global industry of pharmaceuticals

•The pharmaceutical industry is one of the vital and distinct industries as it deals with the lives of the people. At present, pharmaceutical drugs are the most preferred therapeutic treatments for the global population of 6.45 billion.

•Pharmaceutical industry is defined as the market for drugs of chemical or biological origin. These drugs are approved through modern, scientific approval process.

•The coverage of the market is on the basis of therapeutic segment to which the drugs belong.

•Major components of the pharmaceutical industry’s value chain are R&D, manufacturing, marketing and distribution. The Global Pharmaceutical Industry Survey 2005 covers all these major domains of the value chain, focusing at industry and company levels.

•All figures in Major Markets and Major Players are converted to USD with conversion rates as on December 31 of the respective years.

•Estimates are provided wherever data for 2005 is not available

Global Industry Insight -2006

Pharmaceuticals

THEMES

• HIGHLIGHTS

• INDUSTRY OVERVIEW

• GROWTH DRIVERS

• ISSUES & CHALLENGES

• TECHNOLOGY

• MAJOR MARKETS

• MAJOR PLAYERS

• REGULATORY ASPECTS

• MERGERS & ACQUISITIONS

• CRITICAL SUCCESS FACTORS

• FUTURE OUTLOOK

HIGHLIGHTS

•The global pharmaceutical market has grown by 5.95% to USD582.71 billion in 2005. The market has witnessed the lowest growth rate in the last five years owing to increase in patent expiries and measures taken in major markets to curtail the increasing healthcare budget.

•In 2005, the three major markets – North America, Europe and Japan – were valued at USD491.22 billion, accounting for 84.30% of the global pharmaceutical market

•Sales in Europe (including the UK market) totaled USD169.26 billion in 2005, registering the highest regional sales growth of 10.63% compared with 2004

•North America, the largest pharmaceutical market recorded sales totaling USD262.43 billion and a growth rate of 5.82% in 2005 compared with the previous year

•Asia, Africa and Australian market value in 2005 was USD40.86 billion and has grown by 2.14% compared with 2004

HIGHLIGHTS

•In 2005, cardiovascular, CNS, anti-infective, metabolism and oncology segments contributed USD273.42 billion, accounting for 46.92% of the total pharmaceutical market

Cardiovascular was the largest therapeutic segment with the sales value of USD79.03 billion in 2005, growing by 3% compared with 2004

Cholesterol and triglycerides lowering class is the largest therapeutic class of the cardiovascular segment with the sales value of USD31.60 billion in 2005 and accounted for 5.42% of the total pharmaceutical market

The top 10 therapeutic classes contributed USD177.60 billion, accounting for 30.47% of the total pharmaceutical market.

The top 10 best-selling drugs accounted for USD53.2 billion, contributing about 9.13% of the total pharmaceutical market.

Lipitor, with a sale of USD12.19 billion, was the largest selling blockbuster drug in 2005 and accounted for 2.09% of the global pharmaceutical market

•The recent product withdrawals including Tysabri in 2005, and Vioxx and Bextra in 2004 have affected the image of the pharmaceutical industry. This in turn has led the FDA to focus more on safety issues prior to drug approval.

HIGHLIGHTS

Determination of pharmacokinetic data of a new compound by microdosing takes 4 to 6 months and costs USD0.35m

The number of new drugs approved in the US by the FDA decreased by 53% to 17 in 2005 from 36 in 2004. Drugs worth USD21.2 billion are estimated to lose their patent rights in 2006, which is an increase of 76% compared with 2005

•On an average, the value of the M&A in the last 10 years was more than USD40 billion. The number of M&A deals in 2005 was 247 and the total deal value was USD68.20 billion. The deal number has seen a decline of 8% compared with 2004

•The top 10 global pharmaceutical companies spent USD45.79 billion on R&D in 2005. The amount spent on consumer advertising of prescription and non-branded drugs was USD4.51 billion in 2004

The market size of global pharmaceutical outsourcing in 2005 is estimated to be around USD60 billion and has grown at a compounded annual growth rate of 8.37% in the last 5 years.

According to Cygnus estimates, the global pharmaceutical market is projected to grow between USD624 to 629 billion in 2006, an increase of 7 to 8% over 2005.

INDUSTRY OVERVIEW

•The pharmaceutical industry is complex, dynamic and highly globalized with many companies operating as multinationals in various countries. The geographical boundaries are blurring in the pharmaceutical industry with more than one country involved in the manufacture of a single finished product.

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Industry Size (LHS) Growth Rate ( RHS)

Source: IMS world Reviews and Cygnus Research

Global Pharmaceutical Market Size and Growth Rate (2000 -2005)•The global pharmaceutical market is valued at USD582.71 billion in 2005.

•The market grew at an annual rate of 5.95% over the previous year; it is the lowest growth rate in the last five years.

•The lower growth rate during the year compared with 11.83% y/y in 2004 is owing to the increased competition fromgeneric products, cost containment strategies of some of the major markets to curtail their rising healthcare budgets and impact of the drug withdrawals (Vioxx and Bextra) from the market.

The global pharmaceutical market is valued at USD582.71billion in 2005 and grew by 5.95% over that of in 2004.

INDUSTRY OVERVIEW

North America, the largest pharmaceutical market accounted for 43.04% of the global pharmaceutical market in 2005 with sales of USD262.43 billion.

Others, 5.40%

Asia, Africa & Australia,

7.01%

Japan, 10.22%

North America, 45.04%

Latin America, 3.29%

UK, 3.43%Europe, 25.61%Asia, Africa

& Australia, 5.31%

UK, 3.55%Latin America, 5.37%

North America, 43.39%

Europe, 17.83%

Japan, 14.62%

Others, 9.94%

Source: Cygnus Research

Regional nature of the Pharmaceutical Industry - 2000 and 2005

Market size in 2000: USD352.19bn

Market size in 2005: USD582.71 bn

13.56%7.99%

7.39%

6.90%

5.70%

5.83%4.22%

30.89%

1.72%

11.08%

1.34% 3.38%

Cardiovascular CNS Anti-InfectivesMetabolism Oncology RespiratoryMusculoskeletal & PainGastro-intestinal Genito-UrinaryDermatology Ophthalmology Others

Major Therapeutic Segments of the Industry- 2005


•North America, Europe (including the UK market) and Japan constituted nearly 84.30% of the global pharmaceutical market in 2005, up from 79.39% in 2000.

•The collective share of these regions has increased from USD279.59 billion to USD491.22 billion. •Among the regions, Europe (including the UK) has reported a higher growth of 124.81% with the total market size of USD169.26 billion in the period, followed by Asia, Africa and Australia (excluding Japan) over same with the market size of USD40.86 billion in 2005 grew by 118.48% in the period.

•In therapeutic segment, the pharmaceutical market is largelydominated by the drugs related to CVS,CNS, anti-infective, metabolism and oncology segments. These segments account for USD273.42 billion and made up 46.92% of the total market in 2005, down from 47.43% in 2004.

INDUSTRY OVERVIEW

Annual Sales of the Top Ten Therapy Classes 2003 – 2005

S.No

2003 2004 2005†

Therapy ClassSales

(USDbn)

Therapy ClassSales

(USDbn)

Therapy Class Sales

(USDbn)

1Cholesterol. & Triglyceride reducers

26.1Cholesterol & Triglyceride Reducers

30.2Cholesterol & Triglyceride reducers

31.6

2 Anti-ulcerants 24.3 Antiulcerants 25.5 Anticancer* 26.6

3 Anti-depressants 19.5 Anticancer 23.8 Antiulcerants 26.3

4Anti-rheumatic non-steroidals

12.4 Antidepressants 20.3 Antidepressants 20.1

5 Antipsychotics 12.2 Antipsychotics 14.1 Antipsychotics 15.5

6 Calcium Antagonists, plain 10.8Antirheumatic Non-Steroidals

13.1 Erythropoietins 12.1

7 Erythropoietins 10.1 Angiotensin-II Inhibitors 12 Calcium antagonists 11.9

8 Anti-epileptics 9.4Calcium Antagonists Plain

11.6 Antiepileptics 11.7

9 Oral Anti-diabetics 9 Erythropoietin Products 11.4Antirheumatic non steroidals

11.4

10Cephalosporins & combinations

8.3 Anti-Epileptics 11.3 Oral antidiabetics 10.4

Top 10 Therapy classes 142.1 Top 10 Therapy classes 173.3 Top 10 Therapy classes 177.6

Share of top10 therapy class to the total market

28.89%Share of top10 therapy class to the total market

31.51%Share of top10 therapy class to the total market

30.47%

Source: IMS, * Cygnus Research estimate, † MAT June 2005

The top ten therapy classes contributed USD177.6 billion to the total market. The decline in share of the top ten therapy classes from 31.51% to 30.47% in 2005 is mainly owing to

the lower sales of antirheumatic non-steroidals and angiotensin-II inhibitors.

INDUSTRY OVERVIEW

Top 10 Best Selling Drugs 2003 - 2005

2003 2004 2005

S.No ProductsSales

(USDbn)Products

Sales (USDbn)

ProductsSales

(USDbn)

1 Lipitor 9.23 Lipitor 10.86 Lipitor 12.19

2 Zocor 5.00 Plavix 5.64 Plavix 6.21

3 Ogastro/Prevacid 4.71 Zocor 5.20 Seretide/Advair 5.34

4 Norvasc 4.34 Advair,seretide 4.74 Norvasc 4.71

5 Zyprexa 4.28 Norvasc 4.46 Nexium 4.63

6 Plavix 4.13 Zyprexa 4.42 Zocor 4.40

7Erypo (Eprex/Procrit)

3.98 Prevacid, Ogastro 4.14 Zyprexa 4.20

8 Seretide/Advair 3.94 Nexium 3.88 Prevacid/Ogastro 4.00

9 Nexium 3.30 Erypo(Eprex, Procrit) 3.59 Pravachol 3.82

10 Zoloft 3.12 Risperdal 3.05 Diovan/Co-Diovan 3.70

Top 10 drugs 46.03 Top 10 drugs 49.99 Top 10 drugs 53.2

Share of the top 10 drugs to the total market

9.36%Share of the top 10 drugs to the total market

9.09%Share of the top 10 drugs to the total market

9.13%

Source: Annual Reports, compiled by Cygnus Research

The top 10 best selling drugs during 2005 accounted for USD53.2 billion and constituted about 9.13% of the total pharmaceutical market. Among the top 10 drugs, Diovan/Co-Diovan – a hypertensive drug – recorded a higher growth of 19.62% y/y with

sales of USD3.70 billion

INDUSTRY OVERVIEW

Trends shaping the pharmaceutical industry•The pharmaceutical industry is increasingly consolidating over the past 20 years. The market share of the top 10 pharmaceutical companies that was about 20% of the global pharmaceutical market in 1985 has increased to around 47-48% in 2005.

•The global pharmaceutical outsourcing market is increasing by compounded annual growth rate of around 8.37% in the last 5 years. The market size in 2005 is estimated to be around USD60 billion. Outsourcing is leading to an unbundling of pharmaceutical value chain. The number of specialist companies in the traditional value chain has been rising over the last 5-10 years, whereas the number of integrated companies is declining.

•In the last 20 years, the pharmaceutical industry’s “centre of activity” has shifted from the Europe to that to America. This is quite evident from the fact that the European and American markets were of equal size around 20 years back and at present, the size of the American market is almost double that of the European market.

•The R&D costs of a drug that is the costs associated with bringing a drug into the market are increasing at a phenomenal rate over the years. According to the Tufts centre for study of drug development of Tufts University, the costs associated with the drug development were around USD897m in 2003 and these costs have increased by around 59.32% from 1999, which was at USD563m.

Higher consolidation and increasing focus on outsourcing to the specialist companies by the main stream research based companies are the major trends in the global

pharmaceutical industry.

GROWTH DRIVERS

Rising healthcare expenditures and the life style based diseases are the major drivers of the global pharmaceutical industry.

•The likely shift in the disease pattern from communicable to non-communicable diseases would mainly drive the pharmaceutical industry in the future. The DALYs due to non-communicable diseases has been projected to increase from 47% in 2002 to 57% in 2030. This significant increase is being fuelled by the growth in aging population and changes in life style, which includes poor eating habits, less physical exercise, and a stressful work atmosphere (WHO, 2005).

•The increase in Healthcare expenditure across the globe owing to rapid advances in medical technologies, population ageing and higher quality expectations from the public would drive the demand for the pharmaceuticals. The growth in pharmaceutical spending is more than that of the total healthcare spending of the OECD countries in the last few years.

•Biotechnology based drugs are major contributors in the new product sales growth and accounted for 27% of the overall products in R&D pipeline in 2004. The new technologies will accelerate the development of biotech drugs in the future. Though biotech products accounted for 8-10% of the total pharmaceutical market in 2004, this proportion is expected to increase in future (IMS, 2004) backed by a robust R&D pipeline.

•Technology has been making dramatic changes at the drug development level, enabling an analysis of 100,000 compounds per day using combinatorial chemistry and high throughput screening. Technologies like medical imaging and pharmacogenomics are shortening the development timelines and the costs along with the increase in the effectiveness of the drug.

ISSUES & CHALLENGES

Increase in Research & Development spending by the pharmaceutical companies are not turning out towards higher drug approvals

•Despite the increase in R&D expenditure by pharmaceutical companies for the development of new drugs, the number of new drugs getting

approved by USFDA are decreasing. •The tightened regulatory environment, especially for drug approvals has become one of the major issues being faced by the industry. This is one of the reasons behind the 53% decline in drug approvals in 2005 compared with 2004. After the Vioxx withdrawal issue came into limelight, the USFDA is focusing more on safety of the drug, especially for drugs that are to be administered for chronic ailments.

Source: PhRMA and FDA

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R&D spend of PhRMA member companies (RHS)Number of new drugs approved (LHS)

Number of new drugs approved and R&D spend (2001-05)

Source: PhRMA, Cygnus Research

•Between 2006 and 2010, the value of branded drugs losing their patents is USD75.5 billion. (The estimate is based on the sales value of the products in 2004). In 2006 alone, drugs worth USD21.2 billion are estimated to lose their patent rights, which is an increase of 76% compared with 2005.

ISSUES & CHALLENGES

•In order to curtail pharmaceutical spending in the healthcare budgets, governments of various countries are encouraging the use of generic medicines in hospitals. This has been particularly evident in Germany and the UK. The result of this has been an increasing number of generic companies, which in turn has increased competition in the generic market exerting downward pressure on prices.

•The returns on the promotions spent by the pharmaceutical companies are not proportionate to the amount spent on promotions. This is exerting considerable pressure on the pharmaceutical firms to get maximum returns from their increased marketing expenditures, for which they have to identify the poorly performing markets, ineffective promotional campaigns and make corrective measures to maximize the amount spent on promotions.

•Parallel trade has a significant negative impact on the R&D investment and size of the work force of research-based pharmaceutical companies in Europe. Within the European Union, parallel trade was estimated at USD3.3 billion in 2001 and projected to reach USD7.4 billion in 2006.

To curtail the healthcare budgets, governments across the globe are encouraging the use of generic medicines and even are reducing the prices of the

generics regularly.

TECHNOLOGY

Process Analytical Technology would be made mandatory in the years to come by the regulators globally because of its inherent advantages in control of the

operations.

Technology in drug development (Prominent Technologies)

•Combinatorial chemistry and high throughput screening•Chemoinformatics•Medical imaging•Pharmacogenomics

Technology in drug delivery •Nanotechnology in drug delivery •Transdermal drug delivery•Chronopharmaceutical delivery

Technology in manufacturing •Process Analytical Technology

Technology in marketing •Customer relationship

management

Applications of PAT

Inbound and outbound logistics Manufacture of active pharmaceutical ingredients Bulk formulation Filling and packaging of drugs

Benefits of transdermal drug delivery

Improved bioavailability Uniform plasma levels Longer duration of action Reduction in dosing frequency Reduced side effects Maintenance of drug plasma levels up to the end of the dosing interval

TECHNOLOGY

New technologies•Super computers in drug discoveryMicrodosing of new experimental drugs to human volunteers helps to determine the key pharmacokinetic data before phase-I clinical trial and save considerable amount of money. Determination of pharmacokinetic data of a new compound by microdosing takes 4-6 months and costs USD0.35m. It is an improvement over the conventional phase-I studies which take 12-18 months, costing USD3-5m for the determination of the same data (Bryan, 2005b). In the microdosing technique, volunteers are given radio-labeled doses of new experimental drugs and accelerator mass spectroscopy (AMS) is used to count radioactive carbon atoms in blood, urine and fecal samples taken from the volunteers.

•Polymorph screening ReactArray Solo, a new polymorph screening technology from Anachem Ltd, the UK-based instrumentation company, launched in February 2006, provides fast and efficient polymorph screening by enabling simultaneous runs of up to 48 different reaction conditions. This technology will benefit the research-based pharmaceutical companies to a greater extent by protecting the patents of their novel drugs.

•Microdosing in clinical trials•Georgia Institute of Technology is bringing into using one of the world’s most powerful supercomputing clusters, the 1000-node Cluster 1350 system based on IBM BladeCenter systems and powered by dual-core AMD Opteron processors. It can perform more than 8.5 trillion calculations per second.It helps in the development of more targeted drugs by determining the biological and chemical processes of human cancer genes and proteins through fast and accurate analysis of complex DNA and proteins. Polymorph screening would be a major technology in the years to come as the protection

of the intellectual property rights would be very crucial for the research based pharmaceutical companies in the scenario of the lower drug approval rates.

MAJOR MARKETS

The US is the largest pharmaceutical market globally with the total sales of USD248 billion in 2005 with the growth rate of 7.83%.

42.56%

25.61%

13.37%

10.22%

1.18% 1.66%1.96%3.43%

US Europe others Japan UK China Mexico Brazil


Major market share of the global pharmaceutical industry - 2005The US

•The US is the highest spender on the healthcare, globally. According to the latest figures available, the healthcare spending in the US during 2004 was USD1.9 trillion and has grown by 7.9% over 2003. This constitutes about 16% of the country’s GDP (Medical News Today, January 11, 2006).

•The pharmaceutical market in the US has witnessed a lower growth rate of 7.83 % y/y in 2005 with total sales of USD248 billion.

•The growth rate during the year is the lowest in the last five years. This is due to the increased competition from the generic drugs and impact of the drug withdrawals (Vioxx and Bextra) from the market. Between 2001 and 2005, the CAGR was 9.9%.

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Market Size (LHS) Growth Rate (RHS)


Pharmaceutical market in the USA (2001-2005)

MAJOR MARKETS

Drugs related to the Central Nervous System are the largest therapeutic segment in the US with total sales of USD42.45 billion.

•The central nervous system (CNS) stood as the largest therapeutic segment in the US pharmaceutical retail sales with sales of USD42.45 billion in 2005 and accounted for 22.86% of the total pharmaceutical sales.

•The decline in the sales of the products Neurontin, Paxil and Zyprexa in the segment in 2005 has largely been offset by the higher sales of Seroquel, wellbutrin, Cymbalta and Risperdal of CNS segment.

•The top 10 major players accounted for 57.86% of the total pharmaceutical sales in the US market during 2005.

•Pfizer, the largest company, accounted for 10.97% of the market during the year with sales of USD27.2 billion.

8.02%

6.45%

6.13%

5.20%4.80%4.44%3.51%3.39%

42.14%

10.97%

4.96%

Pfizer GlaxoSmithkline Johnson & JohnsonMerck & Co Astrazeneca NovartisAmgen Sanofi-Aventis Lilly

Bristol Myers Squibb Others


Pharmaceutical market share by value in the US, 2005

18.77%

13.60%

9.37%

5.96%

22.86%

7.86%5.78%

2.56%3.01% 5.78%4.46%Cardiovascular Central Nervous SystemAlimentary/MetabolismRespiratory Anti-Infectives Musculo-skeletalGenito-Urinary Cytostatics DermatologicalsBlood Agents Others


Pharmaceutical market segmentation in the US, 2005

MAJOR MARKETS

Pharmaceutical sales in Japan in 2005 is USD59.53billion and the drugs related to cardiovascular disorders are the largest selling drugs

JAPAN

•The pharmaceutical market in Japan has reported a growth rate of 5.95% y/y in 2005 with total sales of USD59.53 billion.

•The growth rate is the lowest in the last three years but is better than the negative growth rates seen in 2001 and 2002 owing to the economic recession, and was above the 2001-2005 CAGR of 5.75%.

•The lower growth rate in the market is mainly owing to greater emphasis on the prescription of generic drugs by the government and the drug price reductions forced by insurance companies.

•Cardiovascular is the leading therapeutic segment in Japan with sales totaling USD13 billion in 2005 and accounts for about 21.84% of the total pharmaceutical market.

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Market Size (LHS) Growth Rate (RHS)


Pharmaceutical market in Japan (2001-2005)

21.84%

15.37%

11.96%10.16%8.68%

8.67%

6.92%6.92% 5.86%

Cardiovascular Alimentary/MetabolismAnti-Infectives CytostaticsRespiratory Central Nervous SystemMusculo-skeletal DermatologicalsOthers


Pharmaceutical market segmentation in Japan, 2005

MAJOR MARKETS

Pharmaceutical market size in Europe (excluding UK) in 2005 is USD149.26 billion and Germany is the leading pharmaceutical market in the region with sales of USD32.5

billion

EUROPE

•The pharmaceutical market in Europe (excluding the UK) has grown by 9.86% y/y in 2005 with the total sales of USD149.26 billion.

• This is the second year of the continuous decline in growth rate in the last five years, which has seen a CAGR of 19.29%. It is mainly a result of market loss owing to the parallel trade estimated to the extent of USD5 billion in 2005 (IMS, 2005).

•Germany is the major market in Europe with sales of USD32.5 billion in 2005, accounting for about 21.77% of the European market.

•The top four markets of Germany, France, Italy and Spain collectively account for about 65.89% of the European market with the total sales of USD98.5 billion.

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Market Size(LHS) Growth Rate(RHS)

Pharmaceutical market in Europe (2001-2005)


32.531

19.615.25

4.94.78

4.44.25

3.73.683.62

3.12.252.11.921.861.81.711.6

0.760.55

GermanyFrance

ItalySpain

NetherlandsBelgiumPolandGreece

PortugalSweden

SwitzerlandAustriaFinland

HungaryDenmarkDenamrk

Czech RepublicNorwayIreland

SlovakiaSlovenia

Value in USDbn


Major Pharmaceutical markets in Europe, 2005

MAJOR MARKETS

Pharmaceutical sales in the UK market is valued at USD20 billion in 2005 with the cardiovascular as the leading therapeutic segment in 2005.

The UK

•The pharmaceutical market in the UK has reported a growth rate of 16.75% y/y, well above the 2001-2005 CAGR of 8.72%, and registered the sales of ofUSD20 billion in 2005.

•The growth rate is one of the highest in the last five years owing to higher spending in both public and private health expenditures.

•Although the UK is one of the markets having a higher generic penetration, the growth in the branded prescriptions in 2005 is higher compared with generics.

•Cardiovascular is the leading therapeutic segment in the retail pharmaceutical market of the UK with sales of USD4.12 billion, about 24.24% of the total pharmaceutical sales. The segment is driven by leading cholesterol lowering drugs including Lipitor, Zocor and Lipostat.

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Pharmaceutical market in the UK (2001-05)

24.24%

23.82%

12.47%

13.47%4.00%10.88%

1.47% 5.76%3.88%Cardiovascular Alimentary/MetabolismAnti-Infectives CytostaticsRespiratory Central Nervous SystemMusculo-skeletal DermatologicalsOthers

Pharmaceutical market segmentation in the UK, 2005


MAJOR MARKETS

The pharmaceutical market in Mexico is valued at USD9.7 billion in 2005 and Anti-infective is the leading therapeutic segment of the market.

Mexico

•The pharmaceutical market Mexico has reported a growth rate of 5.43% in 2005 with total sales of USD9.7 billion. The 2000-2005 CAGR was 15.23%.

• In conjunction with eased export restrictions and the Mexican governments restrictions of manufacturing capacity in the country has led to huge market growth with increased exports to other Latin American markets and the established markets including the US and Canada.

•Anti-infective is the leading therapeutic segment in the market with retail sales of USD1.45 billion, accounting for 17.14% of the total retail pharmaceutical market.

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Pharmaceutical market in Mexico (2001-2005)

Source: IMS retail sales and Cygnus estimates

17.14%

15.11%

13.22%

7.32%

7.25% 7.08%

12.99%8.51%

11.45%Anti-Infectives OthersRespiratory Alimentary/MetabolismCytostatics CardiovascularCentral Nervous System Musculo-skeletal

Dermatologicals


Pharmaceutical market segmentation in Mexico, 2005

MAJOR MARKETS

The pharmaceutical market in Brazil is valued at USD6.89billion in 2005 and Alimentary or Metabolism is the leading therapeutic segment of the market.

Brazil

•The pharmaceutical market in Brazil has reported growth of 23.48% y/y in 2005 with total sales of USD6.89 billion. The high growth is as a result of the complete recovery of the economy from recession and the increased spending on healthcare.

•Brazil is a potential market as it is highly untapped, with medical facilities inaccessible to about 50% of the population. Nearly 80% of the raw material requirement of the pharmaceutical market is imported.

•Alimentary or metabolism is the leading therapeutic segment in the market with sales of USD1.14 billion, accounting for 16.55% of the market in 2005

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Pharmaceutical market in Brazil (2001-2005)

13.57%

15.24%

16.55%9.64%6.24%

7.65%

11.54%

0.65%

19.01%

Cardiovascular Central Nervous SystemAlimentary/Metabolism RespiratoryAnti-Infectives DermatologicalsGenito-Urinary CytostaticsOthers


Pharmaceutical market segmentation in Brazil, 2005

MAJOR MARKETS

The pharmaceutical market in China is valued at USD11.4 billion in 2005 and about 80% of the drugs in the market is distributed through the hospitals.

China

•The pharmaceutical market in China is valued at USD11.4 billion in 2005 and has reported a growth of 20% year in year (figure 7.20). Over the past few years, the Chinese pharmaceuticals market has grown at an amazing rate, recording a CAGR of 21.91% between 2001 and 2005.

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Market size(LHS) Growth Rate(RHS)

Pharmaceutical market in China (2001-2005)


•The excellent growth of the market has been driven by an expanding Chinese urban population, which combined with an increasing standard of living, has created a growing awareness of the importance of healthcare.

•Nearly 80% of the drugs in the country is distributed through hospitals whereas 15% is sold through retail outlets and the rest is through convenience stores that mostly sell over-the-counter drugs (Burril and Co, 2005).

•The major players in the market are JS Yangzijiang Fty, Pfizer, GlaxoSmithKline, Roche, Fresenius, AstraZeneca, Novartis, HLJ Harbin Pharm, Merck & Co and Johnson & Johnson.

MAJOR PLAYERS

Top ten firms in 2005

S.No. CompanyRevenues

’05 (USDbn)

Revenues ’04

(USDbn)

Growth

Rate%

Net Earning

s ‘05

(USDbn)

Net

Earnings

’04 (USDbn)

Net Earnings Growth

Rate

Market Capitaliz

at

ion ’05 (USDbn)

Market Capitalizat

ion

04 (USDbn)

MarketCapitaliz

ation Growth

Rate%

1 Pfizer

51.29 52.51(2.32

)8.08 11.36 -28.87% 171.59

200.

97

-14.62

2 Johnson & Johnson

50.51 47.35 6.67 10.41 8.51 22.33% 178.78 197.86 -17.12

3 GlaxoSmithKline

37.27 38.50(3.19

)8.28 7.74 6.98% 142.68 281.38 -10.67

4 Sanofi-Aventis32.34 34.38

(5.93)

7.50 6.85 9.49% 117.51 56.52 -97.21

5 Novartis32.31 28.24

14.41

6.14 5.60 9.64% 143.77 123.97 51.90

6 Roche26.99 27.64

(2.35)

5.11 6.24 -18.11% 26.65 21.21 13.77

7 AstraZeneca23.95 21.42

11.81

4.72 3.68 28.26% 77.27 59.86 20.41

8 Merck22.00 22.9

(3.93)

4.63 5.81 -20.31% 69.55 95.65 22.53

9 Bristol-Myers Squibb

19.20 19.38(0.92

)3.00 2.38 26.05% 44.95 49.75 -37.53

10 Wyeth 18.75 17.35 8.06 3.65 1.23 196.75% 61.92 57.68 -10.68

Source: Company Websites and Annual ReportsRevenue includes pharmaceutical, consumer healthcare & others

Pfizer is the largest company in the global pharmaceutical market with sales of USD51.29 billion in 2005.

MAJOR PLAYERS

Pfizer’s leading block buster drug Lipitor with sales of USD12.2 billion accounts for 2.09% of the global pharmaceutical market.

Key Financials: Pfizer Inc. 2003 - 2005

Financial Year Ending Dec-05 Dec-04

Dec-03

Revenues (USDbn) 51.29 52.51 44.73

Marketing & Admin. Expenses (USDbn)

16.99 16.90 15.10

R & D expenses (USDbn) 7.44 7.68 7.48

Net Earnings (USDbn) 8.08 11.36 3.91

Net EPS (USD) 1.10 1.51 0.54

Net Margin (%) 15.75 21.63 8.74

Op. Income (USDbn) 11.53 14.00 3.24

Dividends (USD) 0.76 0.68 0.60

Source: Company Website & Annual Reports

Top ten products: Pfizer 2005

S.No. Brand Name Sales in 2005 (USDbn)

1 Lipitor 12.2

2 Norvasc 4.7

3 Zoloft 3.3

4 Celebrex 1.7

5 Viagra 1.6

6 Xalatan/Xalacom

1.4

7 Zyrtec 1.4

8 Detrol 0.988

9 Camptosar 0.91

10 Genotropin 0.808

Source: Annual Report, 2005

Pfizer Inc•Pfizer has three business segments: Health care, Animal health and consumer health care. •Health care constitutes the core of Pfizer Inc and accounted for 86.32% of the total revenue in 2005.•Consumer health care segment accounts for 7.56% of the total revenue in 2005. •Animal health segment accounted for 4.3% of the total revenues in 2005.

MAJOR PLAYERS

Pharmaceutical and Medical devices & diagnostics sales accounted for USD22.3 billion and USD19.1 billion respectively in 2005.

Johnson & Johnson (J&J)•J&J has three business segments: consumer, pharmaceutical and medical devices & diagnostics. •The consumer segment has reported sales of USD9.1 billion in 2005, an increase of 9.2% over last year. •The sales of pharmaceutical segment were USD22.3 billion in 2005, an increase of 0.9% than in 2004. •Medical devices and diagnostics segment reported sales of USD19.1 billion in 2005, which has grown by 13.1% over 2004.

Top products: J & J 2005

S.No.

Brand Name Sales in 2005 (USDbn)

1 RISPERDA 3.552

2 PROCRIT®/EPREX 3.324

3 REMICADE 2.535

4 TOPAMAX 1.68

5 DURAGESIC 1.585

6 LEVAQUIN®/FLOXIN 1.492

7 ACIPHEX®/PARIET 1.169


Key Financials: Johnson & Johnson 2003 - 2005

Financial Year Ending Dec-05 Dec-04 Dec-03

Revenues (USDbn) 50.51 47.35 41.86


16.87 15.86 14.13



Net EPS (USD) 3.46 2.87 2.42

Net Margin (%) 20.61 17.97 17.17

Op. Income (USDbn) 13.65 12.83 10.30

Dividends (USD) NA 1.095 0.925

Source: Company Website & Annual Report, NA-Not Available

MAJOR PLAYERS

Glaxo Smithkline Plc•The company has two business segments: Pharmaceuticals which includes prescription pharmaceuticals & vaccines and Consumer Healthcare consists of over-the-counter medicines, oral care and nutritional healthcare. •Pharmaceuticals and vaccines contributed USD32.11 billion in 2005, which accounted for 86% of the total revenues in 2005. •Consumer healthcare reported USD5.16 billion in 2005, which accounts for 13.85% of the total revenues in 2005. Top ten products: GSK 2005

S.No.

Brand Name Sales in 2005 (USD bn)

1 Seretide/Advair 5.17

2 Avandia 1.99

3 Zofran 1.44

4 Lamictal 1.46

5 Wellbutrin 1.27

6 Imigran/Imitrex 1.20

7 Valtrex 1.20

8 Augmentin 1.15

9 Flixotide/Flovent 1.10

10 Seroxat/Paxil 1.06


Key Financials: GlaxoSmithKline 2003 - 2005


Revenues (USDbn) 37.27 38.50 37.47


12.47 13.87 14.02



Net EPS (USD) 1.42 1.31 1.28

Net Margin (%) 22.21 20.10 20.44

Op. Income (USDbn) 11.82 11.09 10.76


Source: Company Website & Annual Report

Glaxo Smithkline is the second leading pharmaceutical company globally with major focus into Respiratory products and Anti-infectives.

MAJOR PLAYERS

Sanofi-Aventis is the third largest pharmaceutical company (considering only the pharmaceutical sales)with higher net margins of about 23% in 2005 when compared to

other major players

Sanofi-Aventis•The company has two business segment: pharmaceuticals (principally prescription drugs) and human vaccines.

Key Financials: Sanofi-Aventis 2003 - 2005

Financial Year Ending

Dec-05 Dec-04 Dec-03

Revenues (USDbn) 32.34 34.38 30.50


9.77 10.76 9.43

R & D expenses (USDbn)

4.79 5.40 5.10


Net EPS (USD) 5.61 5.14 4.13

Net Margin (%) 23.19 19.92 18.32

Op. Income (USDbn) 10.80 10.47 9.10


Source: Company Website & Annual ReportNA-Not Available

Top ten products: Sanofi-Aventis 2005


1 Lovenox 2.54

2 Plavix 2.40

3 Taxotere 1.91

4 Eloxatine 1.85

5 Stilnox 1.80

6 Allegra 1.59

7 Lantus 1.44

8 Delix 1.20

9 Copaxone 1.07

10 Aprovel 1.06


MAJOR PLAYERS

Novartis revenues in 2005 is about 32.34 billion with the major focus into oncology products.

Novartis•Novartis has three business divisions – Pharmaceuticals, Sandoz (generic pharmaceuticals) and Consumer Health. •The sales of Novartis’ Pharmaceutical division increased 10% to USD20.3 billion backed by a dynamic growth ahead of the market and in all regions. •Sandoz has reported generic pharmaceutical sales of USD4.7 billion in 2005. •Consumer Health net sales increased by 8% to USD7.3 billion, bolstered by a double-digit growth performance in OTC.

Key Financials: Sanofi-Aventis 2003 - 2005

Financial Year Ending Dec-05

Dec-04 Dec-03

Revenues (USDbn) 32.34 34.38 30.50


9.77 10.76 9.43



Net EPS (USD) 5.61 5.14 4.13

Net Margin (%) 23.19 19.92 18.32

Op. Income (USDbn) 10.80 10.47 9.10


Source: Company Website & Annual Report, NA-Not Available

Top ten products: Sanofi-Aventis 2005


1 Lovenox 2.54

2 Plavix 2.40

3 Taxotere 1.91

4 Eloxatine 1.85

5 Stilnox 1.80

6 Allegra 1.59

7 Lantus 1.44

8 Delix 1.20

9 Copaxone 1.07

10 Aprovel 1.06


MAJOR PLAYERS

Roche•Roche has two business divisions –Pharmaceuticals & Diagnostics.

•Roche’s Pharmaceutical division has reported sales of USD20.73bn in 2005.

•Roche Diagnostics has reported sales of USD6.26 billion in 2005 as compared with USD6.91 billion in 2004.

Key Financials: Roche 2003 - 2005



Revenues (USDbn) 26.99 27.64 25.14


9.05 9.21 8.29


4.33 4.50 3.83

Net Earnings (USDbn)

5.11 6.24 2.47

Net EPS (USD) 5.20 6.94 2.94

Net Margin (%) 18.93 22.58 9.82

Op. Income (USDbn) 6.59 7.93 4.50



Top ten products: Roche 2005


1 MabThera/ Rituxan 3.16

2 NeoRecormon, Epogin 1.71

3 Herceptin 1.63

4 CellCept 1.30

5 Avastin 1.27

6 Tamiflu 1.18

7 Pegasys 1.07

8 Rocephin 0.70

9 Xeloda 0.61

10 Xenical 0.48


MAJOR PLAYERS

Astra Zeneca•AstraZeneca has only one business segment: Pharmaceuticals.

•AstraZeneca’s flagship product Nexium sales were up 18% to USD4.63 billion. Sales in the US were up by 15% to USD3.12 billion, and this strong volume growth continues despite being partially offset by lower price realization. Nexium sales in other markets have grown by 25%.

Nexium of Astra Zeneca sales increased in 2005 all across the US and and other regions with Seroquel following at the seconf bestselling product

Key Financials: AstraZeneca 2003 - 2005



Revenues (USDbn) 23.95 21.42 18.85


8.69 8.26 7.39


3.37 3.46 3.01


Net EPS (USD) 2.91 2.18 1.77

Net Margin (%) 19.70 17.18 16.12

Op. Income (USDbn) 6.50 4.54 4.00

Dividends (USD) 1.30 0.94 0.795


Top ten products: AstraZeneca 2005


1 Nexium 4.633

2 Seroquel 2.761

3 Seloken/Toprol-XL 1.735

4 Losec/Prilosec 1.652

5 Crestor 1.268

6 Arimidex 1.181

7 Pulmicort 1.162

8 Casodex 1.123

9 Symbicort 1.006

10 Zoladex 1.004


MAJOR PLAYERS

Merc experiencing a lean result in 2005 in terms of revenues, net return and net margin although the R&D spending of the company decreased

Top ten products: Merck & Co 2005


1 Zocor 4.381

2 Fosamax 3.191

3 Cozaar/Hyzaar 3.037

4 Singulair 2.975

5 Proscar 0.741

6 Primaxin 0.739

7 Vasotec/Vaseretic 0.623

8 Cosopt/Trusopt 0.617

9 Cancidas 0.57

10 Maxalt 0.348


Key Financials: Merck & Co 2003 - 2005

Financial Year Ending Dec-05

Dec-04

Dec-03

Revenues (USDbn) 22.0 22.9 22.48


7.15 7.23 6.39



Net EPS (USD) 2.10 2.61 3.03

Net Margin (%) 21.05 25.37 30.38

Op. Income (USDbn) 7.36 7.97 8.42



Merck• Revenues of Merc in 2005 dropped marginally to USD22 billion from USD22.9 billion in 2004• R&D expanses of the company reduced to USD3.84 billion in 2005 from USD4.01 billion in 2004• Zocor is top product of the company in 2005 posting a total sales of USD4.38 billion

Bristol Myers Squibb•BMS has three divisions: Pharmaceuticals, Healthcare and Nutritionals. •In 2005 throughout the world pharmaceuticals sale of BMS has declined by 2% to USD15.25 billion compared with its previous year.•The healthcare division of Bristol-Myers Squibb has accounted sales of USD1.75 billion, a decline of 3.69% compared with its previous year. •The worldwide sales of nutritionals in 2005 were USD2.20 billion.

Bristol Myers Squibb suffers decline of sales in two of its three business divisions- pharmaceuticals and healthcare

Key Financials: Bristol Myers Squibb 2003 - 2005

Financial Year Ending Dec-05 Dec-04

Dec-03

Revenues (USDbn) 19.20 19.38 18.65


5.10 5.01 4.62



Net EPS (USD) 1.53 1.23 1.60

Net Margin (%) 15.62 12.28 16.56

Op. Income (USDbn) 4.51 4.41 4.68



Top ten products: Bristol Myers Squibb 2005


1 Plavix 3.82

2 Pravachol 2.25

3 Avapro/Avalide 0.982

4 Abilify 0.912

5 Taxol 0.747

6 Reyataz 0.696

7 Sustiva 0.68

8 Erbitux 0.413

9 Efferalgan 0.283

10 Zerit 0.216


MAJOR PLAYERS

MAJOR PLAYERS

Wyeth•Wyeth has three divisions: Wyeth Pharmaceuticals, Wyeth Consumer Healthcare, and Fort Dodge Animal Health. •Wyeth Pharmaceuticals revenues were increased by 10% to USD15.32 billion in 2005 as compared with 2004. •Wyeth Consumer Healthcare has reported sales of USD2.6billion in 2005.•Animal Health has grown by 5% for the year 2005 to USD0.88 billion compared with 2004.

Wyeth posts growth in its pharmaceuticals and animal health business by 10% and 5% respectively in 2005

Key Financials: Wyeth 2003 - 2005


Revenues (USDbn) 18.75 17.35 15.85


6.11 5.80 5.46



Net EPS (USD) 2.73 0.93 1.54

Net Margin (%) 19.46 7.08 12.93

Op. Income (USDbn) 4.78 -0.12 2.36



Top ten products: Wyeth 2005


1 Effexor 3.458

2 Protonix 1.684

3 Prevnar 1.508

4 Enbrel 1.083

5 Nutrition 1.04

6 Premarin 0.908

7 Zosyn/Tazocin 0.891

8 Zoton 0.375

9 BeneFIX 0.343

10 Rapamune 0.3


REGULATORY ASPECTS

Regulatory Bodies

The US

United States Food & Drug administration

European Union

The European Medicines Agency (EMEA)

Japan

Ministry of Health, Labor & Welfare

•Pharmaceutical and Food Safety Bureau office

•Health Policy Bureau

Major divisions of FDA

The Center for Biologics Evaluation and Research The Center for Devices and Radiological HealthThe Center for Drug Evaluation and Research The Center for Food Safety and Applied NutritionThe Center for Veterinary Medicine

Major committees – EMEA

Committee for Medicinal Products for Human Use Committee for Medicinal Products for Veterinary Use Committee on Orphan Medicinal Products

REGULATORY ASPECTS

Regulations in the US•Pure Food and Drug Act, June 30 1906.•Food, Drug, and Cosmetic Act of 1938•The Kefauver-Harris Drug Amendments of 1962•The FDA Modernization Act of 1997.

Regulations in Japan•The Pharmaceutical Affairs Law•The Pharmacists’ Law•The law concerning the Organization for Pharmaceutical Safety and Research•The Blood Collection and Blood Donation Services Control Law•The Poisonous and Deleterious Substances Control Law•The Narcotics and Psycho tropics Control Law•Cannabis Control Law•The Opium Control Law•The Stimulants Control Law

Regulations in European Union•In 1975, the Commission establishes a multistate procedure to allow a pharmaceutical company to market a product in all member states if just one of them approved the product application – a procedure referred to as ‘mutual recognition’. The Commission also created the Committee for Proprietary Medicinal Products (CPMP).

•In 1987, the Commission established another process, ‘the concertation procedure’ designed to foster a single market. Under this procedure, the CPMP reviewed all biotechnology and other high technology pharmaceutical products for approval across the EU.

REGULATORY ASPECTS

International agreements on intellectual property rights protection

The major international agreements to protect intellectual property are

•General Agreement on Tariffs and Trade (GATT)•Trade Related Aspects of Intellectual Property Rights (TRIPS)•The Paris Convention for the Protection of Industrial Property (PCPIP)•The Patent Co-operation Treaty (PCT)

Prolonging Patent Protection

•GATT & TRIPS•The Waxman-Hatch Act

The world is massively heading towards an uniform business environment in pharmaceuticals through a series of international agreements and laws

REGULATORY ASPECTS

Recent regulatory amendments

The USUSFDA sets up Drug Safety Oversight BoardIn line with the regulatory reforms announced by the FDA in the last quarter of 2004, USFDA set up a Drug Safety Oversight Board (DSB) February 2005 to oversee the management of drug safety issues and to increase the transparency of approval process and safety of drugs.

USFDA tightens approval processThe public criticism in the wake of high-profile withdrawals such as Vioxx and Bextra has forced the USFDA to adopt a cautious approach toward new drug approvals. Now the USFDA is not only taking longer time to approve drugs but is also studying side effects more closely than it did in the past. Some of the new drugs that could have otherwise made it to the market a year ago, no longer find place on the shelf.

USFDA becomes more cautious in approving new drugs amid widespread public outcry against the approval of high profile drugs

REGULATORY ASPECTS

EU FDA and EU extend Confidentiality AgreementThe USFDA, the European Commission (EC), and the EMEA extended their confidentiality agreement on medicinal products for human and veterinary use for five more years. This agreement, signed in September 2003, was set to expire in 2005. This confidentiality agreement allows the three agencies to exchange information on legal and regulatory issues, scientific advice and orphan drug designation, inspection reports, marketing authorization procedures and post-marketing surveillance.

Japan Application for approval of generic drugs modifiedIn September 2005, the MHLW modified the application for the approval of generic drugs with single active pharmaceutical ingredient. Now, the manufacturers of generic drugs have to specify in the application, details such as the brand name of the generic drug, active pharmaceutical ingredient, dosage form, quantity and the company name. The new additions to the application are ‘the name of the generic company’ and ‘active pharmaceutical ingredient.’

Generic drug manufacturers in Japan now needs to declare the name of the active pharmaceutical ingredient

MERGERS & ACQUISTIONS

M&A drivers

•Need for low cost pharmaceuticals

•Growing generics market

•Focus on areas of core competence

•To replenish decreasing R&D pipeline and shrinking patented drug list

65

106

0

20

40

60

80

100

120

2005 2010

US

Db

n

Generics retail market estimates (USDbn) – 2005 - 10

Source: *IMS Health *Denotes: Inhouse estimates

CAGR - 11%

Big pharmaceutical firms are acquiring specialty pharmaceutical and biotech firms owing to decrease in the success rate of their R&D, increase in patent expiries and product recalls, which are shortening their list of patented drugs and ultimately hitting a large source of revenue.


M&A Trends•Pharmaceutical M&A accounted for more than one-fourth of total healthcare M&A in deal value

•Pharmaceutical deals declined in terms of number and value in 2005

•Smaller value deals dominated the M&A scenario in 2005

37.88

73.38

40.00

105.85

68.20

020406080

100120

2001 2002 2003 2004 2005

USD

bn


Deal value of Pharmaceutical M&A (2001-2005)

176

246

303268

247

0

50100

150

200

250300

350

2001 2002 2003 2004 2005


Number of Pharmaceutical M&A (2001-2005)


Top 10 M&A 2005

Rank Acquirer TargetDeal value

(USDm)

1 Sankyo Co (Japan) Daiichi Pharmaceutical Co (Japan) 7,700

2 Teva (Israel) IVAX Corp (US) 7,400

3 Novartis AG (Switzerland) Chiron Corp (56% stake) (US) 5,780

4 Sandoz (Novartis AG) - (Switzerland) Hexal AG (Germany) 5,280

5 Abraxis BioScience (formerly APP) (US) American BioScience (US) 4,170

6 Allergan Inc Inamed Corp (US) 3,100

7 Sandoz (Novartis AG) - (Switzerland) Eon Labs (US) 2,600

8 Nycomed A/S (Finland) Nycomed Holding A/S (Finland) 2,270

9 Amgen (US) Abgenix (US) 2,200

10 Dainippon Pharmaceuticals (Japan) Sumitomo Pharmaceuticals (Japan) 2,120


Top 10 M&A 2004

Rank Acquirer TargetDeal value

(USDm)

1 Sanofi-Synthelabo (France) Aventis (France) 62,600

2 Yamanouchi Pharmaceuticals (Japan) Fujisawa Pharmaceuticals (Japan) 8,000

3 Private Equity Consortium (US) Warner Chilcott (UK) 3,000

4 Bayer (Germany) Roche OTC business (Switzerland) 2,900

5 UCB (Belgium) Celltech (UK) 2,700

6 Amgen (US) Tularik (79%) (US) 1,300

7 Genzyme (US) ILEX Oncology (US) 1,000

8 Perrigo (US) Agis Industries (Israel) 818

9 QLT (Canada) Atrix Laboratories (US) 855

10 Sandoz (Novartis AG) - (Switzerland) Sabex (Canada) 565



Top 10 M&A 2003

Rank Acquirer Target Deal value (USDm)

1 Biogen (USA) Idec (USA) 6,700

2 Teva Pharmaceuticals (Israel) Sicor (USA) 3,400

3 Johnson & Johnson (USA) Scios (USA) 2,400

4 DSM (Netherlands) Roche vitamin unit (Switzerland) 2,000

5 Merck & Co (USA) Banyu (Japan) 1,500

6 Roche (Switzerland) Igen (USA) 1,400

7 Pfizer (USA) Esperion Therapeutics (US) 1,300

8 CSL (Australia) Aventis Behring vaccines arm (France) 925

9 Chiron (USA) PowderJect (UK) 880

10 King Pharmaceuticals (USA) Elan (Ireland) primary care franchise 750

CRITICAL SUCCESS FACTORS

Smooth communication between the partners are important to reap the maximum benefit of alliances and acquisitions

•Alliances and acquisitions

•Outsourcing to low cost destinations

•Absorption of technological innovations

•Improving sales force effectiveness

• Need for Critical mass

•Need for blockbuster drugs

To exploit the benefits of alliances and partnerships, pharmaceutical companies need to:

Streamline the exchange of information about partner resources, drugs, and clinical trials and molecule synthesis processes to improve time-to-marketAvoid drug discovery dead ends by keeping their partners abreast of developments while safeguarding their own intellectual propertyImprove quality and reliability of clinical trialsSpeed up regulatory approvals

FUTURE OUTLOOK

•The global pharmaceutical market is expected to grow between 7% to 8% to between USD624 billion and USD629 billion in 2006.

•The US would still be the leading market with sales of about USD267-270 billion, with a growth rate between 8-9% y/y in 2006.

•The higher growth rate in the market is owing to the increased spending on the prescription drugs with the new Medicare Part D of Medicare Prescription Drug Program, which has come into effect on January 1, 2006. It provides

prescription drug coverage to more than 40m people of the US. •Japan is estimated to grow at 3% in 2006 with sales of USD61.07 billion.

•The Latin American market is expected to grow at a higher rate of 10%, with increasing share of healthcare spending as a percentage of GDP in the market and higher economic growth.

•The Chinese pharmaceutical market is expected to witness exceptional growth between 15% and 20% in 2006.

The US is still the leading market in pharmaceuticals with a higher growth rate mainly due to increased spending on the prescription drugs

FUTURE OUTLOOK

The biopharmaceutical market is all set to flood the market taking the advantage of patent expiry of some blockbuster drugs

Major Pharmaceutical and Biopharmaceutical Drugs Losing Patents in 2006

Pharmaceuticals Biopharmaceuticals

BrandPatent holder Brand Patent holder

Zocor Merck & Co. Epogen Amgen Inc

Zoloft Pfizer Neupogen Amgen Inc

Lamisil Novartis Avonex Biogen Inc

Ambien Sanofi-Aventis Ceryzyme Genzyme Corp

Pravachol BMS EnbrelImmugene Corp and Wyeth Ayerst Labs

Zofran GSK


•In the future, an aging global population; the shift in the disease pattern towards lifestyle disorders; and increase in biotechnology based drugs will continue to be the prime driving factors of the pharmaceutical industry.

•Increase in number of patent expiries is a growing concern for the major pharmaceutical companies among the research-based pharmaceutical companies. In 2006 alone, drugs worth USD21.20 billion are going off-patent.

•Generic variants of five major biopharmaceutical drugs are expected to hit the market in 2006. Amgen’s anti-anemic drug Epogen, with a global sale of USD2.5 billion in 2005, is one of the major biopharmaceutical drugs going off-patent in 2006.

FUTURE OUTLOOK

•The pharmaceutical industry will witness further consolidation in the future too.

•In February 2006 alone, a total of 16 M&A worth USD965m happened in the industry. The largest deal for in the first three months of 2006 being Indian-based Dr Reddy’s Laboratories acquisition of Betapharm Group of Germany for USD570m.

•M&As will be driven mainly by the need to refill drying blockbusters of big pharmaceutical companies, which will push they into acquiring biopharmaceutical companies by the need to tap the growing generics market.

•The FDA is concerned more about the safety of the new drugs that comes up for its approval. In the near future it might mandate the requirement of long-term safety data for approving the drugs used to treat chronic ailments mandatory.

•In order to improve the manufacturing standards further, the FDA is also expected to make compliance to process analytical technology mandatory mandatory in the future. Keeping a healthy product pipeline would be the major concern of the pharmaceutical

companies in the future and this will lead to M&A deals

global industry of pharmaceuticals

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