Life Science Investment Strategies for India: Life Science Investment Strategies for India:

Translating Potential into Reality

Harshawardhan Bal, PhD

Stem Cell Capitalwww.stemcellcapital.com

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Unveiling India and Its Potential

• About Stem Cell Capital

Agenda

• Introduction to the Panel

• The India story so far…

• Investment strategies for India

• Q&A

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Moderator

• Lead the Life Sciences practice at Stem Cell Capital, a mid-market advisory firm founded in 2008 with a focus on cross-border transactions covering M&A, capital raise (VC/PE syndication), licensing, asset valuation, global BD and strategic sourcing.

Harshawardhan Bal – Stem Cell Capital (US/India)

(VC/PE syndication), licensing, asset valuation, global BD and strategic sourcing.

• Over a decade of global and diversified experience in life sciences from Dana-Farber/Harvard Cancer Center, OSI Pharmaceuticals and Millennium Pharmaceuticals / Takeda with a focus on early stage drug discovery, disease biology of HIV/AIDS and HTLV-induced Adult T-Cell Leukemia.

• Consultant at Booz, Allen & Hamilton with leadership roles in NCI’s cancer Biomedical Informatics Grid Program and global regulatory submission harmonization strategy for pharma clients. Previously as VP and Head of Life Sciences for MAPE Advisory Group, Mumbai, was responsible for M&A and PE transactions.

• M.S. in Pharmaceutical Sc. from Nagpur University and PhD in Molecular Biology from the National Institute of Immunology, New Delhi. Postdoctoral training at Univ of Rochester and Cold Spring Harbor Laboratory.

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Introduction to the Panel

• Pooja is a Principal at Oxford and focuses on investments across life science sectors including therapeutics, medical devices, diagnostics and bioenergy. She has been involved in the investment and monitoring of portfolio

Pooja Pathak - Oxford Bioscience Partners (Boston)

She has been involved in the investment and monitoring of portfolio companies such as Claros Diagnostics (point-of-care diagnostic), SmartPill (GI capsule technology) and Luca Technologies (natural gas production technology).

• She is currently a Board Observer with Molecular Biometrics (in vitro fertilization diagnostic) and follows Oxford’s public positions in Acadia Pharmaceuticals and Antisoma.

• Prior to Oxford, Pooja was a Senior Associate Consultant at Bain & Company, a global strategy consulting firm. Pooja has a BS in Chemical Engineering from the University of Illinois at Chicago and a MS in Chemical Engineering from the MIT.

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Introduction to the Panel

• Srini is a Managing Director at NLVP and focuses on biopharmaceuticals investments. Prior to joining New Leaf, Srini was a co-founder and Managing Director at Panorama Capital. Before forming Panorama, Srini served as

Srini Akkaraju - New Leaf Venture Partners (Menlo Park)

Director at Panorama Capital. Before forming Panorama, Srini served as Partner of J.P. Morgan Partners, where he was responsible for leading venture investing in biotech companies. Earlier, Srini held business and corporate development positions at Genentech where he was responsible for worldwide partnering activities, in-licensing of therapeutics and out-licensing of development projects.

• Srini is the author of a number of peer-reviewed articles, including ones published in Science and Nature. Board Seats: Presidio Pharmaceuticals, Synageva BioPharma.

• He received B.A. degrees in both Biochemistry and Computer Science from Rice University and M.D. and Ph.D. degrees in Immunology from Stanford University School of Medicine.

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Introduction to the Panel

• Yatin is a Partner at Artiman where he focuses on early-stage Technology and Medtech investments. Yatin has over 17 years of experience working with technology companies in venture capital.

Yatin Mundkur – Artiman Ventures (Palo Alto)

technology companies in venture capital.

• Previously, Yatin was Managing Director at TeleSoft Partners, where he led investments in over twenty companies in the early stage semiconductor and software sectors. He founded and served as President of Equator Technologies, a developer of Programmable MediaProcessors. His prior experience also includes senior positions at Conexant, Sun Microsystems, and others. He holds ten patents in areas of computer architectures, digital consumer electronics, semiconductor design, and software.

• Yatin is currently on the boards of BioImagene, Cellworks Group, Infinite Z, Pricelock, Virident Systems and Prysm.

• Yatin holds a B.S.E.E. from MSU of Baroda, India, and a M.S.E.E. from the UTexas at Austin.

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Introduction to the Panel

• Viren is Senior VP of Global BD at Wockhardt and has global responsibility for acquisitions, licensing and partnerships with a focus pharma, biotech & medical technologies including biosimilars and raising funding for the

Viren Mahurkar – Wockhardt (Mumbai)

company’s infectious diseases preclinical/post-IND research assets.

• Earlier he worked at Pfizer, as Director, International BD at NY, with focus on new growth opportunities for the Europe Region. He was responsible for forging European co-promotion partnerships with Novartis for cardiovascular combination product. He also served as Country Director of Strategy and BD coordinating Pfizer's efforts to define a new India growth strategy.

• Viren specializes in M&A/investment banking and global markets and has held leadership positions in banking and has led some prestigious Indian deals, such as the acquisition and tender offer for Abbott India by Pharmacia.

• Viren holds an MBA from the University of Delhi, MSc from the London School of Economics.

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Unveiling India

The story so far…

All data taken from company, industry, trade organization and analyst reports.8

India

• 4th largest economy by purchasing power parity (PPP) with a GDP of US$1.23 trillion

Economic Outlook

US$1.23 trillion

• Ave. GDP growth of ~9% between 2005-2008

• World’s 2nd fastest growing economy with current GDP growth at ~ 6-7% (2008-09) post global slowdown

• Economic indicators project 8% growth in 2010-11 and beyond

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India

• 4th largest in volume and 13th in value

• >134 FDA-approved plants, one of the highest in the world

Pharmaceutical Industry Overview

• ~ 10,000 pharmaceutical units that produce around 400 bulk drugs and > 60,000 formulations (covering 60 therapeutic categories)*

• With growth ~ 8.4% YOY, India will be a top 10 global pharma market in by sales by 2020 with the total value reaching USD 50 Bn

• The Dept of Pharmaceuticals, GOI founded in 2008 under the Ministry of Chemicals & Fertilizers aims to make India a global pharma innovation hub by 2020

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Indian Pharma Industry

• Large pool of highly trained manpower

• Well developed chemical industry and process engineering skills

Strengths…

• Well developed chemical industry and process engineering skills

• 2nd largest number of US FDA approved facilities

• TRIPS compliance

• Drug cost a fraction of the cost in the West

• FDI up to 100 percent

• Strong IT skills for research data management

• Strong marketing and distribution network

• Well established network of laboratories

• Cost competitive (R&D, manufacturing, clinical trials, and labor)

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Indian Pharma Industry

• Low level of investment in R&D

• Highly fragmented industry

and weaknesses…

• Highly fragmented industry

• Low level of industry-academia partnerships

• Low margins

• Government price controls

• Most Indian companies are small by world standards

• Industry concentrated at lower end of value chain

• Lack of experience in drug discovery

• Low levels of per capita medical expenditure

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Industry Drivers

• Economic growth: The Indian economy’s recent growth expanded the middle-class and grew the healthcare market, a trend that is expected to continue. Increasingly health aware middle class with disposable income.

Economic growth, population, urbanization, demographic changes and the emergence of lifestyle diseases

health aware middle class with disposable income.

• Consumer healthcare spending is expected to increase to 13% of GDP by 2015.

• Population growth: The population is expected to grow to 1.24 Bn by 2015, while the aging population is expected to increase to 112 Mn, opening up a new healthcare dimension.

• Middle-class growth: Households with over US$5,000 annual income are expected to increase to 63.8 Mn by 2015.

• Working age and urban population prone to lifestyle diseases, as a proportion of overall population, is expected to increase from 28% in 2001 to around 31% by 2015.

Mindset shift of urban Indian consumers from treating illness to managing wellness 13

Generics & Services Sector Overview

• India’s active pharmaceutical ingredients (API) industry with estimated sales US$4.1 Bn is the world’s 3rd largest after China and Italy

• India manufactures over 400 APIs and supplies to about 50 countries; exports account for

API, formulations and contract services (CRAMS)

• India manufactures over 400 APIs and supplies to about 50 countries; exports account for around 70% of sales.

• India’s domestic formulations market is projected to grow at a CAGR of 13% to an estimated US$15 Bn by 2015.

• At 30% growth YOY, CRAMS is the fast growing segment in the Indian pharma – with contract research contributing 29% and contract manufacturing contributing 66%.

• Globally, the outsourcing trends are expected to grow further with the contract manufacturing market size at US$ 45 Bn (US$ 29 billion from formulations and US$ 16 Bn from APIs)

• Contract research market size is estimated to be at ~ US$ 38 Bn (US$ 11 Bn from Drug Discovery and US$ 27 Bn from Clinical Research).

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Indian Pharma R&D

The beginning of innovation

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Internal R&D Programs

Company Pre-Clinical Phase I Phase II Phase III Total

Lupin 4 1 2 3 10Dr. Reddy’s 4 2 3 1 10

NCE Pipelines of Indian Pharma

Dr. Reddy’s 4 2 3 1 10Biocon 4 - 1 2 7Glenmark 4 - 2 - 6Ranbaxy 8 1 1 - 10Piramal Healthcare 2 - 3 - 5Cadila - 3 1 - 4Torrent 5 1 - - 6Wockhardt 4 1 1 - 6Sun Pharma 3 1 - - 4Total 38 10 14 6 69

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Discovery & commercialization dealsDate Company Indian Partner Description2010 Endo Pharma Biocon’s subsidiary Syngene

InternationalFirst deal on discovery of a biological therapeutic entity for oncology

2009 BMS Biocon’s subsidiary Syngene International

Agreement to develop integrated drug discovery and development capabilities

2009 Pfizer Aurobindo Pharma Commercialize generic products in US and EU

2009 Pfizer Claris Lifesciences Commercialize off-patent drugs in the US, 2009 Pfizer Claris Lifesciences Commercialize off-patent drugs in the US, Canada, Australia, New Zealand and Europe

2009 GSK DRL Market DRL’s 100 branded pharmaceuticals in emerging markets such as Africa, West Asia, Latin America and Asia-Pacific, excluding India

2009 Novavax Cadila Pharmaceuticals Joint venture to develop, manufacture and commercialize vaccines, drugs and diagnostics

2009 UCB Pharma Alembic Apply Alembic's NDDS for UCB’s epilepsy drug2008 Eli Lilly Piramal Healthcare, Jubilant

Organosys and SuvenDevelopment of molecules from pre-clin to Ph II

2007 Merck Piramal, Orchid and AdvinusTherapeutics

R&D collaboration for developing new drugs

Evolution from (pure) Cost basis ���� Shared risk/reward ���� R&D innovation expertise17

Date Acquirer Target Description

2010 Hospira Orchid Chemicals and Pharmaceuticals

Acquisition of beta-lactamgenerics injectibles business

2009 Perrigo Company, OTC producer

85 % stake in VedantsDrugs and Fine Chemicals

Move API production from Germany and Israel to India

Acquisitions… a snapshot of recent deals

producer Chemicals2008 Japan-based

DaiichiRanbaxy Acquisition of global generics

business 2008 Singapore's

Fresenius KabiDabur pharma Acquisition of oncology API

manufacturing capabilities 2009 Sanofi Aventis (Merieux Alliance's 80 %

stake in) Shantha BiotechStrengthen vaccine portfolio and accelerate growth in strategic emerging markets

2009 Pfizer Vetnex Acquisition of the animal healthcare business

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Thank You!

Harshawardhan Bal, PhD Harshawardhan Bal, PhD

Stem Cell Capital

www.stemcellcapital.com

Tel: +1 717 557 8247 (cell)

harsh.bal@stemcellcapital.com

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