Positive Indicators

• 4th largest economy in the world by PPP

• 2nd fastest growing major economy in the world with GDP growth rate of 8.9%

• Rising foreign exchange reserves of close to US$ 166 billion

• A booming capital market with the popular "Sensex" index topping the majestic 13,500 mark

• The Government is estimating FDI flow of US$ 12 billion in this fiscal, and a more than 22 % surge in exports

• Inflation rate is maintained at 4.2% (consumer prices, 2005 est.)

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

Ch US In J pn Br Russ UK Ger Fr It

Projected to be the third largest economy by 2050

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2000 -2005

2005 -2010

2010 -2015

2015 -2020

2020 -2025

2025 -2030

2030 -2035

2035 -2040

2040 -2045

2045 -2050

Brazil China India Russia

Only India maintains 5% GDP growth through 2050

No wonder, India is projected to become the 3rd largest economy by 2050

Source: BRICs Potential

Population dynamics

• Large population base 1.5 Bn by 2050

• Increasing Life expectancy at birth (age in

years) currently at 65 and projected to go

up to 69 by 2020.

• Geriatric population to double over next 15

years

Increasing capacity to spend

• Literacy rate at 65-70% and estimated to be

close to 95% by 2020.

• Huge middle class with vigorous buying capacity

- 450 mio

• Opening up of reimbursement avenues

• Wave of shopping malls, credit uptake

High disease prevalence

• Fastest growing diabetes

population

• AIDS, Oncology and other chronic

ailments growing in numbers

• Awareness and detection levels

are improving

Changing healthcare model

• Major pharma and insurance cos now in India

• Disease specific insurance plans in place

• Medical tourism growing by 20% YoY

• Corporatisation of hospitals and pharmacies

• Move to more scientific methods of promotion

• New distribution channelsIncreased healthcare access

• Current access ~40-50%; govt. committed to take it to 80% in

next 15-20 years

• Improving access and growth rates in rural India

• Hospital market growing rapidly, ~30-40% QoQ

• OTC market grew at more than 7-8% in 2005, projected to

grow at 10% over the next few years

All of these make us believe that the pharmaceutical market would also benefit from this rapid growth and reforms, projected to grow at 11-13%* over next 3-5 years…

*Revised IMS Prognosis 2006

Source : Stockist Secondary Audit, Nov 06 MAT, WHO reports**

…and the current trends in the IPM clearly reflect the upbeat mood in the economy

Size & GrowthAt $6 Billion on retail, the industry recorded a value growth of 18%, far higher than previous year

Indian Vs MNCIndian companies still dominate the market with a share of ~80%, have been capitalizing the pre-IPR advantage

DoctorsCurrently General Practitioners (GPs) dominate the market, however the trend begins to favor physicians and specialists

Patient PopulationGeriatric population is on the rise in the country, but ~ 40% of the population is also below 14 years of age**

Therapy Split

Acute therapy dominates the market with a value contribution of over 77%. Chronic segment has also registered a healthy growth of 18% against 19% of acute

Growth ContributorsA change in trend, new introductions with 2% have dropped, while price increases contributed 1% with volume growth at 16%

Healthcare segment in India is at the beginning of the evolution curve at the moment ..with large opportunities

• Current healthcare access is at

30%; govt. committed to take

it to 80% in next 15-20 years

• Healthcare spending in India

which is currently at 5.3% of

GDP is expected to rise to 8%

by 2012

• Majority source of healthcare

spending is Private

1837 42 44

63 58 5682

India China Brazil USA

Public Private

Sources of Healthcare Spending (Public vs. Private %)

Source: WHO, IBEF, CII, OPPI

All of these make us believe that the pharmaceutical market would also benefit from this rapid growth and reforms, projected to grow at 11-13%* over next 3-5 years…

*Revised IMS Prognosis 2006

High disease prevalence• Fastest growing diabetes

population• AIDS, Oncology and other

chronic ailments growing

Population dynamics• Large population base

1.5 Bn by 2050• Geriatric population to

double over next 15 years

Increased healthcare access• Current access ~40-50%;

govt. committed to take it to 80% in 15-20 years

• Improving access and growth rates in rural India

Increasing capacity to spend

• Huge middle class with vigorous buying capacity

• Opening up of reimbursement avenuesChanging healthcare model

• Medical tourism growing by 20%

• Corporatisation of hospitals and pharmacies

• New distribution channels

• Indian Pharmaceutical Industry

• Globally Indian Pharma Industry ranks 4th in volume and 14th in value

• Highly fragmented with 5,000+ units

• Only 289 companies tracked (ORG – IMS) with sales of USD 4.1 bn in 2003

• 28 MNCs account for ~ 22% (USD 961 mio) of Pharma market

• Prices controlled but gradually de-regulated from 347 in 1979 to 74 at present

• World class manufacturing facilities :

over 70 US FDA approved facilities – largest number outside of USA

over 350 APIs manufactured from basic stage

exports of APIs USD 700 million

• Emergence of world class CRO facilities

The Indian Market has grown at a CAGR of 7.6% and is projected to reach ~US$8 billion by 2010

Source: IMS; McKinsey analysis

•Retail pharmaceutical sales

•US$ billion

•2000 •2001 •2002 •2003 •2004 •2010 estimated

size

•3.4 •3.5 •3.7•4.2

•4.6

•7.7-8.5

CAGR = 7.6%

CAGR = 9-11%

Market Has Three Key Segments and is Dominated by Branded Generics

•100% = US$ 4.6 billion

•Branded generics

•Generic-

•generics

•OTC

•Ethicals

•(Rx)

•Segment •Description •Examples

•Branded generics

− Prescription only products sold under brand names

− Sales force of pharmacos generate demand through detailing/ other promos to doctors

− Ciplox (Ciprofolxacin)

− Cardace (Ramipril)

•Generic-

•generics

− Prescription only products but sold under the generic/ chemical name

− Usually sold at high discount to the branded version

− Sold through push by chemists who get much higher margins on unbranded products

− Ranitidine

− Amoxycillin

•OTC − Non prescription, self-medication products sold directly to consumers with high emphasis on safety

− Can be sold through non-chemist outlets such as kirana stores etc

− Usually involves high advertising costs

− Crocin,

− Benadryl

•82-85

•7-8

•8-10

•Per cent

•Market segments

•2004

Source: IMS retail audit, web searches

•Market tiering and increase in share of specialty TAs

•Growing competition from MNCs •IP changes

•Pricing

Four Forces are Shaping the Indian Pharma Market

•Fundamental shifts in Indian pharmaceutical market

3

− Historically low prices due to intense competition, government control and self pay market

− Possible to command higher prices through differentiated products and superior marketing skills

− Uncertainty around price control although number of drugs under DPCO has steadily declined

− Undifferentiated mass market dominated by AI and GI moving towards a 4 tier market

− Increase in relative share of specialty TAs driven by greater prevalence of chronic diseases

1

− Current competitive landscape is dominated by local players with only 4 MNCs in top 15

− However, key market trends favour MNCs – as a result incumbents are increasing focus while absentees are evaluating entry

− Market in transition: product patent bill passed in March ’05 after decades of process patents only

− Patent infrastructure gearing up substantially to drive compliance

24

National Pharmaceuticals Policy 2006

• To ensure availability of good quality medicines at reasonable prices

• To improve access particularly to the poor

• To increase investment in manufacturing

• To promote greater research & development by providing incentives

• To enable domestic companies to become internationally competitive

• To increase exports

• To develop India as the preferred global destination for Pharmaceutical R&D and manufacturing

National Pharmaceuticals Policy 2006

• Over the past 25 years price control has been reduced from 400 to only 74 drugs.

• New Policy recommends basket of 354 National List of Essential Medicines to be used for Price Control criteria, in addition to current 74

• Industry opposed to increase in price control - Industry suggests price monitoring v/s. cost based price control

The Country will Reap Enormous Benefits through R&D Growth in the Pharmaceutical Industry

− Increase access to medicine for the mass population

− Provide access to superior products and India-specific treatments developed by MNCs and local companies

− Create high-value jobs in research, manufacturing, and sales and marketing

− Increase inflow of export earnings and FDI

− Create a vibrant and internationally recognised industry

− Prove India’s ability to participate in the knowledge intensive industry

− Make India a hub for global research

•Create good health for all

•Benefit the economy & industry

•Build India Inc. as a brand

INDIAINDIAAn EmergingAn EmergingKnowledgeKnowledgeSuperpowerSuperpower

… India poised to be among the Top 10 players in the Global Pharmaceutical market by 2010