india – a growing player dr. brian w tempest chief mentor & executive vice chairman of the...
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India – a growing player
Dr. Brian W Tempest
Chief Mentor & Executive Vice Chairman of the Board
Ranbaxy Laboratories Limited
Frankfurt – 15th March’06
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Except for the historical information contained herein, statements in this presentation and
the subsequent discussions, which include words or phrases such as “will”, “aim”, “will
likely result”, “would”, “believe”, “may”, “expect”, “will continue”, “anticipate”, “estimate”,
“intend”, “plan”, “contemplate”, “seek to”, “future”, “objective”, “goal”, “likely”, “project”,
“should”, “potential”, “will pursue” and similar expressions or variations of such
expressions may constitute "forward-looking statements". These forward-looking
statements involve a number of risks, uncertainties and other factors that could cause
actual results to differ materially from those suggested by the forward-looking statements.
These risks and uncertainties include, but are not limited to our ability to successfully
implement our strategy, our growth and expansion plans, obtain regulatory approvals, our
provisioning policies, technological changes, investment and business income, cash flow
projections, our exposure to market risks as well as other risks. Ranbaxy does not
undertake any obligation to update forward-looking statements to reflect events or
circumstances after the date thereof.
Disclaimer
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Asia’s Share of the World GDP (at PPP in %)
Year 1870 1913 1950 1973 2001 China 17% 9% 5% 5% 12% India 12% 8% 4% 3% 5% Japan 2% 3% 3% 8% 7%
Rest of Asia 7% 5% 7% 9% 13% Total Asia 38% 25% 19% 25% 37%
Source – WEF
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Davos 2006
Source – FT
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The Productivity Advantage
India a usa pharma view USA India a usa pharma view USA
1 chemist FTE 1 chemist FTE 1 chemist FTE 1 chemist FTE
70 h/week 50 h/week 70 h/week 50 h/week
$ 800 monthly $ 12,000 monthly $ 800 monthly $ 12,000 monthly
Better education x 1,3Better education x 1,3
Longer working time x 1,3Longer working time x 1,3
Lower cost x 20Lower cost x 20
Sources: IPHMR Conferences, New Delhi August 2004
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Europe - retirees grow faster than workers - fertility rates lower
Japan - expansion of grey segment
USA - over 50’s 88m will grow to 118m (2020) - obesity
China - one child families - get older before becoming wealthy - labour costs will rise owing to labour shortage - rural to urban flow
India - will remain very young - source of the extra needed global workforce
The Ageing Advantage
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The R&D Investment Advantage Most attractive R&D Investment locations:
1. China 2. USA 3. India 4. Japan 5. UK
Source – UNCTAD 2005
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Qualified Scientists & Engineers
Global India players with Alliances
English speaking
TRIPs compliant
IIT, IIM & other scientific institutions
Source – UNCTAD 2005
The R&D Investment Advantage-reasons why
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Genetic engineering research 165
Transgenic work 55
Therapeutics 25
Basic research 28
Universities > 250
Source – Dept. of Bio-technology
The R&D Investment Advantage - research institutions in India
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4th largest reservoir of Scientific Manpower
2nd largest in terms of speaking English
3m graduates pa, 115k MSc Chemistry
345k IT, USA 75k
Knowledge super power
Lead by a Scientist as President
Diaspora network (25m across 120 countries)
The world’s largest free nation
US & Europe will not dominate Science, Maths, IT
The Knowledge Advantage
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The Knowledge Advantage
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The State of European Science Teaching
Source – Royal Society of Chemistry, Policy Bulletin – Winter 2006
“This means that when pupils are in a science laboratory their experience is unsafe, unsatisfactory or uninspiring for 65% of the time. In addition, 13% of science classes are not taught in a laboratory at all”
Laboratories in UK state schools:
Excellent 5%Good 29%Basic/uninspiring 41%Unsafe/unsatisfactory 25%
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GDP World growth marginally less in 06 than 05 (+4.3%)
USA expansion at a slower growth than 05 (+3.6%)
Eurozone – expected to perform better than USA
Asia : PRC – slightly slower growth to prevent hard landing Japan – sustain current growth India – increasing growth rate Chindia – 40% population, 8% economy
Largest foreign affairs caucus in US Congress (180)
74,000 demonstrations reported in 2005 in China
The Economic Growth Advantage
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$b
2001/2 6.1
2002/3 5.0
2003/4 4.7
2004/5 5.5
2005/6 6.5
- But still only at 10% of PRC levels
The FDI Advantage
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$m 2000 110 2001 160 2002 200 2003 250 2004 400 2005 450
Source – Citigroup
Investment by top 15 Indian Domestic Pharmaceutical Companies
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Investment by foreign Pharma companies
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Microsoft Global Development Centre (GDCI)
Microsoft Global Services (MGSI)
Microsoft Global Technical Support Centre (GTSC)
Microsoft Systems Research (MSRI)
Microsoft India Development Centre (MIDC)
Investment by Microsoft in India
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Manufacturing growth ‘90’ - 03
- Chinese manufaturing +12% (90-03) - India manufacturing +6.5%
Scope for improvement of Government Policies
Revitalisation of agriculture
Further privatisation
Further encouragement of R&D
Prosperous middle class 300m strong
The Potential for Improvement Advantage
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34 News TV channels. Oldest 13 years old (NDTV)
5000 newspapers, circulation 17m. 12 with 1m copies each
200m daily readers. 21m new daily readers 2003/2005, +14%
50% rural / 50% urban
Indian are hungry for information
Source: World Business 26.2.2006
The Information Advantage
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High quality healthcare
Patients from developed & developing countries
Growing Privatisation
International standards
Low Costs: Thailand India - Open heart $14250 $4400 - Hysterectomy $ 2012 $ 571 - Knee surgery $7000 $4500
Better access through airports likely
The Medical Tourism Advantage
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0
1000
2000
3000
4000
5000
6000
7000
0
1000
2000
3000
4000
5000
6000
7000
The Global Generic Pharma companies
Source : Company /Financial reports & presentations
Annual Sales (US$ Millions)
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% 1999 13% 2000 17% 2001 20% 2002 30% 2003 35% 2004 40%
Source – Citigroup
*DMF – Drug Master Files
Chindia share of all API* filings
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$b 2004 2009
USA 15 27
W Europe 9 14
Japan 3 4
Rest of America 6 9
ROW 25 40
Total 58 94
Source: Frost & Sullivan
The Global Generic Market
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The Generic Pharma Landscape
Fundamental drivers of growth
High healthcare costs
Total Healthcare Spending, % of GDP
15.0
11.110.1 9.9
8.4 7.9 7.7 7.7
0.0
4.0
8.0
12.0
16.0
UnitedStates
Germany France Canada Italy Japan Spain UK (1)
Source: World Bank, DB Global Pharma Report Aug 2005, OECD Health Data 2005 (1) – 2002, UBS European Pharma Report, Sep 2005
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The Generic Pharma Landscape
Fundamental drivers of growth
Demographics
Source: World Bank, DB Global Pharma Report Aug 2005, OECD Health Data 2005 (1) – 2002, UBS European Pharma Report, Sep 2005
15
20
25
30
Europe US
2005 2010 2015 2020 2025
Estimated % of regional population over 60
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The Generic Pharma Landscape
Fundamental drivers of growth Patent Expiries
Source : Global Generic Drug Stocks Citigroup Smith Barney, September 2004, IMS Health : MIDAS , MAT June 2005
0
5
10
15
20
2006 2007 2008 2009 2010
Patent expiry, 2006 - 10
$ Bn
Re
ven
ue
s
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The Generic Pharma Landscape
Fundamental drivers of growth
Source : Global Generic Drug Stocks Citigroup Smith Barney, September 2004, IMS Health : MIDAS , MAT June 2005
0% 10% 20% 30% 40%
IT
SP
JA
FR
CA
UK
GE
USA
Total
% Growth Constant $
Generics
11%
20%
30%
-2%
13%
20%
13%
9%
19%
23%
36%
8%
4%
36%
10%
2%
31%
38%
% Share (Volume) % Share (Value)
8%
5%
8%
2%
20%
20%
16%
7%
2%
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Ranbaxy Strategic Direction
US $ 1 BnUS $ 1 Bn
US $ 5 BnUS $ 5 Bn
US $ 2 BnUS $ 2 Bn2004
2007
• Amongst the Top 5
generic Companies
• Significant income
from proprietary products
2012
• Growth through
- Organic
- Inorganic
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Competitive Advantages
Aggressive Home Market
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Competitive Advantages
Cost of Manufacture
Active Pharmaceuticals Facility, Mohali Dosage Forms Facility, Paonta Sahib
• Highest number of FDA approved plants outside the US
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Competitive Advantages
R&D I
R&D III
R&D II
R&D IV
Cost of Innovation
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Potential Downsides
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Potential downside – Asian Flu
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Potential downside – Oil prices
Source – BLS, ELA, The Conference Board
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Potential downside - Infrastructure
Source – FT
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Potential downside – Counterfeit products
Origin of fake products
seized in EU in 2004
Rank
1. China
2. Thailand
3. Hong Kong
4. Turkey
5. USA
Source: FT
Countries where fake
pharma products seized in
2005
Rank
1. Russia
2. China
3. South Korea
4. Peru
5. Columbia
Source: PSI
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Asia economic strength is returning
Many advantages for India
Some downsides
The feeling in India a turning point has been reached and passed
Summary
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“We have all grown up learning the story of the unfinished voyage of Christopher Columbus setting sail to reach India, he discovered America. I now
invite the people of America to complete the voyage
of that great explorer”
Manmohan SinghPrime Minister of India
July 2005.”
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Thank You