This document provides an overview of the contract research and manufacturing services (CRAMS) sector. It notes that the global CRAMS market is expected to grow significantly between 2000 and 2017, driven by outsourcing trends in the pharmaceutical industry. The market is divided between contract research organizations (CROs) and contract manufacturing organizations (CMOs). The document also outlines the favorable market dynamics and consolidation trends in the CRAMS industry.

1. Contract
Research
and
Manufacturing
Services
(“CRAMS”)
Aurum-DealCurry CXO Dialogues
__________________________________________________________
Webinar on the 30th July 2014: 3pm – 4pm

2. Aurum
Equity
Partners
LLP
An investment banking firm, with a depth of diverse-sector experience.

3. Strictly
Confiden/al
Sector specialization:
• Healthcare and Pharma
• Consumer Markets & Retail
Deal Experience:
12+ years experience spread over 50+
deals
Previous Work Experience:
• Axis Capital
• Ambit Corporate
• Lazard Brothers
Academic Experience:
• Business Management Diploma
from IIPM (New Delhi)
• Bachelor of Commerce from
Sydhenam College, University of
Mumbai
Conferences & seminars:
Regular speaker at industry Seminars &
Conferences.
Select Deals :
Partner
Gautam Dhawan
• Sale of Sanmar's foundry business to Dynamitic Auto
• Acquisition advisory to Marico on Nihar brand
• Acquisition advisory to Dabur India on Fem Care
• Acquisition advisory to United Spirits on Balaji Distilleries
• Sale of Alstom’s electrical business in India to Regal Beloit Corporation
• Corporate restructuring of the Eicher Group
• Sale of ‘Lifespring’ Chain of Wellness Stores to Morepen Laboratories

4. Strictly
Confiden/al
Experience:
35 years of experience in the
pharmaceutical sector, including
research & manufacturing and
business & regulatory management.
Work Experience:
• Technical Advisor at Arch
Pharma Labs (Current)
• Ranbaxy Laboratories Ltd –
1979 – 2010
² Senior Vice President (Research
Project)
² Senior Vice-President (API
research, Manufacturing and
Business)
² Vice President- Chemical
Manufacturing
² Vice President- Chemical
Research
Academic Experience:
• PhD, Studies in Anticancer and
CNS agents, Supervisor: Dr.
Nityanand-Ex-Director, CDRI,
Lucknow, 1977
• MSc, Organic Chemistry; First
Division, 1972
• BSc, Physics, Chemistry, Maths;
First Division, 1970
Conferences & seminars:
Regular speaker at industry seminars &
conferences.
Expertise :
Sector Specialist – Pharmaceuticals
Dr. Naresh Kumar
• Experience in planning and implementing
complex, big-ticket projects
• Extensive experience of developing patent
non-infringing technologies, transferring of
technologies at plant scale and successful
manufacturing at commercial scale.

5. Strictly
Confiden/al
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offer.
Disclaimer
5

6. Strictly
Confiden/al
6
Global
CRAMS
Outlook
1SECTION

7. Strictly
Confiden/al
An
AIracJve
Growth
Market
Big
Pharma
PerspecJve:
ü Faster
development
of
new
drugs
ü Cost
containment
ü Simultaneous
research
in
mul/ple
countries
ü Stringent
government
regula/ons
ü Focus
on
Core
Ac/vi/es
7
Source:
Phillip
Capital
Nov
13
Market
Structure
Key
Drivers
for
Outsourcing
6
25
43
0
50
100
150
2000
2012
2017E
CRO
CMO
Global
CRAMS
–
Growth
(USD
Bn)
21
72
136
Outsourcing
Industry
Contract
Development
Discovery
Contract
Manufacturing
Development
API
FormulaJons
CAGR
00-­‐12
CAGR
12-­‐17
11%
13%
10%
14%
11%
15%

8. Strictly
Confiden/al
Favorable
Market
Dynamics
Generics
Innovators
• Global
generics
to
grow
from
$
260
bn
in
FY
2012
to
$
430
bn
in
2017
represen/ng
a
CAGR
growth
of
11%
• Key
Drivers:
ü Patent
expiries
ü Governments
worldwide
implemen/ng
pro-­‐generic
policies
ü Big
Pharma
pursuing
BGx
opportuni/es
in
emerging
markets
ü Rising
generic
u/liza/on
• GDUFA
legisla/on
will:
Ø Increase
FDA
inspec/ons
of
foreign
pharma
facili/es
Ø Accelerate
FDA
approval
of
ANDAs
• Custom
Development
ü Global
R&D
spends
will
grow
from
$
137
bn
in
2013
to
$
145
bn
in
2016
ü According
to
es/mates
total
addressable
outsourcing
market
at
$
95
bn
ü Outsourcing
penetra/on
at
25%
and
will
increase
to
35%
over
the
next
4-­‐5
years
ü Stronger
Biotec
funding
environment
ü Improving
Regulatory
approval
rates
• Custom
Manufacturing
ü Ongoing
ra/onaliza/on
of
Big
Pharma
manufacturing
ü Increasing
outsourcing
of
intermediates
and
APIs
8

9. Strictly
Confiden/al
Dynamic
M&A
Environment
Date
Acquirer
Target
Value
(USD
mn)
Remarks
June
2014
AMRI
OSO
biopharma
110
Enhance
capabili/es
in
complex
injectable
products
May
2014
Hun/ngdon
Life
Harlan
Lab
-­‐
To
form
3rd
biggest
full
service
CRO
(Non
clinical)
April
2014
Charles
River
Galapagos
NV
179
To
Form
Full
service
early
stage
CRO
March
2014
Patheon
Royal
DSM
2,650
Merger
to
form
2nd
biggest
Full
Service
CDMO
January
2014
Par
Pharma
JHP
Pharma
490
Expand
presence
(injectables)
October
2013
Aenova
Haupt
Pharma
-­‐
To
form
one
of
the
largest
full
service
CDMO’s
August
2013
Quin/les
Novella
Clinical
146
Enhance
capabili/es
on
the
Oncology
Segment
June
2013
PRA
RPS
-­‐
Merger
to
form
a
full
service
CRO
(clinical
development)
9

10. Strictly
Confiden/al
India
CRAMS
Outlook
2SECTION
10

11. Strictly
Confiden/al
Fast
-­‐
Growing
Market
11
Global
CRAMS
to
grow
at
14%
CAGR
6
29
-­‐
10
20
30
40
2012
2017E
Indian
CRAMS
to
grow
at
35%
CAGR
Source:
Phillip
Capital
72
136
0
50
100
150
2012
2017E
14%
CAGR
USD
Bn
USD
Bn
• Global
CRAMS
is
growing
on
the
back
of
rising
generic
u/liza/ons,
patent
expiries,
increasing
R&D
spends
• India’s
market
share
of
Global
CRAMS
is
expected
to
rise
from
8%
currently
to
21%
by
2017
• Key
Drivers:
ü High
number
of
USFDA
and
other
regulatory
approved
plants
ü Cost
advantages
ü Robust
skills
in
chemistry

12. Strictly
Confiden/al
Indian
Market
Structure
Formula/on
23%
Custom
Synthesis
23%
Intermed
14%
API
40%
Contract
Manufacturing
Segment
Wise
(%)
12
Contract
Mfg.
65%
Contract
Research
35%
Break
Up
of
CRAMS
(%)
Indian
CRO
Market
(%)
Research
Chemistry
&
Biology
18%
Pre
Clinical
Trials
30%
Clinical
Trials
52%
• Highly
fragmented
market
• Key
thrust
on
contract
manufacturing
-­‐
API’s
/
intermediates
accoun/ng
for
77%
• Clinical
trials
market
has
been
significantly
impacted
(regulatory
requirements
have
changed)

13. Strictly
Confiden/al
Universe
of
OpportuniJes
API
Formula/ons
Development
Services
-­‐
API
Development
Services
-­‐
Formula/ons
API
Produc/on
Formula/on
Produc/on
Toxicology
Clinical
Trial
Design
and
Mgmt.
Central
Labs
Contract
Research
Contract
Manufacturing
Generic
Supplies
BA
/
BE
Studies
VerJcal
IntegraJon
Full
Service
CDMO
Pre
Clinical
CapabiliJes
Late
Stage
Development
13
Drug
Candidate
Services
Companies
can
focus
on
various
combinaJons
/
hybrid
models
which
offer
end
to
end
services

14. Strictly
Confiden/al
Select
M&A
Deals
Date
Acquirer
Target
Value
(USD
mn)
Remarks
June
2014
Meiji
Seika
Pharma
Medreich
290
Access
to
low
cost
manufacturing
January
2014
GVK
Bio
Aragen
Bioscience
-­‐
Significant
US
presence
and
exper/se
in
large
molecule
R&D
December
2013
Mylan
Agila
Special/es
1,750
Strengthen
injectables
plalorm
and
porlolio
and
entry
to
new
markets
August
2012
Hospira
Orchid
Pharma
200
Increase
API
produc/on
capacity
September
2012
Mitsui
&
Company
Arch
Pharmalabs
68
Supply
arrangement
July
2011
Ajinomoto
Omnichem
Granules
India
-­‐
50:50
Joint
venture
-­‐
To
benefit
from
increasing
outsourcing
to
India
April
2011
Hikma
Pharma
Unimark
Remedies
33
Low
cost
manufacturing
in
India
(API’s)
November
2010
Cambrex
Zenara
Pharma
20
Technological
and
geographic
opportunity
14
M&A
Theme
–
Access
to
low
cost
faciliJes
and
high
quality
products
for
global
generics
operaJons

15. Strictly
Confiden/al
Select
Private
Equity
Deals
Date
Buyer
Target
Target
DescripJon
Value
(USD
mn)
May
2014
Warburg
Pincus
Laurus
Labs
API
and
CRAMS
player
100
+
May
2014
KKR
Asian
Fund
Gland
Pharma
Complex
Injectables
200
April
2014
Tano
Capital
Shilpa
Medicare
API
and
CRAMS
(Oncology)
12
October
2013
Ac/s
LLP
Symbiotec
Pharmalab
API
48
January
2013
Tata
Healthcare
Marck
Biosciences
IV
Fluids
11
February
2012
OrbiMed
Shasun
Pharma
CRAMS
10
15
PE
Theme
–
Leveraging
India’s
low
cost
and
robust
chemistry
skills

16. Strictly
Confiden/al
Aurum
View
q Indian
CRAMS
industry
is
well
posi/oned
to
capture
a
larger
share
of
the
global
$
70
bn
outsourcing
market
q Indian
CDMOs
will
have
to
build
scale
and
move
up
the
value
chain
in
pursuit
of
growth
ü Larger
players
are
exploring
one
stop
shop
for
all
needs
of
pharma
companies
-­‐
Pre-­‐clinical,
clinical
services
to
commercial
manufacturing
ü Mid
size
players
will
have
to
posi/on
themselves
as
niche
end
to
end
service
providers
q Key
opportuni/es:
ü Custom
Synthesis
of
key
intermediates,
API’s
and
drug
products
ü Op/miza/on
of
drug
candidates
and
drug
products
of
a
new
lead,
clinical
trial
quan/ty
supplies
followed
by
commercial
supplies
of
API
/
drug
product
supplies
ü New
drug
delivery
systems
q Given
the
significant
growth
opportuni/es
we
believe
that
investors
will
play
an
important
part
in
the
scale
up
of
Indian
CRAM’s
16

17. Strictly
Confiden/al
ValuaJon
Benchmarks
Dishman
Shasun
Jubilant
Hikal
Biocon
Divis
Suven
Sales
(FY
13)
(
INR
Mn)
12,722
10,555
51,273
6,604
24,547
21,435
2,579
EBITDA
(FY
13)
(
INR
Mn)
3,095
1,285
8,305
1,344
7,998
8,560
551
PAT
(FY
13)
(
INR
Mn)
1003
530
1,527
253
5,089
6,020
308
EPS
Growth
(FY
13-­‐15)
(%)
18.5
-­‐
81.6
77.7
111.1
22.3
131.6
Market
Cap
(
INR
Mn)*
12,125
9,590
28,989
10,168
93,330
196,049
12,407
Enterprise
Value
(
INR
Mn)*
18,957
15,919
64,729
14,635
90,393
198,903
13,226
ROE
(FY
13)
10.2
21.6
6.4
5.74
20.5
26
21.9
P/E
(FY
13)
5.6
6.9
17.9
26.2
10.5
21.8
8.8
EV/EBITDA
(FY
13)
4.6
6.8
7.6
9.1
5.8
14.8
6.7
*
Values
as
of
25th
July
2014
Source:
Thomson
Reuters
17

18. Strictly
Confiden/al
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