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Reflections on the Global Generic Pharmaceuticals Market place

Reflections on the Global Generic Pharmaceuticals Market place. Dr. Brian W Tempest www.briantempest.com Vidya Pratishthan’s School of Biotechnology , Baramati, India October 10 th 2007. DR. BRIAN W. TEMPEST CSci, CChem, MRSC, BSc, PhD

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Reflections on the Global Generic Pharmaceuticals Market place

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  1. Reflections on the Global Generic Pharmaceuticals Market place Dr. Brian W Tempest www.briantempest.com Vidya Pratishthan’s School of Biotechnology , Baramati, India October 10th 2007

  2. DR. BRIAN W. TEMPEST CSci, CChem, MRSC, BSc, PhD Dr. Brian Tempest has worked in the pharma industry for the last 36 years. During this time he has worked for several pharma majors, including Glaxo & Searle, around the world and joined Ranbaxy 12 years ago. During this period Ranbaxy has transformed from a small company focused on the India domestic market, to a top 10 global generic company. Dr. Tempest has lived in New Delhi, India for the last 8 years, and has been President, Managing Director & Chief Executive Officer and, until recently, the Chief Mentor & Executive Vice Chairman of the Board. Dr. Tempest retired from Ranbaxy in December 2007, when he reached 60. Dr. Tempest is one of a few westerners to have held a leadership position in an Indian blue chip MNC, and has an unusual insight into India. Dr Tempest is also a Honorary Professor of the Management School at Lancaster University, UK, and he sits on the Editorial Board of the Journal of Generic Medicines and on the Advisory Board of the India Fund held by JM Financial Investment Managers Ltd in Mumbai. Dr. Tempest will be available from Hale & Tempest Co. Ltd from January 1st 2008 brian.tempest@gmail.com / brian.tempest@clara.co.uk Mobile +91-98100-91192 / Tel:+44 1753 864 616

  3. Asia’s Share of the World GDP (at PPP in %) Year18701913 195019732001 China 17% 9% 5% 5% 12% India 12% 8% 4% 3% 5% Japan 2% 3% 3% 8% 7% Rest of Asia7%5%7%9%13% Total Asia38%25%19%25%37% Source – WEF - was 59% in 1820 with India 16%, China 33%

  4. Asia on the Rise Source – FT

  5. The Global Challenge from Asia

  6. The Asian Race to Prosperity

  7. Reflections • Market drivers • Competition is rising • Why Branded generics • IP changes in USA & India • M&A and Private Equity • East-West Alliances

  8. The Productivity Advantage India a usa Pharma view USA 1 chemist Better education x 1.3 1 chemist 70 hours/week Longer working time x 1.3 50 hours/week $ 800 monthly Lower cost x 20 $ 12,000 monthly Sources: IPHMR Conferences, New Delhi August 2004

  9. India’s Youthful Advantage Percentage of Population aged 65 and older 29.2 22.7 21.5 21.4 18.7 14.8 14.7 2000 A 13.2 12.3 2025 E 2050 E 8.3 6.9 5 China India Europe North America

  10. Median Age in Asia Years 2000 2025 2050 Sources: Rand Corporation

  11. The Education Advantage

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

  13. Japan’s Wealth Advantage Switzerland 1% Spain 1% Netherlands 2% Taiwan 1% Canada 2% Rest of World 10% Germany 4% Italy 4% France 5% USA 37% UK 6% Japan 27% Source: The World Distribution of Household Wealth

  14. Top 5 Global Pharmaceutical Markets 2020 Sources: Goldman Sachs 2007

  15. Patent Expiry Dates Expiry 2010 Expiry 2011 Expiry 2012 Company % at Risk Sources: AXA Framlington

  16. Competition is Rising CPHI Attendees, Milan,2nd – 4th Oct’07 As registered on July 25, 2007

  17. Generics – API’s USA DMF filings by India % Share of USA DMF filings IndiaChina 2004 27% 9% 2005 37% 10% 2006 44% 14% Q1’07 48% 17% Source: US FDA / J P Morgan, 2 may 2007 IndiaChina 2004 187 48 2005 252 87 2006 357 128 Source: US FDA / J P Morgan, 6th August 2006 Source: US FDA, Credit Suisse

  18. Generics - ANDAs - 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 ANDA Filings in USA by Indian Companies 250 144 64 46 24

  19. R&D Productivity is Falling

  20. Global Pharmaceuticals Sales Trends

  21. Global Pharmaceuticals Equity Trends

  22. Speed of Clinical Trials in India EUIndia Patients 85 650 Sites 22 5 Time 36m 18m Neck Cancer CT Plan Actual Patients 100 130 Sites 10 9 Time 5m 2.5m Overactive bladder CT • No. of USA investigators: 2001 - 2006 26,000 18,000 • 300 patients, 30 sites $5.6m EU/USA vs $ 1.8m plus 30% faster at $800K per day savings Sources: CT Outsourcing Conference, 24th July 2007, Mumbai

  23. Electronic Data Capture in India Accuracy - 300 GSK Staff - 2.2m Clinical Data sheets - 450 Trials - No data security issues - Error rate <0.01 / 100k Source: BCG report “Looking Eastward, Sept’2006” % Trials in EDC 2005 2007 25% 45% Savings Paper EDC $2.8m $ 0.5m 2004 data Sources: CT Outsourcing Conference, 24th July 2007, Mumbai

  24. Branded Generics • Promotion to doctors rather than pharmacists • Consistent sales year on year • No huge highs & lows for sales and profits • Need field force to promote products • Tend to be profitable • Promoted in conventional manner • Global generic brands • Relevant to Central Europe, East Europe, Latam, Asia • Ranbaxy 50% branded generics & 50% commodity generics

  25. Branded Generics - the Analyst’s view • “Branded Generics are the most profitable place to be in generics and there are a few markets with better branded characteristics than those of the Middle East and North Africa region” Frances Cloud Nomura September 14 2007

  26. Different Global Generic Market Sizes $bn

  27. Ranbaxy 2006 Sales by Geography $ 1.34b

  28. Ranbaxy H1 2007 Sales by Market

  29. ROW Top 10 Generic Markets - $bn

  30. IP – USA Pendulum • “A key USA Supreme Court ruling KSR VS Teleflex led to Pharmaceutical patents being more easily challenged on the grounds of obviousness, a ruling which immediately came into play when J&J & Merck had a US patent for Pepcid Complete (Famotodine) found to be obvious”. • Scrip, July 6th 2007, p3 • The full beneficial impact of this ruling on the generic industry is yet to be seen eg Sanofi-Aventis Ramipril was invalidated as obvious by Lupin in September 2007.

  31. Bilateral FTAs - USA Pendulum • Democrats now chair the Ways & Means Committee • USTR legally required to work within TRIPS • Up till now the USA has been incorporating TRIPS PLUS IP protection into bilateral free trade agreements • Corrections to bilateral trade agreements e.g. Peru, Columbia, Panama FTAs now being made TRIPS • Basic product patent • Data protection PLUS TRIPS + Data exclusivity + New forms, isomers etc + New Indications + New Combinations

  32. Should IP be the same across all Countries? USD Per Capita Expenditure on Healthcare 2002 USA Brazil Thai China India Sources: World Health Report 2005

  33. 82% of the world population accounts for only 12% of the Global pharmaceutical sales • Sources: • IMS Midas, March 2005 • Earth Trend Data Tables 2005

  34. Enforcement versus Evergreeningin Developing Countries India IP 02/03 06//07 Filed 11466 28882 Examined 9538 14119 Granted 1379 7359 - 140 patent examiners 2007 - 600 more planned - Attrition an issue - Weekly patent journal - IP Appellate Court Source: Business Standard, 16th Aug’2007 • 1995 – 2005 FDA cleared 327 drugs • 95% pre 1995 – before WTO deal • 16 basic patent molecules possible • However 9000 Pharma applications • - for evergreen changes • - for new indications Source: Gopa Kumar “Centre for Trade & Development, Delhi”

  35. PCT Filings PCT Files from Developing Countries 2006 Huawei - China LG - Korea Samsung - Korea LG Cem - Korea Elec Telecom – Korea 2TE – China STR – Singapore Ranbaxy – India CSIR – India NHN - Korea Ranbaxy Patent Filings 24 32 49 86 146 170 185

  36. M&A Building the Top Players in the Global Generic Market

  37. PE Deals in Asia (ex-Japan) in H1 2007 Sources: Thomson Financial

  38. % PE/VC Share of all Global M&A Deals 21% 17% 16% 9% 6% 5% Sources: Thomson One Banker, BCG Analysis

  39. PE Investment in India is rising

  40. Key Challenges to the Asian Scenario

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

  42. Potential Challenge – Climate Change CO2 emission - % of World total in 1990-2000 USA 23% EU 25 17% China 14% Russia 7% Japan 5% India 4% – source: WRI, EIA

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

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

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

  46. Potential Challenge – over the border

  47. Potential Challenge - Currency Volatility

  48. 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 will become the key opportunity

  49. The rise of the Indian Middle Class - Assumes GDP growth of 7.3% for next 20 years with no profound shift in economic policy Sources: McKinsey Quarterly, 3rd November 2007

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