Challenges For Profitable Growth in Livestock Industry

through

Animal Health & Welfare

Dr. P. R. Rao CEO, Novartis South Asia & Chairman, Animal Health Products Sub Committee, OPPI. Lonavala, INDIA 12th September 2009

 The greatness of a nation and its moral progress can be judged by the way its animals are treated

..Mahatma Gandhi

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Four Ingredients of Profitable Livestock Operations

+ BREED FEED

Quality

HEALTH CARE

MANAGEMENT

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Our Purpose
We improve lives, We extend lives, We save lives

Feed the world

Maintain Health

Treat & Cure Disease

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Global Animal Health Market

The World Market

World Livestock Population 2008 In Mio. Heads

Pigs, 944

Cattle, 1,365

Buffaloes, 172

Goats, 790

Sheep, 1,059 Dogs, 240

Poultry, 18000

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As per FAO, 2005

World Animal Health Market- Estimated sales

Sales (billion USD)

20

Year 2008 2007 2006 2005

Companion Animals 42%

Sales
(USD Bn.)

18 16 14 12 10 8 6 4 2 0 2005 2006
Cattle Pigs

19 18 16 15

2007
26% 16% 11% 5%

2008

Farm Animals 58%

Poultry Sheep

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Product Groups 2008

Medicinal Feed Additives 12% Total Pharmaceuticals 65%

Parasiticides Vaccines 23% Others Anti-Infectives

29% 20% 16%

Total Market: 19 billion USD

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Species Wise Market 2008

Companion Animals 42% Others

Farm Animals 58%

Cattle Pigs Poultry Sheep

26% 16% 11% 5%

Total Market: 19 billion USD

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Market Trends : 2006 to 2009

Sales in million USD Source: Vetnosis

8,000

7,000

7.16%

6,000

5,000

1.75%

4,000

3,000

1.06% 0.86% 0.04%

2,000

1,000

0 1996 1997 Cattle 1998 1999 Sheep 2000 Pig 2001 2002 Poultry 2003 2004 2005 2006 2007* 2008* 2009*
*estimates

Companion Animal

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Top 10 Companies 2008 - World Market

Rank 2007 1 2 3 4 5 6 7 8 9 10 Rank 2008 1 2 3 4 5 6 7 8 9 10 Company I/SP * Pfizer N Merial Bayer N Novartis N Elanco Fort Dodge Boehringer Ingleheim Virbac N CEVA N Rank 1-10 Total World Market
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Sales million USD 2,973 2,825 2,643 1,408 1,107 1,093 1,088 683 621 541 14,982 19190

% Share of total market 15.5 14.7 13.8 7.3 5.8 5.7 5.7 3.6 3.2 2.8 78.1 100

Growth % over 2007 9.7 7.0 7.9 7.6 4.8 9.7 4.4 22.4 3.5 16.6

7.2

Global Animal Health Business : Challenges

Long term sustainability
Higher cost of bringing a new product to market Vs expected return Disincentive for innovation

Regulatory agencies to understand animal health industry

requirements rather than merely transposing from human sector, where the drivers are often very different.

3 key areas will result in a range of new products within the

next few years
Sequencing of whole genomes, New genomic tools, and RNA-based technologies
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Global Animal Health Business : Challenges

Effective partnerships between industry, academia,
international animal health organizations and regulators is essential to accelerate the progress to market of innovative products

The European Technology Platform for Global Animal

Health represents a useful model of how these stakeholders can be brought together effectively.

Limiting the development of antimicrobial resistance due to

the use of antimicrobials in animals is one of the greatest challenges

Entry into Emerging Growth Markets and reaching BoP.

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Animal Health Market - India

Biological Market 2008

Population in Million Heads

Cattle

285

Layers Broilers Breeders Sheep Pets Aqua

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164 1750 12 120 0.4 70,000 hectares

GLOCAL AH Market 2008

Therapeutics 65% Feed Addit. 12% Vaccines 23% Cattle 26% Poultry 11% Sheep 5% Pig 16% Pets 40%

World AH Market 19190 Mio. USD +7.2%PY

India: 369 Mio. USD 1.9% MS Feed Addit. 27%
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Cattle 52% Poultry 38% Pets 5% Others 5%

The Dynamics of growth

Market

Trade

AH INDUSTRY

Government & Livestock

NCE
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What Makes India Attractive

Dairy Segment
No.1 milk producer in the world (106 mio.
tons per year)

Poultry Segment
5th largest Egg Producer Growth rate of eggs & broilers are
16% and 20% respectively (CII & Mckinsey)

Meat products (Pork/Beef/Mutton) have a

growth rate of 10% (CII & Mckinsey)

Increasing urbanisation leading to

greater consumerism (Packed milk & meat products)

Productivity of hens equivalent to

USA (300 - 305 eggs/year /hen)

All Poultry & Livestock related industries

establishing base to encash from one of world largest growing economy

Indian eggs cheapest in the world (75

cents/kg)

Production of egg powder for export

greater than China

10th five year plan of Govt. of India

focuses on live stock industry and a National Cattle Development Board set up with huge funds
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Potentiality of marketing poultry feed

for the whole world

The Industry
The Animal Health Care is an integral part of Rural Development. The Indira Gandhi Centre for Advanced research on Livestock
(IGCARL) , a research centre in Andhra Pradesh to develop a world class centre for advanced research in livestock development at more than Rs.600 Crores is fast completing.

Various subsidies extended by government including supply of high

yielding cows and buffaloes to weaker sections have created rural employment and economic development.

Bottom of Pyramid projects by few multinational Animal Health

Companies in dairy sector too gave fillip to rural upliftment.

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The Focus
The Tenth Five Year Plan of Government of India envisages enhanced and
sustainable productivity through improved animal health. The major thrust will be on :
genetic up gradation, conservation of livestock breeds, creation of disease- free zones, development of fodder, Sheep & Goat development, improve animal husbandry extension network, Quality assurance of dairy & poultry produce, promotion of backyard poultry, strengthening of veterinary education, encourage interface with scientific community and other stake holders like animal health companies, poultry associations etc.

More and more Agri- clinics and Farm Science Universities

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Veterinary Institutions

Veterinary Polyclinics/Hospitals: 8720 Veterinary Dispensaries: 17820 Veterinary Aid centers: 25433 Disease Diagnostic labs: 330 Veterinary Vaccine Production units: 27

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Indian A.H Farmaceutical Market: Growth

22000 20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0

CAGR 2002- 2008 10%

Rs. Millions
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?
2008

1965

1980

1996

1999

2002

2003

2004

2005

2006

2007

2009

India- Market Overview

Market Size (Currency)

Canine 5% Poultry 38%

Others 5%

Cattle 52%

Cattle Poultry Canine Others

Category Cattle Poultry Canine Others Total

Market Size (in Mio INR) 9178 6707 795 970 17650

Market size (in Mio USD ) 191 140 19 19 369

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Animal Heath Products Market - Currency

Animal Health Products Market in Mio INR 27% 46%

Therapeutics Feed Additives

27%

Bio- security products

Category Therapeutics Feed Additives Bio- security products Total

Animal Health Products Market in Mio INR 8120 4755 4775 17650

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Top 10 AH Companies 2005

(Not Ranked)

Global
Intervet/ Schering Plough Pfizer Merial Bayer Novartis Elanco Fort Dodge Boehringer Ing. Virbac CEVA
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India
Ventri Vetcare Virbac-Glaxo Sarabhai Zydus Pfizer Intervet Vetnex (Ranbaxy) Wockhardt Novartis Intas

What Makes India Attractive

Livestock industry contributes 6% to GDP next to agriculture

Livestock Industry is the 2nd largest contributor to GDP

(6%) the future food factory of the world.

Per capita consumption levels

Milk : 250gm. Meat: 1.6 kg Eggs: 44 (Tgt. 400 gm) (Tgt. 2.5 kg) (Tgt. 60 eggs)

Ranks 5th in Sheep & 7th in Fish production in the world Has 53% of World buffalo heads.
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Key Industry Drivers

Transformation from disease control and treatment to
complete health cover and welfare

Focus on farm productivity, FCR and ROI Organised poultry production Advanced feed production, [pelleted] feed manufacturers
upgrading to global standards

Tailor made solutions Technical support

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Key Trends

Shift towards increasing milk production Increased focus on cross breeding and high yielding
animals

Marketing of live bird preferred Changing structure of farming more towards integration Awareness of biosecurity on the rise
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Concerns of AH Industry

Lack of Official Market Data Lack of Growth : Value Vs Volume Unethical Mktg. Practices Classification of Feed Supplements High WC: Cattle: 21 - 120 days, Poultry : >120 days No New Products Low Export Opportunity

Direct Selling by Sales Staff/ Handling Cash Parallel Manufacturing & Marketing by 3rd party Formulators Generics Regional Low Talent Pool

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Current Situation & Challenges

Expected GDP growth 7% Inflation under control Proliferation of Generics

Economic explosion

Price wars

Demanding customers

Customer knowledge > sales staff

Attracting & retaining talent

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India An Emerging Knowledge Superpower

Are We There ?

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Partnering Opportunities in India

Contract Manufacturing

Clinical Trials

Contract R&D

Bio-technology

Bioinformatics/ Biostatistics

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Growth Dynamics
Price Monitoring

Bottom of Pyramid

Intellectual Property Enforcement

Regulatory Reforms Fiscal Reforms

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Data Protection

In order to ensure enabling environment, the regulatory division dealing with the applications concerning new drugs and clinical trials would be required to develop suitable mechanisms to ensure confidentiality of the submissions.

Extract from the Report of the Expert Committee (Dr Mashelkar Committee) A Comprehensive Examination of Drug Regulatory Issues, including the Problem Spurious Drugs (November 2003)

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Key Competencies for Success

Strong Brands and Product Range Branding and Marketing Excellence Sales Excellence
Competent and Right sales force size in all potential markets to serve all types of customers

Product innovation / portfolio

Vaccines, Bio Security and new drug delivery forms

Efficiency in supply chain and organization Efficiency in procurement to compete generics and support
functions

Passion
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Outlook of the Industry

Future to 2013

Per capita availability of milk to go up from 220- 450 gm. Per capita consumption of eggs to go up from 41 - 100 Eleventh planning commission of Government of India
focuses more on farm productivity Retail Revolution Untapped potential at the very Bottom of pyramid Good Marketing Practices to become the business culture Development strategy by new entrants will exploit huge hidden potential. More international players to step in through M&A, Licensing, JVs etc.
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The Journey continues.

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