Succeeding in Japan: 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


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. Disclaimer


Slide3: Where is the World’s Wealth? Cannada 2% Rest of World 10% Japan 27% Germany 4% Italy 4% France 5% UK 6% USA 37% Netherlands 2% Spain 1% Switzerland 1% Taiwan 1% Source: The World Distribution of Household Wealth


Slide4: Where are the Worlds’ Pharmaceuticals sold? Top 15 countries = 85.9% of worldwide pharmaceutical market estimate 2003 2.4% 3.3% 3.4% 4.9% 5.4% 12.0% 44.6% 1.5% 1.5% 2.0%


Japan’s GDP: Japan’s GDP


A race to prosperity: A race to prosperity


Indo - Japan Political & Economic Background: 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% > 65 years from 19% in 2005 Huge interest with many Japanese delegations visiting India


Japanese Government Policy changeson Pharmaceuticals: Japanese Government Policy changes on 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


Japanese Government Intervention on Pharmaceuticals: Japanese Government Intervention on Pharmaceuticals Global Size Companies 4 companies of global size Fugisawa + Yamanouchi = Astellas (April’06) Sankyo + Daiichi Takeda Eisai Mid Size Companies Move to niches and/or generics Shionogi Tanabe Mitsubishi


Slide10: Both Japan & India are hungry for Information 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 Internet Usage – Asia Mobile Phones


Japanese – India differences: 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


Slide13: - 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 24 46 64 144 ANDA Filings in USA by Indian Companies


Slide14: The Pharma Advantage – API’s USA DMF filings by India 1990 1 1995 4 2000 36 2004 187 2005 262 Source: Crisil / US FDA / J P Morgan % Share of USA DMF filings India China 2004 27% 9% 2005 37% 10% Q1’06 44% 15% Q2’06 41% 16% Q3’06 45% 17% (latest) Source: US FDA / J P Morgan, 6th August 2006 Source: US FDA, Credit Suisse


Slide15: 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 Science Education in India 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


Slide16: The Education Advantage Engineers/Science graduates p.a – India 0.7m, China 0.5m, EU 0.5m, USA 0.4m, Japan 0.3m


The R&D Investment Advantage: The R&D Investment Advantage Most attractive R&D 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


Slide18: The Productivity Advantage Sources: IPHMR Conferences, New Delhi August 2004


Global Market Trends – Discovery R&D: Global Market Trends – Discovery R&D Vendor Availability India China Analog preparation 41 25 Combinatorial chemistry 37 7 Analytical chemistry 37 7 Structural chemistry 26 5 Assay development 26 2 Computer drug design 26 13 High throughput Screening 11 2 Bio informatics 13 7 Genetically modified animals 0 3 Basic molecular biology 13 25 Source – BCG, ‘Looking Eastwards, September 2006’ *Out of 90 vendors in October 2005


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


The Japanese generic market: 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)


Slide22: Source: JP Morgan Asia Pacific, Equity Research 16 November 2005 Nippon Chemipher Generics Business 4.3 5.4 6.2 8.5 7.3 10.00 11.50 Yen billion


Slide23: 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 Our story in Japan


M&A deals in Europe by Indian Companies2003 - 2007: M&A deals in Europe by Indian Companies 2003 - 2007 Company Number Ranbaxy 6 Wockhardt 3 Stada 2 Matrix 2 DRL 1 Aurobindo 1 Torrent 1 Sun Pharma 1 Jubiliant 1 Zydu Cadilla 1 _______________________________________________ Total 19 _______________________________________________ Source: Nomura, December 2006


Conclusion: 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


Slide26: Thank You