The Indian Challenge in Asia

Dr. Brian W Tempest

Chief Mentor & Executive Vice Chairman of the Board

Ranbaxy Laboratories Limited, Delhi, India

Singapore – 28th March 2007

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

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

- was 59% in 1820 with India 16%, China 33%

Davos 2006

Source – FT

The Productivity Advantage

India a usa Pharma view USA

1 chemist Better education x 1.3 1 chemist

70 hours/week Longer working time x 1.3 50 hours/week

$ 800 monthly Lower cost x 20 $ 12,000 monthly

Sources: IPHMR Conferences, New Delhi August 2004

Japan - by 2050 36% > 65 years from 19% in 2005

China - one child families, get older before becoming wealthy - labour costs will rise owing to labour shortage India - India already has the youngest labour force in the world - source of the extra needed global workforce - India will pass China in total population in 2030 - By 2013 India will have more young workers 20-24 than China

The Ageing Advantage

Working Population, 15-64 yearsIn millions

Growth- Japan, sustain current growth- China, slightly slower growth to prevent hard landing

- India, increasing growth rate being talked up to 9%/10% Sentiment

- India, largest foreign affairs caucus in US Congress (180), nuclear deal - China, 74,000 demonstrations reported in 2005 in China. State secrecy, IP

The Economic Growth Advantage

The world has over 800 billionaires USA has almost half India - 36 billionaires China - 15 billionaires Net worth of 40 richest Indians - $170 b 40 richest Chinese - $38bSource: Forbes, Asia November 27, 2006

“2006 belongs to some of the emerging markets, and no country more than India”

The Billionaires Advantage

The R&D Investment Advantage Most attractive R&D Investment locations:Ranked 3rd - China, USA, India, Japan & UK

Source – UNCTAD 2005 Reasons why India: Qualified Scientists & Engineers Global India players with Alliances English speaking TRIPs compliant – first patent March 2006 IIT, IIM & other scientific institutions

Source – UNCTAD 2005

4th largest reservoir of Scientific Manpower (2nd largest English speaking)

3m graduates pa, 115k MSc Chemistry (3.5k UK), 215k Eng (222k USA)

Physics the most popular subject

Lead by a Nuclear Scientist as President – remote sensing satellite technology, 1/6 countries

PCT application ranked 3rd – K, Ch, Ind, Si, RSA

“US & Europe will not dominate Science, Maths, IT industries” – Mr. Bill Gates

The Education Advantage

Science Education in EU

“This means that when pupils are in a science laboratory their experience is unsafe, unsatisfactory or uninspiring for 65% of the time.” Source: Royal Society of Chemistry, Policy Bulletin – Spring 2006

UK “A” Level entries: Closed UK University 2000 2005 % change Chemistry Departments: Physics : 32,059 28,119 -12% Dundee Kings Chemistry: 40,856 38,851 -5% Surrey Exeter Maths: 67,036 52,897 -21% Lancaster Queen Mary Computing: 19,099 7,242 -62% Source: Daily Mail – 11 August 2006

Only pupils at private schools can take physics, chemistry & biology separately Source: Times, 9th November 2006

Number of Higher Education Institutions

05/06 18,123 +59%00/01 11,41290/01 5,93280/01 4,861

Source: Indian University Grants Commission

Science Education in India

Number of Students enrolled inHigher Education Institutions

05/06 10,500 +40%00/01 7,50090/01 4,00080/01 3,000Source: Indian University Grants Commission

Number of Institutions courses 05/06 99/00Pharmacy 1478 669 +120%Medicine 229 174 +32%Physiotherapy 205 52 +294%

Source: Pavan Agarwal (2006) based on data from professional councils

PhD Degree awarded in Science

03/04 5408 +44%00/01 373490/01 2950(USA 03/04 25,000)

Source: Indian University Grants Committee

The Education Advantage

Engineers/Science graduates p.a – India 0.7m, China 0.5m, EU 0.5m, USA 0.4m, Japan 0.3m

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% with 50% rural and 50% urban readership

Principal internet languages to become English, Chinese and Hindi

Diaspora network (25m across 120 countries)

Indians are hungry for information

The Information Advantage

Internet Usage – Asia

1. China 123 m2. Japan 86 m3. India

51 m4. S.Korea 34 m

Source: Business Today, Sept. 24, 2006

Mobile Phones

1. China 421 m2. USA

190 m3. Japan 157 m4. Russia 148 m5. India

116 m

Source: Times of India, Sept. 14, 2006

Manufacturing growth versus China Scope for improvement of Government Policies

GDP dynamics: 1990 2005 - Agriculture 31% 20%

- Industry 28% 26% - Services 41% 54%

More privatization – public sector not so buoyant

Further encouragement of R&D for Pharmaceuticals

The Potential for Improvement Advantage

Cost Advantage China IndiaCost 40 16Patients/site 250 500

Based on USA at 100 Index

Source: BCG report ‘Looking Forward 2006’

Country USA India

Sites 22 8

Subject 626 896

Source: Andy Lee Pfizer Global, head clinical study and data management.Business India, August 13, 2006

“………..The Country’s World Class skills in Chemistry & IT and it’s large treatment naivepatient population provides added allure” Boston Consultancy Group

Harnessing the power of India 2006

The Clinical Advantage

Medical Tourism

Cardiac Surgery $000s USA 30 Singapore 20 Thailand 14 India 5-7Source: Business world, 18th Dec’2006

Patients

- Naïve untreated patients- HIV 50m- Diabetes 32m- HT 5m

The M&A Future Advantage

India FDI 2003/4 $4.3b 2004/5 $5.6b 2005/6 $6.0b Source: Outlook business June 2006

The Investment Advantage

2005 FDIBrazil $15b UK $164 bRussia $14b USA $ 99 bIndia $6bChina $72b (+$35b)Source: UNCTAD 2006

- India on target for $10b in 2006/07- But still small

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

A Global Strategic Asset for developed

World Market businesses

India

The Competitive Advantage - Pharma

Active Pharmaceuticals Facility, Mohali Dosage Forms Facility, Paonta Sahib

The Competitive Advantage - Pharma

R&D III Ranbaxy’s Patent Filings

2449

32

86146

170185

2001

2000

1999

20042005

Clinical data management•An Indian speciality•300 staff GSK -2.2m clinical data sheets -450 trials -Error rate <0.01/100k -No data security issues

Source: BCG report ‘Looking Eastward Sep’2006’

R&D hotbeds

“China & India have become R&Dhotbeds……….. MNCs already operate some 180 R&D centres in China andMore than 100 in India”

Source: BCG report ‘Looking Eastward Sep’2006’

The Pharma Advantage – API’sUSA DMF filings by India

1990 1 1995 4 2000 36 2004 187 2005 262 Source: Crisil / US FDA / J P Morgan

% Share of USA DMF filings India China 2004 27% 9% 2005 37% 10% Q1’06 44% 15% Q2’06 41% 16%

Q3’06 45% 17% (latest) Source: US FDA / J P Morgan, 6th August 2006

Source: US FDA, Credit Suisse

- One in every four ANDAs filed by Indian Companies in top USA FDA filers Source: KPMG

- No Chinese generic company has yet filed a USA FDA ANDA

The Pharma Advantage - ANDAs

0

20

40

60

80

100

120

140

160

2002 2003 2004 2005

24

46

64

144

ANDA Filings in USA by Indian Companies

Global Market Trends for Generic Companies

Source: UBS, Businessworld, 30th October 2006

Global Market Trends – Discovery R&D

Vendor Availability India ChinaAnalog preparation 41 25Combinatorial chemistry 37 7Analytical chemistry 37 7Structural chemistry 26 5Assay development 26 2Computer drug design 26 13High throughput Screening 11 2Bio informatics 13 7Genetically modified animals 0 3Basic molecular biology 13 25

Source – BCG, ‘Looking Eastwards, September 2006’

*Out of 90 vendors in October 2005

The Tempest Crystal Ball

•Post TRIPs new products will dry up in India by 2008

•Under this pressure Indian companies will adopt different business models: - Generics, Discovery, Services, M&A

•MNCs will continue to be attracted to India owing to the science education

•China will be perceived to be stronger in biology/ toxicology

•75% of new R&D sites and 30% of R&D staff globally will be in India/China

•Alliances between Western Biotech and Indian companies will expand

•The global generic industry will be dominated by India in the next five years

•China will dominate the chemical intermediates segment

•India & China - and not India or China. This will also drive ASEAN market growth.

Japan’s share of World Wealth

Canada2%

Rest of World10%

Japan27%

Germany4% Italy

4%

France5%

UK6%

USA37%

Netherlands2%

Spain1%

Switzerland1%Taiwan

1%

Source: The World Distribution of Household Wealth

Japan’s share of World Pharmaceuticals

USAJapan

GermanyFrance

ItalyUK

SpainCanada

ChinaMexico

Top 15 countries = 85.9% of worldwide pharmaceutical market estimate 2003

2.4%

3.3%

3.4%

4.9%

5.4%

12.0%

44.6%

1.5%

1.5%

2.0%

Japan’s GDP

A race to prosperity

Key Challenges

Potential Challenge – Asian Flu*

*50% of world chickens bred in Asia

Potential challenge – Oil prices

Source – Outlook business June 2006

• A war against Iran could drive oil > $200 a barrel - ‘Times’ 22nd June 2006• BRIC countries consume 20% global oil

Source – BP

India, China, USA – Refuse any mandatory CO2 emission caps

India is 6th greatest energy consumer

Ganges River is the World’s most polluted river – source: World Commission on water

Potential Challenge - Pollution

Potential Challenge – Infrastructure

Source – Manmohan Singh

“Our greatest potential will be realised only if we can ensure that ourInfrastructure does not become a severe and critical handicap”

Asia economic strength is returning to levels seen in the past

Many advantages for India – R&D, Demographics, Education India as a global strategic asset for developed markets Some “Challenges” – infrastructure, pollution

The current feeling in Indian Boardrooms is that a turning point has been reached, a tipping point has been passed and India’s time has arrived

“China & India represent the future of Asia and quite possiblythe future for the global economy” – Steve Roach, Morgan Stanley

Summary

Thank You