Pharmaceutical Innovation:

ORGANISATION OF PHARMACEUTICAL
PRODUCERS OF INDIA (OPPI)
The Indian Odyssey
Founded in 1965

Research-
Research-based International & large Indian Pharma
Companies

Affiliated to International Federation of Pharmaceutical
Manufacturers Associations (IFPMA), Geneva,
Switzerland and World Self-
Self-Medication Industry (WSMI),
France
Dr. Ajit Dangi, Director General
Three Fundamental Beliefs
Organisation of Pharmaceutical Producers of India - Adherence to TRIPs Compliant IPR
avdangi@indiaoppi.com - Ethical Sales Promotion based on IFPMA Guidelines
ENIFarMed and OPPI Code of Conduct
November 20–
20–22, 2007 - Adherence to International GMP & Quality Standards
Sao Paulo, Brazil

India INDIA
A SOCIO-
SOCIO-ECONOMIC

OVERVIEW

•Pharma Company Headquarters

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INDIAN ECONOMY-
ECONOMY-

ECONOMIC INDICATORS 2006-

2006-07 SHARE IN GDP 2006-
2006-07

Gross Domestic Product 9.4% (Growth) re

ul tu Growth

Inflation <5% c
ri %

ForEx Reserve 270 Bn.
Bn. U.S.$ Ag 19 Agriculture - 2.7%
Services
GDP 1 Trillion U.S.$



Savings Rate as % of GDP 32%
55% Industry - 10.0%
Industry

BSE* market cap. crosses 1 Trillion U.S.$ 26%
Services - 11.2%

*Bombay Stock Exchange

INDIA 4
TH LARGEST ECONOMY

(PPP) - 2005 INDIA CHARGES AHEAD

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HEALTH INFRASTRUCTURE INDIAN PHARMA SCENARIO
INDIA - 2006 HIGHLIGHTS – 2006-
2006-07

Population 1.11 Bn.

Doctors 6,25,130 (0.6)*

Domestic Sales: U.S. $ 7.9 Bn.,
Bn., Growth 17.6%
Nurses 8,36,000 (0.75) *
Hospitals 17,300
Exports: U.S. $ 5.3 Bn.,
Bn., Growth 20%
Hospital Beds 9,14,543 (0.84)*
Fastest Growing Segments: Cardiovascular, Anti-
Anti-
Primary Health Centres/ 1,64,000 diabetics, CNS
Community Health Centres
Medical Colleges 171
Total R&D Spend: U.S.$ 570 MM. (~ 6.6% of sales) -
Chemists (Pharmacies) 5,00,000
(40% increase since 2005)
Medical Reps 3,00,000
Ranks 4 in Volume and 14 in Value terms globally
th th

Total Healthcare Market Rs.1,25,000 cr. (U.S.$ 30.5 Bn.)

Government Healthcare Budget Rs.15,291 cr. (U.S.$ 3.7 Bn.)

* Per 1000 Population

INDIAN PHARMA SCENARIO

INDIAN PHARMACEUTICAL
HIGHLIGHTS
Contd…. INDUSTRY - GROWTH TREND

Intense competition - over 10,000 manufacturing units, 2001 2002 2003 2004 2005 2006
highly fragmented

Only about 300 in Organized Sector

Drug Prices one of the lowest in the world (about 10 to Total Growth (%) 9.7 8.3 5.1 6.9 8.6 17.6
15% of U.S. prices)

Highest No. of U.S. FDA approved mfg. facilities outside Volume led Growth (%) 8.8 8.8 5.8 7.5 7.2 17
U.S.A.

Highest No. of Applications for DMF & ANDA to US FDA
Price led Growth (%) 0.9 - 0.5 - 0.7 - 0.6 1.4 0.6

Access to Essential Medicines – only 35%

Prices controlled by National Pharmaceutical Pricing
Authority (NPPA)
Source: ORG-IMS

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TOP 10 PHARMA COMPANIES IN INDIA

– 2006* DOMESTIC SALES INDIAN PHARMA INDUSTRY

Value Market Share STRENGTHS WEAKNESSES

Huge Market with Growing
Low Per Capita Expenditure on
(U.S.$ million) (%)
Middle Class Healthcare (Rs.320)

Low Access to Medicines (35%)

Cost Competitiveness
TOTAL MARKET 6,047.1

Lack of Global Reach

Well Trained Technical &

Low Health Insurance coverage
1. GlaxoSmithKline 313.0 5.2

Scientific Manpower

Chemistry Skills
2. Ranbaxy 306.9 5.1

3. Cipla 305.5 5.1

4. Nicholas Piramal 260.2 4.3

OPPORTUNITIES THREATS
5. Zydus Cadila 209.5 3.5

Under-
Under-developed Market in
Rigid Price Controls
certain Segments
Weak Patent Infrastructure
6. Sun Pharma 194.5 3.2
(e.g. Diabetes)

IPR 2005
7. Alkem 181.0 3.0

Outsourcing
8. Pfizer 158.4 2.6

9. Lupin 141.2 2.3

Retail Chains
10. Dr. Reddy’
Reddy’s Labs 140.5 2.3

*Based on Stockists’ sale to Retailers Source: ORG-IMS

INDIAN PHARMACEUTICALS MARKET

TO TRIPLE OVER THE NEXT DECADE*

2005 Market size: US$ 6.3 Bn

2015 Expct
Expct.. Market size: US$ 20 Bn

This implies a compounded annual growth rate of 12.3
per cent

This growth will be materially higher than the annual
growth rate of 9% witnessed during 2000 to 2005.

*McKinsey Report 2007

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 SIX TRENDS TO INFLUENCE
GROWTH*
1. Doubling of disposable incomes and the number of
middle-
middle-class households
2. Expansion of medical infrastructure
3. Greater penetration of health insurance
4. Rising prevalence of chronic diseases
5. Adoption of product patents
6. Aggressive market penetration driven by relatively
smaller companies

*McKinsey Report 2007

IPR STATUS:

INDIAN BIOPHARMA MARKET Passage of Product Patent Act 2005

 Biotech Market size 2 Bn.

Bn. U.S.$ - 70% in Biopharma 1. Narrowing the definition of Patentability
 2 Types of Products - Recombinant Drugs and
Monoclonal Antibodies 2. Lack of Provision for Data Exclusivity
 Products-
Products- Erythropoietin, Human Insulin, tPA,
tPA, 3. Provision for Pre Grant Opposition
Filgrastim,
Filgrastim, Hepatitis B Vaccine, Interferon,
Streptokinase, etc. 4. Broadening the scope of Compulsory Licensing
 India emerging as a major global source of Vaccines 5. Weak Patent Infrastructure
 Biosimilars – Regulatory Issues, a Challenge

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 2. DATA EXCLUSIVITY
1. PATENTABILITY (Regulatory Data Protection – RDP)

Lack of clear provision for Data Exclusivity (DE)

Definition narrowed to include only NCEs.
NCEs.

Polymorphs, Esters, Metabolites, NDDS, etc. excluded OPPI Recommendation:
Recommendation:
unless “Significant Efficacy”
Efficacy” is proved.
Minimum 5 years Data Protection (DP) period from
the date of marketing approval in India
OPPI Recommendation:
Recommendation:

To allow all forms as long as they comply with the
criteria of “Novelty, Non-
Non-obviousness and Commercial
Applicability”
Applicability”.

3. POST VS. PRE GRANT OPPOSITION 4. COMPULSORY LICENSING

Present law allows both Pre-

Pre-grant & Post-
Post-grant.
Definition broadened to include:

Medicines not available at “Reasonably Affordable”
Affordable” prices

Pre-
Pre-grant Opposition has resulted in frivolous objections
Domestic Demand not met
delaying the grant of patent. Practice of “serial”
serial”

Export Market is not developed
opposition.

The Product is not “worked”
worked” in India
OPPI Recommendation:
Recommendation: OPPI Recommendation:
Recommendation:

Should retain only Post-
Post-Grant Opposition
CL to be restricted only for the National Emergency/Urgency
and not for Commercial Use.

Exports on humanitarian grounds should have anti-anti-diversion
measures and only for specified period.

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 5. PATENT INFRASTRUCTURE KEY ENABLERS FOR
– Capacity Building INNOVATION AND R&D

Need for Clear, Unambiguous Guidelines  Intellectual Property Protection

Patent Office infrastructure  Scientific Infrastructure

Computerization and Global Link  Access to Funds

Dedicated I.P. Courts  Government Policies & Political Leadership

Lack of Patent Specialist Attorneys

Lack of training facility for Patent Examiners,
Attorneys and Judges

INTELLECTUAL PROPERTY PROTECTION

STRONGLY INFLUENCES PHARMACEUTICAL
COMPANIES’ INVESTMENT DECISIONS SCIENTIFIC INFRASTRUCTURE
Percentage of companies* reporting that intellectual property protection
has a strong effect on their investment decision in R&D facilities  Scientific & Technical Manpower
100%
100%  Knowledge and Skills Set
95%  Industry – Academia Partnership
90%
 Training & Development for Sustainable Supply of
88%
86% Scientists & Technologists
85%

80%

75%
Germany Japan U.S.A.
* Chemical and Drug Companies
Source: Mansfield, Edwin, Intellectual Property Protection, Direct Investment
and Technology Transfer, International Finance Corporation, 1995

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 GOVERNMENT POLICIES & POLITICAL

ACCESS TO FUNDS LEADERSHIP

 Drug Discovery Research – Lengthy, Risky and Expensive  President Kennedy – “Man on the Moon”
Moon”
(Global R&D Spend U.S.$ 70 Bn. Bn. - 10-
10-15% of Sales).  National Institutes of Health, U.S.A. - U.S.$ 22 Bn.
Bn.
 Pricing Freedom Funding
 Adequate profitability to Sustain Investment  IIT / CSIR / TIFR – Prime Minister Nehru’
Nehru’s Vision
 R&D as a separate Business Entity –Derisking(NewTrend)
Derisking(NewTrend)  Technology Parks - ICICI Knowledge Park, Andhra;
Biotech Park, Pune
 Venture Capital (ICICI – Dr. Reddy’
Reddy’s Innovative tie-
tie-up)  Tax Incentives / Exemptions
 Access to Capital Markets e.g. NASDAQ, NYSC  Regulatory Pathway
(Dr. Reddy’
Reddy’s)

CASE STUDY 1 CASE STUDY 2

Alza Corporation U.S.A. Sepracor Inc., U.S.A.

 Leadership Dr. Al Zafforani Ph.D.  Strategy - “Improved Chemical Entity”

Entity” (ICE)
 Strategy NDDS (Transdermal
(Transdermal Delivery) - Single Isomers of Racemates through
 Products Fentanyl,
Fentanyl, Estradiol,
Estradiol, - CHIRAL Chemistry
Scopalamine,
Scopalamine, Nicotral,
Nicotral, etc.  19 ICE Drugs by 2009
 Acquired by Johnson & Johnson for  Global Market for “ENANTIOPURE”
ENANTIOPURE” Drugs -
U.S.$ 10.2 Bn.
Bn. U.S.$ 50 Bn.
Bn. (faster onset of action, reduced side
effects, enhanced receptor potency)

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 INDIA – PARTNER OF CHOICE –

R&D THRUST BY SOME COMPANIES COMPETITIVE ADVANTAGE

 Abundance of English speaking scientific and technical

 Novartis OTC R&D Centre in Mumbai manpower.
 Eli Lilly Clinical Trial Research Centre in Delhi  Highest number of U.S. FDA approved manufacturing
facilities outside U.S.A.
 Novo Nordisk Clinical Trial Research Centre in
Hyderabad  Technological capability to manufacture over 400 APIs.
 AstraZeneca Research Centre in Bangalore for Anti-Anti-  Highest number of DMFs and ANDAs filed with U.S. FDA in
T.B. Molecules. 2006 - Higher than China, Spain, Italy and Israel put
together.
 R&D Centres of Ranbaxy,
Ranbaxy, Nicholas Piramal,
Piramal,  Large and diverse patient base and medical professionals to
Dr. Reddy’
Reddy’s, Lupin,
Lupin, Wockhardt,
Wockhardt, etc. conduct clinical trials.
 Cost competitiveness (Intellectual Capital per dollar).
 Well developed ancillary Industry

JAPAN – 1960-
1960-2000 NEW MODELS FOR INNOVATION

 Strong Chemical Industry. Good Process Skills Procter & Gamble, USA
 No Patent Protection. Hence Copying Culture.
From R&D to C&D (Connect & Develop).
 Price Control on Pharmaceuticals Prepare technology brief that defines the
 Patent Protection Introduced in 1976 concept and discover if anyone in the
world has readymade solution.
 Multi-
Multi-billion Dollar Corporation – Takeda, Fujisawa, Goal – 50% of innovations outside the
Eisai, Yamanouchi, Sankyo, Daiichi, Mochida, Chugai. company.
 Year 2006 – 3 Largest Pharmaceutical Industry in
rd “Not Invented Here (NIH)”
(NIH)” to “Proudly
the World (U.S. $ 64 Bn. Found Elsewhere”
Elsewhere”
Bn. 10% of the Global Sales).

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NEW MODELS FOR INNOVATION
Contd….. ALLIANCES & LICENSING

ELI LILLY - INNOCENTIVE Indian Company Overseas Company Area of Alliance

Nicholas Piramal (1) Biosyntech Drug delivery systems
Brokers solutions to more narrowly defined scientific (2) Institute of Biological Vaccine Technology
Sciences Cancer, diabetes, arthritis
problems e.g. whether a 5 step process can be (3) Morvus Technology
accomplished in 3. The question is put to 75,000 contract Orchid Bexel Pharmaceuticals Diabetes, inflammation and
other chronic diseases
scientists. (1) Rheoscience Developing anti-
anti-diabetes
Dr. Reddy’
Reddy’s molecule Respiratory diseases
(2) Argenta
Outcome – over 30% of the problems posted through (3) Clin Tech Development of anti-
anti-cancer
compound
INNOCENTIVE website have been solved
Connexios Rheoscience Diabetes
Suven Life Sciences Eli Lilly Nervous system disorders

Source: HBR March 2006

ALLIANCES & LICENSING Contd….. US prescription Drug Sales US$Bn

Indian Company Overseas Company Area of Alliance 300 285

Ranbaxy Medicines for Malaria Malaria 250

Venture 200
Biocon CIMAB Anti-
Anti-cancer drugs 151
NCE'S
Syngene Innate Pharmaceuticals Anti-
Anti-infectives
150
90 REFORMULATION
Zydus Cadila Onconova Cancer 100 77

50

0
2003 2008

Source: Business World Nov.20, 2006 Scrip Oct. 2007

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 Life Cycle Management
thru’
Incremental Innovation
COMPANY TECHNOLOGY
Soliq------------------------------ Enhancing BA of Poorly Soluble
Compounds

Alza------------------------------- Transdermal Patch

Sepracor------------------------- Single Isomer thru`Chiral

Alpex-----------------------------
Elan-------------------------------
3M--------------------------------
Haselmeir------------------------
Chemistry
Rapid release of solid dosage
forms
Nanocrystal Technology to
enhance solubility
Integrated dose by dose
Counting technology
Autoinjectors / pens for self
injecting

PHARMA ON A SHOPPING SPREE – PHARMA ON A SHOPPING SPREE –

2005-
2005-07 (MAY) 2005-
2005-07 (MAY) Contd..

Sr. No. Acquirer Target Sum ($ Mn.)

Mn.) Sr. No. Acquirer Target Sum ($ Mn.)
1. Matrix Labs. DocPharma 263.00
7. Strides Strides Latina 16.00
2. Ranbaxy RPG Aventis 80.00 Arcolab
Efarmes Sa 18.00
8. Wockhardt Epharma 13.30
Terapia 324.00
Negma 265.00
3. Dr. Reddy’s Roche’s Mexican API Unit 59.00
Tirgenesis 11.00 9. Jubiliant Trinity 12.30
Betapharm 572.00 10 Zydus Cadila French Formulation Unit of Apharma 9.41
4. Torrent Heumann 30.00
11. Glenmark Labs Kilinger 5.20
5. Hikal Marsing 5.90
12. Dishman Synprotec 3.48
Psi Supply 16.50
6. Nicholas Piramal Avecia Pharma 16.25 13. Sun Taro 454.00
Pfizer’s Manufacturing Unit in U.K. 50.00 Total: 2224.34

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Dr. Ajit Dangi – Director General, OPPI
Dr. Ajit Dangi heads the OPPI Secretariat as its Director
General. Organisation of Pharmaceutical Producers of India
(OPPI) is a premier association of research based
international and large Indian pharmaceutical companies.
Dr. Dangi is a veteran in the Pharmaceutical Industry and is
former President & Executive Director of Johnson &
Johnson, India. He has served as Vice President of OPPI
and Chairman of its HRD Committee. He is on the Advisory
Board of United States Pharmacopeia,
Pharmacopeia, Washington and
Indian Institute of Intellectual Property Studies, Mumbai. Dr.
Dangi holds Masters and Doctorate degrees in
Pharmaceutical Chemistry from University of London, U.K.
and has undergone an Advanced Management Programme
at the Kellogg Graduate School of Business, Chicago,
U.S.A. He has over three decades of rich and varied
experience in Research, Manufacturing, Sales & Marketing
and General Management in Pharmaceutical Industry in
India and abroad.

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