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The Indian Challenge in Asia

The Indian Challenge in Asia. Dr. Brian W Tempest Chief Mentor & Executive Vice Chairman of the Board Ranbaxy Laboratories Limited, Delhi, India Singapore – 28 th March 2007.

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The Indian Challenge in Asia

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  1. The Indian Challenge in Asia Dr. Brian W Tempest Chief Mentor & Executive Vice Chairman of the Board Ranbaxy Laboratories Limited, Delhi, India Singapore – 28th March 2007

  2. 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. Disclaimer

  3. Asia’s Share of the World GDP (at PPP in %) Year18701913 195019732001 China 17% 9% 5% 5% 12% India 12% 8% 4% 3% 5% Japan 2% 3% 3% 8% 7% Rest of Asia7%5%7%9%13% Total Asia38%25%19%25%37% Source – WEF - was 59% in 1820 with India 16%, China 33%

  4. Davos 2006 Source – FT

  5. 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

  6. The Ageing Advantage • Japan - by 2050 36% > 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

  7. 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

  8. 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”

  9. The R&D Investment Advantage Most attractive R&D 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

  10. 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

  11. 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% changeChemistry 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

  12. 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

  13. The Education Advantage Engineers/Science graduates p.a – India 0.7m, China 0.5m, EU 0.5m, USA 0.4m, Japan 0.3m

  14. 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

  15. The Potential for Improvement Advantage • Manufacturing growth versus China • Scope for improvement of Government Policies • GDP dynamics: 19902005 -Agriculture 31% 20% - Industry 28% 26% - Services 41% 54% • More privatization – public sector not so buoyant • Further encouragement of R&D for Pharmaceuticals

  16. The Clinical Advantage Cost Advantage China India Cost 40 16 Patients/site 250 500 Based on USA at 100 Index Source: BCG report ‘Looking Forward 2006’ Country USAIndia Sites 22 8 Subject 626 896 Source: Andy Lee Pfizer Global, head clinical study and data management.Business India, August 13, 2006 • Patients • Naïve untreated patients • HIV 50m • Diabetes 32m • HT 5m Medical Tourism Cardiac Surgery $000s USA 30 Singapore 20 Thailand 14 India 5-7 Source: Business world, 18th Dec’2006 “………..The Country’s World Class skills in Chemistry & IT and it’s large treatment naive patient population provides added allure”Boston Consultancy Group Harnessing the power of India 2006

  17. The M&A Future Advantage

  18. 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

  19. 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)

  20. India A Global Strategic Asset for developed World Market businesses

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

  22. The Competitive Advantage - Pharma • Clinical data management • An Indian speciality • 300 staff GSK • -2.2m clinical data sheets • -450 trials • -Error rate <0.01/100k • -No data security issues • Source: BCG report ‘Looking Eastward Sep’2006’ R&D hotbeds “China & India have become R&D hotbeds……….. MNCs already operate some 180 R&D centres in China and More than 100 in India” Source: BCG report ‘Looking Eastward Sep’2006’ 2005 2004 2001 2000 185 170 1999 146 86 49 24 32 R&D III Ranbaxy’s Patent Filings

  23. The Pharma Advantage – API’s USA DMF filings by India % Share of USA DMF filings IndiaChina 2004 27% 9% 2005 37% 10% Q1’06 44% 15% Q2’06 41% 16% Q3’06 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

  24. The Pharma Advantage - ANDAs - 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 ANDA Filings in USA by Indian Companies 144 64 46 24

  25. Global Market Trends for Generic Companies Source: UBS, Businessworld, 30th October 2006

  26. Global Market Trends – Discovery R&D Vendor AvailabilityIndiaChina Analog preparation 41 25 Combinatorial chemistry 37 7 Analytical chemistry 37 7 Structural chemistry 26 5 Assay development 26 2 Computer drug design 26 13 High throughput Screening 11 2 Bio informatics 13 7 Genetically modified animals 0 3 Basic molecular biology 13 25 Source – BCG, ‘Looking Eastwards, September 2006’ *Out of 90 vendors in October 2005

  27. The Tempest Crystal Ball • Post TRIPsnew products will dry up in India by 2008 • Under this pressure Indian companies will adopt different business models: • - Generics, Discovery, Services, M&A • 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 R&D sites and 30% of R&D 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 • India & China - and not India or China. This will also drive ASEAN market growth.

  28. Japan’s share of World Wealth Switzerland 1% Spain 1% Netherlands 2% Taiwan 1% Canada 2% Rest of World 10% Germany 4% Italy 4% France 5% USA 37% UK 6% Japan 27% Source: The World Distribution of Household Wealth

  29. Japan’s share of World Pharmaceuticals 1.5% 1.5% 2.0% 2.4% 3.3% 3.4% 4.9% 5.4% 12.0% 44.6% Top 15 countries = 85.9% of worldwide pharmaceutical market estimate 2003

  30. Japan’s GDP

  31. A race to prosperity

  32. Key Challenges

  33. Potential Challenge – Asian Flu* *50% of world chickens bred in Asia

  34. Potential challenge – Oil prices Source – BP • A war against Iran could drive oil > $200 a barrel - ‘Times’ 22nd June 2006 • BRIC countries consume 20% global oil Source – Outlook business June 2006

  35. Potential Challenge - Pollution India, China, USA – Refuse any mandatory CO2 emission caps India is 6th greatest energy consumer Ganges River is the World’s most polluted river – source: World Commission on water

  36. 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

  37. Summary Asia economic strength is returning to levels seen in the past Many advantages for India – R&D, Demographics, Education India as a global strategic asset for developed markets Some “Challenges” – infrastructure, pollution The current feeling in Indian Boardrooms is that a turning point has been reached, a tipping point has been passed and India’s time has arrived “China & India represent the future of Asia and quite possibly the future for the global economy” – Steve Roach, Morgan Stanley

  38. Thank You

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