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India – a growing player

India – a growing player. Dr. Brian W Tempest Chief Mentor & Executive Vice Chairman of the Board Ranbaxy Laboratories Limited Frankfurt – 15 th March’06.

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India – a growing player

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  1. India – a growing player Dr. Brian W Tempest Chief Mentor & Executive Vice Chairman of the Board Ranbaxy Laboratories Limited Frankfurt – 15th March’06

  2. 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

  3. Asia’s Share of the World GDP (at PPP in %) Year18701913 195019732001 China 17% 9% 5% 5% 12% India 12% 8% 4% 3% 5% Japan 2% 3% 3% 8% 7% Rest of Asia7%5%7%9%13% Total Asia38%25%19%25%37% Source – WEF

  4. Davos 2006 Source – FT

  5. The Productivity Advantage India a usa pharma viewUSA 1 chemist FTE 1 chemist FTE Better education x 1,3 70 h/week50 h/week Longer working time x 1,3 $ 800 monthly $ 12,000 monthly Lower cost x 20 Sources: IPHMR Conferences, New Delhi August 2004

  6. 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 - one child families - get older before becoming wealthy - labour costs will rise owing to labour shortage - rural to urban flow • India - will remain very young - source of the extra needed global workforce

  7. The R&D Investment Advantage Most attractive R&D Investment locations: 1. China 2. USA 3. India 4. Japan 5. UK Source – UNCTAD 2005

  8. 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

  9. The R&D Investment Advantage - research institutions in India Genetic engineering research 165 Transgenic work 55 Therapeutics 25 Basic research 28 Universities > 250 Source – Dept. of Bio-technology

  10. 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

  11. The Knowledge Advantage

  12. 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 5% Good 29% Basic/uninspiring 41% Unsafe/unsatisfactory 25% Source – Royal Society of Chemistry, Policy Bulletin – Winter 2006

  13. 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

  14. The FDI Advantage $b 2001/2 6.1 2002/3 5.0 2003/4 4.7 2004/5 5.5 2005/6 6.5 - But still only at 10% of PRC levels

  15. Investment by top 15 Indian Domestic Pharmaceutical Companies $m 2000 110 2001 160 2002 200 2003 250 2004 400 2005 450 Source – Citigroup

  16. Investment by foreign Pharma companies

  17. 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)

  18. The Potential for Improvement Advantage • Manufacturing growth ‘90’ - 03 - Chinese manufaturing +12% (90-03) - India manufacturing +6.5% • Scope for improvement of Government Policies • Revitalisation of agriculture • Further privatisation • Further encouragement of R&D • Prosperous middle class 300m strong

  19. 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

  20. The Medical Tourism Advantage • High quality healthcare • Patients from developed & developing countries • Growing Privatisation • International standards • Low Costs: Thailand India - Open heart $14250 $4400 - Hysterectomy $ 2012 $ 571 - Knee surgery $7000 $4500 • Better access through airports likely

  21. The Global Generic Pharma companies Annual Sales (US$ Millions) Source : Company /Financial reports & presentations

  22. Chindia share of all API* filings % 1999 13% 2000 17% 2001 20% 2002 30% 2003 35% 2004 40% Source – Citigroup *DMF – Drug Master Files

  23. The Global Generic Market $b 20042009 USA 15 27 W Europe 9 14 Japan 3 4 Rest of America 6 9 ROW 2540 Total 58 94 Source: Frost & Sullivan

  24. The Generic Pharma Landscape Fundamental drivers of growth High healthcare costs Total Healthcare Spending, % of GDP Source: World Bank, DB Global Pharma Report Aug 2005, OECD Health Data 2005 (1) – 2002, UBS European Pharma Report, Sep 2005

  25. The Generic Pharma Landscape Fundamental drivers of growth Demographics Estimated % of regional population over 60 Source: World Bank, DB Global Pharma Report Aug 2005, OECD Health Data 2005 (1) – 2002, UBS European Pharma Report, Sep 2005

  26. The Generic Pharma Landscape Fundamental drivers of growth Patent Expiries $ Bn Revenues Patent expiry, 2006 - 10 Source : Global Generic Drug Stocks Citigroup Smith Barney, September 2004, IMS Health : MIDAS , MAT June 2005

  27. The Generic Pharma Landscape Fundamental drivers of growth % Growth Constant $ Generics 13% 23% 8% 11% 38% 8% 9% 31% 20% 19% 36% 20% 20% 36% 16% 30% 10% 7% 2% -2% 2% 8% 13% 5% 4% 20% 2% % Share (Volume) % Share (Value) Source : Global Generic Drug Stocks Citigroup Smith Barney, September 2004, IMS Health : MIDAS , MAT June 2005

  28. Ranbaxy Strategic Direction • Growth through • - Organic • - Inorganic 2012 US $ 5 Bn 2007 US $ 2 Bn 2004 • Amongst the Top 5 • generic Companies US $ 1 Bn • Significant income • from proprietary products

  29. Competitive Advantages Aggressive Home Market

  30. Competitive Advantages Cost of Manufacture Active Pharmaceuticals Facility, Mohali Dosage Forms Facility, Paonta Sahib • Highest number of FDA approved plants outside the US

  31. Competitive Advantages Cost of Innovation R&D I R&D II R&D III R&D IV

  32. Potential Downsides

  33. Potential downside – Asian Flu

  34. Potential downside – Oil prices Source – BLS, ELA, The Conference Board

  35. Potential downside - Infrastructure Source – FT

  36. Potential downside – Counterfeit products Origin of fake products seized in EU in 2004 Rank • China • Thailand • Hong Kong • Turkey • USA Source: FT Countries where fake pharma products seized in 2005 Rank • Russia • China • South Korea • Peru • Columbia Source: PSI

  37. Summary Asia economic strength is returning Many advantages for India Some downsides The feeling in India a turning point has been reached and passed

  38. “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.”

  39. Thank You

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