The Challenges from India in the Global Generic Market Place Dr. Brian W Tempest Chief Mentor & Executive Vice Chairman of the Board Ranbaxy Laboratories Limited, Delhi, India Madrid – 8 th February 2007

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Asia’s Share of the World GDP (at PPP in %) Year China 17% 9% 5% 5% 12% India 12% 8% 4% 3% 5% Japan 2% 3% 3% 8% 7% Rest of Asia 7% 5% 7% 9% 13% Total Asia 38% 25% 19% 25% 37% Source – WEF - was 59% in 1820 with India 16%, China 33%

Davos 2006 Source – FT

The Productivity Advantage Indiaa usa Pharma view USA 1 chemist Better education x chemist 70 hours/week Longer working time x hours/week $ 800 monthly Lower cost x 20 $ 12,000 monthly Sources: IPHMR Conferences, New Delhi August 2004

 Japan - by % > 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 By 2013 India will have more young workers than China The Ageing Advantage Working Population, years In millions

 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 The Economic Growth Advantage

 The world has over 800 billionaires  USA has almost half  India - 36 billionaires  China - 15 billionaires  Net worth of 40 richest Indians - $170 b  40 richest Chinese - $38b Source: Forbes, Asia November 27, 2006 “2006 belongs to some of the emerging markets, and no country more than India” The Billionaires Advantage

The R&D Investment Advantage Most attractive R&D Investment locations: Ranked 3 rd - 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

 4 th largest reservoir of Scientific Manpower (2 nd 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 3 rd – K, Ch, Ind, Si, RSA  “US & Europe will not dominate Science, Maths, IT industries” – Mr. Bill Gates The Education Advantage

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 % change Chemistry Departments: Physics : 32,059 28, % Dundee Kings Chemistry: 40,856 38,851 -5% Surrey Exeter Maths: 67,036 52, % Lancaster Queen Mary Computing: 19,099 7, % Source: Daily Mail – 11 August 2006 Only pupils at private schools can take physics, chemistry & biology separately Source: Times, 9 th November 2006

Number of Higher Education Institutions 05/06 18, % 00/01 11,412 90/01 5,932 80/01 4,861 Source: Indian University Grants Commission Science Education in India Number of Students enrolled in Higher Education Institutions 05/06 10, % 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 % Medicine % Physiotherapy % Source: Pavan Agarwal (2006) based on data from professional councils PhD Degree awarded in Science 03/ % 00/ / (USA 03/04 25,000) Source: Indian University Grants Committee

The Education Advantage Engineers/Science graduates p.a – India 0.7m, China 0.5m, EU 0.5m, USA 0.4m, Japan 0.3m

 34 News TV channels. Oldest 13 years old (NDTV)  5000 newspapers, circulation 17m. 12 with 1m copies each.200m daily readers. 21m new daily readers 2003/2005, +14% with 50% rural and 50% urban readership  Principal internet languages to become English, Chinese and Hindi  Diaspora network (25m across 120 countries)  Indians are hungry for information The Information Advantage Internet Usage – Asia 1.China123 m 2.Japan 86 m 3.India 51 m 4.S.Korea 34 m Source: Business Today, Sept. 24, 2006 Mobile Phones 1.China421 m 2.USA190 m 3.Japan157 m 4.Russia148 m 5.India116 m Source: Times of India, Sept. 14, 2006

 Manufacturing growth versus China  Scope for improvement of Government Policies  GDP dynamics: Agriculture 31%20% - Industry28%26% - Services41%54%  More privatization – public sector not so buoyant  Further encouragement of R&D for Pharmaceuticals The Potential for Improvement Advantage

Cost Advantage China India Enrolment Cost Patients/site Based on USA at 100 Index Source: BCG report ‘Looking Forward 2006’ CountryUSAIndia Sites228 Subject Source: Andy Lee Pfizer Global, head clinical study and data management.Business India, August 13, 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 The Clinical Advantage Medical Tourism Cardiac Surgery$000s USA30 Singapore20 Thailand14 India5-7 Source: Business world, 18 th Dec’2006 Patients - Naïve untreated patients - HIV50m - Diabetes32m - HT5m

The M&A Future Advantage

India FDI 2003/4$4.3b 2004/5$5.6b 2005/6$6.0b Source: Outlook business June 2006 The Investment Advantage 2005 FDI Brazil$15bUK$164 b Russia$14bUSA$ 99 b India$6b China$72b (+$35b) Source: UNCTAD India on target for $10b in 2006/07 - But still small

 Microsoft Global Development Centre (GDCI)  Microsoft Global Services (MGSI)  Microsoft Global Technical Support Centre (GTSC)  Microsoft Systems Research (MSRI)  Microsoft India Development Centre (MIDC) Investment by Microsoft in India

A Global Strategic Asset for developed World Market businesses India

The Competitive Advantage - Pharma Active Pharmaceuticals Facility, MohaliDosage Forms Facility, Paonta Sahib

The Competitive Advantage - Pharma R&D IIIRanbaxy’s Patent Filings Clinical data management An Indian speciality 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’

The Pharma Advantage – API’s USA DMF filings by India Source: Crisil / US FDA / J P Morgan % Share of USA DMF filings India China % 9% % 10% Q1’06 44% 15% Q2’06 41% 16% Q3’06 45% 17% (latest) Source: US FDA / J P Morgan, 6 th August 2006 Source: US FDA, Credit Suisse

- 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 The Pharma Advantage - ANDAs ANDA Filings in USA by Indian Companies

Global Market Trends for Generic Companies Source: UBS, Businessworld, 30 th October 2006

Global Market Trends – Discovery R&D Vendor Availability India China Analog preparation4125 Combinatorial chemistry377 Analytical chemistry377 Structural chemistry265 Assay development262 Computer drug design2613 High throughput Screening112 Bio informatics137 Genetically modified animals03 Basic molecular biology1325 Source – BCG, ‘Looking Eastwards, September 2006’ * Out of 90 vendors in October 2005

The Tempest Crystal Ball Post TRIPs new products will dry up in India by 2008 Under this pressure Indian companies will adopt different business models: - Generics, Discovery, Services, M&A MNCs will continue to be attracted to India owing to the science education China will be perceived to be stronger in biology/ toxicology 75% of new R&D sites and 30% of R&D staff globally will be in India/China Alliances between Western Biotech and Indian companies will expand The global generic industry will be dominated by India in the next five years China will dominate the chemical intermediates segment It will be India & China - and not India or China

Key Challenges

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

Potential challenge – Oil prices Source – Outlook business June 2006 A war against Iran could drive oil > $200 a barrel - ‘Times’ 22 nd June 2006 BRIC countries consume 20% global oil Source – EIIGSource – BP

India, China, USA – Refuse any mandatory CO2 emission caps India is 6 th greatest energy consumer Ganges River is the World’s most polluted river – source: World Commission on water Potential Challenge - Pollution

Potential Challenge – Infrastructure Source – Manmohan Singh “Our greatest potential will be realised only if we can ensure that our Infrastructure does not become a severe and critical handicap”

Asia economic strength is returning to levels seen in the past Many advantages for India – R&D, Demographics, Education India as a global strategic asset for developed markets Some “Challenges” – infrastructure is the most serious The current feeling in Indian Boardrooms is that a turning point has been reached, a tipping point has been passed and India’s time has arrived “China & India represent the future of Asia and quite possibly the future for the global economy” – Steve Roach, Morgan Stanley Summary

Thank You