India – a growing player
Dr. Brian W Tempest
Chief Mentor & Executive Vice Chairman of the Board
Ranbaxy Laboratories Limited
Frankfurt – 15th March’06
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.
Asia’s Share of the World GDP (at PPP in %)
Year
1870
1913
1950
1973
2001
China
India
Japan
Rest of Asia
17%
12%
2%
7%
9%
8%
3%
5%
5%
4%
3%
7%
5%
3%
8%
9%
12%
5%
7%
13%
Total Asia
38%
25%
19%
25%
37%
Source – WEF
Davos 2006
Source – FT
The Productivity Advantage
India
1 chemist FTE
70 h/week
$ 800 monthly
a usa pharma view
Better education x 1,3
Longer working time x 1,3
Lower cost x 20
USA
1 chemist FTE
50 h/week
$ 12,000 monthly
Sources: IPHMR Conferences, New Delhi August 2004
The Ageing Advantage

Europe
- retirees grow faster than workers
- fertility rates lower

Japan
- expansion of grey segment

USA
- over 50’s 88m will grow to 118m (2020)
- obesity

China
-

India
- will remain very young
- source of the extra needed global workforce
one child families
get older before becoming wealthy
labour costs will rise owing to labour shortage
rural to urban flow
The R&D Investment Advantage
Most attractive R&D Investment locations:
1.
2.
3.
4.
5.
China
USA
India
Japan
UK
Source – UNCTAD 2005
The R&D Investment Advantage
-reasons why

Qualified Scientists & Engineers

Global India players with Alliances

English speaking

TRIPs compliant

IIT, IIM & other scientific institutions
Source – UNCTAD 2005
The R&D Investment Advantage
- research institutions in India
Genetic engineering research
Transgenic work
Therapeutics
Basic research
Universities
Source – Dept. of Bio-technology
165
55
25
28
> 250
The Knowledge Advantage



4th largest reservoir of Scientific Manpower
2nd largest in terms of speaking English
3m graduates pa, 115k MSc Chemistry

345k IT, USA 75k

Knowledge super power

Lead by a Scientist as President

Diaspora network (25m across 120 countries)

The world’s largest free nation

US & Europe will not dominate Science, Maths, IT
The Knowledge Advantage
The State of European Science Teaching
“This means that when pupils are in a science laboratory their experience is
unsafe, unsatisfactory or uninspiring for 65% of the time. In addition, 13%
of science classes are not taught in a laboratory at all”
Laboratories in UK state schools:
Excellent
Good
Basic/uninspiring
Unsafe/unsatisfactory
Source – Royal Society of Chemistry, Policy Bulletin – Winter 2006
5%
29%
41%
25%
The Economic Growth Advantage

GDP World growth marginally less in 06 than 05 (+4.3%)

USA expansion at a slower growth than 05 (+3.6%)

Eurozone – expected to perform better than USA

Asia :
PRC
– slightly slower growth to prevent hard landing
Japan – sustain current growth
India
– increasing growth rate
Chindia – 40% population, 8% economy

Largest foreign affairs caucus in US Congress (180)

74,000 demonstrations reported in 2005 in China
The FDI Advantage
2001/2
2002/3
2003/4
2004/5
2005/6
-
$b
6.1
5.0
4.7
5.5
6.5
But still only at 10% of PRC levels
Investment by top 15 Indian Domestic
Pharmaceutical Companies
2000
2001
2002
2003
2004
2005
Source – Citigroup
$m
110
160
200
250
400
450
Investment by foreign Pharma companies
Investment by Microsoft in India

Microsoft Global Development Centre (GDCI)

Microsoft Global Services (MGSI)

Microsoft Global Technical Support Centre
(GTSC)

Microsoft Systems Research (MSRI)

Microsoft India Development Centre (MIDC)
The Potential for Improvement Advantage

Manufacturing growth ‘90’ - 03
- Chinese manufaturing
- India manufacturing
+12% (90-03)
+6.5%

Scope for improvement of Government Policies

Revitalisation of agriculture

Further privatisation

Further encouragement of R&D

Prosperous middle class 300m strong
The Information Advantage

34 News TV channels. Oldest 13 years old (NDTV)

5000 newspapers, circulation 17m. 12 with 1m copies each

200m daily readers. 21m new daily readers 2003/2005, +14%

50% rural / 50% urban

Indian are hungry for information

Source: World Business 26.2.2006
The Medical Tourism Advantage

High quality healthcare

Patients from developed & developing countries

Growing Privatisation

International standards

Low Costs:
- Open heart
- Hysterectomy
- Knee surgery

Thailand
India
$14250
$ 2012
$7000
$4400
$ 571
$4500
Better access through airports likely
The Global Generic Pharma companies
Annual Sales (US$ Millions)
7000
6000
5000
4000
3000
2000
1000
R
an
ba
xy
M
yl
an
ha
rm
a
A
lp
at
so
n
W
ha
rm
io
p
R
at
M
er
ck
oz
S
an
d
Te
va
0
Source : Company /Financial reports & presentations
Chindia share of all API* filings
1999
2000
2001
2002
2003
2004
Source – Citigroup
*DMF – Drug Master Files
%
13%
17%
20%
30%
35%
40%
The Global Generic Market
$b
2004
2009
USA
W Europe
Japan
Rest of America
ROW
15
9
3
6
25
27
14
4
9
40
Total
58
94
Source: Frost & Sullivan
The Generic Pharma Landscape
Fundamental drivers of growth
High healthcare costs
Total Healthcare Spending, % of GDP
16.0
15.0
11.1
12.0
10.1
9.9
8.4
7.9
7.7
7.7
Japan
Spain
UK (1)
8.0
4.0
0.0
United
States
Germany
France
Canada
Italy
Source: World Bank, DB Global Pharma Report Aug 2005, OECD Health Data 2005 (1) – 2002, UBS European Pharma Report, Sep 2005
The Generic Pharma Landscape
Fundamental drivers of growth
Demographics
30
Estimated % of regional population over 60
25
20
15
Europe
2005
2010
US
2015
2020
2025
Source: World Bank, DB Global Pharma Report Aug 2005, OECD Health Data 2005 (1) – 2002, UBS European Pharma Report, Sep 2005
The Generic Pharma Landscape
Fundamental drivers of growth
Patent Expiries
$ Bn
20
Revenues
15
10
5
0
2006
2007
2008
2009
2010
Patent expiry, 2006 - 10
Source : Global Generic Drug Stocks Citigroup Smith Barney, September 2004, IMS Health : MIDAS , MAT June 2005
The Generic Pharma Landscape
Fundamental drivers of growth
% Growth Constant $
Generics
13%
23%
Total
8%
38%
USA
8%
9%
31%
GE
20%
19%
36%
UK
20%
36%
CA
16%
JA
7%
2%
20%
30%
10%
FR
11%
-2%
2%
13%
8%
SP
5%
IT
2%
0%
20%
4%
10%
% Share (Volume)
20%
30%
40%
% Share (Value)
Source : Global Generic Drug Stocks Citigroup Smith Barney, September 2004, IMS Health : MIDAS , MAT June 2005
Ranbaxy Strategic Direction
• Growth through
- Organic
2012
- Inorganic
2007
2004
US $ 1 Bn
US $ 5 Bn
US $ 2 Bn
• Amongst the Top 5
generic Companies
• Significant income
from proprietary products
Competitive Advantages
Aggressive Home Market
Competitive Advantages
Cost of Manufacture
Active Pharmaceuticals Facility, Mohali
Dosage Forms Facility, Paonta Sahib
• Highest number of FDA approved plants outside the US
Competitive Advantages
Cost of Innovation
R&D I
R&D II
R&D III
R&D IV
Potential Downsides
Potential downside – Asian Flu
Potential downside – Oil prices
Source – BLS, ELA, The Conference Board
Potential downside - Infrastructure
Source – FT
Potential downside – Counterfeit products
Origin of fake products
seized in EU in 2004
Countries where fake
pharma products seized in
2005
Rank
Rank
1.
2.
3.
4.
5.
China
Thailand
Hong Kong
Turkey
USA
Source: FT
1.
2.
3.
4.
5.
Russia
China
South Korea
Peru
Columbia
Source: PSI
Summary
Asia economic strength is returning
Many advantages for India
Some downsides
The feeling in India a turning point has been
reached and passed
“We have all grown up learning the story of the
unfinished voyage of Christopher Columbus setting
sail to reach India, he discovered America. I now
invite the people of America to complete the voyage
of that great explorer”
Manmohan Singh
Prime Minister of India
July 2005.”
Thank You