basis that it is the equivalent of a previously approved drug. Before approving our generic products, the Ministry of Health also requires that our procedures and operations conform to current Good Manufacturing Practice (“cGMP”) regulations, relating to good manufacturing practices as defined by various countries. We must follow the cGMP regulations at all times during the manufacture of our products. We continue to spend significant time, money and effort in the areas of production and quality testing to help ensure full compliance with cGMP regulations. The timing of final Ministry of Health approval of a generic application depends on various factors, including patent expiration dates, sufficiency of data and regulatory approvals.

Pursuant to the amendments in May 2005 to Schedule Y of the Drugs and Cosmetics Act, 1940, manufacturers of finished dosages are required to submit additional technical data to the Drugs Controller General of India in order to obtain a no-objection certificate for conducting clinical trials as well as to manufacture new drugs for marketing.

On March 22, 2005, the Government of India passed the Patents (Amendment) Bill, 2005 (the “2005 Amendment”), introducing a product patent regime for food, chemicals and pharmaceuticals in India. The 2005 Amendment specifically provides that new medicines (patentability of which is not specifically excluded) for which a patent has been applied for in India on or after January 1, 1995 and for which a patent is granted cannot be manufactured or sold in India by anyone other than the patent holder and its assignees and licensees. This has resulted in a reduction of new product introductions in India for all Indian pharmaceutical companies engaged in the development and marketing of generic finished dosages and APIs. Processes for the manufacture of APIs and formulations were patentable in India even prior to the 2005 Amendment, so no additional impact results from patenting of such processes.

Under the present drug policy of the Government of India, certain drugs have been specified under the Drugs (Prices Control) Order, 2013 (the “DPCO”) as subject to price control. The Government of India established the National Pharmaceutical Pricing Authority, 2012 (“NPPA”), to control pharmaceutical prices. Under the DPCO, the NPPA has the authority to fix the maximum selling price for specified products.

During the year ended March 31, 2013, the Department of Pharmaceuticals under the ministryMinistry of Chemicals and Fertilizers of the Government of India proposed the National Pharmaceuticals Pricing Policy, 2012, a revised nationalNational Pharmaceutical Pricing policyPolicy to apply price controls to 348 drugs listed in National List of Essential Medicines. Some of our formulation products were subject to these price controls. The National List of Essential Medicines, as revised in 2016, now contains 376 drugs. In June 2017, the NPPA announced revisions of the maximum prices for various products scheduled in the National List of Essential Medicines on account of the GST implementation in India. This was followed by an announcement in April 2018 of an increase in the maximum prices of various drugs, as a result of positive inflation as measured by India’s Wholesale Price Index.

On March 12, 2016, the Department of Health and Family Welfare under the Ministry of Health and Family Welfare of the Government of India banned 344 fixed dose combination drugs (i.e., two or more active drugs combined in a fixed ratio into a single dosage). A number of pharmaceutical companies, including us, filed a writ petition before the Delhi High Court challenging the ban. The Delhi High Court initially granted an interim stay on the ban notification and on December 1, 2016, it overturned the government imposed ban on the 344 fixed dosage combinations. Subsequently, the Government of India filed an appeal of the decision in the Supreme Court of India. In December 2017, the Supreme Court of India referred the issue to the government’s expert body, the Drugs Technical Advisory Board (“DTAB”), for a fresh review of safety, efficacy and therapeutic justification of the drugs before recommending action. DTAB subsequently completed its review and, in September 2018, the Government of India banned 328 fixed dose combination drugs. The impact of this ban was negligible on our revenue.

On February 27, 2019, the NPPA invoked special powers granted under paragraph 19 of the DPCO, and released an Office Memorandum through which it brought 42 non-scheduled anti-cancer medications under price control by capping their trade margin (the difference between the price at which the manufacturers sell the medicines to distributors and the price paid by the end user) at 30%.This Office Memorandum had no material financial impact on our revenue.

In addition, onOn March 20, 201917, 2020 the NPPA announced an upward revision in the maximum prices of various drugs, as a result of positive inflation as measured by India’s Wholesale Price Index.

Such ongoing price control changes, product bans and other changes can disrupt the Indian branded pharmaceutical market and negatively impact the revenues and profitability of our Indian business and our company.

Russia and other Countries of the former Soviet Union and Romania

Russia

Russia accounted for 12% of our Global Generics segment’s revenues in the year ended March 31, 2019.2020. IQVIA ranked us 17^th in sales in Russia, with a market share of 1.7% for the twelve months ended March 31, 2019.2020.

According to IQVIA, as per its moving annual total report for the twelve months ended March 31, 2019,2020, our Retail sales value growth was 5.8%9.7% and our sales volume decreasedincreased by 2.3% for such period, as compared to the Russian pharmaceutical market value growth of 6.1%9.0% and sales volume decrease of 3.4%0.3% for such period. We were the top ranked Indian pharmaceutical company in Russia for such period.

Our top five brands, Nise, Omez, Nasivin, Femibion,Ibuclin, and Ibuclin,Cetrine accounted for 56%55% of our retail sales in Russia for the year ended March 31, 2019.2020. Nise (pain management product)product, including systemic and topical form), Omez (an anti-ulcerant product), NasivinNasivin* (for cold and flu), Femibion (for pregnant and lactating women), Ibuclin (for cold and flu) and Cetrine (for allergy) were ranked as the 23^rd , 53^rd , 11516^th, 15740^th, 109^th, 122^nd and 191166^stth best-selling formulation brands, respectively, in the Russian market by IQVIA in its moving retail segment report for the twelve months ended March 31, 2019.2020. (*Nasivin is distributed and promoted by us under a licensing agreement and the brand is owned by Licensor). Our strategy in Russia is to focus on the gastro-intestinal, pain management, anti-infectives, respiratory,cough & cold, allergy and oncology therapeutic areas. Our focus is on building leading brands in these therapeutic areas in prescription, over-the-counter and hospital sales.

Our Global Generics segment’s revenues in Russia increased by 26%9% (in Russian rouble absolute currency terms) during the year ended March 31, 2019,2020, which was largely attributable to an improvement in our base business performance. Such revenues, measured in Indian rupees, increased by 21%10% as compared to the year ended March 31, 2018.2019.

Other Countries of the former Soviet Union and Romania

We operate in other countries of the former Soviet Union, including Ukraine, Kazakhstan, Belarus, Uzbekistan and Romania. For the year ended March 31, 2019,2020, revenues from these countries accounted for 4%5% of our total Global Generics segment’s revenues.

Sales, marketing and distribution network

Our marketing and promotion efforts in our Russian prescription divisionRussia market is driven by a team of 289473 medical representatives and 3659 managers to detail our products to doctors in 77 cities in Russia.

Our Russian over-the-counter (“OTC”) division has 225 medical representatives and 30commercial team consists of 17 key account managers and is focused on establishing a network of relationships with key pharmacy chains and individual pharmacies.chains. Our RussianRussia hospital division has 4238 hospital specialists and 17 key account managers, and is focused on expanding our presence in hospitals and institutes.hospitals.

In Russia, we generally extend credit only to customers after they have established a satisfactory history of payment with us. The credit terms offered to these customers are based on turnover, payment record and the number of the customers’ branches or pharmacies, and are reviewed on a periodic basis. We review the credit terms offered to our key customers on a periodic basis and modify them to take into account the macro-economic scenario in Russia.

Competition

Our principal competitors in the Russian market include Gedeon Richter RUS (an affiliate of Gedeon Ritcher PLC), KrkaBerlin-Chemie/Menarini Pharma, GmbH, KRKA Pharma Limited, Teva Pharmaceutical Industries Limited, Lek-Sandoz Pharmaceuticals (an affiliate of Novartis Pharma A.G.), and Zao Ranbaxy (an affiliate of Sun Pharmaceutical Industries Limited), Nycomed International Management GmbH and Zentiva N.V..

Government regulations

Healthcare system development in Russia

In order to promote local industry, in October 2009the year 2012 the Russian government announcedapproved the Strategy of Pharmaceutical Industry Development in the Russian Federation for the period up to the year 2020 (or the “Pharma 2020 plan”), which aimsaimed to develop the research, development and manufacturing of pharmaceutical products by Russia’s domestic pharmaceutical industry. The goal of the Pharma 2020 plan iswas to reduce Russia’s reliance on imported pharmaceutical products and increase Russia’s self-sufficiency in that regard. According to this program, 90% of drugs from the list of “Essential and Vital Drugs” (also known as the “ZhNVLS”) should be produced by local pharmaceutical companies. By the end of the year 2018, this target was almost achieved (84.2% vs planned 90%). In the year 2018 the Russian government announced a new planned “Pharma-2030” program for the further development of Russian pharmaceutical production. One of the key goals of this program is to increase by 500% to 600% the export of locally produced drugs. This program is expected to be approved during 2020.

The Russian government approved the State Program for Healthcare System Development on December 26, 2017. The objectives of this program are increasing life expectancy at birth, reducing mortality of the working-age population, reducing mortality from circulatory diseases and tumors (including malignant ones) and raising medical care quality satisfaction.

Reference pricing regime

During the year ended March 31, 2010, the Russian government announced a reference pricing regime, pursuant to which a price freeze on certain drugs categorized as “essential” was implemented effective as of April 2010. Pharmaceutical companies have had to register maximum import prices for approximately 5,000 drugs on a list of “Essential and Vital Drugs” (also known as the “ZhNVLS”). During the year ended March 31, 2011, the Russian government announced price re-registration in local currency (Russian roubles) for drugs categorized as “essential” and the new registered prices were effective as of December 10, 2010. Also, effective as of September 1, 2010, the price controls on certain drugs categorized as “non-essential” were removed by the Russian Ministry of Health.

For the past several years, the Russian Ministry of Industry and Trade has enacted and renewed short termshort-term government regulations under which local manufacturers (i.e., in Russia, Belarus and Kazakhstan) get a 15% price preference over non-local manufacturers in procurement tenders by the state.

A draft of “Rules for State registration and re-registration of the maximum ex-works manufacturer prices of medicines included in EDL” was published by the Russian Ministry of Health in 2017 and subsequently has undergone several changes overchanges. Federal Law No. 134-FZ dated June 6, 2019 establishes, and obligates the last several months. However, there still remains ambiguity onholder of a registration certificate for a reference drug to re-register, the final form of the document or implementation period and we aremaximum selling prices for drugs included in the processlist of evaluating the impactvital and essential drugs. It also provides for an automatic re-registration of these changesmaximum selling prices for generics and biosimilar based on our operations even as we await further clarity on this draft law.step-down coefficient.

State Regulation of Prices for Vital and Essential Medicines

Russia’s Federal Law No. 34-FZ dated March 8, 2015 amended the Federal Law 61-FZ “On Circulation of Medicines”. The amendments created new rules for the registration, manufacture and quality control of medicines, including new rules for the calculation and registration of the maximum retail prices of vital and essential medicines established by the ZhNVLS (the “EDL”).

Calculation of the maximum sale price for medicines included in the EDL list is determined by the Government of the Russian Federation taking into account a variety of economic and/or social criteria. The updated EDL lists for 2018,2020, approved by the Decree of the Government No. 2323-p2406-p dated October 23, 2017,12, 2019, became effective from January 1, 2018.2020. These lists include the list of drugs for provision to specific groups of citizens, medicines prescribed by a decision of a medical commission of medical organizations, medical supplies from the 7 Nosologies program list (which covers expensive treatments for patients with certain severe chronic diseases), as well as the minimum range of medicines required for medical aid.

Restrictions on access of foreign drugs

In 2015, the Russian Government enacted the Priority Action Plan for sustainable economic and social stability development and regulation No. 128. This plan and regulation affects medicines included in the EDL, and some of their key terms that have impacted the pharmaceutical industry are (i) supporting import substitution; (ii) optimizing budget costs and reducing inefficient expenses; and (iii) restrictions on access of foreign drugs to state procurement tenders, if two or more locally manufactured drugs participate in the relevant tender.

Interactions between healthcare professionals and medical product companies

During the year ended March 31, 2012, Russia introduced Federal Law # 323, titled “On the Foundations of Healthcare for Russian Citizens”. This law imposes stringent restrictions on interactions between (i) healthcare professionals, pharmacists, healthcare management organizations, opinion leaders (both governmental and from the private sector) and certain other parties (collectively referred to as “healthcare decision makers”) and (ii) companies that produce or distribute drugs or medical equipment (collectively referred to as “medical product companies”) and any representatives or intermediaries acting on their behalf (collectively referred to as “medical product representatives”).

Some of the key provisions of this law are prohibitions on:

At the end of 2013, the State Duma (i.e., the lower chamber of the Russian parliament) adopted a series of amendments to various healthcare related laws. Among other things, the “Law on Medicines" was amended to add regulations restricting interactions between medical product representatives with medical professionals in connection with events sponsored by medical product companies. Under these regulations, in the event that medical product companies wish to sponsor certain scientific, medical education or similar events, they are required to disclose the date, place and time of the event and the plans, programs and agendas for discussion. Disclosure is to be made by publishing appropriate information on their official websites not later than two months before the indicated events, and the same information shall also be sent to Russia’s Federal Healthcare Service (Roszdravnadzor).

Liability for non-compliance with such restrictions extends to both the healthcare professional and the medical product representative. Except for requiring the disclosure of information on conflicts of interest, no specific liability has been currently prescribed for medical product companies.

On July 2, 2013, the Ministry of Health of the Government of Russia published an order on its website that binds physicians to prescribe medicinal products by International Nonproprietary Name (i.e., active substance) or by combination list (which combines different International Nonproprietary Names in one treatment group).

Russia signed the agreement onis a member of a common market for medicines within the Eurasian Economic Union

The Eurasian Economic Union (“EEU”), whose member states are Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan, officially started functioning on was established in January 1, 2015. Among other things,2015 with the member statesaim of creating a shared economic space for its members. EEU rules for the circulation of medicines have been in effect since 2017. In 2018, the information base of the EEU signed an international agreement establishing common principles and rules of functioningpharmaceutical market of the market for medicines within the EEU. According to the agreement, the market authorization for a particular medicine received in one EEU member state will be valid throughout the whole EEU territory. On May 6, 2017, the agreementUnion was ratified bycreated. In 2019, the EEU countries.Manufacturers ofbegan re-registering medicines under the EEU rules, which allow manufacturers in EEU countries will be able to apply for re-registration ofre-register medicines under common procedures and reduce administrative costs. All

More than three dozen medicines and medical devices have already been registered under the national regulationsEEU's rules, and more than 200 applications for registration are in process. Work is being actively carried out to inspect pharmaceutical production facilities for compliance with the rules of the individual EEU member states on or before to December 31, 2020 shall be re-registered under the regulationsgood manufacturing practice (GMP) of the EEU, common market on or before December 31, 2025. Furthermore, Russian legislation is being gradually harmonized withand about 20 certificates have already been issued. This year the legislationfirst part of the EEU.

Russian GMP required for medicines registrationfirst volume of the Union Pharmacopoeia is releasing.

Effective January 1, 2016, foreign medicinal products (i.e.In 2020-2022, the Eurasian Economic Commission plans to update a number of documents of the Union on good practices in the field of circulation of medicines (GMP, GVP, and GCP), manufactured outsiderules for registration of Russia) became subjectmedicines, and requirements for inspection of pharmaceutical production. It is also continuing to the following requirements:develop new recommendations on certain aspects of treatment, such as clinical research, biostatistics, and peculiarities of production of certain types of drugs.

Monitoring System of Movement of Medicines from the Producer to the Final Consumer

The Ministry of Health in Russia has proposed a full serialization system to track and trace the passage of pharmaceuticals through the entire supply chain, from the manufacturers to the end users. The proposed federal repository and tracking system would provide the manufacturers, supply chain and end users of pharmaceuticals many functionalities. Listed below are some of the functions that would be available in addition to the usual authentication and track and trace services:

Marketing authorization holders for medicinal products are required to file registration information for the track-and-trace system with the Russian governing body by January 1, 2019.The provisions on manufacturers’ obligations to label the package with the identification marks, to submit the data to the monitoring system as well as the terms governing liability for non-compliance will become effective starting JanuaryJuly 1, 2020. (Art. 2, Federal Law No. 462-FZ dated December 27, 2019).

Antimonopoly compliance in Russia

On March 1, 2020, the Russian President signed the bill setting forth the legal framework for the internal systems of antimonopoly compliance (the "Compliance Amendments"). The Compliance Amendments came into force on March 12, 2020.

In April 2018,The Compliance Amendments set forth the optional right of Russian companies to introduce an internal system of antimonopoly compliance which is designed to assess and prevent violations of Russian antimonopoly laws and promote internal controls for the same (the "Compliance System"). If a Compliance System is adopted by a company and properly functions, this can serve as a mitigating factor, and potentially reduce liability, in the event of an antimonopoly law violation.

A Russian company is entitled to file the Compliance System with the Russian Government published Resolution No.791-r determining the basic principles and an organizational modelFederal Antimonopoly Service (the “FAS”) for prior approval. This mechanism allows minimizing risks of violation of the labelling system usingantimonopoly law and imposition of the means of identificationrespective administrative fines if the Compliance System is approved by the FAS and the company follows it in Russia. According to this resolution, a check code must be generated using cryptographic technologies.

The draft law protecting intellectual property rights upon drug registration has been preparedpractice.

Currently,E-Commerce for Medical Products

In light of the Ministryvolatile situation with COVID-19, on April 3, 2020 the President of Health in Russia carries out state registrationsigned Decree No. 187 dated March 17, 2020 “On Retail Trade of Medicines for Medical Use” under which online retail sales of over-the-counter medicinal products (except illegal drugs, psychedelic medicines without checking the documents for compliance with third parties intellectual property rights. Therefore, circulation ofand medicines containing intellectual propertyover 25% of third parties without their consent has been common. Unfortunately, current judicial procedures for protecting the intellectual property rights of patent holders are inefficientethyl alcohol) in such situations.

Following the EEU Rules for Drug Registration and Examination (Approved by the Decision of the Council of the Eurasian Economic Commission dated 3 November 2016 No.78), the Ministry of Health has prepared a draft law amending the Law on Drug Circulation that obliges manufacturers to provide the following information when submitting an application for state registration of a medicine:

With regard to medicines already registered within the Russian Federation is now permitted. In the applicant must providecase of prescription medicines, online retail sales are now permitted in cases of urgent medical need and emergency or where there is an “occurrence of a licensing agreement. In addition, the draft law obliges the existing holdersthreat of registration certificates to provide information on availabilitytransmission of intellectual rightsa disease constituting a danger to the registered drugpublic.” The online retail sales of medicines can be undertaken by any person (including medicine manufacturers and retail traders) that trades through a licensed pharmacy and has obtained the requisite government agency permission. The law does not set forth any procedures for e-commerce authorization issuance and medical product delivery, which will need to the authorized state agency before January 1, 2020.be established by subsequent government action.

North America (the United States and Canada)

During the year ended March 31, 2019,2020, North America (the United States and Canada) accounted for 49%47% of our total Global Generics segment sales. In the United States, we sell generic drugs that are the chemical and therapeutic equivalents of reference branded drugs, typically sold under their generic chemical names at prices below those of their brand drug equivalents. Generic drugs are finished pharmaceutical products ready for consumption by the patient. These drugs are required to meet the U.S. FDA or Health Canada, as applicable, standards that are similar to those applicable to their brand-name equivalents and must receive regulatory approval prior to their sale.

Generic drugs may be manufactured and marketed only if relevant patents on their brand name equivalents and any additional government-mandated market exclusivity periods have expired, been challenged and invalidated, or otherwise validly circumvented. Generic pharmaceutical companies sometimes conduct “at-risk launches”, in which sales of the product areis launched prior to resolution of a patent challenge.

Generic pharmaceutical sales increased significantly in the last decade, primarily due to an increased awareness and acceptance among consumers, physicians and pharmacists that generic drugs are the equivalent of brand name drugs, and have resulted in substantial cost savings to U.S. healthcare and an encouragementfurther due to support by governments through passage of legislation permitting generic drug alternatives.

However, the generic pharmaceutical business has been negatively impacted by consolidation among wholesalers and retailers and the formation of group purchasing organizations (“GPOs”), which has lead to increased pricing pressures in the market. In addition, accelerated approval from the U.S. FDA under the timelines of the Generic Drug User Fee Act, as amended, has lead to more competition and resulted in a decline in the growth of the generic companies in North America. We intend to continue building our presence in the region by leveraging our product development capabilities and alliance management, manufacturing capacities inspected by various international regulatory agencies and access to our own APIs, which offer significant supply chain efficiencies.

Key acquisitions in North America:

In April 2008, we acquired BASF’s pharmaceutical contract manufacturing business and related facility in Shreveport, Louisiana, U.S.A. The acquisition included the relevant business, customer contracts, certain supplier contracts, related Abbreviated New Drug Applications (“ANDAs”) and New Drug Applications (“NDAs”), trademarks, as well as the manufacturing facility and assets owned by BASF in Shreveport, Louisiana. The facility is designed to manufacture solid, semi-solid and liquid dosage forms.

Further, in March 2011, we acquired from GlaxoSmithKline plc and Glaxo Group Limited (collectively, “GSK”) a penicillin-based antibiotics manufacturing site in Bristol, Tennessee, U.S.A. and certain related antibiotic product rights. The acquisition enabled us to enter the U.S. oral antibiotics market with a comprehensive product filing and a dedicated manufacturing site. During the three months ended September 30, 2018, we sold our subsidiary Dr. Reddy’s Laboratories Tennessee, LLC and certain related assets to Neopharma Inc., resulting in the disposition of our formulations manufacturing facility and related assets in Bristol, Tennessee.

During the years ended March 31, 2019, and 2018, we continued our efforts to grow the Habitrol® business (an over-the-counter Nicotine Replacement Therapy transdermal patch) that we acquired from Novartis Consumer Healthcare Inc. during the year ended March 31, 2015, having fully integrated the business. The Habitrol® business has shown healthy growth as a result of our expansion of distribution into new channels and our product innovations. We believe that there are significant growth opportunities in the smoking cessation category in the United States, and intend to continue growing the business through our focus on expansion in availability and portfolio augmentation by addition of new dosage forms.

During the year ended March 31, 2017 we acquired from Ducere Pharma the rights to six over-the-counter brand products within the cough-and-cold, pain, and dermatology therapeutic areas, including Doan’s, Bufferin and Nupercainal. Furthermore, during the year ended March 31, 2019, we sold the rights for the Bufferin brand to Gennoma Labs. This divestiture was an outcome of our portfolio optimization efforts and re-alignment of our business priorities.

During the year ended March 31, 2017, we acquired from Teva and an affiliate of Allergan plc a portfolio of eight ANDAs for our North American Generics business. The transaction, valued at $350U.S.$350 million, represents the largest assets acquisition in our history.

However, certain products forming part of the said portfolio were impaired during the year ended March 31, 2020. Refer to Note 13 of our consolidated financial statements for further details.

Through coordinated efforts of our teams in the United States and India, we constantly seek to expand our pipeline of generic products. During the year ended March 31, 2019,2020, we made 208 new ANDA filings with the U.S. FDA. As of March 31, 20192020 our cumulative filings were 279,285, which includes 4 NDA filings under section 505(b)(2) of the Federal Food, Drug and Cosmetic Act in the United States and 275281 ANDA filings. These 275281 ANDA filings include 8 ANDAs that we acquired from Teva and an affiliate of Allergan plc. As of March 31, 2019,2020, we had 11099 filings pending approval with the U.S. FDA (107(97 ANDAs and 32 NDAs under the 505(b)(2) route including 1611 tentative approvals). Of the 10797 ANDAs which are pending approval, 6054 are Paragraph IV filings, and we believe that we are the first to file with respect to 3430 of these filings. Further, these 107 ANDAs which are pending for approval include 4 ANDAs acquired from Teva and Allergan plc’s affiliate, all of which are Paragraph IV filings.

We have also filed two new Investigational New Drugs (“IND”) applications, for our proposed biosimilars to rituximab and PEG-GCSF. For rituximab, Phase 1 clinical trials have been successfully completed and Phase 3 clinical trials are currently in progress under the applicable IND. For Peg-GCSF, trials have been run by our collaboration partnerPartner Fresenius Kabi has successfully completed their clinical trials and have been successfully completed.submitted a Biologics License Application (“BLA”) with the U.S. FDA and a Marketing Authorization Application (“MAA”) with the EMA and the respective agencies have accepted to review the same.

Our Canada business generated revenues of Rs.1,648Rs.1,672 million during the year ended March 31, 2019.2020. This business includes revenues from certain profit sharing arrangements with distributors who market certain of our generic products. As of March 31, 20192020 we have filed a cumulative total of 3334 Abbreviated New Drug Submissions (“ANDS”) in Canada, out of which, 2627 were approved, 2and 7 are pending approval, and 5 were withdrawn or rejected.approval.

Sales, Marketing and Distribution Network

Dr. Reddy’s Laboratories, Inc., our wholly-owned subsidiary headquartered in Princeton, New Jersey, United States, is primarily engaged in the marketing of our generic products in the United States. In early 2003, we commenced sales of generic products under our own label. We have our own sales and marketing team to market these generic products. Our key account representatives for generic products call on procurement buyers for chain drug stores, drug wholesalers and distributors, mass merchandisers, group purchasing organizations (“GPOs”) for hospitals, specialty distributors and pharmacy buying groups.

The majority of revenue from our North America genericsGenerics business is derived from sales of oral solids, as well as sales of various products (both oral solids and OTC products) to retail chains. This portion of the business represents nearly three quarters of this segment’s gross revenues for this region. The product portfolio includes a wide range of therapeutic areas.

Our over-the-counter (“OTC”) division primarily markets and distributes store brand OTC products, but expanded into the branded OTC segment in May 2016, developing a new channel for our growth. This division has successfully launched over 10 products. OTC products include store brand generic equivalents of products that originally have prescription drug status and are switched to OTC drug status by the innovator upon U.S. FDA approval (sometimes called “Rx-to-OTC switch” products). Our entry into the OTC branded division in May 2016 was through the acquisition from Ducere Pharma of the rights to six OTC brand products, including Doan’s, Bufferin and Nupercainal. Our OTC division services a broad range of customers, including drug retailers, mass merchandisers, food chains, drug wholesalers, distributors, and GPOs. ForWe launched 4 new products in the market during the year ended March 31, 2019,2020, including some behind-the-counter OTC products such as guaifenasin pseudoephedrine and fexofenadine pseudoephedrine combinations.

The year ended March 31, 2020 also marked another important milestone for our OTC division generated Rs.9,552 millionbusiness, with the launch of our OTC portfolio in revenues.the e-commerce segment through the initiation of business with Amazon under the brand name HealthcareAisle. We feel very optimistic about significantly growing this segment with evolving consumer trends in the U.S. moving towards higher share of e-commerce. Additionally, we continue to strengthen our presence in the smoking cessation space with our Habitrol® business. We secured approval for nicotine lozenges (mint and original) towards the end of FY 2020.

A portion of our revenue is derived from the sale of injectable products in the therapeutic areas of oncology and critical care. Our injectable product portfolio in the United States primarily consists of products such as azacitidine, decitabine, zoledronic acid, doxorubicin liposomal and bivalrudin. We have also expanded our presence from drug wholesalers to specialty distributors, integrated distribution networks (“IDNs”), clinics, and hospitals to market these products. We also supply products for private label customers for injectable prescription products.

Competition

Revenues and gross profit derived from the sales of generic pharmaceutical products are affected by certain regulatory and competitive factors. As patents and regulatory exclusivity for brand name products expire, the first manufacturer to receive regulatory approval for generic equivalents of such products is generally able to achieve significant market penetration. As competing manufacturers receive regulatory approvals on similar products, market share, revenues and gross profit typically decline, in some cases significantly.

Accordingly, the level of market share, revenues and gross profit attributable to a particular generic product is normally dependent upon the number of competitors and the timing of that product’s regulatory approval and launch, in relation to competing approvals and launches. Consequently, we must continue to develop and introduce new products in a timely and cost-effective manner to maintain our revenues and gross margins.

In addition, the other competitive factors critical to this business include price, product quality, consistent and reliable product supplies, customer service and reputation. Our major competitors in the United States include Teva, Mylan Inc., Sandoz (a division of Novartis Pharma A.G.), Endo International plc (including its subsidiaries Endo Pharmaceuticals Inc. and Par Pharmaceutical Inc.), Sun Pharmaceuticals Limited, Lupin Limited, Aurobindo Pharma Limited, Fresenius Kabi, Sagent Pharmaceuticals, Amneal Pharmaceuticals, Inc, Zydus Cadila Healthcare and Hikma.Hikma Pharmaceuticals.

Continued consolidation of customer purchasing power through acquisitions, alliances and joint ventures continues to intensify the competition and drive down prices. Consolidation of manufacturers is also continuing and, at the same time, new manufacturers continue to enter the generic market in the United States, which may further lower our pricing power and adversely affect our revenues in that market.

Brand name manufacturers have devised numerous strategies to delay competition by introducing lower-cost generic versions of their products. One of these strategies is to change the dosage form or dosing regimen of the brand product prior to generic introduction, which may reduce the demand for the original dosage form as sought by a generic ANDA dossier applicant or create regulatory delays, sometimes significant, while the generic applicant, to the extent possible, amends its ANDA dossier to match the changes in the brand product. In many of these instances, the changes to the brand product may be protected by patent or exclusivities, further delaying generic introduction. Another strategy is the launch by the innovator or its licensee of an “authorized generic” during the 180-day generic exclusivity period, resulting in two generic products competing in the market rather than just the product that obtained the generic exclusivity. This may result in reduced revenues for the generic company which has been awarded the generic exclusivity period.

The U.S. market for OTC pharmaceutical products is highly competitive. Competition is based on a variety of factors, including price, quality, product mix, customer service, marketing support, and the reliability and flexibility of the supply chain for products. Our competition in store brand and innovator branded products in the United States consists of several publicly traded and privately owned companies, including large brand-name pharmaceutical companies. The competition is highly fragmented in terms of both geographic market coverage and product categories, such that a competitor generally does not compete across all product lines. In the store brand market, we compete directly with companies, such as Perrigo, Apotex,PLD Aurobindo and Sun Pharma that sell store brand OTC products. In the branded market, we compete directly with companies, such as Bayer and Pfizer, which sell branded OTC products.

With the acquisition of Habitrol®, we now not only compete with store brands but also with large branded companies such as GlaxoSmithKline Consumer Care, which is an industry leader in the nicotine replacement therapy category. In addition, since a majority of our products are generic equivalents of innovator brands, we also compete against large brand-name pharmaceutical companies.

The competitive landscape and market dynamics of the OTC market are rapidly evolving. Large brand-name pharmaceutical companies have begun to more aggressively pursue Rx-to-OTC switches in new categories, which could present opportunities for us and other companies that sell store brand products. At the same time, pricing pressures continue to increase with the entry of new competitors in the market. On key select molecules, the expectation is that competition in this area will continue to grow as newer categories experience Rx-to-OTC switches.

Government regulations

U.S. Regulatory Environment

All pharmaceutical manufacturers that sell products in the United States are subject to extensive regulation by the U.S. federal government, principally pursuant to the Federal Food, Drug and Cosmetic Act, the Hatch-Waxman Act, the Generic Drug Enforcement Act and other federal government statutes and regulations. These regulations govern or influence the testing, manufacturing, packaging, labeling, storing, record keeping, safety, approval, advertising, promotion, sale and distribution of products.

Our facilities and products are periodically inspected by the U.S. FDA, which has extensive enforcement powers over the activities of pharmaceutical manufacturers. Non-compliance with applicable requirements can result in fines, criminal penalties, civil injunction against shipment of products, recall and seizure of products, total or partial suspension of production, sale or import of products, refusal of the U.S. government to enter into supply contracts or to approve new drug applications and criminal prosecution. The U.S. FDA also has the authority to deny or revoke approvals of drug active pharmaceutical ingredients and dosage forms and the power to halt the operations of non-complying manufacturers. Any failure to comply with applicable U.S. FDA policies and regulations could have a material adverse effect on the operations in our generics business.

U.S. FDA approval of an ANDA is required before a generic equivalent of an existing or referenced brand drug can be marketed. The ANDA approval process is abbreviated because the U.S. FDA waives the requirement of conducting complete clinical studies, although it generally requires bio-availability and/or bio-equivalence studies. An ANDA may be submitted for a drug on the basis that it is the equivalent of a previously approved drug or, in the case of a new dosage form, is suitable for use for the indications specified.

An ANDA applicant in the United States is required to review the patents of the innovator listed in the U.S. FDA publication entitled Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the “Orange Book,” and make an appropriate certification. There are several different types of certifications that can be made. A Paragraph IV filing is made when the ANDA applicant believes its product or its manufacture, use or sales thereof does not infringe on the innovator’s patents listed in the Orange Book or where the applicant believes that such patents are not valid or enforceable. The first generic company to file a Paragraph IV filing may be eligible to receive a six-month marketing exclusivity period starting from either the first commercial marketing of the drug by any of the first applicants or a decision of a court holding the patent that is the subject of the paragraph IV certification to be invalid or not infringed. A Paragraph III filing is made when the ANDA applicant does not intend to market its generic product until the patent expiration. A Paragraph II filing is made where the patent has already expired. A Paragraph I filing is made when there are no patents listed in the Orange Book. Another type of certification is made where a patent claims a method of use, and the ANDA applicant’s proposed label does not claim that method of use. When an innovator has listed more than one patent in the Orange Book, the ANDA applicant must file separate certifications as to each patent.

Before approving a product, the U.S. FDA also requires that our procedures and operations conform to cGMP regulations, relating to good manufacturing practices as defined in the U.S. Code of Federal Regulations. We must follow cGMP regulations at all times during the manufacture of our products. We continue to spend significant time, money and effort in the areas of production and quality to help ensure full compliance with cGMP regulations.

The timing of final U.S. FDA approval of an ANDA depends on a variety of factors, including whether the applicant challenges any listed patents for the drug and whether the brand-name manufacturer is entitled to one or more statutory exclusivity periods, during which the U.S. FDA may be prohibited from accepting applications for, or approving, generic products. In certain circumstances, a regulatory exclusivity period can extend beyond the life of a patent, and thus block ANDAs from being approved on the patent expiration date.

The “pediatric exclusivity” program under The Best Pharmaceuticals for Children Act provides a six-month period of extended exclusivity, applicable to certain listed patents and to other regulatory exclusivities for all formulations of an active ingredient, if the sponsor performs and submits pediatric studies requested by the FDA within specified timeframes. An effect of this program has been to delay the launch of numerous generic products by an additional six months.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Medicare Act of 2003”) modified certain provisions of the Hatch-Waxman Act. In particular, significant changes were made to provisions governing 180-day exclusivity and forfeiture thereof where the first Paragraph IV certification was submitted on or after December 8, 2003.

Under the revised provisions, 180-day exclusivity is awarded to each ANDA applicant submitting a Paragraph IV certification for the same drug with regard to any patent on the first day that any ANDA applicant submits a Paragraph IV certification for the same drug. The180-day exclusivity period begins on the date of first commercial marketing of the drug by any of the first applicants or a decision of a court holding the patent that is the subject of the paragraph IV certification to be invalid or not infringed.

However, a first applicant may forfeit its exclusivity in a variety of ways, including, but not limited to (a) failure to obtain tentative approval within 30 months after the application is filed or (b) failure to market its drug by the later of two dates calculated as follows: (x) 75 days after approval or 30 months after submission of the ANDA, whichever comes first, or (y) 75 days after each patent for which the first applicant is qualified for 180-day exclusivity is either (1) the subject of a final court decision holding that the patent is invalid, not infringed, or unenforceable or (2) withdrawn from listing with the U.S. FDA (court decisions qualify if either the first applicant or any applicant with a tentative approval is a party; a final court decision is a decision by a court of appeals or a decision by a district court that is not appealed). The foregoing is an abbreviated summary of certain provisions of the Medicare Act of 2003, and accordingly such act should be consulted for a complete understanding of both the provisions described above and other important provisions related to 180-day exclusivity and forfeiture thereof.

The federal Controlled Substances Act (the “CSA”) and its implementing regulations establish a closed system of controlled substance distribution for legitimate handlers. The CSA imposes registration, security, recordkeeping and reporting, storage, manufacturing, distribution, importation and other requirements upon legitimate handlers under the oversight of the U.S. Drug Enforcement Administration (the “DEA”). The DEA categorizes controlled substances into one of five schedules — Schedule I, II, III, IV, or V — with varying qualifications for listing in each schedule. Facilities that manufacture, distribute, import or export any controlled substance must register annually with the DEA. The DEA inspects manufacturing facilities to review security, record keeping and reporting and handling prior to issuing a controlled substance registration.

Failure to maintain compliance with applicable requirements, particularly as manifested in the loss or diversion of controlled substances, can result in enforcement action, such as civil penalties, refusal to renew necessary registrations, or the initiation of proceedings to revoke those registrations. In certain circumstances, violations could lead to criminal prosecution.

Food and Drug Administration Safety and Innovation Act, Generic Drug User Fee Act, Biosimilar User Fee Act and Food and Drug Administration Reauthorization Act

In 2012, the United States enacted the Food and Drug Administration Safety and Innovation Act (“FDASIA”), a landmark legislation intended to enhance the safety and security of the U.S. drug supply chain by imposing stricter oversight and by holding all drug manufacturers supplying products to the United States to the same U.S. FDA inspection standards. Specifically, prior to the passage of FDASIA, U.S. law required U.S. based manufacturers to be inspected by the U.S. FDA every two years but remained silent with respect to foreign manufacturers, causing some foreign manufacturers to go as many as nine years without a routine U.S. FDA cGMP inspection, according to the Government Accountability Office. FDASIA requires foreign manufacturers to have cGMP inspections at least every two years, or more frequently for manufacturers with high risk profiles.

FDASIA also includes the Generic Drug User Fee Act (“GDUFA”) and Biosimilar User Fee Act (“BuFA”), programs to provide the U.S. FDA with additional funds through user fees imposed on generic and biosimilar products. Under GDUFA, total fees are derived primarily from facility fees paid by finished dosage form manufacturers and active pharmaceutical ingredient facilities listed or referenced in a pending or approved generic drug application. A significant portion is also derived from application fees, including generic drug application fees, prior approval supplement fees and drug master file fees.

The FDA Reauthorization Act of 2017 (“FDARA”) and the GDUFA Amendments (“GDUFA II”), signed into law on August 18, 2017, extended the user fee program for a period of another five years through September, 2022. Under the provisions of these acts, an additional generic drug applicant program fee will be established, which will be based on the number of ANDAs the applicant holds and the prior approval supplement fees will be eliminated. Of the total GDUFA user fee revenue, 35% will be generated from this ANDA-based fee. Further, the GDUFA IIcommitment letter describes a consolidated review goals scheme for all cohorts of ANDAs, prior approval supplements and amendments. This includes shorter review goals for generic drug submissions that are public health priorities.

The establishment of dedicated biosimilar fees was also intended to help ensure that the U.S. FDA has appropriate resources for managing the introduction of biosimilar products on the U.S. market.Under the FDARA, for the first time, an independent fee structure for biosimilars will be implemented, including an initial biosimilar development fee which will be assessed the first year a manufacturer begins clinical trials. Further, an annual biosimilar development fee for subsequent years of the development process, a biosimilar program fee for approved biosimilars, and an application fee for new biosimilar applications will be introduced. The legislation also reauthorizes several programs that are designed to simplify and expedite the regulatory process for the development of drugs and devices that aid patients with rare diseases.

In addition, under the FDARA, a drug is eligible for designation as a “Competitive Generic Therapy” (or “CGT”) if the U.S. FDA determines that there is inadequate generic competition i.e., with respect to a drug, there is not more than one approved drug on the list of drugs described in section 505(j)(7)(A) (not including drugs on the discontinued section of such list) that is (a) the reference listed drug; or (b) a generic drug with the same reference listed drug as the drug for which designation as a competitive generic therapy is sought. A draft guidance on Competitive Generic Therapy was published on February 2019 which provides more clarity on eligibility for and forfeiture and relinquishment of Competitive Generic TherapyCGT exclusivity. Final guidance was issued by the U.S. FDA in March 2020. This final guidance provides a description of the process that applicants should follow to request designation of a drug as a CGT and the criteria for designating a drug as a CGT. It also includes information on the actions the U.S. FDA may take to expedite the development and review of ANDAs for drugs designated as CGTs. Finally, it provides information on how the U.S. FDA implements the statutory provision for a 180-day exclusivity period for certain first approved applicants that submit ANDAs for CGTs.

As part of GDUFA II, in order to accelerate access to generic version of complex products, GDUFA II pre-ANDA program product development meetings can be initiated by the U.S. FDA for an ongoing ANDA development program for complex products. These meetings will encourage applicants for product development meetings, pre-submission meetings and mid-review cycle meetings to clarify regulatory expectations early in product development. Furthermore, in November 2017, theManual of Policy and Procedures (“MAPP”) 5240.3, “Review Order of Original ANDAs, Amendments, and Supplements” was revised to MAPP 5240.4,5240.3 Rev 4, and on January 30,2020 to MAPP 5240.3 Rev 5 “Prioritization of the Review of Original ANDAs, Amendments and Supplements” under which a priority review may be granted by the U.S. FDA if an original ANDA, amendment, or supplement meets one of the prioritization factors set forth in the MAPP, and may receive either a shorter goal date or an expedited review, as defined in the MAPP.

Withdrawal of U.S. FDA Proposed Labeling Rule

On November 13, 2013, the U.S. FDA proposed a new labeling rule which the agency believed would speed up the dissemination of new safety information about generic drugs to health professionals and patients by allowing generic drug manufacturers to use the same process as brand drug manufacturers to update safety information in the product labeling. Under the proposal, generic drug manufacturers would have been able to independently update product labeling (also called prescribing information or package inserts) with newly-acquired safety information before the U.S. FDA’s review of the change, in the same way brand drug manufacturers do today. Generic manufacturers would also have been required to inform the brand name manufacturer about the change. The U.S. FDA would then have evaluated whether the proposed change was justified and made an approval decision on the generic drug labeling change and the corresponding brand drug labeling change at the same time, so that brand and generic drug products would ultimately have the same U.S. FDA-approved prescribing information.

Currently, generic manufacturers must wait to update product safety information until the corresponding brand name product has received approval to update its safety information. Brand drug manufacturers are allowed to independently update and promptly distribute updated safety information by submitting a “changes being effected” (“CBE”) supplement to the U.S. FDA. Generic manufacturers must notify the U.S. FDA of new safety information, and wait for the U.S. FDA and the brand manufacturer to determine the updated labeling, which may result in a delay in getting new information to health care professionals and patients.

Under current law, generic and brand drug manufacturers are required to promptly review safety information about their drugs and comply with the U.S. FDA’s reporting and recordkeeping requirements. When new information becomes available that causes the product labeling to be inaccurate, all drug manufacturers must take steps to update the labeling.

Because the current regulatory scheme only permits a generic manufacturer to use the CBE process to update its label if the branded drug manufacturer changes its label first, this can prevent generic manufacturers from complying with state law warning requirements. As a result, state product liability suits based on failure-to-warn and design defect claims against generics manufacturers have generally been held pre-empted by Federal law, and in June 2013 the United States Supreme Court upheld such pre-emption and immunity of generic manufacturers inMutual Pharmaceutical Co. v. Bartlett.

If the U.S. FDA’s proposed new rule was adopted, it may have eliminated this pre-emption and increased our potential exposure to lawsuits relating to product safety, side effects and warnings on labels. This new potential exposure to lawsuits may also have increased the risk that, in the future, we would not have been able to obtain the type and amount of insurance coverage we desire at an acceptable price and self-insurance may have become the sole commercially reasonable means available for managing the product liability risks of our business. After twice delaying publication of a final rule, the U.S. FDA withdrew its proposed rule during 2017.

Prescription Drug Marketing Act and Laws Regulating Payments to Healthcare Professionals

The FDA also enforces the requirements of the Prescription Drug Marketing Act, which, among other things, imposes various requirements in connection with the distribution of product samples to physicians. Sales, marketing and scientific/educational grant programs must comply with the federal anti-kickback statute, the Medicare-Medicaid Anti-Fraud and Abuse Act, as amended, the False Claims Act, as amended, and similar state laws. Pricing and rebate programs must comply with the Medicaid rebate requirements of the Omnibus Budget Reconciliation Act of 1990, as amended.

We are also subject to Section 6002 of the Patient Protection and Affordable Care Act, commonly known as the Physician Payment Sunshine Act which regulates disclosure of payments to certain healthcare professionals and providers.

Patient Protection and Affordable Care Act and Medicaid Drug Rebate Program

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively, the “PPACA”), were signed into law. The PPACA is one of the most significant healthcare reform measures in the United States in decades, and significantly impacts the U.S. pharmaceutical industry. The PPACA imposes additional rebates, discounts and fees, mandates certain reporting and contains various other requirements that affect our business. The PPACA made several important changes to the federal anti-kickback statute, false claims laws, and health care fraud statutes that made it easier for the government or whistleblowers to pursue such fraud and abuse violations. In addition, the PPACA increased penalties for fraud and abuse violations. If our past, present or future operations are found to be in violation of any of the laws described above or other similar governmental regulations to which we are subject, we may be subject to the applicable penalty associated with the violation which could adversely affect our ability to operate our business and our financial results.

The PPACA changed the computations used to determine Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program by redefining the average manufacturer’s price (“AMP”). In November 2015, the Bipartisan Budget Act of 2015 (the “BBA”) amended the Medicaid Drug Rebate Program to impose a penalty rebate on generic drugs whose price increases exceed the inflation rate. Initially, the penalty rebate had only applied to brand drugs and authorized generics, but other generic drugs were subject to a fixed base rebate of 13% of AMP. The BBA imposed a price increase penalty rebate on generic drugs similar to that of the price increase penalty on brand drugs and authorized generics.

The additional penalty rebate for generic drugs applies to rebate periods beginning with the first quarter of 2017. The additional penalty rebate due for generic drugs is equal to the AMP for the current quarter minus the baseline AMP adjusted for inflation based upon the Consumer Price Index for Urban Consumers.

The PPACA also increased the number of healthcare organizations eligible to participate in the Public Health Service pharmaceutical pricing program, which provides for government controlled prices that result in substantial discounts for participants. To further facilitate the government’s efforts to coordinate and develop comparative clinical effectiveness research, the PPACA established a new Patient-Centered Outcomes Research Institute to oversee and identify priorities in such research. The manner in which the comparative research results would be used by third-party payors is uncertain.

The PPACA has created an abbreviated pathway to U.S. FDA approval of “biosimilar” biological products and allows the first interchangeable biosimilar biological product 18 months of exclusivity, which could increase competition for our biosimilars business. The PPACA also has some anti-generic provisions that could adversely affect our biosimilars business, including provisions granting the innovator of a biological drug product 12 years of exclusive use before generic drugs can be approved based on being biosimilar.

On February 1, 2016, the CMSCenters for Medicare & Medicaid Services (“CMS”) published in the Federal Register a Final Regulation with comment period to implement the Medicaid Drug Rebate Program. The Final Regulation was to clarify ambiguities in the ACA amendments. The key provisions covered under the Final Regulation included, without limitation, the following: (i) the adoption of a final definition of “retail community pharmacy” (“RCP”), (ii) the adoption of a rule permitting inhalation, infusion, instilled, implanted, or injectable drugs (“5i drugs”) to be deemed not to be “generally dispensed” through a RCP, and thus excluded from the calculation of their AMP, if 70% or more of its sales were to entities other than RCPs or wholesalers for drugs distributed to RCPs (the prior threshold was 90%), (iii) the inclusion of authorized generics in calculations of AMP and best price, (iv) narrowing the regulatory definition for “best price”, (v) requiring additional Medicaid rebate payments for generic drugs, effective as of April 1, 2017, and (vi) clarification of the definition of “bona fide service fees” based on a four part test. We are still awaiting guidance from CMS on a delay in the participation of the U.S. territories in the Medicaid Drug Rebate Program until April 1, 2020 an aspect of the rule that was deferred for later implementation. We will evaluate the financial impact of this when it becomes effective.

The PPACA required manufacturers to calculate an alternate rebate amount for drugs that are “line extensions” of an oral solid dosage form. CMS was responsible under the PPACA for providing a regulatory definition of “line extension,” although the CMS February 2016 final rule did not do so. The Comprehensive Addiction and Recovery Act enacted on July 22, 2016 included a statutory definition of line extension as follows: “with respect to a drug, a new formulation of the drug, such as an extended release formulation, but does not include an abuse-deterrent formulation of the drug (as determined by the Secretary), regardless of whether such abuse-deterrent formulation is an extended release formulation.” On April 1, 2019, CMS published a final rule and interim final rule which reiterated prior guidance that manufacturers rely on the statutory definition and where appropriate, may use “reasonable assumptions” to determine if a drug qualifies as a line extension drug. The agency notes that if it should decide to develop a regulatory definition of line extension drug, the normal rulemaking process will be utilized. We are not currently marketing any drugs that we believe would be a line extension.

In 2017, the new U.S. Presidential administration, which had promised to repeal and replace the PPACA, took office in the United States. Although legislative proposals in 2017 to repeal and replace the PPACA in 2017 were never enacted, there are ongoing efforts to achieve that goal. For example, in October 2017, the U.S. President signed an Executive Order directing federal agencies to modify how the PPACA is implemented, ending the subsidies to health care insurance companies that sell insurance to low income consumers through state health insurance marketplaces.

Further, the Tax Cuts and Jobs Act enacted in December 2017 effectively repealed the PPACA’s individual mandate by removing the penalties imposed for failure to purchase healthcare insurance. InAs a result of this change, in December 2018, a U.S. federal district court ruled that the ACAPPACA is unconstitutional. An appellate review of this decision by the Fifth Circuit Court of Appeals in December 2019 held that the individual mandate under the PPACA was unconstitutional, and remanded the case back to the Texas federal judge to conduct a re-evaluation of the entire PPACA to determine which provisions, if any, could survive without the individual mandate provision. The case was appealed to the U.S. Supreme Court in January 2020. The high court agreed to review the Fifth Circuit Court’s decision on the unconstitutionality of the individual mandate and to review the constitutional status of the Affordable Care Act as a whole, but such decision has been stayedrefused to hear the case on an expedited basis and will not take effect while sucha decision is on appeal.expected sometime in 2021. The law remains in place pending final resolution. We cannot predict the outcome of litigation regarding the constitutionality of the ACAPPACA or the form any replacement of the ACAPPACA may take, if any, although it may have the impact of reducing the number of insured as well as coverage for pharmaceutical products. Included in the many parts of the PPACA that could potentially be affected by the continued litigation is the Biologics Price Competition and Incentives Act. We cannot predict the ultimate effect of the reform on our business, and additional policy changes disruptive to the PPACA exchange markets could arise.

The Bipartisan Budget Act of 2018 amended the PPACA, effective January 1, 2019, to close the coverage gap (commonly referred to as the “donut hole”) in most Medicare drug plans, and also increased in 2019 the percentage by which a drug manufacturer must discount the negotiated price of branded prescription drugs dispensed to Medicare Part D patients in the coverage gap from 50% to 70%.

The Continuing Appropriations Act of 2020 and the Health Extenders Act of 2019 became effective, amending the Medicaid Drug Rebate Statute in two key ways: (i) by requiring manufacturers to exclude (rather than include) the prices paid by wholesalers to manufacturers for authorized generic drugs from the calculation of the “average manufacturers’ price” for the branded drug and (ii) by deleting references to “manufacturers” from the definition of wholesaler.

Drug Quality and Security Act

On November 28, 2013, the Drug Quality and Security Act was signed into law in the United States. The legislation introduces a federal track-and-trace system for medicines with serial numbers added to individual packs and (non-mixed) cases within four years of the legislation’s adoption, and electronic tracing of production through the supply chain mandated within ten years. It also strengthens licensure requirements for wholesale distributors and third-party logistics providers, and requires the U.S. FDA to maintain a database of wholesalers that will be available to the public through its website. The law also boosts oversight of compounding pharmacies that make drugs to order, and increases the powers of the U.S. FDA to oversee large-volume or ‘outsourcing’ compounders without individual prescriptions. During 2017, the U.S. FDA delayed the enforcement of serialization requirements for manufacturers until November 2018 to provide manufacturers with additional time to comply and avoid supply disruptions. We completed all of the activities necessary to implement serialization, and the batches packaged after November 26, 2018 are being serialized.

Title XI of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)

On October 6, 2016, the U.S. FDAissued a final rule to implement new regulations that govern the approval of applications under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act in the United States, and of ANDAs. This rule revises and clarifies U.S. FDA regulations as to matters such as: the procedures and requirements for providing notice to each patent owner and the NDA holder of certain patent certifications made by applicants submitting 505(b)(2) applications or ANDAs; the availability of 30-month stays of approval on 505(b)(2) applications and ANDAs that are otherwise ready to be approved; submission of amendments and supplements to 505(b)(2) applications and ANDAs; and the types of bioavailability and bioequivalence data that can be used to support these applications. This rule was effective December 5, 2016.

Biologics Pathway

The Biologics Price Competition and Innovation Act of 2009 (“BPCIA”) created a statutory pathway and abbreviated approval processes for the approval of biosimilar versions of branded biological products.Under the BPCIA, a biosimilar must be highly similar with no clinically meaningful differences compared to the reference medicine. Approval of a biosimilar in the United States requires the submission of a Biologics License Application (“BLA”)BLA to the U.S. FDA, including an assessment of immunogenicity, and pharmacokinetics or pharmacodynamics. The BLA for a biosimilar can be submitted as soon as four years after the initial approval of the reference biologic, but can only be approved 12 years after the initial approval of the reference biologic.

This pathway is still relatively new and some aspects remain untried, controversial and subject to ongoing litigation.Though the U.S. FDA has issued and updated various technical guidance documents addressing quality considerations, scientific considerations and questions and answers regarding commonly posed issues to assist the biopharmaceutical industry in developing biosimilar products in compliance with the BPCIA, there remains some uncertainty regarding the abbreviated biosimilar pathway. On December 11, 2018, the U.S. FDA released final guidance defining biologics, transitioning biological products approved under an NDA to a deemed BLA, and outlining an abbreviated pathway for biosimilar licensure. As part of the publication of the final guidance, the U.S. FDA is allowing for ongoing comments from the public, which may result in further changes or revisions to such guidance. On May 10, 2019, the U.S. FDA issued final guidance on “Considerations in Demonstrating Interchangeability With a Reference Product,” which is intended to provide guidance as to how to demonstrate that a proposed therapeutic protein product is interchangeable with a reference product for the purposes of submitting a marketing application or supplement under section 351(k) of the Public Health Service Act (PHS Act) (42 U.S.C. 262(k)).

The overall status of the BPCIA is uncertain, based on a December 2018 U.S. federal court decision which declared the PPACA, of which the BPCIA is a part, to be unconstitutional. Such decision has been stayed and will not take effect while such decision is on appeal.

21st Century Cures Act

On December 13, 2016, the 21st Century Cures Act was enacted into law in the United States, and is intended to promote biomedical innovation and personalized medicines. The 21st Century Cures Act includes increased funding for the National Institutes of Health and the U.S. FDA and provides for the implementation of, among other reforms, enhanced pathways for medical product approval and the modernization and harmonization of clinical trial procedures over a period of several years.

Blueprint to Lower Drug Prices

In May 2018, U.S. President Trump released “American Patients First: The Trump Administration Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs,” which outlines actions that his administration proposes to take to lower prescription drug prices, including certain actions that can be taken immediately by the U.S. Department of Health and Human Services (“HHS”) and issues on which HHS will solicit public feedback before determining any additional reform proposals. This blueprint seeks to increase competition, improve negotiation, and incentivize lower list prices and lower out-of-pocket costs.

It calls for, among other things, greater transparency of drug prices, better informing consumers about prescription drugs, increased promotion of generic drugs and experimenting with value-based payment. We are currently evaluating the impact of this blueprint on our business, and we cannot yet be certain what the effect will be.

To create better incentives for lower list prices, the blueprint called for HHS to consider requiring the inclusion of list prices in direct-to-consumer advertising. On May 30, 2018, the CMS announced a final rule that will require direct-to-consumer television advertisements for prescription pharmaceuticals covered by Medicare or Medicaid to include the list price if such price is equal to or greater than $35 for a month’s supply or the usual course of therapy. This rule is effective starting on July 9, 2019.

State Efforts to Lower Drug Prices

A number of states have passed legislation intended to impact pricing or requiring price transparency reporting, (California,including California, Colorado, Connecticut, Louisiana, Maine, Maryland, Nevada, Oregon, Texas, Vermont, and Washington). TheseWashington. While the disclosure requirements vary by state, these laws typically require manufacturers to report certain product price information or other financial data to the state, and, in some cases, provide advance notification of price increases. It is expected that states will continue their focus on pharmaceutical price transparency and that this focus will continue to exert pressure on product pricing.

Right to Try Act

On May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017 (the “Right to Try Act”) was signed into law in the United States. The law, among other things, provides a federal framework for certain patients to request access to certain investigational new drug products that have completed a Phase I clinical trial and that are undergoing investigation for U.S. FDA approval. There is no obligation for a pharmaceutical manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act.

Final Conscience Rule

In May 2019, the U.S. Department of Health & Human Services (“HHS”) published final rules to enforce so-called “conscience laws,” a series of previously enacted laws that allow health professionals, insurers and employers to opt out of participating in certain health care activities that violate the worker's conscience or religious beliefs, such as abortion, sterilization, vaccination or assisted suicide. The final rule significantly expands the authority of HHS’s Office of Conscience and Religious Freedom to enforce federal conscience protection laws and implements new enforcement mechanisms. This final rule is set to become effective on July 22, 2019, although lawsuits have already been filed challenging its constitutionality.

The conscience laws and the final rule could potentially impact certain pharmaceutical products, including the availability of such products from hospitals and other prescribers and the availability of insurance coverage for such products. We are currently evaluating the impact of these conscience laws and the final rule on our business, and we cannot yet be certain what their effect will be.

Other matters

Civil Investigative Demand from the Office of the Attorney General, State of Texas

On or about November 10, 2014, Dr. Reddy’s Laboratories, Inc., one of our subsidiaries in the United States, received a Civil Investigative Demand (“CID”) from the Office of the Attorney General, State of Texas (the “Texas AG”) requesting certain information, documents and data regarding sales and price reporting in the U.S. marketplace of certain products for the period of time between January 1, 1995 and the date of the CID. We have responded to all of the Texas AG’s requests to date, and we understand that the investigation is continuing.

SubpeonaSubpoena duces tecum from the Office of the Attorney General, California

On November 3, 2014, Dr. Reddy’s Laboratories, Inc. received a subpoena duces tecum to appear before the Office of the Attorney General, California (the “California AG”) and produce records and documents relating to the pricing of certain products. A set of five interrogatories related to pricing practices was served as well. On July 18, 2016, the California AG sent a letter to inform Dr. Reddy’s Laboratories, Inc. that, in light of the information which had been provided, no further information would be requested at such time in response to this subpoena.

Subpoenas from the Division of the U.S. Department of Justice (“DOJ”) and the office of the Attorney General for the State of Connecticut

On July 6, 2016 and August 7, 2016, Dr. Reddy’s Laboratories, Inc. received subpoenas from the Anti-trust Division of the DOJ and the office of the Attorney General for the State of Connecticut, respectively, seeking information relating to the marketing, pricing and sale of certain of our generic products and any communications with competitors about such products. On May 15, 2018, another subpoena was served on Dr. Reddy’s Laboratories, Inc. by the False Claims Division of the DOJ seeking similar information. We have been cooperating, and intend to continue to fully cooperate, with these inquiries.

State Attorneys General Civil Actions and Multi-District Litigation in the United States

The following cases against our U.S. subsidiary, Dr. Reddy’s Laboratories, Inc., have been filed and are pending and consolidated inIn re Generic Pharmaceutical Pricing Antitrust Litigation, MDL 2724, 14-MD-2724 (Eastern District of Pennsylvania), which is a multidistrict litigation (“MDL”) in the Eastern District of Pennsylvania (“MDL-2724”):

On December 18, 2016,October 30, 2017, the Attorneys General for 19 states filed claims in the Unitedof forty-nine U.S. States, District Court for the District of Connecticut against a number of pharmaceutical companies alleging conspiracies to fix prices and to allocate bids and customers from 2013 through at least 2016, with respect to two generic drugs for which our company and our U.S. subsidiaries were not named as defendants.

In April 2017, a total of 45 states, plus the District of Columbia and the Commonwealth of Puerto Rico joined as plaintiffs in this case (the “State AG Action”). In August 2017,and the State AG Action was transferred and consolidated with the private plaintiff class actions pending in the multi-district litigation (“MDL-2724”)District of Columbia, filed an Amended Complaint in the United States District Court for the Eastern District of Pennsylvania. On October 31, 2017, the Attorneys General for the 45 States, plus the District of Columbia and the Commonwealth of Puerto Rico, filed an Amended Complaint in the State AG Action in MDL-2724 which has addedPennsylvania, against eighteen generic pharmaceutical companies (including our U.S. subsidiary as a defendant. The State AG Action allegessubsidiary) with respect to fifteen generic drugs, alleging that our U.S. subsidiary Dr. Reddy’s Laboratories, Inc., and the other named defendants engaged in a conspiracy to fix prices and to allocate bids and customers in the United States in the sale of the fifteen named drugs. Our U.S. subsidiary is specifically named as a defendant with respect to two generic drugs (meprobamate and zoledronic acidacid), and meprobamate in the United States, and allegesis named as an over-arching conspiracyalleged co-conspirator on an alleged “overarching conspiracy” with the defendants onrespect to the other 13thirteen generic drugs named in the State AG Amended Complaint.named. The State AG Amended Complaint alleges violations of Section 1 of the Sherman Act, 15 U.S.C. §1, and the consumer protection and antitrust laws of 45 states,each of the District of Columbia and the Commonwealth of Puerto Rico, seekingjurisdictions that are plaintiffs.

The Amended Complaint seeks injunctive relief, statutory penalties, punitive damages, and recovery of treble damages, attorney'splus attorney’s fees and other costs.costs, against all named defendants on a joint and several basis, on behalf of the plaintiff jurisdictions and their citizens and inhabitants. We deny any wrongdoingthe claims asserted and intend to vigorously defend against these claims.the claims asserted.

On May 10, 2019, the Attorneys General of forty-nine U.S. States, the Commonwealth of Puerto Rico and the District of Columbia, filed a Complaint in the United States District Court for the District of Connecticut against twenty-one generic pharmaceutical companies (including our U.S. subsidiary) and fifteen individual defendants, with respect to 116 generic drugs, alleging that our U.S. subsidiary, Dr. Reddy’s Laboratories, Inc., and the other named defendants engaged in a conspiracy to fix prices and to allocate bids and customers in the United States in the sale of the 116 named drugs. Under the multi-district litigation rules, this action will be designated a related “tag along” action and will be transferred to and become a part of the MDL-2724. Our U.S. subsidiary is specifically named as a defendant with respect to five generic drugs (ciprofloxacin HCL tablets, glimepiride tablets, oxaprozin tablets, paricalcitol and tizanidine), and is named as an alleged co-conspirator on an alleged “overarching conspiracy” with respect to the other thirteen generic drugs named. The Complaint alleges violations of Section 1 of the Sherman Act, 15 U.S.C. §1, and the consumer protection and antitrust laws of each of the jurisdictions that are plaintiffs. The Complaint seeks injunctive relief, statutory penalties, punitive damages, and recovery of treble damages, plus attorney’s fees and costs, against all named defendants on a joint and several basis, on behalf of the plaintiff jurisdictions and their citizens and inhabitants. We deny the claims asserted and intend to vigorously defend against the claims asserted.

For additional information on the MDL-2724, see Note 3532 of our consolidated financial statements.

Civil Investigative Demand from the Division of the U.S DOJ

On May 15, 2018, Dr.Dr. Reddy’s Laboratories, Inc. received a Civil Investigative Demand from the Civil Division of the U.S. DOJ, enquiring whether there have been any violations of the U.S. False Claims Act, arising from allegations that generic pharmaceutical manufacturers, including us, have engaged in market allocation or price fixing agreements, or paid illegal remuneration, and caused false claims to be submitted in violation of the said Act. We intend to fully cooperate with the DOJ in responding to the demand and cooperate with the investigation.

CANADA REGULATORY ENVIRONMENT

In Canada, we are required to file product dossiers with the Health Canada for permission to market a generic pharmaceutical product. The regulatory authorities may inspect our manufacturing facility before approval of the dossier. As of March 31, 2019,2020, we had filed a total of 3340 Abbreviated New Drug Submissions (“ANDS”) in Canada, out of which 2627 were approved, 27 are pending approval, and 56 were withdrawn or rejected.

Europe

Our sales of generic medicines in Europe for the year ended March 31, 20192020 were Rs.7,873Rs.11,707 million, which accounted for 6%8% of our Global Generics segment’s sales. Our principal markets in Europe are Germany and the United Kingdom. We have also established our presence in other markets, including Italy, France and Spain.

Sales, Marketing and Distribution Network

Germany

In Germany, we sell a broad range of generic pharmaceutical products under the “betapharm” brand.

Over the last decade, the German pharmaceutical market has significantly changed. Health care reforms by the government have significantly increased the power of insurance companies and statutory health insurance funds (“SHI funds”) to influence dispensing of medicines. Pursuant to the reforms, those pharmaceutical products which are covered by rebate contracts with insurance companies and SHI funds will be prescribed by physicians and dispensed by pharmacies with priority. As a result, many SHI funds have enacted tender (i.e., competitive bidding) processes to determine which pharmaceutical companies they will enter into rebate contracts with. This has resulted in more than 90% of generic products currently sold in German retail outlets being supplied through contracts procured in competitive bidding tenders, thereby causing significant pressure on product margins.

United Kingdom and other Countries within Europe

We market our generic products in the United Kingdom and other European Union (“EU”) countries through our U.K. subsidiary, Dr. Reddy’s Laboratories (U.K.) Limited. This subsidiary was formed in the year ended March 31, 2003 after our acquisition of Meridian Healthcare Limited, a United Kingdom based generic pharmaceutical company. We currently sell more than 50 products in the United Kingdom, covering both International Nonproprietary Name (“INN”) generics and branded generics. INN generics are sold via wholesale and retail channels, and hospitals. In the U.K., we work closely with the Clinical Commissioning Groups (i.e., groups that commission healthcare services for their local communities and include all of the general practitioner groups in their geographical area) to promote our range of branded generics. Whilst the retail business covers a broad range of therapeutic areas, the hospital business focuses mainly on oncology, anti-infectives and HIV.

In 2016, we established a commercial structure in Italy, Spain and France to expand our direct footprint in the western European region. Our initial focus has been to supply products through hospitals and to institutional clients. Our product mix in these markets focuses on a limited number of key therapy areas such as oncology, anti-infectives and HIV, leveraging our portfolio. This market’s business is predominantly tender-driven, without the need for a large sales force.

Competition

The German market is highly competitive as a result of a large number of generic players and the predominance of a tender system which drives competition. Our key competitors within the German generics market include Sandoz International GmbH, Teva Pharmaceutical Industries Limited (“Teva”), Winthrop Arzneimittel GmbH and Stada Arzneimittel AG.

According to the British Generic Manufacturers Association, the United Kingdom is one of the largest markets for generic pharmaceuticals in Europe, with generic penetration of around 84%, and is also one of the most price competitive markets due to a high degree of vertical integration and consolidation of buyers, as more than 65% of the retail pharmacies are owned by wholesalers or are part of retail chains, and has low barriers of entry. The market is dominated by global pharmaceutical companies such as Teva, the Sandoz group of Novartis Pharma A.G. and Mylan Inc.

In Italy, Spain and France, we compete with companies such as Hospira (an affiliate of Pfizer Limited), Fresenius SE & Co. KGaA, Teva and Accord Healthcare Limited (an affiliate of Intas Pharmaceuticals Ltd.), each of which has a well-established presence in the hospital segment of these countries.

Government regulations

In the EU, the manufacture and sale of pharmaceutical products is regulated in a manner substantially similar to that in the United States. Legal requirements generally prohibit the handling, manufacture, marketing and importation of any pharmaceutical product unless it is properly registered and manufactured in accordance with applicable law. The registration file relating to any particular product must contain scientific data related to product chemistry, efficacy and safety, including results of clinical testing and references to medical publications, as well as detailed information regarding production methods and quality control. Regulatory authorities are authorized to suspend, restrict or cancel the registration of a product if it is found to be harmful or ineffective, or manufactured and marketed other than in accordance with registration conditions. Additionally, a product registration can be cancelled, if the registration is not used for more than three years (under the regulation’s “sun-set clause”) or the renewal deadline is missed.

The activities of pharmaceutical companies within the EU are governed in particular by Directives 2001/83/EC and 2003/94/EC and Regulation 1234/2008, in each case as amended, and as implemented in national laws within the countries of the EU. The Directives outline the legislative framework, including the legal basis of marketing authorization procedures, and quality standards including manufacture, patient information and pharmacovigilance activities.

Prior approval of a marketing authorization is required to supply products within the EU. Such marketing authorizations may be restricted to one member state, cover a selection of member states or can be for the whole of the EU, depending upon the form of registration procedure selected.

An abridged application can be filed for obtaining EU marketing authorization for a generic drug. Generic or abridged applications contain limited non-clinical and clinical data, depending upon the legal basis of the application or to address a specific issue. However, the applicant is required to demonstrate that its generic product contains the same active pharmaceutical ingredients in an equivalent dosage form for the same indication as the innovator product. Specific data is included in the application to demonstrate that the proposed generic product is interchangeable to the innovator product with respect to quality, safe usage and continued efficacy. EU laws prevent regulatory authorities from accepting applications for registration of generics that rely on the safety and efficacy data of an innovator of a branded product until the expiration of the innovator’s data exclusivity period (usually 8 years from the first marketing authorization in the EU, depending on the circumstances). The applicant is also required to demonstrate bioequivalence or bioavailability, respectively, with the EU reference product. Once all these criteria are met, a marketing authorization may be considered for grant.

Unlike in the United States, there is no equivalent regulatory mechanism within the EU to incentivize challenge to any patent protection, nor is any period of market exclusivity conferred upon the first generic approval. In situations where the period of data exclusivity given to the innovator of a branded product expires before their patent expires, the launch of our product would then be delayed until patent expiration.

Our U.K. facilities are licensed and periodically inspected by the U.K. Medicines and Healthcare products Regulatory Agencies (“MHRA”) good manufacturing practice Inspectorate, which has extensive enforcement powers over the activities of pharmaceutical manufacturers. Non-compliance can result in product recall, plant closure or other penalties and restrictions. In addition, the U.K. MHRA Inspectorate has approved and periodically inspected our manufacturing facilities based in Hyderabad, Telangana, India for the manufacture of generic medicines for supply to Europe.

All pharmaceutical companies that manufacture and market human medicinal products in Germany are subject to the applicable rules and regulations executed by the Federal Institute for Drugs and Medical devices (“BfArM”) or the Paul-Ehrlich-Institut (“PEI”) and the supervisory authorities of the respective federal state in Germany. All pharmaceutical companies in Germany are periodically inspected by the Regierung von Oberbayern (the district government of Upper Bavaria in Germany), which has extensive enforcement powers over the activities of pharmaceutical companies. Non-compliance can result in closure of the facility. The Regierung von Oberbayern has also inspected our plants in Hyderabad and Visakhapatnam.

In Germany, the government has in the past decade enacted a number of laws designed to limit pharmaceutical cost increases. During the fiscal year ended March 31, 2011, the German government introduced a new law entitled “Act on the reorganization of the pharmaceutical market in the public health insurance” (or“Arzneimittelmarktneuordnungsgesetz”,commonly referred to as “AMNOG”), which affects reimbursement of drugs within Germany’s statutory health care system in order to further control the costs of medical care. The key elements of this law are as follows:

In Germany, the German Drug Law (Arzneimittelgesetz) (“AMG”), which implements EU requirements, is the primary regulation applicable to medicinal products. In 2012, the 16^th Amendment to the AMG and related laws were enacted in order to implement European Directives into national laws. Among other things, the most important changes refer to pharmacovigilance, clinical trials, protection measures against counterfeited medicines and liberalization of German drug advertising law. These transpositions of EU legislation into national law also took place in the United Kingdom.

The German Social Code’s price freeze imposed on reimbursable drugs, which was due to expire at the end of 2017, was extended until December 31, 2022 for all patent free drugs launched before August 1, 2010, although the continued price freeze will not apply to medicines subject to internal reference pricing.

New European pharmacovigilance legislation (Regulation (EU) No 1235/2010 and Directive 2010/84/EU) was enacted in July 2012. These new requirements have not yet been fully implemented. Implementation of the final stages specifically new obligations for safety signal management, will increase our administrative burdens and therefore our costs. In 2015, the European Commission introduced pharmacovigilance service fees that our industry pays for the simplification and maintenance of the European pharmacovigilance system, as well as fees for the assessment of aggregate safety reports and protocols and study reports mandated following a safety referral. The service fees payable for these reports are unpredictable, as the Pharmacovigilance Risk Assessment Committee (“PRAC”) of the European Medicine Agency (“EMA”) can initiate a safety referral for any medicine or class of medicines with a significant new safety concern at any time. The costs of such a referral and the consequent costs of any recommendation, such as restrictions on use, cannot be predicted.

The International Standards for Identification of Medicinal Products (“IDMP”), comprised of five International Organization for Standardization (“ISO”) standards, were approved in 2012. These standards are designed to allow unambiguous identification of medicinal products across companies and regions in order to support and improve pharmacovigilance and other activities. Full implementation of these standards in the EU has been deferred, but will be implemented in a phased approach for medicinal product information. The timing of such implementation is currently uncertain.

The submission of medicinal product data to support pharmacovigilance has been required since 2012 in the EU. The original European database for data regarding medicinal products, the Eudravigilance Medicinal Product Dictionary (“EVMPD”), was launched by the EMA at the end of 2001. It was designed to standardize the collection, reporting, coding, and evaluation of authorized and investigational medicinal product information. In 2012 it became mandatory for marketing-authorization holders to supply information to the extended version of the EVMPD (xEVMPD or Article 57 database). However, this currently contains only a fraction of the data that eventually will have to be submitted to the IDMP-compliant database for each authorized product in the EU. In order for us to support the maintenance of medicinal product data in the IDMP-compliant database, we are investing in new systems and will have to make significant changes to our processes and procedures.

In order to prevent counterfeit medicines entering into the supply chain, in October 2015, as part of the Falsified Medicines Directive, the European Commissionadopted regulations providing detailed rules for the safety features appearing on the packaging of medicinal products for human use.Accordingly, all medicinal products generally subject to prescription must bear safety features that facilitate specifically the identification of individual packs and the verification of their authenticity. Effective as of February 9, 2019, only those prescription drugs which have a unique serial number on the pack, and where the integrity of the pack can be seen, may be marketed in all EU countries.

Manufacturers shall be required to put a unique identifier code, in human readable form and in an encrypted two-dimensional matrix, on all secondary packages and shall also be required to include an ”anti-tampering device” safety feature on packages to enable the verification of whether the packaging of a medicinal product has been tampered with. Marketing authorization holders shall upload the serial numbers, along with other product information, to aan “EU Hub” operated by the European Medicines Verification Organisation (“EMVO”). End users (e.g., pharmacies and wholesalers) shall be required to verify and decommission the identifier code before handing over the package to the patient. We have invested significantly in machinery, technology and know-how, and are cooperating with relevant international partners, to ensure our timely readiness for implementation without impacting the supply of our products.

The impact of the decision for the United Kingdom to exit from the EU (the “Brexit”) on pharmacovigilance operations remains unclear. The U.K. pharmaceutical industry and the U.K. MHRA have expressed their desire to continue as full participants in the harmonized pharmacovigilance activities of the EU and the EMA. However, which activities and procedures will remain accessible to the U.K. marketing authorization holders (“MAHs”) post Brexit are only likely to become clear as the negotiations between the U.K. government and the European Commission reach their conclusion.

In the event of a hardno-deal or “hard” Brexit, full access to the pharmacovigilance activities of the EU and the EMA will not available to U.K. MAHs post Brexit, As part of its Brexit planning, the U.K. MHRA is preparing to introduce parallel processes in the U.K. which are expected to result in increased costs to the MAHs.

In the EU, there must be at least one “Qualified Person” who is responsible for a medicinal product’s batch certification and release. Each batch of a medicinal product placed onto the market in the EU must be tested in laboratory in the EU. The MAH’s Qualified Person must then certify that the product is in accordance with its specification and can therefore be released to the market. As a consequence of the Brexit, this activity will no longer be able to be conducted in the U.K. for the EU.

In preparation for this, we are transferring Qualified Person release activities for a number of medicinal products from the U.K. to the EU so that they can continue to be marketed in the EU.

Following the Brexit vote, the EU is movingmoved the headquarters of the EMA from the U.K. to the Netherlands starting in March 2019. A significant percentage of2019. This has impaired the employeeswork of the EMA, will not make the move to the Netherlands. This andis expected to mean that further development and enhancement of European pharmaceutical legislation will be put on hold until the EMA is fully established in its new home.

In the European Union, the term of certain pharmaceutical patents may be extended by up to five years (subject to further patent term extension under certain conditions) through a Supplementary Patent Certificate (“SPC”). The purpose of this extension is to compensate for the patent term lost during regulatory review processes. Effective July 2019, the European Union’s new SPC Manufacturing Waiver Regulation exempts businesses which satisfy its conditions from infringement of a pharmaceutical product protected by a SPC. The exemption covers the manufacture of a product for either the purpose of exporting it to countries outside the European Union, or the purpose stockpiling inventory of such product for up to six months for launch in the European Union upon SPC expiration.

“Rest of the World”World” markets of our Global Generics segment

We refer to all markets of our Global Generics segment other than North America, Europe, Russia and other countries of the former Soviet Union and Romania and India as our “Rest of the World” markets. Our significant Rest of the World markets include China, South Africa, Australia, Brazil, Colombia and Myanmar.

We started our operations in China in the year 2000, by setting up a Joint Venture in the city of Kunshan, Jiangsu Province. Over the past several years, our Joint Venture called Kunshan Rotam Reddy Pharmaceuticals Company Limited (“KRRP”) has commercialized several products. Some of these products are manufactured by KRRP at its manufacturing plant in Kunshan while some others are imported in bulk packs, repackaged and sold in China. In the last year, we have started manufacturing capacity expansion at the Kunshan facility.

Over the last few years, we have also increased our operations with respect to the filing of dossiers and obtaining new product registrations in China. Upon successful registration and approval by the China regulatory authorities, we intend to launch these products in the coming years.

Further, one of our products Olanzapine, which we had commercialized in China through a distribution and supply agreement with a Chinese company, was successfully listed in the national volume based procurement program in September 2019.

Our revenues from our “Rest of the World” markets were Rs.8,353Rs.9,439 million in the year ended March 31, 2019,2020, an increase of 36%13% as compared to the year ended March 31, 2018.2019. The growth is largely attributable to increased sales in China and scale upvolumes of our operations in Brazil, as well as growth in the volumes of existing productsbusiness and launches of new products launched during the year ended March 31, 2020. The foregoing was partially offset by decline in other “Restrevenues due to price erosion in some of the World” markets.our existing products.

Global Generics Manufacturing and Raw Materials

Manufacturing for our Global Generics segment entails converting API into finished dosages. As of March 31, 2019,2020, we had eleventen manufacturing facilities within this segment. TenNine of these facilities are located in India and one in the United States (Shreveport, Louisiana). In addition, we also have one packaging facility in the United Kingdom. All of the facilities are designed in accordance with and are compliant with current cGMP requirements and are used for the manufacture of tablets, hard gelatin capsules, injections, liquids and creams for sale in India as well as other markets. All of our manufacturing sites’ laboratories and facilities are designed and maintained to meet increasingly stringent requirements of safety and quality. All of our sites outside of India are approved by the respective regulatory bodies in the jurisdictions where they are located.

We manufacture most of our finished products at these facilities and also use contract manufacturing arrangements as we determine necessary. For each of our products, we continue to identify, upgrade and develop alternate vendors as part of risk mitigation and continual improvement.

The ingredients for the manufacture of the finished products are sourced from in-house API manufacturing facilities and from vendors, both local and non-local. Each of these vendors undergo a thorough assessment as part of the vendor qualification process before they qualify as an approved source. We attempt to identify more than one supplier in each drug application or make plans for alternate vendor development from time to time, considering the supplier’s history and future product requirements. Arrangements with international raw material suppliers are subject to, among other things, respective country regulations, various import duties and other government clearances.

The prices of our raw materials generally fluctuate in line with commodity cycles. Raw material expense forms the largest portion of our cost of revenues. We evaluate and manage our commodity price risk exposure through our operating procedures and sourcing policies.

The logistics services for storage and distribution in the United States, the European Union, Russia, South Africa, Australia and other emerging markets are outsourced to a third party service provider.

We manufacture formulations in various dosage forms including tablets, capsules, injections, liquids and creams. These dosage forms are then packaged, quarantined and subject to stringent quality tests, to assure product quality before release into the market. We manufacture our key brands for our Indian markets at our facilities in Baddi, Himachal Pradesh, to take advantage of certain fiscal benefits offered by the Government of India, which includes partial exemption from income taxes for a specified period.

All pharmaceutical manufacturers that sell products in any country are subject to regulations issued by the Ministry of Health (or its equivalent) of the respective country. These regulations govern, or influence the testing, manufacturing, packaging, labeling, storing, record-keeping, safety, approval, advertising, promotion, sale and distribution of products. Our facilities and products are periodically inspected by various regulatory authorities such as the U.S. FDA, the U.K. MHRA, the German BfARM, the South African Medicines Control Council, the Brazilian ANVISA, the Romanian National Medicines Agency, Ukrainian State Pharmacological Center, the local World Health Organization and Drug Control Authority of India, all of which have extensive enforcement powers over the activities of pharmaceutical manufacturers operating within their jurisdiction.

In November 2015, we received a warning letter from the U.S. FDA relating to violations at our injectable oncology formulation manufacturing facility at Duvvada, Visakhapatnam, Andhra Pradesh. Subsequently in February 2019, the U.S. FDA issued an EIR indicating successful closure of the audit of the oncology formulation manufacturing facility at Duvvada. Refer to Note 3334 of our consolidated financial statements under “Receipt of“Update on the warning letter from the U.S.FDA”U.S. FDA” for further details.

Pharmaceutical Services and Active Ingredients (“PSAI”) segment

OurPSAI segment primarily includes our business of manufacturing and marketing active pharmaceutical ingredients and intermediates, also known as “API”, which are the principal ingredients for finished pharmaceutical products. Active pharmaceutical ingredients and intermediates become finished pharmaceutical products when the dosages are fixed in a form ready for human consumption, such as a tablet, capsule or liquid using additional inactive ingredients. This segment also includes our contract research services business and our manufacture and sale of steroids in accordance with specific customer requirements.

Our PSAI segment’s revenues for the year ended March 31, 20192020 were Rs.24,140Rs.25,747 million, an increase of 10%7% as compared to the year ended March 31, 2018.2019. Our PSAI segment accounted for 16%15% of our total revenues for the year ended March 31, 2019.2020.

During the year ended March 31, 2019,2020, we filed 8298 Drug Master Files (“DMFs”) worldwide, of which 910 were filed in the United States, 610 were filed in Europe and 6778 were filed in other countries. Cumulatively, our total active DMFs filed worldwide as of March 31, 20192020 were 963,1033, including 208(active)210(active) DMFs filed in the United States.

We produce and market more than 120130 different APIs for numerous markets. Our API business is operated independently from our Global Generics segment and, in addition to supplying API to our Global Generics segment, our PSAI segment sells API to third parties for use in manufacturing generic products, subject to any patent rights of other third parties.

We export API to more than 8076 countries, and our principal overseas markets in this business segment include North America (the United States and Canada) and Europe. The research and development group within our API business contributes to our business by creating intellectual property (principally with respect to novel and non-infringing manufacturing processes and polymorphs), providing research intended to reduce the cost of production of our products and developing new products.

The pharmaceutical services (contract research and manufacturing) arm of our PSAI segment was established in 2001 to leverage our strength in process chemistry to serve the niche segment of Innovator pharmaceutical and specialty chemicals industry. Our objective is to be the preferred partner for innovator pharmaceutical companies, providing a complete range of services that are necessary to support their innovations to bring the new drug to the market quickly and more efficiently.

The focus is to leverage our skills in process development, analytical development, formulation development and Current Good Manufacturing Practice (“cGMP”) to serve outsourcing needs of innovator pharmaceutical companies. We have positioned our PSAI segment’s Custom Pharmaceutical Services business to be the partner of choice for large, medium and emerging innovator companies across the globe, with service offerings spanning the entire value chain of pharmaceutical services.

Sales, Marketing and Distribution

Developed Markets.Our PSAI segment’s principal overseas markets are the United States and Europe. Our PSAI segment’s sales to these markets were Rs.12,373Rs.11,704 million for the year ended March 31, 2019,2020, and accounted for 51%45% of our PSAI segment’s revenues for the year ended March 31, 2019. 2020.