a ringside view of the pharma industry by ranjit shahani

A Ringside View of the Pharma IndustryA Ringside View of the Pharma IndustryRanjit Shahani, Country President, Novartis IndiaPresentation at ValuexIndiaPresentation at ValuexIndiaMumbai, November 7, 2011

Agenda

1. A quick look back

2. Key trends shaping the future

3. Major Challenges

4. Emerging Markets

5. Opportunities & Questions

| Ranjit Shahani | ValuexIndia | November 2011 | Business use only2

Pharma outperformed the S & P 500 for over 20 years

Total returns to shareholdersIndex; 1985 = 100

2,000

1,500 Pharma*

1,000 S&P 500

500

01984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

* Market-cap weighted averageSource: Standard & Poor Index Platform

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

3| Ranjit Shahani | ValuexIndia | November 2011 | Business use only

Then an unprecedented scale and scope of financial crisis ...

Bank write-downs (Citi, UBS, HSBC)

U.S. Mortgage losses (~700 Bn)

EU and IMF launch€750 bn rescue plan

U.S. proposed financial act

Bear Stearns collapse

Lehman bankruptcy ECB 95 B

Euro injection

Greece sovereign debt downgraded

Italy emergency budget

Citigroup bailout ($45 bn)

Northern Rock BoA – Merrill

$85bn AIG bail out

y g y gto reduce deficit by €24 bn

nationalized

Barclays and UBS capitalUBS capital plans

World Equity index

2007 2008 2009 2010SOURCE: Datastream world index; press articles;


Characteristics of Pharma so far

1960 t 19701890 t 1950 1960s to 1970s1890s to 1950s15

Market growth 2001-06CAGR, %

Innovation ledA1960s to 1970s1890s to 1950s

Innovation ledA1960s to 1970s1890s to 1950s

Less important role of payorsBN th A i

Asia/Africa/Australia

Latin America

10

• Strongly outperformed S&P500 last 20 years

Innovation led

Less important role of payors

A

B

1980s to 1990s 2000s and beyond1980s to 1990s 2000s and beyondPhysician driven decisionsC

US major growth driverD

North AmericaEurope

5

• High margins

• Product companies have

Physician driven decisions

U.S. major growth driverC

D

Japan

5Focus on medicines – not servicesEUniform/less complex distributionF

pcreated most value in the health care space

Focus on medicines – not services

Uniform/less complex distributionE

F

0 50 100 150 200 250 300Market size 2006

0

Billion USD


Agenda



3 Major Challenges3. Major Challenges

4. Emerging Markets


g g


Key trends shaping the future of Pharma

Opportunities:Significant unmet medical needs

Challenges:Worldwide cost containment

Aging population Price cuts & generic penetration

Lifestyle diseasesRisk averse regulators

Growing demand in emerging markets

Innovation productivity

Industry reputationIndustry reputationAdvances in science & technology


Trends

1 Lots of unmet needs remain

2 Poor lifestyle leads to increased demand for drugs

3

Wealth – People are getting richer and will spend

Explosion of biological knowledge

4

5

Wealth People are getting richer and will spend more on health care

Demographics – Aging and growing populations

Information – Rise of consumerism and the informed patient6


1Lots of unmet needsExample: Still no cure for dengue fever

Areas with Dengue fever

Some 2.5 billion people – 40% of the world’s population – are now at risk from dengue. WHO currently estimates there may be 50 million cases y yof dengue infection worldwide every year


2Poor lifestyle leads to an increase in the demand for drugs

10 | Ranjit Shahani | ValuexIndia | November 2011 | Business use only

3Fundamental knowledge of biology: genomics, proteomics, metabolomics


Biologics have revolutionized modern medicine – and will continue to do so3

Offer real hope for many unmet needs, particularly complex diseases

Bind to specific targets – simply not possible with other medicines

Contribute significantly to improved survival rates, enhanced longevity, and better quality of life

Human genome

Stem-cell Leading biotech brands emergeCommercial

Today / future

researchGene therapy

1990s to today

brands emerge

1950s

DNA moleculedecoded

Genetic code cracked

1960s

Basic biotechnology

enabled

1970s

biotech firms founded

1980s Today / future1990s to today1950s 1960s 1970s

Source: Company websites and annual reports Note: All trademarks, logos and pictures are the property of the respective owner

1980s


3 Biologics are more complex than small molecules…

Monoclonal Antibody (IgG)CalcitoninAspirin® Antibody (IgG)

simple biologic small chemical molecule

Calcitonin

complex biologic

Aspirin®

Molecular weight Molecular weight Molecular weight = 180 Daltons0 amino acids

= 150,000 Daltons~ 1300 amino acids

- w/host cell modifications(glycosolations, etc)

= 3,455 Daltons~ 32 amino acids

- w/o host cell modifications- produced in yeast, bacteria (glycosolations, etc)

- produced in mammalian cellsproduced in yeast, bacteria


3 New trends in drug discovery

Many Opportunities for scientific breakthroughs

Patient stratification di t ti Pathways

Targeted therapies

according to genetic profile

siRNA

Pathways

Biologics

siRNA

Regenerative medicineg

Translational medicine Stem cells

Reverse vaccinology100,000

200,000

300 ,000

400,000

500 ,000

600 ,000

700,0001,600,000

1,700,000

1,800,000

1,900,000

2,000,000

2,100,0002,200,000 1

Gene therapy800,000

900 ,0001,000,000

1,100,0001,200,000

1,300,000

1,400,000

1,500,000


4 Wealthy people will spend more on healthcareTotal health spending vs. GDP, 2007Per capita, USD at PPP

* 2007 health spending dataSource: OECD


GDP in USD trillions4 Geographical Growth Forecast

12.5US 12.5U.S.

2005E

20.8U.S.

2030E

2.8Germany

2 3China

4.6Japan

2.8Germany

2 3China

4.6Japan 14.3China

5.8Japan

4 9India2.3China

2.1France

2.2UK

2.3China

2.1France

2.2U.K.

2.7Germany

4.9India

2.9Russia

1.8Italy

1.1Canada

1 1S i

1.8Italy

1.1Canada

1 1S i

2.3France

2.6U.K.

2 2B il1.1Spain

0.8India

1.1Spain

0.8India 1.9Canada

2.2Brazil

China and India have already The four BRIC markets will

Source: Global Insights – WMM; GS BRICs Report

yentered the top 10 account for a third of world GDP


5 Demographics: aging and growing populations


5Today’s ‘pyramid-shaped’ population profile will become ‘urn-shaped’ by 2050

45

Females

MalesWorld population by age and sex, 2000Millions, LE* = 65.4

80+75-7970-7465-6960-64

4546

6681

97

2432

5372

9060 6455-5950-5445-4940-4435 39

107133

164182

209

90104

132166

18721535-39

30-3425-2920-2415-19

209233

245249

271

215240

255260

28510-14

5-90-4

294295300

311311317

* LE = Life ExpectancySource: UN, World Population Prospects: The 2002 Revision and World Urbanization Prospects: The 2001 Revision


5Today’s ‘pyramid-shaped’ population profile will become ‘urn-shaped’ by 2050

Females

MalesWorld population by age and sex, 2050Millions, LE* = 74.3

236157

182216

247

142125

159201

242

80+75-7970-7465-6960-64247

255261

271283

295

242257268280294

307

60 6455-5950-5445-4940-4435 39295

301301299298

307

312311

35-3930-3425-2920-2415-19

295293288

309306302

10-145-90-4

* LE = Life ExpectancySource: UN, World Population Prospects: The 2002 Revision and World Urbanization Prospects: The 2001 Revision


5Aging and the continuing rise of chronic diseases will further increase demand for healthcare services

Incidence Economic impact

3.0Population, Bn $ Bn

1,180Indirect3Direct2

Obesity1

1.6 +88%

380+211%

20202005366

20232003430

Diabetes

171+114%

130+226%

1 Obese and overweight, BMI >25

20302000 20232003

2 Direct costs of medical treatment (e.g. hospital, outpatient care, drug costs)3 Loss of productivity and lost working daysSource: Wild et al. (2004); Boyle et al. (2001); Credit Suisse estimates


5 As people get older: prevalence of e.g. Alzheimer’s will grow out of proportion compared to today

Prevalence of Alzheimer’s disease%

47

19

3

AgeYears

65-74 >8575-84


6 Rise of consumerism and the informed patient

Number of weblogsMillions

8

Virtual people networks and virtual worlds>181 million

6

8 blogs > 750 million active users 180 million monthly

4

50 million users

~ +400% unique users

60 million users

0

250 million users

Widely dispersed online 0 > 4 million usersinteractive communities

that overcome geographical barriers

Mar Jul Nov2009

Mar Jul Nov2010


Agenda



3. Major Challenges j g

4 Emerging Markets

5 Opportunities & Questions

4. Emerging Markets



Major Challenges

1 R&D costs pulling ahead of output

2 Government pressure on price

3 Unmet medical needs remain

Commercial model in transition4

Pharma’s negative image a real challenge5


1 Declining R&D Productivity…

25

30NMEs per bn USD

20

25

Today0 5 NMEs per bn USD –

10

15 0.5 NMEs per bn USD –a factor 50 worse than 35 years ago…!

0

5

1970 1975 1980 1985 1990 1995 2000 2005* Does not include Biologics NDAs

Source: NME data for 1966-1971 from Peltzman, S. (1973) Journal of Political Economy 81, no. 5: 1049–91. NME data for 1972-1979 as reported in Hutt, P.B. (1982) Health Affairs 1(2) 6-24. NME Data for 1980-2005 from Parexel’s Pharmaceutical R&D Statistical Sourcebook 2006/2007, Food and

1970 1975 1980 1985 1990 1995 2000 2005

Time

Drug Administration, and Pharmaceutical Research and Manufacturers of America. Industry R&D spend data from the Pharmaceutical Research and Manufacturers of America, PhRMA Annual Membership Survey, 2006


1 ….major issue in the Pharmaceutical Industry

Decreasing internal rate of return on R&D1

IRR percent

Industry R&D spending per new NME approved

$ B

12.0

IRR, percent

3.7

+208%$ Bn

7.5-38%

1.72.0

3.0

1.2

’02-’06’97-’01’06-’08’04-’06’02-’04’01-’03’98-’00

1 IRR 2002-2006: Model based on the performance of all drugs from EvaluatePharma database that were on patent and actively marketed between 2000 and 2006 (~2,500 compounds worldwide); IRR 1997-2001: p y ( , p );Analysis using the model described above but substituting 1997-2001 attrition rates and development times.

Source: Annual reports; Bloomberg, EvaluatePharma, Pharmaprojects, NACDS;


2Pressure on prices as country’s healthcare costs grow faster than GDP

Index IndexIndex

Index: 1992 = 100Per capita HC cost 2006

$3,300 $ 2,800 $ 2,300

Wages1

HC Exp

GDP200

300

200

300

250

400

92 97 02 07 92 97 02 0792 97 02 07100 100 100

$3,930 $ 2,890Index Index

$ 6,675Index

300 300 400

92 97 02 07 92 97 02 0792 97 02 07100

200

100

200

100

250

1. Average nominal wage indexNote: Index on basis of local currency; Per capita HC cost 2006 at exchange rate of 1 USD=0,797 €, 2005: 110,22 Yen/US$Source: OECD Health Data 2008; EIU; BCG analysis


3Unmet medical need remains across disease areas despite medical progress

▪ Alzheimer’s▪ Anticoagulants

▪ MRSA▪ Multiple sclerosis

▪ Autism ▪ Chronic obstructive pulmonary

disease▪ Chronic renal failure

▪ Muscular dystrophy ▪ Myocardial infarction, acute (AMI) ▪ Obstructive sleep apnoea (OSA) ▪ Ovarian cancerChronic renal failure

▪ Cocaine addiction▪ Colorectal cancer▪ Congestive heart failure

Di b ti h th

Ovarian cancer▪ Pancreatic cancer▪ Parkinson’s disease ▪ Prostate cancer

R l f il h i▪ Diabetic nephropathy ▪ Diabetic retinopathy ▪ Epilepsy▪ Hepatic cancer

▪ Renal failure, chronic ▪ Rheumatoid arthritis▪ Schizophrenia ▪ Septic shock p

▪ Hepatitis C treatment ▪ HIV treatment ▪ Lung cancer▪ Lymphomas

p▪ Stroke, acute ▪ Systemic lupus erythematosus (SLE) ▪ Traumatic brain injury ▪ Type 2 diabetes▪ Lymphomas ▪ Type 2 diabetes


4Industry has responded to these challenges with mergers and job cuts

33.600235.000

S&M

R&DManufacturing

Jobs cut as % of staff Jan 2006

30%4 19%5 23% 19% 6% 4% 4% 3%1 1%12%4%

Announced job cuts by function 2006-2009

29.5003

33.600

30.000

25.000

# Jobs cut(000)

R&DUnspecified

15.000

20.000

15.000

7008002.548

3.8484.0004.1396.000

8.01110.000

5.000

LillyRocheJ&JNovartisSanofi-Aventis

GSKBMSAZPfizerMerck Abbott

0

To retain historic profitability pharma industry has to cut costs wherever possible

1. For J&J and Abbott total staff includes non-pharmaceutical business units, J&J excluding medical devices 2. Includes job cuts after merger with Schering-Plough 3. Includes job cuts after merger with Wyeth 4. Includes employees of Schering-Plough as of Dec2008 5. Includes employees of Wyeth as of Dec2008

Source: Factiva, Jan 2006 – Jul 2009; BCG analysis

has to cut costs wherever possible


5 Pharma’s negative image a real challenge

Drug safety Understating the adverse reactions associated with a drug

Clinical trials

g

Failing to disclose the full results of clinical trials

Drug prices

Sales practices

Ignoring social responsibilities in pricing for the developing world

Spending too much on sales & marketing and diverting p

Investor relations

p g g gfunds from R&D

Ignoring negative publicity

Innovation Spending R&D funds to develop “me-too” drugs

Source: PWC


Agenda



3. Major Challenges

4. Emerging Markets

5 Opportunities & Questions5. Opportunities & Questions


The Indian Pharmaceutical Market

CharacteristicsHi hl f t d (53 868 B d )

Highly fragmented Highly fragmented (53,868 Brands )

Top 50 companies contribute to 85% Top 300 brands contribute to 32%

fragmented industry

Top 300 brands contribute to 32% Retails Sales (91%) and Institutional Sales (9%) 5.5 Mn. Pharmacies Low priced ‘branded generic’ market (84%+) Acute therapies (74%) dominate over Chronic

Therapies (26%) Combination Drug Market (62% of new introductions in

2010)2010)

35

Source: IMS /AIOCD

| Ranjit Shahani | ValuexIndia | November 2011 | Business use only

Key Market Types y yp

Market Size US$ 12.1 Bn.Market Size US$ 12.1 Bn.

OTC8%

Branded Generics

84%

Source : AIOCD-AWACs Apr 2011


Indian Pharmaceutical MarketTop 10 Products

Top 300 brands = 32%, Top 10 brands =

3.69% Top 10 Products

Rank Products TG Company Value(Rs. Cr.)

%GR

1 Corex Cough Preparation Pfizer 205.7 4.1

2 Human Mixtard30/70

Insulin Abbott 193.3 15.4

3 Monocef Cephalosporin Aristo Pharma 185 4 17 43 Monocef Cephalosporin Aristo Pharma 185.4 17.4

4 Voveran NSAID Novartis 183.9 7.0

5 Augmentin Amoxy + Clav GSK 173.2 5.5

6 Taxim Cephalosporin Alkem 148.4 13.7

7 Taxim O Cephalosporin Alkem 145.1 18.4

8 Revital Nutritional Ranbaxy 144.6 14.5

9 Dexorange Haematinic Franco Indian 139.4 8.4

10 Betadine Antiseptic Win Medicare 140.5 12.8

Source: AIOCD – April 2011


Healthcare EnvironmentRegulatoryRegulatory


Price Controls

100% of the industry currently under price control 100% of the industry currently under price control.

20% on cost-based price control

80% on price monitoring (para 10b)


Price Control TrendDecontrol has not resulted in increase in prices

No. of Molecules under price control

Decontrol has not resulted in increase in prices

300

400 345

0 7

…Real prices have declined year on year

New Drug Policy

100

200 145

740.20.40.60.8

0

0.50.7

0.7

01979 1987 1995 2008

-0.4-0.2

00.2

-0.5-0.7

-0.2

0

-0.8-0.6

2002 2003 2004 2005 2006 2007 2008


Medicine vs Commodity Prices

Per day treatment cost for common ailment

Rs. Average cost of common goods & services of daily consumption

Rs.

(one time)

Common headache 1.00 Cup of tea 5.00Common allergy 0.75 Thali meal 30.00Common cold 1.50 Milk (half litre) 12.00Gas trouble (antacid) 3.00 Egg 2.50Asthma 0.45 Banana 2.00Diarrhoea 1.20 Suburban train ticket (return) 8.00Amoebiasis 1.10 Bus fare (minimum) 3.00Diabetes 0.70 Inland letter 2.50Blood pressure 1.75 Newspaper 2.00Angina (chest pain) 0.55 Public telephone call 1.00Arthritis 1.50


India Key Challenges

Product Patent 1 2 Counterfeit DrugsWorld class IPR

Drug Price

Addressed by … • Engaging with G t

World class IPREnsure deterrent legislation against counterfeit marketers

Drug Price Control Order

35

Government• Dialogue with MediaMultiple stakeholders need to be engaged

Reduce rigours of price control 35

High Import tariffs

need to be engaged

Reduce import

price control

4Data Protection and Compulsory Licensing

Reduce import tariffs to ASEAN levels

D t t ti f 5Data protection for 5 years


Emerging markets will grow significantly in the next 10 yearsGDP in $ trillions, 2008-18

109

CAGR

2008-18

y

Developed* 62 4%markets* 62

62

4%

Emerging

42

47

Emerging markets will represent 43% of theworld’s GDP

Emerging markets*

47

20

9%world s GDP by 2018

* As determined by FTSE Global Equity IndexSource: Global Insight’s World Overview

2008 2018


BRIC country GDPs are climbing worldwide rankings, demonstrating double digit growth

Ranking Economy2009 GDP, in USD tn

1 US 14 3

CAGR 2000-2009

4%

g , g g g

1 US 14.3

2 Japan 5.1

3 China 4.9

4%

1%

17%

China’s 2Q 2010 GDP was higher than Japan’s!

4 Germany 3.3

5 France 2.6

6 UK 2.2

7%

8%

4% As emerging

7 Italy 2.1

8 Brazil 1.6

9 Spain 1 5

7%

10%

10%

g gmarkets become more affluent, diseases of affluence 9 Spain 1.5

10 Canada 1.3

11 India 1.3

10%

7%

12%

become more prevalent

12 Russia 1.2Source: World Bank, July 1 2010; Reuters, Aug 15 2010

19%


Spending on pharmaceuticals in these markets is expected to grow at 5x

Emerging markets pharma growth Emerging markets pharma growth

Estimated pharma sales ($Bn)

p g

322700800900Estimated pharma sales ($Bn)

Emergingk

232

165

322

500600700

WesternE

markets+10%

+2%

Emerging markets represent:

95% of all population growth

43% of all GDP growth202232

200300400 Europe

334291

+2%

+2% US

43% of all GDP growth

500 million new consumers

0100

2015E2008

291

+x% Est. CAGR 08-15Est. CAGR 08 15

Note 1: Western Europe is France, Germany, UK, Italy, Spain, Greece, Belgium, Sweden, Ireland, Netherlands, Norway, Finland, Denmark, Switzerland, Austria and Portugal. Emerging covers the other countries but excludes Japan, US and CanadaSource: IMS; EIU; BCG analysis


Growth in Emerging Markets is supported by expansion of venture capital

Venture capitalist expectations increase/decrease in investment over the next 5 years (percent of respondents)

p p

92 9176

Increased investment

Germany Israel U.S. U.K. France

-44 -50 -56 -61

Brazil China India

6

-89

Decreased investmentSource: 2010 Global Venture Capital Survey by Deloitte LLP (July 2010)


As emerging markets grow, they will likely increase spend on healthcare

6 0

700

Pharma spend per capita, 2009US$ at constant exchange rate

France

United States (off scale) GDP/cap

p

500

550

600

650

Portugal

Switzerland

Denmark

Ireland

FinlandAustria

Belgium

Canada

Germany

JapanIncreased healthcare spending as GDP increases

350

400

450

SlovakiaH

Netherlands

Sweden

Australia

Germany

UK

ItalySpain

Slovenia

150

200

250

300

Czech

South Korea

Slovakia

Estonia

Hungary

Croatia

Latvia

LithuaniaPolandVenezuela

TurkeyRomania

New ZealandIsraelDecreased healthcare spending

0

50

100

70 00065 00060 00055 00050 0005 000 45 00040 00035 00030 00025 00020 00015 00010 000

Saudi ArabiaTaiwan

Russia

Mexico

yRomania

Malaysia

ArgentinaBrazil

Bulgaria

South AfricaChina

EgyptIndia

0

SingaporeHong Kong

healthcare spending as GDP growth slows

GDP per capita, 2009US$ at constant exchange rate

70,00065,00060,00055,00050,0005,000 45,00040,00035,00030,00025,00020,00015,00010,0000

1 Note: R2=0.8, N = 63, United States outlier excluded from the regression analysisSOURCE: World Market Monitor; IMS


Agenda



3. Major Challenges

4. Emerging Markets



Pharmaco innovation can capture value in the near term by…y

Developing the right therapy1

Identifying the right patientMaximize the

value of 2 y g g pHealth Care

Driving the right treatment3


But in the future ... “Chip in the pill”

Sensors in pills Wearable patch Communications

InvolveImprove Understand Involve patients in their own care

Improve medication adherence

Understand physiologic response


Those are some trends in the near future...what are the trends for 2020 and beyond?y

Phase II

2020+

2010 Ph I

Geographical shift of innovation?

2010 Phase I• Adapting to changing business conditions

• Developing new products• Exploiting competitor weaknessweakness


20 years ago …20 years ago …

G7China World Wide Web


… who would have imagined?… who would have imagined?

G20China Mobile Web


Four Crucibles of Innovation that will shape the next decade and beyond

The great The economic centre of gravity will shift fromThe great rebalancing

The economic centre of gravity will shift from developed to developing countries1

TheThe productivity imperative

To sustain wealth creation, developed countries will need to find ways to boost productivity2

The global grid and technology

Innovative businesses will harness the power of an increasingly interconnected global economy3

Pricing the planet Resource scarcity will drive innovation4


The great rebalancing

Most patent applications

16

2 7Emergence of new centres of

4

3 8

9

innovation

4

5

9

10No U.S. company in the top ten


Old India

New India

...new innovative ways of working

Pipeline – Indian Pharma Companies

Company NCE Pipeline Key Therapeutic AreaBiocon Preclinical – 2 Inflammation, Oncology,

Phase II – 2Phase III – 1

Diabetes

Piramal Healthcare 13 Compounds in Clinical Trials

Oncology, Infectious Diseases, Diabetes InflammationClinical Trials Diabetes, Inflammation

Glenmark Discovery – 4Preclinical – 5Phase I – 1

Metabolic Disorders, Dermatology, Inflammation

Phase I 1Phase II – 3

Ranbaxy Preclinical – 4-6Molecules

Metabolic Diseases, Infectious Diseases, Respiratory Diseases,

Phase II – 1, p y ,

OncologySuven Life Sciences

Discovery – 2Preclinical – 4

Neurodegenerative Diseases, Obesity, Diabetes, Inflammatory

Phase I – 1 DiseasesSource: Industry sources


Pipeline – Indian Pharma Companies

Company NCE Pipeline Key Therapeutic Area

Dr Reddy’s Lab Pre-clinical – 1Phase II – 2Phase III – 1

Metabolic Disorders, Cardiac, Oncology

Advinus Pre-clinical – 3 Diabetes, Cardiac, Lipid Disorders

Wockhardt Preclinical – 10 Infectious Diseases,Wockhardt Preclinical 10Phase II – 1

Infectious Diseases,

Lupin Discovery –2P li i l 1

Migraine, Psoriasis,T.B.Pre-clinical – 1

Sun Pharma Discovery – 2NDDS – 1

Allergy, Muscle Relaxant,, Inflammatory Diseases, Pain yManagement

Source: Industry sources


Collaborative Research

Indian Company

Molecule Indication Nature of Deal

Global Partner

Remark

CadilaHealthcare

Not disclosed

Cardiovascular Collaborative research

Eli Lilly To discover and develop new cardiovascular drugs for a span of six years

Cadila Not Inflammatory Collaborative Karo Bio To develop a newCadilaHealthcare

Not disclosed

Inflammatory diseases

Collaborative research

Karo Bio To develop a new compound that targets the Glucocorticoid receptor for treatment of inflammatory disorders

Torrent Not disclosed

Hypertension Collaborative research

Astra Zeneca To discover a novel drug for hypertension for Rs 1.2 billion

Suven Life Pre-clinical CNS Joint Eli Lilly Partnering deal for earlySuven Life Sciences

Pre clinical drug candidate

CNS Joint development

Eli Lilly Partnering deal for earlyphase research for discovery of NCEs

Dr Reddy’s DRF 1042 Cancer Joint development

ClintechInternational

Co-development and commercialisationpagreement

Source: KPMG, Cygnus Research


Out-licensinggIndian Company

Molecule Indication Nature of Deal

Global Partner

Remark

Orchid Not disclosed Anti-infectives License agreement

Merck & Co. To discover and develop Novel drug anti infectives for USDanti-infectives for USD 100 million

Alembic NDDS for Keppra-XR

Anti-epileptic Out-licensing UCB, Belgium

Out-licensed for milestone payments of USD 11 million andUSD 11 million and royalty on future world net sales

Glenmark GRC 3886 Asthma, COPD Out-licensing Forest Labs Out-licensed to Forest Labs for USD 190Labs for USD 190 million for North American markets

Glenmark GRC 3886 Asthma, COPD Out-licensing Tejin Pharma Out-licensed to TejinPharma for Japanese pmarkets

Source: KPMG, Cygnus Research


Indian Pharmaceutical Exportsp

Source: ibef.org


Generics to drive growth of exports from Indiag p

Source: ibef.org


Recent M&As in the Indian pharmaceuticals industry

Companies involved Value US $ BillionAbb tt & Pi l H lth 3 7

industry

Abbott & Piramal Healthcare 3.7

Hospira & Orchid Chemicals 0.4

Sanofi-aventis & ShanthaBiotech

0.7

Reckitt Benckiser & Paras 0.7PharmaceuticalsMylan & Matrix Laboratories 0.9

Ranbaxy & Daiichi Sankyo 4.6

Dabur Pharma & Fresenius 0.3

Source: UBS, internet


M&A Partnership deals 2011 – Indian pharmaceuticals industry (1/4)

Deal title Deal type Date of deal announcement

Details

The formation of B Z d

pharmaceuticals industry (1/4)

Bayer and Zydus Cadilasign Joint Venture Agreement to strengthen pharmaceutical business in India1

Joint Venture January 28, 2011

• Bayer HealthCare and the Indian company ZydusCadila recently signed an agreement in Mumbai, India, to form the Joint Venture Company Bayer Zydus Pharma. With this newly established marketing and sales enterprise, Bayer aims to enhance its presence in the fast growing

h i l k i I di

Bayer ZydusPharma is in line with Bayer’s strategy to build a stronger presence in the emerging

k tpharmaceutical market in India.

Merck & Co., Inc., and Sun Pharma Establish Joint Venture to Develop • Merck & Co. and Sun Pharmaceutical Industries

markets

This collaboration is aimed atJoint Venture to Develop

and Commercialize Novel Formulations and Combinations of Medicines in Emerging Markets2

Joint Venture April 11, 2011 Ltd. Recently announced the creation of a joint venture to develop, manufacture and commercialize new combinations and formulations of innovative, branded generics in the Emerging Markets

is aimed at expanding Merck’s presence in the emerging markets

Source(s): 1. Bayer and Zydus Cadila sign Joint Venture Agreement to strengthen pharmaceutical business in India , Bayer Press Release, January 28, 2011; 2. Merck & Co., Inc., and Sun Pharma Establish Joint Venture to Develop and Commercialize Novel Formulations and Combinations of Medicines in Emerging Markets, Merck Press Release, April 11, 2011




Details

( )


New England BiolabsEnters into Distribution Agreement with Imperial Life Sciences in India1

Distribution/Marketing April 12, 2011

• New England Biolabs (NEB), a leading company in the production and supply of reagents for life science research, recently signed exclusive distribution agreement with Imperial Life Sciences (ILS), a biosupplier company based in India that currently supplies reagents and instrumentation for genomics proteomics cell biology and

This agreement will help NEB products gain market access in India

for genomics, proteomics, cell biology and imaging

• Bausch + Lomb is launching pharmaceutical business in India through a strategic agreement

ith Mi L b l di id f lit

Through this agreement, Bausch + Lomb aims to capture

Bausch & Lomb Enters into Collaboration Agreement with Micro Labs for Distribution of its Products in India2

Distribution/Marketing

June 30, 2011

with Micro Labs, a leading provider of quality healthcare products.

• This partnership will provide Bausch + Lomb with high-quality manufacturing capabilities in the region that will speed the introduction of new

i ti d th t di i

a s to captu epart of the rapidly expanding ophthalmic pharmaceuticals market in India which is expected

prescription and over-the-counter medicines targeted at a wide range of eye diseases.

pto reach US$300 million by 2015

Source(s): 1. New England Biolabs Enters into Distribution Agreement with Imperial Life Sciences in India, PharmaDeals; 2. Bausch & Lomb Enters into Collaboration Agreement with Micro Labs for Distribution of its Products in India, PharmaDeals




Details

• Eli Lilly India (Lilly) and Lupin Limited (Lupin)


Strategic Collaboration between Eli Lilly India and Lupin to Distribute Diabetes Care Products1

Distribution/Marketing

July 29, 2011

y ( y) p ( p )recently entered into a strategic collaboration to promote and distribute Lilly’s Huminsulin range of products, including Huminsulin RTM, HuminsulinNPHTM, Huminsulin 50/50TM, Huminsulin30/70TM and Humapen Ergo II.

Lupin’s robust promotion and distribution setup along with a strong presence in various Diabetes Care Products

• Under the terms of the agreement, Lupin’s India formulation business will deploy a sales force of 300 medical representatives to pro-vide education and resources to physicians and patients

therapeutic areas, including diabetes market will help Lilly strengthen its foothold in India

Aurobindo Pharma establishes Joint Venture with Diod (Russia) to Joint Venture September 7, 2011

• Aurobindo Pharma Limited through its investment holding subsidiary and OJSC DIOD, a Russian manufacturer of ecological healthcare equipment and nutrition supplements through its investment holding subsidiary recently announced establishment of a joint venture in Russia on a

The establishment of this Joint venture is line with Aurobindo’s( )

manufacture and market generic drugs in Russia2

p , jparity basis (50%:50%).

• The name of the Joint Venture is AurospharmaCompany and it has been established tomanufacture and sell the pharmaceuticals in the markets of Russia, Belarus and Kazakhstan.

international expansion strategy

Source(s): 1. Strategic Collaboration between Eli Lilly India and Lupin to Distribute Diabetes Care Products, PharmaDeals; 2. AurobindoPharma establishes Joint Venture with Diod (Russia) to manufacture and market generic drugs in Russia, Aurobindo Press Release, September 7, 2011




DetailsThis strategic alliance is expected to


Eli Lilly, Boehringer ink pact to sell diabetes drugs1

Co-promotion agreement October 3, 2011

• Eli Lilly India and Boehringer Ingelheim India recently enteried into a India specific pact to co-promote a portfolio of diabetes compounds, currently either in late-stage development or already in the market.

provide both the firms combined benefits with Lilly's expertise in the diabetes market as well as B h i

Exclusive Agreement

• NATCO Pharma Limited has entered into an exclusive agreement with Mabxience, the biosimilar division of Swiss-based Chemo Lugano, to purchase four monoclonal antibodies drug substances from Chemo Lugano and use th t f t fi i h d d

Boehringer Ingelheim's rich and innovative late-stage pipeline.

between Natco Pharma and Mabxience for Biosimilars2

Licensing October 18, 2011them to manufacture finished dosage pharmaceutical formulations.

• Three of the four products including trastuzumab, bevacizumab, rituximab belong to the oncology segment, while etanercept is used to treat

t i di

This agreement is aimed at boosting Natco’s presence in the Biosimilars

kautoimmune disease.

Source(s): 1. Eli Lilly, Boehringer ink pact to sell diabetes drugs, Moneycontrol, October 3, 2011; 2. Exclusive Agreement between NatcoPharma and Mabxience for Biosimilars, PharmaDeals

marketspace


Understanding M&As – Indian issues

• Ownership of Indian companies is with one or two families and decision making concentrated.

▪ Professionals run the process with the owner promoter having the final families and decision making concentrated.say as far as price is concerned. Local auditors sometimes play a role.▪ Owner promoters are now open about selling or

acquiring profit making businesses as against previously when there were only distress sales. ▪ Advisors need to play a key role inp y y

▪ JVs are now more common between Indian promoter run companies and global companies.

▪ Global companies have paid significant premium

▪ Advisors need to play a key role in managing expectations and in ensuring that the deal is closed successfully.

▪ Global companies have paid significant premium to enter / get leadership position in the Indian market through the acquisition route.

▪ Indian promoters are generally not savvy in M&As

▪ There are valuation challenges.

▪ Inadequate internal controls lead to integration issues.

p g y yand MIS is generally not very good.

▪ Cash transactions are not uncommon.

▪ Being individual controlled companies IP is often in the hands of one or two individuals.

▪ Unaccounted sales and profit▪ Unaccounted sales and profit

Source: E&Y| Ranjit Shahani | ValuexIndia | November 2011 | Business use only71

India leads the emerging “hybrid” model

Innovator Companies Generic Companies

Source: UBS


Open questions for Pharmacos looking to come to India

1 How can we productively drive innovation ?

How do we leverage the dynamics in g ythe emerging markets to become leaders in innovation?

2

H d id ff d bl3 How do we provide affordable healthcare?

How well-prepared are we to address the

4 How do we sustain growth?

p pchallenges and opportunities of the future?

5


What should then be our strategic priorities going forward… wrt

1 Business portfolio

g g

?

2 Innovation

?

?Strategic priorities 3 Expansion in high-

th k t

?

?priorities growth markets

4Improvement of organizational

?

?4 organizational productivity

5 Talent

?

?5 development ?| Ranjit Shahani | ValuexIndia | November 2011 | Business use only74

So… the questions for debate…

30%Current Aspiration?

10%

40%

Geographical footprint% of revenue from‘emerging’ markets

1

40%

20%Portfolio diversification% of revenue from non-Pharma

2

50%40%Payment systems

% of revenue with self-pay versus public systems

3

65%35%

TA focus% of revenue from Specialty versus Primary Care

4

20202009Care


a ringside view of the pharma industry by ranjit shahani

Documents

business use

pharma industryranjit

key trends

new trends

bn aig

major challenges4

poor lifestyle

unmet needs1example