Annual Report - Biocon - 2010-2011

BIOCON LIMITED

ANNUAL REPORT 2010-2011

DIRECTOR'S REPORT

Dear Shareholders,

We are pleased to present Thirty-third Annual Report on business and
operations together with the audited financial statements and the auditor's
report of your company for the financial year ended 31st March 2011.



The financial highlights for the year under review are given below:

Results of Operations:
Rs. in Millions
Particulars For the year
ended March 31,
2011 2010

Total Revenues 15,921 12,289
Total Expenditure 9,824 8,710
Profit before Interest, Depreciation and Tax 6,097 3,579
Interest 24 20
Depreciation 902 797
Profit before Tax 5,171 2,762
Income Tax 579 278
Profit after Tax 4,592 2,484
Surplus b/f from previous year 9,470 8,009
Profit available for appropriation 14,062 10,493
Proposed dividend 900 700
Tax on proposed divided 90 74
Transfer to General Reserve 459 248
Balance in Profit and Loss account 12,613 9,470

Consolidated Results (Under Indian GAAP):

Total Revenues 28,137 24,048
Total Expenditure 21,841 18,963
Profit before Interest, Depreciation and Tax 6,296 5,085
Interest 257 169
Depreciation 1,568 1,401
Profit before Tax and Exceptional Items 4,471 3,515
Income Tax 721 487
Profit after Tax, before Minority Interest 3750 3,028
Minority Interest (75) (96)
Profit after Tax 3,675 2,932

For the year ended March 31, 2011 consolidated revenues grew by 17% driven
by a strong growth in biopharmaceutical segment, EBITDA grew by 24% and
Profit after tax (PAT) grew by 25% to Rs. 3,675 million as compared to
Rs.2,932 million in the previous financial year

The highlight of this past year was the strategic partnership with Pfizer
for taking our biosimilar insulin global.

The standalone financial statements reflect higher profits on account of
transfer of certain intangible to subsidiaries within the group, which are
eliminated upon consolidation.

A detailed performance analysis is also discussed in the Management
Discussion and Analysis, which is annexed to this report.

Appropriations:

Dividend:

Directors are pleased to recommend a final dividend of Rs. 3.00 per equity
share, which is in addition to the interim dividend of Rs. 1.50 per share
takes the total dividend payout to 90% on the paid up equity capital of the
Company.

Transfer to Reserves

We propose to transfer Rs. 459 millions to the General Reserves and the
balance of Rs. 12,613 million is proposed to be retained in the profit and
loss account.

Business Operations Overview and Outlook:

During the year, Company's revenue increased by 17% from Rs. 24,048 million
to Rs. 28,137 million. The growth in biopharmaceuticals sales was driven by
a significant increase in sale across business segments including statins,
immunosuppresants and insulins. The immunosuppresants segment specifically
grew by over 30%. The domestic branded formulations business grew 36% on
increasing market share of key brands, introduction of new products and the
launch of two new divisions-Immunotherapy and Comprehensive Care.

We have sought both research and marketing partnerships as a way to access
global markets and we have forged some key strategic partnerships this
year. The most visible and high-profile partnership that we recently
announced was with Pfizer to commercialize our insulins portfolio which is
going to be a very important growth driver in the foreseeable future.

Industry reports cite the insulin market at about US$ 15 billion today and
estimated to grow to a size of US$ 20 billion by 2020. The insulins space
accounts for 46% of the total diabetes drug segment. We estimate this
business will continue to grow at about 6% per annum going forward,
factoring the advent of biosimilar insulins. Biocon's partnership with
Pfizer aims at addressing this very large opportunity first in the emerging
markets, which offer sizeable volume and thereafter at a later stage, enter
the developed markets. Clinical trials for recombinant human insulin for
the European Market are in progress and patient recruitments are currently
underway Biocon's insulin business in India is also beginning to gain
traction and although our insulins business is merely seven years old, we
have steadily gained market share. In volume terms, we have around 11%
share in the insulin vial segment and around 13% market share in the
glargine vial segment. While the market has grown 11%, Biocon's sales in
the segment has grown by over 12%.

Another significant event in this past year was the supply agreement with
Optimer Pharmaceuticals for the supply of Fidaxomicin API. Biocon is the
currently sole supplier of this product for certain regulated markets and
has been involved with this project from 2005.

We have made considerable progress in our partnership with Mylan for
developing biosimilar monoclonal antibodies for the global markets. In
addition to this, we have some very key strategic research partnerships
with Amylin, Vaccinex, the Center for Immunology in Havana, and IATRICa.
What really makes this whole partnering opportunity special for us is that
we can develop all these programs leveraging India's costs and clinical
base in a very cost-effective manner, and we are able to take them first to
the emerging markets and then on to the regulated markets as the program
advances.

Within the novel pipeline, the Company released encouraging preliminary
data from a recently concluded Phase III clinical study conducted in India
on IN-105, its novel oral insulin candidate for the treatment of diabetes.
Initial data analysis show that an unexpectedly high placebo effect
prevented IN-105 from meeting its primary end point of lowering HbA1c as
compared to placebo by a margin effect. However, multiple secondary
endpoints on both efficacy and safety were met, further strengthening the
emerging profile of IN-105.

Our coveted T1h program for a novel Anti-CD6 targeting monoclonal antibody
is in Phase III clinical trials for Psoriasis. Additionally, our novel
anti-CD20 molecule (BVX 20 with Vaccinex) has completed preclinical studies
and we are scheduled to commence clinical trials this year. Our novel
programs are expected to unlock substantial value upon licensing in the
coming years.

Subsidiaries and Joint Ventures: Syngene International Limited:

Syngene continues to be one of the leading contract research organizations
in the country which offers integrated services across discovery and
development continuum. State-of-the-art infrastructure, talented and
experienced scientific and techno-commercial team, flexibility of business
models, robust communication systems, ability to consistently deliver with
quality and speed are some of the reasons why Syngene has become a
preferred partner of choice for several small, medium and large companies
around the world. In addition to pharmaceutical companies, Syngene has
developed a broad customer base in other industries including fine
chemical, petrochemical, agro, cosmetic and electronic companies.

During the year, Syngene continued to successfully manage large
relationships including those with Bristol-Myers Squibb, Merck and DuPont
Agro division which involved various aspects of drug discovery and
development research.

With the emergence of biologics over past few years as important medicinal
interventions, Syngene also offer services in discovery and development of
biologic molecules. Syngene's state-of-the-art biologics pilot plant is
capable of delivering clinical trial material of both bacterial and
mammalian origin.

During the financial year 2010-11, Syngene registered a strong growth of
21% in revenues from Rs. 2,675 million to Rs. 3,231 million. Operational
Margin (EBITDA) increased from Rs. 877 million to Rs. 1,005 million
representing a 14% increase during the year

Increased charge on account of depreciation has led to a marginal decline
in the net profit which was at Rs. 283 million for the year against of
Rs.308 million for the previous year.

Clinigene International Limited:

For the year under review, Clinigene registered revenues of Rs. 289 million
Clinigene had a challenging year and has incurred a loss of Rs. 37 million
on account unfavourable market conditions, delay in study startup and
intensive pricing pressures.

Clinigene is continuing to evolve and adapt its capability platforms and
service offerings against a background of continued macro market pressure
as global R&D spends are being reduced, consolidation of market players
continues and the shift to globally capable preferred partnerships
accelerates. In addition to our standard service platforms, we have
identified several more specialized areas, for example patient based early
studies, complex BA/BE studies and immunoanalytical services where
Clinigene offers strong capabilities. We believe that, these new speciality
services, which have relatively high entry barriers, will allow us to drive
new and differential revenue opportunities.

Biocon Biopharmaceuticals Private Limited:

During the year Biocon Biopharmaceuticals Private Limited (BBPL) became a
wholly owned subsidiary of the Company.

For the year under review, BBPL earned revenues of Rs. 491 million as
against Rs. 381 million in the previous year. The net profits for the year
stood at Rs. 192 million as against Rs. 26 million in the previous year.

Biocon Research Limited:

Biocon Research Limited (BRL) is a wholly owned subsidiary set up to
undertake discovery and development research work in biologics, antibody
molecules and proteins.

For the current year BRL registered revenues of Rs. 649 million as against
Rs. 392 million in the previous year. BRL continues to progress the
development activity on the monoclonal antibody program in joint
collaboration with Mylan. BRL has reported a net loss of Rs. 322 Million
for the year ended March 31, 2011 against a loss of Rs. 51 million in the
previous year.

Being a research driven enterprise, the Company is in the initial stage of
operations and has enlarged its scope to other challenging research
projects during the year.

Biocon SA:

Biocon SA, a wholly owned subsidiary in Switzerland is primarily engaged in
development and commercialisation of biopharmaceuticals across the globe.
Clinical Development of Insulin is currently ongoing in the European
region.

AxiCorp GmbH:

AxiCorp is a specialized Pharma marketing and distribution company based in
Germany.

For the current financial year AxiCorp revenues rose from Rs. 9,117 million
to Rs. 9,800 million. The Company earned a net profit of Rs. 353 million
for the year against Rs. 299 million for the previous year. Given the
synergies brought about by the Pfizer partnership, the Company has decided
to divest its 78% stake in AxiCorp to the existing group of promoter
shareholders.

NeoBiocon FZ LLC:

NeoBiocon FZ LLC is a pharmaceutical research and marketing company based
at Abu Dhabi. Incorporated in January 2008, NeoBiocon is an equal joint
venture with Dr. B.R. Shetty of NeoPharma.

During the current year, NeoBiocon registered significant growth in revenue
to Rs. 60 million and a net profit of Rs. 21 million.

In addition to launching oncology products. NeoBiocon's range of branded
generic products, now approved by the UAE Ministry of Health, has been
successfully launched to address the therapeutic segments of cardiology,
diabetology and infection management.

Biocon SDN. BHD.

During the year, Company has incorporated a wholly owned subsidiary in
Malaysia to set up a state of the art manufacturing facility at BioXcell a
biotechnology park promoted by the Government of Malaysia.

In the first phase of capital outlay the Company envisages an investment of
US$ 161 million and expects the facility to go on stream by year 2015.

Consolidated financial statements:

The consolidated financial statements have been prepared by the Company in
accordance with the Accounting Standards as prescribed by the Companies
(Accounting Standards) Rules, 2006. The audited consolidated financial
statements together with Auditors Report thereon also form part of the
Annual report.

Accounts of subsidiary companies:

The Ministry of Company Affairs has granted General Exemption to Companies
from attaching the financial accounts of the subsidiary companies to this
Report pursuant to Section 212 of the Companies Act, 1956. However, a
statement showing the relevant details of the Subsidiaries is enclosed and
is a part of the Annual Report. The members can write to the Company for
obtaining the annual accounts of the subsidiary companies and copies will
also be available for inspection at the registered office in Bangalore,
India.

Employees Stock Option Plan (ESOP):

Pursuant to the provisions of Guideline 12 of the Securities and Exchange
Board of India (Employee Stock Option Scheme and Employee Stock Purchase
Scheme), Guidelines, 1999, as amended, the details of stock options as on
March 31, 2011 are set out in the Annexure to the Directors' Report.

Corporate Governance:

We strive to attain high standards of corporate governance while
interacting with all our stakeholders. The Company has complied with the
corporate governance code as stipulated under the listing agreement with
the stock exchanges. A separate section on Corporate Governance along with
a certificate from the auditors confirming the level of compliance is
annexed and forms a part of the Directors' report.

Evaluation of Board effectiveness:

The evaluation of the performance of the Board is periodically carried out
by the Chairman of the Audit Committee to measure the effectiveness of the
Board. Dr Bain has considerable experience in Board reviews and has carried
out similar exercises for other companies in the United Kingdom and
elsewhere.

The review conducted earlier showed overall confidence in the company and
the Board's oversight of corporate strategies. Action plans for certain
improvements in key areas were reviewed and evaluated for implementation.

Directors:

Dr. Neville Bain and Mr. Bala Manian shall retire by rotation at the
ensuing Annual General Meeting, and being eligible, offer themselves for
re-appointment.

Mr. Russell Walls was inducted as Additional Director by the board of
directors on 28th April 2011. A resolution confirming his appointment as a
director liable to retire by rotation is proposed at the Annual General
Meeting.

Auditors:

The Statutory Auditors M/s. S. R. Batliboi & Associates (Firm Registration
No. 10104910), Chartered Accountants, Bangalore, retire at the ensuing
Annual General Meeting, and have confirmed their eligibility and
willingness to accept office, if re-appointed.

Cost Audit:

Pursuant to Section 233B of the Companies Act, 1956, the Central Government
has prescribed cost audit of the Company's bulk drug and formulation
division.

The board has appointed the Cost Auditors and they have been duly approved
by the Central Government. Management Discussion and Analysis Report:

The report as required under the Listing agreements with the Stock
Exchanges is annexed and forms part of the Directors' Report. Cumulative
disclosure under the stock option scheme as on March 31, 2011:

Disclosure of the particulars of stock options schemes as on the above
date, as per SEBI guidelines:

Particulars Third Grant Fourth Grant Fifth Grant

a.i) Options Granted (Post 444,600 5,701,628 235,428
equity split and bonus,net
of options cancelled)

b. Exercise price

i) Pre-bonus of 2008 Rs.315 each 20% discount to Market Price
Market Price on on date of
date of Grant Grant

ii) Post-bonus of 2008 Rs. 157.5
each

c. Options vested 426,450 4,411,433 -

d. Options exercised 340,275 3,068,317 -

e. Total number of 340,275 3,068,317 -
Equity Shares to be
transferred from the
ESOP Trust as a result
of exercise of options

f. Options lapsed 104,950 1,721,946 -

g. Variation in the
terms of options None None None

h. Money realized by
exercise of options lacs) 909 4,459 -

i. Option pending exercise Nil 1,343,115 -

j. Total number of
options in force Nil 1,590,526 235,428

k. Person-wise details
of options granted to:

i. Directors and key
managerial employees Nil Please see Table (1) Nil
below for details
regarding options
granted to key
managerial
employees

l. Diluted Earnings Per Not applicable since shares will be transferred
Share (EPS) pursuant to by the ESOP Trust upon exercise of the options
issue of shares on and the Company will not be required to issue
exercise of options any new shares

m. Vesting schedule 25% each in Year 1-25% Year 1-25%
April of Year 2-35% Year 2-35%
2005,2006, 2007 Year 3-40% Year 3-40%
and 2008.
(Year 1 being 3 (Year 1
years from date being
of joining or 1 3 years
year from July 19, from date
2006, whichever of joining)
is later)

n. Lock-in No lock-in, subject to a minimum
vesting period of 1 year.

There are no employees who have received a grant in any one year amounting
to 5% or more of the options granted during that year.

There are no employees who have been granted options during any one year
equal to or exceeding 1% of the issued capital (excluding outstanding
warrants and conversions) of the Company at the time of grant.

Consequent to the bonus shares in the ratio 1:1 on Sept 15, 2008, employees
who had not exercised their options were credited with bonus entitlements
based on ESOP Plan (Eligibility for corporate action).

Table (1) details regarding options granted to key managerial employees are
provided below:

Name of Director or key Fourth Grant (No. of Options Granted)*
managerial personnel
Key managerial employees

1. Mr. Chinappa M B 75,000*
2. Mr. Sandeep Rao 60,000*
3. Mr. Harish Iyer 60,000*

* Adjusted for 2008 Bonus issue.

Fixed Deposits:

The Company has not accepted any fixed deposits from public. Directors'
responsibility statement:

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Board of
Directors hereby confirm as under:

i) In preparation of annual accounts, the applicable accounting standards
have been followed along with proper explanation relating to material
departures, if any,

ii) We have selected such accounting policies and applied them consistently
and made judgments and estimates that are reasonable and prudent so as to
give a true and fair view of the state of affairs of the Company at the end
of the financial year and of the profit of the Company for that period,

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

iv) We have prepared the annual accounts on a going concern basis.

Particulars of Research and Development, Conservation of energy, technology
absorption etc:

Particulars required under Section 217 (I) (e) of the Companies Act, 1956
read with Rule 2 of the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988 is given in the annexure to the Report.

Particulars of employees

In terms of the provisions of Section 217(2A) of the Companies Act, 1956
read with Companies (Particulars of Employees) Rules, 1975, as amended, is
annexed and is a part of this report.

However, having regard to the provisions of Section 219(1)(b)(iv) of the
said Act, the Annual Report excluding the aforesaid information is being
sent to all the members of the Company and others entitled thereto. Any
member interested in obtaining such particulars may write to the Company
Secretary at the registered office of the Company.

Acknowledgements

The Board greatly appreciates the commitment and dedication of employees at
all levels who have contributed to the growth and success of the Company.
We would also thank all our clients, vendors, investors, bankers and other
business associates for their continued support and encouragement during
the year.

We also thank the Government of India, Government of Karnataka, Min istry
of Information Technology and Biotechnology, Ministry of Commerce and
Industry, Ministry of Finance, Department of Scientific & Industrial
Research, Customs and Excise Departments, Income Tax Department, CSEZ, LTU
Bangalore and all other Government agencies for their support during the
year and look forward to their continued support in the future.

For and on behalf of the Board

Kiran Mazumdar-Shaw John Shaw
Chairman and Managing Director Vice Chairman
Date: April 28, 2011

Annexure to the Directors' Report

Particulars under Companies (Disclosure of particulars in the Report of
Board of Directors) Rules, 1988 for the year ended March 31, 2011.

Conservation of Energy:

During the year, the Company has taken significant measures to reduce the
energy consumption by using energy-efficient machines and equipment.

FORM-A
Year ended Year ended
March 31, 2011 March 31, 2010
A. Power and Fuel Consumption:

1. Electricity

a) Electricity Purchase Unit (000) 99,478 94,726

Total Amount (Rs. in Lakhs) 5,060 4,649

Rate per Unit 5.09 4.91

b) Own Generation from Diesel
Generator Unit (000) 12,247 11,119

Total Amount (Rs. in Lakhs) 1,139 869

Rate per Unit 9.30 7.81

2. Furnace Oil*

Unit (K. Ltrs) 8,356 8,343

Total Cost (Rs. in Lakhs) 2,282 1,841

Average/K. Ltrs 27,311 22,063

* Including used for production

B. Consumption per unit of Production

The disclosure of consumption figures per unit of production is not
meaningful as the operations of the Company is not power intensive and
involves multiple products.

FORM-B

1. Specific areas in which R&D work has been carried out by the Company:

- Process and Clinical Development of Novel Biotherapeutics in Oncology,
Diabetes, Rheumatology and Cardiovascular segments.

- Process and Clinical Development of Biosimilars in Oncology, Metabolic
disorders, Diabetes, Rheumatology and Cardiovascular segments.

- Development of Synthetic and Fermentation based Generic Small Molecules
for Anti-infective, Cardio-vascular, Nephrology and Transplantation
segments.

- Generation of Intellectual Property Development - Process Patents for
manufacture of key Generic Small Molecules and Biotherapeutics and
unraveling the mechanism of action of novel biotherapeutics

- Development of globally competitive manufacturing processes

- Clinical Development of new drug combinations

2. Benefits derived as a result of R&D activities

- Scale-up of key Biosimilars with improved productivity and process
efficiencies

- Strategic collaborations for development of new Biotherapeutics

- Global presence in supply of fermentation based Small Molecules to the
Generic Industry in regulated markets

- Rich pipeline of Generic Small Molecules catering to varied therapeutic
areas

- Internationally competitive prices and product quality

- Established intellectual property with 1076 Patents/ PCT applications
filed in Indian and International markets

- Safe and environment friendly processes

3. Future Plan of Action:

- Greater importance in the research areas of New Drug Discovery

- Clinical Development of existing pipeline of Biotherapeutics for
Regulated markets

- Strategic Collaborations for increased speed and cost competitiveness in
Drug Discovery

- Continued emphasis on Monoclonal Antibodies and Biotherapeutics
leveraging on Biocon's in-house process development and analytical skills

- Continue to strengthen R&D capabilities in the area of New
Biotherapeutics

4. Expenditure on scientific Research & Development:

Rs. in Million
March 31, 2011 March 31, 2010

a) Capital 183 129
b) Recurring 1,062 1,126
Total 1,245 1,255
Less: Recharge 725 502
Net R & D Expenses 520 754
Total R & D expenditure as percentage of sales 8.1% 10.8%

5. Technology Absorption, Adoption and Innovation:

No technology was imported by the Company during the year.

6. Foreign Exchange earnings and outgo:

Foreign exchange earned and used for the year:

Rs. in Million
March 31, 2011 March 31, 2010

Gross Earnings 6,935 5,057
Outflow* 4,881 4,595
Net foreign exchange earnings 2,054 462

* For details please refer to information given in the notes to accounts to
the annual accounts of the Company Schedule 17 item no. 7 (d) to (g).

MANAGEMENT DISCUSSION AND ANALYSIS

(All amounts in Indian Rupees thousands, except share data including share
price and amounts expressed in foreign currency) This discussion may

contain forward-looking statements that involve risks and uncertainties.

1. Industry Overview, Opportunities and Outlook:

India has attained global acceptance as a key pharmaceutical manufacturing
hub with the largest number of USFDA and EMEA approvals outside the US and
EU. Good technical expertise combined with an increasing number of drugs
turning generic has enabled the Indian Pharmaceutical Industry to emerge as
one of the world's largest producer of generic drugs with annual exports
worth $ 11 Billion in 2010.

Drawing from this success, the Indian Pharmaceutical sector is now aiming
for the next big opportunity in pharmaceutical manufacturing viz.
Biologics, especially bio-similars. India therefore has the opportunity to
become the global bio-manufacturing hub thus enhancing its stature as the
world's apothecary.

The biopharmaceutical market is currently worth nearly US $137 billion and
growing rapidly. Industry experts estimate that it could be worth US $319
billion by 2020. Moreover, at least 48 biologic products with combined
sales of nearly US $60 billion are due to come off patent over the next
decade. Today India's share of the Bio-pharmaceutical market is a mere 1.4%
but the potential for India to become a manufacturing hub for
biopharmaceuticals is enormous.

2. Business and Operational Overview:

During this year, Biocon's total revenues increased by 17% from Rs. 24,048
million to Rs. 28,136 million. The growth in biopharmaceuticals sales was
driven by a significant increase in sales across business segment including
statins, immunosuppresants and insulins. The immunosuppresants segment grew
over 30%. The domestic branded formulations business grew 36% on key brands
successfully increasing market share and the introduction of new products
in two new divisions - Immunotherapy and Comprehensive Care.

Portfolio approach:

Biocon has successfully developed comprehensive portfolios of statins and
immunosuppressants as generic APIs in the small molecule space and this has
contributed to 75% of our revenues and delivered a sustainable 5-year CAGR
of 24%. The path ahead is to expand our small molecule portfolios to
prostaglandins and peptides. Biocon is selective about the portfolios that
it chooses and hopes to move up the value curve from APIs to dossiers,
especially in the ANDAs. We believe that this approach will give us and
drive much higher value growth for us in the year ahead. Our approach in
large molecules has been, again, a portfolio approach where we have focused
on 2 broad portfolios; the first is the insulins which includes recombinant
human insulin and insulin analogs, and the second portfolio is the
monoclonal antibodies basket. In the large molecule space, however, we have
chosen to straddle both biosimilars as well as novel programs as a risk-
balanced strategy where we believe that the novel programs have the
potential of large upside, if successful. Our portfolio approach has
yielded good financial returns and has allowed us to forge very strong
partnerships.

Research and Marketing partnerships are the way to go:

We have sought both research and marketing partnerships as a way to access
global markets and we have forged key strategic partnerships this year. The
most visible and high-profile partnership that we recently announced was
with Pfizer to commercialize our insulins portfolio which is going to be a
very important growth driver for your Company in the foreseeable future.

Industry reports cite the insulin market at about US$ 15 billion today and
estimated to grow to a size of US$ 20 billion by 2020. The insulins space
accounts for 46% of the diabetes drug segment. We estimate this business
will continue to grow at about 6% per annum going forward, factoring in the
advent of biosimilar insulins. Of course, it is well-recognized that
insulin analogs are rapidly outpacing recombinant human insulin and it is
also well-accepted that biosimilar insulins are inevitable.

We think there are compelling reasons for biosimilar insulins to enter the
regulated markets, driven by escalating concerns on cost of therapies in
these markets, clarity on regulatory path ways and expiry of patents on
product analogues.

We highlight them below:-

1. Cost compulsions are likely to escalate in the regulated markets over
the next few years with ageing populations and this makes a strong case for
biosimilars,

2. Regulatory pathways for approval more or less clear,

3. Product patents on the analogues expiring through 2019.

Market data indicates the growth of diabetic population across the world
and more pronounced in developing economies specifically in Asia and MENA.
In the age group of 20 to 79 years, it is estimated that 7.8% of the
World's population will be diabetic by 2030.

Prevalence of diabetes in people aged 20-79 years.

Biocon's partnership with Pfizer aims at addressing this very large
opportunity first in the emerging markets, which themselves offer sizeable
markets and then at a later stage, enter the U.S. and European markets.
Clinical trials for recombinant human insulin for the European Market are
currently underway with the aim of an entry within the next few year.

Biocon's insulin business in India is also beginning to gain traction and
although our insulins business is merely seven years old, we have steadily
gained market share in volume. In volume terms, we have around 11% share in
the insulin vial segment and 13% market share in the Glargine vial segment.
We expect to roll out devices in the second half of 2011 and this, we
believe, will enable us to increase market share. At a growth level, we
have outpaced both the market and the market leader in the insulin vial
segment. While the market has grown 11%. Biocon has grown by 13% in value
terms. We also are going to be sharing the Indian market with Pfizer
starting this year, and this co-exclusive marketing arrangement is expected
to help get us higher market share going forward.

We have made considerable progress in our partnership with Mylan for
developing biosimilar monoclonal antibodies for the global markets. In
addition to this, we have some very key strategic research partnerships
with Amylin, Vaccinex, Center for Immunology in Havana, and IATRICa. All of
these programs are developed, leveraging India's costs and clinical base in
a cost-effective manner. We expect to initiate discussions for partnering
many of these programs in the coming fiscal.

Another supply partnership in this past year is with Optimer
Pharmaceuticals for the supply of Fidaxomicin API. Biocon is the sole
supplier of this product for North America. Biocon has been involved with
this project from 2005 and has been able to successfully scale up the
process. Fidaxomicin is used for the treatment of CDI-Clostridium Difficile
Infection, which is a major threat in hospitals across the US.

Late-stage Novel programs to see unlocking of value

Our novel pipeline comprises of products in diabetes, oncology and auto-
immune diseases.

Within our novel pipeline, your Company released encouraging preliminary
data from a recently concluded clinical study conducted in India, on IN-
105, its novel oral insulin candidate for the treatment of diabetes.
Initial data analyses show that an unexpectedly high placebo effect
prevented IN-105 from meeting its primary end point of lowering HbA1c
levels by a marginal effect as compared to placebo. However, multiple
secondary endpoints on both efficacy and safety were met, further
strengthening the emerging profile of IN-105.

Our coveted T1h program for a novel Anti-CD6 targeting monoclonal antibody
is in Phase III clinical trials for Psoriasis. The target indications are
expected to address a market size of US$ 20 billion by 2015. Additionally,
our novel anti-CD20 molecule has completed preclinical studies and is
expected to get into the clinic in India this year. Our novel programs are
expected to unlock substantial value upon licensing.

Emerging Markets are large and offer great growth opportunities

The emerging markets are going to be high growth, high-return markets for
Biocon. We have already delivered a 40% growth in our emerging markets
business this year and we expect to improve on this in the years ahead.
Biosimilar insulins are certainly going to be very important for these
emerging market strategies. The current emerging market estimate for this
insulin business is about US$ 1.5 billion with a 5-year CAGR of 15%.
Estimated at US$ 5 billion by 2020, the insulin market in the emerging
economies account for 70% of the world's diabetic population they offer us
quick market entry. Biosimilar Mabs in the emerging markets are also a very
important opportunity for us. Generics, again, are going to be extremely
important for this as APAC alone accounts for 16% of the US$ 124 billion
generics market with the fastest growth rate.

Trend of Externalizing R&D continues on a firmer path

The research services landscape continued to be challenging this year.
While Big Pharma is still externalizing over 22% of its R&D, we also see
risk sharing and resource sharing models evolve along with a move from
component to integrated discovery programs and from chemistry to biologics.
It is no longer cost, time and productivity arbitrage that are rationales
for externalizing research. Finally, although Big Pharma can in-license
from small biotechs in order to fill up the research pipelines, it is amply
clear that this is not adequate. This is the main reason why externalizing
the development of biologics is becoming a big opportunity for our research
services companies, Syngene and Clinigene. Both are very well-positioned to
offer this integrated platform of end-to-end solutions for both NCEs and
NBEs. An important partnership that we have developed in this risk sharing
integrated model is BBRC, which is a dedicated, integrated R&D hub
customized for Bristol-Myers Squibb to pursue pipeline development. This
facility has over 450 scientists and it works in a seamless way with its
labs back in the US.

People:

People are our key assets. Our goal is to create a culture of excellence.
Our human resource department strives to hire the best talent available,
keep them engaged and competitive and create a harmonious, satisfactory
work culture.

Some key initiatives taken this year -

* Launch of leadership development initiative targeted at middle and senior
managements

* Establishing recruitment alliances with tier-1 business schools (ISB,
IIMs, XLRI, NMIMS, NITIE, MDI) and reputed engineering/pharmacy colleges
(IITs, BITs-Pilani & Goa, NIPER and UICT) to ensure a steady stream of high
quality talent.

* Strengthening the goal-setting process by dovetailing vertical goals with
individual objectives.

* An online training tool for technical and behavioral training programs
was developed in house.

* Conducting an all India assessment program for Healthcare Marketing to
build a strong talent pool. A breakup of the talent profile across the
group is as below:

Biocon Group:

Education 2009-10 2010-11

PhD 273 260
Post Grad 2035 2328
Graduate Engineers 102 210
CA/MBA/ICWA/CS/LLB 172 214
Graduate/Undergraduates 1896 2573
Total 4478 5585

The following priorities have been identified for 2011:

* Strengthening the brand value of Biocon leadership through Phase 2 of the
Leadership Development Initiative.

* Setting up collaborations with finishing schools to develop a pool of
quality talent.

* Strengthening the performance appraisal process

* Reinforcing training design and delivery process

* Implement strategies to aid in attracting quality talent

* Employee engagement and organization development programs.

3. Financial Performance:

Overview:

The financial statements have been prepared in compliance with the
requirements of the Companies Act, 1956, and Generally Accepted Accounting
Principles (GAAP) in India.

(All amounts in Indian Rupees thousands)
March 31, March 31, Change
2011 2010
Sources of Funds
Shareholders' Funds

Share capital 1,000,000 1,000,000 0%

Reserves and surplus 18,468,091 14,662,867 26%
19,468,091 15,662,867 24%
Loan Funds

Secured loans 740,643 896,834 -17%

Unsecured loans 945,743 1,021,228 -7%

1,686,386 1,918,062 -12%

Deferred Tax Liability (Net) 395,518 410,408 -4%

21,549,995 17,991,337 20%

Application of Funds Fixed Assets

Gross Block 10,924,574 10,018,002 9%

Less: Accumulated depreciation 4,262,198 3,418,093 25%

Net Block 6,662,376 6,599,909 1%

Capital work-in-progress 1,032,909 583,344 77%

7,695,285 7,183,253 7%

Intangible Assets 134,490 184,062 -27%

Investments 4,858,229 4,186,382 16%

Current Assets, Loans and Advances:

Inventories 2,747,374 2,447,986 12%

Sundry debtors 4,181,044 3,836,444 9%

Cash and bank balances 2,102,320 771,218 173%

Loans and advances 4,086,880 4,030,711 1%

13,117,618 11,086,359 18%
Less: Current Liabilities
and Provisions

Current Liabilities 3,153,719 3,816,243 -17%

Provisions 1,101,908 832,476 32%

4,255,627 4,648,719 -8%
Net Current Assets 8,861,991 6,437,640 38%

21,549,995 17,991,337 20%
Share Capital:

The Company has only one class of shares i.e. equity share capital
comprising of 200,000,000 equity shares of Rs. 5 each. During the year
there has been no change in the equity capital of the Company.

Reserves and surplus:

The total reserves and surplus has increased from Rs. 14,662,867 in March
31, 2010 to Rs. 18,468,091 in March 31, 2011. The increase is primarily on
account accumulations of profits made during the year of Rs. 4,592,495 net
of Dividend distribution.

Loan funds:

There has been a decrease in total loans outstanding from Rs. 1,918,062 in
March 2010 to Rs. 1,686,386 in March 2011.

Unsecured loans decreased by Rs. 75,485 primarily on account of decrease in
short term borrowings from the banks.

During the year, the Company received financial assistance of Rs. 62,100
under Industrial Partnership Programs and Drugs and Pharmaceutical Research
Programs sponsored by government bodies for financing its research
projects. The loan is repayable over a period of 5-10 years from date of
completion of the projects.

As at March 31, 2011, the Company has utilized Rs. 648,624 under deferred
sales tax payment facility. The sales tax liability is repayable in ten
half yearly installments from August 2012.

Secured loans decreased by Rs. 156,191 due to decrease in bank borrowings.

Fixed Assets
2011 2010 Change

Cost 10,924,574 10,018,002 9%

Less: Accumulated depreciation 4,262,198 3,418,093 25%
Net Block 6,662,376 6,599,909 1%
Add : Capital work-in-progress 1,032,909 583,344 77%
Net fixed assets 7,695,285 7,183,253 7%
Net Asset turnover ratio 172 157 22%

During the year 2011, the Company has capitalized fixed assets to the
extent of Rs. 942,162. The primarily additions are in plant and machinery
of Rs. 532,874 and research and development equipments of Rs. 250,320.

The capital work in progress as at March 31, 2011, represents advances paid
towards purchase of fixed assets and the acquisition costs relating to
assets not put to use.

The Company has a capital commitment of Rs. 405,066 as at March 31, 2011 as
compared to Rs. 947,617 as of March 31, 2010.

Investments:

The Company as at March 31, 2011 held current investments in mutual funds
of Rs. 3,939,289 as compared to Rs. 3,526,917 as of March 31, 2010. During
the year, the funds generated from operating activities were invested in
current investments as reflected in Liquidity section below.

The long-term investments have increased from Rs. 659,465 to Rs. 918,940
over the previous year. Additional investments during the year include
investment of Rs. 121,552 for purchase of 49% stake in Biocon
Biopharmaceuticals Private Limited ('BBPL'). As at March 31, 2011, the
entire share capital of BBPL is held by the Company.

During the year 2011, Biocon Sdn.Bhd was incorporated as wholly owned
subsidiary in Malaysia. The joint research collaboration program with
Vaccinex Inc and IATRICa Inc. are on going.

The Company continues to hold its investments in its subsidiaries Syngene,
Clinigene, BBPL, Biocon SA, Biocon Research Limited and joint venture
NeoBiocon.

Intangible Assets:

During the year ended March 31, 2009, the Company acquired marketing rights
of certain products from BBPL for a sum of Rs. 128,850. These rights give
the Company an exclusive right of marketing the products outside India. The
Company has during the year made an application for registration of the
products and consequently commenced amortisation of these intangibles over
a period of five years from April 2010.

As at March 31, 2011 net value of intangibles assets are Rs. 134,490.

Current assets, loans and advances:

The current assets, loans and advances have increased from Rs. 11,086,359
to Rs. 13,117,618 an increase of 18% over the previous year. This was
mainly due to:

- Increase in cash and bank balances from Rs. 771,218 to Rs. 2,102,320.

- Increase in inventories from Rs. 2,447,986 to Rs. 2,747,374 largely on
account of incremental growth in sales.

- Sundry debtors stood at Rs. 4,181,044 (net of provision for doubtful
debts of Rs. 69,136) as at March 31, 2011 as compared to Rs. 3,836,444 (net
of provision for doubtful debts of Rs. 71,537) as at March 31, 2010. These
debtors are considered good and realisable. Debtors represent an
outstanding of 109 days and 110 days of revenue as at March 31, 2011 and
March 31, 2010 respectively on a moving average of trailing 3 month's
sales.

Current liabilities and provisions:

The current liabilities and provisions have decreased by 8.5% from
Rs.4,648,719 as at March 31, 2010 to Rs. 4,255,627, as at March 31, 2011.

This decrease in current liabilities is primarily due to:

- Decrease in deferred revenues from Rs. 1,313,624 to Rs. 751,906 largely
on account of income being recognized over time based on completion of
obligation.

- Decrease in sundry creditors from Rs. 1,856,471 to Rs. 1,834,522
primarily on account of decrease in creditors for raw materials.

The increase in provision from Rs. 832,476 to Rs. 1,101,908 is mainly on
account of increased dividend to Rs. 900,000 for the year ended March 31,
2011 as against Rs. 700,000 in the previous year.

Profit and Loss Account:

Biocon's total income for the year ended March 31, 2011 comprised of three
components:

* Sales of Biopharmaceuticals products,

* Licensing and development fees; and

* Other income.

The following table sets out the contribution of each of these components
of Biocon's income expressed as a percentage of Biocon's total income for
the years ended March 31, 2011 and March 31, 2010:

March 31, March 31, Change
2011 2010
Income

Gross sales 13,644,384 11,580,976 18%

Less: Excise duty 393,724 300,281 31%

Net sales 13,250,660 11,280,695 17%

Licensing and development fees 2,064,963 350,130 490%

Other income 605,716 658,327 -8%

15,921,339 12,289,152 30%
Expenditure

Manufacturing, contract research 9,824,660 8,709,669 13%
and other expenses

Interest and finance charges 23,778 19,910 19%

9,848,438 8,729,579 13%

Profit Before Depreciation and Taxes 6,072,901 3,559,573 71%

Depreciation/Amortisation, net 901,691 797,290 14%

Profit Before Taxes 5,171,210 2,762,283 87%

Provision for income-tax 578,715 278,713 108%

Profit for the year 4,592,495 2,483,570 85%

Balance brought forward from 9,470,267 8,009,190 18%
previous year

Profit Available for Appropriation 14,062,762 10,492,760 34%

Dividend and tax thereon 990,783 774,136 28%

Transfer to general reserve 459,250 248,357 85%

Balance Transferred to Balance Sheet 12,612,729 9,470,267 33%

Sales:
2011 2010

Biopharmaceuticals 83% 92%
Licensing and Development Fees 13% 3%
Other Income 4% 5%
Total Income 100% 100%

Share of revenues from net sales between domestic and export markets are as
follows:

Share of revenues:

2011 % 2010 %

Domestic 8,007,257 60% 6,404,589 57%
Exports 5,243,403 40% 4,876,106 43%
Total 13,250,660 100% 11,280,695 100%

Biocon's net sales grew by 17% to Rs. 13,250,660 in 2010-11 while the
licensing and development fees grew by 490% to Rs. 2,064,963. Company's
domestic revenues from product sales have increased by 25%, and exports
sales have increased by 8%. The increases in domestic sales are mainly
driven by increase in sale of bio-pharmaceutical products and branded
formulations.

4. Segment-Wise Performance:

Biopharmaceuticals:

Our business focus is on the manufacturing and marketing of
biopharmaceuticals that require fermentation and synthetic chemistry
skills. Statins and Orlistat:

Statins are cholesterol-lowering agents used to treat and prevent coronary
diseases and are amongst the largest selling drugs worldwide. Our statins
portfolio presently comprises Simvastatin, Pravastatin, Atorvastatin,
Fluvastatin, Lovastatin and Rosuvastatin. Biocon is primarily selling
Statins across India, USA and Europe.

Our Statins segment grew 13% YoY despite pricing pressures owing to
enhanced capacity enabled by improved productivity. The Statins portfolio
witnessed a changing product mix in this financial year. Atorvastatin and
Rosuvastatin gained share in Statins portfolio. Orlistat a drug in the anti
obesity saw a significant sales growth primarily an account of ban on its
peer's.

Insulins:

Insulin is a hormone that regulates the energy and glucose metabolism in
the body. Biocon markets recombinant human insulin in India under its own
brand name INSUGEN and has also registered the same in several emerging
markets. In addition, Biocon has supply arrangements with pharmaceutical
majors and other companies to supply recombinant human insulin for use in
their novel insulin formulations.

Insulin sales have been growing steadily by 12% YoY in the ROW markets. The
formulation sales business recorded the highest growth in last 3 years.

Immunosuppressants:

Immunosuppressants prevent organ and tissue rejection in transplants and
require high technology based manufacturing capabilities. Currently Biocon
produces mycophenolate mofetil (MMF), sirolimus and tacrolimus.

This segment posted a 35% YoY growth driven by patent expiry despite
pricing pressures.

Branded Formulations:

Branded formulations are finished dosages currently sold in India and
emerging market geographies. Our Company is present in six therapeutic
areas-Diabetology, Oncology, Cardiology, Nephrology, Dermatology and
Comprehensive Care. Branded formulations grew 36% YoY on the back of strong
sales in diabetology and oncology segments.

Our Company is positioning itself as a key player in diabetes therapy on a
global scale. There was significant revival in the insulins franchise both
in the Insugen and Basalog. The launch of Insugen 100, the global standard,
has been widely accepted by diabetic fraternity. Biocon has focused its
efforts to improving diabetes care in India through an awareness campaign
on monitoring and control of blood glucose and early detection of the
disease.

The Comprehensive Care and immunology division was launched in the current
fiscal with a vision of providing quality and affordable therapy in the
critical care segment.

Biocon's pipeline of innovative and biosimilar molecules as well as
marketing partnerships will be the driving force to expand in India and
other markets in the years to come.

The Biocon's formulation division dedicated marketing team of over 1,100
people for the finished dosages business.

5. Other Financial Data Licensing and Development Fees:

These fees represent income received by Biocon towards transfer of
proprietary technology with respect to certain bio-generics under long-term
contracts and out-licensing its proprietary products. During the year, the
Company has a registered licensing income of Rs. 2,064,963, an increase of
Rs. 1,714,833 as compared to previous year. This includes transfer of
certain intangible to subsidiary within the group.

Other Income:

The Other income has registered a decrease of 8% compared to the previous
year. Other income consists primarily of dividend income from investments
amounting to Rs. 167,114 as compared to Rs. 98,604 in fiscal 2010. It also
includes cross charge of utility and other common costs towards use of
Biocon Park facility (SEZ Developer) to subsidiaries which has decreased
from Rs. 336,046 in the fiscal 2010 to Rs. 297,690 in the fiscal 2011.

Material costs:

Materials costs have increased by 17% from Rs. 5,472,390 to Rs. 6,392,513
over the previous year. As a percentage of sales, the material cost has
remained constant at 48% YoY.

Employee costs:

Staff cost comprises:

* Salaries, wages, allowances and bonuses,

* Contributions to provident fund,

* Gratuity and leave provisions,

* Amortisation of Employees stock compensation expenses, and

* Welfare expenses (including employee insurance schemes)

Staff costs have increased from Rs. 997,275 for the fiscal year 2010 to
Rs.1,460,020 for the fiscal year 2011. The increase in employee costs is
due to:

a) Staff increment which was 15% YoY.

b) Addition of employees. Operating and other expenses:

Operating and other expenses comprises traveling and conveyance,
communication, professional charges, power and fuel, lab consumables,
repairs and maintenance, selling expenses like freight outwards, sales
promotion and commissions, research and development costs, provision for
doubtful debts, exchange fluctuations and other general expenses.

Operating and other expenses have decreased by 12% from Rs. 2,240,004 for
the year 2010 to Rs. 1,972,127 for the year 2011 mainly on account of:

a) Foreign exchange gain of Rs. 262,377 as compared to loss of Rs. 33,179
in the previous fiscal.

b) 16% decrease in professional charges from Rs. 175,928 to Rs. 148,242

c) The decrease is offset by a 41% increase in selling expenses from
Rs.401,733 to Rs. 564,493 primarily on account of increase in freight
charges, and

d) 21% increase in power charges from Rs. 672,485 to Rs. 816,291and 19%
increase in repair and maintenance charges from Rs. 280,911 to Rs.334,686.

Interest and Finance Charges:

Interest and finance charges have increased from Rs. 19,910 in fiscal 2010
to Rs. 23,778 in fiscal 2011 due to increase in bank charges.

Depreciation:

During the year depreciation has increased by Rs. 104,401 an increase of
13% on account capitalization of assets. Depreciation as a percentage of
sales has remained constant at 7%.

Provision for Taxes:

Provision for current tax in the year ended March 31, 2011 was Rs. 578,715
as against Rs. 278,713 net of provision for current and deferred tax The
Company availed tax benefit in respect of profit from its EOU and SEZ
operations.

Net Profit:

Net profit for the fiscal year 2011 has increased by 85% to Rs. 4,592,495
resulting in a basic EPS of Rs. 23.49.

Liquidity:

Our primary liquidity requirements are for financing working capital
requirements and funding capital expenditure. The financing needs are met
primarily through cash flows from operations and short term borrowings.

2011 2010

Net cash generated from operating activities 3,649,661 2,307,341
Net cash used for:
Capital expenditure (1,232,442) (806,524)
Dividend including dividend tax (767,584) (701,970)
Investments in associate/subsidiary companies (121,552) (48,100)
Loans to subsidiaries/joint ventures companies 121,548 (39,580)
Borrowings from banks (286,359) 301,491
Others 343,121 359,005
Net cash equivalents 1,706,393 1,371,663
Net (purchase)/redemption of current
investments (412,313) (638,339)
Cash at beginning of year 793,751 60,427
Cash at end of year 2,065,298 793,751

6. Performance of Subsidiaries, Joint Ventures and Associates Syngene
International Limited:

Syngene is a 99.99% owned subsidiary of the Company. Syngene was
incorporated on November 18, 1993. Syngene operates in two main research
areas: Synthetic Chemistry and Molecular Biology. Syngene is also involved
in custom chemical synthesis. During the year, Syngene has confidently
moved into Integrated Drug Discovery services.

Syngene's total income primarily consists of net sales from Contract
research and manufacturing services income. Substantially all of Syngene's
contracts are based on time and material management. Revenue from these
contracts is recognized when services are rendered, in accordance with the
terms of the contract. Syngene's total revenue has increased from
Rs.2,675,660 to Rs. 3,231,378 representing a growth of 21%. The growth in
operations is supported by increase in revenues from existing and new
customers.

Syngene's expenses mainly comprise of raw-material costs and staff costs.
Raw material cost consists of lab consumables used for research. The raw
material costs increased by 27% from Rs. 688,117 to Rs. 876,148 in fiscal
2011 and the staff costs increased by 20% from Rs. 666,393 to Rs. 800,278.
Increase in material cost and increase in staff costs are due to a growth
in sales. Other costs increased by 24% from Rs. 443,585 to Rs. 550,195.

Net profit for the year has decreased by Rs. 25,400 from Rs. 308,144 to
Rs.282,744 mainly due to increase in depreciation by Rs. 58,277 from
Rs.450,872 in the year ended March 31, 2010 to Rs. 509,149 in the year
ended March 31, 2011.

Clinigene International Limited:

Clinigene is a 100% owned subsidiary of Biocon Limited. Clinigene was
established to undertake clinical and other trials and validation for drugs
and pharmaceuticals and to conduct research in the area of medical sciences
for development of new and improve upon existing medical diagnostic,
surgical and therapeutic techniques.

Clinigene's total income principally consists of income from clinical
research fees and also Bio-analytical and Bio-equivalence studies.
Clinigene enters either into time and material contracts and/or fixed price
arrangements. Revenue from time and material contracts are recognised on a
monthly basis as services are rendered in accordance with the terms of the
applicable contracts. Revenue from fixed price contracts is recognized
based on the percentage completion method. For the year ended March 31,
2011, Clinigene has total revenue of Rs. 289,337.

Clinigene is continuing to evolve and adapt its capability platforms and
service offerings against a background of continued macro market pressure
as global R&D spends are being reduced, consolidation of market players
continues and the shift to globally capable preferred partnerships
accelerates.

During the year, the Company has identified several more specialized
services for example patient based early studies, complex BA/BE studies and
bio-analytical services. These new specialty services, which have
relatively high entry barriers, will drive new and differential revenue
opportunities. Studies conducted by Clinigene were successfully audited by
the USFDA and EMA.

Biocon Biopharmaceuticals Private Limited:

BBPL was incorporated on June 17, 2002 and currently has paid-up share
capital is Rs. 176,000. In April 2010, Biocon SA acquired the 49% equity
stake held by CIMAB SA in BBPL. In March 2011, Biocon purchased the 49%
equity stake in BBPL from Biocon SA. Consequently, as at March 31, 2011 all
the equity shares of BBPL are held by Biocon.

For the year under review, BBPL earned revenues of Rs. 491,611 as against
Rs. 381,302 in the previous year. BBPL has commenced full fledged
operations and for the year under review posted a net profit of Rs. 192,047
as against Rs. 26,062 in the previous year.

As at March 31, 2011, BBPL had accumulated losses of Rs. 159,238.

Biocon Research Limited:

Biocon Research Limited ('BRL') was incorporated in 2008, as a wholly owned
subsidiary of Biocon Limited and is engaged in carrying out research and
development of new drugs, drug delivery systems and contract research.

Total revenue of BRL increased from Rs. 392,944 to Rs. 649,591 in fiscal
2011.

BRL spends in research and developments expenses increased from Rs. 416,649
to Rs. 940,991 in fiscal 2011.

NeoBiocon:

NeoBiocon FZ LLC. is a research and marketing pharmaceutical Company based
in Abu Dhabi. Incorporated in January 2008, NeoBiocon is a 50:50 joint
venture with Dr. B.R. Shetty, of NeoPharma.

Financials of NeoBiocon were consolidated based on the Accounting Standard
27-Financial Reporting of Interests in Joint Venture issued by ICAI.
Accordingly, only 50% of the operations incorporated for the consolidation
purpose. NeoBiocon's turnover has increased from Rs. 23,927 to Rs. 59,608
representing a significant growth in business and net profit has increased
from Rs. 2,713 to Rs. 21,243 for fiscal 2011.

IATRICa Inc:

Biocon has made a strategic investment of Rs. 138,470 in a US based
research Company IATRICa Inc to jointly develop novel immunoconjugates for
the treatment of cancer and infectious disorders. As at March 31, 2011,
Biocon has a 30% stake in IATRICa.

The research initiatives of IATRICa are underway and it has initiated work
on two molecules.

Biocon SA:

Biocon SA a wholly owned subsidiary was incorporated in year 2009 in
Switzerland. Biocon SA undertakes development and marketing of
biopharmaceuticals and pursue investment opportunities in Biopharmaceutical
sector.

Germany. During the year, the Company has made significant progress in
clinical the development of insulin for the European markets.

In October 2010, Biocon SA has entered into a global alliance with Pfizer
for commercializing biosimilar Insulin and Insulin analogs. During the year
ended March 31, 2011, the Company earned revenues of Rs. 732,248 and profit
of Rs. 69,465.

AxiCorp GmbH:

During the year 2009, Biocon SA acquired 71% stake in AxiCorp GmbH,
Germany. AxiCorp is a specialized marketing and distribution Company
established in 2002 to address the lucrative generics and parallel
distribution market in Germany.

Axicorp operations are consolidated with the financial results of the group
with a 3 month lag. The Company registered revenue of Rs. 9,800,683 and PAT
of Rs. 353,225 for year ended December 31, 2010 as against revenue of
Rs.9,117,360 and of Rs. 299,322 for year ended December 31, 2009.

Axicorp has contributed 35% to the group revenues and 8% to the group net
profit for the year ended March 31, 2011.

Consequent to an offer made by the minority shareholders of AxiCorp, Biocon
would divest its stake in its German subsidiary, AxiCorp GmbH, to the
existing group of promoter shareholders.

Biocon had entered into a global alliance with Pfizer in October 2010. This
divestment is in line with the objectives of the global alliance wherein
the synergies derived from global development and investments can be
leveraged for the German market as well.

Consolidated financial statements:

Biocon has prepared consolidated financial statements in accordance with
Indian GAAP by consolidating its subsidiaries - Syngene, Clinigene, BBPL,
Biocon Research Limited, Biocon SA and AxiCorp and Joint Venture Neo Biocon
and associate Company IATRICa Inc. The abbreviated consolidated Indian GAAP
profit and loss account is as under:

Abbreviated consolidated profit and loss statement-Indian GAAP:

2011 2010

Total Income 28,136,602 24,048,363
Profit before tax (PBT) 4,471,689 3,514,742
PBT margin 15.9% 14.6%
Profit after Tax 3,675,150 2,932,442
Net margin 13.1% 12.2%

7. Risks and Concern:

The Generic Industry is subject to patent litigation and regulatory issues.
Patent challenges or delay in receipt of regulatory approvals could delay
our product launch in key markets. In addition significant additional
competition in key products could erode our market shares and result in
reduced prices and profitability. The consolidation of the generic industry
could result in larger generic players acquiring manufacturing capabilities
thereby reducing the market for third party manufacturers. The failure to
obtain regulatory approval for new drugs under development could affect
long-term business opportunities. Other key risks related to our business
include loss of key personnel, increase in input costs and adverse movement
of the Indian Rupee against the major currencies (US$ & Euro). Risk of
managing research partnership and commercialisation of novel molecules,
regulatory delays and clarity on regulatory pathways could affect product
launch.

The Company carries out a detailed Risk Management exercise or purposes of
identification of risks and putting in place processes and controls to
mitigate these risks. The audit committee reviews the Company's risk
management framework and approves risk management action plans.

8. Internal Controls:

Biocon has well established internal control systems for operations of the
Company and its subsidiaries. The Finance Department is well staffed with
experienced and qualified personnel who play an important role in
implementing and monitoring the internal control environment and compliance
with statutory requirements.

The Internal Audit is conducted by an independent firm of Chartered
Accountants.

The Audit committee addresses significant issues raised by the Internal and
Statutory Auditor.