The Role of Generics in Reducing the Cost of Healthcare Dr. Brian W Tempest Chief Mentor & Executive Vice Chairman of the Board Ranbaxy Laboratories Limited, Delhi, India Berlin, Germany, Wednesday 26 th September 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%

Asia on the Rise Source – FT

Reducing the Cost of Healthcare 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

Median Age in Asia India China Japan Sources: Rand Corporation Years

 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 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 – Kor, Chi, Ind, Sin, 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

The Education Advantage

The Pharma Plants Advantage Active Pharmaceuticals Facility, MohaliDosage Forms Facility, Paonta Sahib

The Pharma R&D Advantage Ranbaxy’s Patent Filings Electronic Data Capture An Indian specialty 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’ PCT Filers from Developing Countires Huawei – China6. ZTE – China 2.LG – Korea7. STR – Singapore 3.Samsung – Korea8. Ranbaxy – India 4.LG Chem – Korea9. CSIR – India 5.Elec Telecom – Korea10. NHN – Korea Source: WIPRO

Cost Advantage China India Cost Patients/site Based on USA at 100 Index Source: BCG report ‘Looking Forward 2006’ Speed Advantage USAIndia 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 Pharma 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

 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

Sources: Goldman Sachs 2007 Top 5 Global Pharmaceutical Markets 2020 RankCountrySize USA China Japan France India $ 475b $ 125b $ 61b $ 51b $ 43b

Generics – API’s USA DMF filings by India % Share of USA DMF filings India China % 9% % 10% % 14% Q1’07 48% 17% Source: US FDA / J P Morgan, 2 May 2007 Source: US FDA, Credit Suisse India China Source: US FDA / J P Morgan, 6 th August 2006

- 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 but expected in 2008 Generics - ANDAs ANDA Filings in USA by Indian Companies 250

Discovery – Local vendors available in India to Support Discovery Research 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

Discovery – Local vendors available in India to Support Clinical Research Contract Research Organisations30 Bio-equivalence & Bio-analytical15 Data Management & enabled services14 Site Management Organisations5 Central Laboratories8 Storage & Distribution5 Centralised ECG Services2 Clinical Research Training8 Source – Pharmaceutical Technology Asia Pacific, March 2007

Patient Recruitment

The Tempest Crystal Ball India will continue to be a Key Driver in the Global Generic Industry Competition is rising – Post TRIPs Indian companies will evolve Discovery companies will continue to be attracted to India for CT, EDC, MO. China will be perceived to be stronger in biology/ toxicology IP changes in US & India will slowly favor Generics Alliances between Western Biotech and Asians companies will expand. M&A PE deals will grow How to use Asia in Germany will become the key opportunity

“The Indian System looks ramshackle and improvised. But at its best it is capable of brilliance” “When we say the Silicon Valley is built on ICs we don’t mean integrated circuits – we mean Indians & Chinese” “The UK needs to wake up to what India is becoming” Source: DEMOS report – January 2007 Perceptions of India

The Global challenge from Asia

The race to prosperity in Asia

Investment in Asia is rising

Key Challenges to the Scenario of Asian Generic Pharma Companies becoming a major force in Germany

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

Potential Challenge – Oil prices Source – Assocham A war against Iran could drive oil > $200 a barrel - ‘Times’ 22 nd June 2006 India is expected to import 85% of crude oil by 2012 from 70% today Source – BP

CO 2 emission - % of World total in USA23% EU 2517% China14% Russia7% Japan5% India4% – source: WRI, EIA Potential Challenge – Climate Change

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”

Corruption Perception Index RankCountry 1Finland, Iceland, NZ 5Singapore 11Austria, Luxemburg, UK 16Germany 20Belgium, Chile, USA 42Mauritius, S.Korea 51South Africa, Tunisia 70Brazil, China, India, Mexico 121Philippines, Russia 163Haiti Sources: Transparency International 2006, selected countries only

Potential Challenge – over the border

Potential Challenge - Currency Volatility

Asia economic strength is returning to levels seen in the past Many advantages for India in reducing the cost of healthcare India is a global strategic asset for developed markets India is a rich location for R&D alliances and CT outsourcing MNCs will dip in & out of India & China South East Asian economies will be driven by India & China Japan will continue to represent a huge share of global wealth “China & India represent the future of Asia and quite possibly the future for the global economy” – Steve Roach, Morgan Stanley Summary

Thank You