INTRODUCTION TO NORTONS INDIAJune 2011

Indian Economy- A Brief Overview

“We either manage the slow decline of our business in Europe or at best tread water, expending great energy in the process, or we expand into new markets, like India where there is a real need and genuine demand for what we have to offer and what we have spent years perfecting”, CEO of a UK Based Plc in a recent board meeting.

Why Not India?• It is too far away!• It is a very different market!• We do not have any foreign language skills in our business!• We do not have the capital to invest in such a big new market! • We are not a global company!• We do not know where to start!• We do not know who to trust!• How do we protect our IPR?• We do not know if there is a demand for our products and services!

Nortons Group• International firm of chartered accountants and professional business

advisors

• Based in Thames Valley, UK with affiliate offices across 25 countries– 65 professionals in the UK– 2,300+ professionals worldwide

• Senior team drawn from Big 4, technology consulting firms and investment banks

• Track record in supporting high growth businesses at all stages of the life cycle

– #1 in the UK for helping US venture capital backed TMT companies looking to expand internationally

– Network of technology partners for sourcing and qualifying tomorrow’s high performers– Client success stories include a number of US Healthcare businesses (who we are

unable to name because of confidentiality) and technology companies including Amazon.com, Blackberry, Juniper Networks, Napster, Party Gaming, etc…

– Work with over 300 US Clients

• UKTI Registered Advisor

Ian Bussey BJuris (Hons), LLB

Ian is a lawyer with over 10 years of comprehensive corporate finance experience at Board level within the Technology and Healthcare sectors as General Manager, Business Development Director and General Legal Counsel.

Prior to joining Nortons, Ian worked in-house for a number of companies to deliver inorganic growth through acquisition and consolidation. Ian delivered US healthcare company CooperVision's International buy and build strategy by acquisition of manufacturing, distribution and sales businesses in the UK, Germany, Australia, Denmark, Sweden, Finland and Spain. He also in licensed and out licensed key technologies to US and International businesses.

He also implemented and executed Mistral’ Internet's inorganic growth strategy delivering an increase in turnover from £4m in 2002 to £22m in 2006 by acquiring 9 companies. He successfully integrated 9 companies into the core Mistral business before selling the business to Kingston Communications for £21m in 2007.

Ian has overseen a number of successful fundraises, sales, acquisitions and licenses over the past 3 years with Nortons.

Senior Director

Nortons Corporate Finance

Nortons India

India has;…largest democracy

…fourth largest economy in the world by GDP

…second largest growing economy with :

– increasing disposable income– Rapidly emerging middle class– low cost competitive workforce– investment friendly policies– strong import growth– record capital inflows

…predicted working age population (15-64) increasing by 135m by 2020

– young, eager, well educated workforce– High-potential market when Europe, China & US are decreasing

India Snapshot

•

Population: 1.21 billion (Est. 2011)

•

Demographics : One half of the country is below age 25

•

Land area: 1.27 million square miles (1/3 of US)

•

Languages: 18 Languages (English widely used)

• Y-o-Y GDP growth – 2010/11 forecast of 10% across all industriesIndia GDP (USD Bn)

785877

1115 1175 1175

1381

1638

0200

400600

8001000

12001400

16001800

2005 2006 2007 2008 2009 2010e 2011e

India Demography

Economy concentrated in the big cities

– Delhi & Mumbai alone contribute 32% of India’s GDP

– 42 cities have over 1m people

– By 2030, 68 cities will have over 1m people

More poor than Africa – worlds highest concentration of poor people

Indian Economy- A brief overviewSize of Economy

• India’s GDP of US$1.4trn is expected to grow 10% in 2011 and at the same level for the next 10 years

• Many, including Morgan Stanley, predict that India’s growth will overtake China’s by 2014. From then on India is forecast to grow faster than any other major economy.

• Goldman Sachs see India’s economy overtaking the UK by 2017, Japan by 2027, the whole EU by 2035, America by 2045 and possibly China around 2050.

• If India had liberalised at the same time as China – India would be leading the way!• Within 40 years India will once again be the biggest economy in the world, as it has been for 496

of the past 500 centuries.

Demographics

• Within 15 years India will once again become the largest country in the world in terms of population.

• Importantly India’s working age cohort will increase by 136m by 2020 versus China’s, which will grow by only 23m. Many Western countries and Japan are already seeing their working age population shrink and the number of dependents increase.

Indian Economy- A brief overview

Development of Infrastructure

• According to many commentators, India could unleash its full potential, provided it improves its infrastructure, which at present is not sufficient to meet the growing demands of the economy.

• The Indian government’s first priority is rising to the challenge of maintaining and managing high growth through investment in the infrastructure sector.

• India will invest an estimated US$ 492.5 billion over the next 5 years on infrastructure projects.

• This investment will represent 7.5% of GDP and will be focussed on building out both physical and social infrastructure.

India Continues to Develop and Improve

Indian Healthcare Market

• Indian Healthcare Market was estimated to be worth US$45bn in 2010 and is growing at 15% per annum

• Medical Device market value will reach US$6.41bn by 2014 (Pharmabiz March 2011)

• Indian Paradox: Best in class healthcare delivery in private hospitals in tier 1 cities supporting upper and middle class and medical tourism. Absence of accessible affordable quality health services for the majority of the population.

• Less than 10% of population has insurance.• There are only 6 doctors for every 10,000 Indians which compares to 548

per 10,000 in the USA.

Med Tec Growth Drivers

Med Tec Growth Drivers

Medical Devices

Indian Med Tec- Key Segments

Med Tec Key Short Term Challenges

Medical Devices - Outsourcing

• Leveraging the services of an Indian partner that specializes in finished-device manufacturing can be a good choice :

– Offshore partners can help a company improve quality while shortening the product development cycle and reducing time-to-market.

– It can decrease costs by as much as 60%.

– Many of the established and experienced offshore companies in India have robust offshore development processes that have been created, tested, retested, and fine-tuned to reduce costs and shorten development cycles

• Some Indian companies have expanded their manufacturing capabilities by– Developing an infrastructure and adopting manufacturing processes that uphold the strictest of standards

– Some have added clinical trial and FDA regulatory certification processes to their portfolios.

• With the implementation of a high-quality telecom and connectivity infrastructure in India, it has become convenient for these companies to provide maintenance and field support as well.

Benefits of Outsourcing - India

Medical Devices - Manufacturing

• India is well placed in the outsourced contract design, development and manufacturing space

because of its engineering capabilities in a wide spectrum of areas

• India demonstrates multi-disciplinary R&D and engineering capability in multiple sciences of

electronics, chip design, software mechanical and medical engineering

• We see two market opportunities in contract design and development of medical devices:– One that companies in the US and Europe can offload a whole range of existing medical device products to India to maximize the cost

advantage. India has been proving to be a reliable and dependable source for this capability

– Second that global companies can look at India as a hub in the Asian region to undertake contract design, development, manufacture

and packaging of medical devices for regional markets

India as a Manufacturing Hub

Medical Devices - Manufacturing

• With more than 380 universities, 11,200 colleges, and 1500 research institutions, India has the

second-largest pool of scientists and engineers in the world.

• More than 2.5 million graduates are added to the workforce every year, including 300,000 engineers

and 150,000 information technology (IT) professionals.

• India has a sound record in adherence to IPR which follows English law.

• The country has already made a mark in pharmaceuticals, development of new chemical entities

and clinical research.

• Private Equity firms and Venture Capitalists see Medical Devices as the second most attractive

sector after Diagnostics.

• The government is encouraging creation of medical devices industry clusters.

India as a manufacturing hub

Medical Devices - Manufacturing

• Japan’s Olympus Corporation opened an Indian subsidiary in April 2010

• In 2010, GE Healthcare invested nearly US$50 million to establish an R&D facility in Bengaluru for

the design and manufacture of modern molecular imaging systems used in the diagnosis of cancer,

heart diseases and brain disorders. The company claims that products manufactured at this facility

will be about 30%–40% less expensive than those made elsewhere

• Chennai-based Trivitron Healthcare’s investment in India’s first-ever medical technology park in

Chennai to position India as an alternate and viable low-cost manufacturing site comparable to

China. Some of its technology partnerships are:

– Aloka, Japan - manufacturing Ultrasound Systems and Color Doppler

– Biosystems, Spain - manufacturing diagnostics laboratory reagents

– Brandon, U.K - manufacturing high end OT lights

– ET Medical Devices, Italy - manufacturing Cardiac diagnostic instruments

– Johnson Medical, Sweden - manufacturing modular infection free OTs, Pendants

– Vision Engineering, Pune, India - manufacturing x-ray imaging systems

India as a manufacturing hub

Medical Devices – IP Protection•

India is a signatory to GATT (General Agreement on Tariffs and Trade) : and

• TRIPS (Trade Related aspects on Intellectual Property Rights).

• This means that it has to follow the rules set by WTO (World Trade Organization) and recourse

could be sought in international forums for not implementing the agreement.

• The TRIPS agreement also brings harmonized laws and regulations throughout the global

community on Intellectual property.

• The patent laws of every signatory country are similar and hence what is applicable in the USA

and Europe is also applicable in India.

It is critical that International Companies have an Indian Patent for their products.

Diagnostic Market Overview

• Diagnostic and pathology market is around USD 3bn and growing rapidly (23% p.a)

• There are 2 major segments of the Diagnostics Market:

Pathology Laboratories

Diagnostic kits and reagents

• Both of the above segments provide very strong potential for growth, both in the domestic

market and as a preferred hub for clinical trials and outsourcing from western countries.

• The number of diagnostic tests conducted in the last decade has more than doubled from 180

million to over 500 million

Market Overview

Market OverviewDrivers & Challenges

Market Overview

• Infectious diseases – TB, HIV, malaria, dengue, lepracy and hepatites B&C

– Rapid tests for TB, PCR test for HIV in infants

• Non-communicable diseases –– Diabetes

– Coronary heart diseases

– Oncology, breast and cervical cancer

– Screening for risk factors, other preventive measures, early diagnosis

• Rapid tests for blood banks – 5 in 1 - HIV, syphilis, malaria, hepatitis C&B

Needs in the Indian Market

Market Overview

• Rural areas have special needs– Extreme conditions

– Temperatures

– Long distances and lack of infrastructure

– Missing cold chain

– No doctors available

– Patient Identity and the need for see and treat solutions

– Many undiagnosed diseases in remote areas

• Affordability and usability are key words– Local production required in most cases

– Local partnering required in most cases

Needs in the Indian Market

Pathology Lab Business

Pathology Lab Business

• There are over 40,000 independent pathology labs in the country servicing around 1-1.25

million patients per day

• This includes specialized laboratories, laboratory facilities in hospitals and nursing homes

and small testing centers with basic facilities

• Organized pathlabs are rapidly expanding using the hub and spoke model, including small,

independent labs in the network

• The industry is witnessing some action with the entry of bigger players and international

companies

• National Accreditation Board of Laboratories (NABL) has been established to accredit the

laboratories

• The Industry is highly competitive and price-driven with kickbacks and business referral

payments in the absence of a regulatory body

Pathology Lab Business

• International health insurance companies entering India are tying up with pathology chains

• Market is consolidating but still large number of independent labs

• Large path labs have outperformed the industry growth estimates – eg: Metropolis grew

50% last year

• SRL, Fortis, Dr. Lal Pathlabs, Apollo Clinics are using advertising and focusing more

towards brand development

• There has been a major improvement in sample collection procedures with the use of

sealed sample collection kits and vacutainers

• There has been major focus on training phlebotomists; emphasis is on their technical as

well as communication skills to enhance end-customer experience

Diagnostic Kits and Equipment Segment

• The diagnostic kits and reagents segment in India is a relatively new segment

• In addition to the presence of international players, at present India has more than 25

companies manufacturing diagnostic kits

• These diagnostic companies are manufacturing and selling kits mainly in the areas of

pregnancy, ovulation, estimation of T3, T4 & TSH, HIV, HBV and HCV infection, rheumatoid

diseases and disorders, cancer (cervix, colon, prostate, lung, mouth etc.), kidney function

and liver function

• There has been an increase in the utilization of diagnostic devices and tests in last few

years

• The major factor that is driving the growth of manufacturing of diagnostic kits in India is the

70-80 percent cost advantage that Indian laboratories offer over their western counterparts

Diagnostic Kits and Equipment Segment

• Issues in the Indian Diagnostic Kits and Reagents Industry:

– Diagnostic kits and reagents still being imported

– Imported Kits are expensive and often ineffective as these are not designed for Indian climatic

conditions

– Lack of market and technical know-how

– Gap between the industry and academia. No real Indian academic sponsored research.

– Lack of standard guidelines for issuing licenses for manufacturing diagnostic products.

– There is also no government support for establishing diagnostic manufacturing units.

– Absence of any trade organization of diagnostic kits and reagents manufacturers to take these

important issues with the authorities.

How and Why Engage With India

Local Culture & Nuances

•4 Major Religions – All with their own holidays

•India is a very accommodating environment & respect is everything

•Most people in business speak English but do not assume that means you are understood

•The workplace is still male and age driven – though this is changing

•Indians are very open and will often make personal statements. Try not to take it personally!

•There is such a thing as ‘Indian Time’ – always factor this in

Establishing and Growing a Business in India

Doing Business in India

Do’s

Rely on written agreements – not just a “Yes”

Get an independent advisor to review your local plans & agreements

Consider all your options before committing

Travel with a colleague for key meetings

Always hold something back for the 12th hour of negotiations

Dont’s

× Don’t be swayed by kindness× Don’t be too forthright in the first

meeting× Don’t raise your voice – however

frustrated× Don’t be misled by the head wobble× Don’t walk out of a meeting until

you are sure you know where you stand

Establishing and Growing a Business in India

Doing Business in India

Nortons India ClientsInlicensing/Customer Sales BasecampOncology Diagnostics Mobile OperatorPharmaceutical Company ERP Software3D Medical Software IT SecurityUS Medical Device Systems IntegratorPharma LogisticsMedical Device Oncology

Acquisition SearchesUS Pharma Distribution

Fundraising Diagnostics Company ManufacturingMedical Device UK Medical DevicesMedical Device Oncology US Medical Device

Cold Chain Logistics

Joint Ventures InvestmentsRetail Brands Medical Device DiagnosticsOncology Service Provider

India Summary

• Do your homework

– Visit, research, acknowledge cultural differences

• Be prepared

– Understand market, get support– Clear thought-through entry strategy– Strong business plan and operating model– Ensure your organisation & processes can support growth in India

• Commit

– Top management need to be fully committed– Expect & be prepared for the unforeseen – more time, more cost

Dipak Chattaraj

Dipak retired as the Chairman of Ranbaxy Inc., USA and President (Corporate Development) , Ranbaxy Laboratories Ltd. on December 31, 2010. He was instrumental in setting up Ranbaxy's US and Canada operations from their very inception as the President and CEO . In 2005, he relinquished the day to day responsibilities for these operations to take up a Corporate Development role for Ranbaxy Laboratories to drive the Company into the high growth verticals of biotechnology, vaccines and oncology etc. following M&A and licensing routes. In this role he was also responsible for corporate strategy and planning. Prior to joining Ranbaxy in 1991, Dipak was with the State Trading Corporation of India Ltd. having joined them as a Management Trainee in 1972. With STC, he played a pioneering role in organizing the then nascent exports of pharmaceuticals from India besides being integrally involved in the importation of pharmaceutical substances and intermediates for the entire Indian market. Dipak holds a masters degree in economics . He currently lives in Princeton, USA and during his career he has lived in Raleigh, London, Mumbai and New Delhi. He has travelled extensively through all the continents in pursuit of global business opportunities not only in pharmaceuticals but in other areas, both commodities and manufactured products.

Senior Vice President Healthcare (US)

Nortons Corporate Finance

Andrew Norton FCA

Andrew is Managing Partner of Nortons Group and has worked extensively with fast growing UK companies in all industry sectors, but particularly Technology, Media and Telecoms companies.

Following qualification in 1983, Andrew moved to Price Waterhouse Coopers in Copenhagen before returning to the UK with Ernst & Young in 1986. Andrew set up the Norton Practice in 1993 where he over sees all aspects of the firm.

Andrew has wide corporate finance experience in fundraising, mergers and acquisitions, management buyouts and divestitures. He sits as non-exec / financial advisor on a number of technology company Boards and has assisted many technology companies in setting up their operations throughout Europe.

Andrew also heads up the 25 member firms of Norton International Services and works closely with Corporate Finance to leverage the deep relationships with TMT companies across Europe, India .MENA, Asia and North America.

Chairman

Nortons Corporate Finance

Founder & Managing Partner

Nortons Group

Anil Khandewal ACA

Anil has nearly three decades of varied and rich work experience in Finance, M&A, Operations, and Business Development. Last he worked for Ranbaxy Laboratories Limited, amongst the top ten generic Pharma Company in the world, as Director & Head - M&A. In addition, he has spent time working with GlaxoSmithKline Beecham, Arcelor Mittal and Havells-Sylvania, in India and overseas. He has extensive industry knowledge in the Pharma and Life Science space and has been instrumental in successfully executing number of M&A transactions in this space. He has travelled extensively world-wide with good understanding of market dynamics, opportunities and challenges in the emerging markets, in particular.

He is a fellow member of the Institute of Chartered Accountants of India and an Associate member of Institute of Internal Auditors Inc. Anil’s other interest is reading, social work and sports. He lives in Gurgaon, upcoming millennium city in North India.

Anil enjoys excellent networking with some of the best known Investment Bankers, PEs and Banking community world-wide. He has served as executive member of various industry forums and professional groups and is a regular speaker at leading business schools and M&A workshop in India and abroad.

Board Member

Investments

Nortons Corporate Finance

Adrian Mutton

Adrian Mutton has eighteen years experience working in India in a variety of sectors, including the IT industry, the education, leisure, travel and tourism sectors, corporate social responsibility initiatives and Delhi government department for urban infrastructure and development.

As founding India Country Director of the UK India Business Council, (UKIBC - the British Government's lead organisation dealing with trade between India and the UK) in India, Adrian successfully devised and implemented the market entry strategy for the organization working closely with the public and private sector.Adrian's career includes extensive international business experience gained in the UK, throughout Europe, South Africa, USA, Singapore, Hong Kong, and Taiwan. He has a track record of working with companies' start up business units in new territories and expanding their local offices to add significant value to the group. Adrian has pioneered the entry of various businesses into these international markets, establishing new corporate offices, joint ventures and distributors. On the supply side, he has spearheaded new manufacturing, research and development and outsourcing arrangements in Asia and Africa.

Director - India

Nortons Corporate Finance

Mukul Purohit BA (Hons), D.Bus

Mukul heads the Business Development for the India practice with a particular focus on Lifesciences and Healthcare and is based out of Gurgaon (Delhi NCR), India .

Mukul has worked with global companies and institutions like IMS Health, Old Royal Naval College London, Indian Tobacco Company (ITC), Kuoni Travel Holdings and TUI where he was responsible for both business and product development roles.

Mukul holds a business degree from Queensland University of Technology (Australia) and an arts degree from University of Greenwich (London, UK).

Head of Business Development

India Practice

Nortons Corporate Finance

Nortons Group

Contact UsAndrew Nortona.norton@nortonsgroup.com+44 (0)118 976 8980+44 (0)7775658502

Nortons GroupHighlands HouseBasingstoke RoadSpencer’s WoodReadingRG7 1NT

Ian Busseyi.bussey@nortonsgroup.com+44 (0)118 976 8980+44 (0)7825556662