Succeeding in Japan

Dr. Brian W Tempest

Chief Mentor & Executive Vice Chairman of the Board
Ranbaxy Laboratories Limited, Delhi, India

India Japan Initiative
Mumbai 2
nd
February 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
Where is the Worlds 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
Where are the Worlds Pharmaceuticals sold?
USA
Japan
Germany
France
Italy
UK
Spain
Canada
China
Mexico
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%
Japans GDP
A race to prosperity
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 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
Global Size Companies

4 companies of global size
Fugisawa + Yamanouchi = Astellas (April06)
Sankyo + Daiichi
Takeda
Eisai

Mid Size Companies

Move to niches and/or generics
Shionogi
Tanabe
Mitsubishi

Both Japan & India are hungry for Information

1. China 123 m
2. Japan 86 m
3. India 51 m
4. S.Korea 34 m



Source: Business Today, Sept. 24, 2006



1. China 421 m
2. USA 190 m
3. Japan 157 m
4. Russia 148 m
5. India 116 m


Source: Times of I ndia, Sept. 14, 2006


Internet Usage Asia
Mobile Phones
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



- 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
0
20
40
60
80
100
120
140
160
2002 2003 2004 2005
24
46
64
144
ANDA Filings in USA by Indian Companies
The Pharma Advantage APIs
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%
Q106 44% 15%
Q206 41% 16%
Q306 45% 17% (latest)
Source: US FDA / J P Morgan, 6
th
August 2006




Source: US FDA, Credit Suisse
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
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

Most attractive R&D Investment locations:
Ranked 3
rd
- 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



The Productivity Advantage
India a usa Pharma view USA

1 chemist Better education x 1.3 1 chemist
70 hours/week Longer working time x 1.3 50 hours/week

$ 800 monthly Lower cost x 20 $ 12,000 monthly
Sources: IPHMR Conferences, New Delhi August 2004
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
Source: UBS, Businessworld, 30
th
October 2006
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)


Source: JP Morgan Asia Pacific, Equity Research 16 November 2005
Nippon Chemipher Generics Business
0
2
4
6
8
10
12
14
Q3A Q4A Q5E Q6E Q7E Q8E Q9E
4.3
5.4
6.2
8.5
7.3
10.00
11.50
Yen billion
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 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

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


Thank You