AFC Agro Biotech

AFC Agro Biotech (AFCAGRO), the associate company of Active Fine Chemicals (AFCL), has
businesses of manufacturing antibiotics, proteins, vaccines, enzymes etc. from agricultural
ingredients like molasses, glucose, potato starch, and other nutrients.

At present, AFCAGRO is producing Biological Assets; e.g., Macrolide Protein (raw material for
Erythromycin, Azithromycin), Acetic Acid, L-Lysine, Mono Sodium Glutamate and Methonione.

The Companys sales remain concentrated to local market. The raw materials are procured mostly
from local suppliers.

Huge market: The Bangladesh Biotech market size is estimated at BDT 50bn served to
pharmaceuticals, food, textile companies.

Bangladesh Antibiotic market requires 300 ton of Erythromycin per year worth of around BDT
2.4bn/ USD 30.0mn (USD 100 per kg). Total Azithromycin market size is around BDT 2.8bn/ USD
35.0mn.

First mover in the industry: AFCAGRO is a first of its kind commercial biotech raw material
manufacturer in API and pharmaceutical market of Bangladesh. Currently APIs are being imported
from China, India and Taiwan.

Captive demand: Pharmaceutical companies need constant supplies of APIs to run their
production. As AFCLs products are import substitutes, cost saving & high quality, there is captive
demand for AFCAGROs outputs

Strong financial performance: AFCAGRO performed strongly for the current year (Q1 and Q2
2014), as its YoY growth in revenue accrued to 40.1% and in net profit recorded to 76.8% and
103.1% respectively.

Value Drivers:
1. AFCAGRO work as the backward company for AFCL. Major production of it will be consumed
by AFCL (around 80%). The last 4 years CAGR of AFCL was 94.6%.
2. The recent initiative of National Revenue Board (NBR) and Bangladesh Tariff Authority (BTA)
to increase import duty on API of Erythromycin and Azithromycin from existing 10.0% to
25.0% should increase the sales of AFCAGRO through AFCL. AFCL purchased product worth of
BDT 32.0mn from AFC Agro-Biotech in 2014. If AFCL could capture 20% of the market share
which would turn into a turnover increase of BDT 10.0mn to BDT 12.5mn monthly
(approximately).
3. Commercial Production of Industrial Enzymes for leather industry jointly with Department of
Microbiology, University of Dhaka for which it will pay 4% Royalty to Dhaka University on the
invoice price of Industrial Enzymes. Expected turnover of the Company will increase BDT
10.0mn to BDT 12.5mn monthly (approximately) and it will increase gradually for the
production of Industrial Enzymes.

AFC Agro Biotech

4. AFCL Board has also decided to set up an Anti-Cancer Formulations plant at Uttar Shoilmary,
Koiya Bazar, Batiaghata, Khulna with an estimated cost of BDT 900.0mn (approx.). Upon
completion of the project, it is expected that AFCAGRO would supply the biotech raw
materials to AFCL.
5. Tax savings from 9 years tax holiday treatment as it is located in Khulna region.

RISKS & CHALLENGES

Competition: Competition from abroad manufacturers. Moreover, we expect competition

by 2017 from new local manufacturers

Little development in the R&D: Lack of technical and knowledgeable people to work in the
arena as well as low investment in R&D. Knowledge based work force will be key factors to
maintain high standard of purity of products.

Outdated sales and marketing strategies: Coordination and strategic focus may prove to
be a significant challenge as the company adds more assets. Delivering right products on
time is a big challenge.

Low healthcare expenditure of people: The real barrier, hindering access to treatments is
in fact a lack of the basic healthcare infrastructure required to get existing medicines to
people.