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The Role of Generics in Reducing the Cost of Healthcare

The Role of Generics in Reducing the Cost of Healthcare . Dr. Brian W Tempest Chief Mentor & Executive Vice Chairman of the Board Ranbaxy Laboratories Limited, Delhi, India Berlin, Germany, Wednesday 26 th September 2007.

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The Role of Generics in Reducing the Cost of Healthcare

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  1. The Role of Generics inReducing the Cost of Healthcare Dr. Brian W Tempest Chief Mentor & Executive Vice Chairman of the Board Ranbaxy Laboratories Limited, Delhi, India Berlin, Germany, Wednesday 26th September 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. Asia on the Rise Source – FT

  5. Reducing the Cost of Healthcare 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. Median Age in Asia Years 2000 2025 2050 Sources: Rand Corporation

  8. 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

  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 – Kor, Chi, Ind, Sin, 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 Education Advantage

  15. The Pharma Plants Advantage Active Pharmaceuticals Facility, Mohali Dosage Forms Facility, Paonta Sahib

  16. The Pharma R&D Advantage • Electronic Data Capture • An Indian specialty • 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 • PCT Filers from Developing Countires 2006 • Huawei – China 6. ZTE – China • LG – Korea 7. STR – Singapore • Samsung – Korea 8. Ranbaxy – India • LG Chem – Korea 9. CSIR – India • Elec Telecom – Korea 10. NHN – Korea • Source: WIPRO 2001 185 2000 170 146 1999 86 49 32 24 Ranbaxy’s Patent Filings

  17. The Pharma 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’ Speed Advantage 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

  18. 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)

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

  20. Top 5 Global Pharmaceutical Markets 2020 Sources: Goldman Sachs 2007

  21. Generics – API’s USA DMF filings by India % Share of USA DMF filings IndiaChina 2004 27% 9% 2005 37% 10% 2006 44% 14% Q1’07 48% 17% Source: US FDA / J P Morgan, 2 May 2007 IndiaChina 2004 187 48 2005 252 87 2006 357 128 Source: US FDA / J P Morgan, 6th August 2006 Source: US FDA, Credit Suisse

  22. Generics - 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 but expected in 2008 ANDA Filings in USA by Indian Companies 250 144 64 46 24

  23. Discovery – Local vendors available in India to Support Discovery Research 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

  24. Discovery – Local vendors available in India to Support Clinical Research Contract Research Organisations 30 Bio-equivalence & Bio-analytical 15 Data Management & enabled services 14 Site Management Organisations 5 Central Laboratories 8 Storage & Distribution 5 Centralised ECG Services 2 Clinical Research Training 8 Source – Pharmaceutical Technology Asia Pacific, March 2007

  25. Patient Recruitment

  26. The Tempest Crystal Ball • India will continue to be a Key Driver in the Global Generic Industry • Competition is rising – Post TRIPs Indian companies will evolve • Discovery companies will continue to be attracted to India for CT, EDC, • MO. China will be perceived to be stronger in biology/ toxicology • IP changes in US & India will slowly favor Generics • Alliances between Western Biotech and Asians companies will expand. • M&A PE deals will grow • How to use Asia in Germany will become the key opportunity

  27. Perceptions of India “The Indian System looks ramshackle and improvised. But at its best it is capable of brilliance” “When we say the Silicon Valley is built on ICs we don’t mean integrated circuits – we mean Indians & Chinese” “The UK needs to wake up to what India is becoming” Source: DEMOS report – January 2007

  28. The Global challenge from Asia

  29. The race to prosperity in Asia

  30. Investment in Asia is rising

  31. Key Challenges to the Scenario of Asian Generic Pharma Companies becoming a major force in Germany

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

  33. Potential Challenge – Oil prices Source – BP • A war against Iran could drive oil > $200 a barrel - ‘Times’ 22nd June 2006 • India is expected to import 85% of crude oil by 2012 from 70% today Source – Assocham

  34. Potential Challenge – Climate Change CO2 emission - % of World total in 1990-2000 USA 23% EU 25 17% China 14% Russia 7% Japan 5% India 4% – source: WRI, EIA

  35. 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

  36. Corruption Perception Index RankCountry 1 Finland, Iceland, NZ 5 Singapore 11 Austria, Luxemburg, UK 16 Germany 20 Belgium, Chile, USA 42 Mauritius, S.Korea 51 South Africa, Tunisia 70 Brazil, China, India, Mexico 121 Philippines, Russia 163 Haiti Sources: Transparency International 2006, selected countries only

  37. Potential Challenge – over the border

  38. Potential Challenge - Currency Volatility

  39. Summary Asia economic strength is returning to levels seen in the past Many advantages for India in reducing the cost of healthcare India is a global strategic asset for developed markets India is a rich location for R&D alliances and CT outsourcing MNCs will dip in & out of India & China South East Asian economies will be driven by India & China Japan will continue to represent a huge share of global wealth “China & India represent the future of Asia and quite possibly the future for the global economy” – Steve Roach, Morgan Stanley

  40. Thank You

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