Inflation-Linked Bonds April 2003YungShin GroupYungShin Group Decade Before and ThenDecade Before and Then
Fangchen Lee, PhD, MBAFangchen Lee, PhD, MBA ChairmanChairman
Yung Shin Pharm. Ind. Co., Ltd.Yung Shin Pharm. Ind. Co., Ltd. Fangchen@yungshingroup.comFangchen@yungshingroup.com
2
AgendaAgenda
Healthcare Industry TrendsHealthcare Industry Trends
YungShin GroupYungShin Group
Strategies for the Next Decade Strategies for the Next Decade Vertical Integration of Resources to Global Markets Vertical Integration of Resources to Global Markets Acquisition of Complimentary Acquisition of Complimentary Financial Leverage and Stock Dilution Financial Leverage and Stock Dilution
3
4
Taiwan Market HighlightsTaiwan Market Highlights Market > NT$ 100 B, CAGR in 11 years: 8.6%, HospitalMarket > NT$ 100 B, CAGR in 11 years: 8.6%, Hospital--based market: ~78%based market: ~78%
The growth of market in 2006 The growth of market in 2006 only 3.1%only 3.1% resulting from continuous fierce resulting from continuous fierce price cut of BNHI effective on Nov 1 of 2006price cut of BNHI effective on Nov 1 of 2006
Fixed Fixed The amount being adjusted is in historical high at around NT$ 9 The amount being adjusted is in historical high at around NT$ 9 billionsbillions More than 5,359 items affectedMore than 5,359 items affected
BNHI BNHI to to introducing the balance billing (or sointroducing the balance billing (or so--called called ““Pay for the DifferencePay for the Difference””))
The investigatThe investigation ofion of the black holethe black hole (price difference) issue(price difference) issue by prosecutor. by prosecutor. suggested BNHI to correct it from price resuggested BNHI to correct it from price re--submission by hospitals andsubmission by hospitals and pharmaceutical pharmaceutical companiescompanies 1,339 pharmaceutical companies and 5291,339 pharmaceutical companies and 529 hospitals are requested to rehospitals are requested to re--submit their prices for submit their prices for the confirmation and correctionthe confirmation and correction prior the deadline set forth on Feb 15prior the deadline set forth on Feb 15
BNHI BNHI tto limit outpatiento limit outpatient access for flu visits access for flu visits restricting flu drug reimbursement in exception of agedrestricting flu drug reimbursement in exception of aged people over 60 and age people over 60 and age below 3below 3
BNHI intends to increase insurance premium after Lunar New BNHI intends to increase insurance premium after Lunar New YearYear
The new scheme will inject BNHI an addition of NT$ 8 billions a The new scheme will inject BNHI an addition of NT$ 8 billions a yearyear,,
2nd generation NHI on the road2nd generation NHI on the road
↑↑ aging population, aging population, ↑↑ life style, oncology and CNS drugs, life style, oncology and CNS drugs, ↑↑ Generic substitutionGeneric substitution
5
Taiwan Pharmaceutical TrendTaiwan Pharmaceutical Trend An  industry where the market growth is dramatically decliningAn  industry where the market growth is dramatically declining
Source: IMS 4Q, 2006Source: IMS 4Q, 2006
44.044.0 48.948.9 49.749.7
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0
100.0 110.0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
2. S2. S--AA
3. GSK3. GSK
1. Pfizer1. Pfizer
5. Roche5. Roche
6. A6. A--ZZ
4. 4. NovartisNovartis
8. Bayer8. Bayer
9. 9. WyethWyeth
7. MSD7. MSD
10. Yung Shin10. Yung Shin
((Top 10 Ranking)Top 10 Ranking) ((NT$, Bio.)NT$, Bio.) Total market size in 2006: 108 BillionTotal market size in 2006: 108 Billion
11 Years CAGR from 1995 since NHI rolled out to 2005 is 8.6%, bu11 Years CAGR from 1995 since NHI rolled out to 2005 is 8.6%, but the latest 5 years CAGR arrived t the latest 5 years CAGR arrived only at only at 3.4%3.4% indicating market growth is dramatically slowing down or could indicating market growth is dramatically slowing down or could be even worsen years be even worsen years onwardonward
6
Five Years Trend Five Years Trend –– Hospital SectorHospital Sector shown an improvement in 2006 by growing at midshown an improvement in 2006 by growing at midsingle digit of single digit of  5.6%5.6%
((SARS)SARS)
73,15273,627
80,28079,913
84,349
(0.4)
0.7
6.8
9.0
5.6
66,000
1.5
3.5
5.5
7.5
9.5
7
((SARS)SARS)
10,60510,960
9,826
3.4
5.5
0.4
13.9
(10.4)
0
2,000
4,000
6,000
8,000
10,000
12,000
2002 2003 2004 2005 2006 -12.0 -10.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0
Clinic Sector Growth % (Growth %)
Five Years Trend Five Years Trend –– Clinic SectorClinic Sector kept sharply downward pattern continuouslykept sharply downward pattern continuously
Source: Source: IMS Data, 4Q, 2006IMS Data, 4Q, 2006
8
Five Years Trend Five Years Trend –– Drugstore SectorDrugstore Sector kept growth pattern at low single digit growth by 2.7%kept growth pattern at low single digit growth by 2.7%
((SARS)SARS)
10,373 11,610
12,273 13,42813,791
-3.0
-1.0
1.0
3.0
5.0
7.0
9.0
11.0
9
Top 10 ManufacturersTop 10 Manufacturers YungShin is the only one local manufacturer on the listYungShin is the only one local manufacturer on the list
Sales Share % Growth % E.I. % Sales Share % Growth % E.I. % PFIZER 9,164,532,606 8.5 5 101 8,730,362,709 8.4 3 102
SANOFI-AVENTIS 6,582,453,144 6.1 5.4 102 6,244,180,794 6 -3.3 96
GLAXOSMITHKLINE 5,577,766,411 5.2 -2.9 94 5,746,755,194 5.5 -0.2 99
NOVARTIS 5,205,478,220 4.8 10.6 107 4,708,146,449 4.5 3.4 102
ROCHE 4,568,043,486 4.2 16.6 113 3,919,028,322 3.8 5.8 105
ASTRAZENECA 4,377,944,740 4.1 11.6 108 3,922,759,532 3.8 10.1 109
MERCK SHARP&DOHME 3,890,303,074 3.6 0.3 97 3,877,870,171 3.7 -12.4 87
BAYER 3,268,536,238 3 28.2 124 2,549,837,518 2.4 -2.6 96
WYETH/LEDERLE 2,693,731,155 2.5 7 103 2,518,573,828 2.4 9.9 109
YUNG SHIN 2,508,522,741 2.3 0.9 97 2,485,900,688 2.4 3.3 102
MAT 4Q2006 MAT 4Q2005
10
Top 10 Foreign ManufacturersTop 10 Foreign Manufacturers
Sales Share % Growth % E.I. % Sales Share % Growth % E.I. % PFIZER 9,164,532,606 11.3 5.0 99 8,730,362,709 11.4 3.0 103 SANOFI-AVENTIS 6,582,453,144 8.2 5.4 100 6,244,180,794 8.2 (3.3) 96 GLAXOSMITHKLINE 5,577,766,411 6.9 (2.9) 92 5,746,755,194 7.5 (0.2) 99 NOVARTIS 5,205,478,220 6.4 10.6 104 4,708,146,449 6.2 3.4 103 ROCHE 4,568,043,486 5.7 16.6 110 3,919,028,322 5.1 5.8 105 ASTRAZENECA 4,377,944,740 5.4 11.6 105 3,922,759,532 5.1 10.1 110 MERCK SHARP&DOHME 3,890,303,074 4.8 0.3 95 3,877,870,171 5.1 (12.4) 87 BAYER 3,268,536,238 4.1 28.2 121 2,549,837,518 3.3 (2.6) 97 WYETH/LEDERLE 2,693,731,155 3.3 7.0 101 2,518,573,828 3.3 9.9 110 LILLY 1,959,647,620 2.4 26.1 119 1,554,000,824 2.0 (4.1) 96
MAT 4Q2006 MAT 4Q2005
Source: Source: IMS Data, 4Q, 2006IMS Data, 4Q, 2006
Total growth rate for foreign manufacturers: 5.8%Total growth rate for foreign manufacturers: 5.8%
11
Top 10 Local ManufacturersTop 10 Local Manufacturers
Sales Share % Growth % E.I. % Sales Share % Growth % E.I. % YUNG SHIN 2,508,522,741 9.3 0.9 104 2,485,900,688 8.9 3.3 100
C.C.P.C 2,111,703,526 7.8 7.7 111 1,960,464,729 7.1 (0.1) 97
STANDARD 1,697,844,315 6.3 (2.1) 101 1,734,221,693 6.2 10.1 107
SINTONG 1,544,312,820 5.7 (14.6) 88 1,808,613,470 6.5 16.0 112
TUNG YANG 1,494,805,896 5.5 (1.0) 102 1,509,234,022 5.4 0.5 97
NANG KUANG 868,961,375 3.2 1.4 104 856,813,868 3.1 37.9 134
SINPHAR 731,921,638 2.7 33.9 138 546,700,459 2.0 15.4 112
EVEREST CHEM 626,410,195 2.3 (10.2) 92 697,688,138 2.5 11.9 108
ORIENT EUROPHARMA 565,527,968 2.1 11.4 115 507,699,813 1.8 11.6 108
PURZER 558,546,192 2.1 (2.0) 101 569,655,408 2.1 (1.3) 96
MAT 4Q2006 MAT 4Q2005
Source: Source: IMS Data, 4Q, 2006IMS Data, 4Q, 2006
Total growth rate for local manufacturers: Total growth rate for local manufacturers: --2.9%2.9%
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11XX Negative GainNegative Gain
StarsStars
Top 20 Therapeutic ClassesTop 20 Therapeutic Classes
2006 2005 Sales Share % Growth % E.I. % 1 1 C08A CALCIUM ANTAGONISTS PLAIN 5,287,992,363 4.9 0.8 97
2 2 A10B ORAL ANTIDIABETICS 4,819,381,178 4.5 5.9 102
3 4 C10A CHOLEST&TRIGLY.REGULATOR 3,739,457,692 3.5 10 106
4 5 C09C ANGIOTENS-II ANTAG, PLAIN 3,598,600,691 3.3 9.4 106
5 8 L01X ALL OTH. ANTINEOPLASTICS 3,375,748,313 3.1 38.7 134
6 3 J01D CEPHALOSPORINS & COMBS 3,226,224,937 3 -8.9 88
7 6 A02B ANTIULCERANTS 2,911,104,594 2.7 0.2 97
8 9 N05A ANTIPSYCHOTICS 2,808,724,855 2.6 15.6 112
9 7 J01C BROAD SPECTRUM PENICILLIN 2,591,594,161 2.4 5.7 102
10 10 M01A ANTIRHEUMATIC NON-STEROID 2,179,242,037 2 -7.4 89
11 12 N06A ANTIDEPRESS.& MOOD STAB. 2,107,757,665 2 6.1 102
12 13 L01C VINCA ALKALOIDS 2,065,390,906 1.9 17.1 113
13 11 C07A BETA BLOCKING AGENT PLAIN 1,971,895,061 1.8 -2.2 94
14 17 B02D BLOOD COAGULATION 1,967,748,568 1.8 41.3 136
15 16 B01C PLATELET AGGREG INHIBITRS 1,559,138,559 1.4 10.2 106
16 18 N03A ANTI-EPILEPTICS 1,520,362,538 1.4 15.4 111
17 14 C09A ACE INHIBITORS PLAIN 1,485,367,314 1.4 -12.9 84
18 24 L01B ANTIMETABOLITES 1,422,364,558 1.3 36.7 132
19 19 J01G FLUOROQUINOLONES 1,401,466,195 1.3 7.2 104
20 15 A02A ANTACIDS ANTIFLATULENTS 1,303,814,255 1.2 -16.2 81
MAT 4Q2006RANKING THERAPEUTIC CLASS
14
Source: Source: IMS Data, 4Q, 2006IMS Data, 4Q, 2006
2006 2005 Sales Share % Growth % E.I. % 1 1 NORVASC PFZ 2,570,418,768 2.4 9.9 106
2 2 LIPITOR PFZ 1,346,596,124 1.3 6.3 103
3 3 DIOVAN NVR 1,337,251,039 1.2 10.8 107
4 5 PLAVIX S.A 881,177,561 0.8 8.1 104
5 8 GLIVEC NVR 861,504,163 0.8 23.3 119
6 6 AVANDIA GSK 842,100,156 0.8 3.9 100
7 4 COZAAR MSD 809,576,089 0.8 -12.3 85
8 7 APROVEL S.A 807,520,940 0.8 14 110
9 11 TAZOCIN WYL 779,872,504 0.7 15.2 111
10 10 TAXOTERE S.A 779,274,763 0.7 12.7 109
11 37 KOGENATE FS BAY 773,643,353 0.7 98.8 192
12 12 AMARYL S.A 750,729,088 0.7 11.9 108
13 19 RECORMON ROC 730,215,875 0.7 31.3 127
14 17 IRESSA AZN 682,548,551 0.6 20.7 117
15 15 RISPERDAL J-C 640,570,011 0.6 7.7 104
16 14 CIPROXIN BAY 609,633,073 0.6 -3.3 93
17 20 ADALAT OROS BAY 603,960,534 0.6 9.7 106
18 25 REDUCTIL ABT 601,246,424 0.6 24 120
19 9 VIAGRA PFZ 600,138,453 0.6 -13.7 83
20 16 DILATREND ROC 580,820,252 0.5 -1.7 95
RANKING Product Company MAT 4Q2006
15
11,942
25,733
10,715
11,948
12,404
30,607
11,921
13,322
12,427
35,217
13,818
14,899
12,561
37,457
13,391
15,728
12,358
40,507
12,293
15,808
9,456
46,539
13,201
17,595
9,837
49,391
13,085
17,644
10,473
56,436
16,030
21,243
10,839
57,183
16,763
22,022
20,000
40,000
60,000
80,000
100,000
120,000
Out-patients OPD Chronic Diseases OPD Others In-patients
95.05

13.9%13.9% 14.4%14.4% 14.6%14.6% 14.2%14.2% 15.1%15.1% 20.6%20.6% 24.5%24.5% 28.5%28.5% 0.4%0.4% 0.5%0.5% 0.7%0.7% 0.9%0.9% 0.7%0.7% 0.7%0.7% 0.8%0.8% 1.1%1.1% BA/BEBA/BE 0.9%0.9% 0.9%0.9% 1.1%1.1% 0.3%0.3% 0.6%0.6% 0.9%0.9% 0.7%0.7% 0.6%0.6% 0.6%0.6% 0.7%0.7% 0.7%0.7% 0.7%0.7% 1.1%1.1% 1.0%1.0% 1.4%1.4% 1.1%1.1% 15.7%15.7% 16.5%16.5% 17.1%17.1% 16.2%16.2% 17.4%17.4% 23.2%23.2% 27.5%27.5% 31.3%31.3% 34.2%34.2% 34.7%34.7% 36.1%36.1% 38.8%38.8% 39.4%39.4% 34.3%34.3% 32.7%32.7% 27.8%27.8% 3.2%3.2% 3.4%3.4% 3.2%3.2% 3.5%3.5% 3.6%3.6% 3.8%3.8% 4.0%4.0% 3.9%3.9% BA/BEBA/BE 9.3%9.3% 10.6%10.6% 11.4%11.4% 12.6%12.6% 13.3%13.3% 13.7%13.7% 13.6%13.6% 14.2%14.2% 37.3%37.3% 34.6%34.6% 31.9%31.9% 28.7%28.7% 26.0%26.0% 24.8%24.8% 22.0%22.0% 22.6%22.6% TPNTPN 0.3%0.3% 0.3%0.3% 0.2%0.2% 0.2%0.2% 0.3%0.3% 0.2%0.2% 0.2%0.2% 0.2%0.2% 84.3%84.3% 83.5%83.5% 82.9%82.9% 83.8%83.8% 82.6%82.6% 76.8%76.8% 72.5%72.5% 68.7%68.7%
100%100% 100%100% 100%100% 100%100% 100%100% 100%100% 100%100% 100%100%




17
1.1. 2.2.
NT$, Mio.NT$, Mio. ProductProduct
481481 473473 1,9331,933 4,0634,063 6,1216,121 8,4318,431 12,86312,863 16,69416,694 21,83421,834
LaunchLaunch
18
19
Global Pharmaceutical Industry OverviewGlobal Pharmaceutical Industry Overview
The generic drugs market which is expected to grow at 10%The generic drugs market which is expected to grow at 10%--12% over the next few years is a key 12% over the next few years is a key growth area for emerging pharmaceutical manufacturersgrowth area for emerging pharmaceutical manufacturers
Emerging TrendsEmerging Trends
Estimated to be a US$550 billion market in 2004 Estimated to be a US$550 billion market in 2004 (including estimated (including estimated unauditedunaudited pharmaceutical sales)pharmaceutical sales)
•• Market expected to grow at a rate of 7% to 9%Market expected to grow at a rate of 7% to 9%
Regulated markets account for almost 90% of the Regulated markets account for almost 90% of the market in terms of revenuemarket in terms of revenue
•• North America is the single largest market accounting for approxNorth America is the single largest market accounting for approx. . 50% of global sales and is expected to grow at a CAGR of 10%50% of global sales and is expected to grow at a CAGR of 10%
•• EU was the fastest growing market, growing at a CAGR of 26% in EU was the fastest growing market, growing at a CAGR of 26% in the period 2002 the period 2002 –– 2004 2004
Growing importance of generics in regulated marketsGrowing importance of generics in regulated markets •• Pressure from healthcare providers and insurance companies to Pressure from healthcare providers and insurance companies to
reduce healthcare costs driving usage of generic drugsreduce healthcare costs driving usage of generic drugs •• Increasing patent expirations driving generic drug availabilityIncreasing patent expirations driving generic drug availability •• Legislative changes such as the enactment of the HatchLegislative changes such as the enactment of the Hatch--Waxman Waxman
act and changes to the Medicare Act in the US providing a major act and changes to the Medicare Act in the US providing a major boostboost
Stringent testing requirements and declining R&D Stringent testing requirements and declining R&D productivity has led to limited new drug pipeline productivity has led to limited new drug pipeline
•• Increasing pressure on big pharmaceutical companies to Increasing pressure on big pharmaceutical companies to enhance new drug pipelineenhance new drug pipeline
204204 230230 248248
20022002 20032003 20042004 North AmericaNorth America EUEU JapanJapan Rest of EuropeRest of Europe Rest of WorldRest of World
U S$
Global Pharmaceutical Sales*Global Pharmaceutical Sales* CAGR CAGR –– 13.7%13.7%
Source: IMS World Review (Industry Sales based on Audited Source: IMS World Review (Industry Sales based on Audited Numbers)Numbers)
Key Generic Drug MarketsKey Generic Drug Markets
24.824.8
5.75.7
5.35.3
4.14.1
3.33.3
2.52.5
1.91.9
USUS
IndiaIndia
GermanyGermany
UKUK
JapanJapan
ItalyItaly
FranceFrance
20002000 20012001 20022002 20032003 20082008 CAGR %CAGR %
20032003--20082008
EthicalEthical 317.1 317.1 363.4 363.4 401.0401.0 437.6437.6 677.8677.8 9.19.1 GenericsGenerics 24.024.0 27.027.0 30.5 30.5 37.037.0 64.064.0 11.611.6 OTC OTC 70.570.5 73.873.8 78.578.5 82.082.0 101.0101.0 4.34.3
BBiopharmaceuticalsiopharmaceuticals 22.1 22.1 26.3 26.3 31.031.0 36.536.5 58.658.6 9.99.9 Total World Total World MarketMarket 433.7 433.7 490.5 490.5 541.0 541.0 593.1 593.1 901.4901.4 8.78.7
((US$,B)US$,B)
21
Worldwide Pharmaceutical MarketWorldwide Pharmaceutical Market Global Pharmaceutical Market is still Growing, but Global Pharmaceutical Market is still Growing, but  Under PressureUnder Pressure
Sales Growth will vary greatly region by regionSales Growth will vary greatly region by region
North America North America 55--8% 8% 315315--370370
Europe (All) Europe (All) 55--8% 8% 205205--240240
Asia/Africa/Australia Asia/Africa/Australia 99--12% 12% 7575--9090
Japan Japan 33--6% 6% 6565--8080
Latin America Latin America 77--10% 10% 3535--4545
Total World Total World 55--8% 8% 710710--820820
CAGR CAGR 2004~20092004~2009
US$ B.US$ B. 200920095 5 Years OutlookYears Outlook
Source: IMS Knowledge Link Q4, 2005 MATSource: IMS Knowledge Link Q4, 2005 MAT
22
Top 10 Key Markets in the WorldTop 10 Key Markets in the World 20052005
Rank Rank 20012001
Rank Rank 20052005
Share Share 20052005
Rank Rank 20012001
Rank Rank 20052005
Share Share 20052005
45%45%1111
11%11%2222
5.7%5.7%3333
5.5%5.5%4444
3.6%3.6%5555
3.5%3.5%6666
2.7%2.7%7777
2.4%2.4%8888
1.6%1.6%991010
1.3%1.3%101099
Most of countries maintain their ranking, expect China has overMost of countries maintain their ranking, expect China has over--passed Mexico in 05passed Mexico in 05
Source: IMS Knowledge Link Q3 2005 MATSource: IMS Knowledge Link Q3 2005 MAT
23
Negative publicity (pricing, safety, manufacturing, accounting)Negative publicity (pricing, safety, manufacturing, accounting)
Recent blockbusters satisfy unmet needsRecent blockbusters satisfy unmet needs Slowed approvals (and decreased submissions) result in fewer newSlowed approvals (and decreased submissions) result in fewer new product launchesproduct launches
Increasing chronic diseases caring and emphasizing patient qualiIncreasing chronic diseases caring and emphasizing patient quality of lifety of life Generics and failed patent extensions rapidly erode marketGenerics and failed patent extensions rapidly erode market CostCost--containment measures and economic slowdowns continuecontainment measures and economic slowdowns continue
Price increase in US marketPrice increase in US market Continued government policy interventionContinued government policy intervention DTC expenses in US is decliningDTC expenses in US is declining
Health care cost is under increased pressureHealth care cost is under increased pressure
Large parts of the GP initiated prescribing will be off patentLarge parts of the GP initiated prescribing will be off patent
Payers will find ways to benefit more from the patent expirationPayers will find ways to benefit more from the patent expirations s –– both through higher penetration and lower priceboth through higher penetration and lower price
Eastern Europe are already largely generic Eastern Europe are already largely generic –– the segment growth will the segment growth will due to this be slowerdue to this be slower
The generic industry will show continued fast growth The generic industry will show continued fast growth –– but also fast but also fast change due to competitionchange due to competition
BiosimilarsBiosimilars will take a relatively smaller part of the market but with will take a relatively smaller part of the market but with better pricesbetter prices
24
GlobalGlobal generic sales reached an generic sales reached an  estimated US$ 61 Billion in 2005 estimated US$ 61 Billion in 2005 
USA representing half of the USA representing half of the marketmarket
Western Europe
Asia 13%
Global Generic Market (*): US$ 61B. (2005)Global Generic Market (*): US$ 61B. (2005) Global Generic Market (2): US$ 77B. (2005)Global Generic Market (2): US$ 77B. (2005)
Adding Adding ““other brandsother brands”” (2) for emerging market(2) for emerging market
25
G en
er ic
p ri
Absolute Low Price ZoneAbsolute Low Price Zone
Major Generic Market DistributionMajor Generic Market Distribution
26
19.8%19.8% 48.5%48.5%
27
Estimated Global Generic Sales by Co. Estimated Global Generic Sales by Co.  SandozSandoz head in value ; head in value ; TevaTeva leads in volumeleads in volume
U S
bi lli
28
%
S$ )
29
Market Segment in Asia PacificMarket Segment in Asia Pacific Local Manufacturers Local Manufacturers vsvs Foreign ManufacturersForeign Manufacturers
Taiwan is dominated by foreign manufacturersTaiwan is dominated by foreign manufacturers
90%90%
90%90%
85%85%
75%75%
70%70%
65%65%
55%55%
35%35%
25%25%
10%10%
15%15%
25%25%
30%30%
35%35%
45%45%
65%65%
75%75%
10%10%
Cost Containment
CostCost ContainmentContainment
Healthcare Reform
HealthcareHealthcare ReformReform
Industry Consolidation IndustryIndustry
Global M&AGlobal M&A Distribution network consolidationDistribution network consolidation
Increased demand of efficiency to drive cost downIncreased demand of efficiency to drive cost down CoCo--marketing and comarketing and co--promotionpromotion
31
Key Challenges in Asia Pacific MarketKey Challenges in Asia Pacific Market
PricingPricingPricing
(China, India, Indonesia)(China, India, Indonesia)
32
Critical Issues Affecting Generic Markets Critical Issues Affecting Generic Markets  Over the Next 10 YearsOver the Next 10 Years
Price erosion will continue; less in added value Price erosion will continue; less in added value segmentssegments
Medicare/Medicaid in the USAMedicare/Medicaid in the USA
Blockbusters increasingly coming in specialty driven Blockbusters increasingly coming in specialty driven marketsmarkets
Weak primary care launches threaten long term generic Weak primary care launches threaten long term generic potentialpotential
OTC cannibalization of genericsOTC cannibalization of generics
Low cost manufacturing and maintaining sustainable Low cost manufacturing and maintaining sustainable marginsmargins
Slow emergence of protocols and adoption for Slow emergence of protocols and adoption for biosimilarsbiosimilars
33
Factors Favoring Generics in Asia PacificFactors Favoring Generics in Asia Pacific
Highest price in the world Highest price in the world –– differential of only 20% in Australia, differential of only 20% in Australia, Korea and Taiwan Korea and Taiwan –– doubledouble--edged sword edged sword –– less erosion of branded less erosion of branded productsproducts First generics get large market share Government endorsement First generics get large market share Government endorsement –– generics favored and used for reference pricing to contain costsgenerics favored and used for reference pricing to contain costs of of increased drug consumption in chronic diseases where brands increased drug consumption in chronic diseases where brands dominatedominate Improvement in GMP and distributionImprovement in GMP and distribution Higher margin allows for nonHigher margin allows for non--transparent discounting and transparent discounting and ““purchase of prescriptionspurchase of prescriptions”” among domestic companies among domestic companies especially in dispensing marketsespecially in dispensing markets Better acceptance by physiciansBetter acceptance by physicians BiogenericsBiogenerics are less regulated and already launched in Australia, are less regulated and already launched in Australia, China,Korea and IndiaChina,Korea and India
34
The future of Generics in Asia PacificThe future of Generics in Asia Pacific Emerging new regional players will drive more shareEmerging new regional players will drive more share
MNCsMNCs :: SandozSandoz WinthropeWinthrope –– SanofiSanofi--AventisAventis Merck KGAAMerck KGAA TevaTeva
Asian :Asian : RanbaxyRanbaxy WockhardtWockhardt UnilabUnilab YangzhizhangYangzhizhang SamyangSamyang Dong ADong A YungShin GroupYungShin Group
35
Pharmaceutical Pharmaceutical  NutraceuticalsNutraceuticals
Favorable demographics Favorable demographics –– the ageing peoplethe ageing people Acceleration of R&D spendingAcceleration of R&D spending Continued consolidation and strategic alliancesContinued consolidation and strategic alliances DirectDirect--toto--consumer (DTC) pushconsumer (DTC) push Internet emerges as key marketing toolInternet emerges as key marketing tool Managed care gets tough on drugsManaged care gets tough on drugs Trend in CMOTrend in CMO Regulation Regulation harmonization with higher requirementharmonization with higher requirement
37
Favorable DemographicsFavorable Demographics
Aging baby boomers and lengthening life span will Aging baby boomers and lengthening life span will generate powerful demandgenerate powerful demand
Over 60 crowd to rise from 606 million in 2000 to 2 Over 60 crowd to rise from 606 million in 2000 to 2 billion in 2050billion in 2050
Over 65 in US expected to expand 53% from 2001 to Over 65 in US expected to expand 53% from 2001 to 2020 vs. overall population growth of 17 % (Over 65 2020 vs. overall population growth of 17 % (Over 65 crowd accounts for 16 % of US population, but 33 % crowd accounts for 16 % of US population, but 33 % of all prescriptions written)of all prescriptions written)
38
Baby Boomers Driving DemandBaby Boomers Driving Demand
Source: U.S. Census Bureau, HCAB 2002Source: U.S. Census Bureau, HCAB 2002
Approximate Age Distribution of Baby BoomersApproximate Age Distribution of Baby Boomers
Small leading edge Small leading edge begin to increase begin to increase
utilizationutilization
2525 4545
3535 5555
Nearly half now Nearly half now needing greater needing greater
health care health care attentionattention
20002000
39
Acceleration of R&D SpendingAcceleration of R&D Spending Pharmaceutical Industry (1994 Pharmaceutical Industry (1994 –– 2003)2003)
0
10
20
30
40
50
60
Source: PHRMASource: PHRMA
Note: Annual R&D expenditures Note: Annual R&D expenditures adjusted to reflect 2003 equivalence.adjusted to reflect 2003 equivalence.
New Drug ApprovalsNew Drug Approvals
Industry R&D spendingIndustry R&D spending
Central nervous system Central nervous system -- 26%26%
Neoplasm, endocrine system, Neoplasm, endocrine system, metabolic metabolic -- 21%21%
CardiovascularCardiovascular -- 18%18%
Respiratory system Respiratory system -- 10%10%
Digestive Digestive -- 4%4%
40
Target ID &Target ID & ValidationValidation
DrugDrug DiscoveryDiscovery PrePre--clinical clinical INDIND Clinical phase IClinical phase I Clinical IIClinical II--IVIV NDA &NDA &
MarketMarket
““Valley of DeathValley of Death””
The average cost The average cost of developing a of developing a new drug in the new drug in the Western countries Western countries has reached has reached approximately $1 approximately $1 billionbillion ““PharmaPharma Innovation GapInnovation Gap”” ““Valley of DeathValley of Death””
The The ““innovation gapinnovation gap”” continues to plague the pharmaceutical industry.continues to plague the pharmaceutical industry.
41
19891989 BristolBristol--Myers SquibbMyers Squibb SmithklineSmithkline BeechamBeecham
19931993 Rhone Rhone PoulencPoulenc--RorerRorer
19981998 Roche/Roche/BoehringerBoehringer MannheimMannheim
20012001 Abbott/KnollAbbott/Knoll BMS/DupontBMS/Dupont
19991999 AventisAventis AstraZenecaAstraZeneca SanofiSanofi--SynthelaboSynthelabo
FunctionalFunctional
““Getting back to basicsGetting back to basics”” and concentration on and concentration on core, high margin core, high margin pharmapharma productsproducts
Divest Divest ““noncorenoncore”” businesses, such as businesses, such as AgrichemicalsAgrichemicals
Molecular biology and Molecular biology and genomics discoveries genomics discoveries have made strategic have made strategic alliances more pervasivealliances more pervasive
42
DirectDirecttotoConsumer PushConsumer Push
FDA relaxed DTC advertising in 1997FDA relaxed DTC advertising in 1997
Ad spending $2.27 billion in 2000 (41 percent Ad spending $2.27 billion in 2000 (41 percent increase over 1999)increase over 1999)
They want you to say to They want you to say to
your doctor your doctor –– ““I want I want
VioxxVioxx”” or or ““you know, you know,
the purple pillthe purple pill””
PayersPayers HealthHealth agentsagents
Internet Key Marketing toolInternet Key Marketing tool
Today all Today all pharmaspharmas have product information on their have product information on their website or through web partnership such as website or through web partnership such as WebMDWebMD, , use this medium to promote use this medium to promote pharmapharma to MDsto MDs
More than 75 % of US doctors report that patients bring More than 75 % of US doctors report that patients bring Internet printouts to their office visits.Internet printouts to their office visits.
82.6%
69.2%
69.0%
51.8%
23.5%
Specialists or hospitals
InformatioInformatio n Patients n Patients Bring to Bring to
MDsMDs
44
Web Delivery / MultiWeb Delivery / Multi--LanguageLanguage
SPCSPC (EU)(EU)
BNFBNF EPEP
PatientPatient InsertsInserts
(US)(US)PILsPILs (EU)(EU)
ComplianceCompliance DossiersDossiers
PatientPatient InfoInfo
PhysicianPhysician InfoInfo
The goal:The goal: common data sources for common data sources for
multiple documents in multiple documents in multiple languagesmultiple languages
A question:A question: can this be done across and can this be done across and
between between pharmapharma companies?companies?
Internet key marketing toolInternet key marketing tool
Restrictions on accessRestrictions on access Call saturationCall saturation 10 percent of contacts10 percent of contacts 20 percent+ growth per annum20 percent+ growth per annum
Rarely leveraged for valueRarely leveraged for value The health information sourceThe health information source
BB--toto--B, BB, B--toto--C, BC, B--toto--EE Low cost/high serviceLow cost/high service Going mobileGoing mobile
Sales ForceSales Force
Call CenterCall Center
US$25US$25 per contactper contact
US$1US$1 per contactper contact
Sales force is the most costly promotion nowadaysSales force is the most costly promotion nowadays
46
Managed Care Gets Tough on DrugsManaged Care Gets Tough on Drugs
Managed care is key market Managed care is key market –– 70 percent all 70 percent all retail prescriptions to retail prescriptions to pharmapharma
Fastest growing expenseFastest growing expense
New cost and control strategies being New cost and control strategies being developeddeveloped
Higher coHigher co--pay for more expensivepay for more expensive Use collective purchasing power on bulk Use collective purchasing power on bulk purchasespurchases
47
Hospitals intend
Hospitals intend
to secure
to secure
profita bility
fro m
profita bility
fro m
Drug suppliers
Drug suppliers
hospitals
hospitals
How can a pharmaceutical company How can a pharmaceutical company mitigate the risk of pricing pressure on mitigate the risk of pricing pressure on
its growth?its growth?
2005 price Ex-mnf Euros %SU PRICE %SU PRICE %SU PRICE %SU PRICE %SU PRICE %SU PRICE %SU PRICE
Branded 23% 0.77 51% 0.94 12% 1.23 26% 1.03 44% 1.02 61% 0.73 71% 0.98
Generics 77% 0.35 49% 0.21 88% 0.06 74% 0.05 56% 0.14 39% 0.42 29% 0.84
TOTAL 0.45 0.58 0.2 0.31 0.52 0.61 0.94
UK Spain GreeceGermany Norway Sweden Denmark
TaiwanTaiwan
48
Price Pressures will Drive ConsolidationsPrice Pressures will Drive Consolidations in order to Maintain Earning Levelsin order to Maintain Earning Levels
Sales Sales
Price Pressures limitsPrice Pressures limits Industry ability to use Industry ability to use
price for growthprice for growth
Industry continues toIndustry continues to consolidate in order toconsolidate in order to
cut infrastructure costs:cut infrastructure costs: --Reduce sales reps Reduce sales reps -- Eliminate TA areasEliminate TA areas
in Researchin Research --Reduce duplication in Reduce duplication in
support functionssupport functions
Capital valueCapital value
““Companies are outsourcing Companies are outsourcing to concentrate on to concentrate on marketing their productsmarketing their products””
““Spending less time in drug Spending less time in drug discovery and discovery and manufacturingmanufacturing””
““Virtual companies exist by Virtual companies exist by the simple fact that they the simple fact that they can rely on the contract can rely on the contract manufacturers and manufacturers and researchersresearchers””
Source: Source: RBRB--203 Pharmaceutical Contract Manufacturing and Research203 Pharmaceutical Contract Manufacturing and Research,, BUSINESS COMMUNICATIONS COMPANY, INCBUSINESS COMMUNICATIONS COMPANY, INC Published: April 2005Published: April 2005
CROCRO
Contract Contract FormulatorFormulator
company)company)
* * Note: Some CMONote: Some CMO’’s offer more than one s offer more than one service such as formulation, analytical and service such as formulation, analytical and regulatory expertiseregulatory expertise
Owns the knowOwns the know--howhow
Manages technology transferManages technology transfer
Needs short term capacity:Needs short term capacity: Unexpected salesUnexpected sales Launch quantitiesLaunch quantities Limit risk on new Limit risk on new technologiestechnologies
Contract ManufacturerContract Manufacturer
EquipmentEquipment LabourLabour Specific technologySpecific technology
51
and research for the and research for the pharmaceutical pharmaceutical
industry was estimated industry was estimated at $100 billion in 2004 at $100 billion in 2004 and is expected to rise and is expected to rise at an average annual at an average annual
growth rate ofgrowth rate of 10.8% to $168 billion in 10.8% to $168 billion in
20092009””
Source: Source: RBRB--203 Pharmaceutical Contract Manufacturing and Research203 Pharmaceutical Contract Manufacturing and Research,, BUSINESS COMMUNICATIONS COMPANY, INCBUSINESS COMMUNICATIONS COMPANY, INC Published: April 2005Published: April 2005
Emerging countries Emerging countries like India and soon like India and soon
China will provide low China will provide low cost products that will cost products that will
meet meet cGMPcGMP’’ss
The old business The old business model will not sustain model will not sustain
growth for North growth for North American CMOAmerican CMO’’ss
The new business The new business model is more complex model is more complex and requires different and requires different
Pharmaceutical Pharmaceutical cGMPscGMPs for the 21for the 21stst CenturyCentury Bioterrorism ActBioterrorism Act
Title III: Protecting Safety & Security of Food & Drug SupplyTitle III: Protecting Safety & Security of Food & Drug Supply
21 CFR Part 11 Scope and Application Guidance21 CFR Part 11 Scope and Application Guidance Bar Code Label Requirements for Human Drugs and BloodBar Code Label Requirements for Human Drugs and Blood Strengthened commitment to international harmonization activitieStrengthened commitment to international harmonization activitiess
EU Mutual Recognition Agreement effective June 20, 1997, Final REU Mutual Recognition Agreement effective June 20, 1997, Final Rule (21 CFR Part 26) ule (21 CFR Part 26) effective December 7, 1998effective December 7, 1998 Confidentiality Agreement and Implementation Plan to facilitate Confidentiality Agreement and Implementation Plan to facilitate regulatory cooperation regulatory cooperation between EU and FDA/DHHS for medicinal products for human use (fibetween EU and FDA/DHHS for medicinal products for human use (finalized nalized September 2004)September 2004) General Principles for EMEAGeneral Principles for EMEA--FDA Parallel Scientific Advice Meetings FDA Parallel Scientific Advice Meetings –– Pilot Program Pilot Program (September 2004)(September 2004)
FDA final report on FDA final report on ““Combating Counterfeit DrugsCombating Counterfeit Drugs””, , February 18, 2004February 18, 2004
FDA to create independent Drug Safety Oversight Board (DSB)FDA to create independent Drug Safety Oversight Board (DSB) ““PharmacogenomicPharmacogenomic Data SubmissionsData Submissions””,, Final Guidance, March 22, 2005Final Guidance, March 22, 2005
First laboratory test for genotyping approved by FDAFirst laboratory test for genotyping approved by FDA
FDA Notable Actions & EventsFDA Notable Actions & Events
54
PrinciplesPrinciples RiskRisk--based orientationbased orientation ScienceScience--based policies and standards based policies and standards (incorporate up(incorporate up--toto--date science, and encourage advances in date science, and encourage advances in technology)technology) Integrated quality systems orientationIntegrated quality systems orientation International cooperationInternational cooperation Strong public health protectionStrong public health protection
Broad ActionsBroad Actions External review of existing External review of existing cGMPscGMPs, and product review practices, and product review practices Reassess and reevaluate current scientific approach to Reassess and reevaluate current scientific approach to cGMPscGMPs and and product review processproduct review process Emphasize riskEmphasize risk--based control point analysis and facilitate latest based control point analysis and facilitate latest innovations in pharmaceutical engineeringinnovations in pharmaceutical engineering
55
Immediate StepsImmediate Steps Encouraging innovation by allowing certain manufacturing processEncouraging innovation by allowing certain manufacturing process changes without prior FDA review/approvalchanges without prior FDA review/approval Enhancing expertise in pharmaceutical technologiesEnhancing expertise in pharmaceutical technologies Exploring better mechanisms for communicating deficiencies to Exploring better mechanisms for communicating deficiencies to industryindustry 21 CFR Part 11 lead shifted to CDER (Chaired by Joe 21 CFR Part 11 lead shifted to CDER (Chaired by Joe FamulareFamulare)) Including product specialists in inspection teamsIncluding product specialists in inspection teams Centers to provide reviews of all Warning LettersCenters to provide reviews of all Warning Letters Developing a technical dispute resolution processDeveloping a technical dispute resolution process Emphasizing riskEmphasizing risk--based approach in work planning processbased approach in work planning process FDA is encouraging industries to adopt new technologies such as FDA is encouraging industries to adopt new technologies such as Process Analytical Technologies (PAT) to improve manufacturing Process Analytical Technologies (PAT) to improve manufacturing efficiency and overall quality of the drug productefficiency and overall quality of the drug product
56
21 21 CFR Part 11 GuidanceCFR Part 11 Guidance
Scope & Application GuidanceScope & Application Guidance Withdrew preceding draft guidance and Compliance Policy GuideWithdrew preceding draft guidance and Compliance Policy Guide Specific definition of records subject to Part 11Specific definition of records subject to Part 11 Enforcement Discretion to be exercised for:Enforcement Discretion to be exercised for: –– Audit TrailsAudit Trails –– EE--copies of Ecopies of E--recordsrecords –– Record RetentionRecord Retention –– ValidationValidation Effectively grandfathers systems in place prior to August 20, 19Effectively grandfathers systems in place prior to August 20, 199797 Emphasis on decision based on documented risk assessment Emphasis on decision based on documented risk assessment 21 CFR Part 11 and preceding guidance subject to review,21 CFR Part 11 and preceding guidance subject to review, Regulations are likely to be revised, but have not changedRegulations are likely to be revised, but have not changed……YET!YET!
57
MotivationMotivation Medication errors are a huge problemMedication errors are a huge problem
–– 770,000 patients injured or die annually770,000 patients injured or die annually –– Cost to treat was $177.4 billion in 2002Cost to treat was $177.4 billion in 2002
Bar coding to unit of use level ensures right patient gets the rBar coding to unit of use level ensures right patient gets the right ight drug at the right timedrug at the right time FDA estimates rule will prevent 500,000 adverse events and FDA estimates rule will prevent 500,000 adverse events and transfusion errors and save $93 billion in healthcare costs overtransfusion errors and save $93 billion in healthcare costs over next next 20 years20 years
Final RuleFinal Rule ““Bar Code Label for Human Drug Products and BloodBar Code Label for Human Drug Products and Blood””, 21 CFR Parts , 21 CFR Parts 201,606, and 610201,606, and 610 Finalized February 25, 2004Finalized February 25, 2004
58
NutraceuticalNutraceutical
59
The Global The Global NutraceuticalsNutraceuticals Industry is Industry is  $196 Billion$196 Billion
Source: Nutrition Business Journal/Source: Nutrition Business Journal/BurrillBurrill & Company& Company
Supplements 34%
Latin America
Australia/ NZ
P er
ce nt
ag es
P er
ce nt
ag es
60
Food and Lifestyle can Influence Food and Lifestyle can Influence  our Genes and How they Workour Genes and How they Work
Diet Diet –– Gene InteractionsGene Interactions
Exercise Exercise –– Gene InteractionsGene Interactions
61
GenotypingGenotyping
of of PredispositionPredisposition
Health & Wellness Health & Wellness management against a set of management against a set of
personalized personalized biomarkersbiomarkers
Biomarker monitoringBiomarker monitoring
Personalized nutritionPersonalized nutrition
62
Many New Players in an Emerging MarketMany New Players in an Emerging Market
Alternative HealthAlternative Health DS CompaniesDS Companies
Health and Health and WellnessWellness MarketMarket
Fo od
C om
pa ni
Dietary supplementsDietary supplements M ed
ica l F
In Summary:In Summary: 8 Overarching Global Trends8 Overarching Global Trends
Range of Range of Marketplace Marketplace
ImpactsImpacts
Payers constrain and shift Payers constrain and shift pharmaceutical spendpharmaceutical spend
Shifting balance of powerShifting balance of power in an evolving healthcare in an evolving healthcare decisiondecision--maker networkmaker network
Elevated regulatory hurdlesElevated regulatory hurdles
Challenges toChallenges to Intellectual PropertyIntellectual Property
Changing public expectations Changing public expectations and negative industry imageand negative industry image
Growing global interdependency Growing global interdependency and transparency driven by and transparency driven by
technology evolutiontechnology evolution
64
65
A combination of strong chemistry skills, regulatory capabilitieA combination of strong chemistry skills, regulatory capabilities and quality manufacturing has s and quality manufacturing has positioned India favorably to capitalize on the global pharmaceupositioned India favorably to capitalize on the global pharmaceutical opportunitytical opportunity
Indian Pharmaceutical Indian Pharmaceutical Market OverviewMarket Overview
Approximately US$5 Approximately US$5 bnbn in 2004 with in 2004 with exports accounting for an additional exports accounting for an additional US$2.5 US$2.5 bnbn •• Amongst top 4 markets by Amongst top 4 markets by
volume globallyvolume globally Strong branded generics marketStrong branded generics market Market growing at a rate 6%Market growing at a rate 6%--8% as a 8% as a result of growing awareness, result of growing awareness, increasing penetration & increasing increasing penetration & increasing affordabilityaffordability •• Emerging segments such as Emerging segments such as
CNS, diabetes etc. growing at 15CNS, diabetes etc. growing at 15-- 20% +20% +
Introduction of product patents in Introduction of product patents in India in 2005 are expected to lead to India in 2005 are expected to lead to a greater emphasis on drug a greater emphasis on drug discovery and development discovery and development
G row
th O pportunities
Generic Exports and API OutsourcingGeneric Exports and API Outsourcing India is well positioned to target generic exports India is well positioned to target generic exports and API outsourcing opportunities in the regulated and API outsourcing opportunities in the regulated marketsmarkets
Skilled work force with strong chemistry skillsSkilled work force with strong chemistry skills Significant and sustainable cost advantage over Significant and sustainable cost advantage over international peers international peers Good understanding of the regulatory frameworkGood understanding of the regulatory framework
•• India has largest number of US FDA approved India has largest number of US FDA approved plants outside the US plants outside the US
•• Largest number of DMF filings outside US Largest number of DMF filings outside US •• Indian companies are among the leading players Indian companies are among the leading players
participating in Para IV challengesparticipating in Para IV challenges
R&D OutsourcingR&D Outsourcing Skilled work force at competitive costs Skilled work force at competitive costs Significant progress in development of Significant progress in development of pharmapharma & & R&D infrastructure over last 5 yearsR&D infrastructure over last 5 years Focus on early stage processes for Focus on early stage processes for NCEsNCEs, NDDS, , NDDS, clinical trials, process reclinical trials, process re--engineering and dedicated engineering and dedicated manufacturingmanufacturing
55
66
State of Innovation:State of Innovation: Innovation historically has been in process Innovation historically has been in process improvement improvement However, there are a growing number of However, there are a growing number of patents and publications from government and patents and publications from government and academic labsacademic labs
IndiaIndia Innovation is IncreasingInnovation is Increasing
Indian Patents & PublicationsIndian Patents & Publications
00 5050
19 91
19 91
19 92
19 92
19 93
19 93
19 94
19 94
19 95
19 95
19 96
19 96
19 97
19 97
19 98
19 98
19 99
19 99
20 00
20 00
20 01
20 01
20 02
20 02
India AdvantageIndia Advantage
Large skill baseLarge skill base Experts in process chemistry Experts in process chemistry Long history of reverse Long history of reverse engineeringengineering
Vast talent poolVast talent pool Sheer number of scientistsSheer number of scientists Motivated & English speakingMotivated & English speaking Large number of trained Indians Large number of trained Indians returning home from North returning home from North America and EuropeAmerica and Europe
Unmatched cost Unmatched cost competitivenesscompetitiveness
Lower cost of infrastructure and Lower cost of infrastructure and skilled manpowerskilled manpower Vertical integrationVertical integration
Strong local industryStrong local industry Growing expertise with international Growing expertise with international regulatory complianceregulatory compliance High quality manufacturing with High quality manufacturing with abundant capacitiesabundant capacities
SpeedSpeed Very strong entrepreneurial spiritVery strong entrepreneurial spirit Hungry for growth and recognitionHungry for growth and recognition Quick learners and fast moversQuick learners and fast movers
Availability of capitalAvailability of capital Stock market has seen Stock market has seen unprecedented growth in the last unprecedented growth in the last decadedecade Continues to be bullish on the Continues to be bullish on the pharmapharma industryindustry
68
Selected FDA Approved Plants Selected FDA Approved Plants  Outside the U.S.Outside the U.S.
Source: Source: BusinessworldBusinessworld
IsraelIsrael
HungaryHungary
TaiwanTaiwan
ChinaChina
SpainSpain
ItalyItaly
IndiaIndia
6161
6060
2525
2222
99
55
77
69
70
China becoming outsourcing center for drug China becoming outsourcing center for drug development and manufacturingdevelopment and manufacturing
PrePre--clinical costs in China are, on average, 20% of the U.S.clinical costs in China are, on average, 20% of the U.S. Big Big pharmaspharmas are rapidly increasing outsourcing to China (e.g. Eli Lilly)are rapidly increasing outsourcing to China (e.g. Eli Lilly) Special resources: e.g. primates, large Special resources: e.g. primates, large ““untesteduntested”” patients populationpatients population
ChinaChina’’s domestic market becoming significants domestic market becoming significant Western pharmaceuticals market will become top 5 by 2010 Western pharmaceuticals market will become top 5 by 2010 Healthcare system privatized; insurance industry boomingHealthcare system privatized; insurance industry booming Largest patient baseLargest patient base
China is developing its own expertiseChina is developing its own expertise First gene therapy approved in China: First gene therapy approved in China: GendicineGendicine by Shenzhen by Shenzhen SiBionoSiBiono GenTechGenTech Chemistry services: Chemistry services: WuxiWuxi PharmaTechPharmaTech Traditional Chinese Medicine (TCM): Traditional Chinese Medicine (TCM): BaiyunshanBaiyunshan Hutchison TCM Hutchison TCM
CHINACHINA BECOMING A SIGNIFICANT FORCEBECOMING A SIGNIFICANT FORCE
71
10,52910,529
4,5094,509
2,7192,719
1,9841,984
1,9801,980
1,8691,869
1,8211,821
1,7211,721
13,78313,783
2,7902,790
7,3347,334
3,2913,291
2,3922,392
1,7361,736
1,7251,725
1,6201,620
1,4621,462
1,4491,449
10,33210,332
2,2742,274
4444
3737
1515
2525
1515
1414
1010
1414
1919
1919
China Has A Large And Rapidly China Has A Large And Rapidly  Growing EconomyGrowing Economy Projected Projected
Accumulative GDP Accumulative GDP Growth (2004Growth (2004--2010) %2010) %
Average Average 17%17%
Real GDP in US$ billions (Based on Purchasing Power Parity)Real GDP in US$ billions (Based on Purchasing Power Parity) 20042004
U.S.U.S.
JapanJapan
GermanyGermany
FranceFrance
U.S.U.S.
JapanJapan
GermanyGermany
FranceFrance
U.K.U.K.
ItalyItaly
ChinaChina
BrazilBrazil
IndiaIndia
RussiaRussia
72
Unprecedented Growth in China Life Unprecedented Growth in China Life  Sciences MarketsSciences Markets
Source: IMS; Frost & Sullivan; E&Y; literatures search, World BSource: IMS; Frost & Sullivan; E&Y; literatures search, World Bank; ank; BurrillBurrill Analysis, Goldman Sachs, BCGAnalysis, Goldman Sachs, BCG
20002000 20052005 20102010
20002000 20052005 20102010
Total Health Care SpendingTotal Health Care Spending ((US Billion Dollars)US Billion Dollars)
Total Pharmaceutical MarketTotal Pharmaceutical Market ((US Billion Dollars)US Billion Dollars)
CAGR CAGR 16%16%
CAGR CAGR 17%17%
Total Medical Devices MarketTotal Medical Devices Market ((US Billion Dollars)US Billion Dollars)
CAGR CAGR 19%19%
CAGR CAGR 19%19%
•• 55thth largest largest pharmaceutical pharmaceutical market by 2010 market by 2010 (Boston Consulting (Boston Consulting Group)Group)
•• 33rdrd largest medical largest medical devices market by devices market by 2010 (Goldman 2010 (Goldman Sachs)Sachs)
•• Excellent Excellent investment and investment and merchant banking merchant banking opportunitiesopportunities
3434
150150
7070
China Life Sciences StrengthsChina Life Sciences Strengths
Low costs in drug R&D and manufacturingLow costs in drug R&D and manufacturing
High growth potential in domestic market driven by High growth potential in domestic market driven by aging population and improved personal incomeaging population and improved personal income
Large researcher talent pool with technology and Large researcher talent pool with technology and industry knowledge and skills industry knowledge and skills
Strong central and local government support, with Strong central and local government support, with favorable tax policies and grants favorable tax policies and grants
Special strengths: Gene therapy, stem cell research, Special strengths: Gene therapy, stem cell research, Traditional Chinese Medicine (TCM), chemistry Traditional Chinese Medicine (TCM), chemistry servicesservices
74
ChinaChina’’s market size for ethical & OTC drugs in USD Billions market size for ethical & OTC drugs in USD Billion
Source: Boston Consulting GroupSource: Boston Consulting Group
ChinChineseese PharmaPharma Market To Become Market To Become  No. 5 World Wide by 2010No. 5 World Wide by 2010
346346TotalTotal 66ChinaChina 88MexicoMexico 88CanadaCanada 99SpainSpain
1313ItalyItaly 1414UKUK 1919FranceFrance 2020GermanyGermany 5353JapanJapan
196196USAUSA 2002 Top 102002 Top 10
447447TotalTotal 1010SpainSpain 1010CanadaCanada 1010BrazilBrazil 1414ChinaChina 1515ItalyItaly 1616UKUK 2121FranceFrance 2424GermanyGermany 6565JapanJapan
262262USAUSA 2005 Top 102005 Top 10
731731TotalTotal 1515BrazilBrazil 1616SpainSpain 1717CanadaCanada 2323ItalyItaly 2424UKUK 2424ChinaChina 2828FranceFrance 3737GermanyGermany 8181JapanJapan
466466USAUSA 2010 Top 102010 Top 10
75
Company ProfileCompany Profile
Founder : Mr. TienFounder : Mr. Tien--Te Lee Te Lee (Retired in 2004)(Retired in 2004)
Chairman & President: Dr. Fangchen Lee Chairman & President: Dr. Fangchen Lee
Incorporation: August 1965Incorporation: August 1965
TSE Listing : May 1993TSE Listing : May 1993
No. of Employee: around 960No. of Employee: around 960
77
Integrating Group FacilityIntegrating Group Facility Fermentation FacilityFermentation Facility Cephalosporin and Penicillin FacilityCephalosporin and Penicillin Facility HighHigh--hypersensitive Product Facilityhypersensitive Product Facility (Anti(Anti--cancer, Hormone and Steroid)cancer, Hormone and Steroid) APIAPI’’s Facilitiess Facilities Diagnostics Product FacilityDiagnostics Product Facility
ANDA in Northern America for Generic MarketANDA in Northern America for Generic Market
PIC/S and PIC/S and cGMPcGMP ComplianceCompliance
InterInter--affiliates R&D and affiliates R&D and ManufManuf. Integration. Integration
Projects for Integrating GlobalizationProjects for Integrating Globalization
78
Major Overseas InvestmentsMajor Overseas Investments
Yung Zip Chemical Ind. Co., Ltd.Yung Zip Chemical Ind. Co., Ltd. APIs and APIs and ExcipientExcipient
Carlsbad Technology Inc.Carlsbad Technology Inc. California, USA since 1994California, USA since 1994
Yung Shin Pharm. Ind. (Yung Shin Pharm. Ind. (KunshanKunshan) ) Co., Ltd.Co., Ltd.
JiangSuJiangSu, China since 1994, China since 1994
79
Main Office: Kuala Lumpur, Malaysia since 1984Main Office: Kuala Lumpur, Malaysia since 1984 Territory: Malaysia, Philippines, Singapore, Territory: Malaysia, Philippines, Singapore, Thailand, Vietnam, Myanmar, Cambodia, Thailand, Vietnam, Myanmar, Cambodia, IndonesiaIndonesia
Yung Shin Company LimitedYung Shin Company Limited Hong Kong, since 1985Hong Kong, since 1985 Various medicine and agricultural products Various medicine and agricultural products
Shanghai Yung Zip Pharmaceutical Trading Co., Ltd.Shanghai Yung Zip Pharmaceutical Trading Co., Ltd. Shanghai, China since 1994Shanghai, China since 1994 Export/ import of API since 1994Export/ import of API since 1994
80
AnalgesicsAnalgesics Phase I: ongoing (Taiwan)Phase I: ongoing (Taiwan) Phase I: progressing (USA)Phase I: progressing (USA)
Cold sore reliefCold sore relief prepre--IND granted (USA)IND granted (USA) waiting for phase I trial (USA)waiting for phase I trial (USA)
AntiAnti--cancercancer IND submission (AntiIND submission (Anti--HIF, USA)HIF, USA) Phase II: Waiting for process comparability (AntiPhase II: Waiting for process comparability (Anti--angiogenesis, angiogenesis, USA)USA)
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SWOT AnalysisSWOT Analysis
close and related to the Asianclose and related to the Asian--Pacific market that Pacific market that growing up fastgrowing up fast
domestic fund is still called sufficient, the will of domestic fund is still called sufficient, the will of investment is high, the family property person investment is high, the family property person participates in the will vigorouslyparticipates in the will vigorously
rich foundation and experience that developed the rich foundation and experience that developed the industry in the pastindustry in the past
experienced manufacturing and well established experienced manufacturing and well established distribution channels in Adistribution channels in A--PP
Excellent reputation in the fieldExcellent reputation in the field
it needs for a long time to be absorbed to grow it needs for a long time to be absorbed to grow industry's biotechnology of the skill, investors may industry's biotechnology of the skill, investors may not be able to bear waiting for a long timenot be able to bear waiting for a long time
the execution of the relevant method of the the execution of the relevant method of the intelligence proprietary, has not reached the intelligence proprietary, has not reached the advanced country's leveladvanced country's level
lack of experience of international marketing and lack of experience of international marketing and operationsoperations
insufficient of connection with insufficient of connection with MNCsMNCs low sales effectiveness of generic sales forcelow sales effectiveness of generic sales force less R&D outcome from the huge investment less R&D outcome from the huge investment
YSP plant grants for YSP plant grants for cGMPcGMP and FDA inspectionand FDA inspection great growth opportunities worldwide for generic great growth opportunities worldwide for generic
productsproducts well established branches in Awell established branches in A--P and USAP and USA increasing ageing people that impel the demand of increasing ageing people that impel the demand of
the medical product to increase the medical product to increase getting strong demands of CMO from getting strong demands of CMO from MNCsMNCs
the domestic relevant production cost is relatively the domestic relevant production cost is relatively high, cause the competitiveness to be lowhigh, cause the competitiveness to be low
face the competition of the low steps products face the competition of the low steps products from developing country and of the highfrom developing country and of the high--order order products in the advanced countryproducts in the advanced country
potential production competition from India and potential production competition from India and mainland China due to their huge size of mass mainland China due to their huge size of mass productionproduction
price erosion from BNHI cost containmentprice erosion from BNHI cost containment Increasing expenses in R&D as well as marketing Increasing expenses in R&D as well as marketing
generic products generic products
5
10
15
20
25
(NT$Mio.)(NT$Mio.) (%)(%)
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YSP Taiwan
Brances Net Sales EBIT Net Profit CYI 478 91 19%
YSK 130 0.3 0.2%
YSPSAH 881 133 11%
Animal DrugsAnimal Drugs 9%9%
Human DrugsHuman Drugs 82%82%
OthersOthers 1%1%
APIAPI 2%2%
FoodFood 6%6%
Y/e DecY/e Dec 20052005 2006E2006E yoyyoy
Sales Sales EBITDAEBITDA
Net DebtNet Debt Enterprise ValueEnterprise Value
9090 8888 --2%2% 2525 2424 --5%5% 28% 28% 27%27% 1414 2121 48% 48%
16%16% 24%24% 223223 --1212 210210
Source: Company data & BloombergSource: Company data & Bloomberg
Focus on Alimentary track & metabolism, Focus on Alimentary track & metabolism, CardiovascularsCardiovasculars, urology, anti, urology, anti--infectivesinfectives,, CNS, CNS, dermatologicalsdermatologicals, hormones, oncology,, hormones, oncology, MusculoMusculo--skeletal, skeletal, parasitologyparasitology, respiratory, respiratory & sensory organs& sensory organs
Research focus: Herbal medicines, food Research focus: Herbal medicines, food Supplements, slow release medicines, APIs,Supplements, slow release medicines, APIs, AntiAnti--cancer medicinescancer medicines
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Benchmark Benchmark –– Dr. ReddyDr. Reddy’’s Lab. Ltd. s Lab. Ltd. 
Source: Company data & BloombergSource: Company data & Bloomberg
RussiaRussia 15%15%
IndiaIndia 34%34%
OthersOthers 17%17%
Y/e MarchY/e March 20062006 2007E2007E yoyyoy
Sales Sales EBITDAEBITDA
Net DebtNet Debt Enterprise ValueEnterprise Value
549 549 13631363 148%148% 4242 267267 535%535% 8% 8% 20%20% 3737 144144 291% 291% 7%7% 11%11%
2,8222,822 616616
Research focus: Metabolic disorders, Research focus: Metabolic disorders, cardiologycardiology
Established in 1984Established in 1984
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Benchmark Benchmark –– Dr. ReddyDr. Reddy’’s Lab. Ltd. s Lab. Ltd.  Strategic AnalysisStrategic Analysis
StrengthsStrengths –– Drug discovery, research, Drug discovery, research, energingenerging strength in strength in
biotechnology, USFDAbiotechnology, USFDA--approved manufacturing facilityapproved manufacturing facility WeaknessWeakness –– A lack of marketing presence in the US, DRL is A lack of marketing presence in the US, DRL is
building critical mass in its US and European building critical mass in its US and European operationsoperations
OpportunitiesOpportunities –– Large US market for generics; other nonLarge US market for generics; other non--regulated regulated
markets I.e. China, Brazil, CIS, Russia and Indiamarkets I.e. China, Brazil, CIS, Russia and India ThreatsThreats –– Increase competition in the generics segment in the Increase competition in the generics segment in the
US; slowdown in the number of drugs going offUS; slowdown in the number of drugs going off--patent patent in the futurein the future
RoW formulations
Revenue Breakdown, FY08FRevenue Breakdown, FY08F
Competitive PositionCompetitive Position Supplier PowerSupplier Power –– Superior backwardSuperior backward--integrated manufacturing facilities approved by integrated manufacturing facilities approved by
FDA; no problem with new material suppliesFDA; no problem with new material supplies
Barriers to EntryBarriers to Entry –– Strong R&D background focusing on new drug discoveries, legal Strong R&D background focusing on new drug discoveries, legal
expertise, strength in chemical synthesis difficult to replicateexpertise, strength in chemical synthesis difficult to replicate
Customer PowerCustomer Power –– Key products have pricing power in US, the lower the price, the Key products have pricing power in US, the lower the price, the
higher the market shareshigher the market shares
Substitute ProductsSubstitute Products –– Old products are substitutable, a need to innovate constantly toOld products are substitutable, a need to innovate constantly to
launch complex productslaunch complex products
RivalryRivalry –– Strong competition from varies players that are entrenched in thStrong competition from varies players that are entrenched in the e
advanced markets that DRL is targeting advanced markets that DRL is targeting
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Trends 2006: Where are we today?Trends 2006: Where are we today?
Many companies are still only looking for pure labor Many companies are still only looking for pure labor arbitragearbitrage
How low will the vendors go?How low will the vendors go?
The smart ones are looking for valueThe smart ones are looking for value How can I improve my processes?How can I improve my processes? How can I develop new revenue opportunities?How can I develop new revenue opportunities?
Many buyers want bestMany buyers want best--ofof--breed rather than a single breed rather than a single providerprovider
Most buyers use between two and five offshore Most buyers use between two and five offshore providers to manage demand and pricingproviders to manage demand and pricing
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Strategies for the Next DecadeStrategies for the Next Decade Vertical integration of resources to global Markets Vertical integration of resources to global Markets  Acquisition of complimentary Acquisition of complimentary  Financial leverage and stock dilution Financial leverage and stock dilution  Goals of each 5Goals of each 5years termyears term
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API ExportsAPI Exports
office office developmentdevelopment
Global Global generics generics suppliersupplier
new R&D new R&D center at center at IndiaIndia Distribution Distribution
companies or companies or partners at partners at Australia, Australia, South South America and America and AfricaAfrica
NCE NCE developer developer and and supplier, 1 supplier, 1 meme--too NCE too NCE every yearevery year
Extreme the existing strength Extreme the existing strength manufacturing for regulated manufacturing for regulated market US, EU and Japanmarket US, EU and Japan Product licensingProduct licensing--in for The in for The
Group Group New R&D center in ChinaNew R&D center in China Distribution companies at China, Distribution companies at China,
US or EU or MidUS or EU or Mid--EastEast Distribution partner at Japan or Distribution partner at Japan or
EU or MidEU or Mid--East East
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SFA and eSFA and e-- business Roll outbusiness Roll out
Strengthen Strengthen Presence in Presence in
Lifestyle DrugsLifestyle Drugs
Penetrate Penetrate Regulated Regulated
and nicheand niche
SustainableSustainable GrowthGrowth


- Chronic - High Risk Group



PatientsPatientsPatientsSemi-PatientsSemiSemi--PatientsPatientsHealth PeopleHealth PeopleHealth People
Disease Disease ManagementManagement
Health Health ManagementManagement
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Penetrate Regulated Markets by M&APenetrate Regulated Markets by M&A
New Markets/ Initiatives:New Markets/ Initiatives: Enter Advanced Markets/ establish onEnter Advanced Markets/ establish on--shore presence in 5 shore presence in 5 select marketsselect markets oo EUEU oo JapanJapan oo AustraliaAustralia oo South AfricaSouth Africa oo Latin AmericaLatin America
Acquisition:Acquisition: oo Brands in USBrands in US oo Businesses in select countries of EUBusinesses in select countries of EU oo DomesticDomestic
RegulatorsRegulators
IndustryIndustry
SuppliersSuppliers
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Enhance Research (ANDA, NDDS and NCE)Enhance Research (ANDA, NDDS and NCE)
New chemical entity in TaiwanNew chemical entity in Taiwan
New dosage form /New deliver pathwayNew dosage form /New deliver pathway
Authorized brand genericAuthorized brand generic
11stst generic in potential generic in potential TCsTCs
Distributorship of patent productsDistributorship of patent products
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GPGP
Value Value Creation Creation through through ExecutionExecution
Performance Performance ManagementManagement
Employee RetentionEmployee Retention Recruiting, induction and training costsRecruiting, induction and training costs Central HR administration costsCentral HR administration costs Sales value and volume per repSales value and volume per rep
Sales value and volume per repSales value and volume per rep Employee satisfactionEmployee satisfaction Employee retentionEmployee retention
Sales Force Sales Force Effectiveness Effectiveness
Va lu
e Tr
ee Va
lu e
Tr ee
ProcessProcessManagementManagement AreaArea
WorkforceWorkforce ManagementManagement
Competency Competency ManagementManagement
Sales value and volume per repSales value and volume per rep CrossCross--selling and share of customer walletselling and share of customer wallet Time to competencyTime to competency Cost per training hour and training cost per Cost per training hour and training cost per reprep
Alignment of culture, values, people performanceAlignment of culture, values, people performance
Average cost of recruitment per repAverage cost of recruitment per rep Average ROI of individuals recruitedAverage ROI of individuals recruited Number of right candidates accepting job Number of right candidates accepting job offers offers
Efficiency and productivity per repEfficiency and productivity per rep Maximise impact against business metricsMaximise impact against business metrics
Costs through longer tenureCosts through longer tenure Cost of recruitingCost of recruiting
Time available for conducting roleTime available for conducting role Average travel and meeting timeAverage travel and meeting time
ConversionsConversions Sales value per rep Sales value per rep Cross sellingCross selling Average meeting preparation lengthAverage meeting preparation length ConversionsConversions Sales value per rep Sales value per rep Cross sellingCross selling Average travel and meeting timeAverage travel and meeting time
Cost of Sales Cost of Sales
Win Rate Win Rate
Forecasting Accuracy Forecasting Accuracy
Customer Retention Customer Retention
Business ImpactBusiness Impact
“…“…....the way management treats the associates (employees) is exactly the way management treats the associates (employees) is exactly how the associates will treat the customers. And if the associathow the associates will treat the customers. And if the associates es treat the customers well, the customers will return again and agtreat the customers well, the customers will return again and again, and that is where the real profit liesain, and that is where the real profit lies”” (Sam Walton, founder of Wal(Sam Walton, founder of Wal--Mart)Mart)
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DOMESTIC FORMULATIONSDOMESTIC FORMULATIONS
11stst brand generic in potential brand generic in potential TCsTCs
Reduce pricing pressure on Reduce pricing pressure on ‘‘olderolder’’ moleculesmolecules
Brands/ differentiated productsBrands/ differentiated products
higher growth than market (E.I. > 100)higher growth than market (E.I. > 100)
In Licensing/ coIn Licensing/ co--marketingmarketing
GENERICS BUSINESSGENERICS BUSINESS
Define tender business operation Define tender business operation platformplatform
Aggressive build up of productsAggressive build up of products
Acquisition/ mergerAcquisition/ merger
CONTRACT MANUFACTURINGCONTRACT MANUFACTURING
Creative our license dealsCreative our license deals
Product acquisitionProduct acquisition
ENHANCE RESEARCHENHANCE RESEARCH
CoCo--development/ licensedevelopment/ license--inin
High Investment/ Long gestationHigh Investment/ Long gestation
Integration efforts among groupIntegration efforts among group
R&D center in China/ IndiaR&D center in China/ India
YungShinYungShin GroupGroup
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Future PerspectivesFuture Perspectives Asia is a diverse region with potential for YungShin group with Asia is a diverse region with potential for YungShin group with  operations in 15(18) Countriesoperations in 15(18) Countries
AustraliaAustralia
YSPSAHYSPSAH 881881 1,4181,418
YZCYZC 290290 467467
Average annual Average annual growth rate: 10%growth rate: 10%

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Thanks Very Much for Your Kind Attention !Thanks Very Much for Your Kind Attention !
Fangchen Lee, PhD, MBAFangchen Lee, PhD, MBA ChairmanChairman
Yung Shin Pharm. Ind. Co., Ltd.Yung Shin Pharm. Ind. Co., Ltd. ffangchen@yungshingroup.comangchen@yungshingroup.com
YungShin GroupDecade Before and Then
Agenda
Taiwan Market Highlights
Taiwan Pharmaceutical TrendAn industry where the market growth is dramatically declining
Top 10 Foreign Manufacturers
Top 10 Local Manufacturers
Worldwide Pharmaceutical MarketGlobal Pharmaceutical Market is still Growing, but Under Pressure
Top 10 Key Markets in the World- 2005
Factors Affecting Global Market Growth
Global generic sales reached an estimated US$ 61 Billion in 2005
Western Europe Generic Penetration
Estimated Global Generic Sales by Co. Sandoz head in value ; Teva leads in volume
Few Players with a “Global” ProfileMost are very regional
Market Segment in Asia PacificLocal Manufacturers vs Foreign Manufacturers
Critical Issues Affecting Generic Markets Over the Next 10 Years
Factors Favoring Generics in Asia Pacific
The future of Generics in Asia PacificEmerging new regional players will drive more share
Healthcare Industry Trends- Pharmaceutical - - Nutraceuticals -
Healthcare industry trend : Pharma
Direct-to-Consumer Push
Pricing Pressure: the Biggest Challenge
Price Pressures will Drive Consolidationsin order to Maintain Earning Levels
New trend in Contract Manufacturing
Traditional relationship
Opportunities Threats
FDA Notable Actions & Events
21 CFR Part 11 Guidance
Bar Coding Regulations
The Global Nutraceuticals Industry is $196 Billion
Food and Lifestyle can Influence our Genes and How they Work
The Emerging Health & Wellness Market
Many New Players in an Emerging Market
In Summary:8 Overarching Global Trends
Factors driving the Indian Pharmaceutical Industry
IndiaInnovation is Increasing
China Has A Large And Rapidly Growing Economy
Unprecedented Growth in China Life Sciences Markets
China Life Sciences Strengths
China’s market size for ethical & OTC drugs in USD Billion
YungShin Group
Company Profile
SWOT Analysis
Benchmark – Dr. Reddy’s Lab. Ltd.
Benchmark – Dr. Reddy’s Lab. Ltd.
Trends 2006: Where are we today?
Strategies for the Next Decade - Vertical integration of resources to global Markets - Acquisition of complimentary - Fina
Strategic Goals
Business Strategy
Penetrate Regulated Markets by M&A
Enhance Research (ANDA, NDDS and NCE)
Tough Environment for Sales Management
Sales Force Automation
YungShin Group – Emerging Scenario
Future Perspectives Asia is a diverse region with potential for YungShin group with operations in 15(18) Countries
Thanks Very Much for Your Kind Attention !