India – a growing player

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India a growing player
Dr. Brian W Tempest Chief Mentor Executive Vice
Chairman of the Board Ranbaxy Laboratories
Limited Frankfurt 15th March06
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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

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Davos 2006
Source FT
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The Productivity Advantage
India a usa pharma view
USA
1 chemist FTE 1 chemist
FTE
Better education x 1,3
70 h/week 50 h/week
Longer working time x 1,3
800 monthly
12,000 monthly
Lower cost x 20
Sources IPHMR Conferences, New Delhi August 2004
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The Ageing Advantage

• Europe - retirees grow faster than
  workers
• - fertility rates
  lower
• Japan - expansion of grey segment
• USA - over 50s 88m will grow to
  118m (2020)
• - obesity
• China - one child families
• - get older before
  becoming wealthy
• - labour costs will
  rise owing to labour shortage
• - rural to urban
  flow
• India - will remain very young
• - source of the
  extra needed global workforce

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The RD Investment Advantage

• 
  
• Most attractive RD Investment locations
• 1. China
• 2. USA
• 3. India
• 4. Japan
• 5. UK
• Source UNCTAD 2005

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The RD Investment Advantage -reasons why

• Qualified Scientists Engineers
• Global India players with Alliances
• English speaking
• TRIPs compliant
• IIT, IIM other scientific institutions
• Source UNCTAD 2005

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The RD Investment Advantage - research
institutions in India

• Genetic engineering research
  165
• Transgenic work
  55
• Therapeutics
  25
• Basic research
  28
• Universities
  gt 250
  
• Source Dept. of Bio-technology

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The Knowledge Advantage

• 4th largest reservoir of Scientific Manpower
• 2nd largest in terms of speaking English
• 3m graduates pa, 115k MSc Chemistry
• 345k IT, USA 75k
• Knowledge super power
• Lead by a Scientist as President
• Diaspora network (25m across 120 countries)
• The worlds largest free nation
• US Europe will not dominate Science, Maths, IT

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The Knowledge Advantage
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The State of European Science Teaching
This means that when pupils are in a science
laboratory their experience is unsafe,
unsatisfactory or uninspiring for 65 of the
time. In addition, 13 of science classes are
not taught in a laboratory at all
Laboratories in UK state schools Excellent 5
Good 29 Basic/uninspiring 41 Unsafe/unsa
tisfactory 25
Source Royal Society of Chemistry, Policy
Bulletin Winter 2006
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The Economic Growth Advantage

• GDP World growth marginally less in 06 than 05
  (4.3)
• USA expansion at a slower growth than 05 (3.6)
• Eurozone expected to perform better than USA
• Asia
• PRC slightly slower growth to
  prevent hard landing
• Japan sustain current growth
• India increasing growth rate
  
• Chindia 40 population, 8 economy
• Largest foreign affairs caucus in US Congress
  (180)
• 74,000 demonstrations reported in 2005 in China

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The FDI Advantage

• 
  b
• 2001/2
  6.1
• 2002/3
  5.0
• 2003/4
  4.7
• 2004/5
  5.5
• 2005/6
  6.5
• - But still only at 10 of PRC levels

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Investment by top 15 Indian Domestic
Pharmaceutical Companies

• 
  m
• 2000
  110
• 2001
  160
• 2002
  200
• 2003
  250
• 2004
  400
• 2005
  450
• Source Citigroup

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Investment by foreign Pharma companies
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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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The Potential for Improvement Advantage

• Manufacturing growth 90 - 03
• - Chinese manufaturing 12 (90-03)
• - India manufacturing 6.5
• Scope for improvement of Government Policies
• Revitalisation of agriculture
• Further privatisation
• Further encouragement of RD
• Prosperous middle class 300m strong

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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
• 50 rural / 50 urban
• Indian are hungry for information
• Source World Business 26.2.2006

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The Medical Tourism Advantage

• High quality healthcare
• Patients from developed developing countries
• Growing Privatisation
• International standards
• Low Costs
• 
  Thailand India
• - Open heart
  14250 4400
• - Hysterectomy
  2012 571
• - Knee surgery
  7000 4500
• Better access through airports likely

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The Global Generic Pharma companies
Annual Sales (US Millions)
Source Company /Financial reports
presentations
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Chindia share of all API filings

• 
  
• 1999
  13
• 2000
  17
• 2001
  20
• 2002
  30
• 2003
  35
• 2004
  40
• Source Citigroup
• DMF Drug Master Files

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The Global Generic Market

• b 2004
  2009
• USA 15
  27
• W Europe 9
  14
• Japan 3
  4
• Rest of America 6
  9
• ROW 25
  40
• Total 58
  94
• Source Frost Sullivan

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The Generic Pharma Landscape
Fundamental drivers of growth
High healthcare costs
Total Healthcare Spending, of GDP
Source World Bank, DB Global Pharma Report Aug
2005, OECD Health Data 2005 (1) 2002, UBS
European Pharma Report, Sep 2005
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The Generic Pharma Landscape
Fundamental drivers of growth
Demographics
Estimated of regional population over 60
Source World Bank, DB Global Pharma Report Aug
2005, OECD Health Data 2005 (1) 2002, UBS
European Pharma Report, Sep 2005
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The Generic Pharma Landscape
Fundamental drivers of growth
Patent Expiries
Bn
Revenues
Patent expiry, 2006 - 10
Source Global Generic Drug Stocks Citigroup
Smith Barney, September 2004, IMS Health MIDAS
, MAT June 2005
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The Generic Pharma Landscape
Fundamental drivers of growth
Growth Constant
Generics
13
23
8
11
38
8
9
31
20
19
36
20
20
36
16
30
10
7
-2
2
2
13
8
5
20
4
2
Share (Volume)
Share (Value)
Source Global Generic Drug Stocks Citigroup
Smith Barney, September 2004, IMS Health MIDAS
, MAT June 2005
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Ranbaxy Strategic Direction

• Growth through
• - Organic
• - Inorganic

2012
US 5 Bn
2007
US 2 Bn
2004

• Amongst the Top 5
• generic Companies

US 1 Bn

• Significant income
• from proprietary products

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Competitive Advantages
Aggressive Home Market
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Competitive Advantages
Cost of Manufacture
Active Pharmaceuticals Facility, Mohali
Dosage Forms Facility, Paonta Sahib

• Highest number of FDA approved plants outside
  the US

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Competitive Advantages
Cost of Innovation
RD I
RD II
RD III
RD IV
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Potential Downsides
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Potential downside Asian Flu
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Potential downside Oil prices
Source BLS, ELA, The Conference Board
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Potential downside - Infrastructure
Source FT
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Potential downside Counterfeit products

• 
  
• 
  

• 
  
• Origin of fake products
• seized in EU in 2004
• Rank
• China
• Thailand
• Hong Kong
• Turkey
• USA
• Source FT

• 
  
• Countries where fake
• pharma products seized in
• 2005
• Rank
• Russia
• China
• South Korea
• Peru
• Columbia
• Source PSI

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Summary

• 
  
• Asia economic strength is returning
• Many advantages for India
• Some downsides
• The feeling in India a turning point has
  been
• reached and passed

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We have all grown up learning the story of the
unfinished voyage of Christopher Columbus
setting sail to reach India, he discovered
America. I now invite the people of America to
complete the voyage of that great explorer
Manmohan Singh Prime Minister of India July
2005.
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Thank You