The Challenges from India in the Global Generic Market Place

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The Challenges from India in theGlobal Generic
Market Place
Dr. Brian W Tempest Chief Mentor Executive Vice
Chairman of the Board Ranbaxy Laboratories
Limited, Delhi, India Madrid 8th February 2007
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Disclaimer
Except for the historical information contained
herein, statements in this presentation and the
subsequent discussions, which include words or
phrases such as will, aim, will likely
result, would, believe, may, expect,
will continue, anticipate, estimate,
intend, plan, contemplate, seek to,
future, objective, goal, likely,
project, should, potential, will pursue
and similar expressions or variations of such
expressions may constitute "forward-looking
statements". These forward-looking statements
involve a number of risks, uncertainties and
other factors that could cause actual results to
differ materially from those suggested by the
forward-looking statements. These risks and
uncertainties include, but are not limited to our
ability to successfully implement our strategy,
our growth and expansion plans, obtain regulatory
approvals, our provisioning policies,
technological changes, investment and business
income, cash flow projections, our exposure to
market risks as well as other risks. Ranbaxy does
not undertake any obligation to update
forward-looking statements to reflect events or
circumstances after the date thereof.
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Asias Share of the World GDP (at PPP in )

• Year 1870 1913
  1950 1973 2001
• China 17 9
  5 5 12
• India 12 8
  4 3 5
• Japan 2 3
  3 8 7
• Rest of Asia 7 5 7
  9 13
• Total Asia 38 25
  19 25 37
• Source WEF
• - was 59 in 1820 with India 16,
  China 33

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Davos 2006
Source FT
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The Productivity Advantage
India a usa Pharma view USA
1 chemist Better education x
1.3 1 chemist
70 hours/week Longer working time x 1.3
50 hours/week
800 monthly Lower cost x 20
12,000 monthly
Sources IPHMR Conferences, New Delhi August 2004
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The Ageing Advantage

• Japan - by 2050 36 gt 65 years from
  19 in 2005
• China - one child families, get older
  before becoming wealthy
• - labour costs
  will rise owing to labour shortage
• India - India already has the
  youngest labour force in the world
• - source of the
  extra needed global workforce
• - India will pass
  China in total population in 2030
• - By 2013 India
  will have more young workers 20-24 than China

Working Population, 15-64 years In millions
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The Economic Growth Advantage

• Growth
• - Japan, sustain current growth
• - China, slightly slower growth to prevent hard
  landing
• - India, increasing growth rate being talked
  up to 9/10
• Sentiment
• - India, largest foreign affairs caucus in US
  Congress (180), nuclear deal
• - China, 74,000 demonstrations reported in
  2005 in China. State secrecy, IP

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The Billionaires Advantage

• The world has over 800 billionaires
• USA has almost half
• India - 36 billionaires
• China - 15 billionaires
• Net worth of 40 richest Indians - 170 b
• 40 richest Chinese - 38b
• Source Forbes, Asia November 27, 2006
• 2006 belongs to some of the emerging markets,
• and no country more than India

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The RD Investment Advantage

• 
  
• Most attractive RD Investment locations
• Ranked 3rd - China, USA, India, Japan UK
• Source UNCTAD 2005

• Reasons why India
• Qualified Scientists Engineers
• Global India players with Alliances
• English speaking
• TRIPs compliant first patent March 2006
• IIT, IIM other scientific institutions
• Source UNCTAD 2005

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The Education Advantage

• 4th largest reservoir of Scientific Manpower (2nd
  largest English speaking)
• 3m graduates pa, 115k MSc Chemistry (3.5k UK),
  215k Eng (222k USA)
• Physics the most popular subject
• Lead by a Nuclear Scientist as President
  remote sensing satellite technology, 1/6
  countries
• PCT application ranked 3rd K, Ch, Ind, Si, RSA
• US Europe will not dominate Science, Maths, IT
  industries
• Mr. Bill Gates

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Science Education in EU
This means that when pupils are in a science
laboratory their experience is unsafe,
unsatisfactory or uninspiring for 65 of the
time. Source Royal Society of Chemistry, Policy
Bulletin Spring 2006 UK A Level
entries Closed UK University
2000 2005 change
Chemistry Departments Physics
32,059 28,119 -12 Dundee
Kings Chemistry 40,856 38,851
-5 Surrey Exeter Maths
67,036 52,897 -21 Lancaster
Queen Mary Computing 19,099 7,242
-62 Source Daily Mail 11 August
2006 Only pupils at private schools can take
physics, chemistry biology separately Source
Times, 9th November 2006
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Science Education in India

• Number of Higher Education Institutions
• 05/06 18,123 59
• 00/01 11,412
• 90/01 5,932
• 80/01 4,861
• Source Indian University Grants Commission

Number of Students enrolled in Higher Education
Institutions 05/06 10,500
40 00/01 7,500 90/01
4,000 80/01 3,000 Source Indian
University Grants Commission
Number of Institutions courses
05/06 99/00 Pharmacy
1478 669 120 Medicine
229 174 32 Physiotherapy
205 52 294 Source Pavan
Agarwal (2006) based on data from
professional councils
PhD Degree awarded in Science 03/04 5408 44 00/
01 3734 90/01 2950 (USA 03/04 25,000)
Source Indian University Grants Committee
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The Education Advantage
Engineers/Science graduates p.a India 0.7m,
China 0.5m, EU 0.5m, USA 0.4m, Japan 0.3m
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The Information Advantage

• 34 News TV channels. Oldest 13 years old (NDTV)
• 5000 newspapers, circulation 17m. 12 with 1m
  copies each.200m daily readers. 21m new daily
  readers 2003/2005, 14 with 50 rural and 50
  urban readership
• Principal internet languages to become English,
  Chinese and Hindi
• Diaspora network (25m across 120 countries)
• Indians are hungry for information

• Internet Usage Asia
• China 123 m
• Japan 86 m
• India 51 m
• S.Korea 34 m
• Source Business Today, Sept. 24, 2006

• Mobile Phones
• China 421 m
• 2. USA 190 m
• Japan 157 m
• Russia 148 m
• 5. India 116 m
• Source Times of India, Sept. 14, 2006

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The Potential for Improvement Advantage

• Manufacturing growth versus China
• Scope for improvement of Government Policies
• GDP dynamics 1990 2005
• - Agriculture 31 20
• - Industry 28 26
• - Services 41 54
• More privatization public sector not so buoyant
• Further encouragement of RD for Pharmaceuticals

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The Clinical Advantage

• Cost Advantage
• China India
• Enrolment 50 33
• Cost 40 16
• Patients/site 250 500
• Based on USA at 100 Index
• Source BCG report Looking Forward 2006

Country USA India Sites 22 8 Subject 626 896
Source Andy Lee Pfizer Global, head clinical
study and data management.Business India, August
13, 2006
Medical Tourism Cardiac Surgery 000s

USA 30 Singapore 20 Thailand 14
India 5-7 Source Business world, 18th Dec2006

• Patients
• Naïve untreated patients
• HIV 50m
• Diabetes 32m
• HT 5m

..The Countrys World Class skills in
Chemistry IT and its large treatment
naive patient population provides added allure
Boston Consultancy
Group Harnessing the power of India 2006
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The MA Future Advantage
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The Investment Advantage

• India FDI
• 2003/4 4.3b
• 2004/5 5.6b
• 2005/6 6.0b
• Source Outlook business June 2006

2005 FDI Brazil 15b UK 164
b Russia 14b USA 99 b India 6b China 72b
(35b) Source UNCTAD 2006

• India on target for 10b in 2006/07
• - But still small

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Investment by Microsoft in India

• Microsoft Global Development Centre (GDCI)
• Microsoft Global Services (MGSI)
• Microsoft Global Technical Support Centre (GTSC)
• Microsoft Systems Research (MSRI)
• Microsoft India Development Centre (MIDC)

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India

• A Global Strategic Asset for developed
• World Market businesses

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The Competitive Advantage - Pharma
Active Pharmaceuticals Facility, Mohali
Dosage Forms Facility, Paonta Sahib
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The Competitive Advantage - Pharma

• Clinical data management
• An Indian speciality
• 300 staff GSK
• -2.2m clinical data sheets
• -450 trials
• -Error rate lt0.01/100k
• -No data security issues
• Source BCG report Looking Eastward Sep2006

RD hotbeds China India have become
RD hotbeds.. MNCs already operate some 180
RD centres in China and More than 100 in
India Source BCG report Looking Eastward
Sep2006
2005
2004
2001
2000
185
170
1999
146
86
49
24
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RD III
Ranbaxys Patent Filings
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The Pharma Advantage APIs
USA DMF filings by India
Share of USA DMF filings

• 
  
  
• India China
  
• 2004 27 9
• 2005 37 10
• Q106 44 15
• Q206 41 16
• Q306 45 17 (latest)
  
• Source US FDA / J P Morgan, 6th
  August 2006

• 
  
• 1990
  1
• 1995 4
• 2000 36
  
• 2004 187
• 2005 262
• Source Crisil / US FDA / J P Morgan

Source US FDA, Credit Suisse
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The Pharma Advantage - ANDAs
ANDA Filings in USA by Indian Companies
144
64
46
24

• - One in every four ANDAs filed
  by Indian Companies in top
• USA FDA filers
• Source KPMG
• - No Chinese generic company has
  yet filed a USA FDA ANDA

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Global Market Trends for Generic Companies
Source UBS, Businessworld, 30th October 2006
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Global Market Trends Discovery RD
Vendor Availability
India China Analog
preparation 41 25 Combinatorial
chemistry 37 7 Analytical chemistry 37 7 Str
uctural chemistry 26 5 Assay
development 26 2 Computer drug
design 26 13 High throughput
Screening 11 2 Bio informatics 13 7 Genetica
lly modified animals 0 3 Basic molecular
biology 13 25 Source BCG, Looking
Eastwards, September 2006 Out of 90 vendors in
October 2005
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The Tempest Crystal Ball

• Post TRIPs new products will dry up in India by
  2008
• Under this pressure Indian companies will adopt
  different business models
• - Generics, Discovery, Services, MA
• MNCs will continue to be attracted to India owing
  to the science education
• China will be perceived to be stronger in
  biology/ toxicology
• 75 of new RD sites and 30 of RD staff
  globally will be in India/China
• Alliances between Western Biotech and Indian
  companies will expand
• The global generic industry will be dominated by
  India in the next five years
• China will dominate the chemical intermediates
  segment
• It will be India China - and not India or China

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Key Challenges
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Potential Challenge Asian Flu
50 of world chickens bred in Asia
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Potential challenge Oil prices
Source EIIG
Source BP

• A war against Iran could drive oil gt 200 a
  barrel - Times 22nd June 2006
• BRIC countries consume 20 global oil

Source Outlook business June 2006
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Potential Challenge - Pollution
India, China, USA Refuse any mandatory CO2
emission caps India is 6th greatest energy
consumer Ganges River is the Worlds most
polluted river source World Commission on
water
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Potential Challenge Infrastructure
Our greatest potential will be realised only if
we can ensure that our Infrastructure does not
become a severe and critical handicap
Source Manmohan Singh
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Summary

• 
  
• Asia economic strength is returning to
  levels seen in the past
• Many advantages for India RD,
  Demographics, Education
• India as a global strategic asset for
  developed markets
• Some Challenges infrastructure is the
  most serious
• The current feeling in Indian Boardrooms is
  that a turning point has been reached, a tipping
  point has been passed and Indias time has
  arrived
• China India represent the future of Asia and
  quite possibly
• the future for the global economy Steve
  Roach, Morgan Stanley

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Thank You