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Innovation in the Domestic Poultry Vaccine Business

Hester Biosciences - 2021 Annual Report Summary
#hesterbio

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Topics Covered
1. Company overview
2. New launches
3. Key innovation
4. Vaccine plant in Africa
5. Future Opportunities

6. Subsidiaries
7. Manufacturing facilities
8. Revenue Split
9. MD's message
10. Management Discussion and Analysis
11. Financials

1. Company Overview
Hester Biosciences is a leading poultry and animal healthcare company engaged in manufacturing and marketing of vaccines

and healthcare products. They currently have a capacity to manufacture 8.99 billion doses. They offer a wide range of high-efficacy vaccines, quality pharmaceutical medicines and affordable feed supplements that protect poultry and animals from diseases. The company has a range

of 48 poultry vaccines (single and combination), 3 large animal vaccines, medicines, feed supplements and disinfectants for poultry and large animals

2. New launches:
During the year, they launched a new category of herbal products for poultry and animals. They also launched

3 new vaccines viz. Live Thermo-tolerant PPR Vaccine – Nigerian strain, Newcastle Disease Vaccine and Infectious Avian Encephalomyelitis Vaccine

3. Key innovation:
They are about to launch the first vaccine in India for lumpy skin disease. Lumpy skin disease is a viral infection

that causes prolonged morbidity in cattle and buffaloes

4. Vaccine manufacturing plant in Africa:
They have completed the construction of the animal vaccine manufacturing plant in Tanzania, which is one of the largest in the African continent. The plant is expected to commence

production by December 2021 and its benefits will be visible from FY 2021-22. Built at a total cost of USD 14.30 million, it will serve the African markets which has one of the largest population of domestic livestock and large animals. It has a capacity

to manufacture 1.5 billion doses annually.

5. Future Opportunities:
Large animal diseases are rising and the Government of India will be focussing on the immunisation programmes. Hester has made several tie-ups to develop vaccines for classical swine fever & sheep pox, PPR

(Peste Des Petits Ruminants), lumpy skin disease and brucella disease.

6. Subsidiaries: Hester biosciences has four subsidiaries:

i) HESTER BIOSCIENCES NEPAL PRIVATE LIMITED (65% stake): Manufactures and supplies animal vaccines

ii) TEXAS LIFESCIENCES PRIVATE LIMITED (54.85% stake): Manufactures and supplies pharma formulations, tablets, capsules, powder and oral liquid for human and veterinary health

iii)HESTER BIOSCIENCES AFRICA LIMITED (100% stake): Manufactures and supplies veterinary vaccines and animal health products
iv) HESTER BIOSCIENCES KENYA LIMITED (100% stake): Engaged in trading and supplying of veterinary vaccines and animal health products in Kenya, Tanzania

and other African regions.
7. Manufacturing Facilities:
Hester has 3 state-of-the-art manufacturing units for vaccine, health products and diagnostics. Hester’s first manufacturing unit is located in Kadi, Mehsana district of Gujarat. It is the single largest location animal

biological manufacturing facility in Asia, created to benchmarked international quality and compliance standards. The Company’s second unit is located in Kathmandu, Nepal. Hester has an installed manufacturing capacity of 6.25 billion doses in India and 1.24 billion

doses in Nepal. The Company is also setting up Dar es Salaam unit in Tanzania, Africa. The facility is almost near completion.
8. Revenue Split

9. Managing Director’s message :
i) The company performed better than expected in the domestic market.
ii) Poultry division showed a growth of 25% whereas the animal health division showed a growth of 19%.
iii) They will be releasing the first batches of the locally manufactured

PPR vaccine and New Castle Disease vaccine in Africa this financial year.
iv)They have historically built their portfolio in the poultry segment. They are now looking to grow in the large animal health space.

v) They are actively partnering with various institutions to get the technology for developing vaccines for the emerging diseases that require attention.
vi) The recently launched herbal product division is primarily going to focus on the long-term chronic illnesses in animals.

It will be complementing their range of allopathic health products. This division is expected to give substantial results in increasing the top line in the coming financial year.
vii) On 27 May 2021, an MoU was signed between Bharat Biotech and Gujarat Covid Vaccine Consortium

(GCVC) of which Hester is a part. Hester shall provide the complete infrastructure at its Gujarat plant for manufacturing the Drug Substance for COVAXIN for Bharat Biotech.

10. Management Discussion and analysis:
i) Global Animal Healthcare Market size was valued at around USD 139 billion in 2020 and is predicted to grow at over 4.7% CAGR from 2021 to 2027
ii)Factors that drive the trend towards animal healthcare are changes in lifestyles,

increased urbanisation, nuclear families, single status, few or no children, and employment stresses are creating a significant need for emotional support.
iii)Among the developing countries, India has the highest zoonotic disease burden, with widespread illness and death.

The increasing prevalence of zoonotic ailments and a significant growth in the veterinary pharmaceutical industry are primarily driving the India animal health market.
iv)The Company primarily deals in four business verticals namely Poultry Vaccines, Large Animal Vaccines,

Poultry Health Products and Large Animal Health Products
v)In line with global health practices to move away from antibiotics, Hester has decided to focus on herbal products. Most new products to be launched by the Company would be natural or herbal in nature for both Poultry

as well as Animal division.
vi)In order to reduce dependency on any product, division or geography, the Company has strategically increased the sales of the health products. Although these products will have a lower gross margin, it will ultimately improve the top line

and the bottom line.
Lumpy Skin Disease in cattle is an emerging disease in India, which is of economic importance for cattle farmers. Hester is currently working towards developing a vaccine against LSD. The Company has already received the test license for evaluation of safety

& efficacy of the vaccine and has plans to commercially launch the vaccine by first quarter FY 2021-22. Hester is the only Company in India who has an LSD vaccine under development and will have a monopoly in it.

vii) The vaccine has a good export potential as well. LSD is endemic in most African and Middle Eastern countries.
viii)The Government of India has planned to immunise 4 crore female calves in India in the first phase against Brucella through vaccination. Hence, the Company has

signed the agreement with ICAR-IVRI in September 2020 for developing the Brucella Abortus S19 Delta Par vaccine.
viii)In order to produce good quality vaccine in India at low cost, Hester has signed two agreements with ICAR-IVRI in April 2021,

for acquiring technologies for the production and commercialisation of Classical Swine Fever Vaccine and Sheep Pox Vaccine
ix)In view of the various opportunities and increasing demand worldwide, including those of Brucella and LSD vaccines, Hester is planning

to expand it production capacities.
11. Financials:
Sales – 208.4 Cr (23% yoy growth). Of this, 73% was generated from the poultry business, 19% from the Animal segment and 8% from other segments.
EBITDA Margin – 35% of sales
PAT Margin – 19% of sales