The Opportunities & Challenges from India

Dr. Brian W Tempest

Chief Mentor & Executive Vice Chairman of the Board

Ranbaxy Laboratories Limited, Delhi, India

Generics, Supergenerics & Patent Strategies

London – Monday, 14th May 2007

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

Asia’s Share of the World GDP (at PPP in %)

Year 1870 1913 1950 1973 2001 China 17% 9% 5% 5% 12% India 12% 8% 4% 3% 5% Japan 2% 3% 3% 8% 7%

Rest of Asia 7% 5% 7% 9% 13% Total Asia 38% 25% 19% 25% 37%

Source – WEF

- was 59% in 1820 with India 16%, China 33%

Davos

Source – FT

The Productivity Advantage

India a usa Pharma view USA India a usa Pharma view USA

1 chemist Better education x 1.3 1 chemist 1 chemist Better education x 1.3 1 chemist

70 hours/week Longer working time x 1.3 50 hours/week 70 hours/week Longer working time x 1.3 50 hours/week

$ 800 monthly Lower cost x 20 $ 12,000 monthly $ 800 monthly Lower cost x 20 $ 12,000 monthly

Sources: IPHMR Conferences, New Delhi August 2004

Japan - by 2050 36% > 65 years from 19% in 2005

China - one child families, get older before becoming wealthy - labour costs will rise owing to labour shortage India - India already has the youngest labour force in the world - source of the extra needed global workforce - India will pass China in total population in 2030 - By 2013 India will have more young workers 20-24 than China

The Ageing Advantage

Working Population, 15-64 yearsIn millions

Growth- Japan, sustain current growth- China, slightly slower growth to prevent hard landing

- India, increasing growth rate being talked up to 9%/10% Sentiment

- India, largest foreign affairs caucus in US Congress (180), nuclear deal - China, 74,000 demonstrations reported in 2005 in China. State secrecy, IP

The Economic Growth Advantage

A race to prosperity

The world has over 800 billionaires USA has almost half India - 36 billionaires China - 15 billionaires Net worth of 40 richest Indians - $170 b 40 richest Chinese - $38bSource: Forbes, Asia November 27, 2006

“2006 belongs to some of the emerging markets,

and no country more than India”

The Billionaires 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

4th largest reservoir of Scientific Manpower (2nd largest English speaking)

3m graduates pa, 115k MSc Chemistry (3.5k UK), 215k Eng (222k USA)

Physics the most popular subject

Lead by a Nuclear Scientist as President – remote sensing satellite technology, 1/6 countries

PCT application ranked 3rd – Kor, Chi, Ind, Sin, RSA

“US & Europe will not dominate Science, Maths, IT industries” – Mr. Bill Gates

The Education Advantage

Science Education in EU

“This means that when pupils are in a science laboratory their experience is unsafe, unsatisfactory or uninspiring for 65% of the time.” Source: Royal Society of Chemistry, Policy Bulletin – Spring 2006

UK “A” Level entries: Closed UK University 2000 2005 % change Chemistry Departments: Physics : 32,059 28,119 -12% Dundee Kings Chemistry: 40,856 38,851 -5% Surrey Exeter Maths: 67,036 52,897 -21% Lancaster Queen Mary Computing: 19,099 7,242 -62% Source: Daily Mail – 11 August 2006

Only pupils at private schools can take physics, chemistry & biology separately Source: Times, 9th November 2006

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 3,000Source: 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

The Education Advantage

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

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% with 50% rural and 50% urban readership

Diaspora network (25m across 120 countries)

Indians are hungry for information

The Information Advantage

Internet Usage – Asia

1. China 123 m2. Japan 86 m3. India 51 m4. S.Korea 34 m

Source: Business Today, Sept. 24, 2006

Mobile Phones

1. China 421 m2. USA

190 m3. Japan 157 m4. Russia 148 m5. India 116 m

Source: Times of India, Sept. 14, 2006

More Privatization – public sector not so buoyant

Scope for improvement of Government Policies

Manufacturing growth versus China

GDP dynamics: 1990 2005 - Agriculture 31% 20%

- Industry 28% 26% - Services 41% 54%

Further encouragement of R&D for Pharmaceuticals

The Potential for Improvement Advantage

The Pharma Plants Advantage

Active Pharmaceuticals Facility, Mohali Dosage Forms Facility, Paonta Sahib

The Pharma R&D Advantage

Ranbaxy’s Patent Filings

2449

32

86

146

170185

2001

2000

1999

2004

2005

Clinical data management•An Indian speciality•300 staff GSK -2.2m clinical data sheets -450 trials -Error rate <0.01/100k -No data security issues

Source: BCG report ‘Looking Eastward Sep’2006’

R&D hotbeds

“China & India have become R&Dhotbeds……….. MNCs already operate some 180 R&D centres in China andMore than 100 in India”

Source: BCG report ‘Looking Eastward Sep’2006’

PCT Filers from Developing Countires 20061. Huawei – China 6. ZTE – China2. LG – Korea 7. STR – Singapore3. Samsung – Korea 8. Ranbaxy – India4. LG Chem – Korea 9. CSIR – India5. Elec Telecom – Korea 10. NHN – Korea

Source: WIPRO

Cost Advantage China IndiaCost 40 16Patients/site 250 500

Based on USA at 100 Index

Source: BCG report ‘Looking Forward 2006’

Country USAIndia

Sites 22 8

Subject 626 896

Source: Andy Lee Pfizer Global, head clinical study and data management.Business India, August 13, 2006

“………..The Country’s World Class skills in Chemistry & IT and it’s large treatment naivepatient population provides added allure” Boston Consultancy Group

Harnessing the power of India 2006

The Pharma Clinical Advantage

Medical Tourism

Cardiac Surgery $000s USA 30 Singapore 20 Thailand 14 India 5-7Source: Business world, 18th Dec’2006

Patients

- Naïve untreated patients- HIV 50m- Diabetes 32m- HT 5m

India FDI

2003/4 $4.3b

2004/5 $5.6b

2005/6 $6.0b Source: Outlook business June 2006

The Investment Advantage

2005 FDIBrazil $15b UK $164 bRussia $14b USA $ 99 bIndia $6bChina $72b (+$35b)Source: UNCTAD 2006

- India on target for $12b in 2006/07- But still small

Microsoft Global Development Centre (GDCI)

Microsoft Global Services (MGSI)

Microsoft Global Technical Support Centre (GTSC)

Microsoft Systems Research (MSRI)

Microsoft India Development Centre (MIDC)

Investment by Microsoft in India

A Global Strategic Asset for developed

World Market businesses

India

Generics – API’sUSA 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% 2006 44% 14%

Q4’06 47% 9%

Source: US FDA / J P Morgan, 6th August 2006

Source: US FDA, Credit Suisse

- 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 ANDAbut expected in 2008

Generics - ANDAs

0

20

40

60

80

100

120

140

160

2002 2003 2004 2005

24

46

64

144

ANDA Filings in USA by Indian Companies

Generics Rankings

Source: UBS, Businessworld, 30th October 2006

Discovery – Local vendors available in India to Support Discovery Research

Vendor Availability India ChinaAnalog preparation 41 25Combinatorial chemistry 37 7Analytical chemistry 37 7Structural chemistry 26 5Assay development 26 2Computer drug design 26 13High throughput Screening 11 2Bio informatics 13 7Genetically modified animals 0 3Basic molecular biology 13 25

Source – BCG, ‘Looking Eastwards, September 2006’

*Out of 90 vendors in October 2005

Discovery – Local vendors available in India to Support Clinical Research

Contract Research Organisations 30Bio-equivalence & Bio-analytical 15Data Management & enabled services 14Site Management Organisations 5Central Laboratories 8Storage & Distribution 5Centralised ECG Services 2Clinical Research Training 8

Source – Pharmaceutical Technology Asia Pacific, March 2007

The Tempest Crystal Ball – India & China

•Post TRIPs new products will dry up in India by 2008. Under this pressure Indian companies will adopt different business models

•The global generic industry will be dominated by India

•Discovery companies will continue to be attracted to India

•China will be perceived to be stronger in biology/ toxicology

•Alliances between Western Biotech and Indian companies will expand

•It will be India & China - and not India or China.

“The Indian System looks ramshackleand improvised. But at its best it is capable of brilliance”

“When we say the Silicon Valley isbuilt on ICs we don’t mean integratedcircuits – we mean Indians & Chinese”

“The UK needs to wake up to whatIndia is becoming”

Source: DEMOS report – January 2007

Perceptions of India

Key Challenges to the Indian Scenario

Potential Challenge – Asian Flu*

*50% of world chickens bred in Asia

Potential challenge – Oil prices

Source – Assocham

• 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 – BP

CO2 emission - % of World total in 1990-2000

USA 23%EU 25 17%China 14%Russia 7%Japan 5%India 4%

– source: WRI, EIA

Potential Challenge – Climate Change

Potential Challenge – Infrastructure

Source – Manmohan Singh

“Our greatest potential will be realised only if we can ensure that ourInfrastructure does not become a severe and critical handicap”

Asia economic strength is returning to levels seen in the past

Many advantages for India – Demographics, Education India is a global strategic asset for developed markets Some “Challenges” – infrastructure, climate change

The current feeling in Indian Boardrooms is that a turning point has been reached, a tipping point has been passed and India’s time has arrived

India is a rich location for future alliances

MNCs will dip in& out of India & China, using their individual strengths

“China & India represent the future of Asia and quite possibly the future for the global economy” – Steve Roach, Morgan Stanley

Summary

Thank You