Drug Discovery & Development

for the World Market from India: How Real

GV Prasad
Vice Chairman & CEO,
Dr. Reddy’s Laboratories
1 NOV 2007
1 1
 Indian Pharma Industry: Poised for
Transformation

2
Indian Pharma Industry Backdrop
Indian Pharma to dominate Global generic industry
CAPEX BY INDIAN COMPANIES SHARE OF THE GLOBAL GENERICS PIE
Source: Capex of Top 15 companies; Annual reports, Analyst reports Source: International revenues of 13 Indian companies; Annual
reports, Analyst/Industry reports
6.0%
802
CAPEX (US$ Mn)

669 5.5%
472
348 5.1%

2.9
2.0 2.4

2002-03 2003-04 2004-05 2005-06 2003-04 2004-05 2005-06

ANDA FILINGS FROM INDIA DMF FILINGS FROM INDIA

Source: Annual reports, Analyst reports 177 Source: USFDA website
144

90
80 57% 49%
65 68%
80%
41
43% 51%
20% 32%

2000 2001 2002 2003 2004 2005 2001 2003 2005 2006*
3
Indian Pharma Industry Backdrop
Home Market also Poised for Transformation!!

 Growth in disposable incomes & RETAIL PHARMACEUTICAL MARKET IN INDIA

the number of middle-class
US $ billion
households

 Expansion of medical 20

infrastructure

 Greater penetration of health

insurance 4.6 6.1
3.4 3.9
 Rising prevalence of chronic
diseases
2000 2002 2004 2006 2015
 Adoption of product patents Source: India Pharma 2015, McKinsey & Co

 Aggressive market penetration

4 Debut of organized retail chains

 Innovation: Opportunity for India

5
Innovation Capacity  Unmet Needs

6
Innovation Capacity  Unmet Needs
Why Is It Important?

4%

1980 1985 1990 1995 2000 ‘02 ‘03

Though the R&D spend is increasing, success is decreasing

7
Innovation Capacity  Unmet Needs
Why Is It Important?

4%

... As Does Average Cost Per Drug ...

Average Cost to Develop One Drug (US$Mn)

$1,200

$802

$318
$138

1975 1987 2001 2006

1980 1985 1990 1995
Source: PhRMA Pharmaceutical Industry Profiles 2007 2000 ‘02 ‘03

Though the R&D spend is increasing, success is decreasing

8
Innovation Capacity  Unmet Needs
Why Is It Important?

... With Only 3 of 10 Drugs Recovering Investment...

4%

... As Does Average Cost Per Drug ...

Average Cost to Develop One Drug (US$Mn)

$1,200

$802

$318
$138

1975 1987 2001 2006

1980 1985 1990 1995
Source: PhRMA Pharmaceutical Industry Profiles 2007 2000 ‘02 ‘03

Though the R&D spend is increasing, success is decreasing

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Innovation Capacity  Unmet Needs
India’s Cost Structure… Key Advantage

 Western companies able to obtain a step

down of 30-40% in cost by a mere site transfer
Cost to India
Leadership
(in High
Risk Game)  Companies in India able to reduce the upfront
capital cost of setting up a project by 25-50%
Lower Filing
Cost  Outsourced services to India significantly
reduces the cost and time of clinical trials
Process
Innovation
 India’s huge resource of skilled scientists,
available at a fraction of the cost in developed
Manpower Cost Advantage
countries

Capital efficiency  Scientists of Indian origin retuning provide a

strong talent pool

Source: IBEF, E&Y Analysis

10
Global Pharma’s Challenge…Creating
Opportunities for Indian Pharmacos

 Improving R&D productivity, a high priority for innovator pharma

companies

 Exploring opportunities for expanding pipeline while addressing

costs as well
 Testing the waters: Outsourcing of non-core activities on an experimental basis

 Expanding partnerships: Drug discovery experimental programs in various

countries

 Indian companies are setting up internal drug discovery programs

as well as exploring partnerships with large & medium innovator
companies
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 Innovation in India: Current Status

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Current status of Discovery & Development in India

Internal Programs Services Model MNC Outposts Partnerships

 Dr. Reddy’s  Aurigene, Advinus, Drug Discovery  GSK – Ranbaxy
 Glenmark GVK Lifesciences  AstraZeneca  Eli Lilly – Jubilant,
 Ranbaxy  Dr. Reddy’s, Discman,  Altana Suven
Nicholas, Jubilant,  Zydus – BI, Onconova,
 Cadila
Shasun, Divis, Suven  Dr. Reddy’s –
 Torrent Clinical trials & data
 GVK Bio, Vimta, management Rheoscience, Argenta,
 Sun Pharma ClinTec
Lambda, Lotus,
 Pfizer
 Biocon Accutest  Aurigene – Merck/
 Wockhardt  Eli Lilly Serono, Forest Labs,
 Siro Clinpharm, iGate
 Novartis Rheoscience
 Nicholas Piramal Clinical Research,
Asian Clinical  GSK  Merck & Co. – Advinus
Therapeutics
 Quintiles, ClinTec
 AstraZeneca – Torrent
 Wyeth – GVK
 Nicholas – Morvus,
Connexios, Biosynth
 Syngene - Innate
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Source: Company news, industry reports
Headlines Today

 More than three-quarters of the Top 50 pharma companies

conduct clinical development in India(1)

 Outsourced manufacturing activity in India at $100 million(2)

 Outsourced clinical trial activity in India at $75 million in 2005(3)

 40 – 50 NCEs under development by Indian pharma companies

When will the first indigenously developed drug be launched from

India?

(1,2) Motilal Oswal Report

14 (3) Frost & Sullivan
 NCE Pipeline of Indian Companies
What would be the timeframe when innovative product from India will hit the market

Company Pre-Clinical Phase I Phase II Phase III TOTAL

Dr. Reddy’s 2 1 2 1 6

Glenmark 4 - 2 - 6

Ranbaxy 8 1 1 - 10

Cadila n/a 3 1 - 4

Torrent 5 1 - - 6

Wockhardt 4 1 1 - 6

Sun Pharma 3 1 - - 4

Nicholas Piramal 2 - 3 - 5
At least 3-4
Biocon 3 - 2 - 5 years away
from launch
Total 31 8 12 1 52

15 Source: Analyst reports, company presentations

 NCE Programs focused on Metabolic Disorders

Company Therapeutic Focus

Dr. Reddy’s Metabolic Disorders, Cardiovascular

Glenmark Metabolic Disorders, Respiratory, Pain Management

Ranbaxy Metabolic Disorders, Inflammation/Respiratory, Anti-Infectives, Urology

Cadila Metabolic Disorders, Inflammation

Torrent Metabolic Disorders, Cardiovascular

Wockhardt Sepsis & Anti-Infectives

Sun Pharma Asthma/COPD, CNS, Allergy

Nicholas Piramal Metabolic Disorders, Inflammation, Anti-Infectives, Oncology

Biocon Metabolic Disorders, Inflammation, Cardiovascular, Oncology

16 Source: Analyst reports

 Building a sustainable Innovation-led
business : Key Challenges

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 Key Challenges

Target Selection :

• Precedent targets vs Unprecedented targets

• Translatability of in vivo disease models to humans

• Length and Cost of meaningful human proof of concept studies

•Increasingly crowded research makes selection of clinically differentiated

products difficult

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 Key Challenges

• Challenges operating out of India

• Not yet part of the innovation eco system of venture capital, academic research &
biotech
• Lack of talent in critical functions
• Access to thought leadership
• Funding
• P&L driven valuation
• Lack of “patient” capital
• Regulatory Frameworks for timely approvals
• Regulatory frameworks/expertise not in place
• Pace of approvals not satisfactory

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Closing Thoughts…

Indian Pharmaceutical Industry has the potential to…

1. Bring Affordability and Accessibility of Drugs to the Masses

2. Increase Global Pharma Industry’s Innovation Capacity to Meet Unmet
Needs
3. But needs to get the basics right

“We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if
we have remembered that, they have never failed to appear. The better we have remembered that, the
larger they have been.”
-- George W. Merck

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