Pharmaceuticals

Last Updated: July 2010

India's pharmaceutical industry is now the third largest in the world in terms of volume and stands 14th in terms of
value. According to data published by the Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers, the
total turnover of India's pharmaceuticals industry between September 2008 and September 2009 was US$ 21.04 billion.
Of this the domestic market was worth US$ 12.26 billion.

Moreover, according to an Ernst & Young and industry body study, the increasing population of the higher-income
group in the country, will open a potential US$ 8 billion market for multinational companies selling costly drugs by
2015. Besides, the report said the domestic pharma market is estimated to touch US$ 20 billion by 2015, making India
a lucrative destination for clinical trials for global giants.

Exports

Export of pharmaceutical products from India increased from US$ 6.23 billion in 2006-07 to US$ 8.7 billion in 2008-
09—a combined annual growth rate (CAGR) of 21.25 per cent. According to Mr Jyotiraditya M Scindia, Minister of
State for Commerce, pharmaceutical exports from the country have recorded growth rates of 21.61 per cent, 14.37 per
cent and 28.54 cent, respectively, in the three consecutive years of 2006-07, 2007-08 and 2008-09.

Pharmaceutical exports during April-December 2009 were worth US$ 6.33 billion, according to the Department of
Pharmaceuticals, Ministry of Chemicals and Fertilizers.

Growth

According to the All India Organisation of Chemists and Druggists (AIOCD), the pharmaceuticals industry in India
will grow by over 100 per cent over the next two years.

"The people are increasingly becoming health conscious and the sell of all types of medicines, particularly anti-biotic,
will zoom up in the coming years. We expect the business to double by 2012", as per JS Shinde, President, AIOCD.

According to Shinde, the pharmaceutical industry is currently growing at the rate of 12 per cent, but this will accelerate
soon. The sale of all types of medicines in the country stands at US$ 9.61 billion, which is expected to reach around
US$ 19.22 billion by 2012.

Further, a RNCOS report titled 'Booming Pharma Sector in India' projects the industry to continue growing at a CAGR
of around 13 per cent during 2010-11 to 2012-13. The formulations industry is expected to prosper parallel to the
pharmaceutical industry. It is expected that the domestic formulations market in India will grow at an annual rate of
around 17 per cent in 2009-10, owing to increasing middle class population and rapid urbanisation.

Diagnostics Outsourcing/Clinical Trials

According to the research published by RNCOS titled 'Indian Diagnostic Market Analysis' published in January 2010,
the Indian diagnostic services are projected to grow at a CAGR of more than 20 per cent during 2010-2012.

Generics

According to Mr Srikant Kumar Jena, Union Minister of State for Chemicals and Fertilisers, India tops the world in
exporting generic medicines worth US$ 11 billion and currently, the Indian pharmaceutical industry is one of the
world's largest and most developed.

Moreover, as per a press release by research firm RNCOS in May 2010, the report titled ‘Booming Generics Drug
Market in India' projects the Indian generic drug market to grow at a CAGR of around 17 per cent between 2010-11
and 2012-13. Mr Anand Sharma, Union Minister of Commerce and Industry and Lim Hng Kiang, Minister for Trade
and Industry, Singapore , have signed a 'Special Scheme for Registration of Generic Medicinal Products from India' in
May 2010, which seeks to fast-track the registration process for Indian generic medicines in Singapore.

According to Lim Hng Kiang, "What we have agreed is that if your (Indian) generics have already cleared the
regulations of one of the five countries/ regions - US, Canada, the European Union, UK or Australia - Singapore will
take that as 'already cleared' and we will import it (the generic medicines) without any additional clearances."

Mr Sharma said, "This (understanding) will facilitate quick registration and approvals (of Indian generic drugs) in
Singapore. It is a major movement forward. One-fourth of the world's generics come from India. This has ensured easy
availability of life-saving medicines particularly where affordability has been an issue."

Mergers and Acquisitions/ Licensing Deals

• Orchid Chemicals & Pharmaceuticals Ltd, a Chennai-based pharmaceutical company, has entered
into an agreement to acquire US-based generic marketing company Karalex Pharma LLC, in an all-
cash deal.
• In May 2010, Glenmark Pharmaceuticals licensed its chronic pain molecule to Sanofi Aventis for a
cumulative deal of US$ 321.7 million.
• Dr Reddy Laboratories has signed an agreement with Alchemia, an Australian Pharmaceutical
company, for marketing Fondaparinux sodium (which is used for the treatment and prevention of
deep vein thrombosis (DVTs)) in all markets outside of North America. According to the agreement,
Dr Reddy's will pay to Alchemia a royalty on sales at an agreed proportion.
• Super Religare Laboratories (SRL), a diagnostic chain has signed a definitive agreement to buy
Piramal Healthcare's diagnostic chain for US$ 128.6 million, making it the country's largest
diagnostic player.

Government Initiative

100 per cent foreign direct investment (FDI) is allowed under the automatic route in the drugs and pharmaceuticals
sector including those involving use of recombinant technology. (DIPP)

The Government plans to set up a US$ 639.56 million venture capital (VC) fund to give a boost to drug discovery and
strengthen the pharma infrastructure in the country.

According to Mr Ashok Kumar, Secretary, Department of Pharmaceuticals, the Government had issued an expression
of interest (EoI) for technical and financial bids for the selection of a global level consultant (GLC) for the preparation
of a detailed project report (DPR) in order to develop India as a drug discovery and pharma innovation hub by 2020.

The Drugs and Pharmaceuticals Manufacturers Association has received an in-principle approval for its proposed
special economic zone (SEZ) for pharmaceuticals, bulk drugs, active pharmaceutical ingredients (APIs) and
formulations to be located at Nakkapalli mandal in Visakhapatnam district, according to a government press release.

According to Mr Srikant Kumar Jena, Union Minister of State for Chemicals and Fertilisers, the Department of
Pharmaceuticals has prepared a "Pharma Vision 2020" for making India one of the leading destinations for end-to-end
drug discovery and innovation and for that purpose provides requisite support by way of world class infrastructure,
internationally competitive scientific manpower for pharma research and development (R&D), venture fund for
research in the public and private domain and such other measures.

Investment

• The drugs and pharmaceuticals sector has attracted FDI worth US$ 1707.52 million between April
2000 and April 2010, according to data published by Department of Industrial Policy and Promotion
(DIPP) in April 2010.
 • Indian Immunologicals Ltd (IIL), a subsidiary of National Dairy Development Board, will launch four
new vaccines next year. The company is setting up a new manufacturing facility in Hyderabad with
an investment of US$ 32.4 million. The manufacturing unit will produce both human and animal
vaccine.

Road Ahead

According to a report by PricewaterhouseCoopers (PwC) in April 2010, India will join the league of top 10 global
pharmaceuticals markets in terms of sales by 2020 with the total value reaching US$ 50 billion.

Exchange rate used: 1 USD = 46.66 INR (as on July 2010)