the new economic landscape brian w tempest ceo & managing director ranbaxy laboratories limited,...
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The New Economic Landscape
Brian W TempestCEO & Managing Director
Ranbaxy Laboratories Limited, India
The Pharmaceutical Industry in the 21st Century :
Is India Challenging the R&D Business Model?
Chatham House, London, January 2005
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Gross Saving as % GDP
5
10
15
20
25
30
35
40
45
50
1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002
India China
Source: CSO, China National Bureau of Statistics, Morgan Stanley Research
The New Asia
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-
10,000
20,000
30,000
40,000
50,000
China US India Europe Brazil Japan Russia
GD
P U
S$
Bn
-
10,000
20,000
30,000
40,000
50,000
China US India Europe Brazil Japan Russia
GD
P U
S$
Bn
Largest Economies in 2050
Source: Global Economics Paper No:118 by Goldman Sachs 14-Oct-04
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0
200
400
600
800
1000
1200
1400
1600
2005 2015 2025 2035 2045
China India
0
200
400
600
800
1000
1200
1400
1600
2005 2015 2025 2035 2045
China India
Source: Global Economics Paper No:118 by Goldman Sachs 14-Oct-04
Number, millions
A Dramatic Rise in China and India’s Middle Classes
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% YoY
0
2
4
6
8
10
12
1997 1998 1999 2000 2001 2002 2003 2004
Source: Central Statistical Organization of India (CSO), Morgan Stanley Research
Indian GDP Growth
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Advantage India
• # of Co’s listed on the BSE second only to NYSE
• 4 out of 10 silicon valley startups run by Indians
• 2nd largest pool of scientists & engineers in the world
• 220 out of the Fortune 500 Co’s outsource IT work here
• ~ 15% of scientists in Big Pharma are of Indian origin
Source : CLSA India Paradox Report, 2003
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The Chrysler Example
For each mid size car Daimler Chrysler AG builds at one of
its plants, the Company pays $1,300 to cover employee
healthcare costs, more than twice the cost of the sheet
metal in the vehicle *
Source : IMS presentation at the IGPA Conference in Prague , June 2004.
(Covers both present and retired employee’s with family)
By Kirsten DowneyWashington Post Staff WriterSaturday, March 6, 2004 Pg E01
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Cost of Health
• Cost of non pharma healthcare
• High cost innovative medicines
• Across USA, EU & Japan
60 64 68 72 76 80 84 88 92 96 '002%
4%
6%
8%
10%
12%
14%
Source: Deutsche Bank and SSB Research, 2002 , OECD Health Data 2003 3rd Ed.
USA
France
UK
Spain
Germany
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Healthcare Expenditure of select countries (%
to GDP)
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Cost of Health and Age
Source: Deutsche Bank Research, July 2002,OECD Health Data 2003 3rd Ed.
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Issues facing Big Pharma
• Increasing R&D costs
• Product withdrawals e.g. Vioxx
• Re-importation of prescription drugs
• Drug shortages in hospitals in USA
• Pressure on earnings
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India Competitive Advantages
1. Aggressive Home Market
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India Competitive Advantages
2. Cost of Manufacture
Active Pharmaceuticals Facility, Mohali Dosage Forms Facility, Paonta Sahib
• Highest # of FDA approved plants outside the US
* Drug Master File
• 1/3rd of all DMF* filings with the FDA
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India Competitive Advantages
3. Cost of Innovation
• India’s inherent strength in
Chemistry
Mathematics
Ranbaxy R & D Center – I Ranbaxy R & D Center – II
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The Productivity Advantage
India USA India USA
1 chemist FTE 1 chemist FTE 1 chemist FTE 1 chemist FTE
70 h/week 50 h/week 70 h/week 50 h/week
$ 800 monthly $ 12,000 monthly $ 800 monthly $ 12,000 monthly
Better education x 1,3Better education x 1,3
Longer working time x 1,3Longer working time x 1,3
Lower cost x 20Lower cost x 20
Source: IPHMR Conference, New Delhi August 2004Source: IPHMR Conference, New Delhi August 2004
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UnileverEmerson Electric
Tyco ElectronicsEli Lilly
Texas InstrumentsDaimler Chrysler
QualcommDuPont
MonsantoD-Link
McDonald’sDelphi
IntelDanisco Cultor
HoneywellCummins
HPColgate Palmolive
General MotorsBell Labs
GEAkzo Nobel
Source: CLSA Emerging Markets
MNC owned R&D centers in India
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Ranbaxy R&D Organization
115,000 MSc Scientists & 12,000 PhD's in Chemistry every year
> 1000 Scientistsin R&D
22 from US / EU in 2003
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India Geographic Footprint
USA43%
RoW19%
BRIC 29%
Europe9%
USA14%
RoW34%
BRIC 46%
Europe6%
2003 - US$ 972 Mn
USA~50%
RoW10%
BRIC 20%
Europe~20%
2000 - US$ 475 Mn
2007 - US$ 2 Bn*
USA36%
RoW22%
BRIC 26%
Europe16%
2004 - US$ 1178 Mn
* Estimated
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Global Human Bridge
Leading to shareholder wealth
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Innovation - Our own example
BD / TD
product
with no
OD
solution
FDA
APPROVAL
USA
product
prescriptions
begin
Licensing
out
to patent
holder
Full
product
development
in the
USA
Discovery
& patenting
by Indian
Pharma
company
4-5 Years
Royalty
to
Indian
Pharma
company
Product
gains
~ 15%
market
share
Cipro XR
Thank You
Brian W TempestCEO & Managing Director
Ranbaxy Laboratories Limited, India
The Pharmaceutical Industry in the 21st Century : Is India Challenging the R&D Business Model
Chatham House, London, January 2005