Hale & Tempest

Exploring the Structural Changes in the Global Pharmaceutical Marketplace

Dr. Brian W Tempest

www.briantempest.com

9th Annual Global Generic Strategy Summit

Barcelona, Spain 14-16September 2010

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Dr Brian Tempest advises Companies, Banks, High Net Worth Individuals and Investment Funds on their Strategy in the Emerging World based on his wide experience in China, Japan, South East Asia

and India where he has lived for the last decade.Brian has worked for Ranbaxy Laboratories since 1995 holding the position of Managing Director and Chief Executive Officer until 2005. He was then Chief Mentor and Non Executive Director until 2008. He is one of the few westerners to have led a Sensex Nifty 50 Indian blue Chip MNC and as a result has a valuable insight into India. Brian has also been Regional Director, Far East for Glaxo where he

was responsible for businesses in Japan, China, Korea, and Taiwan.Brian has worked in the Pharmaceutical Industry for the last 39 years and led Healthcare businesses in North America, South America, Europe, Africa, Middle East, Asia and India. He has also led sessions at Investor Meetings across Asia, Europe and USA. He is now an International Advisor to MAPE – India, Religare -India and UNCTAD - Switzerland. In addition he is a member of the SCRIP Global awards panel. Brian speaks at global conferences on the Challenge from India and China and more

information on these presentations can be found on his website www.briantempest.com.Brian has a PhD in Polymer Chemistry from Lancaster University and is a member of the Royal

Society of Medicine, the Royal Society of Chemistry and is a Chartered Chemist. He is now Chairman of Hale & Tempest Co Ltd.

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Healthcare Pressures to 2050

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Emerging World’s Perceived Economic Health in 2009

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The Future? - Pharma Vending Machines currently being test marketed in UK Hospitals & Supermarkets 2010

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Structural Change:

Big Pharma

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Big Pharma- Despite increasing R&D NCE Productivity continues to fall

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Approvals becoming Difficult Source: Pharmatimes UK July-August 2010

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Many Drugs withdrawn this Decade Source: Deutsche bank, FDA

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EC Surprise Anti Trust Raids 2008/9

1st - GSK, Astra Zeneca, Sanofi Aventis, Pfizer, Wyeth, Teva in January 2008

2nd – Teva , Servier, Kirka in November 2008

3rd – Sanofi Aventis France, Novartis France, Teva France in October 2009

4th – Lundbeck Italy, Teva UK in December 2009

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Generic Exposure

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Sales Force Job Cuts in Press since 2009

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USA – Many OTC Switches this Decade Source: Deutsche Bank

Hale & TempestSources: 1. IMS Midas, March 20052. Earth Trend Data Tables 2005

82% of the world population accounts for only 12% of the global pharma sales

Region Pharma Sales Population

North America

Europe

Japan

$255 b 47%

$158 b 30%

$59 b 11%

332 5%

725 11%

128 2%

Asia/Africa/Aus

Latam

88%

$41 b 8%

$20 b 4%

18%

4711 73%

558 9%

12% 82%

Worldwide $533 b 100% 6454 100%

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Emerging World Share of Pharma Growth source IMS

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Emerging World Share of PharmaSource EIU, OECD, WHO, IMS, Roland Berger

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Profitability in Branded Generic Markets

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Big Pharma & the Emerging World source IMS - BRIC, Mexico, Turkey, South Korea

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India RankingsAbbott now has 7000 reps & 7% Market Share

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Emerging Markets & Big Pharma

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A New World Order is Comingwith New Alliances

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Structural Change:

Generic Companies

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Patent Expiries 2003-2013 (in 8 Markets)

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USA Generics Filings Source: Deutsche bank July 2010

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USA - First to File Lawsuits Source RBC Capital Markets January 15 2010

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USA - Litigation Success Rates Source RBC Capital Markets January 15 2010

Patent Challenges on rise - 65 FTFs in 2009 Success rate at 48% - or 76% including deals 3 courts hold 69% with 36% success e.g. NJ 4 courts never ruled against generics e.g. NY At risk launches on the rise – 6 in 2009 Teva has 12 of the 28 at risk launches – 2002/9 Settlements on the rise – 54 in 2009 Teva accounts for a third of all settlements Authorized generics on the rise – 25 in 2009 Watson represents a fifth of all AGs

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USA Challenge – Size of Product Basket Source: Deutsche Bank

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Distributors moving into Generics UK Coop – the world’s largest consumer cooperative

GBP£10b UK company running food stores, banks, insurance, funeral

homes, travel agents, farms and pharmacies 3rd rank pharmacy chain in UK with 800 stores Owns UK pharmaceutical wholesaler Sants Opus Marketing JV with Day Lewis Pharmacy

Chain offers 113 products under “Prospect” brand Tianjin Tasly Sants Manufacturing JV opens

2010/11 With Investment GBP£20m, 200 staff

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Generic Profit Margin Profile in descending order source: Deutsche Bank July 2010

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Top 22 Generic Companies over $1b Source: Company Reports Generics Bulletin 28 May 2010 (excludes Apotex & Actavis Private Companies)

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Next18 Generic Companies < $1b Source: Company Reports Generics Bulletin 28 May 2010 (excludes Recalcine Private Company)

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Structural Changes:

Indian Pharma Companies

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Indian Generics have consistently outperformed USA Generics

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To understand India , understand the promoter families McKinsey Quarterly 16 Jan 2010

Family ownership -often overlooked 1/3 of S&P500 index, 40% of top 250 Cos Fr/Ge <30% survive into the 3rd generation Survivors do better than their corporate peers Family Councils, Wealth Management Offices Every generation has a liquidity event Families renew their portfolios over time

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Indian Deals Roaring Ahead July 2010 Grant Thornton Deal Tracker

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Indian DMFs 62% April 2010

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Chinese DMFs 22% April 2010

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India represents 50% of USA ANDAs

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FDA Approved Manufacturing Sites

source FDA

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Early discovery leads from US, Europe, Taiwan, Singapore Molecular optimisation from India

Toxicology from China, Central Europe, Singapore Electronic Data Capture from India

API Manufacture from India with Raw Materials from China

Drug Formulation Manufacture from India, USA

Phase 1 Clinical Trials from Europe

Phase 2,3 heavy use of India

Corporate back office from India

The Indian Drug Development Model

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India – Share of CRAMS Market

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Chinese ANDAs are Coming

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The Tempest Crystal Ball

•Asia will become the Centre of Gravity for global business

•Big Pharma will develop Emerging World Strategies, Generics Strategies, OTC Strategies, Vaccine Strategies, VC Strategies

•Big Pharma will continue to be attracted to India for CT, EDC, MO. and to China for RM/Biology/Toxicology

•Big Pharma will develop dual IP as well as dual pricing

•Many Indian families are reviewing their family portfolios and will optimize their holdings. M&A will consequently expand further

•In Commodity Generics risks and competition will rise further. Branded Generics will continue to be very attractive

•Monoclonals will be the next generic wave from India

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Thank Youbrian.tempest@clara.co.uk

www.briantempest.com