The New Economic Landscape

Brian W TempestCEO & Managing Director

Ranbaxy Laboratories Limited, India

The Pharmaceutical Industry in the 21st Century :

Is India Challenging the R&D Business Model?

Chatham House, London, January 2005

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Gross Saving as % GDP

5

10

15

20

25

30

35

40

45

50

1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002

India China

Source: CSO, China National Bureau of Statistics, Morgan Stanley Research

The New Asia

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-

10,000

20,000

30,000

40,000

50,000

China US India Europe Brazil Japan Russia

GD

P U

S$

Bn

-

10,000

20,000

30,000

40,000

50,000

China US India Europe Brazil Japan Russia

GD

P U

S$

Bn

Largest Economies in 2050

Source: Global Economics Paper No:118 by Goldman Sachs 14-Oct-04

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0

200

400

600

800

1000

1200

1400

1600

2005 2015 2025 2035 2045

China India

0

200

400

600

800

1000

1200

1400

1600

2005 2015 2025 2035 2045

China India

Source: Global Economics Paper No:118 by Goldman Sachs 14-Oct-04

Number, millions

A Dramatic Rise in China and India’s Middle Classes

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% YoY

0

2

4

6

8

10

12

1997 1998 1999 2000 2001 2002 2003 2004

Source: Central Statistical Organization of India (CSO), Morgan Stanley Research

Indian GDP Growth

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Advantage India

• # of Co’s listed on the BSE second only to NYSE

• 4 out of 10 silicon valley startups run by Indians

• 2nd largest pool of scientists & engineers in the world

• 220 out of the Fortune 500 Co’s outsource IT work here

• ~ 15% of scientists in Big Pharma are of Indian origin

Source : CLSA India Paradox Report, 2003

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The Chrysler Example

For each mid size car Daimler Chrysler AG builds at one of

its plants, the Company pays $1,300 to cover employee

healthcare costs, more than twice the cost of the sheet

metal in the vehicle *

Source : IMS presentation at the IGPA Conference in Prague , June 2004.

(Covers both present and retired employee’s with family)

By Kirsten DowneyWashington Post Staff WriterSaturday, March 6, 2004 Pg E01

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Cost of Health

• Cost of non pharma healthcare

• High cost innovative medicines

• Across USA, EU & Japan

60 64 68 72 76 80 84 88 92 96 '002%

4%

6%

8%

10%

12%

14%

Source: Deutsche Bank and SSB Research, 2002 , OECD Health Data 2003 3rd Ed.

USA

France

UK

Spain

Germany

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Healthcare Expenditure of select countries (%

to GDP)

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Cost of Health and Age

Source: Deutsche Bank Research, July 2002,OECD Health Data 2003 3rd Ed.

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Issues facing Big Pharma

• Increasing R&D costs

• Product withdrawals e.g. Vioxx

• Re-importation of prescription drugs

• Drug shortages in hospitals in USA

• Pressure on earnings

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India Competitive Advantages

1. Aggressive Home Market

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India Competitive Advantages

2. Cost of Manufacture

Active Pharmaceuticals Facility, Mohali Dosage Forms Facility, Paonta Sahib

• Highest # of FDA approved plants outside the US

* Drug Master File

• 1/3rd of all DMF* filings with the FDA

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India Competitive Advantages

3. Cost of Innovation

• India’s inherent strength in

Chemistry

Mathematics

Ranbaxy R & D Center – I Ranbaxy R & D Center – II

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The Productivity Advantage

India USA India USA

1 chemist FTE 1 chemist FTE 1 chemist FTE 1 chemist FTE

70 h/week 50 h/week 70 h/week 50 h/week

$ 800 monthly $ 12,000 monthly $ 800 monthly $ 12,000 monthly

Better education x 1,3Better education x 1,3

Longer working time x 1,3Longer working time x 1,3

Lower cost x 20Lower cost x 20

Source: IPHMR Conference, New Delhi August 2004Source: IPHMR Conference, New Delhi August 2004

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UnileverEmerson Electric

Tyco ElectronicsEli Lilly

Texas InstrumentsDaimler Chrysler

QualcommDuPont

MonsantoD-Link

McDonald’sDelphi

IntelDanisco Cultor

HoneywellCummins

HPColgate Palmolive

General MotorsBell Labs

GEAkzo Nobel

Source: CLSA Emerging Markets

MNC owned R&D centers in India

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Ranbaxy R&D Organization

115,000 MSc Scientists & 12,000 PhD's in Chemistry every year

> 1000 Scientistsin R&D

22 from US / EU in 2003

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India Geographic Footprint

USA43%

RoW19%

BRIC 29%

Europe9%

USA14%

RoW34%

BRIC 46%

Europe6%

2003 - US$ 972 Mn

USA~50%

RoW10%

BRIC 20%

Europe~20%

2000 - US$ 475 Mn

2007 - US$ 2 Bn*

USA36%

RoW22%

BRIC 26%

Europe16%

2004 - US$ 1178 Mn

* Estimated

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Global Human Bridge

Leading to shareholder wealth

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Innovation - Our own example

BD / TD

product

with no

OD

solution

FDA

APPROVAL

USA

product

prescriptions

begin

Licensing

out

to patent

holder

Full

product

development

in the

USA

Discovery

& patenting

by Indian

Pharma

company

4-5 Years

Royalty

to

Indian

Pharma

company

Product

gains

~ 15%

market

share

Cipro XR

Thank You

Brian W TempestCEO & Managing Director

Ranbaxy Laboratories Limited, India

The Pharmaceutical Industry in the 21st Century : Is India Challenging the R&D Business Model

Chatham House, London, January 2005