PHARMACEUTICAL AND HEALTHCARE LOGISTICS

THE RIGHT REMEDY FOR YOUR PHARMACEUTICAL AND HEALTHCARE LOGISTICS NEEDS

For many pharmaceutical and healthcare product manufacturers, the business of logistics can be a mine field filled with its own set of challenges. After all, when it comes to healthcare products, logistics goes beyond just storing and shipping the product. It can include everything from temperature control management, keeping the product secure in terms of the chain of custody, and most importantly, it comes with its own set of regulatory compliance guidelines.

Thus, not every logistics company is capable of providing the right type of services to meet pharmaceutical and healthcare logistics needs. Enter the Kuehne + Nagel Group.

Founded as a family-owned enterprise in 1890, the Kuehne + Nagel Group is one of the world’s leading logistics companies across all industries. With approximately 65,000 employees working at more than 1,000 locations in over 100 countries, the Group covers every aspect of international logistics – on land, at sea and in the air. It also has a significant footprint in Canada, its first Canadian location established in 1953 (the very first that the German/Swiss company expanded to outside of Germany).

Part of this Canadian footprint is a special 380,000 square foot facility located in Mississauga, ON. What makes this facility special is that is home to the company’s Canadian Pharmaceutical and Healthcare logistics center. The building, which officially opened in March 2012 is truly unique says Darrell Skelly, director, Strategic Customer Development Pharmaceutical & Healthcare for Kuehne + Nagel Ltd.

“We offer warehousing of human and animal pharmaceuticals, medical devices and other consumer healthcare products. It is fully Pharma Healthcare GMP compliant, with Health Canada drug establishment and medical device licenses in place.”

He explains what makes the building for their products and in most cases we’re the ones investing our capital to meet our clients design needs.”

Whatever the requirements, freezers, coolers or narcotics vaults all are customizable.

He adds that there are redundancy measures in place for everything in the facility; including a diesel generator to support full operations should power go down, coupled with enough fuel on site for three days plus fuel replenishment agreements to ensure power is never lost.

“So we never have to stop working and there are monitors everywhere for temperature and humidity environment measurement, transmitting data to a server, accessible by internet to our employees and securely to the quality control staff of our clients.”

As alluded to, within the facility everything is monitored for both temperature and humidity. This is important due to the

unique is both the intricate details of its physical design as well as the people who work within it.

In terms of the design, 100,000 sq.ft. is for consumer healthcare products with a further 80,000 sq.ft. that is both temperature and humidity- controlled.

The additional 80,000 sq.ft. of Pharmaceutical Healthcare 15°C to 25°C space is temperature mapped and validated with white scrubable surfaces and GMP complaint sealed flooring. Temperature and humidity set points by zone are maintained by seven roof mounted HVAC units controlled electronically by a building computer system. Segregated receiving and shipping bay doors are accordion style to eliminate dust and prevent rodent entrance. Multiple Cool Zone areas are also available to meet clients’ specific needs in keeping with the demands of the highly regulated pharmaceutical sector.

“We have multiple coolers and freezers built that range from 2ºC to 8ºC all the way down to -30ºC because we are client driven. We actually build to the exact requirements

The Global Logistics Network

 Worldwide network – more than 1000 locations in over 100 countries  Integrated service portfolio – approximately 63,000 employees  Turnover of CHF 20,930 million in 2013

nature of the products, and not many logistics facilities today are able to meet both these needs. Another aspect of the facility’s uniqueness is that clients are also given the ability through secured internet-based EDx System access to both track and look at the real-time temperature and humidity readings in their zone of storage and also to print this data for immediate reporting. Combined with further online access to the KN Login system, clients retain strong working control as they may further see specific order status as well as overall inventory status right down to the item level.

“In a way, we’re adding to their capabilities by providing full supply chain visibility from source right through to end-customer. It helps our clients be in control and also helps them to prepare for any audits or studies they wish to do. They gain more capability through outsourcing, and they give nothing up. ”

The staff on the site for the Pharma Healthcare centre is equally unique. Again, due to the specialized nature of the products they are handling, the staff are GMP and client specific trained with a focus to ensure quality performance and safety in the patient care supply chain.

He explains, many drugs are highly sensitive to temperature; some are extremely valuable; and all are subject to a complex array of government regulations. In the Pharma Healthcare supply chain, every detail counts.

“Our staff, both here and globally are the ones ensuring that every single process, order and aspect of what they do meets global and local regulatory guidelines and the standard operating procedures as well as each client’s requirements for the storage, warehousing and transportation of their goods. So we have a very high skill level that aligns with the Pharma Healthcare product storage and distribution.”

In fact, the company is an award winning company in terms of both its GMP training and its cold chain management, winning the “Eye for Transport” 3PL award best 3PL for pharma/life science/healthcare supply chains in 2013 and “IQPC” Cool Chain Excellence Awards in 2012 in Europe.

Skelly says it’s important to note that the service they provide goes beyond just storing and shipping the product. It’s about meeting the needs of the client/customer and ultimately the patient.

“We sell integrated logistics solutions. It’s not just about storing your products; it’s about what is your market strategy, how can we help you reach your end customer and how can we do that from your source, wherever in the world you’re bringing the products from to wherever in the world you need them to be.”

Skelly adds that is what makes the facility so attractive to potential clients, is that it can be tailored to meet the requirements of the client source to end-customer.

“We realize that one size does not fill all so, we’re willing to make strategic investments to ensure our customers are happy. We’re very focused on continuous improvement both here in Canada and worldwide. We have engineers on site who are continuously looking to see how processes can be improved, by changing the way we do things, or adding technology to make things simpler, more effective and accurate. It’s all about being more efficient to create savings for our customers.”

On a global scale the company ranks as one of the top exporters/importers of drugs. Being global, the company has strived to standardize its pharma and healthcare logistics operations with all the necessary regulating government bodies including the World Health Organization, the U.S. FDA and with Health Canada as applicable.

“Whatever the regulating body is, we do that on one common system worldwide. Once clients set up on our systems once, it’s just about retesting in other markets. With this capability, we offer them a chance to get a footprint in other markets to expand simply through our reach.”

Likewise, Kuehne + Nagel’s clients also benefit from the company’s international standing.

“On a larger scale we build pharma healthcare solutions that are designed to take products from the source or manufacturing right through to the end customer, or in this case the patient. For Pharma Healthcare, we have 53 centers in 30 countries. So, for a lot of the companies or clients that come to us, we’re not just able to serve them here in Canada, but we can do so also in other countries. We give them the list and they are astounded by our presence,” says Skelly.

Taking it step-by-step, Skelly says the company can arrange the pickup anywhere in the world at the manufacturing plants, provide the containers whether for sea or air, arrange for them to clear customs on an export basis, travel and being monitored at multiple temperature environments, come to a port or airport, in this case Canada, where they arrange for the proper transport pickup to come right to the facilities too.

“We receive it and enter it into our warehouse management system, put the product away in barcoded specific locations unique to that product, lot number, expiry date and if a medical device, its serial number. That’s all managed on a system that meets Health Canada’s expectations for a Pharma Healthcare validated system.”

Returning to what they do here in the Mississauga facility, he says they deal with all kinds of local and international companies.

“In this facility, we have a full suite of pharma and healthcare products including nutritional products, brand and generic pharmaceutical products, biologics, vaccines, animal drugs and medical devices. We have about a dozen clients in the healthcare industry in this facility currently, as we speak, with two more new clients coming. We also have space to welcome the biotechnology community further starting with 40,000 sq. ft. in the current building still to fill.”

But the company’s logistics footprint in the healthcare and pharmaceutical space goes beyond what they do in the facility he says.

“For example, there are approximately 100 Pharma Healthcare companies that use our sea and air freight services for importing and exporting, and we’re the top air freight mover of drugs in this country,” says Skelly.

The facilities location in the heart of Mississauga’s life science cluster was not accidental says Skelly.

“There are many reasons why Mr. Keuhne negotiated buying this land. This is an industry that’s important to our business. Not only does Mississauga sit at the gateway to the Golden Horseshoe, 45 minutes from CN and CP rail hubs and 20 minutes from Pearson International Airport, but we want to be in the heart of Mississauga’s biotech, pharma and medical device communities. There are about 200 healthcare companies within about 20km of this site, we are in the heart of “Pill Hill”, and we want their business.”

For these reasons, Skelly says the company intends to build a third facility approximately 300,000 sq. ft. on the campus in the near future. The end goal, he says, is to further expand Kuehne + Nagel’s pharmaceutical & healthcare and logistics services.

To see this story online visit http://biotechnologyfocus.ca/ right-remedy-pharmaceuticalhealthcare-logistics-needs-2

Public policy in Canada in respect of the commercialization of our basic life-sciences research has been a costly folly. Only a government sufficiently enlightened to reverse this folly will stand head and shoulders above its predecessors. The absence of constructive policies for commercialization of basic medical research and the presence of impediments in the form of tax policies that specifically discourage capital formation for that activity have resulted in a monumental economic cost to the country and, in particular, to Ontario. Why particularly Ontario and just how much of an economic cost?

As a recent report (http://www.

tradecommissioner.gc.ca/eng/science/

document.jsp?did=131981)\) from the Department of Foreign Affairs (DFAIT) states: “Toronto has the largest faculty of medicine in North America, producing more peer-reviewed publications than any other medical centre in the world. Canada’s health sciences research community includes over 30,000 investigators in 16 medical schools and over 100 teaching hospitals and research Institutes.”

Pretty impressive figures and those “peerreviewed papers” – what I would call a “national resource” – are as precise an equivalent for the life sciences as the rocks, biogenic pools, and trees are the raw materials for our natural resources industries. The publications describe discoveries, innovations or processes of sufficient novelty and interest to merit peer review and thus are the raw material that should be exploited by the “biotech” industry. I use “biotech” rather than “life-sciences” because biotech is where the exploration and development companies work and lifesciences goes beyond to embrace the multinational pharmaceutical companies.

A national resource that has produced “more peer-reviewed publications than any other medical centre in the world” is the scientific equivalent of Canada’s happy ERROR OR FOLLY? geographic accident that has provided this THE SORRY STATE OF BASIC RESEARCH nation with its competitive advantage from its natural resources that has given rise to DEVELOPMENT IN CANADA thousands of Canadian companies exploiting them. A “national resource” of the magnitude we enjoy is significantly superior in quantity to anything available to any of the hundreds of “biotech development companies” that exist in our neighbor to the south – none of them had access at their creation to anything that even approaches the magnitude of Canada’s medical science output. Of those hundreds we shall focus on just a handful to demonstrate the colossal economic impact in which the development of “biological discovery” can result and that measures what we have foregone. The largest of the U.S. biotechs by market cap - Gilead Sciences – was valued 20 years ago at $400 million. The third largest, Celgene, was valued at $130 million at the same time. The sixth largest, Alexion, was valued at $15 million. These three companies today – just 20 years on – have a combined market capitalization of ~$290 billion. Market cap is a fair, evidential proxy for the present value of a company’s ultimate economic contribution. The market cap of those three exceeds the combined market capitalization of all 1,513 listed mining companies on the Toronto Stock Exchange, and to further understand the magnitude also that of Toyota (the world’s largest automotive manufacturer), plus GM and Ford. Just four of the largest U.S. biotechs alone – Gilead, Amgen, Celgene and BiogenIdec – exceed the total value of the entire 340 listed oil and gas companies in Canada. To ensure that our thesis is not dismissed by comparison those four also exceed the market capitalizations of Canada’s “Big Six” banks plus its two largest insurance companies, Sun Life and Manulife. A curmudgeon would say that apples-toapples would compare biotech to Apple, or Exxon, or even Alibaba rather than to Canada’s natural resource companies. That is completely missing the point. The point is that we have an established competitive advantage in terms of our basic science community and, to our great discredit, we have not only ignored the conversion of this national resource into economic value for this nation but we have created impediments, that we will not disassemble, to its commercialization.

“ERROR” IS A DECISION THAT TURNS OUT TO HAVE BEEN WRONG, AS THINGS DO. “FOLLY” IS A DECISION THAT TURNS OUT TO HAVE BEEN WRONG BUT MADE DESPITE THE AVAILABILITY OF EVIDENT, READILY-AVAILABLE AND FEASIBLE ALTERNATIVES.

Biological exploration and development is undertaken very much as is geological exploration – predominantly by small and mediumsized enterprises. Public policy’s best results are often through tax inducement, positive or negative and, in the case of geological exploration, one of the world’s most admired subsidies, the flow-through-share scheme, has been demonstrably valuable in its 50-year life. That encouragement to geological exploration is achieved by allocating to the providers of capital the write-offs from losses that are not currently useful to the exploration company thereby decreasing the capital provider’s cost by ~50 per cent. No better description of the utility of this scheme is available than the one posted by the Canada Revenue Agency in its own description.1

Failure in geological exploration is likely to occur rapidly – months but not numerous years – and exploratory success results in a world-market commodity that requires only transportation to secure its price. Conversely, in biological exploration, failure occurs with measurable frequency after many years of development and time-to-failure can exceed 15 years. The “likelihood-of-approval” of an oncology drug in the first stages of development (after “exploration” has identified the asset) is a mere six to seven per cent2 – a number unheard of in geological exploration – and even post-approval there is no certainty regarding the price that a therapeutic might command or that the drug would achieve uptake by physicians. Price and volume can be unknown until after marketing approval.

Capital formation in Canada for this sector has not been well served either by leadership through a broad-spectrum public policy embracing the economic impact of the sector nor by inspiring leadership encouraging capital formation for it. Nor has capital formation been encouraged or promulgated by the national stock exchange as its interest in SMEs has declined markedly over the years. Certain federal and provincial programs have provided capital to the sector for both exploration as well as development with the Scientific Research and Experimental Development Tax Incentive Program (SR&ED) being a coveted exemplar for the rest of the world. However the magnitude of the amounts of capital that are required for development of even a single drug for a single company in the sector has evidentially not been addressed by any federal or provincial government program because, I submit, it must somehow not be understood that the cost of development for a drug in Canada is largely the same as it is in Japan, Europe or the United States.

Canadian VCs are every bit as sophisticated, professional and well-managed as their peers internationally but the funding available to them pales in comparison to that available in the public markets. One Ontario company, YM BioSciences, raised $80 million in a single equity issue in 2012, approximately the same amount that was provided by all venture capital sources across all investees across the entire province of Ontario that year. The fact is that the public markets in the U.S. provide greater amounts of capital to the life-sciences than venture capital does, whereas in Canada public markets are an oily eddy, a backwater for capital for biotechnology. Incredibly, what is entirely overlooked is that Canada has an enormous population of highly risktolerant investors – those who have poured billions and billions of dollars into the flowthrough-share programs over the past 50 years. The impediment that the federal tax policy creates to these risk-tolerant investors to provide capital, in both the public and private markets, for commercialization of basic life science research, is the monumental folly that has led to our international humiliation and embarrassment that our national resource has been left to decay giving birth to no full-grown, productive development companies because of perverse neglect.

Public policy in Canada ignores the development sector of medical basic research at its economic peril and concentration on basic industries’ maintenance of employment, whilst necessary and socially and economically critical, will never take this province or this country “From Recovery to Growth”. The hard evidence in this paper shows that biotech is by far and away the nag to bet on for this race.

Where biotech has long been considered an exotic economic appendix, policymakers have been oblivious to its economic and job-creation impact - employment of architects and engineers designing and building factories, construction crews, scientists and workers engaged in manufacturing, managers managing, capital market intermediaries raising capital, high-earning graduates, and Canadian-manufactured medicines reducing costs by replacing imports. The natural resource industry, whose exploration and development is so vigorously supported by Canadian tax policy, in large measure ships our raw materials abroad for processing before Canada re-imports the value-added products. By comparison this is folly.

There are solutions. The initial financial burden on the system can be benign, the raw materials are at our feet and the economic impact of making this sector a priority of government will be rapid and substantial. The only requirement is comprehension, vision and execution.

References

1. Canada Revenue Agency http://www. cra-arc.gc.ca/tx/bsnss/tpcs/fts-paa/ menu-eng.html Flow-through shares (FTSs) Certain corporations in the mining, oil and gas, and renewable energy and energy conservation sectors may issue

FTSs to help finance their exploration and project development activities. The FTSs must be newly issued shares that have the attributes generally attached to common shares. Junior resource corporations often have difficulty raising capital to finance their exploration and development activities. Moreover, many are in a non-taxable position and do not need to deduct their resource expenses. The FTS mechanism allows the issuer corporation to transfer the resource expenses to the investor. A junior resource corporation, in particular, benefits greatly from FTS financing. 2. Clinical Development Success Rates for

Investigational Drugs. Michael Hay, David

W Thomas, John L Craighead, Celia Economides & Jesse Rosenthal. Nature Biotechnology volume 32 Number 1 January 2014

To see this story online visit www.biotechnologyfocus.ca/ error-folly-sorry-state-basicresearch-development-canada