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The information contained in this section is derived from several industry sources. Certain information contained in this section is derived from the reports “Global CRO Market: Transformation, Developments, Opportunities and Future of CRO Market” by Frost & Sullivan, dated February 2015 (the “Frost & Sullivan Report”) and “Contract Drug Discovery Research: Outsourcing Global (CDDRO) Market-2018” by IQ4I Research & Consultancy Pvt. Ltd., dated January 2015 (the “IQ4I Report”). Information in the Frost & Sullivan Report reflects estimates based on sample survey, projection techniques and other research tools. References to Frost & Sullivan should not be considered as Frost & Sullivan’s opinion as to the value of any security or the advisability of investing in us.

Neither we nor any other person connected with the Offer has independently verified information contained in this section. Industry sources and publications generally state that the information contained therein has been obtained from sources generally believed to be reliable, but that their accuracy, completeness and underlying assumptions are not guaranteed and their reliability cannot be assured. Industry publications are also prepared based on information as of specific dates and may no longer be current or reflect current trends. Accordingly, investment decisions should not be based on such information.

Unless otherwise specified, references to years in this section are to calendar years. CRO Industry

Contract Research Organisations (“CROs”) offer outsourced services to support discovery and development for R&D driven organisations across industrial sectors like pharmaceuticals, biotechnology, biopharmaceuticals, nutraceuticals, animal health, agro-chemicals, cosmetics and electronics. CRO services span the range of R&D activities from New Molecular Entity (“NME”) discovery, development and manufacturing. Growth in the CRO market has historically been driven by growth in R&D spending and increased outsourcing of R&D activities. The discovery and development process generally involves (1) discovery (target identification, target validation, lead generation, lead optimisation and lead selection), (2) development (pre-clinical testing, clinical testing and regulatory filings with the FDA and other relevant regulators), and (3) manufacture (process development and early stage manufacture) leading to commercialisation (manufacturing and post-marketing follow-up studies on impact and side effects).

Frost & Sullivan estimates that global R&D expenditure for the pharmaceutical industry in 2014 was approximately US$139 billion, of which US$105 billion could have potentially been outsourced (Source: Frost & Sullivan Report). According to IQ4I Research & Consultancy Pvt. Ltd (“IQ4I”), outsourcing penetration of CRO discovery services in 2013 is estimated to be 51.9% of the global pharmaceutical and biotech industry but poised to grow to 65.7% in 2015, reflecting a CAGR of 12.5% (Source: IQ4I Report). According to the Frost & Sullivan Report, outsourcing penetration for the CRO market for development services as of 2014 is estimated to be 27.3% of the potential outsourcing market for development services, but poised to grow to 38.7% in 2019, reflecting a CAGR of 12.5%.

Although the CRO industry has grown substantially in recent years, the opportunity to further penetrate potential outsourcing markets provides an opportunity for the industry to increase its share of global R&D expenditures.

The global CRO market for discovery services was estimated to be US$14.7 billion in 2014 and is expected to reach US$22.7 billion in 2018, reflecting a CAGR of 11.5% (2014-2018), according to the IQ4I Report. The global CRO market for development services was estimated to be US$28.8 billion in 2014 and is expected to reach US$44.6 billion in 2018, reflecting a CAGR (2014–2018) of 11.6%, according to the Frost & Sullivan Report.

Overview of CRO Services

CROs offer clients an opportunity to manage costs, have flexible operations and realise efficiencies in R&D and related functions. As an industry, CROs have expanded their service offerings over time to meet growing needs for full-service outsourcing across the full spectrum of R&D and related activities. In practice, however, most

CRO service providers specialise to some degree based on the needs of their clients and the market in which they operate.

CRO service providers will typically compete in various segments of (1) Discovery, (2) Development and (3) Manufacturing, as reflected below.

Discovery

Discovery covers the process from target identification to target validation to lead generation and lead optimisation. The focus at this stage is to narrow down thousands of compounds to a few hundred, promising possibilities for further research and development. Typically scientists begin with basic research on the physiological target and develop hypothetical mechanisms of action which could potentially bring about the desired outcome. Following basic research, researchers look for a lead compound—a promising molecule that could influence the target in line with the projected hypotheses and potentially become a medicine. Researchers do this in various ways, including creating a molecule, using high-throughput screening techniques to select a few promising possibilities from among thousands of potential candidates, finding compounds from nature, and using biotechnology to genetically engineer living systems to produce disease-fighting molecules.

Some of the key steps in the NME discovery process are described below:

x Target Validation: Target validation involves intensive in vitro, as well as in vivo studies that provide

information on the effects of the pharmacological intervention. The result of these efforts helps establish sufficient knowledge so that physiologically relevant model systems could be developed into assays for downstream screening.

x Lead Generation: The aim of this stage of the work is to refine each hit series to try to produce more

potent and selective compounds which possess properties adequate to examine their efficacy in any in vivo models that are available.

x Lead Optimisation and Selection: Lead optimisation and selection seeks to identify and synthesise lead

compounds, new analogs with improved potency, reduced off-target activities, and physiochemical/metabolic properties suggestive of reasonable in vivo pharmacokinetics through chemical modification of the hit structure. Modifications are chosen by employing knowledge of the structure- activity relationship (SAR) as well as structure-based design if structural information about the target is available.

Development

After the NME discovery stage narrows down thousands of compounds to a few hundred promising possibilities, these molecules enter the development stage. The development stage spans preclinical and clinical testing in addition to drug substance and drug product development.

The key stages in the process are described as below:

x Preclinical Testing: This step involves exhaustive laboratory and animal experimentation of the pre- clinical drug candidates for safety and therapeutic effect in order to determine whether a compound is suitable for human testing. The focus during this stage is largely on generating data around safety and preliminary efficacy by testing the NMEs on relevant animal models. This process may take several years to come up with a molecule considered suitable for human testing. The data generated during this

stage is a critical part of the dossier which gets submitted to the relevant regulatory bodies in order to receive approval for the concerned NME for moving to clinical trials.

x Clinical Trials: Drug candidates approved by the relevant regulatory body are typically referred to as an Investigational New Drug Application (“IND”). INDs proceed to clinical trials. Broadly, clinical trials are studies in humans to determine the safety, efficacy and suitable drug dosage of potential drug candidates. The major phases in clinical trials are described below:

o Phase I trials test a compound in a small group (e.g., 20 to 100) of healthy volunteers to determine the safety of the compound.

o Phase II trials test the compound in a somewhat larger group (e.g., 100 to 500) of volunteers who have the disease or condition the compound is designed to treat. Phase II trials determine the effectiveness of the compound, examine possible short-term side effects and risks, and identify optimal dose and schedule.

o Phase III trials test the compound in a much larger group (e.g., 1,000 to 5,000) of participants to generate statistically significant information about safety and efficacy and to determine the overall benefit-risk ratio.

o Bio-analytical testing of clinical trial samples generated during the aforementioned studies to quantify the safety, efficacy and associated data related to the clinical trial end points. The data generated here helps in evaluating the success or failure of the trial with respect to its predefined objectives.

x Drug Substance Development: Drug substance development covers early stage and late stage process development and optimisation. This process starts at a candidate selection stage, with small quantities of drug substance being manufactured under non-GMP conditions for toxicology evaluation and under GMP conditions for initial clinical studies. Depending on the outcome of these studies, larger quantities of drug substance are manufactured for late stage clinical programs. As an NME passes through the clinical development continuum, increasing emphasis is placed on developing a robust, scalable, safe and efficient manufacturing process which can be used for subsequent commercialisation of the drug.

x Drug Product Development: Drug product development covers early stage and late stage formulation development and manufacture. The drug substance can be formulated in a variety of forms, depending on the preferred mode of administration. The formulations tend to be simpler for preclinical and Phase I trials. As the molecule moves further along the development cycle, the formulation becomes increasingly nuanced in line with the data being generated through the trials. The key formulation types are oral solid dosage forms (tablets, capsules, drug-in-capsule), oral liquid dosage forms (solutions and suspensions), injectable dosage forms (solutions and lyophilised), and modified release oral dosage forms (functionally coated mini-tablets, drug layered beads as well as matrix tablet formulations).

Manufacturing

NMEs can be used by millions of people or sometimes by a small, select population, and often are on the market for many years. Consequently, manufacturing facilities must be carefully designed so that the commercialised product can be consistently and efficiently produced at the highest level of quality.

Accordingly, manufacturing facilities must be constructed to the high standards to ensure safety and quality in the manufacturing process. For example, pharmaceutical companies must adhere to FDA or other relevant regulations, and must upgrade facilities when new NMEs are approved, since each new NME is manufactured differently.

Factors Driving Outsourcing of R&D

According to Contract Pharma’s 2014 Annual Outsourcing Survey, respondents attributed their decisions to outsource to the factors in the chart below.

Source: Contract Pharma, 2014 Annual Outsourcing Survey

Factors driving R&D and outsourcing trends include:

Focus on Core Competencies

Many industry participants and consultants have suggested that pharmaceutical companies are revisiting what is deemed a core competency, suggesting more willingness to outsource functions across the development spectrum (the “D” of R&D), and certain discovery research functions such as lead optimisation (part of the “R” of R&D). According to a survey by RolandBerger Strategy Consultants, pharmaceutical executives identified marketing, sales and clinical development as the core competencies of their organisations, with other functions such as discovery and pre-clinical development lagging (Source: “Pharma at the Crossroads: Choosing Directions in a Transforming Healthcare World” by Roland Berger Strategy Consultants, 2008). To the extent such discovery and pre-clinical development processes do not represent pharmaceutical core competencies, the activities are outsourced. The pressure to lower internal R&D costs and optimise processes, coupled with an increasing level of scientific and technical sophistication at CROs, could lead to more functions being outsourced over time.

Company is Virtual: Smaller Clients and Virtual Pharma

Emerging venture-backed or virtual biotechnology firms focusing on a limited range of products generally have limited resources, infrastructure and experience in drug discovery and development. With greater access to capital, these firms may increasingly have the resources to outsource discovery and development services to CROs. These organisations tend to seek a broader range of services from CROs than traditional pharmaceutical companies. The rebound in biotech funding has given a thrust to R&D outsourcing from these companies. According to PwC/NVCA MoneyTree Report with data provided by Thomson Reuters, for the full year 2014, investments in the U.S. life sciences sector rose 29% in value, with $8.6 billion invested in 789 deals (Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree Report; data: Thomson Reuters, February 2015). To focus on core competencies 36% Company is virtual 30% Temporary lack of capacity 16% Lifecycle management 9% to reduce company size 7% others 2%

Client Flexibility and Moving from Fixed to Variable Cost Models

Rising costs of R&D, profit pressures arising from patent expirations and the need for greater flexibility have reduced the willingness of pharmaceutical companies to incur large fixed costs associated with large scale R&D programs. Outsourcing allows clients to convert a portion of their R&D budgets from a fixed to a variable cost, giving them greater flexibility to shift strategic and development priorities in response to market conditions. This trend was reflected in a recent survey of outsourcing clients conducted by Parexel International in which the flexibility to convert fixed R&D costs into variable costs was cited as the second most important factor motivating a shift to outsourcing (following access to capabilities not available in-house) (Source: “Strategic Partnerships 2013: Transforming and Unlocking Value in Biopharmaceutical Development” by PARAXEL International Corporation, 2013). In addition, clients prefer to tap into outsourcing services when they undergo temporary lack of capacities rather than making additional investments into infrastructure.

Decreasing the Unit Cost of R&D Output

Pharmaceutical companies face pressure to decrease the unit cost of R&D output by realising efficiencies in the R&D process without compromising the pace and quality of drug development. According to a 2012 article titled “Diagnosing the decline in pharmaceutical R&D efficiency” appearing in Nature Reviews Drug Discovery, the number of new drugs approved per billion US dollars on R&D has halved roughly every nine years since 1950 (or, equivalently, the cost of developing a new drug has doubled every nine years), falling around 80-fold in inflation-adjusted terms (Source: Adapted by permission from Macmillan Publishers Ltd: Diagnosing the decline in pharmaceutical R&D efficiency, Nature Reviews Drug Discovery 11 (191-200), March 2012). Since there are natural limits on the pace of drug development, improving R&D productivity through cost management is a significant issue. This decreased productivity has come in conjunction with a “patent cliff” in which small molecule products representing US$154 billion of annual sales revenue came off patent protection from 2009 to 2013, with another US$27 billion of branded drugs projected to come off patent protection in 2015 alone (Source: Global Outlook for Medicines Through 2018 by IMS Institute for Healthcare Informatics©, November 2014), motivating pharmaceutical companies to invest in R&D to drive new drugs to market and replace lost revenue. However, in 2008, it was estimated that for every dollar lost in declining product revenues due to patent expirations by 2012, the large-cap pharmaceutical companies would only be able to replace on average 26 cents with new product revenues. (Source: Adapted by permission from Macmillan Publishers Ltd: Diagnosing the decline in pharmaceutical R&D efficiency, Nature Reviews Drug Discovery 11 (191-200), March 2012)

Source: Reprinted by permission from Macmillan Publishers Ltd: Nature Reviews Drug Discovery 11 (191-200), March 2012

The pharmaceutical industry has responded to R&D productivity challenges by seeking to improve the return on investment for R&D spending by realising efficiencies through outsourcing. The average cost to develop a new drug, including the costs of failures, has increased from US$140 million in the late 1970’s to US$800 million by the late 1990’s and approximately US$1.2 billion by the early 2000s (all in US dollars as of 2000). Furthermore, for every 5,000 to 10,000 potential compounds that are evaluated, ultimately only one receives approval from the FDA. (Source: Pharmaceutical Research and Manufacturers of America, 2014 Biopharmaceutical Research Industry Profile (Washington, DC: PhRMA, April 2014)). Given the relatively low yield from early stage compounds, cost effective drug development processes are critical to the health of the pharmaceutical industry. The rise in the average cost of developing an NME (USD million) is reflected in the chart below:

Source: Pharmaceutical Research and Manufacturers of America, 2014 Biopharmaceutical Research Industry Profile (Washington, DC: PhRMA, April 2014)

CROs, especially those based in Asia Pacific and Eastern Europe, provide a significant cost advantage to organisations seeking to rationalise their R&D spends. The lower cost structure in these regions helps in reducing the R&D spend by decreasing the unit cost of R&D output.

R&D Pipeline Growth

Frost & Sullivan estimates that global R&D expenditure for the pharmaceutical industry in 2014 was approximately US$139 billion reflecting a growth of 2.2% vis-à-vis 2013. (Source: Frost & Sullivan Report). With a handful of promising and innovative products in the industry pipeline, and with 2014 representing the best year for approvals of NMEs since the 1990s, the Frost & Sullivan Report projects an increase in R&D spending from US$139.0 billion in 2014 to US$152.3 billion in 2018, implying a CAGR of 2.3% during such period. Healthy prescription pharmaceutical sales growth (projected to grow at a CAGR of 5.1% from 2013 to 2020 to a projected US$1,017 billion in 2020) (Source: EvaluatePharma® World Preview 2014, Evaluate Ltd, www.evaluate.com) and improving FDA approval levels may also allow pharmaceutical companies to allocate more capital to R&D spending. Frost & Sullivan estimates that out of the current R&D spends, about 75% could be potentially outsourced indicating significant headroom for growth of the global outsourcing industry.

Client Relationships and Contracting

CRO contracts can take a variety of forms, ranging from the strategic partnerships to functional service agreements for a specific function (i.e., target validation, hit identification, lead optimisation, etc.) or more one- off transactional contracts. Furthermore, these relationships can be for a specific compound, set of trials,

therapeutic area, or geography. CROs typically employ business development teams, often segmented by service offering, to participate in request-for-proposal processes. Clients evaluate CROs on numerous factors. According to Contract Pharma’s 2014 Annual Outsourcing Survey, respondents cited the following items as the most important considerations when selecting an outsourcing vendor:

x Quality: Quality is the foremost consideration for clients, implying that clients do not view outsourcing

as a pure cost play;

x Consistency of Performance: Consistent performance is one of the leading considerations for clients,

which indicates that clients are looking for a dependable partner with whom they can work consistently over a longer time horizon;

x Confidentiality: Concerns relating to the protection of proprietary intellectual property and discovery and

development initiatives ranks among the top client priorities. Clients typically demand that CRO providers have adequate processes in place to protect confidential information in addition to a verifiable track record of IP protection;

x Regulatory Inspection History & Good Manufacturing Processes (“GMP”): CROs are subject to

inspection by the FDA and other regulators, and outsourcing clients take a keen interest in the regulatory inspection history of a CRO provider to ensure compliance with applicable regulations. Hence, clients