AGRICULTURE NKEA: HERBS SUB-SECTOR

ENTRY POINT PROJECT (EPP)

HIGH VALUE HERBAL PRODUCTS

February 2011

(LIMITED CIRCULATION)

1
INTRODUCTION

Global trade of natural products, which amounted to RM777 billion in 2009, is projected
to triple by 2020. The shift in healthcare, denoted by global growth in nutraceuticals,
towards a preference for natural products with therapeutic value provides opportunities
for Malaysia to become a significant global player, given our rich biodiversity. However,
currently the majority of local products are largely in the low-end market segment, such
as fortified beverages. Diversification towards high-end herbal products based on
standardized extracts and validated by clinical studies remains weak due to lack of
industry champions, weaknesses in local R&D, large investment required for clinical
studies and difficulty in penetrating international markets.

OBJECTIVES

Given the vast potential in market opportunities, and in support of providing alternative
and complementary medicines to the masses for better healthcare and healthy living,
the Entry Point Project for herbal products towards nutraceuticals with claims and high
value botanical drugs has been identified. This EPP is a private sector-led initiative,
aimed as a coordinated national project with the following objectives:

 To increase the gross national income (GNI) amounting to USD1.016 billion or

RM3.25 billion by 2020;

 To produce quality, safe and efficacious high-end herbal products especially for
the export markets;

 To strengthen the supplies across the value chain; and

 To enhance R&D in herbs and secure the intellectual property rights from local
herbs.

GNI CONTRIBUTION

This initiative is projected to provide an increase in gross national income to the country
amounting to USD1.016 billion or RM3.25 billion by 2020 with contribution from the
Entry Point Project of high value herbal products and spin-offs from other business
opportunities.

2
GNI Contribution : USD 1.016 billion (RM3.25 billion)

EPP High value

Herbal products : USD692 million (RM2.21 billion)

Business opportunities : USD324 million (1.04 billion)

COMPONENTS OF THE PROJECT OF HIGH VALUE HERBAL PRODUCTS

I. R&D grants will be established to support:

 Upstream research activities (discovery and crop production & agronomy).

Grants will be given to research institutions based on research requirements
requested by the participating companies.

 Downstream research activities (standardization & product development, and

pre-clinical and clinical studies) to be given to research institutions based on
research requirements as requested by the participating companies.

Private sector manufacturing companies will invest in other capital expenditure

(CAPEX) and operations expenditure (OPEX).

The herbal fund is meant to be a seed grant. Once fully disbursed, the private sector
is expected to make further investment contribution to the development,
commercialization of herbal products and finally to generate returns to increase the
gross national income to the country within the agriculture NKEA herbal sub-sector.

II. Clusters of R&D Centre of Excellence (CoEs).These clusters will coordinate

research amongst public R&D organizations. The clusters are:

 discovery;

 crop production & agronomy;

 standardization & product development;

 pre-clinicals and clinicals; and

 processing technology

3
 The main role of the R&D clusters is to accelerate and coordinate sustainable
R&D activities for the NKEA projects. As such, research capabilities and
infrastructure will be improved.

III. Raw material supply

To ensure adequate and consistent supply of raw materials, Herbal Cultivation

Parks will be developed in corridor areas where the herbs will be planted on a
large commercial scale based on a contract farming model. Anchor companies
will be selected to manage smaller farmers (out-growers) and ensure compliance
with international standards on GAP and organic certifications. The Government
will provide the basic infrastructure i.e. basic utilities, and a collection, processing
and packaging center. In return, anchor companies will invest in equipment and
machineries, as well as manage and run the operations.

IV. Standardized extract supply

Extraction facilities in the country will be expanded. There are currently limited
commercial-scale facilities. Most are small or at pilot scale and not designed to
operate commercially. New facilities will be built, each with a capacity of
1,000kg per extraction cycle to supply the industry with reliable and premium
quality extracts at competitive cost.

V. National Branding

 Government will facilitate an integrated marketing approach to promote a

national brand

 Herbal products developed under the project will carry the national brand

PRIVATE SECTOR LED

The Government encourages greater participation from the private sector in driving the
development of these high value herbal products NKEA initiative as a new growth area.

The Government will facilitate and support this project through the set-up of a
Malaysian Herbal Council.

4
PARTICIPATION

Malaysian herbal companies are invited to participate in this national program. Several
popular Malaysian herbs have been identified as the focus, including tongkat ali, kacip
fatimah, misai kucing, hempedu bumi and dukung anak.

The target for each participating company is to develop and launch:

 New nutraceuticals products by 2012 and 2013

 New botanical drugs by 2016

Companies are expected to sell products overseas and hence need to comply with the
requirements of foreign regulators.

APPLICATION PROCEDURES

The following are procedures that companies need to comply with:

1. Submit a letter of intent, signed by the company management and attached with
the company profile, to the Herbal Development Office.

2. Sign the non-disclosure agreement (NDA) with the Herbal Development Office.

3. Submit the company’s business plan (including the brief proposal for R&D
areas) as an appendix and present to the Herbal Development Office for
evaluation and approval.

4. Once approved, sign a contract agreement with the Herbal Development Office.

5. Works on the details of the R&D areas with the chosen COE/s for onward
submission to the Herbal Development Office.

Companies wishing to participate will need to fill in the necessary documents as

in the application procedures, and to satisfy requirements.

5
FAQs

1. What is defined as nutraceutical product and what is a botanical drug?

Nutraceuticals are beneficial foods, currently classified as ‘foods’ and not

‘drugs’. Therefore, any medical claims to prevent, treat or cure disease cannot
be made for nutraceutical products. However, both dietary supplements and
functional foods are permitted to make health claims.

Source: Nutraceuticals, A Global Strategic Business Report, Global Industry Analysts, Inc, March
2008

A botanical drug product consists of plant materials, which may include

vegetables, algae, macroscopic fungi, or combinations thereof, which is
intended for use in the diagnosis, cure, mitigation, treatment or prevention of
disease in humans.

Source: FDA, US

2. Can companies participate in both nutraceuticals and botanical drugs?

Yes, qualified companies can participate in both as long as the companies fulfill
the -requirements.

3. Can companies submit more than one product proposal for nutraceuticals and
/ or botanical drugs?

Yes, but this is subject to approval from the Herbal Development Office.

4. Are the herbs confined to selected few?

The listed herbs are the focus herbs (tongkat ali, kacip fatimah, misai kucing,
hempedu bumi and dukung anak) identified for EPP. However, if companies can
justify focusing on herbs outside these five in order to generate high returns for
GNI, they are welcome to present these business opportunities in their
proposal.

6
5. Can companies choose their own research institutions?

Yes, companies may engage with any research institutions under the particular
clusters.

6. Can non-Bionexus companies participate in this program?

Yes, non-Bionexus companies can participate in this program as long as the

companies fulfill the pre-requirements of the evaluation criteria.

7. What are the procedures or guidelines that companies need to adhere to in

relation to the pre-clinical and clinical compliance by the Ministry of Health?

Companies or individuals interested in venturing into upgrading the value of

their herbal products are advised to comply with the guidelines determined by
the Ministry of Health Malaysia (MOH), which were prepared according to the
respective international standards and requirements. These include product’s
manufacturing as in Good Manufacturing Practice (GMP), Good Laboratory
Practices (GLP) for pre-clinical toxicology/safety testing as well as Good Clinical
Practice (GCP) for clinical trials. Further information are made available from
the following websites:

i. GMP and GLP practices: The National Pharmaceutical Control Bureau

(BPFK) website http://portal.bpfk.gov.my/

ii. Ethical approval: The National Institute of health (NIH), MOH Research and
Ethical Committee (MREC), http://nih.gov.my/

iii. Guidelines for Research in Herbal Medicine including Preclinical safety

evaluation: National Research and Development on Herbal Medicine
Committee (NRDHM) http://www.globinmed.com/

iv. Clinical evaluation and clinical trial: Clinical Research Centre (CRC)
http://www.crc.gov.my/

7
-------------------------------------------------------------

Address all enquiries and forms to

Head
Herbal Development Office
Level 10, Wisma Tani
Kementerian Pertanian dan Industri Asas Tani
No 28, Persiaran Perdana, Presint 4
62624 Putrajaya

Tel: 03-8870 1000

Faks: 03-8888 6901
e-mail: hdo@moa.gov.my / sitihawa@moa.gov.my

8
GUIDELINES FOR APPLICANTS

ELIGIBILITY CRITERIA

1. EVALUATION OF COMPANIES

1.1 COMMERCIALIZATION CAPABILITY FOR NUTRACEUTICAL with CLAIMS

and BOTANICAL DRUGS
1.1.1 market knowledge
1.1.2 regulatory knowledge
1.1.3 branding
1.1.4 products distribution locally and international
1.1.5 manufacturing

1.2 SCIENTIFIC AND TECHNOLOGY CAPABILITIES (where applicable)

1.2.1 discovery
1.2.2 crop production & agronomy
1.2.3 pre -clinical and clinical
1.2.4 standardization & product development

1.3 FINANCIAL STRENGTH IN COMERCIALIZING HERBAL PRODUCTS

LOCALLY & OVERSEAS

1.4 PREFERABLY COMPANIES ARE TO SOURCE THEIR RAW MATERIALS

AND EXTRACTION FACILITIES LOCALLY

1.5 CORPORATE STRENGTHS/PROJECT MANAGEMENT

1.5.1 All categories of companies must have a minimum of 51% equity held by
Malaysians. Company applicant must provide the attested latest Form 49
Companies Act 1965 together with the audited three years Annual Report;

1.5.2 Company entity must have minimum paid-up capital of RM 1 million.

Company applicant must provide the attested latest Form 24 Companies Act

9
 1965, and Forms 9, 24 and 49 Companies Act 1965 should be certified by
the Companies Commission of Malaysia (SSM) prior to submission;

1.5.3 None of the company directors have been convicted for any fraudulent
activities, nor has the company ever been into bankruptcy, liquidation or
receivership.

1.6 PROJECT & APPLICATION DURATION

The maximum project duration allowed is up to 10 years with good performance in line
with the NKEA EPP. The target for participating companies is to develop and launch a
minimum of:

 Ten nutraceuticals products by 2012 and 2013

 Five botanical drugs by 2016

10