OPPI Ernts N Young - Pharma Sector 2009

Taking wings
Coming of age of the Indian

pharmaceutical outsourcing industry
Ranga Iyer
President
OPPI
The engineering industry has discovered India’s talent and potential for what an automobile
maker called “frugal engineering”. Global automakers are now tapping India’s engineering
resources to improve their competitiveness.
A similar revolution is under way in the pharmaceutical sector. As this OPPI-Ernst & Young
study reveals, India has emerged as a growing customs manufacturing and outsourcing
destination with a growth rate of 43% that is thrice the global market rate.
I am sure that this study will be an eye-opener for everyone on the growing potential of India’s
vibrant pharmaceutical sector.
Organisation of Pharmaceutical Producers of India
Taking wings
Coming of age of the Indian
Pharmaceutical outsourcing industry
Table of contents
Foreword Introduction Executive summary
2 Taking wings
Insight into pharma Acknowledgement Glossary of terms
outsourcing to
India
Section 1 :
Trends in the global
pharmaceutical industry
and resultant shift to
outsourcing
Section 2 :
Custom manufacturing
services
Section 3 :
Drug discovery and
development services
Coming of age of the Indian pharmaceutical outsourcing industry 3

Foreword
4 Taking wings
Tapan Ray
Director General
OPPI
Dear reader, By 2010 global Contract Research and Manufacturing Market

(CRAMS) is expected to reach around USD66b (excluding clinical
By 2020 India is expected to be one of the top 5 pharma
trials), when Indian CRAMS market will be around USD3.8b
innovation hubs with one out of every 5 to 10 drugs discovered
(excluding clinical trials) with CAGR of 51%. The global market
worldwide coming from India, as reported by The Economic
for contract manufacturing is highly fragmented. The market
Times dated 14 March 2009 quoting Mr. Ashok Kumar,
share of top 10 companies in this field is just around 30%.
Secretary, Department of Pharmaceuticals, Ministry of
Chemicals and Fertilisers, Government of India. Realising the importance of the CRAMS sector, Global Sourcing
Committee of OPPI spearheaded by Mr. Alok Sonig, Managing
Focused actions aimed at building world class infrastructure,
Director, Bristol-Myers Squibb took the initiative to partner with
creation of a large talent pool through public-private
Ernst and Young for a study on the Indian Contract Research
partnerships, offering financial incentives to encourage
And Manufacturing Services (CRAMS) sector.
innovation and shaping a favorable regulatory environment will
help propelling the country in this direction faster. This report captures the opinions of the key stakeholders like,
the customers, the suppliers, the regulatory authorities, various
Towards this effort, the Organisation of Pharmaceutical
experts group to highlight India’s potential in the CRAMS space.
Producers of India (OPPI) has been undertaking, over a
I compliment the members of the Global Sourcing Committee of
period of time, a series of research studies to meet the unmet
OPPI and the Ernst & Young team for preparing this important
information needs of the stakeholders to help improving the
research report aimed at offering significant value to the
healthcare environment of the nation. We are pleased to share
stakeholders in pursuit of excellence.
that to encourage innovation in the country; OPPI has recently
collaborated with two premier R&D focused institutions, National
Institute of Pharmaceutical Education & Research (NIPER) and
Council of Scientific & Industrial Research (CSIR) through a
Public-Private Partnership (PPP) initiative.
Decreasing R&D productivity and increasing cost containment

pressures are driving the global pharmaceutical companies to
contract out some research related and manufacturing activities
from North America and Europe to low cost destinations of
the world like, India and China. A global survey done by the
Economist Intelligence Unit (EIU) about two years ago on the
preferred centers for overseas contract research indicates
39% preference for China and 28% preference for India. The
Indian Pharmaceutical industry is poised to grab this opportunity
with its world class facilities and large pool of English speaking
skilled manpower.

Alok Sonig (MD, BMS India)
Chairman
OPPI Global Sourcing Committee
Dear reader,
On behalf of OPPI’s Global Sourcing Committee, I am pleased to share this comprehensive, yet succinctly summarized, body of work
put together by the OPPI and Ernst & Young.
India and outsourcing are invariably used in the same sentence. We all know that India has become an established player across
industries such as I.T. and other G&A functions such as Human Resources and Finance. While this has happened due to cost
advantages, skilled workforce, and a favorable political and economic environment, the OPPI and Ernst & Young teams undertook this
initiative to better and more specifically understand the current and future drivers of growth for outsourcing pharmaceutical R&D and
manufacturing to India.
The team reached out to several pharmaceutical leaders and professionals worldwide, both suppliers and customers of services, to
develop a balanced perspective on India’s capabilities in these areas and the outlook ahead.
The worldwide pharmaceutical industry is keenly looking at driving effectiveness and efficiencies in R&D and Manufacturing and is
looking at India with renewed interest. I am confident that this report will provide a renewed and rich perspective as global players
gear up to make significant bets on the Indian R&D and manufacturing capabilities.
I’d like to thank members of the OPPI sourcing committee Ms. Mukta Arora, Eli Lilly (Vice Chairperson), Dr. Ashoke Banerjee, GSK
Pharmaceuticals, Mr. Jayant Dwivedy, Piramal Healthcare, Mr. Nilesh Wadhwa, Sanofi-Aventis, Mr. Chittur Devaraj, Wyeth and the
Ernst & Young team who have made this comprehensive report possible.
6 Taking wings
Hitesh Sharma Ajit Mahadevan
Partner Partner
Ernst & Young Ernst & Young
Dear reader, • Track record of supplying pharmaceutical API and

formulations globally (with all the requisite quality and
For many decades, the pharmaceutical and biotechnology
regulatory approvals in place) – particularly small molecule
industry has been considered an “evergreen” industry. It has
weathered recessions, downturns and upturns and has provided • Strong cost/quality proposition. Lower costs and strong
investors with certain risk/reward that was well understood and supply of skilled manpower (scientists, QA/QC professionals
documented. The rate of change in this industry, compared with etc) and capital efficiency
most of the others, has always been sedate – with a group of few
• Diverse and wide group of companies who have acquired
pharmaceutical companies driving its future.
this capability
This decade has seen perhaps the most significant changes in
India as a outsourcing market is USD1.1b and growing at
the fortunes of the pharma industry:
~51%. The opportunity for growth for Indian as well as global
• Development of new products, the real driver of growth and companies looking at setting up in India is very strong and
profitability, has seen a serious drop in approvals, against a sustainable for the foreseeable future.
backdrop of ever increasing R&D costs.
The Indian outsourcing industry has overcome many hurdles
• There has been an emergence of biologics as a significant along the way and is now poised to assume the mantle
driver of new R&D. Many of the established pharmaceutical of leadership as a strategic partner of choice for global
companies have had to make changes/acquisitions to align pharmaceutical companies across the areas of R&D
their portfolios to include a larger biologic presence. and manufacturing.
• On the other end of the product life-cycle, the ever This publication, collaboration between OPPI and Ernst & Young,
strengthening generic competition has meant rapid declines attempts to characterize the Indian outsourcing landscape, its
in sales of products going off patent. capabilities, challenges and opportunities, all of which could
make it the preferred destination for partnering, especially
• The global financial crisis of the past two years has added the
when outsourcing decisions are increasingly becoming strategic
final challenge in that the key markets, US & Europe, have
in nature.
had low/no growth.
The times we are going through encourage you to explore,
Big Pharma in particular have had to take a look at their
engage and partner with the Indian outsourcing industry, which
business models and refocus energies towards new growth
is truly at an inflexion point.
opportunities (biologics, cytotoxics and emerging markets) as
well as evaluate more cost efficient operating models. The result
has been that the innovative pharmaceutical industry has moved
into a faster trajectory of outsourcing and offshoring of R&D
and manufacturing across APIs and dosage forms. The global
outsourcing industry is USD51b and growing at 14%; faster than
the global pharmaceutical industry growth.
India is perfectly positioned to be a preferred destination for

global pharmaceutical companies to outsource R&D as well as
manufacturing. Some of the key drivers being:

Introduction
8 Taking wings
This report is a collaboration between Organisation of Pharmaceutical Producers of India (OPPI) and
Ernst & Young and aims to present to you:
• Trends in the global pharmaceutical industry that are leading to an increase in outsourcing
• An assessment of the capabilities and potential for growth of the Indian custom manufacturing and
drug discovery and development outsourcing industry in light of the customer expectations from
their outsourcing service providers
While this report covers clinical trials supplies, it does not cover clinical trials services market.
Pharmaceutical value chain
Launch
Lead molecule
identified Expiry
On-patent On-patent
Discovery Pre-launch Off patent
growing mature
research
Discovery Development Full scale manufacturing
Research Pre- Ph Ph Ph Ph
biology clinc. I IIa IIb III
& chemistry
Contract research Contract manufacturing
The viewpoints and conclusions presented in this report are an outcome of discussions with various
stakeholders, i.e., customers, suppliers, regulators, key opinion leaders and data available in public
domain and our industry understanding. As part of this initiative, we have interviewed/interacted
with more than 50 respondents across 30 organizations including large and medium pharmaceutical
companies across US, Europe and India; Indian suppliers and regulatory authorities. Further, as part
of this report, a benchmarking survey has been conducted, to assess relative attractiveness in custom
manufacturing outsourcing of six countries/geographies – India, China, Eastern Europe, Puerto Rico,
Singapore and Ireland. The findings of this survey are presented as part of this report.
This report is intended to serve as a reference document for the global pharmaceutical community to
explore, assess and partner with India in the pharmaceutical outsourcing segment. It does not consider
the investment objectives, financial situation and impact of specific business decisions associated with
outsourcing in general and India in particular.

Executive summary
The global pharmaceutical and biotechnology • Current global financial crisis: the crisis has severely
industry is in the midst of challenging times. affected the liquidity of small biotech companies; with
44% of the US biotech companies having less than a year’s
In 2008, the global pharmaceutical market has grown at operating cash and 26% having less than six months
the slowest rate in this decade and is expected to slow down of operating cash. Further, the consumer spend on
further. The market reached USD773 billion at a growth healthcare has declined, reflected by a drop in the number
rate of 4.8% in 2008, which is the slowest growth rate of of prescriptions in the US by 2% for the first time in a
the decade. The two largest markets, the US and Europe decade in 2008-09.
which contributed almost 73% of the global market in 2008,
achieved growth rates of 1.4% and 5.8% respectively. Going • Increasing penetration of generics: penetration of generics
forward, the US market is expected to stagnate or decline in US, in terms of their share in total prescriptions, has
further over the next five years while the European market increased from 47% in 1999 to 63% in 2007 .Going
is expected to grow at a sluggish pace with a CAGR of 2 - 5% forward, this is expected to increase further driven by
for 2008 - 2013. There are primarily four reasons for impending patent expiries and measures by governments
this slowdown: to reduce healthcare costs.
• Decreased R&D productivity: during the eight year • Fewer and smaller blockbusters: decreased number of
period between 2000 and 2008, while the total R&D blockbuster approvals to replace the existing ones going
spend of pharmaceutical companies has increased off patent and reduced sales potential of recently launched
from USD53 billion to USD129 billion, the number of drugs will further decelerate the market growth. The
drugs approved has declined. This decreased R&D sales of blockbuster drugs have grown only 9% in 2007
productivity is due to the increased failure rate in trials compared to 24% in 2004. Further, projected sales of top
and higher cost of developing new drugs due to stricter 10 NMEs launched in 2008 show no potential of achieving
regulatory requirements. a blockbuster status in the next 5 years.
10 Taking wings
These challenges have forced the industry to • Emerging markets are expected to be the key engines
look at three key imperatives for creating and of growth for the global pharmaceutical market. While
sustaining profitable growth – new technology, there has been a slowdown in the western pharmaceutical
market, emerging markets which form 18% of the
emerging markets and efficiency enhancement
global pharmaceutical market, continue to drive growth
Pharmaceutical companies are tackling the slowdown by contributing 49% of the total growth in 2009. Emerging
focusing on new technologies, participating in emerging markets outperformed developed markets in terms of
markets and enhancing efficiency. growth with a CAGR (2003-2008) of 12-13% whereas
• The companies are focusing on biologics, which is making CAGR for developed economies stayed around 6-8% for
rapid in-roads in the global pharma industry and is the same period.
projected to have a share of 23% of total market and 50% • Pharmaceutical companies are focusing on restructuring
of top 100 molecules in 2014. Other new technologies and implementing cost containment initiatives. Almost all
which are increasingly becoming areas of interest are of them have announced cost reduction programs over the
the ones required for complex chemistries, such as past few years. They are increasingly using acquisitions
lower-temperature technology that can suppress side as a key strategy for sustained growth and adopting a
reactions and increase reaction selectivity, chemical ‘‘networked’’ operating model to boost efficiencies, gain
decontamination technology for cytotoxics and research access to technologies and to emerging markets. Through
in nanotechnology. “networked” model, pharmaceutical companies have been
increasingly becoming reliant on using third parties to
improve efficiencies through in-licensing, out-licensing,
collaborations and outsourcing.

Outsourcing is no more an option but a strategic • Emergence of biologics: As a high percentage (~75%)
imperative for pharmaceutical companies across of the current pipeline is from biologics and cost of
the globe investing in a new manufacturing facility is high, companies
prefer to outsource manufacturing rather than to invest in
Over the past two decades, there has been a shift in the pattern a facility.
of outsourcing. Companies have moved from outsourcing
non-core functions to routinely outsourcing a number of • Drug discovery and development, spans from target
core functions such as manufacturing and drug discovery identification though lead optimisation till clinical trial IIa.
and development. Between 2006 and 2009, percentage of Global drug discovery and development services market is
big pharma companies considering outsourcing for strategic valued at ~ USD18 billion and is projected to grow with an
advantage has increased from 42% to 57%. estimated CAGR of 17% over 2007 – 2010.
• The global R&D and manufacturing outsourcing market Globally, pharmaceutical companies are shifting their outsourcing
(excluding clinical trials) is USD51 billion in size and activities to Asian markets with India emerging as one of the most
represents 19% of total global pharmaceutical R&D and attractive destinations.
manufacturing spend in 2008.
• Across the value chain, the penetration of outsourcing varies India is a fast growing custom manufacturing
significantly with approximately 55% penetration in API outsourcing destination with a growth rate of
manufacturing and 15% penetration in dosage (formulation) 43% that is thrice the global market rate. This
manufacturing. is driven by its ability to create a differentiating
• The R&D and manufacturing outsourcing market has two cost value proposition powered by its lower
major segments – custom manufacturing services and drug manufacturing costs, skilled manpower and strong
discovery and development services. technical capabilities
• Custom manufacturing, spans from clinical trial phase Assurance, quality and service are the ticket to play in the
II b to the off-patent stage and includes manufacturing custom manufacturing space while cost and innovation serve as
of intermediates, APIs and formulations. Global custom differentiating criteria for selection. The India story is driven by
manufacturing services market is valued at ~ USD33 billion its offering of a ‘cost value proposition’ comprising cost efficiency
and is projected to grow at a CAGR of 13% between 2007 – along with skilled manpower and technical capabilities.
2010. The growth of this industry is driven by: • As per our survey conducted as part of this study, India is rated
• Rationalization of plants due to low capacity utilization: highest in terms of its cost efficiency attractiveness among
Big Pharma companies have built huge capacities over the six countries – India, China, Eastern Europe, Puerto Rico,
years and with products moving to the late lifecycle, these Singapore and Ireland. Approximately 67% of the respondents
companies are operating plants at only 20–30% capacity. have rated India as “excellent” and rest 33% have rated it
As a result, more companies are looking at divesting such “above average”.
plants and outsourcing while retaining marketing rights for • India’s cost efficiency is driven by its low manufacturing
the products thereby reducing their fixed costs. costs which is only 35-40% of the cost of manufacturing in
• New operating models for companies: Many of the virtual/ the US supported by its low installation and manpower cost.
emerging biopharma/biotech companies do not have an • Around 90% of the respondents have rated India either
internal capacity for manufacturing and outsource it while “excellent” or “above average” for its technical capability
retaining only the marketing rights. attractiveness. This is demonstrated by the following:
12 Taking wings
• It has manufacturing prowess in both APIs, where India is • While India needs to improve its IP perception Indian
the 3rd largest player in the world with 500 different APIs companies are adopting various business models to ensure
and in formulations where it manufactures 60,000 packs partnering with global companies and have been successful in
across 60 therapy areas. doing so.
• India currently accounts for 8% of the global • In order to further strengthen India’s position in the
pharmaceutical production making it the world’s 4th pharmaceutical manufacturing outsourcing market,
largest pharmaceutical producer. government has taken or planning to take several initiatives
such as
• Vertically integrated model of Indian players to offer end-
to-end services across development and manufacturing in • Streamlining and reducing time frame for approvals
both formulations and API’s. involving NOC manufacturer and NOC export licenses from
8 – 12 weeks to 2 weeks.
• It has around 119 USFDA and 84 UK MHRA approved
plants and accounts for one third of DMFs and highest • Providing infrastructure support such as building
number of ANDAs in the US. “Pharmazones”, a separate dedicated temperature
and atmosphere controlled area to maintain the safety,
• Approximately 90% of the respondents have rated India
efficacy, and quality of imported and export drugs/
either “excellent” or “above average” for its skilled manpower
pharmaceutical products at international airports at Delhi,
attractiveness.
Hyderabad and Mumbai.
• India offers a large pool of English speaking skilled
• Building capabilities through collaboration with western
manpower. Every year, around 1.6 million graduates and
countries such as MoU with US FDA, WHO, Health Canada,
0.4 million post graduates qualify in science courses.
South Africa and EMEA.
• While the growth in the North American and European
• All the above factors have been instrumental in the Big
markets is expected to slow down to -1 to 2% and 2 - 5%
Pharma conducting their sourcing operations from India and
respectively over 2008-2013, the growth of emerging
attracting global CMOs like Lonza, Patheon, DSM and Albany
markets would be 11-14%.This increasing influence of the
Molecular Research Institute to set up base or collaborate
emerging markets will position India in the proximity of the
in India.
markets driving growth of the pharmaceutical industry.
• India is thus well poised to become the strategic partner of
• Share of emerging markets in clinical trials has been
choice in the arena of contract manufacturing
increasing and India is emerging as a hot spot as compared
to most emerging markets, with a robust growth of 31%
p.a. over the last four years. This trend will increase India’s
proximity to the clinical trial supplies market.
• 67% of respondents have rated India “above average” both

on project management attractiveness and response
time attractiveness indicating that India has developed
strong project management capabilities with reduced
turnaround time

In drug discovery and development services, India However, India lacks a culture of innovation due
is emerging as a hot spot, growing at ~ 65%, i.e. to legacy issues such as low levels of funding,
more than three and half times the global growth collaboration between industry, academia and
rate driven by strong chemistry capabilities, educational infrastructure
skilled manpower and cost value proposition • India spends only 0.8% of its total GDP on research and
Each stage of the discovery and development cycle has different innovation which is much lower as compared to developed
requirements, but certain attributes are required across the countries such as US (2.8%), Japan (3.1%), Germany (2.5%)
value chain. While speed of delivery is more important in case and France (2.2%).
of development, innovation is more important in case of drug
• A two-way traffic of knowledge and experience between
discovery. Flexibility, integrated capabilities and cost value
industry and academia is quintessential for innovation .Unlike
proposition are the attributes applicable across both drug
in the west, the transfer of knowledge between industry and
discovery and development. India’s story is driven by cost
the academia is comparatively lower in India due to minimal
competitive strong chemistry capabilities supported by talent
movement of people from the industry to the academia and
pool of skilled professionals and R&D infrastructure.
vice versa. While recently there has been some movement
• India has developed strong capabilities in process chemistry, from academia to industry, this needs to increase significantly
medicinal chemistry and analytical chemistry. Further, and the movement from industry to academia most certainly
process development and scale up capabilities for clinical APIs needs to gain traction, to ensure cross fertilisation of ideas.
and formulation manufacturing across various dosage forms
• To innovate, scientists need to draw from different disciplines
such as solids, semi-solids, liquids, powders (lyophilisation)
like mathematics, biology & chemistry; however the education
and parenterals have also been undertaken.
system in India creates scientists who have little exposure
• India has developed pre-clinical services capabilities with across disciplines due to the excessive focus on specialization
a number of animal testing facilities (existing and under and minimal opportunity to change disciplines. Lack of
development) using dogs and primates. interdisciplinary processes is one of the factors that has
hampered innovation in drug discovery in India.
• India offers significant cost arbitrage in end-to-end research
and development with potential savings of 61% as compared • Indian educational institutes do not have the relevant
to US. Further, India offers an abundant pool of professionals exposure to the industry and follow a curriculum which
in the area of drug development and research chemistry with does not include courses like programs in regulatory affairs,
~ 50,000 pharmacists and 150,000 chemistry post graduates IPR, legal issues and scientific development. Further, less
qualifying every year. attractive career options in the area of research result in
students either not opting for research as profession or
• India has more than 200 DSIR (Department of Scientific and
migration from India in search of better options. For instance,
Industrial Research) approved in-house pharmaceutical R&D
39% of the pharmacists working in the US are of Indian origin.
units and 48 GLP compliant R&D facilities.
• Big pharma companies and global outsourcing service

providers have started focusing on India for drug
development and research chemistry. Big pharma companies
have adopted different operating models such as captive off
shoring, dedicated R&D unit in partnership, fee for services
and collaboration/JV.
14 Taking wings
The Indian government has recognized the Despite India’s inherent advantages, it accounts
need to build an environment conducive for for only ~3% share of global outsourcing market,
research and innovation and has planned/ indicating significant opportunity for growth in
implemented a number of initiatives to provide this segment.
the much needed impetus to research and The global pharmaceutical and biotech industry is yet to harvest
innovation in pharma & biotech the full potential of India’s skilled talent pool, strong technical
• The Government of India is embarking on a major multi-billion capabilities and cost value proposition. This can be attributed
dollar initiative with 50% public funding through a public- to the perception arising from its legacy of IP regime and its
private-partnership model to harness India’s innovation branded generic market image, which have in the past hampered
capability. The vision is to catapult India into one of the top global pharmaceutical companies from taking advantage of the
five pharma Innovation hubs by 2020 with one out of every value proposition offered. This mindset has been undergoing a
five to ten drugs discovered worldwide by 2020 coming sweeping change and India has set its sights on becoming the
from India. strategic partner of choice to the global pharmaceutical industry.
This can be achieved in both arenas by;
• The Government of India is promoting collaboration among
industry, academia and government through various • Custom manufacturing: Building infrastructure, instilling a
programs such as New Millennium Indian Technology culture of quality & acquiring newer technology capabilities
Leadership (NMITLI) and Drugs and Pharmaceuticals such as biologics, cytotoxics and lyophilization for custom
Research Program (DPRP). manufacturing and
• Government has set up 7 NIPERs as institutes of “national • Drug discovery and development services: Creating global
importance” to achieve excellence in pharmaceutical sciences reach, developing end to end service offerings, building
and technologies, education and training. a culture of process safety and quality, creating a project
management mindset, investing and building biologics,
• These initiatives have motivated Indian pharmaceutical research biology, lyophilization and cytotoxics capabilities to
companies to pursue drug discovery programs. Indian capitalize on future high growth opportunities.
companies are pursuing new drug discovery research and
have more than 50 candidates across different stages of The Indian pharmaceutical outsourcing service provider
drug pipeline. community is committed to demonstrate the capability
required to enhance its credibility further in global
However, India needs to rapidly build its research biology and pharmaceutical industry.
further enhance its development capabilities to emerge as a
partner of choice for early stage discovery and patented
product launches.

Section 1: Trends in the global pharmaceutical industry
and resultant shift to outsourcing
16 Taking wings
Section 1
1.1 The global pharmaceutical market has grown at the slowest rate in this
decade and is expected to slow down further. This is being shaped by:
►► Declining R&D productivity
►► The current global financial crisis
►► Increasing genericization
►► Fewer and smaller blockbuster
1.2 The industry is focusing on three key imperatives to sustain growth:

►► Investing in new technology platforms
►► Building a presence in emerging markets
►► Enhancing efficiency in operations
1.3 Acquisitions and the networked model have emerged as the key levers
being deployed by the industry to meet these strategic imperatives.

Section 1
1.1 The global pharmaceutical market has grown at
the slowest rate in this decade and is expected
to slow down further. This is being shaped by:
► DecliningR&D productivity
► The current global financial crisis
► Increasing genericization
► Fewer and smaller blockbuster
18 Taking wings
Global pharmaceutical market growth the slowest in this
decade and expected to slow down further
The growth rate of the global pharma market has less than halved in the last decade
• The global pharmaceutical market reached USD773b, at a growth rate of 4.8%, in 2008, which is the slowest growth rate of the
decade. The two largest markets, the US and Europe, which contributed almost 73% to the global market in 2008, achieved growth
rates of 1.4% and 5.8%, respectively1.
• Going forward, it is estimated that global market growth rates will decline further. The US market is expected to stagnate or
further decline over the next five years. The European market is also expected to grow at a sluggish pace with a CAGR of 2 to 5%
for 2008–20131
• The only silver lining in the global pharma market is expected to come from emerging markets, which, according to IMS forecasts,
will collectively grow at 13–16%1.
Global Pharma market size trend
11.8% 773
800 715 12%
648
605 10%
600
8%
393
400 7.2% 6%
6.8% 6.6%
4.8%
4%
200
2%
0 0%
2001 2005 2006 2007 2008
Market size in % Growth over

USDb previous year
Source: IMS Health Market Prognosis , March 2009
Source: 1.IMS Health Market Prognosis, March 2009

Four key structural trends affecting pharma market
de-growth
Decreasing
Decreasing
R&DR&D
productivity
productivity
Current
Fewer and
global Global pharmaceutical
Global pharmaceutical
2 financial
Current
global
crisis smaller
blockbusters
Fewer
smaller
and 4
financial market de-growth
market de - growth blockbusters
crisis
Increasing
Increasing
penetration of
penetration of
generics
generics
20 Taking wings
Despite increasing R&D spend and number of
1
Decreasing
Decreasing
R&D
R&D
productivity
productivity
active compounds in development, no significant 2

Current
Current
global
global
financial
financial
crisis
crisis
market de-growth
market de-growth
Fewer
Fewerand
and
smaller 4
smaller
blockbusters
blockbusters
change in the number of approved NMEs Increasing

Increasing
penetration of
generics
generics
3
of
1 Decreasing R&D productivity
Number of NME approvals (2000 - 2008)
36
27 25
24 22
18 19 20 18
2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: CDER NME, BLA Approval 2008
Growth in R&D expenditure in USDb from 2000-2008 Trend in mean number of active substances** developed for
first launch (2003-2007)
129 52
46 48
114
103 39
92 36
85
76
67
53 59
2000 2001 2002 2003 2004 2005 2006 2007 2008*** 2003 2004 2005 2006 2007
Source: CDER NME, BLA Approval 2008
Source: Evaluate Pharma Alpha – World Preview 2012, CenterWatch Analysis,
CDER, PhRMA Industry Profile Note: **Active substance (AS): The active ingredient that is intended to furnish
Note: *** CMR international 2008 pharmaceutical R&D factbook pharmacological activity or other direct effect to a pharmaceutical product — this
may be a chemical, biological, biotech or radiopharmaceutical substance that is or is
• Although the R&D spend has more than doubled from destined to be made available as a “prescription only medicine,” to be used for the
USD53b in 2000 to USD129b in 2008, the number of NCE cure, alleviation, treatment, prevention or in vivo diagnosis of diseases in humans
approvals have shown a largely declining trend with a historic

low of only 18 in 2007 before correcting to 25 in 2008. • Over the last five years, the average number of active
substances in the development for the first launch has
• Further, while there has been an increase in the number of
increased steadily across companies. However, this has yet to
approved NMEs in 2008, the percentage of new products,
be reflected in new product approvals.
which offered a significant improvement* over currently
marketed products, fell from 44% in 2007 to 36% in 2008.1
Note * As defined by the CDER; significant Improvement compared to marketed

products in the treatment, diagnosis or prevention of the disease and are under a
priority review
Source: 1.CDER NME, BLA Approval 2008

Declining R&D productivity due to increasing failure rate
of NMEs and high costs incurred in developing molecules
for complex therapies
The decrease in R&D productivity has been due to: Number of projects terminated in Phase III
Increasing failure rate in trials 39

36
• An increasing number of projects are being terminated at the 35
Phase III stage. This has increased by 25% between 2002– 31
2004 and 2005–2007, resulting in fewer NME approvals.
Increasing cost of developing a new drug

• The average cost of developing a new drug has increased
2002 - 04 2003 - 05 2004 - 06 2005 - 07
from USD1.1b in 2004 to USD1.3b in 2008.
Source: Tufts Center for drug development Source: 2008 © CMR International, a Thomson Reuters business
Based on data provided for all years by 19 companies
• Annual drug withdrawal, based on NME, and the withdrawal
data for preceding periods indicates a sharp rise ranging
from 4–10% and an average of 7%1. Thus, stricter FDA
regulations have increased the need for more extensive
data submissions.
• In addition, the FDA requires companies to monitor drugs after their launch for safety, and can at times require specific additional
data. Such data is known as post-marketing commitment (PMC). Over the last decade, the number of PMCs has increased by 50%,
resulting in a significant cost increase2.
Source: 1. Analysis Group Inc, 2. Datamonitor
Increase in time taken for trial completion and Parameters 1999-2002 2003-2006
drug approval Average duration of 5.8 years 7 years
• Longer trials with higher complexity result in increased costs. Phase 1-3
Protocol design to 460 days 780 days
• Six therapy areas, oncology, CNS, respiratory,
database lock time
endocrinology, cardiovascular and infectious diseases,
account for 68% of all clinical trial protocols. Patient recruitment 75% 59%
rates
• These therapies require a larger number of patients
Volunteer retention 69% 48%
per trial, e.g., the mean patient enrolment rates in the
therapies mentioned above for Phase III trials is nearly
twice as much as compared to other therapies.
Source: Karlberg, 2008, EY FICCI Report
22 Taking wings
Reduced funding to mid-tier and small pharma/
1
Decreasing
Decreasing
R&D
R&D
productivity
productivity
biotech companies and decreased consumer 2

Current
Current
global
global
financial
financial
crisis
crisis
market de-growth
market de-growth
Fewer
Fewerand
and
smaller 4
smaller
blockbusters
blockbusters
spending due to financial crisis Increasing

Increasing
penetration of
generics
generics
3
of
2 Financial crisis
Small and biotech pharma companies, which contribute almost 75% of the total R&D pipeline, are most
impacted by the financial crisis.
• Although the financial crisis has had a lower impact on the pharma industry in comparison to other sectors, small biotech
companies have been adversely affected by it. Based on a market study conducted by Ernst &Young’s global biotechnology center,
it is estimated that 44% of US biotech companies have less than a year’s operating cash, while 26% have less than six months of
operating cash. This is due to decreasing funding from venture capitalists and the inability of small pharma and biotech companies
to launch an IPO in current market conditions. The financial crisis will have a negative impact on the already drying product pipeline
for the pharma industry.
Source: Ernst & Young, Beyond borders, Global Biotechnology report, 2008
The financial crisis: impacted the consumer spend on healthcare

• According to IMS, contrary to the 5.6% CAGR increase in prescriptions from 1997 to 2007, the number of prescriptions filled in the
US dropped by 2% for the first time in a decade in 2008–09.
Growth in number of prescriptions filled in US
5.6% CAGR -2%
1997 2007 2008-09
Source: Ernst & Young, Beyond borders, Global Biotechnology report, 2008

Increasing genericization driven by the impending
1
Decreasing
Decreasing
R&D
R&D
productivity
productivity
patent cliff due to expiry of key blockbusters and 2

Current
Current
global
global
financial
financial
crisis
crisis
market de-growth
market de-growth
Fewer
Fewerand
and
smaller 4
smaller
blockbusters
blockbusters
government pressures to reduce cost of healthcare Increasing

Increasing
penetration of
generics
generics
3
of
3 Generic penetration has increased by 16% in the last decade…
% of total prescriptions dispensed (in US)

• The global generics industry was valued at USD78b in 2008.
100%
• The top eight global markets — US, Germany, France, UK.,
80% 47 47 51 Canada, Italy, Spain and Japan — today account for 84% of
57 63
total generics sales.
60%
40%
53 53 49
20% 43 37
0%
1999 2001 2003 2005 2007
Brands Generics
Source: IMS Health, National Prescription Audit Plus
…and is expected to further increase driven by impending patent expiries and measures by governments
to reduce healthcare costs.
Sales at risk due to the patent cliff (in USDb) • Sales of more than USD235b are at risk in six years as many
blockbuster drugs go off patent.
58
48 • Of this, USD~40b worth of drugs are biologics, which are
39 37
27 difficult to copy, and as a result, have low price erosion post
26
genericization. Thus, it is an attractive market for players
with biologic capability.
2009 2010 2011 2012 2013 2014
Source: EvaluatePharma World Preview 2014, Datamonitor
High healthcare costs as % of GDP • Governments are taking various steps to promote generics to
reduce healthcare costs:
US 15.3%
• Centralized procurement, e.g., 68% of generic sales in
Switzerland 11.3% Germany
• Generic substitution, e.g., Japan

France 11.1%
• Waiving co-payments for patients using generics, e.g., US
Germany 10.6%
• Promoting and monitoring physician prescription habits
Canada 10.0%
Japan 8.2%
Source: IMS Health, National Prescription Audit Plus
24 Taking wings
Fewer blockbuster approvals to replace existing
1
Decreasing
Decreasing
R&D
R&D
productivity
productivity
ones going off-patent to further decelerate 2

Current
Current
global
global
financial
financial
crisis
crisis
market de-growth
market de-growth
Fewer
Fewerand
and
smaller 4
smaller
blockbusters
blockbusters
market growth Increasing

Increasing
penetration of
generics
generics
3
of
4 Fewer blockbuster drugs launched
One of the other key reasons for the slowdown of the pharmaceutical industry has been the lack of replacements for blockbuster drugs
that have gone off-patent in the past.
Decreasing sales growth of blockbuster drugs
Year 2003 2004 2005 2006 2007

Blockbuster sales growth n/a 24% 14% 10% 9%
Market share 33.1% 36.5% 38.7% 39.7% 39.7%
Pharma market growth% n/a 12% 8% 7% 9%
Source: IMS Health, Business Insight Analysis
It is evident that although the market share of blockbuster drugs is increasing, this increase has slowed down in recent years.
Blockbuster drugs only grew by 9% in 2007 as compared to 24% in 2004.
Reduced sales potential of recently launched drugs

The impact of the industry’s dearth of blockbuster approvals in recent years can be seen in the modest sales potential of all the new
drugs approved in 2007 and 2008.
Top 10 NMEs in 2008: ranked on USA Consensus Sales in 2013
Product Company Therapy 2008 2013

1 Treanda Cephalon Oncology 75 544
2 Nucynta J&J Analgesic 0 424
3 Promacta/Revolade GSK Hematology 2 409
4 Pristiq Wyeth CNS 67 372
5 Relistor Wyeth CNS 6 371
6 Lexiscan Astellas CVD 50 296
7 Mozobil Genzyme Oncology 0 275
8 Cimzia UCB I&I 12 249
9 Vimpat UCB CNS 0 237
10 Intelence J&J Anti-infectives 42 215
Note: CVD: cardiovascular diseases, CNS: central nervous system, I&I: immunology and inflammation
Source: EvaluatePharma, World Preview 2014; Datamonitor, Company comparator 2009
• The projected sales of the top 10 NMEs launched in 2008 show no potential of achieving blockbuster status in the next five years.
• Four of these 10 NMEs have been developed by emerging/biotech pharma (Cephalon, Genzyme, UCB)

Section 1
1.2 The industry is focusing on three key imperatives
to sustain growth:
► Investing in new technology platforms
► Building a presence in emerging markets
► Enhancing efficiency in operations
26 Taking wings
Industry facing three key imperatives for creating and
sustaining profitable growth — new technology, emerging
markets and enhanced efficiency
Imperatives for pharma

Pharmaceutical companies are tackling this slowdown by focusing on new technologies, participating in emerging markets and
increasing their efficiency.
Key imperatives for growth
Focus on new
technologies
Growth
En
n ha
n i ts nc
n sio arke ed
effi
pa m
Ex ging cie
nc
e r y
em
2 3

Key imperatives for growth — focus on
1
Focus on new
technologies
new technologies pa
Ex ging
ion
in ts
ns marke
Growth
En
ha
nc
ed
effic
ienc
er y
em
2 3
1 A presence in biologics, which is making rapid inroads in the global pharma industry, accounting
for an estimated market share of 23% and 50% of the top 100 molecules in 2014
Biologics accounted for 17% of the world pharma market in Share of biologics in top 100 molecules
2008. It also accounted for 42% of preclinical candidates and
26% of submissions the same year. As a result, the share 11%
28%
of biologics is expected to grow to 23% of the world pharma
50%
market in 2014. The fastest growing therapies (oncology
and diabetes) are being driven by biologics. Within biologics,
mAbs, therapeutic proteins and DNA therapeutics are fast- 89%
growing segments. 72%
50%
2000 2008 2014
Conventional Biologics
Source : EvaluatePharma, World Preview 2014
New technologies required for complex

Novel target Intermediate
Oncology
chemistries:
Immunology 3%1 4% 14%
• Lower-temperature technology that can suppress side Diabetes
reactions and increase reaction selectivity
Muscoskeletal
Therapy areas
• Chemical decontamination technology for cytotoxics Hematology

Infectious Dis. 1% 2% 10%
• Research in nanotechnology
Urology
Respiratory
Cardiovascular
targets
Me too
Gastrointestinal -6% -5% 5%

Small Therapeutic Monoclonal
Molecules Proteins Antibodies
high
Very High Emerging Absent
Exposure to generics2
Source : Datamonitor, Future Pharma Trends, 2009

Note :
1.Represents a CAGR 2008-2013
2.Indicates probability of entry of generics in the segment
28 Taking wings
Key imperatives for growth – expansion in
1
Focus on new
technologies
emerging markets pa
Ex ging
ion
in ts
ns marke
Growth
En
ha
nc
ed
effic
ienc
er y
em
2 3
2 Emerging markets are expected to be the key engines of growth for the global
pharmaceutical market
While there has been a slowdown in western pharmaceutical markets, emerging markets, which form 18% of the global
pharmaceutical market, continue to drive its growth, contributing 49% of its total growth in 2009.
Pharma market size (USDb) % share in overall absolute growth of global pharmaceutical
market over previous year
311.8
247.5 60% 57%

49%
40%
76.6 90.8 20%

46.5 12%
13%
0%
2003 2009
North Europe Japan Asia/Africa/ Latin
America Australia America North America Emerging Markets*
Source: IMS Health, 2009 Source: IMS Health, 2009

Note: * include India , China , South Korea, Brazil, Mexico, Russia and Turkey.
Pharma market growth CAGR % 2003-2008 • According to IMS Health, emerging markets outperformed
developed ones in terms of their growth with a CAGR
13.7% 12.7% (2003-2008) of 12-13%, whereas the CAGR of developed
economies remained at around 6-8% for the same period.
5.7% 6.4%
2.7%
North Europe Japan Asia/Africa/ Latin

America Australia America
Source: IMS Health 2009
Big Pharma is increasing its emerging market focus, as indicated by recent deals being made:
• GSK expanded its emerging market footprint by buying Bristol-Myers Squibb’s branded generics drugs business in the Middle East
and striking a deal with Indian generic drug-maker Dr Reddy’s Laboratories, thereby gaining access to a portfolio of 100+ drugs
• Sanofi-Aventis extended its reach into Eastern Europe and Turkey with its purchase of Zentiva in Czech Republic, and has since
expanded into Latin America with the purchase of Medley in Brazil and Krendrick in Mexico.
• Pfizer, the world’s largest drugmaker, signed two licensing deals with India-based companies, adding 128 new off-patent products
to its portfolio
Sources: Company websites, press releases

Key imperatives for growth — enhanced efficiency
1
Focus on new
technologies
Growth
En
in ts ha
nc
ion ed
ns marke effic
pa
Ex ging ienc
er y
em
2 3
3 Increasing operational efficiency is essential for sustaining profitability in the long run
Rising pricing pressure, increasing generic competition, ongoing fallout of product safety concerns, thinning pipelines and
looming patent losses have captured the headlines throughout 2007 and 2008.
The industry is responding to some of these issues by restructuring and implementing cost- containment initiatives. Nearly all
the major pharmaceutical firms have announced cost-reduction programs over the past year.
The key initiatives of the top pharmaceutical companies include the following:
Company Revenue1 2008 Est. annual savings Program term Key initiatives2
(USD million) (USD million)
Merck USD23,850 USD3,500–4,000 2006–2010 Headcount reduction (7,200, 12%)
Plant rationalization (5 of 31 facilities)
Novartis USD41,459 USD1,600 2008–2010 Headcount reduction (2,500, 3%)
Global procurement and sourcing
Plant rationalization and LEAN initiatives
Bristol-Myers USD20,597 USD1,600 2008–2010 Headcount reduction (4,300, 10%)
Squibb Plant rationalization (27 facilities)
GlaxoSmithKline USD39,694 USD1,400 2007–2010 Improving the selling model
Streamlining global manufacturing
Enhancing R&D efficiency
AstraZeneca USD31,601 USD1,400 2007–2010 Headcount reduction (7,600, 12%)
Strategic procurement
Simplifying business support functions
Pfizer USD48,296 USD4,500–5,000 2005–2008 Headcount reduction (10,000, 10%)
Plant rationalization (48 of the 93 facilities)
Simplifying research and development (R&D)
Johnson USD63,747 USD1,300–1,600 2007–2008 Headcount reduction (4,800, 4%)
&Johnson Consolidation of pharma operations
Integration of business model for Cordis
franchise
Sanofi Aventis USD38,585 Not disclosed 2009 onwards Headcount reduction (1,300, 1%)
Research site rationalization (27 sites)
Sources:
1. Annual reports
2.Company 4Q07earnings release
30 Taking wings
Section 1
1.3 Acquisitions and the networked model
have emerged as the key levers being
deployed by the industry to meet these
strategic imperatives.

Companies increasingly using acquisitions as key
strategy for sustained growth…
• M&A activities in the pharma and biotech industries have increased over the last three years.
• The year 2009 has been the landmark year in this area, with a spate of large ticket acquisitions taking place with the aim to
augment R&D pipelines and achieve cost benefits through synergies in operations.
• Big Pharma is making acquisitions within itself, with biotech and generics players satisfying its business imperatives.
M&A activity in the pharma space
M&A activity in the pharma space
Value of transaction No. of deals
200 400
298
284
271 268
150 167 300
226
100 117 200

112
108
79 85
74 100
50
0 0
2004 2005 2006 2007 2008 2009 (Till 30 June)
Value of deals Number of deals
Source: www.mergermarket.com
Key acquisitions by Big Pharma
Type of acquisition Deal Value

Pfizer – Wyeth USD64b
Big Pharma — Big Pharma
Merck – Schering Plough USD43b
Roche – Genentech USD44b
Big Pharma — biotech
Eli Lilly – ImClone USD5.8b
Sanofi Aventis – Zentiva USD2.9b
Big Pharma — generic
Daichii Sankyo – Ranbaxy USD5.9b
Source : www.mergermarket.com
32 Taking wings
…and adopting a “networked” operating model as
a strategy to boost efficiencies, and gain access to
technologies and emerging markets
• Over the past 20 years, pharmaceutical companies have become increasingly reliant on using third parties to improve efficiencies
through in-licensing, out-licensing, collaborations and outsourcing – moving toward a networked pharma operating model.
• The degree to which companies have embraced the networked pharma model to date varies extensively, with some heavily reliant
on third parties, while others are using third parties to a lesser degree.
• A networked model with reliable third parties not only enhances capital efficiency but also improves flexibility and the overall cost
structure, maximizes access to novel technologies for increasingly complex molecules, optimizes time to market and releases
internal capacity/resource for core tasks.
Responsibility for a function provided to third party
Outsourcing
Pharma company and Core tasks Pharma company acquires the

third party play a role in Collaborations In-licensing rights to a product or
(in-house)
the project concerned technology from a third party
Out-licensing
Pharma company sells the rights to a

product or a technology to a third party
Source: Datamonitor

Outsourcing increasingly becoming a strategic decision
for Big Pharma companies
How do pharma companies describe their outsourcing strategy?
• According to a survey conducted by Contract Pharma across Contract pharma study 2009 (% of respondents)
more than 200 sponsor-side respondents in 2009, 55%
of global pharma companies regard their outsourcing as a
Big pharma 43%
strategic decision. 57%
• Except for responses from emerging bio-pharma companies,
Small/mid-tier 48%
the majority responses from all other types of pharma pharma 52%
companies described outsourcing as a strategic decision.
Emerging 54%
bio-pharma 46%
Total 45%
55%
Tactical Strategic
Source : According to a survey conducted by Contract Pharma across more than

200 sponsor side respondents in 2009
Big pharma companies’ inclination to outsource, as a strategic imperative, has increased significantly
over last few years.
• Further, a comparison of the Contract Pharma Survey results Comparison of Big Pharma responses across two Contract
of 2009, with the same survey conducted in 2006, shows Pharma surveys
that 57% of Big Pharma respondents regard their outsourcing
decisions as strategic compared to 42% in 2006.
58%
2006
42%
43%
2009
57%
Tactical Strategic
Source : According to a survey conducted by Contract Pharma across more than

200 sponsor side respondents in 2009 and 2006
34 Taking wings
Global outsourcing market, valued at USD51b, 19% of
total R&D and manufacturing spend
• The R&D and manufacturing outsourcing market amounts to USD51b in size and represents 19% of the total global pharmaceutical
R&D and manufacturing spend in 2008.
• Further, the outsourcing market is growing at a CAGR of 14%.
Share of outsourcing in global pharma R&D and manufacturing spend Global outsourcing spend
USDb
80 14%
66
58
60 51
44
R&D and Global pharma 40
manufacturing R&D and
outsourcing manufacturing
spend USD264b 20
(USD51b)*
0
2007 2008 2009P 2010P
Sources:
*Note: The R&D outsourcing spend above does not include clinical trials 1. India Pharmaceuticals In-Depth – Global Outsourcing – Best Ideas, Morgan Stanley
Sources: Report, 2007
1. Goldman Sachs, 2006 2. Kalorama Information, Outsourcing in drug discovery, 2008
2. CMR International 2008 Pharmaceutical R&D Factbook, 3. State of the Pharmaceutical Outsourcing Industry, 2007, Jim Miller, President,
3. India Pharmaceuticals In-Depth – Global Outsourcing – Best Ideas, Morgan Stanley PharmSource,
Report, 2007 4. Ernst & Young analysis
4. Ernst & Young analysis
Outsourcing is here to stay despite the financial crisis and economic slowdown.
• A recent survey by Contract Pharma in 2009 revealed that 64% of the respondents said that they will continue or increase
outsourcing in 2010 .
Outsourcing spend 2010 estimates
Increase, 39%
Decrease, 36%
No change, 25%
Source: According to a survey conducted by Contract Pharma across more than

200 sponsor-side respondents in 2009

Outsourcing taking place across value chain with
API manufacturing constituting large portion of total
outsourcing pie
Outsourcing trends
Utilization of outsourcing across value chain components
• There has been a change in Launch

Lead molecule
the reasons for outsourcing identified Expiry
and an expansion in the scope
of outsourcing.
• Over the past two decades,

there has been a shift in the
pattern of outsourcing of
pharma companies from non- Discovery
On-patent On-patent
Pre-launch growing mature Off patent
core functions to routinely research
outsourcing a number of
core functions such as
clinical trial management and Research Pre- Ph Ph Ph Ph
manufacturing. Drug discovery biology clinc. I IIa IIb III
is one of the more recent core & chemistry
functions to be outsourced.
• There is higher prevalence

of outsourcing across the
late lifecycle than at the
early stages.
Extent of outsourcing in each area of the value chain
• Outsourcing in API
manufacturing is around 55%
55%, the highest across
the value chain 25%
15% 20% 15% 15%
• Utilization of outsourcing
in the discovery and
Discovery API dev Dosage API mfg Dosage Packaging
development space,
dev mfg
as well as in dosage
manufacturing, is low Source: Frost & Sulivan, 2006
since they are considered
as core. However, it also
indicates the scope for
future growth.
Trend in change of outsourcing spend of pharma companies in 2010 over the previous year
• Further, pharma companies API dev. 48% 15% 37%

have indicated a preference Dosage dev. 41% 17% 42%
for API development and
API mfg 38% 22% 40%
dosage manufacturing along
with the intention of increasing Dosage mfg. 48% 15% 37%
outsourcing spends in Increase No change Decrease
these areas
Source : According to a survey conducted by Contract Pharma across more than 200 sponsor side respondents in 2009
36 Taking wings
Outsourcing to shift to Asian markets with India and
China being the most attractive destinations
Probability of a project being outsourced to Asia

Around 35% of the total number of pharma companies will
outsource their projects to Asian markets in 2009. However,
only 8% of emerging bio-pharma will outsource projects to Asia
during the same period.1
Source: 1.According to a survey conducted by Contract Pharma across more than
200 sponsor side respondents in 2009
Trends in outsourcing to Asia
Top pharma 41% 29% 30%
Small/mid-tier
28% 21% 52%
pharma
Emerging
8% 8% 84%
bio-pharma
Total 35% 22% 43%
Yes May or may not No
Source: According to a survey conducted by Contract Pharma across more than

200 sponsor side respondents in 2009, EY analysis
Emerging bio-pharma being slow to come to Asia could be due

to the current credit crunch. Capital constraints have decreased
the risk appetite of such companies. This prevents them from
looking at destinations that have not been tested in the past, in
spite of the cost competitiveness of these destinations.
India and China have been ranked the top two best outsourcing
destinations due to their huge market potential and cost-saving
offered by them.
The need for a continued evolution of the

Innovative Pharmaceuticals Business model,
coupled with the war for technical talent,
has put India at the heart of global sourcing
initiatives. Strong cost competitive and well
developed local industry base, combined
with the large pool of technical talent has
necessitated the inclusion of India as a part
of all global sourcing initiatives across global
pharmaceutical businesses.
Dr. Hasit B. Joshipura
Chairman
GlaxoSmithKline Pharmaceuticals Ltd., India

Winds of change blowing in the pharmaceutical
outsourcing landscape
Increasing pressures in the pharmaceutical industry

have resulted in the emergence of the networked
model as companies seek alternative ways to drive
revenue and profit growth. Outsourcing is a core
part of this model and companies are increasing their
reliance on third parties to deliver value across drug
discovery, development and manufacturing, which
have traditionally been considered as core functions.
Over the last three years, Big Pharma has increasingly

shifted the focus of its outsourcing operations from
being tactical to strategic.
The outsourcing industry is undergoing a paradigm

shift with the rise of a number of new players from
emerging economies who offer global capabilities
and a substantial cost advantage. This is forcing
Big Pharma and Western CMOs to introspect and
recognize the need to transition from the West to the
East, to fully leverage the benefits outsourcing can
offer beyond simple cost-savings to strategic benefits.
38 Taking wings
Section 2: Custom manufacturing services
40 Taking wings
Section 2
2.1 Rationalization of plants due to low capacity utilization, new operating
models for companies and the emergence of biologics are the key factors
driving the growth of the USD33b global custom manufacturing industry,
which is projected to grow at the rate of CAGR of 13% between 2007–
2010. The Indian custom manufacturing market is growing at thrice the
rate of the global CMO market with Indian companies looking at expanding
their capabilities to grow from 2.8% in 2007 to 5.5% of the total market
in 2010.
2.2 India scores well on its ability to create a differentiating cost value
proposition, powered by its lower manufacturing costs and manpower and
technical capabilities, but it needs to build/improve on its culture of EHS
compliance, IP protection and infrastructure.

Section 2
2.1 Rationalization of plants due to low capacity
utilization, new operating models for companies
and the emergence of biologics are the key
factors driving the growth of the USD33b
global custom manufacturing industry, which
is projected to grow at the rate of CAGR of
13% between 2007–2010. The Indian custom
manufacturing market is growing at thrice
the rate of the global CMO market with Indian
companies looking at expanding their capabilities
to grow from 2.8% in 2007 to 5.5% of the total
market in 2010.
42 Taking wings
API and intermediates outsourcing 67% of global
manufacturing outsourcing pie of USD33b with an
estimated CAGR of 13% over 2007–2010
Global custom manufacturing outsourcing market – size, growth and key segments
Manufacturing outsourcing across pharma value chain
Launch
Lead molecule
identified Expiry
On-patent On-patent
growing mature
research
biology Clinc. I IIa IIb III
& chemistry
Pharmaceutical manufacturing outsourcing, also known as custom or contract manufacturing, spans the clinical trial phase II b
through till the off-patent stage and includes manufacturing of intermediates, APIs and formulations.
Share of outsourcing in total pharma manufacturing spend Global custom manufacturing outsourcing spend
USDb
50 13%
42
40 37
33
29
Custom Pharma Manufacturing 30
manufacturing manufacturing outsourcing account for
(USD33b) spend USD135b 24% of total pharma 20
manufacturing spend
10
0
2007 2008P 2009P 2010P
Source: Morgan Stanley India Pharmaceuticals In-Depth – Global Outsourcing – Source: Morgan Stanley India Pharmaceuticals In-Depth – Global Outsourcing –
Best Ideas, July 3 2007 Best Ideas, July 3 2007
API and intermediates contribute almost 67%1 of the total outsourcing market.
Source: 1.Boston Analytics, ‘An introduction to the Indian Pharmaceutical Industry – An In-depth study of India’s domestic and outsourced pharmaceutical market,”
October 2007

Outsourcing of custom manufacturing services affected
by several trends
Increasing regulatory costs
Lack of integrated CMOs
Biologics
Virtual/emerging
bio-pharma/biotech
Closure of assets
Drivers Challenges
Drivers Challenges
• Closure of assets: Big Pharma companies have built huge • Lack of integrated CMOs: Pharmaceutical companies
capacities over the years, and with products moving to their are looking at collaborating with a CMO, which offers
late lifecycle, these companies are operating plants at only end-to-end services spanning development services to
20– 30%1 of their capacity. As a result, more companies are packaging and managing logistics. However there are only
looking at divesting such plants and outsourcing and retaining a few CMOs that are able to provide such services. This is
the marketing rights for the products, thereby reducing their especially true for western CMOs that are present in either
fixed costs. Acquiring these assets gives CMOs a new business formulations or API, unlike some large CMOs in India.
opportunity and a relationship with Big Pharma.
• Increasing regulatory costs: The cost of complying
• Virtual/emerging biopharma/biotech: Many of these companies with regulations contributes a high percent of the fixed
do not have the internal capacity for manufacturing, and costs of CMOs. With technological advances taking place
outsource it, only retaining their marketing rights. regularly, investments in upgrading facilities, to provide
the requisite expertise to pharmaceutical companies to
• Biologics: As a high percentage of the current pipeline is from
sustain business, is essential.
biologics, and the cost of investing in a new manufacturing facility
is high, companies prefer to outsource their manufacturing rather
than invest in a facility.
Source: 1.Total European Pharma/Biotech Contract Manufacturing Market , Frost and Sullivan , 2008
44 Taking wings
Indian custom manufacturing outsourcing market
growing at thrice the global market rate and estimated to
reach USD2.3b in 2010
Indian pharmaceutical manufacturing outsourcing is valued at USD1.1b and is growing at a rate that is thrice that of the global market.
Indian custom manufacturing outsourcing market (USDb)
3
2.3
43%
2 1.6
1.1
0.8
1
0
2007 2008P 2009P 2010P
Source: Morgan Stanley India Pharmaceuticals In-Depth – Global Outsourcing – Best Ideas, July 3 2007
• India’s share of the outsourcing market is estimated to increase from 2.8% in 2007 to 5.5% in 2010.1
• API/Intermediate outsourcing is more prevalent in India than formulation outsourcing. Around 64%2 of total outsourcing is in the
area of APIs/Intermediates.
• Further, most Indian players participate in mid-late lifecycle products and in contributing to the N-2 state of APIs. Indian CMOs do
not participate in the production of the final API/formulation sourced for patented product launch/filing for submission.
Sources:
1.Ernst & Young Analysis , Morgan Stanley India Pharmaceuticals In-Depth – Global Outsourcing – Best Ideas, July 3 2007
2.Boston Analytics , An introduction to the Indian Pharmaceutical Industry – An In-depth study of India’s domestic and outsourced pharmaceutical market, October 2007

Indian players extending their capabilities to offer wider
portfolio of services
Segments Indian service provider

API and intermediates Dishman, Divi’s Labs, Dr. Reddys, Hikal, Jubilant, Piramal, Shasun, Syngene
Formulations Dr. Reddys, Emcure, Intas, Jubilant, Piramal, Strides Arcolab , Syngene
Biologics Dr. Reddys, Emcure, Strides Arcolab, Syngene
Source: Company website , Annual Report. Note: The service providers are indicative and not an exhaustive list and are presented in alphabetical order of preference.
Indian players have been taking the inorganic route of mergers and acquisitions to gain access to customers, new geographies
(especially regulated markets) and technology (biologics, sterile injectables , cytotoxics ).
Names of Indian CMOs Acquisitions Capability

Piramal Healthcare Torcan, Avecia, Morpeth API – Clinical Trial Supplies (CTS) , Custom
Manufacturing (CM) , fermentation
manufacturing facility
Jubilant Biosys, Trigen, Hollister-Stier, Draxis, PSI supply Formulations, injectables in US
Dishman Carbogen and Amcis, Synprotec Drug development and commercialization in
Switzerland, UK
Shasun Rhodia Custom Synthesis (CS) and CM in France and UK
DRL Roche, BASF, Trigenesis CM in US and Mexico
Strides Arcolabs Diaspa Fermentation manufacturing facility
Note: The deals mentioned are indicative and are not an exhaustive list.
Source: Company website, Annual Report , Mergermarket
46 Taking wings
Section 2
2.2 India scores well on its ability to create
a differentiating cost value proposition,
powered by its lower manufacturing costs
and manpower and technical capabilities,
but it needs to build/improve its culture
of EHS compliance, IP protection and
infrastructure.
Today, the definition of a successful CMO is going through a transition. Earlier, The Indian Pharma Outsourcing has
innovator companies saw outsourced services as a transaction, driven by a matured significantly during the last
combination of speed, cost effectiveness and dependability. Today, outsourced decade. The Companies operating in this
services are seen in a much more strategic light. Relationships are going beyond space have built excellent capabilities
outsourced development to collaborative development. Hence, for an Indian not only for API manufacturing but
company to become a successful CMO in the long term, it needs to be trustworthy also finished formulations including
as a long term strategic collaborator in development and manufacturing. This specialized galenic forms such as
means that if the CMO wishes to be in the early phase development space, it cytotoxics, lyophilized injectables,
needs to have strong technical capabilities and be able to deliver quickly as per ophthalmologicals etc thus keeping
commitment. As a competitive player in the late life cycle stages, the CMO needs pace with global trends and future
to have the ability to continually innovate to improve on cost efficiencies. There needs. India offers a lucrative package
needs to be a match in overall attitude and philosophy towards quality, safety, comprising of wide spectrum of
health and environment, since customers’ risk taking capacity on these aspects products, significant cost advantage,
is constantly diminishing. In summary therefore, to be successful, a CMO needs unmatchable process efficiencies and
to establish strong technical credibility, along with robust management practices nimbleness, which are key success
(project management, quality management, SHE practice management, financial factors for a sound play in Emerging
management and people management) to ensure profitability and business markets - one of future growth drivers
viability. for most global pharma majors.
Ajay Piramal Nilesh Wadhwa
Chairman Director - In Licensing
Piramal Healthcare Ltd. Aventis Pharma Ltd., Sanofi-Aventis
Group

Assurance, quality and service the ticket to play in
the CMO space while cost and innovation serve as
differentiating criteria for selection
Assurance Capacity, on time supply, confidentiality, sourcing

Ticket to play
Quality Culture, EHS, accreditation
Service Project management, responsiveness
Cost Manufacturing and manpower cost, cost of capital, tax incentives

Differentiation
Innovation Technical capability (biologics, cytotoxics, etc. ), skilled manpower
Vendor selection is a function of the country and company-level parameters.
India is the first place we look for companies with resources, capacity and capability. India business needs to continue to focus on the end to
end business model but work harder to build contacts with stakeholders in Pharma R&D - both API and Formulations.
Senior Executive based in Europe
Global Big Pharma
48 Taking wings
India story driven by “cost value proposition” comprising
cost efficiency along with skilled manpower and technical
capabilities
This analysis is based on the Ernst & Young–OPPI survey and interviews carried out with 38 respondents across 17 Big Pharma and
medium pharma companies. The respondents were from manufacturing strategy and sourcing teams and senior executives spread
across Europe, US and Asia.
India attractiveness evaluation
Cost efficiency India has been rated as

excellent by 67% of the
Skilled manpower respondents on cost efficiency
Technical capabilities
Cultural compatibility
Response time (speed)

Parameters of evaluation
Project management
Innovation
Regulatory environment
IP protection
Proximity to market
EHS compliance
Infrastructure
The X axis
Tax incentives
represents the % of
respondents
0% 20% 40% 60% 80% 100%
Poor Below average Average Above average Excellent
Areas of strength Areas of improvement
Source : Ernst & Young analysis
However factors such as tax incentives, infrastructure and EHS compliance are areas of improvement.
Bayer believes in value sourcing rather than low cost sourcing and here we see India as a key country that fits into our strategic sourcing
plans nicely.
K. R. Shekhar
Vice President, Procurement and Logistics
Bayer CropScience Limited

India’s cost efficiency driven by low manufacturing costs
— only 35–40% of the cost of manufacturing in the US…
India rank: 1
Cost efficiency attractiveness
India India has been rated as

China excellent by 67% of the
respondents
Eastern Europe
Puerto Rico
Singapore
Ireland
0% 20% 40% 60% 80% 100%

Source: Ernst & Young analysis
On comparing India with some prominent manufacturing locations, it is seen that India rates higher on cost efficiency than all the other
countries. This has been possible due to the intrinsic nature of the Indian pharmaceutical Industry and its evolution. The three key
factors that contribute to this efficiency include:
1. Manufacturing costs: The Indian market is highly Overall indexed manufacturing cost ( US FDA approved plant )
fragmented with almost 80001 manufacturers. This high
Cost index
competition has driven Indian companies to relentlessly 100%
drive their costs down over the life cycle of a product. 100
80 -85%
The competency developed as a result also reflects in the 80
manufacturing costs of US FDA plants in India, whose costs
60
are 65% lower than that in the US and 50% lower than that
40 35 -40%
in Europe.
20
0
US Europe India
Source: Crisinfac, 2007 , Ernst & Young analysis
Source: 1.Drugs and Pharmaceuticals for the Eleventh Five Year Plan , Planning Commission of India, December 2006
50 Taking wings
…supported by low installation and manpower costs…
2. Installation costs: The cost of setting up a plant in India is Installation cost – US vs India
30% lower than that of establishing an FDA plant in the US. Cost index
100
80
100
60
70
40
20
0
US India
Source: Enam CRAM sector report, March 2007
3. Manpower costs: India’s pool of trained chemists and Relative indexed cost of skilled chemists
pharmacists is six times as large as the USA’s and is Cost index
available at less than 1/10th the cost. 100
100
80
95
60
70
40
20
7
0
US Germany Italy India
Source: CRISINFAC/ Motilal Oswal Securities Report, 2006
India plays a key role in the Best Cost Country Sourcing Strategy of Bayer
Health Care. India is seen as a reliable partner for the more advanced
products whereas China is seen as a supplier for early intermediates and
less value adding processes.
Ingrid Reinkober
Vice President
Global Procurement – Raw Materials & Intermediates The Indian market has become a major player for API sourcing. The key
Bayer HealthCare AG Leverkusen, Germany strengths lies in its ability to provide low cost API’s (mainly mature API’s)
to an appropriate standard combined with an well improved manufacturing
and development capability which differentiate themselves from other low
cost countries.
The areas for improvement are Supply chain management with ‘lean’
focus combined with a greater ability to through out a product lifecycle
continuously improve the manufacturing process to drive down the total
cost of goods, whilst still maintaining the low cost base.
Nicklas Westerholm
Director of API Supply, Global External Sourcing
AstraZeneca

…and offering large pool of skilled manpower…
India rank: 1
Skilled manpower attractiveness
India Around 58% of the

respondents rated India
Ireland
as excellent
Singapore
Eastern Europe
Puerto Rico
China
0% 20% 40% 60% 80% 100%

Poor Below average average Above average Excellent
India is rated as the country with the highest skilled manpower for custom manufacturing. One of the reasons for this is the large
number of students who qualify every year, giving companies an abundant pool from which to choose. For example, of the total
number of post graduate students qualifying every year, almost 37.5%1 have chemistry as their specialization.
This large talent pool qualifies from almost 7000 Annual supply of talent in India
institutes which are approved by the All India Council for
Technical Education ( AICTE ), which offer both degree Pharmacist 50,000
and engineering courses. Almost 9% of these offer
pharmacy courses. In addition, there are around 300 Post 400,000
college -level educational and training institutes offering Graduate
degrees or diplomas in biotechnology, bioinformatics
and biological sciences, and produce almost 50,000 Engineering
653,000
Graduates
qualified professionals annually2.
Science 1,600,000
Graduate
Source: University development in India, basic facts and figures, University

Grant Commission, Government of India; NCAER’s National Science Survey –
2004; Ernst & Young analysis; Changing trends in Pharmacy Profession,
Express Pharma, Industry sources
Sources:
1.CII, Ernst & Young analysis ,
2.Report of the Working Group for the Eleventh Five Year Plan , Department of Biotechnology, Ministry of Science and Technology
52 Taking wings
... who exhibit a high level of cultural compatibility with
customers across the world
India rank: 3
Cultural compatibility attractiveness
Ireland
Singapore
respondents rated India as
Puerto Rico above average and 17%
Eastern Europe as excellent
China
0% 20% 40% 60% 80% 100%

Not only is there a large pool of qualified professionals, but English is widely used in higher education, business and medicine-making.
India is the second-largest English-speaking country in the world after the US .
India has positioned itself as one of the leading global pharmaceutical players. It not only offers lower cost manufacturing solutions, but
innovation through R&D. Process development, drug discovery support services, chemical synthesis and clinical trials are some of the
areas which are being outsourced by global pharmaceutical companies. Custom manufacturing of API’s and intermediates presents the
biggest opportunity for Indian companies in the CRAM’s sector. India now has the highest number of FDA approved plants outside the US.
High costs, margin and pricing pressures faced by global pharma companies can be mitigated by outsourcing their manufacturing to India.
Indian companies which maintain global quality, intellectual property and environment, health and safety standards could become preferred
suppliers to Big Pharma companies. That being said, India is emerging as the preferred destination and a hub for outsourcing across the
entire value chain from drug discovery to drug product manufacturing”
Sameer Hiremath
Deputy Managing Director
Hikal Ltd.

India’s forte its technical capability…
India rank: 1
India is ranked the highest in terms of technical capability with almost all the respondents rating it as “Above average” or “Excellent”.
The key reason for its strong technical capability is its strong manufacturing base.
Technical capability attractiveness
India Amost all the respondents

have rated India as either
Ireland above average(83%) or
Singapore excellent(8%)
Eastern Europe
Puerto Rico
China
0% 20% 40% 60% 80% 100%

Currently India accounts for 8% of global pharmaceutical production, making it the world’s fourth-largest pharmaceutical producer1.
Its prowess is in API, where it is the third-largest player worldwide with 500 different APIs, and in formulations where it manufactures
60,000 packs across 60 therapy areas.2
Most large Indian pharma companies are vertically integrated.

In India, companies have adopted a vertically integrated model
USFDA-approved plants
to become more competitive in the price-competitive Indian
market.This advantage has been leveraged by some leading 119
120
outsourcing players who offer end-to-end services across
development and manufacturing in formulations and APIs,
unlike western CMOs which generally have a presence in either
formulations or APIs, but not in both. 80
55
India has the highest number of US FDA approved
plants outside the US 40 27 25
India has the around 119 USFDA plants in addition to around
3
10 8 5
844 UK MHRA approved plants Many of these plants also have
0
approvals from countries such as Canada, Australia, Germany
India Italy China Spain Taiwan Israel Hungary
and South Africa. These approved sites aptly demonstrate the
ability of Indian companies to deliver quality products worldwide Source: Indian Pharma CRAMS, July 2008
and act as a platform for CRAMs players. Note: * Ministry of Commerce and Industry, Department of Commerce, Govern-
ment of India - Strategy for Increasing Exports
Sources:
1.Report of the Working Group on Drugs and Pharmaceutical s for the Eleventh Five Year Plan (2007 – 2012)Planning Commission Report, Planning commission
of India
2.Strategy for increasing exports of pharmaceutical products , Department of Commerce GOI , December 2008
3.Ministry of Commerce and Industry, Department of Commerce, Government of India - Strategy for Increasing Exports of Pharmaceutical Products, December 12, 2008
4.UK MHRA , March 2008
54 Taking wings
… reflected in large number of filings in the US and
increasing exports
India accounts for one-third of the DMFs in the US and has filed the largest number of ANDAs from any other country apart from
the US.
Indian companies have been active in filing DMFs in the US since 2000 and had a 36% share of the total filings in 2007. Between 2000
and 2007, India filed 1,155 DMFs with the US FDA, a much larger number as compared to countries such as China, Italy and Japan
during the same period.
Cumulative DMF filings India’s share in total ANDA approvals

DMF filings % share ANDA filings % share
1400 40% 160 35%
34% 30%
1200 35% 140 30%
27%
30% 120
1000 25%
25% 100 20%
800 1155 136 20%
20% 80
600 14%
125 15%
15% 60
400 10% 9% 72
8% 10% 7% 7% 10%
40 6%
200 329 4% 4% 49 5%
268 2% 51 5% 20 21 24 26
142 131 66 1.5% 14
0 0% 0 0%
India China Italy Japan Spain France Mexico 2001 2002 2003 2004 2005 2006 2007 2008
DMF filings % Share in total DMF filing Total ANDA approvals % share
Source: Reliance Money, Indian Pharma CRAMS, The Imminent CRAMs opportunity Source: Reliance Money, Business Standard, March 6 2009
Filing such a large number of DMFs and ANDAs has also helped India to develop technology transfer capabilities essential for custom
manufacturing players.
Resulting in a growth of exports by 24% over 2004–2008

Further, rising exports in formulations and bulk drug production, especially to regulated markets, indicate the high quality of
manufacturing capabilities in India.
Exports of formulations and bulk drugs Country name Export share%
USA 19.1
USDb
8 Germany 4.7
Russia 4.7
6
2 0% 3.3 UK 3.7
R
C AG China 2.8
4 %
26 Brazil 2.6
GR
CA Canada 2.5
1.6
2 4.1
South Africa 2.2
1.6
0 Nigeria 2.2
2004 2008 Spain 1.7
Formulations API
Source: Strategy for Increasing Exports of Pharmaceutical Products,

Report of the Task Force, December 2008, Ernst & Young analysis

Continuous building of capabilities by Indian companies
in emerging areas with support from the government
Increasing capability in bio-similars Segment Potential (2010)1

Currently, India has 200 companies working in the area of Biopharmaceuticals USD2b
biotechnology with an emphasis on vaccines and bio-services. Bio-services USD1b
There are over a 100 national research centers in the country outsourced research services)
that support these activities.
India has identified the need to augment its capabilities in oncology and biologics…
Oncology is the largest and one of the fastest growing therapy areas in the country and also has the highest number of active INDs;
biologics is not far behind and has the third-highest number of active INDs present in the pipeline. India has nascent capability in these
areas currently since they require higher investment and highly specialized technology.
…and has taken several initiatives to build its capabilities in this area.
Governmental measures1
• The government is in the process of setting up five biotechnology parks in India to promote upcoming biotech companies.1
• The Department of Biotechnology has set up 35 facilities between 2002–2007 to produce and supply biologicals, reagents,
culture collections and experimental animals to scientists, industries and students at a nominal cost.2
• A National Biotechnology Regulatory Authority will be set up to provide a single window clearance mechanism for all
biotechnology products.
• International collaboration to assist in the transfer of knowledge between various countries is on the anvil. India has tied up with
Denmark, Finland, France, UK, US, Switzerland and the Netherlands to achieve this.
• Enabling public institutions to work with the industry: Public-funded R&D companies will be allowed to set up “not for profit”
companies to facilitate collaboration with the industry. Scientists can pursue innovative projects for a defined period on a user
charge basis, providing access to centralized equipment and scientific consultation.
Sources:
1.Department of Biotechnology
2.Report on the working group for the Eleventh Five Year Plan ( 2007 – 2012 ) Department of Biotechnology
56 Taking wings
India’s proximity to emerging markets likely to impact
its current ratings positively
Proximity to market attractiveness
Ireland
Eastern Europe
Puerto Rico
Singapore Around 27% of the
respondents have rated
India India as above average;
China 55% have rated it as average
0% 20% 40% 60% 80% 100%

According to the survey, countries that are in the western hemisphere rate higher than Asian countries in terms of their proximity to
market. This is due to the fact that western countries contribute almost 72%1 of the global market today.
However, according to IMS estimates, the growth in the North American and European markets will slow down to -1–2%1 and 3-6%1,
respectively, over 2008–2013 period. On the other hand, Asia, Africa and Australia will grow at the rate of 11–14%1. This market
is playing an increasingly big role in Big Pharma strategy and is therefore expected to increase the “proximity to market“ rating
for India.
Potential growth by region

100%
7 7 8 10 11
80% 3 3 3 3 4 Asia/Africa/Australia has the
highest share of the market growth
60% 13 14 17 19 21
Growth in Asia/Africa/Australia
40% is three times that of the US in
15 16 absolute terms
17 18 19
20%
6 6 6 7 7
0%
2009 2010 2011 2012 2013
North America Europe Asia/Africa/Australia Japan Latin America
Source: Ernst & Young analysis, IMS Health Prognosis March 2009
Note : The growth has been calculated based on the best case IMS estimates of CAGR by region over 2008-13
Source: 1.IMS Health Market Prognosis, March 2009, Ernst & Young analysis

Shifting of clinical trials to emerging markets likely to
positively impact India’s ranking in clinical trial supply
outsourcing
More clinical trials moving to emerging markets will increase India’s proximity to the market…
trends in clinical trial globalization Growth in clinical trial studies (CAGR: 2004–2008)
5
100%
9 12 13 19
9 25 29
10
75% 11 40% 39% 38% 31% 28% 24% 23% 18% 17% 17% 10% 14%
13
14
50%
86 80 77 70
62 57
25%
0%
1997 1999 2001 2003 2005 2007
Korea
China
Romania
India
Philippines
Hungary
Russia
Poland
Brazil
Taiwan
Australia
Global
US Western Europe Rest of world
Source: Tufts CSDD analysis of BMIS Source: www.clinicaltrials.gov
… especially in the case of Phase III trials, where India is growing almost seven times the global average of 5% CAGR between 2004-2008
No. of Phase III trials started in 2008

CAGR –
14% 12% 24% 35% 22% 20% 45% 39% 28% 39% 22%
2004 to 2008
160
140
120
100
80
60
40
20
0
Poland
Australia
Russia
India
Brazil
Hungary
Korea
Romania
Taiwan
China
Philippines
Source: www.clinicaltrials.gov
58 Taking wings
India’s improved project management capabilities and
responsiveness to customer requirements
India rank: 3
Response time attractiveness
Singapore
Ireland
China India as above average
Eastern Europe or better
Puerto Rico
0% 20% 40% 60% 80% 100%

Although most respondents have rated India as above average on both these parameters, it is still rated behind Singapore and Ireland.
One of the keys to improve responsiveness and project management is to ensure a reliable supply of raw materials.
India rank: 3
Project management attractiveness
Singapore
Ireland
Eastern Europe India as above average
Puerto Rico or excellent.
China
0% 20% 40% 60% 80% 100%

This requires a strategic perspective toward sourcing of raw material rather than a tactical approach. Indian companies are looking at
identifying multiple vendors for critical raw materials, to conduct vendor audits and establish a long-term relationship with selected
vendors to assure their customers about supplies.
“In terms of strengths, I can think of the fact that India does have a strong pool of talent in the project management function courtesy the
highly successful service industry that exists in the nation. CRAMS is a service industry where the products we sell are only incidental
These are aspects in which many companies need to move several steps towards attaining maturity
1. Project management still needs recognition as a separate line function and it cannot be a time share for R&D folks.
2. While it is a science and technology oriented business, leaving project management with R&D which as a function has too much emotional
attachment to the science leads to risk of loosing business focus
3. Project management as earlier mentioned needs to be recognized as a full time line function and it needs autonomy by means of a direct
top management sponsorship. It needs to function almost like QA when it comes to autonomy lest the organization looses the customer
focus
4. Project management is a techno commercial role at best and NOT a technical role
5. Much needs to be done in terms of attaining cross industry learning from an industry like IT where India has excelled in the recent past.
Project management operates exactly to the above principles
Senior Executive,
Large Indian Service Provider

Global CMOs attracted to set up bases or collaborate
with Indian companies
These capabilities have attracted western CMOs to work in India.
• Lonza is planning to set up a base in India with an investment of USD150m in Hyderabad, which will be engaged in
biopharmaceutical manufacturing.1
• Patheon has a strategic tie-up with Kemwell (a provider of formulation contracts, manufacturing and development services in
India). The alliance will enable both Patheon and Kemwell to market each others’ services to their clients.2
• Albany Molecular Research Institute (AMRI) has followed up its push into new markets for its drug discovery operations by acquiring
the assets of Ariane Orgachem & Ferico Laboratories.2
Sources
1.Fierce Biotech, 22 May 2009,
2.Outsourcing-pharma.com
60 Taking wings
In spite of cost value proposition offered by Indian
companies, IP risk perception limiting growth
IP protection attractiveness
Singapore
Ireland
Puerto Rico
Around 33% of the
Eastern Europe respondents have rated
67% have rated it as
China average
0% 20% 40% 60% 80% 100%
Outsourcing players still perceive IP risk in India …

According to the survey, India is rated fifth in terms of perception of IP protection.While, it has implemented the WHO –TRIPS patent
regime, companies still perceive a risk on protection of their IP in the country. As a result, many companies are still reluctant to
outsource certain parts of their value chain to India, especially in the area of formulations of patented products in the growth phase.
In its Special 301 Submission for 2009, Pharmaceutical Research and Manufacturers of America (PhRMA) recommended that India
remains a Priority Watch List country and that the US Government conducts an Out-of-Cycle Review of the deteriorating IP regime in
the country.
Key areas of concern: data protection and exclusivity1,2

Currently there are no provisions in Indian laws regarding whether the data collected from clinical trials can be used by the Drug
Controller General of India ( DCGI ) in its approval procedures for other drugs. The data protection law will ensure that although the
government can approve a generic drug that can claim bioequivalence by using this data, it cannot disclose this data to any third
party. The concern of the innovator companies is that in the absence of such a law, the data they provide may be shared with other
companies, leading to its commercial usage by other companies.
In addition, there is a debate whether data exclusivity laws need to be enacted in India . Data exclusivity laws would ensure that the
regulatory authority will not be permitted to use the data submitted during clinical trials to approve a generic drug till the end of this
exclusivity period. This may result in the protection of the innovator product for a period over its 20-year patent life. For example, if
a product is introduced in the market in the 18th of its 20-year patent life, and if the country has a five-year data exclusivity law, this
would effectively extend patent protection to 23 years.
Sources:
1.India: Ministry of Commerce and Industry, Strategy for Increasing exports of pharmaceutical products December 2008
2.India: Data Exclusivity, Anand and Anand

Launch of patented products in India — an indication of
waning IP risk
Although there are concerns on data protection and data exclusivity, companies have launched “on
patent products” in Indian markets, which shows that IP risk perception about the country might
be waning.
Company name On-patent brands launched in India

Pfizer Vfend, Viagra, Lyrica, Caduet, Genotropin, Macugen, Champix
GSK Windia, Coreg, Arixtra, Flutivate – E , Boostrix, Infranix, Tykerb
Roche Tamiflu, Avastin, Tarceva, Pegasys
Sanofi Aventis Aprovel, Stilnox
MSD Lescol XL, Lucentis
Novartis Gardasil, Januvia
Source: CrisInfac, Ernst & Young analysis
62 Taking wings
Different models adopted by Indian players to mitigate
risk perception
The IP risk perception for Big Pharma is increasing due to the Para IV filing strategy of Indian generic players. As a result, Big Pharma
is reluctant to outsource products under patent to Indian companies that have a Para IV filing generic strategy.
Indian players use different strategies to mitigate the perception of Big Pharma:
• Companies have clearly defined their generic policy of not filing Para IV products and have a non-competing policy with the Big
Pharma, e.g., Piramal Healthcare.
• Companies that only work in the API space and have not entered the formulations space, e.g., Divis Labs and
Dishman Pharmaceuticals.
• Companies interested in generics have also established separate organizations that are independent from the parent organization,
to prevent any conflict of interests, e.g., Biocon-Syngene.
• Companies file Para IV but work predominantly with biotech companies in the US and Europe for whom the risk of Para IV filing is
low, e.g., Dr Reddy’s Labs.

Need for India to improve regulatory timelines
Regulatory environment attractiveness
Singapore
Ireland
Puerto Rico Around 9% of the
India India as excellent while
Eastern Europe 45% have rated it as
above average
China
0% 20% 40% 60% 80% 100%

India fares better than Eastern Europe and China in terms of the regulatory environment, but it is an area of improvement as
compared to western countries.India has regulatory approvals and processes which take anywhere from 8–12 weeks and involves
import licenses (NOC from DCGI), manufacturing licenses, a Certificate of a Pharmaceutical Product (CoPP) and a Certificate of
Origin (CoI).
However, initiatives are in progress to change the regulatory scenario in India. One of these initiatives has been the move from the
decentralized approach to drug control to a single Central Drug Authority (CDA)* on the lines of the US FDA.
Current regulatory scenario Future scenario
Central authorities State authorities Central authority
• Laying down standards for drugs, cosmetics, • Licensing of drug manufacturing and sales • Modeling autonomous on lines of the US FDA
diagnostics and devices establishments • Separating divisions for regulatory oversight
• Regulating market authorizations • Approving drug formulations for of clinical trials, new drugs, medical devices,
• Regulating clinical research manufacture GMP, DCGI
• Regulating standards of drug imports • Monitoring quality of drugs and cosmetics • Granting manufacturing licenses
• Testing of drugs by central labs manufactured in a particular state and sold
• Monitoring adverse drug reactions in that state
• Approving licenses to manufacture • Investigating and prosecuting contravention
parenterals and vaccines of legal provisions
• Recalling substandard drugs
• Conducting pre- and post- licensing
inspection Five years to transition completely
Source: CDSCO
Note: * Bill under consideration in Parliament
64 Taking wings
A number of initiatives being taken to improve the
efficiency and speed of the regulatory process and
the infrastructure
Some of the other steps being taken, which will help to improve the regulatory environment, are listed as in table below.
Initiative Measures by the government

Implementation of the Common Technical Document (CTD )format
for biological and qualification of National Regulatory Authority (NRA)
assessment by WHO and introduction of CTD format for New Chemical
Entity (NCE)1
Single window clearance for all approvals from regulators — currently, six
departments are involved at various stages of the approval cycle.1
The DCGI proposes to have a fast track process for license applications for
SEZ-based units, which either have a NCE under clinical development or a
molecule under patent for which a value addition is required.3
• As part of this process, in the case of exports of services, a separate NOC

manufacture and NOC export might not be needed.
Streamlining and reducing timeframe for approvals • In the case of export of physical material, if both NOC manufacture
and export are submitted, the timelines for granting the licenses are
proposed to be two weeks ( 10 working days ).3
Recruitment drive to increase manpower (200 drug inspectors4) and shift to
new location to improve operations to meet timelines1
e-Governance initiatives under progress to include online submission
of all forms, a digitized interactive portal, digitalization of records and
online approvals1
Only the central drug authority will have the right to issue the export quality
Certificate of Pharmaceutical Product (COPP). This will be issued in the WHO
GMP format2 and will help to remove the inconsistencies seen in the COPPs
earlier awarded by different state authorities.
A separate dedicated temperature and atmosphere-controlled area to
maintain the safety, efficacy and quality of imported and export drugs/
pharma products at airporst and sea ports, known as “Pharmazones” — this
Infrastructure support
facility will be in line with product requirements and GMP compliance and
will also have a mini-lab, e.g., the international airports at Delhi, Hyderabad
and Mumbai.
Sources:
1.CDSCO Initiatives 2008-12
2.“Is India evolving to support global drug development ?” Anthony Woodman and Suresh Gupta
3.DCGI
4.Business Line , Drug regulator to get more inspectors , 19 July 2009
We are streamlining the regulatory approval pathway to facilitate development of New Chemical Entities (NCE) to make India a global
destination for drug discovery & development.
Dr. Surinder Singh
Drug Controller General of India
Ministry of Health and Family Welfare

Focus on regulatory capability building and enhancement
of EHS compliance culture
Initiative Measures by the government

• MOU with USFDA
• Collaboration in clinical practices, biological drugs, pharmacovigilance, medical devices, IT
• MOUs with WHO, Health Canada, ANVISA, South Africa, EMEA

Capability building
• Setting up of US FDA office in India
• Training and workshops with USFDA on GCP, clinical research inspection, pharmacovigilance
• Proposal to set up a national biotechnology regulatory authority

Source: “Is India evolving to support global drug development ?” Anthony Woodman and Suresh Gupta
EHS compliance attractiveness
Ireland
Singapore
Puerto Rico
Eastern Europe Around 17% of the
China
average
0% 20% 40% 60% 80% 100%
According to the respondents, only 17% of them perceive that EHS standards in India are above average.
The Ministry of Chemical and Fertilizers has created an “Environment Cell” to improve the standards of EHS in India Department of
Pharmaceuticals ( DOP). The primary objective of the cell will be to collect knowledge and compile data on the latest technologies
available for effluent treatment and disaster management and disseminate information in the pharmaceutical industry.1
Source: 1.“Is India evolving to support global drug development ?” Anthony Woodman and Suresh Gupta
66 Taking wings
Government taking steps to enhance capacity and
capability to support physical infrastructure …
To tap this opportunity, India will need to augment its infrastructure. It is currently ranked as the lowest among these six countries in
terms of infrastructure.
Infrastructure attractiveness
Singapore
Ireland
Puerto Rico
Around 17% of the
China
Eastern Europe India as above average;
India average
0% 20% 40% 60% 80% 100%
Particulars US UK India China

Electric consumption per capita (KwH) 14,240 6,756 618 1,684
Steel consumption per capita (Kg) 357 195 34 244
Rail route per mn people (Km) 755 276 56 57
Cargo handled at ports per capita (Kg) 7,953 9,733 572 4,265
No. of passengers handled at airports 4,780 3,517 71 151
per 1,000 persons
Source: Published media, Global Research
The government is responding by increasing its outlay for infrastructure development.

With a view to accelerate infrastructure development in the country, the Government of India has planned an estimated capital outlay
of USD530b* over the 11th Five Year Plan. This will constitute 9.2% of its GDP by 2011–12 as against 5.6 in 2006 –07.
Investment in infrastructure sector Infrastructure spending as % of GDP

in 10th & 11th plan (USDb)
530
9.2%
8.1%
171% 7.2%
6.5%
5.6% 5.9%
195
10th plan 11th plan 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
2002-03 to 2006-07 2007-08 to 2011-12
Source: Planning commission, Global research Source: Planning commission, Global research
Note * : INR45 = USD1

…and setting up special economic zones to improve the
fiscal benefits provided to companies
Tax incentive attractiveness
Ireland
Puerto Rico
Singapore
China Only 11% of the
Eastern Europe respondents felt that
India offered above
India average tax incentives
0% 20% 40% 60% 80% 100%

Although Indian companies are highly cost competitive, some of this advantage is offset by the tax incentives provided to companies in
the country as compared to other countries. This is especially true for the high corporate tax levied on Indian companies.
Countries Corporate Income Tax rate

Ireland 12.5%1
Puerto Rico 4%1b
Singapore 18%1
China (Peoples Republic of China) 25%1
Eastern Europe (Poland, Romania, Hungary) 16–19%1
India 33.99%1*
Big pharma companies have been optimizing their tax benefits by sourcing APIs and intermediates from emerging markets such as
India and China till the N-2 stage and then moving the final production of APIs and/or formulations to countries such as Puerto Rico
and Ireland. To negate this, CMOs in India have set up operations in Special Economic Zones ( SEZs ), which provide direct and indirect
tax incentives.
SEZ advantages in India

Direct tax • 15-year tax holiday with 100% for five years, 50% for the next five years, 50%a for the last five years
• Custom duty exemption on goods imported for authorized operations in SEZs and exported to any place
Indirect tax outside India
• Exemption from service tax on taxable services procured by SEZ developer for authorized operations
Note [a] Subject to the extent of profits ploughed back and transferred to SEZ Re-investment Reserve Account to be utilized for the purpose of capacity expansion
Source: 1.Ernst & Young, 2009 Worldwide Tax Guide. The tax rates are for an indicative purpose only
Note [*] Includes education cess and surcharge
Note [b] Flat tax on IDI derived by companies that obtain exemption grants — tax rates differ depending on zone of development
68 Taking wings
Big Pharma using India as an offshore and outsourced
location due to these factors
Sponsors
MNC pharma — Big Pharma, medium and small pharma and biotech
Offshoring Outsourcing
Traditionally, India has been considered an ideal geography for sourcing of APIs/intermediates and formulations for generic and off-
patent products. However, in recent years, both Big Pharma and biotech companies have increasingly moved toward sourcing APIs/
intermediates and formulations across the pharma life cycle from India. Big Pharma companies such as Pfizer, GSK, Eli Lilly, BMS and
AstraZeneca have mainly adopted the outsourcing route. However, there are instances such as Nycomed and Zydus Cadila that have
established partnerships.
Company Offshoring Outsourced Company APIs and Formulations

Pfizer √ intermediates
Eli Lilly √ Pfizer √ √
AstraZeneca √ Eli Lilly √ √
Novartis √ AstraZeneca √
Sanofi Aventis √ √ Novartis √
GSK √ GSK √
Wyeth √ Merck √
Schering Plough √
 Nycomed √
Abbott √
 Allergan √
Merck √ √ Solvay √
Source: Annual reports, Ernst & Young analysis
BMS √
 √
Nycomed √
Solvay √
Allergan √
Source: Annual reports, Ernst & Young analysis
Note : Offshoring defines that the company uses India as a base for other markets and is a substantial part of its exports as available in the Annual Report.

India well poised to become strategic partner of choice
in arena of contract manufacturing due to its cost
value proposition
Although India is already established as a low-cost

manufacturing base with significant technical and manpower
capability driving its growth, it is important to realize that
countries such as China are also investing in capability and • Create better infrastructure
• Build capability in biologics
will pose a threat to India’s position in the medium/long term.
Infrastructure, a culture of quality and EHS and niche technology
capabilities, e.g., biologics, cytotoxics and lyophilization, are
areas India needs to immediately ramp-up to stay ahead of the
• Improve EHS standards
curve and assume the leadership position, thereby transitioning • Shorten regulatory
from a vendor of choice to a strategic partner. timelines
• Change perception about IP
protection in India
• Enhance cytotoxic and
lyophilization capabilities
• Instill quality culture
Short – medium (<3 years) Medium – long (3–6 years)
Time period
We need to understand that it is not enough to have advantages of

1. Infrastructure (USFDA approved plants)
2. Cost
We need to have a mindset of quality both in results and in process.
Deepak Naik
Managing Director,
Eisai, India India has made tremendous progress of the past 10 years as a key component of the Pharma supply
chain in terms of Plant, Infrastructure, technical competence, Quality and EHS capability. However this
has introduced greater complexity and potential risk to the supply chain from a European and American
perspective. To address this, the next key challenge facing India over the next few years is the need to
focus on Logistics, transport infrastructure and supply chain management. - it goes without saying that
this needs to be achieved without India losing its competitive edge.
Senior Executive based in Europe
Global Big Pharma
70 Taking wings
Section 3: Drug discovery and development services
72 Taking wings
Section 3
3.1 The global drug discovery and development market is valued at USD49b.
The outsourcing market is valued at USD18b, i.e., ~37% of the total pie, and
is growing at 17% p.a. India is emerging as a hot spot n drug discovery and
development outsourcing, growing at ~ 65%, i.e., at more than three-and-
half times the global growth rate.
3.2 India’s pharmaceutical outsourcing landscape is well positioned to provide
services in the area of late stage discovery (research chemistry) and drug
development services. The country has recognised the need to develop
its early stage discovery (research biology) capabilities and has begun
investing in this area.

Section 3
3.1 The global drug discovery and development
market is valued at USD49b. The outsourcing
market is valued at USD18b, i.e. ~37% of the
total pie, and is growing at 17% p.a. In drug
discovery and development outsourcing, India
is emerging as a hot spot, growing at ~ 65%,
i.e., more than three-and-half times the global
growth rate.
74 Taking wings
Drug discovery and development outsourcing — contract
research — spanning target identification through lead
optimization and clinical Phase Trial IIa
Drug discovery and development outsourcing across pharma value chain
Launch
Lead molecule
identified Expiry
On-patent On-patent
growing mature
research
biology Clinc. I IIa IIb III
& chemistry
Drug discovery and development outsourcing, also known as contract research, spans target
identification and lead optimization to Clinical Trial IIa.
Drug discovery Drug development
Research chemistry Pre-clinical to clinical trial

Research biology
Phase II a
Target Compound generation, Process chemistry

identification Lead identification development
Target validation Analytical method

Screening development and validation
Solubility, stability and

Lead optimization
other studies
ADME, toxicology, Pre-formulation and

in vitro – in-vivo PK formulation development
Clinical APIs and

formulation manufacturing
Scaling up from micrograms

to grams and kilograms

Global drug discovery and development outsourcing
market valued at USD18b and growing at 17% annually
Global drug discovery and development outsourcing market – size and growth
Share of outsourcing in global pharma R&D spend Global drug discovery and development outsourcing market –
size and growth
25
17%
Drug discovery
20
and development
USD49b* • Drug discovery and 17
15 14
development accounts 12
for 38% of total R&D 10 10
Out- Global pharma • ~ 37% of total drug
sourced R&D spend discovery and 5 8
5 6 7
USD18b USD129b development is
0
outsourced 2007 2008 2009P 2010P
Drug discovery Development
Source:
• India Pharmaceuticals In-Depth – Global Outsourcing – Best Ideas,
Morgan Stanley report, 2007
*Note: excluding clinical trials • Kalorama Information, Outsourcing in drug discovery, 2008
Source: • State of the Pharmaceutical Outsourcing Industry, 2007, Jim Miller,
• Goldman Sachs, 2006 President, PharmSource
• CMR International 2008 Pharmaceutical R&D Factbook • Ernst & Young analysis
• Ernst and Young analysis
India’s drug discovery and development outsourcing market is valued at USD0.6b and is growing at ~65% p.a.
The Indian drug discovery and development outsourcing market – size and growth
India’s share in global drug discovery and development Indian drug discovery and development outsourcing market –
outsourcing market size and growth
1.5
1.5
65%
1 0.9
Global drug
discovery and 0.6
India accounts for ~3% of 0.5 0.3
development
India global drug discovery and
outsourcing
(USD0.6b)* development outsourcing
market USD18b
0
2007E 2008E 2009P 2010P
Source: : India Pharmaceuticals In-Depth – Global Outsourcing – Best Ideas,

Morgan Stanley Report, 2007, Ernst & Young analysis
*Note: excluding clinical trials

Source: India Pharmaceuticals In-Depth – Global Outsourcing – Best Ideas,
Morgan Stanley Report, 2007, Ernst & Young analysis
76 Taking wings
Section 3
3.2 India’s pharmaceutical outsourcing
landscape is well positioned to provide
services in the area of late stage discovery
(research chemistry) and drug development
services. The country has recognized the
need to develop its early stage discovery
(research biology) capabilities and has
begun investing in this area.
Our vision is to catapult India into top five pharma discovery and innovation hubs by 2020 with a significant number of drugs discovered
worldwide by 2020 coming from India. We want to position India as the destination of choice for global pharmaceutical R&D.
In pursuit of this vision, we are working towards a novel and major initiative through a public-private-partnership to harness India’s
innovation capacity. We are planning focused action aimed at building world-class infrastructure for talent and research; encouraging
public-private-partnership in infrastructure development for discovery research and clinical research; offering public private financial
instruments to encourage and incubate innovation; and shaping a favorable growth supportive environment. These efforts will be directed
towards reaping social and economic benefits including creation of approximately 500,000 new jobs employing pharmaceutical scientists,
researchers and technicians and finding cost effective cures for diseases endemic in India and elsewhere in addition to many more
opportunities for indirect employment. The contribution of the pharma industry to the Indian GDP needs to be targeted to increase by
about USD20b in 2020. This would include worldwide sales generated by new drugs discovered in India, those developed through off-shore
partnerships, as well as drug discovery and innovation by companies and organizations overseas who locate their research projects in India
to take advantage of world class research infrastructure, rich talent and human resource and competitive cost advantage emanating from
our efforts under this proposed vision.
Ashok Kumar
Secretary, Government of India,
Ministry of Chemicals & Fertilizers,
Department of Pharmaceuticals

Capabilities required across value chain according to
their influence
Drug discovery Drug development
Pre-clinical to clinical trial

Research biology Research chemistry
Phase II a
Speed of delivery
As the drug candidate moves from discovery research to development, the importance of speed of delivery becomes more important as a delay of
even a few days can jeopardize millions of dollars in potential revenues.
Flexibility
Financial crises, high rate of failure of drugs in development stages, changing market dynamics – all create an environment of uncertainty where
customers value the ability to scale up/down or focus/de-focus in certain areas as and when needed.
Integrated capabilities
Integrated capabilities, demonstrated by a one-stop shop offering end-to-end services right from research biology to chemistry, scale up from
laboratory to pilot plants across API as well as formulations are of paramount importance.
Cost value proposition
The margins of pharma companies are dwindling due to increasing genericization and rising R&D costs. With this background, one of the key
themes of outsourcing is cost saving with no compromise on quality.
Innovation
Innovation is the ability to deliver new value to the customer in a non-deterministic environment. As the drug candidate moves from discovery
research to development, where both expectations and activities become more deterministic, operational excellence takes the place of innovation.
Process safety
Degree of influence Implementation of a high level of safety standards are of paramount

importance since the development of new drugs involves new reactions/
Low High chemicals, whose effect on the safety of people, equipment and facilities
are not completely known.
Critical parameters would be to maintain the competitive edge in terms of cost and timelines, quality being a given. It is imperative to
anticipate all major milestones, including the regulatory process, in one go, reflect those in a reasonable manner in the timelines and then
adhere to those timelines.
Mukund Ranade
Director
Emcure Pharmaceuticals Ltd.
78 Taking wings
India’s strengths — drug development and research
chemistry
A view of how India measures against the key evaluation criteria for outsourcing decisions
The analysis is based on the Ernst & Young–OPPI survey and interviews conducted with 25 respondents across 10 big and mid-tier
global pharma companies and Indian suppliers. The respondents were from research and development teams, sourcing teams and
included senior executives spread across Europe, US and Asia.
Evaluation criteria Drug discovery Development

Research biology Research chemistry
Speed of delivery L M-H M-H
Flexibility L-M M-H M-H
Capability L M H
Cost value proposition L-M M-H H
Innovation L L L
Process safety NA NA L
Capability rating: H = High, M = Medium, L = Low
India offers a unique cost value proposition in drug development and

research chemistry, supported by process, analytical and research
chemistry, a large talent pool and GLP-compliant facilities.
Process, analytical
and
research chemistry
Cost value
India advantage Talent pool
proposition
GLP-compliant
R&D facilities

India’s technical capabilities — development, research
chemistry…
India has strong capabilities in process and analytical chemistry…

• India has developed strong process chemistry capabilities ranging across a wide range of reaction types spanning old
technology-based chemistry, complex and hazardous chemistry and high-end reactions.
• India has strong analytical chemistry capabilities, e.g., method validation and transfer, solubility, flowability and
compressibility studies.
• India has strong process development and scale up capabilities for clinical APIs and formulation manufacturing of solids,
semi-solids and liquids and are growing for powders (lyophilization) and parenterals.
Reaction type High end Hazardous Complex chemistry Old technology

Existing capability • Chloroalkylation • Sulphonation • Oxidation • Benzoylation
• Cyanation • Dealkylation
• Methylation
Emerging capability • Ring chlorination • Nitration • Grignard
• Catalytic • Cytotoxics • Chiral

hydrogenation
• Pyridines
Source: Ernst & Young research
…which has helped it to build its capability in research chemistry.

India’s R&D legacy has been focused on the development of generics for western markets, which involved developing non-infringing
process- and cost-effective routes. It has been able to leverage this capability in research chemistry, especially in the areas of
medicinal chemistry, analytical chemistry and compound synthesis.
Capabilities Compound generation Screening Lead optimization

Existing capability • Analogue preparation • Compound synthesis • Medicinal chemistry
• Synthesis • Medium throughput

screening
• Analytical chemistry
Emerging capability • Drug design • Assay development • Assay execution
• Structural chemistry • Structure activity

relationships
Need to build capabilities • High throughput screening • Cell-based model for
(HTS) efficacy
Source: Ernst & Young research
India has strong process and analytical chemistry skills which India has strong capabilities in New Chemical Entity
have driven India’s capability to offer clinical development and (NCE) development. We are sourcing a several NCE
manufacturing of APIs and intermediates. India offers these services intermediates from India which go into manufacturing
during pre-clinical and clinical development at micrograms and grams of NCE molecules during clinical trials, from phase I to
level and can scale up to kilogram and several tons level. phase III.
Senior Executive based in India Senior Executive based in India
Global Big Pharma Global Big Pharma
80 Taking wings
…and pre-clinical services but needs to build research
biology skills
India has also developed pre-clinical services capabilities…

India has at least eight animal testing facilities (existing and under development) that are capable of using dogs as an animal model for
efficacy. These include Zydus Cadila (Gujarat), Advinus, Jubilant, Dr. Reddy’s Laboratories and Wockhardt. Two sites for a primate-
based animal model for efficacy are under construction1.
Source: 1.Industry sources
Reaction type Pharmacology PKDM Toxicology Animal models for efficacy

Existing capability • Safety • Bioanalysis • General • Rodents
• Efficacy • In Vitro ADME • Reproductive • Dogs
• In Vivo ADME • Genotoxicology
• Immunotoxicology
• Carcinogenicity
Emerging capability • Primates
Source: Report of the working group on drugs and pharmaceuticals for the 11 Five Year Plan (2007–2012), Planning Commission of India, 1 December 2006
th
…and is moving toward building research biology capabilities…

Traditionally, India’s focus area has been chemistry-based skills, which resulted in a limited focus on research biology capabilities.
However, it has realized the importance of basic biology capabilities and has begun building them.
Gene
Target identification Genetics Proteomics Chemoinformatics Bioinformatics
sequencing
Functional Protein Disease Genetically

Target validation Bioimaging
genomics biochemistry model modified mice
Existing capability Emerging capability Need to build capability
Source: Off shoring in the Pharmaceutical Industry: Mridula Pore, Yu Pu, Charles Cooney, Massachusetts Institute of Technology, Ernst & Young analysis
In drug discovery and early development, we are likely to see a major push to set up risk based collaborative programs. The great question
will be the ability to develop the biology and preclinical animal models to be effective. Also, we will need to look at novel ways to financing
these collaborations, as operating profits will be needed to funded revenue growth and the timelines for research are significantly
back ended.
Dr. Ranga Raju
Chairman and CEO
SaiAdvantium

Large and growing English-speaking pool of skilled and
experienced professionals offered by India
Growing pool of talent in the area of chemistry

India has a large number of science graduates and postgraduates (especially MSc chemistry), pharmacists and doctorates.
Segment Qualification (s)

Research chemistry • Doctorates in chemistry
Process chemistry • Post graduation and Graduation in chemistry
Analytical chemistry
• Post graduation, Graduation, Diploma in pharmacy
Growing pool of students enrolling in science Annual supply (2007–08)

courses
Phd. Science 1,500
It was estimated that India would have ~ 2.1 m students enrolled
Pharmacists
in (graduate +) science graduate courses in 2007–08. 50,000
(Graduate + post gradute)
Chemistry post graduates 150,000
Gross enrolment in higher education (Graduate+ )
for science course Science post graduates 400,000
In millions Science graduates 1,600,000
2.5
2.1
Source:
2 1.8 • Annual Report 2007-08, HRD Ministry
• Science Education in India : by Prof. G. Padmanaban), Report of the Committee
1.5 1.3 to Review the Pay Scales and Service Conditions of University and College
Teachers, 2008
1 • University development in India, basic facts and figures, University Grant
Commission, Government of India
• NCAER’s National Science Survey – 2004
0.5 • Industry sources and Ernst & Young analysis
0
1995 - 96 2003 - 04 2007 - 08
Source: University development in India, basic facts and figures,

University Grant Commission, Government of India
NCAER’s National Science Survey – 2004; Ernst & Young analysis
Patent expiries of blockbuster drugs, ballooning R&D costs together with low R&D productivity, more and more stringent regulatory
standards coupled with intense cost containment measures are exerting intense pressure on the bottom lines of the global pharmaceutical
companies. Such a scenario is increasing interests of these companies towards various ‘Business Processes Outsourcing’ initiatives such as
contract research and manufacturing services (CRAMS) to lower cost countries like India.
At the same time, many Indian pharmaceutical companies are engaging themselves in basic research and development either independently
or through various collaborative ventures.
To encourage innovation, OPPI has collaborated with two premier R&D focused institutes in India, National Institute of Pharmaceutical
Education & Research (NIPER) and Council of Scientific & Industrial Research (CSIR) through a public-private-partnership arrangement,
constituting Scientists and Young Scientists Awards at both the institutes. The winners will be awarded a cash Prize of INR1 lakh each, along
with a citation and trophy at the OPPI Annual General Meeting.
Tapan Ray
Director General
82 Taking wings
Existence of GLP-compliant R&D facilities in the country
but need for enhancement of existing level of speed,
flexibility and process safety
India has 48 GLP-approved process and analytical chemistry facilities…
Facility type No. of facilities

Toxicity studies 11
Mutagenicity studies 9
Analytical and clinical chemistry testing 8
Physical-chemical testing 7
Environmental toxicity studies on aquatic & terrestrial organisms 4
Residue studies 3
Studies on behavior in water, soil and air; bioaccumulation 2
Studies on natural enemies and predators 1
Studies on effects on mesocosms and natural ecosystems 1
Safety pharmacology and pharmacokinetic studies 1
Others (drug metabolism and pharmacokinetics [DMPK] and tissue distribution studies) 1
Source: Ministry of Commerce and Industry, Department of Commerce, Government of India - Strategy for Increasing Exports of
Pharmaceutical Products, 12 December 2008
India has more than 200 Department of Scientific and Industrial Research (DSIR)-approved in-house pharmaceutical R&D units,1 which
are eligible for all R&D related fiscal incentives.
Source: 1.Report of the working group on drugs and pharmaceuticals for the 11th Five Year Plan (2007-2012), Planning Commission of India, 1 December 2006
...but needs to enhance speed of delivery, flexibility and process safety standards to become a favorite
destination for drug development outsourcing.
Due to India’s legacy of process innovation, Indian players focus more on attaining process optimization, and consequently, miss
project deadlines sometimes. While process optimization is an important criteria, agility of response and flexibility to adapt to
customer needs matter the most in drug development. Further, in India, which is a generic market, drug development involves known
reactions and chemicals. This has resulted in inadequate attention being paid to the required safety and health standards in labs and
pilot plants.
Sourcing capabilities also directly influence the ability to provide timely and speedy delivery. Indian suppliers have a tactical approach
to sourcing as compared to the strategic approach required. There is a tendency to be more price-oriented rather than build long-term
contracts. Indian suppliers have recognized this need and have now begun exploring partnerships or setting up operations and offices
abroad to leverage strategic sourcing advantages.

Significant cost arbitrage offered by India for
development and research chemistry outsourcing
• In end-to-end research and development, India offers 61% cost savings vis-à-vis the US. Research chemistry and drug development
are stages where close to 85% of savings can be achieved.
Potential savings in outsourcing end-to-end research and development to India
Cost index
9 Total cost
24 savings
of 61%
100 27
39
Total R&D cost Research Research Development Total R&D cost

in the US biology chemistry cost in India
Source: Boston Analytics Research, An Introduction to the Indian Pharmaceutical Industry, October, 2007, Ernst & Young analysis
• India has a pool of trained resources with chemistry capability and pharmacists six times as large as that in the US at less than
1/10th the cost.1 The annual salary of a medicinal chemist in the US is around USD250,000, while in India it is around USD20,000.
Source: 1.CRAMS Sector Report – The India Advantage Story, Enam Securities, March, 2007
Relative indexed cost of skilled FTEs Annual salary comparison (medicinal chemist)
Cost index USD ‘000
250
100 250
100
80 200
95
60 150
70
40 100
20 50
7 20
0 0
US Germany Italy India US India
Source: CRISINFAC/Motilal Oswal Securities Report, 2006 Source: Report of the working group on drugs and pharmaceuticals for the 11th
Five Year Plan (2007–2012), Planning Commission of India, 1 December 2006
84 Taking wings
Indian players building presence across drug
development and research chemistry…
Indian players have capabilities across late stage drug discovery and development…
Company LI HS LO PCB SA AMDT PC&D AC ST

Acoris (100% √ √ √ √
subsidiary of Hikal)
Chembiotek √ √ √ √ √ √ √ √ √
Dishman √ √ √ √
Divi’s Laboratories √ √ √ √
Ltd.
Emcure √ √ √ √
GVK Biosciences √ √ √ √ √ √ √ √ √
Indus Biosciences √ √ √ √ √
(subsidiary of
CiVentiChem)
Jubilant Biosys & √ √ √ √ √
 √
 √
 √
 √

Chemsys
Kemwell √
 √
 √
 √

Piramal Healthcare √ √ √ √ √ √ √ √ √
Rubicon √ √ √ √
SaiAdvantium √ √ √ √ √ √ √ √ √
Suven Lifesciences √ √ √ √ √
Syngene √ √ √ √ √ √ √ √ √
Source: Ernst & Young research and analysis (based on company websites), Note: This is not an exhaustive list in terms of players or their capabilities
LI: Lead Identification AMDT: Analytical method development and transfer
HS: Hit screening PC&D: Process chemistry and development
LO: Lead optimisation AC: Analytical chemistry
PCB: Preclinical biology (PK/ADME) ST: Scale up and transfer
SA: Safety Assessment (in vitro/in vivo toxicology)

…and extending their business development and delivery
footprint across frontiers
Indian players are building global assets to move closer to customers…

In the case of drug development, customers, especially emerging biopharma/small biotech companies, prefer the geographical
proximity of their outsourcing partners. As 75% of the R&D pipeline is expected to come from these companies, Indian players have
realized the importance of moving closer to their customers to provide the latter much needed comfort.
Names of Indian players Acquisitions/Expansion Geographies

30% stake in IATRICa US
Biocon
Nobex Corporation US
Dishman Carbogen and Amcis Switzerland
Jubilant Target Research Associates US
Kemwell Pfizer’s Site in Uppsala Sweden
Billingham, UK
Avecia Limited Torcan, (Canada)
Piramal Healthcare Limited
Grangemouth (Scotland)
Pfizer’s facility in Morpeth Morpeth, UK
Shasun Rhodia (pharmaceutical custom synthesis business) France
Source: Ernst & Young research and analysis
….and forming alliances with global players in the drug development space
Kemwell, an India-based company providing contract research services in drug development, has formed an alliance with Patheon,
a leading global provider of contract dosage form development and manufacturing services. The alliance will enable them to market
each others’ services to their clients1.
Source: 1.www.outsourcing-pharma.com
86 Taking wings
Big Pharma companies and global outsourcing service
providers focusing on India for drug development and
research chemistry…
Global Big Pharma companies are attracted to India for chemistry-related work…
Big Pharma companies have been outsourcing to/collaborating with Indian companies right from lead identification and optimization
to clinical manufacturing (custom chemical synthesis and formulation development).
Company LI HS LO PCD CD
Eli Lilly √ √ √ √ √
Merck √ √ √ √ √
Forest Labs √ √
Amgen √ √
Astra Zeneca √ √ √ √
Wyeth √ √
Ortho McNeill Jannson, J&J √ √ √ √ √
Novo Nordisk √ √ √ √
BMS √ √ √ √ √
Glaxo Smith Kline √ √ √
Source: Ernst & Young research and analysis (based on company websites) Note: This is not an exhaustive list in terms of players or their capabilities
LI: Lead Identification HS: Hit screening LO: Lead optimisation PCD: Preclinical development CD: Clinical development
…and western drug development outsourcing service providers are setting up bases in India
• Lonza is planning to set up a base in India with an investment of USD150m at Hyderabad. The investment will be in two phases —
Phase I (from 2011 to 2013) will include development of R&D labs for over 100 resources and Phase II (from 2014 to 2015) will
include expanded manufacturing capabilities and additional R&D lab capacity for biologics with additional 200 resources1.
• Albany Molecular Research (AMRI) has followed up its push into new markets for its drug discovery operations by tapping into the
well-established trend to source contract pharmaceutical manufacturing from India. The company has acquired the assets of Ariane
Orgachem Pvt. Ltd. in Aurangabad and Ferico Laboratories Ltd. in Navi Mumbai.2.
Sources:
1.www.fiercebiotech.com
2.www.outsourcing-pharma.com

…and exploring various operating models
Sponsors
Global pharma – big pharma, medium and small pharma and biotech
Dedicated R&D
Captive (offshoring) Fee for services Collaborative/JV
unit in partnership
MNC pharma company sets MNC pharma company MNC pharma company MNC pharma company
up own drug discovery partners with an Indian pays a fixed fee for all the enters a risk-reward-
(R&D) center in India, outsourcing service services it avails from the sharing collaboration for
e.g., AstraZeneca provider to set up a service provider, e.g., drug discovery and
dedicated R&D unit, e.g., Eli Lilly development, e.g., Eli Lilly
Bristol-Myers Squibb
Captive (offshoring) Dedicated R&D unit in partnership

The captive offshoring model, which works in synchronization A dedicated R&D unit in partnership requires a higher degree
with the global R&D network, offers the unique advantage of a of co-ordination between the customer and vendor, resulting in
24x7 workforce and thereby increases the speed of delivery. better understanding of mutual expectations. Cost advantages
Further, control on the intellectual property is direct and hence still exist as manpower can be varied according to requirement.
more reliable than other models. However, costs may be much
higher vis-à-vis other models.
Fee for services Collaboration/JV

Traditionally, fee-for-services has been the most common type Collaboration and JV work on a risk-reward sharing model and
of customer-vendor relationship in the Indian drug discovery and is based on milestone success. The sponsor offers the lead
development outsourcing space. Fee-for-services is a fixed-term molecule to the service provider to develop it through clinical
association which leverages cost advantage. However, there trial phases. The service provider receives milestone payments
may be larger risks in terms of IP, communication gaps and and a certain percentage of sales after the commercial launch.
project timelines.
88 Taking wings
AstraZeneca case study — leveraging developing market
cost advantage by establishing captive R&D centers
AstraZeneca, the UK-based USD31b Big Pharma, is one of the first companies to use India as a base for carrying out its R&D work. It
has established two captive centers for carrying out research work in India.
• Captive R&D center: As early as 2003, it established a captive R&D facility at a cost of USD10m in Bangalore, with a view of
making it a Center of Excellence with a mandate to discover new chemical entities for the treatment of diseases of the developing
world. The facility is presently dedicated to finding a new therapy for tuberculosis that will act on drug-resistant diseases and
will reduce the complexity and/or duration of treatment. More than 80 scientists, including biotechnologists, pharmacologists
and medicinal chemists, work in the center. These scientists work closely with AstraZeneca’s Global R&D network, including the
infection research center in Boston, US, as well as with academic leaders in the field.
• Captive Process Research & Development centre ( PR&D ) : In March 2007, AstraZeneca opened a new PR&D laboratory in
Bangalore, India, to leverage India’s strength in process chemistry. It was the first time that AstraZeneca established a PR&D lab
outside UK or Sweden. This facility built at a cost of USD15m, covers 8000 square meters on a 14,200 square meter plot, and can
accommodate up to 75 process scientists. The successful delivery of global projects in terms of cost,quality and time has resulted
in the decision of expanding the PR&D, Bangalore, to 120 scientists by the end of 2010. The success can also be attributed to the
existence of suitable Indian vendors who have been able to meet the PR&D requirements of early intermediates as well as larger
amounts of later campaign material . This center was located close to the discovery R&D center to facilitate knowledge sharing and
reducing costs by optimizing use of shared resource.
According to David Brennan CEO AstraZeneca, the advantage of doing research in India, besides the cost advantage is, “We are
moving some of our work from Europe to India. We get high quality work from our people here. So, the cost is certainly a factor but it is
quality of work and the speed that we get here that are the primary drivers. Another advantage is getting a 24-hour cycle instead of our
old 12-hour cycle. You gain a day and that speeds things up. Besides, our people here have shown to our people in Europe that they are
highly skilled and can handle high quality work. We spend a billion dollars to get a drug to market, we have to look at fastest options.”1
The success of PR&D Bangalore in meeting the Global project needs in terms of quality cost and time while working with local vendors has
spawned interest among the other AZ global departments with outsourcing needs to look at India as a potential destination for outsourcing
Senior Executive based in India,
AstraZeneca India Ltd.
Source: 1.Business world

Bristol-Myers Squibb case study – driving R&D through
strategic collaborations
Collaborating globally for strategic advantage: The facility can accommodate 450 researchers. Currently, there
are 300 researchers employed in it and the number is expected
Bristol-Myers Squibb, with an R&D spend of 17%, is amongst
to reach to 360 by the end of 20092.
the world’s top five drug companies with 65 product lines1.
In addition to its in-house research and development efforts, Biocon (Syngene) has set up the facility, and, according to
the company actively pursues products through research business arrangements, will charge BMS an annual fee based on
collaborations and strategic alliances. This enables it to leverage the number of scientists employed in the facility.3
its partners’ expertise and expand its capacity in a cost-
This initiative indicates the sustained interest of BMS to
disciplined way. Globally, the company has strategic research
undertake R&D in India in a cost- effective manner. According
partnerships with other leading pharmaceutical companies such
to a BMS spokesman, the company has plans of investing about
as Astrazeneca, Pfizer.
USD300m in R&D in India over the next eight years4.
R&D collaboration model adopted in India: Supporting development of scientific excellence

BMS has been active in the R&D space in India through its in India:
research partnership with Biocon through its subsidiary
In addition to expanding its R&D capabilities in India, BMS
Syngene since 1998, to develop integrated drug discovery and
supports the development of scientific excellence in the
development capabilities. The company opened a 200,000 sq
country. Since 2007, it has established fellowships supporting
ft dedicated R&D facility in partnership with Biocon, called the
doctoral and post-graduate students at academic institutions
BMS-Biocon Research and Development Centre (BBRC ), in
in the areas of biology, medicinal chemistry, pharmaceutics,
Bangalore, India. The R&D work at the facility spans initial hit to
drug metabolism, toxicology , chemical engineering, clinical
lead optimization, early pharmaceutical development, clinical
pharmacology and translational medicine.5
nomination ,and further into clinical phase studies2.
Note: All the information contained in the case study above has been obtained from the following publicly available sources:
1.Datamonitor and ESPICOM,

2.The Financial Express, March 23, 2009,
3.Frost & Sullivan’s Movers & Shakers interview with Syngene (2009),
4.www.reuters.com,
5.www.biospectrumindia.ciol.com
90 Taking wings
Eli – Lilly case study: dissolving boundaries to
build network
Moving from “FIPCO” to “FIPNET”: Bringing India into the network:

Eli Lilly has made considerable progress in transforming itself Under the FIPNET model, the company has adopted a mix
from a fully integrated pharmaceutical company – the old FIPCO of traditional outsourcing (fee for services), collaborative
model into what it refers to as a fully-integrated pharmaceutical partnership (risk-reward sharing) and JV to leverage India’s
network— the FIPNET model. In the new model, the company strengths in R&D:
draws on a broad range of resources outside the company’s
• Traditional outsourcing (fee for services): The early-stage
walls to increase effective capacity, access external capabilities,
discovery efforts with Jubilant in India is an example of
reduce level of risk, accelerate development and help to lower
traditional outsourcing where Lilly has signed a five-year drug
the average cost of the R&D per molecule.
discovery pact with Jubilant in 2006.
As part of this model, the company has sold its 600,000 sq.
• Collaborative partnership (risk-reward sharing): The
ft. Greenfield Laboratories facility in Indiana, which carries out
company has entered a collaborative partnership with
preclinical toxicology and other early-stage drug discovery work,
Piramal, which is developing selected molecules from the
to Covance for USD50m. Covance has also received guarantees
company’s pipeline up to the end of Phase II, in exchange for
of USD1.6b in drug development contracts from Lilly for over
milestone payments and a royalty if a product reaches the
the next 10 years.
market. According to the business arrangement, Lilly has the
Further, the company has announced that it will transfer its option to bring the molecules back into its portfolio. Lilly has a
clinical trial monitoring work in the US and Puerto Rico to similar risk-sharing collaboration with Suven Pharmaceuticals
Quintiles and the majority of its data management work in in Hyderabad.
the United States to i3, a full-service, global clinical research
• Joint Venture with Jubilant: Lilly has set up a 50:50 joint
organisation.
venture with Jubilant in Bangalore that will see the two
The emergence of Lilly as the hub of a FIPNET should contribute companies collaborate on the development of new drugs
to the company’s productivity gains across the business. Since in oncology, metabolic diseases, cardiovascular diseases
2003, Lilly has reduced its headcount by about 11% worldwide, and diabetes. The JV, called Vanthys, will take the lead
increased its net sales per employee by 64%, improved gross compounds obtained from the two parents or outside through
margin as a percent of sales, and reduced manufacturing, R&D the development till the Phase II stage by outsourcing work
and administrative infrastructure while increasing overall output. to a host of companies engaged in CRAMS business in India.
The molecules will then be returned to their originators for
further development.
Drug Discovery and Early stage development outsourcing in India will move from simple FTE based or project based business models to more
complex and integrated ones, with risks and rewards being shared by both partners. Indian CROs are evolving rapidly in their capabilities
and are aspiring to share the rewards of the intellectual property generated early on through the outsourcing deals. Big Pharma, pressed
for resources, are looking for high quality throughput from the partners they engage with, to get flexibility, speed and access to talent and
capacity outside of their own walls.
As the early stage work is maturing, there is a need being felt for integrated players who have the capabilities and capacities to carry the
molecules through the entire development work here.
Mukta Arora
Head – Global Sourcing
Eli Lilly and Company (India) Pvt. Ltd.
Source: Eli Lilly and Company 2007 Annual Report, www.outsourcing-pharma.com

India lacks a culture of innovation due to legacy issues
such as low levels of funding, educational infrastructure
and collaboration between industry and academia...
In most parts of the world, relevant innovations take place at all three key centers such as universities, public institutions and industry.
In India, beyond the initial beginnings in public sector and public institutions, linkages were not established sufficiently between these
three centers of innovation.
Low level of financial resources allocated to R&D …

India is lacking on the two key parameters of monitoring resources devoted to R&D in the science and technology area — Gross
Expenditure on R&D (GERD) and R&D Intensity (measured by ratio of GERD to GDP) as compared to developed countries and China.
Gross expenditure on R&D (GERD) and GERD as a % GDP

Billion USD PPP
300 274.6 3.5%
3.1%
3.0%
250
2.8%
2.5%
2.2% 2.5%
200 2.1%
2.0%
1.9%
150
1.1% 1.1%
98.6 1.5%
100 0.8% 1.2%
55.5 51.5 1.0%
31.3 27.0
50 22.7
13.0 12.0 0.5%
0.1
0 0.0%
USA Japan China Germany France UK India Brazil Russia Singapore
Gross expenditure on R&D (GERD) GERD as a % of GDP
Source: Measures of Progress of Science in India, 2006 Report by National Institute of Science, Technology and Development Studies (NISTADS)
According to the planning commission1 report “ Several MNCs are of the opinion that 20–25% of science graduates are suitable for the
deliverables the industry is looking at.”
Key reasons
• Collaboration between industry and academia: A two-way traffic of knowledge and experience between industry and academia is
quintessential for innovation. Unlike in the West, this is comparatively lower in India due to minimal movement of people between
the above. The movement from industry to academia needs to increase significantly to ensure cross-fertilization of ideas.
• Education system: To innovate, scientists need to draw from different disciplines such as mathematics, biology and chemistry.
However, the education system in India creates scientists who have little exposure across disciplines due to the excessive focus
on specialization and minimal opportunity to change disciplines. This has hampered innovation in drug discovery in India, since
innovation in drug discovery is essentially the result of interdisciplinary processes.
• Lack of exposure: Educational institutes lack the relevant exposure to the industry due to the non-existent interface between the
academia and the industry.
• Outdated curriculum: Courses need to be developed for existing professionals to include programs in regulatory affairs, IPR, legal
issues and scientific development.
• Less attractive career option: A number of young students prefer to choose engineering as a career option rather than pure
sciences such as biology or chemistry.
• Brain drain: Migration of Indian pharmacists to other countries also affects the Indian pharmaceutical industry. It is estimated that
39% of the pharmacists working in the US are of Indian origin.
Source: 1.Report of the working group on drugs and pharmaceuticals for the eleventh five – year plan (2007-2012), Planning Commission of India, 1 December 2006
92 Taking wings
…reflected in India’s low standing in research
output indicator
Between 1996 –2006, India has published less than 1/10th of the total number of papers published in the US. Also, during the same
period, China has published close to twice the number of papers as India.
During the same period, only 0.33% of the papers authored by scientists from India were among the top percentile (1%) of Web of
Science (coverage of WoS stands at + 85,00 across all disciplines in science) papers when arranged in decreasing order of citations
received. While 0.52% of the papers authored by scientists from China were among the top percentile (1%). India was ranked 13th by
percentage of papers in the top 1% cited papers while China was ranked 10th.
Total papers published between 1996 – 2006 Percentage of papers Rank by percentage of papers
cited among top 1% in top 1% cited papers
US 2,908 1.87% 1
Japan 791 0.72% 9
Germany 743 1.27% 4
UK 661 1.53% 2
France 536 1.11% 6
China 423 0.52% 10
Canada 395 1.34% 3
Italy 369 1.04% 7
Spain 263 0.82% 8
Australia 248 1.13% 5
India 211 0.33% 13
S. Korea 180 0.52% 11
Taiwan 125 0.44% 12
Source: King, C., Science Watch, May/June 2007
India has only 1/10th and 1/5th the number of total research workers in the US and China.
Research workers (FTEs)
US 1,261,200
China 810,500
India 117,500
Source: Measures of Progress of Science in India, 2006 Report by National Institute

of Science, Technology and Development Studies (NISTADS)

Initiatives being taken to provide much needed impetus
to research and innovation in pharma and biotech…
Objective Key initiatives undertaken

Promote Indian drug Vision 2020 program
discovery platforms
The Government of India is embarking on a major multi-billion dollar initiative with 50% public funding
through a public-private partnership model to harness India’s innovation capability. The vision is to catapult
India into one of the top five pharma Innovation hubs by 2020 with one out of every 5–10 drugs discovered
worldwide by 2020 coming from India.
Collaborations New Millennium Indian Technology Leadership (NMITLI)
between industry,
Partnered with 222 public sector and 65 private sector entities on projects aimed at innovation centred
academia and
technology development, e.g., joint development between CDRI, NIPER and an Indian pharmaceutical
government
company for a new single ingredient oral herbal drug for psoriasis, which is under Phase II trial
Drugs and Pharmaceuticals Research Program (DPRP)
Set up a number of public funded research and development centers to conduct joint research projects
Some of the achievements under this program:
• Synthesis of anti-mycotic and structurally unique anti-cancer agents
• Rational design and synthesis of novel anti bacterial agents

Focus on specialized National Institute of Pharmaceutical Education and Research (NIPER)
pharmaceutical
The government has set up 7 NIPERs as institutes of “national importance” to achieve excellence in
education
pharmaceutical sciences and technologies, education and training.
Translational Health Science and Technology Institute (THSTI)
DBT has partnered with Massachusetts Institute of Technology (MIT) to set up a THSTI. The vision of
the institute is to emerge as a world leader in translational research at the interface of medicine and
engineering, built on a strong foundation of basic and applied sciences.
Fiscal incentives for Department of Scientic and Industrial Research (DSIR) recognition for availment of fiscal incentives
profitable operations
DSIR is the nodal department for granting recognition to in-house R&D units in industry. In-house R&D units,
as recognized by DSIR in the area of Pharma and bio-tech sectors, are eligible for the following benefits:
• Duty-free import of specified goods for R&D, production and pharmaceutical reference standards
• Weighted tax deduction of a 150% of any expenditure incurred on scientific research (except for
expenditure on cost of any land, building)
Source: Report of the working group on drugs and pharmaceuticals for the eleventh five – year plan (2007-2012), Planning Commission of India, 1 December 2006
Indian Government is playing an effective role in fostering the growth in pharma by adopting product patent regime in 2005 and recently
proposed a “2020 initiative” to transform India into a global leader in pharma innovation in order for India not only move up in the drug
discovery arena but also make India as an attractive destination for innovative research and development outsourcing
For innovation led growth huge infrastructure is to be created to upgrade educational system to train scientists, new world-class research
incubators and for patenting needs along with fiscal benefits to the industry for taking up drug discovery and development activities. Long
term commitment with a special fund needs to be created which the Government through Department of Pharmaceuticals has announced to
the tune of $2 billion and if that implemented it will be a boon to Indian Pharma.
In addition to the above some other proactive fiscal measures have to be taken like the total R&D expenses (including clinical trials and patent
related) whether incurred in India or abroad should be included for weighted average deduction under section 35 (2ab) and these benefits
should be extended permanently but not for 3 to 5 years to promote new chemical entity (NCE) based research.
Finally Indian Government should promote Public/private partnerships between the National institutes, Academia and Industry for the long-
term sustained growth in this sector.
Venkat Jasti
Managing Director
Suven Life Sciences Ltd.
94 Taking wings
…fueling Indian pharmaceutical companies to pursue
drug discovery programs
Indian pharma companies increasing investment in R&D

India began investing in R&D for drug discovery-related work in Specifics 2001 2008 Comments
the mid 90s . R&D 1.4% 9.9% 7 times
R&D activity has seen a significant impetus in the last seven expenditure as
years, resulting in the total R&D spend increasing by almost a% of sales
12 times over this period. In 2008, the Top 10 companies (by R&D 55 660 12 times
sales in value) had a cumulative sales of USD5.1b and invested a expenditure in
cumulative sum of USD387m in R&D, which accounted for 7.5% absolute terms
of their total sales.1 (USD m)
Source: 1.CMIE Data Base Prowess Source: Ernst & Young analysis of top 25 pharmaceutical companies operating
in India
Indian companies are pursuing new drug discovery research…

Companies are using two strategies to mitigate risk and reduce costs in this area — finding a new drug within an existing family that has
been discovered and out-licensing the drug candidate to MNCs after its pre-clinical stage.
Drug development pipeline of key Indian companies Category of diseases Indian pharma companies are
Discovery/ Phases working on…
Preclinical Phase I II III Company Category of diseases worked on
Ranbaxy 6 0 1 0 Ranbaxy Infectious, respiratory, urinary

diseases and diabetes
Dr Reddy’s 1 1 0 1
DRL CVS, infection, diabetes and
Glenmark 6 2 3 0
cancer
Zydus Cadila 4 3 2 0
Glenmark Respiratory and inflammatory
Piramal 10 3 4 0 diseases, diabetes and obesity
Healthcare
Zydus Cadila Diabetes, inflammation, obesity,
Lupin 4 1 2 1 novel drug delivery
Sun 3 0 1 0 Piramal Oncology, inflammation and
Note : This is only an illustrative list of companies involved in discovery research in India. Healthcare diabetes
Source: Company websites, Ernst & Young analysis
Source: Company websites
In spite of lack of credible track records India has shown tremendous progress in developing good medicinal chemistry and biochemical assay
development skill. To really become a serious discovery player, we need to develop high level animal biology and pharmacology skills which
are still at a nascent stage. Discovering novel drug targets will also help us to boost our confidence in innovative biology, an area where we
need to change the general perception of our capabilities.
Dr. Goutam Das
COO
Syngene

Need for India to rapidly build its research biology and
enhance its development capabilities to emerge as a
partner of choice for global pharma
Although Indian companies have only recently started partnering with global companies in drug discovery and development, the
industry been growing at a rapid pace. Indian players are today at a threshold where investing in the right capabilities will differentiate
them from the rest of the world as global players. These include:
• Creating global reach through acquisitions and partnering models
• Developing end-to-end capabilities from research biology to clinical trial supplies across API and formulations
• Building a culture of process safety and quality
• Creating a project management mindset to enhance efficiency and speed of delivery
• Collaborating with government and academia to harness the power of innovation in delivering new value to the customer
• Investing and building capabilities to tap the biologics market, which is expected to be the next frontier of growth in the global
pharma industry due to an estimated growth of 56% and an increase in market share from 17% in 2008 to 23% in 20141
• Investing and building research biology, lyophilization and cytotoxics capabilities to capitalize on future high growth and niche
opportunities
Source: 1.World Preview 2014, EvaluatePharma Report, May 2009
Roadmap of initiatives needed to fuel domestic R&D and

drug discovery and development outsourcing
• Research biology capability

• Drug discovery and
development capability
in biologics
• Research collaborations
between universities,
public institutions and
industry
• Enhance process safety

standards
• Enhance project
mangament capabilities to
increase speed of delivery
• Enhance global asset
network
Short – medium (<3 years) Medium – long (3–6 years)
Drug Discovery is a very complex interdisciplinary area where successful outcome is not guaranteed. It needs significant resources in
terms of technology and highly trained people. For success in this area India needs to have a short term and long term plan. In short term,
highly trained personnel have to be recruited in key leadership positions who have consistently delivered high quality clinical candidates
and letting them build an international quality R&D facility and a project portfolio that will yield better than average chance of success in
clinical development. For long term, an education system that trains students in deep understanding of physical and natural sciences has
to be developed. This training also should focus on application of this knowledge to solving the complex issues that stymie drug discovery
progress towards high quality clinical candidates. Part of the training should also focus on developing excellent leadership, interpersonal and
communication skills. These are important in creating very highly functional discovery project teams that understand the complex mission.
The mantra is ‘Excellent project teams deliver excellent products
Dr. Sham S. Nikam
Vice President Global Discovery, RDP/GD
Nycomed
96 Taking wings
Acknowledgements
Aatosh Chauhan G. K. Raman

Sr. Relationship Manager, External Manufacturing Director - External Affairs
Chemical Operations Bristol-Myers Squibb India Pvt. Ltd.
Merck
Dr. Goutam Das
Ajay Piramal COO
Chairman Syngene
Piramal Healthcare Ltd.
Dr. H. Sivaramakrishnan
Alok Sonig President, Research and Development
Managing Director, India Piramal Healthcare Ltd.
Bristol-Myers Squibb Company
Harish Kapoor
Dr. Ananth Narayan Marketing & Sourcing – Special Assignments
President & Director, Pharma Solutions Associated Capsules Pvt. Ltd.
Piramal Healthcare Ltd.
Dr. Hasit B. Joshipura
Ashok Kumar Chairman,
Secretary, Government of India GlaxoSmithKline Pharmaceuticals Ltd., India
Ministry of Chemicals & Fertilizers
Department of Pharmaceuticals Helmut Altmann
Base Business, Director Generics Sourcing
Dr. Ashoke Banerjee Sanofi Aventis
Executive Director
GlaxoSmithKline Pharmaceuticals Ltd. Ingrid Reinkober
Vice President
Dr. Bala Subramanian Global Procurement – Raw Materials & Intermediates
Director, Infection Pharmacology Bayer HealthCare AG Leverkusen, Germany
Janmejay R. Vyas
Dr. Balu Balasubramanium Managing Director
Executive Director, Research and Development Dishman Pharmaceuticals and Chemicals Ltd.
Bristol-Myers Squibb Company
Jayant Dwivedy
Bhaskar R. Venepalli President – Global Supply Chain
President and CEO Piramal Healthcare Ltd.
CiVentiChem
Joe Principe
Bjorn Treptow Head - Business Development (US)
Head Emerging Markets, Sourcing & COARTEM Piramal Healthcare Ltd.
Novartis Pharma AG
K. R. Shekhar
Chithur Devaraj Vice President, Procurement and Logistics
Strategic Sourcing Director – Asia Pacific Bayer CropScience Limited
Wyeth Ltd., India
Kamlesh Patel
Deepak Naik Director, APIs & Key Intermediates
Managing Director Direct Materials & Capital, Global Procurement
Eisai, India Merck
Denzyl Sardinha Lorraine Hazlehurst

Head – India Sourcing Centre, GES Director, GMS Strategy, Emerging Markets
AstraZeneca Pharma India Ltd. GlaxoSmithKline Pharmaceuticals Ltd.
Dr. Duncan Judd Dr. Martin J. Hewlett

Manager, Computational and Structural Chemistry Director of Procurement – APIs
Research and Development, Harlow Production Procurement Shared Service
GlaxoSmithKline Pharmaceuticals Ltd GlaxoSmithKline Pharmaceuticals Ltd.
98 Taking wings
Michael J Monaghan S. R. Emani
Director – Third Party Manufacturing, GMS Manager - Business Development
GlaxoSmithKline Pharmaceuticals Ltd. GVK Biosciences
Mukta Arora Sameer Hiremath

Head – Global Sourcing Deputy Managing Director
Eli Lilly and Company (India) Pvt. Ltd. Hikal Ltd.
Mukund Ranade Scott P. Laird

Director Business Director, External Chemical
Emcure Pharmaceuticals Ltd. Manufacturing Operations
Merck
N Govind Rajan
CEO & MD Dr. Sham S. Nikam
Shasun Chemicals and Drugs Ltd. Vice President Global Discovery, RDP/GD
Nycomed
Nicklas Westerholm
Director of API Supply, Global External Sourcing Shayam Tiwari
AstraZeneca Head - Sourcing Global Services
Novartis, India
Nilesh Wadhwa
Director - In Licensing Dr. Shireesh Ambhaikar
Aventis Pharma Ltd., Sanofi-Aventis Group Director- Manufacturing & Industrial Purchasing
UCB India Pvt. Ltd.
Dr. Pankaj Shah
Executive Director, Research and Development Sri Mosur
Bristol-Myers Squibb Company President and CEO
Jubilant Biosys Ltd.
Phil Priest
VP, Head of Strategy, GMS Steve Fishwick
GlaxoSmithKline Pharmaceuticals Ltd. Head – LCCS, Global Procurement
AstraZeneca
R. Shah
Director - Sourcing & Exports Dr. Sudhir Nambiar
Pfizer Ltd., India Head - PR&D
Rahul Gupta
General Manager, Corporate Regulatory Affairs Dr. Surinder Singh
Piramal Healthcare Ltd. Drug Controller General of India
Ministry of Health and Family Welfare
Ramesh Krishnan
Vice President - Program Management Dr. Tanjore BalGanesh
Piramal Healthcare Ltd. Head of Research
Ramesh Subramanian
Asia Pacific President Tapan Ray
Merck & Co, Inc. Director General
Dr. Ranga Raju
Chairman and CEO Uday Dhupkar
SaiAdvantium Manager, Global Sourcing, Emerging Markets
Abbott India Ltd.Venkat Jasti
Ranjit Shahani Managing Director
Country President, Novartis Group in India Suven Life Sciences Ltd.
Novartis
Venkat Jasti
Roger Cassidy Managing Director
Procurement Director – Outsourcing, Primary Supply Suven Life Sciences Ltd.
Global Manufacturing and Supply
GlaxoSmithKline Pharmaceuticals Ltd.

Glossary of terms
Term Explanation
AC Analytical Chemistry
ADME Absorption, Distribution, Metabolism, Excretion
AICTE All India Council for Technical Education
AMDT Analytical Method Development and Transfer
AMRI Albany Molecular Research Inc.
ANDA Abbreviated New Drug Application
ANVISA Agência Nacional de Vigilância Sanitária (National Health Surveillance Agency Brazil)
The Agency is linked to the Ministry of Health in Brazil. The institutional purpose of the agency is to foster protection of the health of
the population by exercising sanitary control over production and marketing of products and services subject to sanitary surveillance.
API Active Pharmaceutical Ingredient
BBRC Biocon Research and Development Centre
BMS Bristol-Myers Squibb
CAGR Compound annual growth rate
CD Clinical Development
CDER Center for Drug Evaluation and Research
It is a division of the U.S. Food and Drug Administration (FDA). Its primary objective is to ensure that all prescription and over-the-
counter (OTC) medications are safe and effective when used as directed.
CDRI Central Drug Research Institute
CDRI was established under the Council of Scientific & Industrial Research, an autonomous registered Society of the Government of
India, as a centre of excellence dedicated to drug research. CDRI is considered to be a pioneer research organization in the field of
biomedical research where all the infrastructure and expertise are available to develop a drug right from its concept to market.
CDSCO Central Drugs Standard Control Organization
CDSCO is responsible for approval of new drugs, regulation of clinical research, laying down the standards for Drugs, laying down
regulatory measures, amendments to Acts & Rules, control over the quality of imported Drugs, coordination of the activities of State
Drug Control Organizations and providing expert advice with a view of bring about the uniformity in the enforcement of the Drugs and
Cosmetics Act.
CEO Chief Executive Officer
CII Confederation of Indian Industry
CII is a non-government, not-for-profit, industry led and industry managed organization, playing a proactive role in India's development
process. It works to create and sustain an environment conducive to the growth of industry in India, partnering industry and
government alike through advisory and consultative processes.
CM Custom Manufacturing
CMIE Centre for Monitoring Indian Economy
CMO Custom manufacturing organization
CNS Central nervous system
COI Certificate of OriginA Certificate of Origin
(CO) is a document which is used for certification that the products exported are wholly obtained, produced or manufactured in India. It
is generally an integral part of export documents.
CoPP Certificate of Pharmaceutical Product
CoPP is a certificate issued by the national health authorities upon request from either the manufacturer, the customer or the
authorities in the importing country. The certificate is issued for a specific product and states whether or not the product is marketed
in the country of origin. Furthermore, it states that the manufacturer of the product complies with GMP and that they are inspected
regularly by the national health authorities.
CRAM Contract Research and Manufacturing
CS Custom Synthesis
CTD Common Technical Document
CTD is a set of specification for application dossier for the registration of Medicines. It was developed by the European Medicines
Agency (EMEA, Europe), the Food and Drug Administration (FDA, USA) and the Ministry of Health, Labour and Welfare (Japan). The
CTD is maintained by the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals
for Human Use (ICH)
100 Taking wings

Term Explanation
CTS Clinical Trial Supplies
CVD Cardio vascular disease
DCGI Drug Controller General of India
DMF Drug Master File
A drug master file (DMF) is a master file that provides a full set of data on an API.
DOP Department of Pharmaceutical
DPRP Drugs and Pharmaceuticals Research Program
DSIR Department of Scientific & Industrial Research
EHS Environment, Health & Safety
EMEA European Medicines Agency
EMEA is a decentralized body of the European Union with headquarters in London. Its main responsibility is the protection and
promotion of public and animal health, through the evaluation and supervision of medicines for human and veterinary use.
FDA or Food and Drug Administration
USFDA FDA is a federal agency of the United States Department of Health and Human Services
FIPCO Fully Integrated Pharmaceutical Company
FIPNET Fully-Integrated Pharmaceutical Network
FTE Full time equivalent
GCP Good Clinical Practice
GDP Gross Domestic Product
GERD Gross Expenditure on R&D
GMP Good Manufacturing Practices
GSK GlaxoSmithKline Pharmaceuticals Ltd
HRD Ministry of Human Resource Development
Ministry
HS Hit Screening
HTS High throughput screening
I&I Immunology & inflammation
IDI Industrial Development Income
IND Investigational New Drug
IND program is an application to the US FDA by which a pharmaceutical company obtains permission to ship an experimental drug
across state lines (usually to clinical investigators) before a marketing application for the drug has been approved.
IP Intellectual Property
IPO Initial Public Offering
IT Information Technology
J&J Johnson & Johnson
JV Joint Venture
LI Lead Identification
LO Lead Optimization
M&A Merger & Acquisition
mAbs Monoclonal antibodies
MHRA Medicines and Healthcare products Regulatory Agency
The MHRA is an executive agency of the Department of Health. It is responsible for ensuring that medicines and medical devices work,
and are acceptably safe.

Term Explanation
MIT Massachusetts Institute of Technology
MNC Multi National Company
MOU Memorandum of Understanding
NCAER National Council for Applied Economic Research
NIPER National Institute of Pharmaceutical Education and Research
NISTADS National Institute of Science, Technology and Development Studies
NME New Molecular Entity
NMITLI New Millennium Indian Technology Leadership
NOC No Objection Certificate
NRA National Regulatory Authority
OPPI Organization of Pharmaceutical Producers of India
OPPI established in 1965, is a premier association of research based international and large pharmaceutical companies in India.
It caters to the needs of Research based Pharmaceutical Industry thereby creating and sustaining an environment conducive to
innovation and growth, simultaneously, facilitating industry and stakeholders partnership through various advisory and consultative
processes to achieve the Healthcare objectives of the Nation.
Para IV Paragraph IV filingA Para IV
Filing is made when the ANDA applicant believes its product or the use of its product does not infringe on the innovator's patents listed
in the Orange Book or where the applicant believes such patents are not valid or enforceable.
PC&D Process Chemistry and Development
PCB Preclinical Biology
PCD Preclinical Development
PhRMA Pharmaceutical Research and Manufacturers of America
PhRMA, founded in 1958, is an industry trade group representing the pharmaceutical research and biotechnology companies in United
States
PKDM Pharmacokinetics and Drug Metabolism
PMC Post-marketing commitments
PR&D Process Research and Development
QA Quality Assurance
R&D Research & Development
SA Safety Assessment
SEZ Special Economic Zones
ST Scale up and Transfer
THSTI Translational Health Science and Technology Institute
TRIPS Trade Related Aspects of Intellectual Property Rights
The Agreement on TRIPS is an international agreement administered by the World Trade Organization (WTO) that sets down minimum
standards for many forms of intellectual property (IP) regulation.
UK United Kingdom
USD US Dollar
WHO World Health Organization
WHO is a specialized agency of the United Nations (UN) that acts as a coordinating authority on international public health. It is
responsible for providing leadership on global health matters, shaping the health research agenda, setting norms and standards,
articulating evidence-based policy options, providing technical support to countries and monitoring and assessing health trends.
WoS Web of Science
102 Taking wings

About OPPI
OPPI mission
To make continuing contribution towards achieving healthcare objectives of the nation while professionally addressing the collective
interests of its members and encouraging innovation for inclusive growth.
Organisation of Pharmaceutical Producers of India (OPPI) established in 1965, is a premier association of research based international
and large pharmaceutical companies in India and is also a scientific and professional body. It caters to the needs of Research based
Pharmaceutical Industry thereby creating and sustaining an environment conducive to innovation and growth, simultaneously,
facilitating industry and stakeholders partnership through various advisory and consultative processes to achieve the Healthcare
objectives of the Nation.
OPPI Members Follow:
• Good Manufacturing Practices (GMP)
• International Code of Pharmaceutical Marketing Practices
• OPPI’s position on Intellectual Property Rights (IPR)
OPPI functions mainly on the following areas:
• Continuous dialogue with the stakeholders
• Actively engage in knowledge creation & knowledge sharing with value addition
• Engage in ‘Corporate Academia’ Interaction
OPPI identifies itself with the country’s national healthcare objectives and encourages its members to make substantial contributions
to social concerns and actively promotes Corporate Social Responsibility (CSR).
OPPI is an active member of International Federation of Pharmaceutical Manufacturers Associations (IFPMA), Geneva.
Contact
Peninsula Chambers, Ground Floor,
Ganpatrao Kadam Marg,
Lower Parel,
Mumbai 400 013.
Tel: +91 22 24918123, 24912486, 66627007

Fax: +91 22 24915168
E-Mail : indiaoppi@vsnl.com

Notes
104 Taking wings

Notes

106 Taking wings
Our offices
Ahmedabad Kolkata
2nd floor, Shivalik Ishaan 22 Camac Street
Near CN Vidhyalaya Block ‘C’, 3rd floor
Ambawadi Kolkata - 700 016
Ahmedabad - 380 015 Tel: + 91 33 6615 3400
Tel: + 91 79 6608 3800 Fax: + 91 33 2281 7750
Fax: + 91 79 6608 3900
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Bengaluru 6th floor & 18th floor, Express Towers
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Tel: + 91 80 4027 5000 Tel: + 91 22 6665 5000 (18th floor)
+ 91 80 6727 5000 Fax: + 91 22 2282 6000
Fax: + 91 80 2210 6000 (12th floor)
Fax: + 91 80 2224 0695 (13th floor) Jolly Makers Chambers II
15th floor, Nariman Point
Chennai Mumbai - 400 021
TPL House, 2nd floor Tel: + 91 22 6749 8000
No. 3 Cenotaph Road Fax: + 91 22 6749 8200
Teynampet
Chennai - 600 018 Jalan Mill Compound
Tel: + 91 44 4219 4400 95 Ganpatrao Kadam Marg
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Near DLF Golf Course
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Tel: + 91 124 464 4000 18-20 Kasturba Gandhi Marg
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Tel: + 91 11 4363 3000
Hyderabad Fax: + 91 11 4363 3200
205, 2nd floor
Ashoka Bhoopal Chambers Pune
Sardar Patel Road C-401, 4th floor
Secunderabad - 500 003 Panchshil Tech Park
Tel: + 91 40 6627 4000 Yerwada (Near Don Bosco School)
Fax: + 91 40 2789 8851 Pune - 411 006
Tel: + 91 20 6601 6000
Fax: + 91 20 6601 5900

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Taking wings

Coming of age of the Indian

Foreword Introduction Executive summary

Coming of age of the Indian pharmaceutical outsourcing industry 3

Dear reader, By 2010 global Contract Research and Manufacturing Market

Decreasing R&D productivity and increasing cost containment

Coming of age of the Indian pharmaceutical outsourcing industry 5

Dear reader, • Track record of supplying pharmaceutical API and

India is perfectly positioned to be a preferred destination for

Coming of age of the Indian pharmaceutical outsourcing industry 7

Pharmaceutical value chain

Discovery Development Full scale manufacturing

Contract research Contract manufacturing

Coming of age of the Indian pharmaceutical outsourcing industry 9

Coming of age of the Indian pharmaceutical outsourcing industry 11

• 67% of respondents have rated India “above average” both

Coming of age of the Indian pharmaceutical outsourcing industry 13

• Big pharma companies and global outsourcing service

Coming of age of the Indian pharmaceutical outsourcing industry 15

1.2 The industry is focusing on three key imperatives to sustain growth:

Coming of age of the Indian pharmaceutical outsourcing industry 17

Global Pharma market size trend

Market size in % Growth over

Source: IMS Health Market Prognosis , March 2009

Source: 1.IMS Health Market Prognosis, March 2009

Coming of age of the Indian pharmaceutical outsourcing industry 19

active compounds in development, no significant 2

change in the number of approved NMEs Increasing

1 Decreasing R&D productivity

Number of NME approvals (2000 - 2008)

2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: CDER NME, BLA Approval 2008

approvals have shown a largely declining trend with a historic

Note * As defined by the CDER; significant Improvement compared to marketed

Source: 1.CDER NME, BLA Approval 2008

Coming of age of the Indian pharmaceutical outsourcing industry 21

Increasing failure rate in trials 39

Increasing cost of developing a new drug

biotech companies and decreased consumer 2

spending due to financial crisis Increasing

The financial crisis: impacted the consumer spend on healthcare

Growth in number of prescriptions ﬁlled in US

5.6% CAGR -2%

1997 2007 2008-09

Coming of age of the Indian pharmaceutical outsourcing industry 23

patent cliff due to expiry of key blockbusters and 2

government pressures to reduce cost of healthcare Increasing

3 Generic penetration has increased by 16% in the last decade…

% of total prescriptions dispensed (in US)

Source: IMS Health, National Prescription Audit Plus

2009 2010 2011 2012 2013 2014

Source: EvaluatePharma World Preview 2014, Datamonitor

• Generic substitution, e.g., Japan

Source: IMS Health, National Prescription Audit Plus

ones going off-patent to further decelerate 2

market growth Increasing

4 Fewer blockbuster drugs launched

Decreasing sales growth of blockbuster drugs

Year 2003 2004 2005 2006 2007

Reduced sales potential of recently launched drugs

Top 10 NMEs in 2008: ranked on USA Consensus Sales in 2013

Product Company Therapy 2008 2013