The Challenge from India Dr. Brian W Tempest Chief Mentor & Executive Vice Chairman of the Board Ranbaxy Laboratories Limited, Delhi, India Lisbon – 8/9.

The Challenge from India

Dr. Brian W Tempest

Chief Mentor & Executive Vice Chairman of the Board

Ranbaxy Laboratories Limited, Delhi, India

Lisbon – 8/9 November 2006

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%

1. India +84%

2. Pakistan +75%

3. Korea +54%

4. Philippines +39%

5. China +34%

Stock Market Performance in Asia in 2005

Source: Rimes in GBP

Davos 2006

Source – FT

The Productivity Advantage

India a usa Pharma view USA India a usa Pharma view USA

1 chemist 1 chemist 1 chemist 1 chemist

70 hours/week 50 hours/week 70 hours/week 50 hours/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

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 - South Guangdong province is short of 2m workers

India - will remain very young, 50% <25years, 65% <35 years - source of the extra needed global workforce

- in 2025 100m > 65 years (to China’s 200m)

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 793 billionaires USA has 371 – almost half India - 23 billionaires, UK has 24 China - 8 billionaires Net worth of 40 richest Indians - $106 b 40 richest Chinese - $26b

“2006 belongs to some of the emerging markets, and

no country more than India”

Source: Forbes

The Billionaires Advantage

The R&D Investment Advantage Most attractive R&D Investment locations:

1. China 2. USA 3. India 4. Japan 5. UK

Source – UNCTAD 2005

Qualified Scientists & Engineers

Global India players with Alliances

English speaking

TRIPs compliant – first patent March 2006

IIT, IIM & other scientific institutions

Source – UNCTAD 2005

The R&D Investment Advantage-reasons why India

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

3m graduates pa, 115k MSc Chemistry, 215k Eng (222k USA) Physics the most popular subject

Knowledge super power in the making

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

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

Diaspora network (25m across 120 countries)

US & Europe will not dominate Science, Maths, IT

The Knowledge 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. In addition, 13% of science classes are not taught in a laboratory at all”

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% under review-Sussex

Source: Daily Mail – 11 August 2006

Number of Higher Education Institutions

05/06 18,123 +59%

00/01 11,412

90/01 5,932

80/01 4,861

Source: Indian University Grants Commission

Science Education in India

Number of Students enrolled in

Higher Education Institutions

05/06 10,500 +40%

00/01 7,500

90/01 4,000

80/01 3,000Source: Indian University Grants Commission

Number of Institutions courses

05/06 99/00

Pharmacy 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 3734

90/01 2950

(USA 03/04 25,000)

Source: Indian University Grants Committee

The Knowledge 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

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

Revitalization of agriculture - beyond milk (1st globally), wheat (2nd), rice (2rd)

More privatization – public sector not so buoyant

Further encouragement of R&D for Pharmaceuticals

Expand further the prosperous middle class of 300m

The Potential for Improvement Advantage

CRO Market India

2006 $318 m +347%2005 $71 m2000 $10 m

Source:Clinivest Research Pvt. Ltd

Country USAIndia

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

Thailand India

- Open heart $14250 $4400

- Hysterectomy $ 2012 $ 571 - Knee surgery $7000 $4500

Patients

- Naïve- HIV 50m- Diabetes 32m- HT 5m

The M&A Future Advantage

$b

1997/8 3.61998/9 2.51999/0 2.22000/1 4.02001/2 6.12002/3 5.02003/4 4.32004/5 5.62005/6 6.0

Source: Outlook business June 2006

- 2006/7 on target for $10b- But still only 15% of China

The FDI Advantage

$m 2000 110 2001 160 2002 200 2003 250 2004 400 2005 450

- Leading to even more Pharma R&D facilities and factories

Source – Citigroup

Investment by top 15 Indian Domestic Pharmaceutical Companies

Investment by foreign Pharma companies

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

$b 2004 2009

USA 15 27 W Europe 9 14 Japan 3 4 Rest of America 6 9 ROW 25 40

Total 58 94 Source: Frost & Sullivan

“India could soon dominate the entire production chain for generics”

IMS prediction No 4 Scrip April 5 2006

The Global Generic Market – growing everywhere

The Pharma Advantage

Competitive Advantage – Aggressive Home Market

The Pharma Advantage

Competitive Advantage - Cost of Manufacture

Active Pharmaceuticals Facility, Mohali Dosage Forms Facility, Paonta Sahib

Highest number of FDA approved plants outside the USNo. of FDA approved plants:

1990 11995 102000 442004 105

Source: Crisil / IPA

The Pharma Advantage

R&D I

R&D III

R&D II

Competitive Advantage - Cost of Innovation

Ranbaxy’s Patent Filings

2449

32

86

146

24

170

185

2001

2000

1999

20042005

The Pharma Advantage – API’s

USA 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%

Source: US FDA / J P Morgan 6th August 2006

Annual USA ANDA FilingsRanbaxy 29Sun 22Orchid 18Lupin 14DRL 13Cadilla 12

Source: Pharmabiz 8th Sept’ 2005

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

- 29 ANDAs p.a ranks in top 3 USA FDA filers

- Indian Generic Companies on a Filing Spree - BOA

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

The Pharma Advantage - ANDAs

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

Leading Generic Companies

Source : Company /Financial reports & presentations

Annual Sales (US$ Millions)

Source: CLSA, 6 August 2006

A race to Prosperity in Asia

•With Law (India) & Order (China)

•Buddhism

•Joint Bids for oil assets

•Silk road re-opened – Sikkim to Tibet (Nathula Pass)

•Calcutta port is only 1120k from Lhasa

•India leading in the Pharma race

Potential Downsides to theIndian Scenario

Potential downside – Asian Flu*

*50% of world chickens bred in Asia

Potential downside – Oil prices

Source – Outlook business June 2006

• A war against Iran could drive oil > $200 a barrel - ‘Times’ 22nd June 2006• Oil is 33% of Indian Energy Sources – IMA, India June 2006• BRIC countries consume 20% oil

Source – EIIG Source – BP

USA – 4% population with 20% emissions

China – Same level as USA in 2005. In 2025 will be double

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 Downside - Pollution

Potential downside – InfrastructureA common view

Source – Manmohan Singh

- Infrastructure will need $155b over the next five years

Potential downside – Counterfeit products from India-but not a global issue

Origin of fake products

seized in EU in 2004

Rank

1. China

2. Thailand

3. Hong Kong

4. Turkey

5. USA

Source: FT

Countries where fake

pharma products seized in

2005Rank

1. Russia

2. China

3. South Korea

4. Peru

5. Columbia

Source: PSI

192,000 died from Counterfeit drugs in China in 2001 Source: IMS 27th Feb’2006

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 Some downsides - infrastructure

The current feeling in India a turning point has been reached and an inflexion point has been passed

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

Summary

“We have all grown up learning the story of the unfinished voyage of Christopher Columbus

setting sail to reach India, he discovered America. I now invite the people of America to complete the

Voyage of that great explorer”

Manmohan SinghPrime Minister of India

July 2005

Thank You