Identifying Commercial Opportunities to Sell API to Emerging MarketsDCAT 2009 NEW YORK KATE KUHRT MARCH 18, 2009

Agenda API and Regulatory Intelligence at Thomson Reuters Why are regulated market players interested in Emerging markets? Opportunities and challenges of selling API to BRIC countries Q&A

API and Generics Intelligence at Thomson Reuters Newport Strategies founded in 1990 and acquired by Thomson Scientific in 2004 Since 2008, part of Thomson Reuters Industry pioneer in research and analysis of the impact of global API development on competition in generic products Strategic competitive intelligence Tools for API sourcing and business development

Used by over 220 companies and 3000 users across the globe

Regulatory Intelligence at Thomson Reuters IDRAC founded in 1993 and acquired by Thomson in 2004 Since 2008, part of Thomson Reuters Unique regulatory intelligence An authoritative source of global regulatory requirements Proprietary Regulatory Intelligence created by dedicated team of regulatory experts In-depth regulatory summaries Reference texts Global coverage Alerts

Used by over 200 companies and 4000 users across the globe

Industry Backdrop Growth Expectations for 2009 Will hold steady at 2008 levels* US: 1-2%, EU5: 3-4%, Japan: 4-5% BRIC: 14-15%

Brand pharma Innovation slump Blockbusters losing patent protection Outsourcing of manufacturing and R&D

Generics Increasing competition, especially from India Low cost API coming from India, China Margin pressures in U.S., UK, Germany Drop in small molecule opportunities post-2011

Will growth in BRIC markets translate into opportunities for regulated market API manufacturers?*2009 IMS Global Pharmaceutical and Therapy Forecast

Outlook for Regulated Market Players in a Particular Market Improves with Weak local API supply Limited number of local API manufacturers Limited number of regulated market players with local API manufacturing presence Gaps in technology among local API manufacturers Increasing costs

Strong demand for API Strong local dose manufacturing Emphasis on quality over price

Favorable import environment Transparent and inexpensive import registration process Low import duties Limited red tape

INDIA

Population: 1.1 billion Pharmaceutical market: $7.4 billionSource: VOI, 2007 Pharma Handbook

Indian Landscape: API Supply Strong local API manufacturing 600 Indian groups involved with API manufacturing 25 Established, 25 Less Established, 84 Potential Future

52 groups with manufacturing sites inspected by US FDA

Strong local API manufacturing by regulated market players Trifarma (Italy), PharmaZell (Germany), Albany Molecular (US) AZ (UK), Bayer (Germany), Daiichi (Japan), Novartis (Switzerland)

Increasing costs Salaries, energy, raw materials from China

Gaps in technology Fermentation, steroids, narcotics Filled by acquisitions (Strides-Diaspa, Sun-Chattem)

Indian Landscape: Demand for API Strong local dose manufacturing 10,000+ pharmaceutical manufacturers registered in India With products meant for local and other less regulated markets, focus continues to be on price Maharashtra hit list of 110 drug makers

Increasing number of Big Pharma with manufacturing presence (ex: Glaxo, Pfizer)

Increasing amount of manufacturing of finished dose for export to regulated markets 27 Indian groups have presence in the U.S. generic market Increasing number of foreign dose companies with Indian manufacturing presence (Watson, Sandoz, Mylan) Indian contract manufacturers making products for U.S. and European generics (Intas)

Indian Landscape: Import Registration A license for import necessary for the import of any bulk API or finished dose Since January 2003, manufacturing sites of foreign manufacturers and individual imported APIs have to be registered with Drug Controller General of India Valid for 3 years API in transit does not need to be registered

All the paperwork needs to be submitted by a single Indian agent Exclusive representation for the duration of the certificate Registration done in English

Bureaucratic system Amount of time required to get a product registered varies Paperwork can be held up on minor technicalities Open for potential abuse

Source: Thomson Reuters IDRAC

Indian Landscape: Duties and Fees Import license fee Rs 1000 for a single drug, Rs 100 for additional drugs paid by the importer Import registration fees paid by the manufacturer or agent $1500 USD for overseas manufacturing premises $1000 USD for every drug $5000 USD for inspection, if required None so far?

Payment for testing, if required

Import Duties In 2007, maximum customs duties on APIs and intermediates were reduced from 12.8% to 7.7%. Import duties are waived if the finished dose product is ultimately exported

VAT of 4% on medicines in most states Excise duty of 8% per 2008-2009 budgetSource: Thomson Reuters IDRAC, VOI 2007 Pharma Handbook

What are Indian Import Registration Certificates Telling Us?Unique IIRsOther 17% South Korea 3% China 36%

Almost 1200 unique Indian Import Registration (IIR) Certificates issued since introduction (Jan 2003) >1/3 from China 55% from regulated markets Filings for prestige? APIs in transit not registered

Netherlands 3% Switzerland 3% Israel 4% France 4% Japan 5% Italy 7% Germany 10% USA 8%Source: Newport Horizon

What are Indian Import Registration Certificates Telling Us?Unique IIRs500 400 300 200 100 0 2003 2004 2005 2006 2007 2008 Emerging Regulated

Rush by regulated market players to get their products registered in 2003 New filings primarily coming out of emerging markets

Source: Newport Horizon

Products with Most Unique Registration CertificatesProduct Name Total IIRs IIRs from Regulated Markets 2 5 3 4 3 2 3 2 1 2 4 3 8 4 5 4 5 5 4 5 6 5 3 4 IIRs from Emerging Markets Confirmed Indian Mfrs 7 0 3 13 7 1 0 2 2 1 3 2Source: Newport Horizon

Cefotaxime sodium Clavulanate potassium Ofloxacin Amoxicillin Erythromycin Vancomycin hcl Thiamine mononitrate (Vit B1) Penicillin G Potassium Gatifloxacin Erythromycin thiocyanate Cefuroxime sodium Cefoperazone sodium

10 9 8 8 8 7 7 7 7 7 7 7

Products with Most Unique Registration Certificates from Regulated MarketsProduct Name IIRs from Regulated Markets 5 4 4 4 4 4 4 4 IIRs from Emerging Mkts (China) 4 (1) 4 (3) 1 (0) 0 (0) 3 (2) 0 (0) 0 (0) 1 (0) Confirmed Indian Mfrs (w/ US DMFs) 0 (0) 13 (3) 3 (0) 3 (1) 3 (2) 2 (0) 0 (0) 1 (0)

Clavulanate potassium Amoxicillin Amoxicillin sodium Beclomethasone dipropionate Cefuroxime Sodium Hydrocortisone sodium succinate Lactulose Pancreatin

Source: Newport Horizon

Regulated Market Manufacturers with Most Unique Registration CertificatesName Teva ScheringPlough BASF SanofiAventis DSM Kyowa Hakko Novartis Pfizer E.ON AG Ergon Capital (Farmabios) Country Israel USA Germany France Netherlands Japan Switzerland USA Germany Belgium (Italy) IIRs 45 39 37 26 26 23 20 16 16 13 Examples Beclomethasone, cabergoline, cyclosporine, leuprolide, rocuronium Desogestrel, estradiol, fentanyl, insulin, leuprolide, pancuronium Dopamine, pseudoephedrine, ibuprofen Dinoprostone, ketoprofen, ramipril, spiramycin Beta carotene, cefadroxil, cephalexin, riboflavin Acetylcysteine, glutamine, ornithine, pravastatin Amoxicillin,clavulanic, benazepril, ergotamine, levothyroxine gabapentin, neomycin, oxytetracycline, misoprostol Alanine, aspartic acid, lysine acetate, methionine Beclomethasone, cefuroxime, medroxyprogesterone Dose Site in India No Yes No Yes No No Yes Yes No No API Site in India Yes No No Yes Yes No Yes No No No

Source: Newport Horizon

Where are the Opportunities? Fermentation based products Steroids Controlled substances Neuromuscular blockers Ergot alkaloids Peptides Prostaglandins Large volume products from specialized plants Innovator APIs APIs to support regulated market dose launches

CHINA

Population: 1.3 billion Pharmaceutical market: $12 billionSource: VOI, 2007 Pharma Handbook

Chinese Landscape: API Supply Strong local API manufacturing 1000+ Chinese groups involved with API manufacturing 11 Established, 23 Less Established, 145 Potential Future

62 groups have had manufacturing sites inspected by US FDA

Increasing local API manufacturing by regulated market players Actavis (Iceland), Esteve (Spain), Hovione (Portugal) GSK (UK), BMS (US), Schering-Plough (US)

Increasing costs Salaries, energy, workforce turnover, regulatory, environmental

Gaps in technology?

Chinese Landscape: Demand for API Strong local dose manufacturing 3500 drug manufacturers Increasing number of foreign dose companies with Chinese manufacturing presence Big Pharma (ex: Pfizer, AstraZeneca, Novartis) Generics (ex: Stada, Sandoz, Teva)

Limited manufacturing of finished dose for export to regulated markets Beijing Double Crane ANDA for meloxicam Huahai tentative approval under PEPFAR Perrigo ibuprofen OTC

Chinese Landscape: Import Registration Registration prior to import required for both API and dose API in transit does not need to be registered

Import Drug Licenses introduced in 1987 Dossier review at sFDA followed by quality testing at a testing institute Must meet highest quality specs of all other IDL holders for the product

Registration certificate valid for 5 years A single agent per product required in China sFDA follows established timelines Can track the process of dossier review on sFDA website About 18 months to register API

Source: PharmaVantage; Thomson Reuters IDRAC

Chinese Landscape: Duties and Fees Application fee for import drug license charged by SFDA with dossier submission: RMB 45,300 (~$6,600) Quality testing fee dependent on product type Import Duties Dependent on indication In most cases 3%-5%

Duties are waived if the finished dose product is ultimately exported (lailiao jiagong) Must import and export through the same port Quantity of incoming API must match quantity in outgoing finished dose

Source: PharmaVantage; Thomson Reuters IDRAC

What are Chinese Import Drug Licenses Telling Us?Netherlands 4% Other 8% France 4% Japan 29% England, UK 5%

Unique IDLs

Over 400 unique Chinese Import Drug Licenses approved since January 2004 Considerably less than in India How many are for PR reasons?

Italy 5%

Almost 1/3 from JapanSwitzerland 7% Germany 8% South Korea 8% India 10% Source: Newport Horizon USA 12%

80% from regulated markets

What are Chinese Import Drug Licenses Telling Us?Unique IDLs140 120 100 80 60 40 20 0 2004 2005 Emerging 2006 2007 2008 Regulated

Rush by regulated market players to get their APIs registered (or re-registered) in 2004 New filings continuing to come out of regulated markets

Source: Newport Horizon

Products with Most Unique IDLsProduct Name Total IDLs IDLs from Regulated Markets 3 5 3 3 1 2 2 1 2 2 1 1 2 0 1 1 4 2 2 3 2 2 3 3 IDLs from Emerging Markets Confirmed Chinese Mfrs 5 1 5 10 1 6 7 1 5 1 1 6Source: Newport Horizon

Clavulanate potassium Ubidecarenone (coenzyme Q10) Clarithromycin Amoxicillin Ceftizoxime sodium Cephalexin Cefuroxime sodium Cefuroxime axetil Cefaclor Cefpodoxime proxetil Cefminox sodium Cefixime

5 5 4 4 5 4 4 4 4 4 4 4

Products with Most Unique Chinese Import Drug Licenses from Regulated MarketsProduct Name IDLs from Regulated Markets 5 3 3 3 3 3 3 IDLs from Emerging Mkts (India) 0 (0) 1 (0) 0 (0) 1 (1) 2 (0) 0 (0) 0 (0) Confirmed Chinese Mfrs (US DMFs) 1 (0) 10 (2) 9 (0) 5 (2) 5 (0) 0 (0) 2 (0)

Ubidecarenone (CoQ10) Amoxicillin Cephradine Clarithromycin Clavulanate potassium Lactulose Minocycline hcl

Source: Newport Horizon

Regulated Market API Manufacturers with Most Unique Chinese IDLsName Kyowa Hakko Ajinomoto DSM Fine Chemicals Novartis AG Daiichi Sankyo Pfizer GSK Country Japan Japan Netherlands Switzerland Japan USA UK IDLs 35 21 17 17 16 15 10 Examples Acetylcysteine, adenosine, arginine, cysteine, glutamine Cysteine, glutamine, isoleucine, nateglinide, histidine Cefadroxil, clavulanate potassium, nystatin, vitamin A acetate Benazepril, clavulanate potassium, penicillin V potassium, valsartan Olmesartan, pravastatin, cefpodoxime, ofloxacin Atorvastatin, celecoxib, fluconazole, sildenafil, sulbactam sodium Amoxicillin, clavulanate potassium, cefuroxime sodium, rantidine, rosiglitazone, zidovudine Domperidone, galantamine, ketoconazole, risperidone Cefaclor, cefazolin, cefuroxime, cilastatin, imipenem Dose Site in China No No No Yes Yes Yes Yes API Site in China Yes Yes Yes No No No Yes

J&J ACS Dobfar

USA Italy

9 9

Yes No

No No

Source: Newport Horizon

Where are the Opportunities? New products Brand new APIs APIs used in specialized formulations

Products with a marketing message Specialized anti-cancers Vaccines Diagnostics Very complex and hazardous chemistries Select small volume drugs Large volume products with economies of scale Products requiring dedicated facilities

RUSSIA

Population: 144 million Pharmaceutical market: $7 billionSource: VOI, 2007 Pharma Handbook

Russian Landscape: API Supply Very limited local API manufacturing