Madagascar Artemisia/artemisinin Production Experience/Challenges November 2008 Waterfall Hotel, Guilin, China

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1 BIONE X Madagascar Artemisia/artemisinin Production Experience/Challenges November 2008 Waterfall Hotel, Guilin, China

2 Project History / Key dates Project initiated in March 2005 with first large scale cultivation in Madagascar Since startup of project Bionexx has cultivated over 1500 hectares on both captive fields and in outgrower mode. Our network of outgrowers has grown to 3500 farmers that work exclusively with Bionexx. Raw material harvested has been stored in anticipation of future extraction/purification. Bionexx has developped in partnership with Indena the extraction protocols. The shareholders of Bionexx have completed early 2008 the acquisition of Indena Madagascar a company involved in the extraction and purification of 5 local Malagasy Medicinal plants. The extraction manufacturing plant has a capacity of around 2500 Metric tons of Artemisia Annua. In 2008, the extraction plant located in Fianarantsoa has begun at an industrial scale. The purification is subcontracted to a Chinese artemisinin supplier in anticipation to the setting up in Madagascar of purification capacity. Startup of industrial scale purification is expected Q3 2008

3 Comments Artemisia Production yields, costs Competitions from other Crops and Artemisinin extraction Large scale Artemisia Annua cultivation was inexistent prior to Bionexx Starting from scratch, Bionexx built up a new agricultural value chain in Madagascar The learning curve has been steep and Bionexx has made a significant number of mistakes along the way. There was in fact no prior experience to leverage on to achieve the published yields.the investments to date on the agricultural part of the projects are too high to admit. Since the onset the project, Bionexx aimed to become a high quality and fully tracable artemisinin producer. In our view the only road forward was to invest in a strong system to monitor the agricultural value chain and progressively improve yields. After initial growth pains, Bionexx is now in a position to attain competitive yields but much still remains to be achieved. We believe that long term competitiveness in artemisinin production can only be achieved through the secure and competitive procurement of quality artemisia annua leaf. Our mid term objective is to reach 2 MT per ha and 1,1% content at industrial scale. Competition from other crops is in most cases not an issue. Artemisia Annua cultivation is quite competitive versus other cash crops. On an industrial basis, we aim for a 60 to 70% overall efficiency from leaf to artemisinin

4 Specific Local competitive advantages What initially constituted a weak point for Madagascar, which was that there was no availability of raw material has now allowed for what will be a secure and competitive value chain. The exclusivity that Bionexx benefits from will allow Bionexx to maintain it s artemisinin competitiveness regardless of market shortages. A climate which is diverse and well suited for artemisia annua. The agricultural oversight and control system allows Bionexx/Innovexx to duplicate the system for other medicinal plants, ensuring stability with our outgrower partners. Bionexx/Innovexx is a multi product line company allowing a certain flexibility and independence vis a vis the unpredictable artemisinin market

5 Global Factors affecting Production : prices, market Bionexx/Innovexx is setting itself up to be a 10 to 20 MT per year artemisinin producer. What will determine the volume of artemisinin of Madagascar origin is the market price and volume. What is clear is that Bionexx WILL NOT sell on the spot market and will favor long term contracts with clients at a fair price. Fair pricing for artemisinin is between 330 and 370 USD per kg for quality and tracable artemisinin. It is only at this price level that we can setup a fair share of the margins which ensures a stable supply in the long term. The last couple of years have benefited to the ACT manufacturers which have been able to secure artemisinin prices at dumping prices. Expecting rock bottom breakeven prices from artemisinin manufactures and farmers is dangerous and will eventually contribute to the price cycles we have experienced in the past.

6 Malagasy Investment climate/plans Bionexx/Innovexx shareholders are currently investing heavily in the expansion of agricultural and industrial capacities. The political situation is obviously better handled by «local» entrepreneurs that can better manage business risks and complexities. All foreign driven projects have failed because of organizational and financial shortfalls. Madagascar remains a complex country to operate in despite all of its potential