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 Dyasi Managing Director: Dr MM Dyasi Managing 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

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 by DR 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 ARCOnderstepoort 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 vaccines 14 Viral vaccines 4 Blood vaccines 6 Diagnostic reagents Production capacity: Up to 170 million doses a year PRODUCT MIX

Species covered: Cattle Sheep Goat Equine 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, RSA Custom-made vaccine:Bluetongue for Europe Quality control:ISO 9001:2008 VETERINARY VACCINOLOGY

KEY VACCINES Vaccines 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

YearLocal 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 THRUST OBP 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

ASSUMPTIONS 2. 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

2009/102010/112011/12 R'm REVENUE COST OF SALES GROSS PROFIT LESS EXPENSES OPERATING PROFIT / (LOSS)(11)(10) OTHER INCOME999 NET PROFIT / (LOSS)(2)(1) ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD INCOME STATEMENT

R'm ASSETS Non-current Assets Current Assets TOTAL ASSETS EQUITY AND LIABILITIES Equity Non-current Liabilities--- Current Liabilities1110 TOTAL EQUITY AND LIABILITES ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD BALANCE SHEET AS AT 31 MARCH

ONDERSTEPOORT BIOLOGICAL PRODUCTS LTD CONCLUSION Presented by Adv. D Mitchell

THANK YOU