Succeeding in Japan

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Succeeding in Japan
Dr. Brian W Tempest Chief Mentor Executive Vice
Chairman of the Board Ranbaxy Laboratories
Limited, Delhi, India India Japan
Initiative Mumbai 2nd February 2007
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Disclaimer
Except for the historical information contained
herein, statements in this presentation and the
subsequent discussions, which include words or
phrases such as will, aim, will likely
result, would, believe, may, expect,
will continue, anticipate, estimate,
intend, plan, contemplate, seek to,
future, objective, goal, likely,
project, should, potential, will pursue
and similar expressions or variations of such
expressions may constitute "forward-looking
statements". These forward-looking statements
involve a number of risks, uncertainties and
other factors that could cause actual results to
differ materially from those suggested by the
forward-looking statements. These risks and
uncertainties include, but are not limited to our
ability to successfully implement our strategy,
our growth and expansion plans, obtain regulatory
approvals, our provisioning policies,
technological changes, investment and business
income, cash flow projections, our exposure to
market risks as well as other risks. Ranbaxy does
not undertake any obligation to update
forward-looking statements to reflect events or
circumstances after the date thereof.
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Where is the Worlds Wealth?
Netherlands 2
Spain 1
Switzerland 1
Taiwan 1
Cannada 2
Rest of World 10
Germany 4
Italy 4
France 5
UK 6
USA 37
Japan 27
Source The World Distribution of Household Wealth
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Where are the Worlds Pharmaceuticals sold?
1.5
1.5
2.0
2.4
3.3
3.4
4.9
5.4
12.0
44.6
Top 15 countries 85.9 of worldwide
pharmaceutical market estimate 2003
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Japans GDP
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A race to prosperity
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Indo - Japan Political Economic Background

• Japan Recovering from a decade old recession
• Japan is fully exposed to China, but now there is
  a political inpasse
• JETRO, Abe, Koizumi all giving positive
  guidance on India
• Ageing is a major issue in Japan
• - by 2050 36 gt 65 years from 19 in 2005
• Huge interest with many Japanese delegations
  visiting India

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Japanese Government Policy changeson
Pharmaceuticals

• Past - Poor quality, poor support
• 2002 - National hospitals start using generics
• 2003 - Co-payments begin at 30
• 2004 - Public hospitals become companies
• 2006 - GPs can opt for generic substitution
• Postal worker challenge helped minimize the
  influence of the doctor
• lobby

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Japanese Government Intervention on
Pharmaceuticals

• Global Size Companies
• 4 companies of global size
• Fugisawa Yamanouchi Astellas (April06)
• Sankyo Daiichi
• Takeda
• Eisai

• Mid Size Companies
• Move to niches and/or generics
• Shionogi
• Tanabe
• Mitsubishi

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Both Japan India are hungry for Information
Internet Usage Asia
Mobile Phones

• China 123 m
• Japan 86 m
• India 51 m
• S.Korea 34 m
• Source Business Today, Sept. 24, 2006

• China 421 m
• 2. USA 190 m
• Japan 157 m
• Russia 148 m
• 5. India 116 m
• Source Times of India, Sept. 14, 2006

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Japanese India differences

• Before time vs After time
• Open neck shirt vs White shirts/ties
• Sashime vs Vegetarianism
• Golf vs Cricket
• Takes time for each side to understand what is a
  very complex picture, eg. visiting cards, hellos
• Japanese are heavily influenced by USA,
  Technology Innovation, Productivity Education

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The Pharma Advantage - ANDAs
ANDA Filings in USA by Indian Companies
144
64
46
24

• - 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

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The Pharma Advantage APIs
USA DMF filings by India
Share of USA DMF filings

• 
  
  
• India China
  
• 2004 27 9
• 2005 37 10
• Q106 44 15
• Q206 41 16
• Q306 45 17 (latest)
  
• Source US FDA / J P Morgan, 6th
  August 2006

• 
  
• 1990
  1
• 1995 4
• 2000 36
  
• 2004 187
• 2005 262
• Source Crisil / US FDA / J P Morgan

Source US FDA, Credit Suisse
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Science Education in India

• Number of Higher Education Institutions
• 05/06 18,123 59
• 00/01 11,412
• 90/01 5,932
• 80/01 4,861
• Source Indian University Grants Commission

Number of Students enrolled in Higher Education
Institutions 05/06 10,500
40 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
1478 669 120 Medicine
229 174 32 Physiotherapy
205 52 294 Source Pavan
Agarwal (2006) based on data from
professional councils
PhD Degree awarded in Science 03/04 5408 44 00/
01 3734 90/01 2950 (USA 03/04 25,000)
Source Indian University Grants Committee
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The Education Advantage
Engineers/Science graduates p.a India 0.7m,
China 0.5m, EU 0.5m, USA 0.4m, Japan 0.3m
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The RD Investment Advantage

• 
  
• Most attractive RD Investment locations
• Ranked 3rd - 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

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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
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Global Market Trends Discovery RD
Vendor Availability
India China Analog
preparation 41 25 Combinatorial
chemistry 37 7 Analytical chemistry 37 7 Str
uctural chemistry 26 5 Assay
development 26 2 Computer drug
design 26 13 High throughput
Screening 11 2 Bio informatics 13 7 Genetica
lly modified animals 0 3 Basic molecular
biology 13 25 Source BCG, Looking
Eastwards, September 2006 Out of 90 vendors in
October 2005
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Global Market Trends for Generic Companies
Source UBS, Businessworld, 30th October 2006
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The Japanese generic market

• 2.0b in 2006 with a 5 level of generic
  substitution
• Forecast to increase by 11 p.a to 2010
• Novartis has a 5 share leading foreign generic
  player
• Regular price reductions (related to trade
  discounts)

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Nippon Chemipher Generics Business
Yen billion
11.50
10.00
8.5
7.3
6.2
5.4
4.3

• Source JP Morgan Asia Pacific, Equity Research
  16 November 2005

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Our story in Japan

• Experience
• Worked on our relationship for several years
  since 2003
• 50 in joint venture
• Filed products to meet expectations of MHLW
• Manufactured products to Japanese Consumer
  expectations
• Now launched several products with our partner
• Leading market share of products launched
• Constant Interaction with Japanese investors
  media

• Reputation
• Licence in opportunities for India/China from
  Japan
• Manufacturing contracts for Japan NCEs
  intermediates

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MA deals in Europe by Indian Companies2003 -
2007
Company Number Ranbaxy 6 Wockhardt 3
Stada 2 Matrix 2 DRL 1 Aurobindo 1
Torrent 1 Sun Pharma 1 Jubiliant 1 Zyd
u Cadilla 1 ___________________________________
____________ Total 19 ________________________
_______________________ Source Nomura, December
2006
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Conclusion

• Huge business potential opportunity
• Good fit Synergy between India Japan
• Long term planning needed
• Personal attention of the CEO required on the
  relationship
• Accept the complexity and may not understand
  everything
• Focus on technology innovation, USA, education,
  productivity

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Thank You