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November 02, 2012

Dabur Research Foundation 22, Site IV, Sahibabad Ghaziabad – 201010 Uttar Pradesh, INDIA

www.daburresearch.in

Manu Jaggi, Ph.D Vice President

Indian Pharmaceutical Industry: Overcoming Hurdles And Opening Up New Opportunities

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Global Economy

• New world order has emerged

– Advanced economies slowing down

– Emerging economies driving growth

• Emerging Economies:

– “Developing countries undergoing rapid growth & industrialization”

– Strong economic fundamentals, domestic consumption demand

– Lesser impact of current economic slowdown, early signs of recovery

• Brazil, Russia, India, China (BRIC)

– All 4 projected to be amongst largest 6 economies by 2040

– China will overtake US by 2035 (Rank 1)

– India will overtake US by 2050 (Rank 2)

GDP Growth % 2007 2008 2009 2010

Advanced economies 2.7 0.8 -3.8 0.6

India 9.0 6.7 5.4 6.5

China 13.0 9.0 7.5 8.5

GDP Base Growth % 2006-50

Brazil 3.7

Russia 3.0

India 6.0

China 4.8

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Global Pharmaceutical Markets

• Global Pharma growth slowing down

– Reducing R&D productivity, Fewer blockbusters, Increasing market genericization

• Global Market Growth: 4.8% in 2008 (slowest growth rate of the decade)

– U.S & Europe (73% of global market) achieved growths of 1.4% & 5.8% respectively

• Expected to grow at 3% in 2012 (Impact of economic slowdown)

– US will further decline by 1–2% in 2013

• CAGR: 2009-13: 4-5% (Economic recovery, large patent expirations)

0100200300400500600700800900

2001 2002 2003 2004 2005 2006 2007 20080%2%

4%6%8%10%

12%14%

Market Size ($ Bn) Growth (%)

Global Pharma Market

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Top Emerging Pharmaceutical Markets

Russia, 7

S. Korea, 9

India, 9

Mexico, 11

Turkey, 11Brazil, 19

China, 25

Russia, 13

S. Korea, 15

India, 16

Mexico, 15

Turkey, 20Brazil, 27

China, 68

2008: $ 91 Bn 2013: $ 174 Bn

• Mature Markets: US, Canada, Japan, Top 5 European Countries – CAGR: 2008-13: 1-2% (US: zero to negative growth)

• Top Emerging Markets: BRIC; Mexico, Turkey (MT); South Korea – 12% Market Share, 51% contribution to global growth in 2012 (up from 16% in 2006)

– CAGR for 2009-13: 13-14%, 40% contribution to global growth

• China: 3rd largest by 2013 (currently 6th), Brazil 8th largest by 2013 (currently 10th)

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Health Care in India

Much to be proud of…

India – with a population of 1.2 billion – is currently the 12th largest economy India has made tremendous gains in critical areas such as malaria, smallpox, polio

Life expectancy has improved significantly in last 40 years

Annual healthcare expenditures are growing at 15% per annum, about $50 billion

in 2012 from a low base

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The Indian Pharmaceutical Industry

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Indian Pharma Market is More Attractive Than Ever Before

• Infrastructure: Government spending on healthcare aimed to increase to 3-4% of GDP

• Pricing: Providing higher flexibility to companies to expand the market

• Patentability: Broadening of the current narrow definition of patentability

• Data Protection & Exclusivity: Rewarding innovation

• Phase I Clinical Trials: Approval to ensure realization of full value chain

• PPPs: Collaboration between industry & government on healthcare issues

• Partnerships: Increase in partnerships between Indian cos. & MNCs

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India: CRAMS - Custom Manufacturing

• Global Pharma Mfg. Outsourcing: $ 33 Bn

– Outsourcing accounts for 24% of pharma mfg. spend, CAGR: 13% (2007-10)

• India market: $ 1 Bn, 43% growth

– Estimated to cross $ 3 Bn in 2013

– Share of global outsourcing mkt: 2.8% (2007), 5.5% (2010)

– Dominated by API/Intermediate outsourcing (64%)

• Advantage India:

– Mfg costs: 65% lower than in US, 50% lower than in Europe

– Cost of installation of US FDA approved plant in India is 30% lower than in US

– Trained chemists & pharmacists is 6 times of US’, at less than 1/5th cost

– Export growth of 24% ($ 3.2 Bn in 2004 to $ 7.4 Bn in 2008)

• Partnerships in Mfg: GSK & Dr. Reddy’s; Pfizer & Aurobindo, Claris

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Drug Discovery

Early Preclinical

Advanced Preclinical

API Synthesis & Form. Dev

Drug Manufacture Phase I Phase II Phase III Clinical

Support

DRUG DISCOVERY & PRECLINICAL CRAM CLINICAL

Biochemical & Cell based screens

Target based screens

Signal transduction

Molecular modeling

Fermentation Tech.

Bioinformatics

Chemistry • Medicinal • Combichem • Computational • Natural Product • Analytical

Efficacy • Oncology • Diabetes • Pain • Inflammation • CVS • Dermatology • Urology • Respiratory

ADME

Bioanalytical

Characterization

Pharmacokinetics

Toxicology

Special Toxicity

Safety Pharmacology

Process Development

Scale up

Characterization

GMP Synthesis

GMP • Manufacture • Solid oral • Injectible

Bioavailability

Bioequivalence

Tissue banking

• Data Management Plan • Database Design • CRF Management • Double Data Entry • Central Lab Data Import • Medical / AE Coding • Query Management • Manual Data Quality Control

Key Activities

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Drug Discovery

Early Preclinical

Advanced Preclinical

API Synthesis & Form. Dev

Drug Manufacture Phase I Phase II Phase III Clinical

Support

DRUG DISCOVERY & PRECLINICAL CRAM CLINICAL

Key Players

• Jubilant (Biosys)

• Reliance

• Advinus

• GVK

• Aurigene

• TCG (Chembiotek)

• Dabur

• Jubilant (Biosys)

• Reliance

• Advinus

• GVK

• RCC

• Aurigene

• Biocon (Syngene)

• Dabur

• Jubilant (Biosys)

• Reliance

• Advinus

• GVK

• RCC

• Intox

• Ind It. Tox

• JRF

• Dabur

• Jubilant

• Reliance

• Advinus

• GVK

• Biocon

• Suven

• Accutest

• Jubilant

• Reliance

• Advinus

• Biocon

• Jubilant (Clinsys)

• Reliance

• GVK

• Lambda Therapeutics

• Veeda

• Siro Clinpharm

• Biocon (Clinigene)

• TCG (Clininvent)

• Jubilant

• Reliance

• GVK

• Lambda

• Veeda

• Siro Clinpharm

• Biocon

(Clinigene)

• Suven

• Lotus Labs

• Accutest

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Current status

Dr. Reddy’s Glenmark Ranbaxy Cadila Dabur Torrent Sun Pharma Biocon Wockhardt Nicholas Piramal

Internal Programs Aurigene Advinus GVK Lifesciences Dr. Reddy’s Discman Dabur Nicholas Jubilant Shasun Suven Siro Clinpharm Asian Clinical Quintiles Lambda

Services Model Drug Discovery AstraZeneca Altana Clinical trials & data management Pfizer Eli Lilly Novartis GSK

MNC Outposts GSK – Ranbaxy Eli Lilly – Jubilant, Suven Zydus – BI, Onconova, Dr. Reddy’s – Rheoscience,

Argenta, ClinTec Aurigene – Merck / Serono,

Forest Labs, Rheoscience Merck & Co. – Advinus

Therapeutics AstraZeneca – Torrent Wyeth – GVK Nicholas – Morvus, Connexios,

Biosynth Syngene - Innate

Partnerships

Source: Company news, industry reports

Business Models in India

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What makes India a hot destination

• Capabilities to alleviate the bottlenecks in the R&D pipeline

• Reducing R&D costs

• Accelerating clinical trials

• Proven prowess in chemistry and data management

• Emerging skills in preclinical development

• IPR protection since 2005

• Speed to overcome drying pipeline Source: BCG | Focus, Harnessing the Power of India – May 2006

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Opportunities in different therapeutic areas

Company Therapeutic Focus

Dr. Reddy’s Metabolic Disorders, Cardiovascular

Glenmark Metabolic Disorders, Respiratory, Pain Management

Ranbaxy Metabolic Disorders, Inflammation/Respiratory, Anti-Infectives, Urology

Cadila Metabolic Disorders, Inflammation

Torrent Metabolic Disorders, Cardiovascular

Wockhardt Sepsis & Anti-Infectives

Sun Pharma Asthma/COPD, CNS, Allergy

Nicholas Piramal Metabolic Disorders, Inflammation, Anti-Infectives, Oncology

Biocon Metabolic Disorders, Inflammation, Cardiovascular, Oncology

Dabur Oncology, Metabolic Disorders, Inflammation, Dermatology, Hair Biology

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Expansion opportunities & strategy

Traditional APIs & Dosage forms

Cytotoxic, steroids, hormone APIs & Dosage

forms

Biotech based APIs & Dosage forms

Pre

clin

ical

se

rvic

es

Clin

ical

ser

vice

s M

anu

fact

uri

ng

se

rvic

es

Clinical Research Organizations

Contract Manufacturing Organizations

Drug Discovery Contract Research

Opportunity area

Opportunity area

Opportunity area Opportunity area

Opportunity area

Opportunity area

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MNCs are leveraging the India advantage

• Quintiles Transnational, a leading global CRO with revenues touching $2 billion, has completed 10 years in India.

• Other global CROs too started their operations in a country where economy is booming and has plenty of resources to do business in the CRO space.

• Some others like Parexel, Covance and INC Research to be on safer side, took the alliance partnership approach.

• Depending on the risk and confidence level, these CROs opted different routes such as acquisition, alliance and direct presence to enter the Indian the market.

• CROs like PPD, Kendle, PharmaNet, Omnicare, Chiltern, ClinTec, RCC and Simbec opted for direct entry route

• PRA International and ICON decided to adopt the acquisition model.

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The most tractable targets have perhaps been exploited Higher risk compounds are now in portfolios The more difficult (or rare) clinical conditions are now being addressed, resulting in spiraling costs The expectations from some of the newer technologies have not been met Incorrect applications of some of the technologies Regulatory authorities are making approval of newer targeted agents more stringent Unlike the blockbusters (primarily the cytotoxics), the newly emerging targeted drugs need patient stratification to enter niche markets Growing realization that single target – single drug paradigm is an oversimplification… Biology is still more complex

With the closing of the era of blockbuster molecules, taking targeted molecules through clinical development is going to get increasingly technology dependent & cost intensive

Reasons for Declining Productivity in NCE programs …and what have we learnt

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OVERCOMING THE

CHALLENGES

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Managing Risk in Innovation

• Innovation is expensive and risky – Even in India and in the best of circumstances

• Most Indian companies are too small to carry this risk

individually

• Can Indian companies form JV so that risk is bearable? – The government is helping (not interfering)?

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Support of National Labs

• Indian national labs have significant lab infrastructure – Better managed now than before – Becoming accessible to industries

• Tremendous scope for PPP • Government opening up to the idea of ‘accountable access’ to

national labs

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Industry Associations

• Industry associations setting up shared laboratory infrastructure

• CII, ABLE, ICMR, DCGI etc working with government to

develop a credible regulatory infrastructure

• DBT has recently started providing grants to biotech companies

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How to get Talent back?

• Lack of good options in US or EU in current scenario

• ‘Parity’ compensation

• Professional work culture

• Commitment of management

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VC Funding

• Financial crises has forced life-sciences VCs to look for investment opportunities in India – Small-sized funds, but enough to get going – Network of partnerships

• Financial crises has also lowered valuation expectations of Funds – Encouraging investment – Growth rates picking up

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Role of Government

• Central Government – Policy reforms – Lab infrastructure for industry – Strengthening industry orientation of national labs

• State governments – Facilitation of business establishment – Duty exemptions – Venture funds for incubating start-ups

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Recent Initiatives of CII

• Driving force for the growth of life science industry in India through its National committees on

pharmaceuticals and biotechnology

• Drug pricing policy : Key role played by CII towards moving away from a cost based model

to market based model

• Section 3(d) in the Indian Patents Act : yardstick for determining non-obviousness of an

invention

• “Compulsory Licensing” against a cancer drug drew huge criticism all around the world : CII

proposed a transparent process to ensure that CL is invoked for right candidate and for right reason

• Policy Documents to streamline regulatory norms • Biopharmaceuticals

• Agri-biotechnology products

• Clinical Trials

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Business Models

• Fee for service

• FTE

• Licensing

• Collaborative Research

• Risk sharing

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Concluding Remarks

• The financial crises has crystallized long-term changes in the industry

• Significant opportunities in innovation, partnerships, and

acquisitions • Challenges in managing financial risks and technical talent • Collaboration between countries, companies, industry

associations, and governments is the need of the hour

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Our collaboration in Australia

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About Dabur

• Established in 1884, Dabur India Ltd is among the oldest and largest healthcare company in India

• Has over 5000 employees working in more than 20 countries

• Market Cap of over 4 bn USD, DIL recently achieved sales of 1 bn USD

• More than 600 herbal products in market

• 17 ultra-modern manufacturing units spread around the globe

• Products marketed in over 60 countries

• More than 5000 distributors and over 2.8 million retail outlets all over India

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M R T Package

Screening

Module for

Accelerating

Research in

Therapeutics

A comprehensive package from Discovery to Pre-IND selection

in vitro screens Efficacy Models ADMET Studies Lead Selection Formulation Dev Safety

S A

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Other successful collaborations

• Oxford University, UK

• New York State University, USA

• Three among top 10 Pharma Companies in the world

• Among the largest Finnish Pharmaceutical Company

• 10-12 other collaborations in APAC

• Collaborations in Scandinavia – Denmark, Sweden, Finland

• Major Pharma Companies in India

U.K. U.S.

Germany

Finland

Korea

Thailand

China

India Hong Kong

Australia

Taiwan

Egypt

Pakistan

Israel Japan

Denmark

France

Switzerland

Russia

Malaysia

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Thanks for listening… …and hoping to do business with you in India