Company Overview

AFC Agro Biotech (AFCABL) was incorporated on August 31st, 2010 as a publlic limited company. The
core business of the company is to manufacture antibiotics, proteins, vaccines, enzymes etc. from
agricultural ingredients like molasses, glucose, potato starch, and other nutrients. At present, AFCABL is
producing Biological Assets; e.g., Macrolide Protein, Acetic Acid, L-Lysine, Mono Sodium Glutamate and
Methonione. The Company has set up a multi-purpose chemeicals manufacturing facility at Uttar
Shoilmary, Koiya Bazar, Batiaghata, and Khulna. The plant is established on the 3.0 acre land. It started
its commercial production on 7th October, 2012. The Company has got listed on DSE & CSE on 3 rd
February 2014.
The Companys sales remain concentrated to local market. The raw materials are procured mostly from
local suppliers. AFCL has an associate company AFCABL performs as backward linkage of its parent
company, Active Fine Chemical (AFCL), in order to reduce import dependency from China and India. The
main product of AFCABL is used as raw materials in the API and Laboratory Reagent manufacturing
process of AFCL. Moreover, other main customer groups of AFCABL include poultry feed manufacturer;
fish/cattle feed manufacturers and textile and various food manufacturing industries. AFCABL is
producing these materials by using locally available raw materials. The Company has already raised
BDT 120.0 mn (net amount after IPO expense BDT 109.0mn) to make further capital investment to
expand the current business.
The parent company, AFCL which is the large customer of AFCABL has set up a multipurpose bulk drugs
and fine chemicals manufacturing facility at Munshiganj, 20 km away from the capital city, Dhaka to
enlarge current market share. Annual production capacity of the plant is 480 kilo liters. AFCL is in the
process of investing into forward linked supply system to signify its presence in the health care and fine
chemical sector of Bangladesh. The management of AFCL is expecting to launch the new
Cephalosporin plant which will produce some important antibiotics. The Company is also exploring its
export opportunities in Asia. In November, 2013 AFCL announced the decision to inject fresh fund to
expand operating capacity by using strategic investment subject to the approval of BSEC. However, the
expansion plan has not been disclosed yet.

Competitive Advantage of AFCABL

Bangladesh Biotech Market

Bio tech Market is estimated to BDT 50bn, served to pharmaceuticals, food, textile companies.
Total market size of pharmaceuticals is BDT 122 bn as of June 2013 growing at 17% during the
last five years
The key driving force of AFCABL is the opportunity to serve a fast growing pharmaceutical sector
of Bangladesh which is heavily import dependent for its raw materials.

Competitive Advantage of AFCABL:

No local competition:
AFCABL is a first of its kind commercial biotech raw material manufacturer in API and pharmaceutical
market of Bangladesh. There is huge demand for these products in Bangladesh. Currently APIs are
being imported from China, India and Taiwan. The demand for AFCABLs products will increase gradually
and significantly in the coming years.

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 AFCABLs outputs.

Local Raw Materials:

As a backward linked company AFCABL produce API raw materials using local materials. This will reduce
import dependency, supply chain management problems, save foreign currency and promote local
sources & employment. As the agricultural sector of Bangladesh is immensely subsidized, the costing of

these raw materials will be cheaper as well comparing with our neighboring country. These agricultural
products are vastly produced in our country and available throughout the year. The climate of our
country also supports in producing these materials. So we have great competitive advantage in getting
the raw materials which are cheap as well as abundantly available.

Import substitute products so there will not be any import duty.

Savings of foreign currency:

Bangladesh is totally dependent on outside world to import APIs, hence a great amount of foreign
currency is being required. As AFCL increases its production capacity further, a great extent of demand
will be fulfilled by AFCABL

Labor cost is low.

Cost effectiveness.

Taking all the comparative advantage we have, i.e. cheap labor cost, savings of import duty, vastly
subsidized raw materials, the Company would be a cost effective and profitable one.
SWOC Analysis:
Strengths

Cost effective technology

Strong and well-developed manufacturing base
Well-developed research base
Knowledge based, low- cost manpower in science & technology
High standards of purity
Future growth driver
Managing Director of this company, is having vast experience and unique qualities
in this arena to handle this type of company
AFCABL work as the backward company for AFCL. Major production of AFC Agro
Biotech Ltd. will be consumed by Active Fine Chemicals Ltd. (80%)
The production process will be done in the companys own land base

Weaknesses
Low R&D investments
Low healthcare expenditure of people
Lack of technical and knowledgeable people to work in the arena
Opportunities
Incredible export potential as well as huge demand and supply mismatch in the country
Increasing health consciousness
New innovative products will come up the coming days
Good drug delivery system management
Increased income and buying power of the people
Production of generic drugs
Drug molecules
Cheap labor and raw materials
Challenges

Competition from abroad manufacturers

Little development in the R&D
Outdated Sales and marketing methods

AFCABL pro-forma
AFCABL is experiencing a boost in revenue with a growth rate more than 600.0% in 2013. EBITDA
growth of the company was more than 550% in the last year. Gross profit margin declined in 2013
due to increase in depreciation charge, R&D expense, and biological asset written off charges. In
2013, GM decreased by 2.8%. The reduction in gross margin and increase in opex leads to the
decrease in EBITDA and net profit margin also to 30% and 21.5% respectively.

Both ROE and ROA improved significantly in 2013

led by increase in sales revenue. Short Term loan
consists of CC Hypo from Janata bank. Leverage
and liquidity remain steady in the last two years.

Return Analysis

Bangladesh Pharmaceuticals Industry

Overview

Industry Highlight
The Pharmaceutical sector is one of the fastest growing
sectors in Bangladesh with an annual average growth rate Size: BDT 122.0 bn as of June 30,
2013
of 17.2%. Bangladeshi pharmaceutical firms produce both

Growth: Avg.19.4% (5 Years)

patented and off-patent products: the WTO TRIPS

No. of Companies: 258 registered

agreement allows any manufacturer in Bangladesh to
pharmaceutical companies and
produce a molecule (either patented or off-patent) and
529 registered drug
market it under different brand names. In Bangladesh
manufacturers in BD
pharmaceutical companies focus primarily on branded

Market Composition: Local

generic final formulations, mostly using imported APIs
Manufacturers (98%), MNC (2%)
(Active Pharmaceuticals Ingredient). According to IMS,

No. of Drugs: 5,300 brands with

Bangladeshi companies have registered about 5,300
brands with c9500 dosage forms and strengths, covering all major therapeutic classes. Considering
the industrial output from pharmaceutical sector of Bangladesh only 1% of total GDP is being
contributed by current pharma sector, whereas in most of the countries with comparable population
density and per capita income, pharma sector contributes more than 5% of the GDP.

Industry Size and Growth

According to IMS report the size of the retail market reached
BDT 122.0 billion as of June 30, 2013. Bangladesh has 258
registered
pharmaceutical
companies,
of
which
approximately 150 are in operation. Industry had averaged
19.2% growth over the last five years, and was growing at
26.2% year-on-year. The industry grew by 121% from 2006
to 2011.
The Bangladesh Pharma sector has experienced strong
growth. In 2012 the growth in national market was 26.2%
which is higher than its 5 year
A Branded Generic Market
BD pharma industry is producing both patented and off-patented products. Any manufacturer can
produce the same molecule (either patented or off-patented) and market it in different brand names.
There are about 450 generics/substances registered in Bangladesh, out of which 117 are in EDL
(Essential Drug List) or price controlled. The total number of brands/ items that are registered in
Bangladesh is currently estimated to be 5,300, while the total number of dosage forums and
strengths are 9,500. These cover all the major therapeutic classes from CVS to CNS, Metabolic to
Endocrine, Gastrointestinal to Genitourinary and Allergic to Anti-infective.
The finished formulation-manufacturing base of Bangladesh is very strong and all of the
pharmaceutical companies have their own manufacturing facilities. 98% of the total demand of
Bangladesh is being met by local manufacturing. The remaining 2% basically constitutes import of
very specialized products like Vaccines, Anticancer products etc. Bangladesh have already become
self-sufficient in some areas of Active Pharmaceutical Ingredients (APIs) namely, Penicillin,
Cephalexin, NSAID and Anti-Pyretic. And have also developed some new and exciting APIs like
Celecoxib, Refecoxib, Ciprofloxacin, Ranitidine, Amlodipine, Fluconazole, Cetirizin etc., which have
huge local and international demand.
Major Pharmaceutical Manufacturers
BDs pharma market is dominated by local manufacturers. All the top 10 companies are local in

terms of market share. And 9 out of 10 top products in terms of sales volume are produce by local
companies, only Mixtard-30 is produced by a MNC Novo Nordisk. According to Directorate General
of Drug Administration (DGDA) there are 529 registered drug manufacturers in Bangladesh. However
the total drug manufacturing companies operated in Bangladesh are as follows.
Domestic firms dominate the industry with them producing 98% of local demand with the balance
being imported. The industry is highly concentrated - according to IMS in 2012 the top 3
pharmaceutical, Square, Incepta and Beximco, account for 38.2% of the market share, while the top
five have a market share of 48.9% and the top ten domestic manufacturers contribute about 69.5%
of the total pharmaceutical market of Bangladesh. According to IMS, Bangladeshi companies have
registered about 5,300 brands with c9500 dosage forms and strengths, covering all major
therapeutic classes.
Composition of Local Market

Pharmaceutical's Market Share

Source: IMS

Source: IMS Q2, 2013 (June 2013)

The table below lists the top ten pharmaceutical manufacturers in Bangladesh in terms of market
share and top ten pharmaceutical Products in Bangladesh in terms of sales value.

Top 10 Pharma companies in 2012

Source: IMS

Bangladesh's Top 10 Pharma Brands

Source: IMS

The Bangladesh API Market:

Bangladeshi pharma companies import 80% of the required raw material, mainly from India and
China to meet their raw material consumption. Select high quality few are imported from
Europe and USA. Approximately about more than BDT 35.0bn / USD 437.5mn worth of APIs and
fine chemicals are being imported.
Few leading local manufacturers focus any APIs, focusing mainly on antibiotics, to meet internal
consumptions. Pharma Co is a first of its kind
commercial API manufacturer in Bangladesh.
Drug manufacturers in Bangladesh
There is huge demand for these products in
Bangladesh.
A list of the API manufacturing companies and the
APIs already manufactured in Bangladesh are
shown in the table below:
API Portfolio Produced Locally
Active Fine Chemicals Ltd.
Azithromycin Dihydrate, Erythromycin
Source:Ethyl
DGDA Succinate,
Erythromycin
Stearate,
Metformin
Hydrochloride,

Beximco Pharmaceuticals Ltd.

Square Pharmaceuticals Ltd.
Drug International Ltd.
Globe Pharmaceutical Ltd.
Gonoshashtaya
Pharmaceutical Ltd.
Sunipun Pharmaceutical Ltd.
Opsonin Chemicals Ltd.

Erythromycin Base, Clarithromycine, Pantoprazole Sodium,

Esomeprazole Magnesium Trihydrate, Losartan Potassium,
Fluconazole,
Omeprazole,
Atorvastatin
Calcium,
Fexofenadine Hydrochloride, Cetirizine Dihydrochloride,
Clopidogrel Bisulphate
Amlodipine, Amoxycillin, Ampicillin, Celecocib, Rofecoxib,
Paracetamol, Diclofenac, Cloxazillin, Flucloxacillin, Cetirizine,
Fluconazole, Ciprofloxazin, Ranitidine, Cephalexin
Amoxycillin,
Paracetamol,
Diclofenac,
Cloxazillin,
Flucloxacillin, Cephalexin
Amoxycillin,Diclofenac, Cloxazillin, Flucloxacillin, Cephalexin
Amoxycillin,
Paracetamol,
Diclofenac,
Cloxazillin,
Flucloxacillin, Cephalexin
Amoxycillin,
Paracetamol,
Diclofenac,
Cloxazillin,
Flucloxacillin, Cephalexin
Paracetamol
Amoxycillin, Paracetamol, Diclofenac,