K V BALASUBRAMANIAM

MANAGING DIRECTOR

INDIAN IMMUNOLOGICALS LTD

ANIMAL HEALTH IN INDIA SME BUSINESS OPPORTUNITIES

NIABI 2012

ABOUT INDIAN IMMUNOLOGICALS LTD Producer of animal and human vaccines, health & nutrition products # 1 in animal vaccines, # 3 in animal health in India # 4 in human vaccines, # 7 biopharma company # 12 biotech company Top 3 world producer of Foot & Mouth disease vaccine. Top 3 world producer of human and animal rabies vaccines. Major supplier of UIP vaccines – r Hepatitis B, Measles, DPT, TT etc., Mission: Biotechnology in healthcare made affordable & accessible. Service Offerings – Raksha Vet Centres, Indiagen, Abhay Clinics. Sales Rs 284 Cr ($ 63 mio.) FY 2010-11, Employees 1300.

ANIMAL HEALTH IN INDIA SME BUSINESS OPPORTUNITIES

PRESENTATION OBJECTIVE

About : India - Animal Health Business - SME Business – Specific Opportunities - Challenges – Success Factors

Not About : Dairy or Poultry Value Chain Business

ANIMAL HEALTH IN INDIA SME BUSINESS OPPORTUNITIES

1. ANIMAL HEALTH MARKET - PERSPECTIVE

2. FUTURE PROSPECTS

3. SPECIFIC SME OPPORTUNITIES

4. CHALLENGES

5. SUCCESS FACTORS

ANIMAL HEALTH IN INDIA SME BUSINESS OPPORTUNITIES

1. ANIMAL HEALTH MARKET - PERSPECTIVE

PERSPECTIVE - ANIMAL POPULATION

Cattle & Buffaloes 296 mio (18% of world) Sheep & Goats 120 mio (12 % of world) Poultry - Layers 169 mio - Broilers 1800 mio ( 10% of world) Dogs - Street 20 mio - Pets 0.4 mio (8 % of world)

1. ANIMAL HEALTH MARKET - PERSPECTIVE

Item Unit per person per year

India Developed

Countries

World Average

Meat Kg 5.1 82.1 41.2

Milk Kg 65.2 207.7 82.1

Eggs Kg 1.8 13.0 9.0

Source: The State of Food & Agriculture 2009, FAO

AH MARKET – FUTURE PROSPECTS National Dairy Plan to focus on increased milk

productivity -> Growth in animal breeding, nutrition and

health business Large outlays in 12th five year plan for disease

control -> Large business opportunities for vaccines for

cattle & sheep Growing integration of poultry businesses -> Higher health and hygeine outlays Higher emphasis on productive livestock with high

yielding animals -> Better range and volume of feed and nutrition Growing ownership of pets as lifestyle statements -> Opportunities for pet care and pet health

2. FUTURE PROSPECTS

3. SPECIFIC SME OPPORTUNITIES

MARKET SIZE

Compounded Animal Feed : Rs 8000 Cr Health –Vaccines & Medicines : Rs 1700 Cr Nutrition Products : Rs 700 Cr

ANIMAL FEED, NUTRITION & HEALTH

1. COMPOUNDED ANIMAL FEED Feed requirements of cattle : 60 % home made, 28 %

grazing, 12 % cattle feed 0.5 kgs cattle feed for every 1 lit milk produced. = Market potential of 60 mio MT Current market only 6 mio MT i.e 10 % of potential. Poultry Feed market addl. 2 mio MT Scope for value added products : specific feeds for

calves, buffaloes, pregnant animals etc., Medium size cattle feed plants 50 -100 TPD serving

100 kms radius Investment cost Rs 5-6 Cr.Turnover Rs 15-30 Cr Technology – Medium, Available with Machinery

Suppliers

3. SPECIFIC SME OPPORTUNITIES

2. HEALTH PRODUCTS Indian Mkt Rs 1700 Cr i.e $ 340 mio, Growth

10% p.a World Mkt $ 18 bio India 2 % of world AH market. Potential to grow. Rank 10 (USA 24%,Europe 20%,China 7% Brazil

6% Japan 5%) Main Product Groups: Vaccines 31 % Rs 530 Cr Antibiotics 30 % Rs 500 Cr Dewormers 17 % Rs 290 Cr Infusions 5 % Rs 90 Cr NSAIDS 4 % Rs 70 Cr Parasiticicides 4 % Rs 70 Cr Others 9 % Rs 150 Cr Total Rs 1700 Cr

3. SPECIFIC SME OPPORTUNITIES

2. HEALTH PRODUCTS Manufacture/Marketing of Formulations Market Rs 1200 Cr Investment cost Rs 5-15 Cr. Sales Turnover Rs 15-30 Cr p.a Technology – Medium ( Tabletting, Orals) – High ( Injectables) Available with several Consultants Contract Manufacture of Formulations Investment cost Rs 5-10 Cr. Sales Turnover Rs 10-20 Cr p.a Technology – Medium - High

3. SPECIFIC SME OPPORTUNITIES

3. ANIMAL VACCINES Manufacture of Animal Vaccines Cattle, Poultry, Canine & Sheep Vaccines Market Rs 530 Cr Investment cost Rs 20-30 Cr. Sales Turnover Rs 20-30 Cr p.a Technology – Medium for Bacterial Vaccines High for Viral Vaccines, Recombinant Vaccines Available with IVRI, NRDC, Consultants Better – Tech transfer

3. SPECIFIC SME OPPORTUNITIES

3. VACCINE TECHNOLOGY TRANSFER – IMPORTANT ASPECTS Technical Scale : Large difference between lab, pilot and commercial scale. Raw Material : R&D uses pure material, commercially unaffordable. Process Parameters : Better control in Lab scale vs commercial scale Strain Used : Sufficient data required. Clinical trials : Adequate data on Immunogenicity, Safety & Efficacy Commercial Intellectual Property Rights, Warranty, Training, Demo of Comml.

Batches, Jurisdiction, Training etc.,

3. SPECIFIC SME OPPORTUNITIES

4. NUTRITION PRODUCTS MARKET Market Size Rs 700 Cr Growth 19 % p.a Main Product Groups Vitamin & Mineral Premixes Rs 150 Cr Calcium Supplements Rs 140 Cr Mineral Mixtures Rs 100 Cr By pass Fat Rs 20 Cr Others Rs 190 Cr Manufacture of Mineral Mixture/Vitamin premixes/ Supplements Investment cost Rs 3 -5 Cr. Turnover Rs 10 - 15 Cr p.a Technology – Low. Available with Machinery Suppliers.

3. SPECIFIC SME OPPORTUNITIES

MARKET CHALLENGES Small farmer market makes marketing a long haul Dispersed market puts pressure on distribution costs, esp. vaccines Trade exerts pressure on margins due to the dispersed market Affordabilty issues leads to high price sensitivity Unregulated competition

TECHNOLOGY CHALLENGES

Need to develop products for the Indian requirements Little R&D on AH products, dependence on human product

extensions New IPR regime imposes additional diligence demands and research

costs

4. CHALLENGES

MANUFACTURING CHALLENGES Lower volumes compared to pharma result in higher cost of

manufacture Contract manufacturing as solution has quality imperatives Small supporting manufacturers also have quality issues

REGULATORY CHALLENGES

Absence of proper regulatory framework for new drug, esp GM

products Evolving regulatory environment creates uncertainty in new product

introduction Licensure a State subject, except vaccines, creates inconsistencies

4. CHALLENGES

Clear assessment of need-gap in the market. Build sustainable business model. Create niche position before expanding. Differentiated product offerings. Appropriate technology which is cost effective. Manufacturing economies of scale. Adequate investment in sales force with good productivity norms. Cost effective distribution. Customer relationship Performance metrics for manufacturing, supply chain & marketing. Good management of cash cycle and working capital. Regular performance reviews and corrections. Patience, Perspiration, Persistence

5. SUCCESS FACTORS

THANK YOU