ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD

PRESENTATION TO THE PORTFOLIO COMMITTEE 1 JULY 2009

PRESENTATION OUTLINE

Introduction Adv. D. Mitchell

Operations & Strategic Thrusts Dr. M.M. Dyasi

Financial Budget for 2009/10 Mr. A. Ntsho

Conclusion Adv. D. Mitchell

Advocate D J Mitchell

Acting Chairperson

Advocate D J Mitchell

Acting Chairperson

Dr MM DyasiManaging Director: Dr MM DyasiManaging Director:

Mr M Shezi Remco & R&D Committees

Ms N Jaxa Audit & Risk Management

Dr B Ntshabele R&D & Audit Committees

Ms N Qata Remco & Risk Management

Board of Directors: OBP Ltd Board of Directors: OBP Ltd

GOVERNANCE OF OBP

• National government business enterprise under PFMA

• Public company under Companies Act (registered taxpayer)

• Own OBP Incorporation Act

• Corporate governance codes & protocols

• Declared national key point

• Ramathe Fivaz as external auditors (Auditor-General approval)

• ISO standards & business specific regulatory authorities

OPERATIONS & STRATEGIC THRUST

Presented byDR M.M. DYASI

HISTORY OF ONDERSTEPOORT

1908: Establishment of the Onderstepoort Veterinary Research Institute

1968: Dedicated vaccine facility established

1992: OBP separated from OVI (ARC)

2000: OBP corporatized as a Government- owned commercial

company

ONDERSTEPOORT COMPLEX

Veterinary Faculty:•Veterinary Training

ARC Onderstepoort Veterinary Institute:•Services: Diagnostics, Production (Foot

& Mouth Disease)•Research

OBP: Onderstepoort Biological Products Ltd:•Vaccines •Biological reagents

OBP ACT no 19, 1999

To provide for the establishment of a company to manage the institution known as Onderstepoort Biological Products, the appointment of directors, the holding and disposal of shares in the company, the transfer of personnel to the company and the transfer of funds and assets to the company and to provide for matters connected therewith.

MANDATE OF OBP

The mandate of OBP Ltd is to play a pivotal role in the management and prevention of animal diseases in South Africa, SADC and the rest of Africa

VISION To be a global biotech manufacturer and

provider of animal health products underpinned by a skilled, innovative and passionate team.

MISSION To translate science into biological

products, knowledge and technology resulting in improved animal health, food security and safety for all stakeholders.

Current product range:28 Bacterial vaccines14 Viral vaccines 4 Blood vaccines 6 Diagnostic reagents

Production capacity:Up to 170 million doses a year

PRODUCT MIX

Species covered: CattleSheepGoatEquine Poultry

Bulk vaccine antigen production

PRODUCT MIX

• Immunology (host-pathogen interaction)• Antigen research: bacteriology, virology,

molecular biology• Vaccine delivery: vaccine adjuvant research• Production processes: Bio-reactor

technology, freeze-drying technology, cell culture, etc.

• Quality control: experimental animals• Product development according to set

protocols

VETERINARY VACCINOLOGY EXPERTISE

Bulk antigen production: Morocco, South America

Vaccine bank: EU, RSACustom-made vaccine : Bluetongue for

EuropeQuality control: ISO 9001:2008

VETERINARY VACCINOLOGY

KEY VACCINESVaccines against TAD’s:

• CBPP (Contagious Bovine Pleura Pneumonia)

• RVF (live attenuated & inactivated)• Lumpy Skin Disease (LSD)• Rinderpest• Bluetongue• 3 Day Stiff Sickness• Newcastle Disease

Vaccines against parasitic diseases:• Anaplasmosis• Heartwater• Babesiosis

KEY VACCINES UNIQUE TO OBP• Bluetongue against 16 serotypes• African Horsesickness • New Castle Disease Komarov strain• Rift Valley Fever inactivated• A number of autogenous vaccines• Flexibility for custom-made vaccines

• Antigen/vaccine bank (storage)• Appropriate combinations

Year Local Export  Total

2004/05

33,5 43,4 76,9

2005/06

42,2 31,2 73,4

2006/07

51,0 12,7 63,7

2007/08

49,9 19,6 69,5

2008/09

63,9 18,8 82,8        

REVENUE GENERATED (R’m)

REVENUE GENERATED

STRATEGIC THRUST

• OBP PLANT UPGRADE• VACCINE BANK• DEVELOPMENT OF NEW PRODUCTS• CONTRIBUTION TO RURAL DEVELOPMENT• MARKET GROWTH• RESEARCH & DEVELOPMENT • HUMAN CAPITAL DEVELOPMENT

STRATEGIC THRUSTOBP PLANT UPGRADE

• GMP compliance• OBP sustainability• Future capacity improvement• National & international regulatory compliance• Current plant & equipment from 1968• New production equipment in non compatible

environment • Validation requirements • Green building

STRATEGIC THRUST VACCINE BANK

SA Vaccine Bank (contingency vaccines)• Resurgence of diseases• Outbreak impacts on all livestock

especially rural farmers• Ensure product availability• Rapid response

STRATEGIC THRUST DEVELOPMENT OF NEW PRODUCTS

• Tri-party alliance (OBP,OVI, FVS)• International co-operation• In-house R&D development• Universities• Intellectual property development• Multivalent /combination vaccines • New generation vaccines (Plant extracts)

STRATEGIC THRUST RURAL DEVELOPMENT

• Strategic availability of vaccines• Economically viable vaccines• Empowerment with knowledge of disease

and animal management• Product distribution challenges (heat stable)

• Support commodity groups (NAFU, NERPO, NWGA)

STRATEGIC THRUST MARKET GROWTH

• Declining numbers of animals in market • Export market development• SADC market growth• Collaboration with international institutes• National & provincial animal health strategies • Customer relation management • Strategic partnership • Animal health and product training

STRATEGIC THRUST HUMAN CAPITAL DEVELOPMENT

• Employment equity• Labour relations• Education, training & development• Health & AIDS prevention and education• Intellectual property management &

development

CHALLENGES • Funding for upgrade• Research / innovation backlog• Ageing company (physical & human )• Maintenance cost• International competition • GMP (Cost of compliance)• Distribution to rural clients• Technical information • Trade secrets and no patents

ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD

2009 – 2012 BUDGET Presented by

Mr A Ntsho

ASSUMPTIONS

1. REVENUE• Review product prices twice a year• Royalty revenue from the collaboration excluded• Revenue from new products is not included • Discount policy reviewed based on costing

exercise• Increased sales to government

ASSUMPTIONS2. COST OF SALES

An efficiency saving is assumed based on:• Benefits of the product costing exercise • Implementation of purchases based on Economic

Order Quantity principle• Appointment of the COO – expected new

initiatives• Economic and efficient use of production

resources – drive from the MD’s office to apply concept of QUALITY in everything we do

ASSUMPTIONS

3. STAFF COSTS• An average 10% increase is estimated• Positions of COO, BDO, Legal officer will be

filled

4. OTHER SIGNIFICANT ACCOUNTS• An average of 8% increase is assumed• Travel claim and out-of-town allowance

revision

ASSUMPTIONS

5. CAPITAL EXPENDITURE (INCLUDING FACILITY UPGRADE)

• Shareholder will approve funding for the upgrade of the facilities

• R15 million of capital expenditure is budgeted for this financial year

• Additional capex will be needed for the following years

2009/10 2010/11 2011/12 R'm R'm R'm REVENUE 91 98 106COST OF SALES 52 55 59 GROSS PROFIT 39 43 47LESS EXPENSES 50 53 57 OPERATING PROFIT / (LOSS) (11) (10) (10)OTHER INCOME 9 9 9NET PROFIT / (LOSS) (2) (1) (1)

ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD INCOME STATEMENT

2010 2011 2012 R'm R'm R'mASSETSNon-current Assets 65 57 50 Current Assets 107 111 116TOTAL ASSETS 172 168 166 EQUITY AND LIABILITIESEquity 161 158 156 Non-current Liabilities - - - Current Liabilities 11 10 10TOTAL EQUITY AND LIABILITES 172 168 166

ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD

BALANCE SHEET AS AT 31 MARCH

ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD

CONCLUSIONPresented by

Adv. D Mitchell

THANK YOU