1. FINANCIAL POSITION | Onderstepoort Biological Products © |22nd February 2013Page 73

2. FINANCIAL RATIOS | Onderstepoort Biological Products © |22nd February 2013Page 74

3. Summary of challenges | Onderstepoort Biological Products © |22nd February 2013Page 75

4. 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) | Onderstepoort Biological Products © |22nd February 2013Page 76

5. 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 | Onderstepoort Biological Products © |22nd February 2013Page 77

6. Challenges Research and Development No/limited control over reference/vaccine strains (OVI) – no patents, only trade secrets in production processes Research / innovation backlog – predominantly 1 st and 2 nd 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 2013Page 78

7. 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 | Onderstepoort Biological Products © |22nd February 2013Page 79

8. | Onderstepoort Biological Products © |22nd February 2013Page 80 Competitiveness and sustainability Limited market and growth potential Declining market share and sales revenue Product availability and quality Non-GMP Unreliable supply Production Challenges Facility/plantEquipment Summary of Current Challenges

9. Possible Solutions | Onderstepoort Biological Products © |22nd February 2013Page 81

10. Proposal to strengthen OBP | Onderstepoort Biological Products © |22nd February 2013Page 82 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

11. 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 2013Page 83

12. | Onderstepoort Biological Products © |22nd February 2013Page 84 THANK YOU