The New Economic Landscape

1
The New Economic Landscape

• Brian W Tempest
• CEO Managing Director
• Ranbaxy Laboratories Limited, India

The Pharmaceutical Industry in the 21st Century
Is India Challenging the RD Business
Model? Chatham House, London, January 2005
2
The New Asia
Source CSO, China National Bureau of Statistics,
Morgan Stanley Research
3
Largest Economies in 2050
Source Global Economics Paper No118 by Goldman
Sachs 14-Oct-04
4
A Dramatic Rise in China and Indias Middle
Classes
Number, millions
Source Global Economics Paper No118 by Goldman
Sachs 14-Oct-04
5
Indian GDP Growth
Source Central Statistical Organization of India
(CSO), Morgan Stanley Research
6
Advantage India

• of Cos listed on the BSE second only to NYSE
• 4 out of 10 silicon valley startups run by
  Indians
• 2nd largest pool of scientists engineers in the
  world
• 220 out of the Fortune 500 Cos outsource IT work
  here
• 15 of scientists in Big Pharma are of Indian
  origin

Source CLSA India Paradox Report, 2003
7
The Chrysler Example
By Kirsten Downey Washington Post Staff
Writer Saturday, March 6, 2004 Pg E01
For each mid size car Daimler Chrysler AG builds
at one of its plants, the Company pays 1,300 to
cover employee healthcare costs, more than twice
the cost of the sheet metal in the vehicle
(Covers both present and retired employees with
family)
Source IMS presentation at the IGPA Conference
in Prague , June 2004.
8
Cost of Health

• Cost of non pharma healthcare
• High cost innovative medicines
• Across USA, EU Japan

USA
Germany
Healthcare Expenditure of select countries ( to
GDP)
France
Spain
UK
RANBAXY
Source Deutsche Bank and SSB Research, 2002 ,
OECD Health Data 2003 3rd Ed.
9
Cost of Health and Age
Source Deutsche Bank Research, July 2002,OECD
Health Data 2003 3rd Ed.
10
Issues facing Big Pharma

• Increasing RD costs
• Product withdrawals e.g. Vioxx
• Re-importation of prescription drugs
• Drug shortages in hospitals in USA
• Pressure on earnings

11
India Competitive Advantages
1. Aggressive Home Market
12
India Competitive Advantages
2. Cost of Manufacture
Active Pharmaceuticals Facility, Mohali
Dosage Forms Facility, Paonta Sahib

• Highest of FDA approved plants outside the US

• 1/3rd of all DMF filings with the FDA

Drug Master File
13
India Competitive Advantages
3. Cost of Innovation
Ranbaxy R D Center I
Ranbaxy R D Center II

• Indias inherent strength in Chemistry
  Mathematics

14
The Productivity Advantage
India USA
1 chemist FTE 1 chemist
FTE
Better education x 1,3
70 h/week 50 h/week
Longer working time x 1,3
800 monthly
12,000 monthly
Lower cost x 20
Source IPHMR Conference, New Delhi August 2004
15
MNC owned RD centers in India
Akzo Nobel
GE
General Motors
Bell Labs
HP
Colgate Palmolive
Honeywell
Cummins
Intel
Danisco Cultor
McDonalds
Delphi
Monsanto
D-Link
Qualcomm
DuPont
Texas Instruments
Daimler Chrysler
Eli Lilly
Tyco Electronics
Unilever
Emerson Electric
Source CLSA Emerging Markets
16
Ranbaxy RD Organization
22 from US / EU in 2003


gt 1000 Scientists in RD

• 115,000 MSc Scientists 12,000 PhD's in
  Chemistry every year

17
India Geographic Footprint
2003 - US 972 Mn
2000 - US 475 Mn
2004 - US 1178 Mn
2007 - US 2 Bn
Estimated
18
Global Human Bridge
Leading to shareholder wealth
19
Innovation - Our own example
Cipro XR
BD / TD product with no OD solution
FDA APPROVAL
USA product prescriptions begin
Licensing out to patent holder
Full product development in the USA
Discovery patenting by Indian Pharma company
Royalty to Indian Pharma company
Product gains 15 market share
4-5 Years
20
Thank You

• Brian W Tempest
• CEO Managing Director
• Ranbaxy Laboratories Limited, India

The Pharmaceutical Industry in the 21st Century
Is India Challenging the RD Business
Model Chatham House, London, January 2005