PROFILE

Wynberg supplies an extensive range of natural, chemical-based products that are human, animal and plant safe, as well as internationally recognised and certified in terms of the British Standards, European Standards (BS ES), UK, and the National Regulatory Compulsory Specifications (NRCS) in terms of the National Regulator for Compulsory Specifications Act, 2008 (No. 5 of 2008), South Africa, as well as the Department of Agriculture, Forestry and Fishing (DAFF) certification and registrations.

The products are registered and manufactured locally and are used in the agricultural, food, and general health and hygiene sectors. Wynberg signed a licensing and joint venture agreement with a UK-based company to manufacture and market an extensive and totally natural range of hygiene and sanitation products into the food and agricultural pre-harvest spray programs and post-harvest packhouse processing sectors. These strategic initiatives enhance the local manufacturing industry to build resources and skills.

As a result of these signed agreements, Wynberg now has the capability to operate in southern Africa and as a global player, established a significant export network.

2016 OPERATIONAL PERFORMANCE

Wynberg increased its market share in the southern region to 5% after three years of research and development and the registration of various products. Their overall financial performance is below budget largely due to the drought in the Western Cape region which reduced the demand for their products.

Diversification into the food sector is critical to reduce the impact of the drought and the cyclical nature of the agricultural market. Wynberg successfully concluded a joint venture and registered a company in South Africa to supply equipment required as an efficient delivery mechanism for their products.

Key to sustainability is the ownership of IP registered product and the right to manufacture locally by agreement. South Africa will be the centre of excellence for future development of the product portfolio and act as the global agricultural centre of field research.

Wynberg, together with Citrus Research Institutes are in their 3rd year of trials to eliminate “Citrus Black Spot” which for the prior two years yielded excellent results.

VISION 2020 VISION – WYNBERG’S CONTRIBUTION

A detailed analysis of the business was done in 2015 with the primary objective of having focused and aligned efforts across the business to deliver on its long-term goals. A five point strategic plan in line with Vision 2020 Vision was implemented in 2015 with clear deliverables, strategic actions for each strategic level as well as detailing clear time frames.

The following was achieved during the 2016 year:

  • Wynberg moved from research to commercialisation of products into the agricultural sector.
  • New regulatory submissions to the NRCS are currently in progress. A test trial, after overseas Good Laboratory Practice (GLP) Laboratory “Micro-Challenge” on two ViBacSan products was successful and Wynberg was granted the NRCS Registration Number, by the NRCS for these two products. The timeline for completion of registration by the NRCS is estimated to be the end of 2016.
  • The introduction of pre-harvest products to the local market has been extremely successful providing farmers with opportunities to meet international standards on food safety in the export of fruit and vegetables. All registrations with the Department of Agriculture, Forestry and Fisheries for pre-harvest products have being successfully accomplished.
  • The post-harvest products will add to the value chain in the agricultural sector. These are part of the products mentioned in the second bullet point above and is used in the processing following harvest and picking. Packhouses are the primary customer and a national agreement has been signed with a distribution company to promote to the farms and packhouses.
  • Growth in the food and beverage sector is still in the research and development phase having done projects with bread manufacturers and other fresh product producers to extend the shelf life of products. It is anticipated that this will become commercial in 2017.

PROSPECTS AND FUTURE OUTLOOK

Wynberg developed a platform for growth which is estimated at 25% per annum based on the uptake of the product offering over the next three years. There are no planned acquisitions in the short to medium term and organic growth is expected by increasing market share and penetration into both the pre- and post-harvest markets.

The main opportunity that exists is the international focus of a green economy and protecting the environment as Wynberg have acquired the rights to internationally recognised natural products supporting key industries that impact on the health and well-being of the population as a whole, ranging from domestic hygiene to food security.

The following prospects have been identified in reaching their Vision 2020 Vision:

  • Growth of product portfolio for food and beverage – the opportunities to capitalise on their empowered status and successfully attract international and local partners to expand their product portfolio;
  • One joint venture is currently under negotiation which will bring new technology and innovative products into the South African economy with cost-effective improvements in food shelf life and quality;
  • The food and beverage manufacturing and processing market sector has been delayed for active entry until the 2017 – 2018 fiscal year, due to the intense focus and demand from the agricultural market sector;
  • Concluding a joint venture local manufacturing agreement with a UK-based company – this initiative will provide local jobs and require the transfer of new skills to staff;
  • Diversity of product portfolio – the diversity of their portfolio and their strategy to manufacture using local companies;
  • Expansion into new sectors with innovative products – a significant opportunity exists to capture a large portion of the infection control and hygiene and sanitation markets in the health delivery system, the food processing and hospitality sectors;
  • Retention of business won – in a business environment that is based on a high level of relationship building, the successful retention of business won on this basis is a key measure of their performance; and
  • Expand into new markets outside of South Africa.

OPERATIONAL FOOTPRINT

Wynberg’s administrative functions which include management, marketing and finance operate under AEEI at the V&A Waterfront offices. Manufacturing is done under agreement with a contract manufacturer in Blackheath, Cape Town. The distribution of product is done under distribution agreements with vendors in the respective sectors.

BRANDS/ PRODUCTS

Detailed information about Wynberg’s business model, stakeholders, risks and governance is available on the website at www.aeei.co.za.

BUSINESS MODEL

Wynberg’s model for the manufacture and distribution of its products are based on the following principles:

  • The acquisition of innovative local and international products patents and internal IP as well as international collaborative IP that is relevant to the African markets;
  • The Company trials and micro challenges all products and brings them to registration at which point they do the following upon receipt of registration and certification:
    • Appoint local manufacturers to produce the products to stringent quality standards; with the objective of establishing own manufacturing facilities throughout the country where critical mass has being attained;
    • Appoint local distributors who are active in the markets relevant to the products; and
  • Provide their partners with ongoing technical support.

In applying this business model, the ultimate objective is to transfer knowledge and opportunities to local SMMEs while providing employment opportunities.

GOVERNANCE

Through the application of policies and structures within the AEEI Group, Wynberg complies with all sound governance and regulatory functions and has had no reported fraud or deviations in the application of these principles in the current period. The continued training and exposure of employees to the ever-changing regulatory environment and regulations of the Companies Act ensure that all employees are fully informed of their responsibilities.

The Board of Wynberg approved a formal delegated authority schedule, which informs executive management of the necessary levels of approval for all key business transactions. In this way, the Board of Wynberg ensures that there is a senior manager, or the Board itself, reviewing each key business transaction/initiative to ensure that key business activities are aligned with their strategy, is lawful, will contribute to their sustainability and will not be harmful to any stakeholders and/or the environment.

STRATEGIC PLANNING AND MONITORING

In applying its business model, Wynberg is focused on becoming the leading black empowered Company in its sector which is completely void of BBBEE Companies in this market sector. In addition, while providing returns to its investors and making a positive contribution to the provision of bio-agricultural solutions, food manufacturing and processing entities, medical care and in this process increasing employment and knowledge transfer to the broadest possible population of South Africa. In achieving this objective Wynberg strives to support similar strategies in the rest of Africa.

Wynberg manages its businesses strategically, following a process, which includes an annual review of past performance, products/services, markets as well as a review of the internal and external environments. This review is followed by the setting of strategies and action plans, aimed at both growth and sustainability in current markets.

In addition to the annual strategic planning exercise, quarterly reviews of strategy achievement and how changes in the internal and external environments may positively, or negatively, affect them is held. Strategies and actions are adjusted to ensure the growth and sustainability of the business with due regard to the success of its partners.

The Board of Wynberg approves the annual operational budgets and monitors their financial performance against strategies set for the year and evaluates this against the key performance areas of management and key employees. Through this process the sustainability of operations are ensured.

Wynberg’s focus is on servicing the public and private sectors and strategically maximising opportunities that arise from legislative changes to introduce their natural range of products, which promote health and environmental safety. In June 2016, the “REACH ACCORD” blacklisted more than fifty agrochemical products. Over time their product range will be able to replace a high percentage of the blacklisted synthetic chemical products.

The initiatives taken in Wynberg within the agricultural sector, offers local farmers alternative products to the synthetic chemicals, which are being eliminated through the REACH Accord to which, South Africa is a signatory. In addition, it is now known that Government Gazette regulations for “clean labelling” and the ongoing collaboration with the research and production of food manufacturing and processing will have a positive impact on the sustainable production of food through the use of ViBacSan products which will positively enhance the health of consumers as well as the environmental impact by reducing the use of harmful chemicals in the production of food. Recent trials have been successful and resulted in the shelf life extension of bread which is one of the staple foods of the lower income groups, as well as at abattoir level, the prevention of fruit decomposition prior to packaging in controlled atmospheric cold storage facilities. This innovative and natural solution will ensure less wastage and longer storage in the supply chain. In following these exhaustive trials Wynberg has ensured that human and environmental standards of safety have met the stringent regulatory standards set.

ECONOMIC SUSTAINABILITY

Wynberg believes that with its current strategy of focusing on innovation and conversion of current markets to future thinking and technology will provide for the long-term sustainability of the Company in that existing business will be maintained while future business is developed in new markets.

The involvement of communities in this process will increase the sustainability and increase their profile especially in the agricultural sector where an increase in emerging farmers as reform initiatives start to impact on this sector. Wynberg will continue to diversify their business to compete in key sectors of the total health and agricultural produce delivery system in South Africa and southern Africa and increase their product offering by acquiring innovative new products in the medical, general health care and food safety and agricultural sectors.

ENVIRONMENTAL SUSTAINABILITY

Wynberg specialises in this arena with a product range that is developed and derived from totally natural plant sustainable resource extracts. These extracts have the ability to be formulated into products that achieve the same level or better results than synthetic chemicals, which are currently being banned in terms of the REACH Accord.

Wynberg considers themselves to be among the cutting-edge companies in producing sustainable products without any negative effect on the environment.

SOCIAL SUSTAINABILITY

Wynberg subscribes to AEEI’s code in this regard and recognises that without the upliftment and involvement of the total population they will not have a viable business environment and they will not achieve their social contract to improve the health service delivery to all their people. The assistance to and support of government initiative for “Emerging Farmers” is an area to which their products are specifically applicable as is the ability to technically support this level of framing practices.

Wynberg has highly motivated employees with the required skills to grow their business in each chosen sector and will continue to develop internal skills and acquire external expertise to bring knowledge and skills to South Africa creating opportunities for the transfer of intellectual property to South Africans.

Their key aims are to:

  • Transfer knowledge and skills beyond their own workforce;
  • Give the community access to resources that encourages innovation; and
  • Support entrepreneurs as they extend their product offering.

Wynberg continues to form local and international alliances to introduce cost-effective services and innovative products relevant to the needs of South African citizens. Their primary objective is to include the transfer of knowledge through job opportunities to the local economy.

KEY CHALLENGES AND RISK MANAGEMENT

Key challenges

Key challenges that must be overcome to achieve their strategic objectives within their value set are:

Risks

Risk management is integrated into Wynberg’s business management process. They maintain a risk register, which is compiled and maintained by the executive management, with the risk status and execution of planned actions being reviewed monthly. Wynberg’s executive management is responsible for the identification, classification and management of all operational risks.

Significant strategic and going-concern risks can be identified at all levels in their business. However, the responsibility for directing the actions necessary to manage these risks is the responsibility of the Board of Wynberg. Strategic and going-concern risks are reviewed at the quarterly Board meetings and the executive directors are charged with the execution of approved risk management actions.

In the year under review, although a number of identified risks could not be avoided, the pre-planned management strategies for these risks were successful in mitigating or avoiding the severity of the impact on their overall
financial performance.

The following risks have been identified:

STAKEHOLDER MANAGEMENT

The main ministerial or departmental stakeholders are listed below and their business model is based on strong relationships and the dissemination of highly technical information.

REMUNERATION

Wynberg aims to be a competitive and attractive employer in the marketplace. Remuneration and benefits are important drivers, as are career opportunities, personal development, culture and values, leadership. As stated in the Code of Conduct, they comply with applicable laws, agreements and industry standards on working hours and compensation.

Wynberg has various incentive schemes in place in order to retain talent and experienced employees. Their Company policy requires all employees to belong to the pension or provident fund in order to plan for their retirement and medical insurance is compulsory.

PROFILE

Genius was established in 1982, and is arguably the oldest health care biotechnology company in South Africa, if not the African continent, with a track record of investing in research and development work that led to successfully commercialising South Africa’s first biosimilar product Repotin, a recombinant human hormone known as erythropoietin (EPO).

Genius is a research and development biopharmaceutical group of companies which includes the following operational business units:

  • Immunotherapy dendritic cell vaccine technology (DCV)
  • Erythropoietin production registered as Repotin
  • Granulocyte-colony stimulating factor (G-CSF) product development
  • Integrated Bioworks (IBW)
    • Producing laboratory reagents
    • MMLV Reverse Transcriptase (RT)
    • Additional lab consumables
  • Other niche products
    • Peptide cream

2016 OPERATIONAL PERFORMANCE

Progress has been made across all the projects in the research and development phase. The operational performance depends on their respective timelines and milestones.

A key milestone for the DCV project was the successful submission of the clinical trial protocol to the Medicines Control Council (MCC) in 2016. The evaluation of cell culture technology is in progress with the objective of improving the current production process for the production of erythropoietin which will result in a significant efficient and optimised manufacturing process. A review of contract manufacturing activities is under investigation with the objective of generating short-term income to improve the GMP standards at the Cape Town production facility. Genius recently concluded a partnership agreement for the production of niche products like peptide cream.

Integrated Bioworks (IBW) is the latest start-up business unit in this division which manufactures laboratory enzymes and sells MMLV-RT Reverse Transcriptase (RT) product to research laboratories. Management increased their product offerings to meet the demands for their products.

VISION 2020 VISION – GENIUS’ CONTRIBUTION

A detailed analysis of the businesses was done in 2015 with the primary objective of having focused and aligned efforts across the Genius Group to deliver on its long-term goals. A five-year strategic plan was implemented with clear deliverables, strategic actions for each strategic lever as well as detailing clear time frames.

The following was achieved to date:

  • Immunotherapy
    • Pre-clinical work on breast cancer was completed with a positive outcome;
    • Submission of a Clinical Trial Protocol to the MCC. Once approval is received from the MCC, phase 1 of human clinical trials can commence.
  • Erythropoietin production
    • Infrastructure and facility improvement to meet the MCC audit was completed;
    • The evaluation of cell culture technology is in progress with the objective of improving the current process to increase efficiencies and reduce production risks;
    • Appointment of key personnel: pharmacists, scientists and technicians;
    • Implementation of Quality Management System in progress including Standard Operating Procedures (SOPS);
    • Validation of equipment completed.

PROSPECTS AND FUTURE OUTLOOK

The following prospects have been identified:

Short-term prospects:

  • For Repotin to re-enter the market by early 2018 and optimising the production process into a pre-filled syringe;
  • Secure funds to continue with the G-CSF project at the Ribotech facility;
  • Complete the phase 1 human clinical trial in breast cancer patients and pre-clinical work on other diseases;
  • Integrated Bioworks to generate revenue from the sale of laboratory reagents and increase its product offering; and
  • Based on the phase 1 trial results – accelerate the listing of Genius to obtain the necessary capital to complete phase 2 and 3 trials.

Medium- to long-term:

  • Optimise and increase the output of Repotin so that it is able to meet market demand and introduce additional formulation strengths to enter the oncology market.
  • Introduce an additional range of cosmeceutical products;
  • Re-capitalise the reagent business to increase its product pipeline and establish local production;
  • Grow a portfolio of new products by increasing research and development; and
  • Plan and prepare to list Genius on a foreign stock exchange.

OPERATIONAL FOOTPRINT

The Genius Group has two state-of-the-art medium-sized biopharmaceutical laboratory facilities, one in Cape Town and the other in Centurion, Pretoria.

PRODUCTS/BRANDS

Dendrovac is registered as the commercial brand for the cancer DCV immunotherapy treatment.
Bioclones has two erythropoietin therapeutics registered – Repotin 2000 and Repotin 4000.
Recogen is the registered commercial brand for G-CSF therapeutic.

Detailed information about Genius’ business model, stakeholders, risks and governance is available on the website at www.aeei.co.za.

BUSINESS MODEL

Genius operates a production facility based in Centurion, Pretoria for the production of Repotin. The product is used for treating anaemia in patients caused mainly as a result of kidney disease. Repotin acts by increasing the production of red blood cells that help improve the oxygen carrying capacity of the blood in the body. Patients suffering from anaemia due to kidney failure are affected due to lack of EPO released by the kidney. This leads to poor oxygen supply to the body and also affects their normal daily physical activities. Using Repotin as the treatment helps to improve the quality of life of such patients.

Ribotech is a subsidiary of Genius and is based in Goodwood, Cape Town. The drug to be produced at the facility is the second most important biosimilar used in the treatment of cancer patients suffering from neutropenia, a low white blood cell count as a result of chemotherapy treatment.

Genius has a strong pipeline of 22 patent-protected technologies that is focused on the enhancement of cellular immune response in humans. This immunotherapy from the dendritic cell vaccine (DCV) is an example of personalised medicine, where the patient’s intrinsic cellular immune response is used for the treatment of cancer. Significant progress has been made in the areas of immunotherapy, which stimulates the body’s own immune cells to fight a range of cancers.

GOVERNANCE

Through the application of policies and structures within the AEEI Group, Genius complies with all sound governance and regulatory functions and has had no reported fraud or deviations in the application of these principles in the current period. The continued training and exposure of employees to the ever-changing regulatory environment and regulations of the Companies Act ensure that all employees are fully informed of their responsibilities.

STRATEGIC PLANNING AND MONITORING

Genius manages its businesses strategically, following a process which includes an annual review of past performance, products/services, markets as well as a review of the internal and external environments. This review is followed by the setting of strategies and action plans.

The Board of each business unit approved a formal delegated authority schedule, which informs executive management of the necessary levels of approval for all key business transactions. In this way, the respective Boards ensure that there is a senior manager, or the Board itself, reviewing each key business transaction/initiative to ensure that key business activities are aligned with Genius’ strategy, is lawful, will contribute to their sustainability and will not be harmful to any stakeholders and/or the environment. In this manner, Genius can monitor its performance against strategies set for the year and evaluate this against the key performance areas of management and key employees.

In addition to the annual strategic planning exercise, quarterly reviews of strategic achievements and how changes in the internal and external environments may positively or negatively affect each business unit are held. Strategies and actions are adjusted to ensure the growth and sustainability of each business unit is tracked.

ECONOMIC SUSTAINABILITY

Genius has re-prioritised the different projects in order to take advantage of other low-hanging opportunities so that they are able to generate some revenue while attending to their core products such as Repotin and Recogen. The use of Repotin as an active ingredient in cosmeceutical products was vigorously pursued by scientists on the basis that it has skin healing and rejuvenating properties. A product was launched into the market in June 2016 and is now generating sales.

A research grant was awarded for three years by the National Research Foundation (NRF) and with matching funding from the major shareholder for the pre-clinical work done on cancer immunotherapy using dendritic cell vaccine. This is one of the global patented technologies that Genius owns and they are working in collaboration with the University of Cape Town’s Department of Medicine. The pre-clinical phase on the dendritic cell vaccine is completed. They expect the phase 1 trial to commence during 2017.

An additional grant was awarded by the NRF to investigate the use of DCV immunotherapy on extreme drug resistant tuberculosis (XDR TB) patients. The DCV immunotherapy may offer XDR TB patients a solution. The research and development work will be conducted by the Department of Medicine, Immunology Department and the Lung Institute at the University of Cape Town. According to UCT’s researchers this will be pioneering work in the field of XDR TB and will be the first of its kind in the world. It will present the researchers with an opportunity to publish and present papers on their research and holds the promise of new IP.

Integrated Bioworks (IBW) is a new business in the Genius Group and was set up in 2014 to take advantage of opportunities in the laboratory reagents and the enzyme market. These products are very lucrative and unlike human therapeutic products or biosimilars such as Repotin and G-CSF, they do not require lengthy regulatory approval processes or any complex manufacturing processes. IBW makes use of contract manufactures to make its products which are essentially protein-based reagents used in research laboratories. There first product was an enzyme, Reverse Transcriptase (RT MMLV) and was launched in June 2016. Export opportunities are also being pursued and IBW is in the process of appointing a distribution agent in the USA. Reciprocal arrangements with the American Company for their products are also being sought for the South African market. IBW will be focusing on sales and marketing to grow before developing more reagents of which it has a strong pipeline of products.

Innovation

Genius’ two production facilities are designed and constructed as a single product facility for the production of two different recombinant therapeutic drugs. To accelerate the return on investment of these facilities requires a change in the operating model from a single product facility to a multiple production facility by introducing additional products, bearing in mind that each site uses two very different production technologies. Genius is currently investigating other biosimilar products that use similar processing technologies. This could offer the opportunity to produce multiple products using these methods in both facilities.

Genius will continue with its plans to list offshore since an approval was granted by the South African Reserve Bank. Success of its current production processes with new technology, sales generation and growth plans for the underlying businesses and expanding its current product portfolio will support and strengthen its business case to the market and to potential investors.

ENVIRONMENTAL SUSTAINABILITY

Regulatory requirements dictate the disposal of biological waste generated during production including radio-active waste. Using new equipment and improved testing methods has reduced waste and eliminated the use of radio-active material from the mouse-assay which was previously used.

The heating, ventilation and air conditioning (HVAC) system acts as the “lung” of the any biopharmaceutical manufacturing facility by providing a constant supply of fresh, clean and sterile and temperature regulated air to the plant. The HVAC system is responsible for the consumption of approximately 70% of the energy demand of the facility. The facility was upgraded using the latest technologies on the HVAC system at the Centurion facility and employs a Quality Management System. This provides better control and reduces energy costs. The Ribotech facility will be following suite with a similar control system.

SOCIAL SUSTAINABILITY

Genius has collaborated with research institutions to develop human capital and take advantage of skills transfer. They also afford scientists the opportunity to upskill themselves by creating opportunities within the businesses based on new business opportunities.

The research work also presents academics with the opportunity to publish work in peer review journals. This could generate global interest from other medical institutions and investors alike.

KEY CHALLENGES AND RISK MANAGEMENT

Key challenges

The Genius Group face the following key challenges:

Risks

Risk management is integrated into Genius’ business management process. Each business unit maintains a risk register, which is compiled and maintained by the executive management, with the risk status and execution of planned actions being reviewed monthly. Executive management is responsible for the identification, classification and management of all operational risks.

Significant strategic and going-concern risks can be identified at all levels in each business unit. However, the responsibility for directing the actions necessary to manage these risks is the responsibility of the Genius board of directors of each business unit. Strategic and going-concern risks are reviewed at the quarterly business units Board meetings and the executive directors are charged with the execution of approved risk management actions.

Funding challenges that Genius faces is not atypical to what most small biotech companies globally experience. In most cases research and development work requires sustainable funding support for lengthy periods of time due to various regulatory processes, including early stage clinical trials. The other challenge lies in achieving commercial scale production, coupled to this is the effective sales and marketing plan for their products.

In the year under review, although a number of identified risks could not be avoided, the pre-planned management strategies for these risks were successful in mitigating or avoiding the severity of the impact on the respective business units overall financial performance.

The following risks have been identified and are being managed. Means of mitigating these risks have been identified.

STAKEHOLDER MANAGEMENT

The Genius Group’s businesses are based on strong relationships with external stakeholders, ensuring the understanding of their business units and its requirements. The industry is highly regulated and subject to several legislative acts.

The main stakeholders are:

REMUNERATION

Genius focuses its remuneration policy on the balance between fixed and risk remuneration practices. Structuring pay packages evaluated on job-specific market trends to ensure that they remain competitive. Affordability and sustainability are also factors that influence the remuneration model with performance and incentive-driven targets to stimulate growth.