FINANCIAL POSITION

2008 2009 2010 2011 2012AssetsNon current assets 78 515 120 71 128 732 70 904 593 65 795 295 78 444 703 Current assets 97 010 400 109 178 613 138 422 709 181 210 702 142 201 803 Total assets 175 525 520 180 307 345 209 327 302 247 005 997 220 646 506

LiabilitiesNon current liabilities 783 366 - 35 734 162 32 758 318 29 816 852 Current liabilities 8 350 269 8 536 451 22 057 935 41 200 300 19 934 293 Total liabilities 9 133 635 8 536 451 57 792 097 73 958 618 49 751 145 Net asset value 166 391 885 171 770 894 151 535 205 173 047 379 170 895 361 Number of shares issued 1 000 1 000 1 000 1 000 1 000

NAV/share 166 392 171 771 151 535 173 047 170 895

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FINANCIAL RATIOS

2008 2009 2010 2011 2012Revenue growth 9% 19% 21% 58% -38%

Operating costs growth -3% 20% 33% 84% -23%Gross margin 33% 37% 65% 73% 62%

Operating cost to income ratio 45% 46% 50% 59% 73%Staff costs to Revenue ratio 47% 41% 46% 38% 57%

Staff costs growth 5% 4% 36% 30% -9%R & M as percent of revenue 7% 6% 6% 4% 6%R&D as percent of revenue 4% 3% 2% 1% 3%

Average staff cost per employee 161 829 174 880 220 475 299 256 278 232 Average revenue per employee 341 676 423 238 474 866 781 430 490 512

Current ratio 14.31 15.78 13.31 4.40 7.13Quick ratio 2.58 12.93 3.46 3.93 5.87

Return on asset 1% 3% 12% 12% -1%

Financial performance ratio

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Summary of challenges

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Challenges

Competitiveness and sustainability

•Multinational and increasing local competition (OBP not seen as preferred or strategic partner in local

development)

•No preferential procurement from government

Technical information – limited as many vaccines designed/developed 20-40 years ago (regulatory

requirements changing and information needs updating) (time and money required)

Unregistered, so called autogenous vaccines – direct adaptation of OBP product, damaging

reputation of OBP and OBP products

20:80 pareto principle: 20 % of OBP products generate 80% of our revenues, many products with

negative or very low GP margins – who should fund or support these, who should fund/support

vaccines against orphan diseases (ie those that bigger multinationals have little interest in?

Limited or no distribution/access of product to rural clients (who must fund, drive and support this)

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Challenges Quality

•Quality - cost of compliance (subsidise or pass on to consumer?)

•Lack of validated, new generation diagnostic assays (support quality control testing of

vaccines) – who should develop and fund the development of these?

• Production

•Ageing and redundant equipment

•Old technology processes

•Limited scope to improve production efficiencies, efficacy and capacity

•Consistency of quality and supply of raw materials

•Variable demand for products

•Products – extensive, variable type and production processes

•Planning/scheduling challenges – compounded by

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Challenges Research and Development

No/limited control over reference/vaccine strains (OVI) – no patents, only trade secrets

in production processes

Research / innovation backlog – predominantly 1st and 2nd generation vaccines

Delays in registration of new or improved products by Registrar (up to 305 working days)

Expectation that OBP has endless funds to support projects, student training at OVI or the

university but in reality OBP has a limited internal R&D budget and there is limited scope for

OBP as a commercial entity to apply for funding

•Budget cuts done first at R&D

•Average ratio of OBP scientific personnel: projects (1:6)

•Who funds/should fund new vaccine development to prevent new/emerging diseases?

| Onderstepoort Biological Products © |22nd February 2013 Page 78

Challenges General

• Funding for upgrade – limited internal revenues, need government support or support

from third party (PFMA, DAFF restrictions)

• Ageing technically skilled staff, limitations in up- skilling staff to

• Increasing maintenance and utility costs

• Confusion by public and private stakeholders between OBP, OVI and Faculty of

Veterinary Science (Univ Pretoria) – pros and cons

• Loss of world-renowned recognition of Onderstepoort for its veterinary excellence –

due to lack of capacity, scientific outputs, limited financial resources etc

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| Onderstepoort Biological Products © |22nd February 2013 Page 80

Summary of Current Challenges

Possible Solutions

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Proposal to strengthen OBP

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• Upgrade of facilities, equipment and processes to PIC /S standards as a matter of

urgency – improved production efficiencies, cost reduction and competitiveness,

access to more markets

• Establishment of a new facility.

• Support by government – vaccine bank/reserve - to ensure supply for benefit of

country (i.e. annual transfer payment on the MTEF of DAFF)

• Increased collaboration, technology transfer and technology acquisition (locally and

internationally) to address research / innovation backlog e.g. linkage with TIA’s

Animal Cluster.

• Financial support for R&D to develop new and improved products

• Increase product range - offer more combination vaccines

• OBP to be recognised by DAFF as an important role player in conjunction with

government in terms of disease management and control – strategic vaccine bank and

reserve, training and improved access of products to small holder/emerging farmers

Conclusion• OBP is required to deliver on its mandate of preventing and controlling animal

diseases that impact food security and public health• To be able to effectively and efficiently carry out this mandate and to remain a

viable and sustainable business entity the following is required:• Investment into upgrading and /or establishing new facilities• Stronger relationships need to be built with provincial and national

government (? preferential procurement of local products vs multinationals)• Vaccination/health programmes driven by provinces and private vets• Improved communication and interaction between all role players• Contingency plan for vaccine reserve to be considered and supported.

| Onderstepoort Biological Products © |22nd February 2013 Page 83

| Onderstepoort Biological Products © |22nd February 2013 Page 84

THANK YOU