Opportunities in Drug Discovery & Healthcare: A Comprehensive Overview

1. Drug Discovery and Healthcare India’s Opportunities An overview

2. Disclaimerfacing the truth upfront • I am not a mechanical Engineer but I have a Ph. D. in mechanical engineering • I am not a life scientist by training but most of my patents and contributions are on life science • I am not part of the “movie industry” and yet I did receive an “Academy Award” (Technical Oscar) • I look very much “Indian” but I just begun to learn to think “Indian” • So take what I say with a proper sense of skepticism.

3. Background -Macro Factors • Global pharmaceutical business is in transition • R&D Productivity is a major pressure point • Large R&D Budgets • Industry ~ $55B • NIH ~ $23B in FY2002 • Increasing demand • Longevity is on the increase worldwide • 65,000 Centenarians in US today • 1Million by year 2050 • Emphasis on quality of life • Focus on wellness and disease management

4. It is all about “Knowledge” • It is a knowledge intensive business • Requires multi-disciplinary knowledge • IP Rights & barriers are derived from knowledge generation • Knowledge “production” has a direct impact on creating shareholder value

5. R&D - Industry Facts • Drug development cost too prohibitive – average cost is $800M and takes 10 - 15 years • Average sales per drug: $265M • >90% drugs generate sales <$180M • Genomics has created abundance of new targets. However, • R&D productivity is expected to decline while cost expected to increase in the near term • Patient stratification will further increase pressure on R&D cost • Patient stratification and segmented markets

6. Not all Drugs are Block Busters 1% 1% 2% 6% 90%

7. R&D - Industry Facts • Drug development cost too prohibitive – average cost is $800M and takes 10 - 15 years • Average sales per drug: $265M • >90% drugs generate sales <$180M • Genomics has created abundance of new targets. However, • R&D productivity is expected to decline while cost expected to increase in the near term • Patient stratification will further increase pressure on R&D cost • Patient stratification and segmented markets

8. #1 Pfizer $2.9b #18 Amgen $0.56b Pfizer $1.5b Amgen $0.28b Pharma/ Biotech R&D Spending Top 40 Companies Spent $40b on R&D in 2000 Development Research

9. Rate of Failure unchanged Reason for Failure unchanged Productivity & Bottlenecks Few NCE’s filed 1998: 42 1999: 41 2000: 32 2001: 34 19881997 • Efficacy: ~25% 30% • Toxicity: ~31% 30% • PK Issues: ~41% 39% Biocentury June 10, 2002

10. R&D Productivity R&D in $B NCEs

11. Increasing Competition

12. Patent Pressures • In 2000, 13 out of top 100 drugs came of patent (Represented $11B/yr) • In 2005, 53 of the top 100 drugs will be off patent (2000 sales $53B/yr) • Pharma needs 3 to 5 NCEs to maintain double digit growth

13. Significant Unmet Needs • In pharmaceutical R&D by • Increasing the probability of success, • Decreasing the time to market, or • Reducing the cost of a given phase of drug discovery or development • In diagnostics by • Reducing the time and cost of developing tests to address cost containment pressures • In healthcare delivery by • Using technologies to address inefficiencies in access & reach

14. Large Vs Small Interesting comparison (12/31/00) Biotech Index Merck

15. Where does India Fit in? The evolution has just begun

16. “INDIA” Advantage • Human resources • 10% of researchers and 15% of scientists in Pharma/ Biotech R&D in USA are of Indian origin • Large English speaking skill base: 3 million graduates, 700,000 post graduates & 3,000 PhDs qualify in bio-sciences each year • Speed & Low cost of innovation • World class scientific skills at significantly lower costs • Favorable policies & incentives • From central and state governments • Building the knowledge bridge • Real interest from US-based Indian pharmaceutical professionals

17. “India's” Promise • TRIPS compliant patent regime • Expected by 2005 • India ranks No:3 in Asia in patent filings • Huge potential for clinical trials and research • Access to vast & diverse disease populations. Indian companies, hospitals & clinics are beginning to comply with GCP guidelines • Bio-diversity • India’s human gene pools offer an exciting opportunity for genomic research and pharmacogenomic validation • International and domestic VCs • Beginning to show interest in the Indian Biotechnology segment

18. Challenges • Missing link between research and commercialization • Absence of entrepreneurial venture capital • Thin supply of well-trained domain specific management talent • Relatively low R&D expenditure by industry • Image of Indian industry – doubts about ability of to meet high standards of quality

19. What is the Road Ahead? • 2 +2 = at least 3 strategy • Incremental • Narrow exploration • Opportunities around the current capability • 2 + 2 = can be 8 strategy • Leverage the present • Look for new opportunities where the current capability plus the new brings unique advantages

20. Opportunity Space – Big Picture • Enabling niche opportunities to become economical through access to low cost R&D • “un orphanizing” compelling opportunities • Enabling faster R&D through access to a larger pool of skilled resources at affordable costs • “faster, better and cost efficient” • Enabling the exploration of alternative development methodologies by reducing the amount of risk capital • “out of box thinking made affordable”

21. IT Experience • Low cost labor focus • Transitioning to skill based services now • Struggling to move-up the value chain • No creation of leveraged “technology” • Minimal direct impact on internal “economic production”

22. The “Big Questions” • What are the lessons learned from IT experience and how not to repeat the mistakes? • How to focus on low cost of “knowledge generation” and not simply on access to low “cost of labor”? • Can integrated policies and “R&D” infrastructure investments impact length and size of “opportunity cycle”? • Is it possible to achieve synergistic growth leading to highly valued “solutions” and not result in simple execution of discreet tasks.

23. Summary • Global “Healthcare” is entering a period of monumental challenge • Ability to “ride” the wave will depend on whether one is over it or under it • Knowledge driven approach will be the key differentiating factor • Great opportunity to create “wealth “ for the nation but more importantly contribute to the “health” of the nation

24. Thank you