| Onderstepoort Biological Products © | March 1, 2011
OBP Delegation
o Mr Ayanda Ntsho CA (SA) – Acting Chief Executive Officer
o Mr Caiphus Ramoroka – Strategic Projects & Planning Executive and Acting Chief Scientific Officer
o Dr Jacob Modumo – Business Development Officer
o Mrs Ntombizodwa Mobeng – Company Secretary and Legal Advisor
o Mr Kolobe Mashala CA (SA) – Acting Chief Financial Officer
o Department of Agriculture, Forestry and Fisheries Officials
| Onderstepoort Biological Products © | March 1, 2011
Introduction
o Incorporated in 2000 – OBP Incorporation Act 19, 1999 (OBP Act)
o Incorporated to ensure financial viability & sustainability – access to technology, GMP
facilities, etc.
o Facility build in 1968:
o R&D, Manufacturing, QC labs and Experimental Animals facilities.
o Product Portfolio: >50 products – specific to local needs
o Vaccines (viral, bacterial, protozoal diseases) & Diagnostic reagents.
o Business Performance:
o Revenue growth – av. 15% (year on year) in the last 3 years.
o Achieved R100 m sales in 2010 FY.
o Profitability – av. 23% improvement in margins.
o Product innovation – launched 4 products in 2011 FY.
o No. of employees:
o 205
| Onderstepoort Biological Products © | March 1, 2011
Governance
o Board has been appointed and awaiting announcement of members
o Induction is planned
o Sub-committee members to be appointed
| Onderstepoort Biological Products © | March 1, 2011
OBP Structure
| Onderstepoort Biological Products © | March 1, 2011
Mandate & Vision
Mandate:
OBP exists to prevent and control animal diseases that impact food security, human health and
livelihood.
Vision:
To be a global biotech manufacturer of animal health products underpinned by a skilled, innovative and passionate team.
7 Strategic Thrusts: 1. Increase net operating profits.
2. Increase market share.
3. Build partnerships with provinces to gain access rural farmers.
4. Strategic vaccine bank in partnership with DAFF.
5. Funding for Manufacturing plant recapitalisation and GMP compliance.
6. Development of new products.
7. Human capital development.
| Onderstepoort Biological Products © | March 1, 2011
Annual Strategy Review Process
o Consider major developments and changes in the industry – global & local
view.
o Consider available internal resources required to successfully implement
strategy.
o Prioritisation
o Ensure OBP’s alignment to the MTSF and the New Growth Path.
o Compliance - PFMA framework.
| Onderstepoort Biological Products © | March 1, 2011
Review Outcomes – Strategic Objectives
| Onderstepoort Biological Products © | March 1, 2011
Sustainable delivery of
OBP mandate
Volume growth
Improve margins
Innovation
R&D investment New markets –
emerging sector & exports
Recapitalisation – GMP compliance
HCD & Performance
Review Outcomes – Strategic Objectives
| Onderstepoort Biological Products © | March 1, 2011
o Strategic Objectives:
o SO1 – Build an innovative, passionate, high performance culture.
o SO2 – Build a profitable, sustainable and socially responsible biomanufacturing
company.
o SO3 – Focus on core competencies and unique strains, products and know-how to
develop new product & leverage strategic partnerships.
Financial Key Performance Indicators
Indicator Key
Business
Area
Current Projections
2010/11 2011/12 2012/13 2013/14
Sales revenue growth Financial
Performance
R95m R130m R141m R157m
Sales volume growth Financial
Performance
10% 10% 10% 10%
Percentage cost of sales (COS)
to sales -
Financial
Performance
40% (R56.4m) 36% (R46.8m) 36% (R51.5m) 32% (R50.2m)
Cost reduction on operating
expenses
Financial
Performance
0% 5% (R3.6m) 5% (R3.5m) 5% (R3.5m)
% Operating profit Financial
Performance
0% (R0m) 10% (R13m) 15% (R21.2m) 20% (R31.4m)
| Onderstepoort Biological Products © | March 1, 2011
Non-Financial Key Performance Indicators
Indicator Key Business
Area
Current Projections
2010/11 2011/12 2012/13 2013/14
Number of new and improved
vaccines developed and registered
with Act 36, 1947 (SA) and other
countries.
R&D
(Innovation)
3 1 2 3
Number of doses of vaccines
produced per year.
Manufacturing 84.6 million 92.3 million 100 million 107 million
Percentage training budget to
sales.
Human
Resources
0.4%
(R0.5m)
1.0%
(R1.2m)
1.0% (R1.3m) 1.0% (R1.5m)
Improvement of quality
management systems - ISO 17025
certification
Quality - 20% of
project
schedule
50% of project
schedule
100% of
project
schedule
Number of strategic partnerships
with provincial governments
targeting emerging farmers.
Sales &
Marketing
3 3 3 -
| Onderstepoort Biological Products © | March 1, 2011
The role OBP continues to play in the economy
o As an SOE, OBP will strive to contribute towards economic growth and
creation of job opportunities:
o Medium-term strategic framework –
o Outcome 5 – Skilled and capable workforce to support an inclusive growth path.
o Outcome 7 – Vibrant, equitable, sustainable rural communities, contributing towards food
security for all.
o New growth path –
o Job driver 2 – Improving job creation in economic sectors: Agricultural value chain &
Manufacturing.
o Job driver 3 – Seizing the potential of new economies: Knowledge economy.
o DAFF’s strategic objectives.
| Onderstepoort Biological Products © | March 1, 2011
ALIGNMENT TO GOVERNMENT PROGRAMMES
New Growth Path -
Improving job creation in
economic sectors
(Agricultural value chain)
DAFF:
Strategic Goals 1 & 5
(Growth in food production value
chain)
OBP:
Strategic Thrusts 1, 2 & 6
(Growth + Innovation)
OBP:
Strategic Objective 2
(Profitability & sustainability)
New Growth Path –
Improving job creation in economic
sectors
(Manufacturing: IPAP2)
DAFF:
Strategic Goal 5
(Investment, growth + market access)
OBP:
Strategic Thrusts 1, 2 & 5
(Sustainable Infrastructure
Investment - GMP)
OBP:
Strategic Objective 2
(Profitability & sustainability)
New Growth Path –
Seizing the potential of new economies
(Knowledge economy: IPAP2)
DAFF:
Strategic Goal 5
(Research leadership & support)
OBP:
Strategic Thrust 6
(New product development)
OBP:
Strategic Objective 3
(Focus: Unique strains, products,
know-how)
MTSF Outcome 5 –
Skilled and capable workforce to support an inclusive growth path.
DAFF:
Strategic Goals 4 & 6
(Transformation through skills development)
OBP:
Strategic Thrusts 6 & 7
(Skills development + Innovation)
OBP:
Strategic Objectives 1 & 3
(HCD + Innovation & Performance)
MTSF Outcome 7 - Vibrant, equitable, sustainable rural
communities, contributing towards food security for all.
DAFF:
Strategic Goals 1, 4 & 5
(Equitable participation of
emerging sector in mainstream economy)
OBP:
Strategic Thrusts 3, 4 & 6
(Improved access of vaccines to emerging
sector)
OBP:
Strategic Objectives 2 & 3
(Sustainable support of emerging sector
through innovation)
| Onderstepoort Biological Products © | March 1, 2011
OBP’s role in the economy – Livestock & food production
o Animal health plays an important role in the sector’s outputs and productivity.
o Vaccines - most important & cost-effective solution of preventing infectious disease
o Strategy:
o Improved manufacturing efficiencies:
o 8% improvement in gross profit margins.
o Improved availability of products:
o Achieve 85% of planned vs. actual sales forecast.
o 5% reduction in operating costs
o Grow market share:
o Feedlots.
o Emerging sector.
o Export markets.
| Onderstepoort Biological Products © | March 1, 2011
New Growth Path -
Improving job creation in economic sectors
(Agricultural value chain)
DAFF:
Strategic Goals 1 & 5
(Growth in food production value chain)
OBP:
Strategic Thrusts 1, 2 & 6
(Growth + Innovation)
OBP:
Strategic Objective 2
(Profitability & sustainability)
OBP’s role in the economy – Investment in Manufacturing infrastructure
o Sustainability of OBP – GMP compliance:
o Act 36 – plans to use GMP as a system of ensuring product quality, safety and efficacy.
o Access to lucrative export markets.
o Local manufacturing: o Preserve primary and secondary job
opportunities.
o Create new job opportunities to support growth.
o Exports – contribute to a positive trade balance.
o Strategy:
o Plant recapitalisation: short-term
o GMP plant upgrade: medium to long term.
| Onderstepoort Biological Products © | March 1, 2011
New Growth Path -
Improving job creation in economic sectors
(Manufacturing – IPAP2)
DAFF:
Strategic Goal 5
(Investment, Growth and Market access
OBP:
Strategic Thrusts 1, 2 & 5
(Sustainable infrastructure investment – Recapitalisation &
GMP)
OBP:
Strategic Objective 2
(Profitability & sustainability)
Recapitalisation & GMP Upgrade
o Recapitalisation:
o Replacement of old critical equipment to ensure security of vaccine supply.
o GMP Project:
o Growth strategy into key export markets.
o Process –
o “As Is analysis” – Review previous GMP reports, Quality system, Portfolio, Opportunities.
o Project Approach.
o Pre-feasibility study.
o Propose sustainable funding models.
o Approval from Management, Board & Executive Authority by Sept 2011.
| Onderstepoort Biological Products © | March 1, 2011
Project name 2011/12 2012/13 2013/14 Total
Recapitalisation of current manufacturing facility R48.3m R42.0m R29.8m R120.1m
The role OBP in the economy – R&D to drive the Knowledge economy
o OBP a global leader in application of biotechnology to bring to market tropical disease vaccines - 40 yrs.
o Industry is driven by innovation.
o Strategy:
o Increase internal R&D funding:
o Inputs – 10% of revenue
o Outputs – 6 new products in the next 3 years.
o Leverage South Africa’s research capacity, investments and outputs towards commercially viable IP and products.
o Partner globally for technologies enabling competitiveness and growth.
| Onderstepoort Biological Products © | March 1, 2011
New Growth Path -
Seizing the potential of new economies
(Knowledge economy – IPAP2)
DAFF:
Strategic Goal 5
(Research leadership and Support)
OBP:
Strategic Thrusts 1, 2, 6
(Growth, Innovation - R&D)
OBP:
Strategic Objective 2
(Core competence, unique strains, products, know-how)
OBP’s role in the economy – Skills Development
o To ensure access to scientific knowledge
o To ensure that the war over animal diseases is won
o To ensure food safety and security
o To alleviate poverty
o Strategy:
o Improve internal human capital development funding:
o Target – 1% of revenue.
o Learnership programme:
o Targets – 30 in 3 years.
o Internship programme:
o Targets – 30 in 3 years.
| Onderstepoort Biological Products © | March 1, 2011
MTSF Outcome 5 -
Skilled and capable workforce to support an inclusive growth path
DAFF:
Strategic Goals 4 & 6
(Transformation through skills development)
OBP:
Strategic Thrusts 6 & 7
(Skills development & Innovation)
OBP:
Strategic Objective 1 & 3
(HCD, Innovation and performance culture)
The role OBP in the economy – Rural Economic Development o A significant number of livestock ownership
in rural communities: unexplored wealth.
o Economic Opportunity – close the local supply gap in meat and livestock products.
o Strategy:
o Information sharing & training sessions to rural farmers through provincial departments of Agriculture.
o Rural distribution points in rural – job opportunities.
| Onderstepoort Biological Products © | March 1, 2011
MTSF Outcome 7 -
Vibrant, equitable, sustainable rural communities contributing towards
food security for all
DAFF:
Strategic Goals 1, 4 & 5
(Equitable participation of emerging sector in mainstream economy)
OBP:
Strategic Thrusts 3, 4 & 6
(Improved access of technical support and vaccines to the emerging sector)
OBP:
Strategic Objective 2 & 3
(Sustainable support of emerging sector through innovation:
products, vaccine costs)
| Onderstepoort Biological Products © | March 1, 2011
Targets Strategic Objectives Measurements Year 1 Year 2 Year 3 Responsibility
Fin
anci
al
Per
spec
tive
Sales volume growth % increase in unit sales 10% 10% 10% Business Development Officer
Sales Revenue growth Increase in sales revenue R130m R143m R157m Business Development Officer
Gross profit margins % GP 64% 64% 68% Chief Operations Officer
% Operating profit % Operating profit 10% 10% 15% EXCO
Cost reduction on operational
expenses % reduction 5% 5% 5% EXCO
Cu
sto
mer
Per
spec
tive
Industry leading service delivery
to stakeholders Customer satisfaction survey
10% improvement
on baseline Not measured
10% improvement
on Yr. 1
Business Development Officer
Build the OBP Ltd brand. Market awareness survey Establish baseline 15% increase 20% increase Business Development Officer
Develop partnerships with
provincial governments.
No. of provinces where OBP is
the preferred supplier 3 3 0
Business Development Officer
Inte
rnal
Pro
cess
es
Per
spec
tive
New and improved products
development.
No. of new & improved
products developed on
schedule.
1 2 1 Chief Scientific Officer
Improvement of quality
management systems
% of QC methods complying
to ISO 17025
20% of the
schedule
50% of the
schedule
100% of the
schedule Quality Executive
On-time delivery of forecasted
products
% of actual production versus
forecast met 85% 85% 85% Chief Operations Officer
Efficient Production and cost
management.
Meet cost of sales and
operational expenses target
(%).
95% 95% 95% Chief Operational Officer
Improve the management &
flow of information. Implementation of ERP system Finance, HR, EMU Quality Production Chief Financial Officer
Proactive and timely response
to operational and risk matters.
Effective strategic, operational
and tactical meetings Quarterly Quarterly Quarterly EXCO
Lea
rnin
g an
d
Gro
wth
Per
spec
tive
Align employee’s performance
to set objectives.
Performance agreements
signed by 30 April each FY. 90% by April 95% by April 100% by April HR Executive
GMP project plan Approval by Board and
Executive Authority Sept 2011
Implementati
on of Phase I - Strategy & Planning
Implement innovations and
best practices benchmarked
against the industry.
No of innovations
implemented. 1 2 4 Strategy & Planning
Financial Projections - summary
• 10% growth in vaccine usage expected – conservative
• Top 18 products as a minimum to be available up to forecast + risk
• Direct product cost below 40% of turnover – industry norm is 40%
• 5% Cost reduction or maintenance of current levels
• Ensure operational efficiency to generate sufficient cash from operations
| Onderstepoort Biological Products © | March 1, 2011
INDUSTRY
NORM2009/10 2010/11 2011/12 2012/13 2013/14
R'000
Sales 100 042 145 000 130 460 143 506 157 857
GP MARGIN % 60% 54% 60% 64% 64% 68%
Operating Profit 16% 20% 10% 15% 20%
Research & Development ≥10% 2% 2% 7% 7% 7%
2 007 2 655 9 422 10 364 11 401
Cash Generated from
Operations 19 236 30 000 25 127 20 471 37 041
Financial Projections – Income statement
| Onderstepoort Biological Products © | March 1, 2011
ONDERSTEPOORT BIOLOGICAL PRODUCTS LTDIncome Statement for the year ended 31 March
2011/12 2012/13 2013/14
R'000 R'000 R'000
Revenue 130 460 143 506 157 857
Cost of Sales 44 356 48 792 53 671
Gross profit 86 104 94 714 104 185
Other operating income 666 1 624 1 844
Administrative expenses 46 665 50 971 56 288
Other operating expenses 33 456 36 802 40 482
Operating profit 6 648 8 565 9 259
Interest received 6 352 1 300 1 430
Profit before tax 13 000 9 865 10 689
Taxation 3 640 2 762 2 993
Net profit for the year 9 360 7 103 7 696
Financial Projections – Balance Sheet
| Onderstepoort Biological Products © | March 1, 2011
ONDERSTEPOORT BIOLOGICAL PRODUCTS LTDBalance Sheet at 31 March
2011/12 2012/13 2013/14
R'000 R'000 R'000
Assets
Non-current assets
Property, plant and equipment 50 492 50 640 56 717
Deferred tax
50 492 50 640 56 717
Current assets
Inventories 28 672 25 672 27 672
Trade and other receivables 6 964 6 364 5 564
Cash and cash equivalents 174 407 224 407 284 407
210 043 256 443 317 643
Total assets 260 535 307 083 374 360
260 535 307 083 374 360
Equity and liability
Share capital 20 482 59 195 118 413
Retained earnings 228 109 236 674 245 933
Capital and reserves 248 591 295 869 364 346
Trade and other payables 9 301 8 801 8 001
Provisions 2 643 2 413 2 013
Current liabilities 11 944 11 214 10 014
Total equity and liabilities 260 535 307 083 374 360
Financial Projections – Cash Flow Statement
| Onderstepoort Biological Products © | March 1, 2011
ONDERSTEPOORT BIOLOGICAL PRODUCTS LTDCash Flow statement for the year ended 31 March
2011/12 2012/13 2013/14
R'000 R'000 R'000
Cash flow from operating activities
Cash Receipts 135 976 151 042 167 170
Cash paid to suppliers and employees 110 849 130 571 130 128
Cash generated from operations 25 127 20 471 37 041
Interest received 6 352 1 300 1 430
Dividends received
Taxation paid - - -
Net cash inflow from operating activities 31 479 21 771 38 471
31 479 18 389 28 772
- 3 382 9 699
Cash outflow from investing activities
Purchase of property, plant and equipment 1 935 11 142 18 390
Net cash outflow from investing activities 1 935 11 142 18 390
Cash flow from financing activities
Issue of share capital - ordinary 12 038 39 371 39 919
Net cash inflow from financing activities 12 038 39 371 39 919
Net increase in cash and cash equivalents 41 582 50 000 60 000
Cash and cash equivalents at beginning of year 132 825 174 407 224 407
Cash and cash equivalents at end of year 174 407 224 407 284 407
Performance Monitoring
o Effective implementation of strategy.
o Impact of strategic initiatives –
o Achievement of KPI’s.
o Strategic goals.
o Sustainability.
o Use experience in annual reviews.
o Balanced Scorecard:
o Alignment to organisational strategy.
o Basis for individual performance
contracts.
o Quarterly performance monitoring.
o Annual performance reporting:
o Treasury regulations – Auditor
General.
o Pre-determined objectives.
| Onderstepoort Biological Products © | March 1, 2011
Conclusion o At an operational level OBP has stabilised:
o Growing revenue and operating profits.
o Investing profits in:
o Development of new vaccines.
o Replacing critical equipment to maintain manufacturing capacity.
o Emerging sector:
o Support through provincial government.
o Rural vaccine distribution opportunities.
o Skills development prioritised:
o Learnership and Internship programmes.
o Bursaries and development programmes.
o Training budget increased.
o GMP project high priority in 2011/12.
| Onderstepoort Biological Products © | March 1, 2011
| Onderstepoort Biological Products © | March 1, 2011
Thank you