Mak Jawadekar, Ph.D. Director, AMP, WWPM Pfizer Global R & D, Groton/New London Labs CHLA Presentation, Montreal, Ca

1. The East is the New West: Charting the India Frontiers Mak Jawadekar, Ph.D. Director, AMP, WWPM Pfizer Global R & D, Groton/New London Labs CHLA Presentation, Montreal, Canada September 21st, 2006

2. Singapore Indochina Vietnam, Laos Cambodia, Myanmar China Taiwan Thailand Hong Kong S. Korea Indonesia Malaysia Pakistan Philippines India Asia is a diverse region for Pfizer with operations in 18 Countries Australia Japan New Zealand

3. Today’s Focus: Charting India Frontiers • India : Growth Rate Statistics • Drivers for Growth in Outsourcing & New Markets in India for the Western Bio/Pharma Industry • Anticipated Growth Drivers for M & A activity • Wall Street’s focus on corporate ‘bottom line’ and its R & D Productivity • Ever Changing Global Pharma Industry Landscape • Factors for further economic equilibration • Recent Changes in India’s IPR Regulations

4. My personal networkingPassion for India • As an Immigrant, Naturalized US Citizen,my family background • Key-Note address: Indian Pharmaceutical Congress, New Delhi December 2001 • Roundtable with the President of India, Dr. Abdul Kalam: 2003 • Outsourcing Experience within the US 2000-2004/SRI Initiative • Getting involved with USIBA and USINPAC/ Meetings In DC 2004

5. My Personal NetworkingPassion for Asia continues… • Meeting with President George Bush: June 2005 • Invitation to the White House: ‘Diwali Celebration’: Nov 2005 • President Bush’s Trade Mission to India – March 2006 • Looking at Pfizer’s ‘Capturing Global Advantage Initiative’ • Contributions to Pfizer, the US and to the motherland • Ability to participate and help in the future growth

6. President George W. Bush’s Ongoing Agenda • Grow Bilateral Trade • More outsourcing • Enhance US Business efficiencies • Further Growth in Science & Technology Exchange • Economic Partnerships

7. Growth Rates Highest in Asia: GDP Growth – 2005 Annual Percent Change: Source: IMF WEOD %

8. LABOR COSTS AROUND THE WORLD Hourly Compensation Costs__________________________________________________________ $US

9. Business Activity in India • Majority of outsourcing work is labor-intensive manufacturing • Growth in manufacturing leading to surge in commodity imports • Most outsourcing is comprised of business processing services (e.g., IT services, call centers, back office etc.) • Higher value-added business is still minor component

10. Growing India:

11. Today’s Modern India! • Growth spurred by the IT sector, translating into Life-Sciences • Many new Pharma-Bio-tech Parks are on the horizon • Growth in Mumbai, Pune, Bangalore, Hyderabad areas for the Life Sciences sector • Huge rise on the third party CRO type businesses.

12. Themes – India Ready for Take Off? • Reforms have produced a stable macro environment for sustaining strong growth • Huge labor stock and rising • Growth is expected to accelerate to 6.5%, driven largely by the services sector • Acceleration in manufacturing is critical for achieving 8% growth target • Relatively low savings and slow pace of infrastructure development could be a constraint

13. Population Aged 25-59 Population Aged 15-64 India: Potential Working Population Trend MM

14. India: Low-Cost Service Provider Average Annual IT Services Employee Cost $US U.S. Canada Ireland Israel South Africa China Malaysia Philippines Czech Republic Russia India

15. India Pharma Expertise • Chemical Process Expertise – Indian companies have built development skills over the last three decades to research and manufacture complex drugs • Cost advantages • Fixed asset costs – The cost of building and staffing an FDA approved facility in India is 20-25% of the cost of setting up a comparable facility in the US or Europe • Variable costs – Cheap labor and lower development costs • Clinical study costs – Due to the large population of India, patients for various tests are easily available at up to 10% of the cost of US patients

16. Evolving Indian Business Model • Targeting regulated markets • Indian companies looking to US and Europe for growth and at same time attempting to move up product value chain to leverage internal competencies and capture greater economics • Servicing/outsourcing • Some Indian companies have positioned themselves to service large-cap pharma by focusing on contract manufacturing for already existing drugs or research candidates

17. India -Statistics India • Population: 1.08 billion (16% of world total) • GDP growth rate: 8% • WEF growth competitiveness ranking: 56 • Trade balance (% of GDP): -2% • Foreign reserves: US$ 222 billion (November 2005)

18. India –More Fast facts India • Area: 3.3 Million Sq.Km (USA 9.63 Million Sq.Km) • GDP: $3.68 trillion (USA 12.37 trillion) • GDP growth rate: 8% (USA about 4 %) • Pro capita GDP: $3400, (US$41,800) • World’s Largest Democracy • Pharma Sales $8 Billion • Global Pharma Volume Ranking :4th in the world • Share of Global Pharma Volume Market 8%

19. The number of FDA inspected Indian fine chemicals companies has greatly expanded over the past few years.(Source: Arthur D Little) An increasing number of Indian companies have been FDA inspected

20. GlobalDrivers for India revolve around various factors Lower costs Growing Capacity Higher flexibility/Speed Market size/ Trade Potential Equivalent GXP Quality/ Capability

21. Advantages of IPR/TRIPS • Strong intellectual property rights support innovation – new medicines, improved treatments; • Implementing TRIPS protects consumers against counterfeits, thus saving lives and health; • TRIPS gives the basis of company access programs – the proven solution for improving access; • TRIPS is a delicate balance of flexibilties and responsibilities; • Ministers agreed in Doha Declaration that public health needs can be met in the TRIPS framework.

22. Total Pharmaceutical R&D Spending: Canada 1000 $ millions 1000 900 900 825 800 700 600 500 412 400 300 200 103 57 28 100 10.4 18 0 1967 1972 1977 1982 1987 1992 1997 1998 2001 1984-1987 - as compiled by Peat Marwick, 1988-1995 - as compiled by the PMPRB,1997, 1998 as compiled by Deloitte and Touche; 2001 according to SCRIP, July 17 2002

23. Innovation & IPR Recognition • IPRs clearly stimulate innovation and growth in pharmaceuticals. • The real benefit of strengthened IPRs will go to domestic innovators, helping developing countries in their development policies. • Key developing countries can take their rightful place as global leaders in pharmaceutical innovation, which will benefit patients in developing countries and around the world.

24. Indian Pharma & Where it is Going! • Indian Pharma is expected to be one of the key global growth players into the US and Europe. • Indian firms have accounted for 35% of the DMF filings during 2004 with the USFDA. API integration factor • Expansion in Semi Regulated Markets: With better margins in Russia, Brazil , and eastern European countries. • Polarization of Generic Industry: Post Ivax acquisition, Teva is the market leader ($7B), followed by Sandoz ($3B) • Pharmaceutical(fragmented) Distribution: A next wave of Reform? • Growth in Biotech/Vaccines: High institutional sales, Distinct target markets, large Phrama’s reluctance to develop for diseases in developing countries • Value Driven Growth Vs. Volume driven Growth

25. Recent past & Current M & A Activity The value of total sector (M& A) in India has more than quadrupled to a record of $ 18.3 Billions in 2005. A total of 872 Indian companies merged or were acquired in 2005 compared to 565 worth $4.5 B in the same period in 2004. According to AT Kearney’s 2005 survey, India is the 2nd most favorite global destination • Indian with International Companies: Zydus Cadila-Alpharma (Fr), Sun-Caraco(US), Ranbaxy-RPGAventis (Fr),Glenmark-Lab Klinger(Brazil), Dr. Reddy’s-Trigenesis(US), Jubliant Organosys-PSI (Belgium) • Global Generics: Teva-Ivax, Teva-Sicor(US), Sandoz-Sabex(Canada),Meda-Viatris(Germany), Matrix-DocPharma (Belgium), Actavis-Amide (US) • In the News: Wockhardt trying to do a deal in the US • Jubliant Organsys trying to acquire in the US

26. Expect much more M & A activity in the next 5 years !! • 2006-2007 will continue to see more M & A activity because of the changing Pharma Industry and pressures on Margins & Pricing • Indian Parliamentary ordinance amending the patents Act, to encourage International MNCs for greater presence and increase market share. • Expect more M & A with Biotech as well with growth in virtual, small companies looking to do JVs, Partnerships, collaborations, alliances and other types of tie-ups with bigger companies.

27. India: Pro-factors for the Western Big Pharma to consider • India: Emerging economic power for Market growth • Favorable WTO/IPR environment • Fair Legal System • Access to talented Scientific work force • Pharmaceutical Mfg facilities with GXP • Most favorable cost advantages with economies of scale • Rapidly establishing reforms/ changing infrastructure

28. Asia Strategy (Under Development): Factors under consideration: • Outsource for more capacity, lower costs of R & D • Access to the emerging Growth Market economies • Corporate overarching strategies • TA Dynamics • Market needs • Regulatory environment • S & T /Innovation • Business Cycle dynamics • IPR/Data Protection with all the cautionary measures

29. Key Drivers for growth for the global Pharma/Biotech/Generic Pharmaceutical Industry: Crystal ball • Growth of Global Pharma Market Volumes due to India/China • Enhancing Productivity in Pharma R & D • Focus on Performance and adapting to changing environment • Global Outreach & capturing advantage due to the global outreach • Geographic Expansion through M & A / Economies of scale • Expansion of capabilities in DDS/Formulations • Vertical Integration into API/ USFDA approved sites • Exploration of Specialty Pharma options • Global Metamorphosis of Speed/Quality/Cost paradigm

30. Acknowledgements • Pfizer PGRD ‘CGA’ Team • Arthur D. Little :Data Output • Morgan Stanley (V. Pandit) Financial Data • Dr. E. Noehrenberg, IFPMA • US Congressional India Caucus Staff • White House Support Staff • Many Pfizer colleagues