Overview of Development, Manufacturing & Global Marketing from India Dr Brian W Tempest President – Pharmaceuticals New Delhi February 12, 2002

Once R&D discovers, Can the Indian Pharma Industry develop, manufacture & market around the world? R&D discovers

Global Pharmaceutical Industry  Global pharma market ~ $ 362 bn estimates  Top 10 companies have ~ 40 % market share  10 countries presently cover ~ 80% of global pharma market  Generics opportunities  ~ $45 bn in advanced markets by 2005  Government focus on affordable health care costs Blockbuster Patent Expirations (adjusted for patent extensions) in $ Bn

Source: IMS World Review 2000 Rank in USA(1) 2.Japan (2) 3.Germany (3) 4.France (4) 5.UK (5) 6.Italy (6) 7.Mexico (11)  8.China (7)  9.Brazil (8)  10.Canada (9)  11.Spain (10)  12.India (14)  (Rank in 2000) Total market CAGR ( ) = 5.3% US market CAGR ( ) = 12.4% Total market growth in 2000 = 6.9% US contribution ~ 55% ( $18.2 bn) $ 282 bn$ 362 bn World Pharma Markets

Source: IMS World Review 2000 US 31% Europe 19% Japan 11% Others 39% Generics Market in 2000 ~ USD 36 bn Emerging Markets in 2000 ~ USD 30 bn (Latin America, China, India, Russia) World Generics and Emerging Markets

Indian Pharma Market Size ~ $ 4 Bn in % of Global Volume, 1% of global value Rank 5th in volume, 14th in value terms Number of drugs under price control – % of market – % –2000?? Exports of $ 1.7 b, Imports of $ 0.7b Prescription driven, Branded Generic market Modern Medicine reach 30% of population

Manufacturing capabilities Employs approx mn people Has manufacturing units large scale and 7100 in small scale sector Total production stands at $ 4.2 bn. 95 % Formulations manufactured indigenously 90% of bulk drug requirement met indigenously RANBAXY

Production capacity of Indian Pharma Industry Rs Crores * *1Crore = 10 Million RANBAXY

Investment in Indian Pharma Industry RANBAXY

The Indian Pharma Market API manufacturing Organized domestic sector 80 ExportingInternational operations 68 Accredited R&D facilities Average spend ~ 3.5% New drugs research 3 70% of pharma Market ($ 3.5b) 75% of API Production ($ 700m) 90% of pharma Exports ($1.4b) 65% of total R&D Spend ($ 75m) 80% of JVs and foreign investment Ranbaxy present in all categories

Improvement in health indicators in India over the years RANBAXY

Exports of Pharmaceutical Products from India RANBAXY

Significant Presence India ranks 5 th among the drug producing countries in volume terms and 14 th in Value terms. 8% share of global pharmaceuticals production. Market size of $ 3.5 bn growing at 16% 23,000 companies registered. 350 companies operating nationally. RANBAXY

Comparative Drug Prices Naproxen 250mg (antiarthritic) Haloperidol 5mg (cardioprotective) Atenolol 100mg (cardiovascular) Diltiazem 60mg (antihpertensive) Nifedipine 10mg (cardiovascular) Captopril 25mg (antihypertensive) Ranitidine 150mg (anti-ulcer) Cimetidine 200mg (anti-ulcer) UKINDIADRUG Rupees RANBAXY

Key elements in the success of Indian Pharma Industry Entrepreneurship and Scientific & Technological skills Reversing brain drain Strong capacity to learn, absorb, and adopt process technologies World class capabilities in Quality Management ensured approvals by US-FDA, UK-MCA, Australian-TGA and SA-MCC Moving up the value chain in R&D – Process development to Analog research, NDDS, Chiral research and NCEs RANBAXY

Competitive edge of Indian Pharmaceutical Companies Immense flexibility of industry to move from one drug to another Strong presence in foreign markets, net exporter of bulk drugs & formulations Advantage of low costs and availability of high skills in process development Cost of R&D much lower compared to other nations India has third largest scientific pool in the world In volume terms India produces 8-10% of worlds volume RANBAXY

Ranbaxy Competitive Edges Brand Marketing –Origins in India – cut throat competition –USA Commodity generics Backward Integration –Control API costs –Not locked into suppliers –Productivity breakthroughs R&D –Low cost –Excellent chemical research skills

Unique Price advantage Lower production cost due to reverse engineering capabilities Lower input cost due to indigenously manufactured raw material Low labor costs Inexpensive machinery Government’s policies RANBAXY

PCT applications from developing countries CompanyCountryApplications 1.Samsung ElectronicsKorea112 2.Shanghai GereChina105 3.Shanghai GereChina97 4.Fudon UniversityChina71 5.LG ElectronicsKorea38 6.Korea Institute of TechnologyKorea32 7.LG ChemicalsKorea30 8.RanbaxyIndia22 9.Samsung ChemicalsKorea22 10.Korea ???Bwker InstituteKorea20

Strategic Architecture for Ranbaxy … products Gross margins Technology barriers Business risk R&D investment Regulatory requirements Scale management Information intensity Teachnological & Marketing complexity NCE NDDR 60-80% Intermediates & Bulk Substances % Commodity generics % Conven- tional dosage forms % Value Added/ Branded Generics 30-40% NDDS OTC %

Market Mix - Changing Profile DevelopingEmerging Developed Regulatory / Technology / Cost Structure Russia China UK USA Australia Nigeria Brazil INDIA Egypt Vietnam Thailand S. Africa Poland Malaysia ‘99 ‘04 Sales Revenue % FW Africa Sri Lanka Japan

Business dynamics of markets Russia Germany UK USA W. Europe Nigeria Brazil INDIA Egypt Vietnam Thailand Kenya S. Africa Poland C. Europe AdvancedEmergingDeveloping China Regulatory /marketing complexity Cost / Returns Hi Lo Malaysia Myanmar Ukraine C. America Mexico Cote-d-Ivory Ireland Canada Cameroon Peru ANZ M.East

90’s80’s 00’s  Internationalization … our changing contours Strategy India          Exports        International        Markets Developing       Emerging       +  +      Advanced     +  + Products API, Dosage Form Generics, Branded Generics Proprietary technology platforms (NDDS), VAGs, R x products Competencies Backward integration Developmental research, Regulatory, Manufacturing, Marketing Innovative research, Patents, Legal Brand marketing for R x products

Thank You