Astrazeneca - Operations: Friday, 17 October 2003 Barrie Thorpe - Executive Vice President Operations

AstraZeneca - Operations
Friday, 17 October 2003
Barrie Thorpe – Executive Vice President

Operations
Investor Rel Macc ful l pack 31 017v 2.ppt: Investor Rel ations vis it to Macclesfiel d 17-Oct-03 Propri etary and C onfid enti al © AstraZenec a 200 3 19/04/2 004
AstraZeneca
A creative, fast and effective company with

the global sales and marketing strength to
realise the full potential
from productive R&D thereby delivering
sustainable top tier financial growth
2- 2 -
Investor Rel Macc ful l pack 31 017v 2.ppt: Agen da Investor Re latio ns visit to Macclesfi eld 1 7-Oct-03 Propri etary and C onfid enti al © AstraZenec a 200 3 19/04/2 004
Clear priorities
• Create a single unified company

• Portfolio transformation
3- 3 -
Delivering sustained performance
TM
®
4- 4 -
Supporting the Portfolio Transformation
1999 2003
Base Expiry Growth Launch
5- 5 -
Clear priorities
• Create a single unified company

• Portfolio transformation
• Improve efficiency and effectiveness
What role does the Supply Chain play?
6- 6 -
Dimensions
• 32 plants in 20 countries + contractors

• 15,000+ employees
• 2002 Budget about $2.5bn
• Inventory level circa $1.8bn
• 2002 Capital
- Business ~$1000m
- Operations ~$450m
7- 7 -
Supply System Vision
‘Our customers and our

competitors will recognise us as
the best’
8- 8 -
Supply Chain Development
To date:
• Merger
• Maintain supply
• Synergies
• Secure new product launches
Now:
• Drive performance
• Leverage the supply chain
Throughout:
• ‘Business as usual’
9- 9 -
AstraZeneca: Translating Company
Priorities to Supply
Create enduring shareholder value EPS
Fast effective organisation Supply

Growth through key products Confidence
Win globally
Secure flow of new products
Licence to Operate
First choice for customers
Build the talent base

Enabling Capabilities
10
- 10 -
AstraZeneca links Supply Chain activities
to business priorities
Supply Chain priorities
Manage COGS through lifecycle
Balance investment in fixed & working capital
Sourcing strategy EPS
Time to market
Responsive supply chains Supply
Supply chains adapting with lifecycle Confidence
GMP compliance
Licence to Operate
SHE
Development of capabilities
People, technical & IS/IM Enabling Capabilities
11
- 11 -
Simple value chain
Primary Secondary Packaging

(DS or API) (DP)
12
- 12 -
Strategic focus for supply
Primary Global
(Bulk chemical active)
Secondary Regional and Global

(Deliverable dosage form) Technology based
Packaging Regional or local
Pilot Typically close to R&D
Supported by appropriate Outsourcing
13
- 13 -
Using supply to deliver maximum benefit
via:
• Excellent customer service, shortened lead times and

responsiveness giving …
• Increased stock turns, lower stock-holding costs &
improved productivity
• Product lifecycle management integrated with other
business processes giving …
• Cost of goods improvement through lower materials costs,
improved yields and lower cost sourcing
1% point COS ≈ $150-200m ; 3 Stock Turns ≈ $500m
14
- 14 -
Strategic supply: key factors
• Global decision making

• Close linkages to R&D
- Time to market
• Risk management
- High uncertainty
• Licence to Operate
- Regulatory
- Safety, Health & Environment
• Outsourcing
- Early production stages for primary
- Emerging high competence / low cost sources
• Tax
15
- 15 -
Industry issues from a Supply and
Manufacturing perspective
• Regulatory environment in the industry

- Approval times
- Constraining vs. Science based
- Adoption of new technology
• Adapting to future R&D and portfolio base
• Intellectual Property
• Movement of goods
- Parallel trade EU & Importation USA
- Future channel evolution
- Anti-counterfeiting
• Macro trends
16
- 16 -
AstraZeneca
A creative, fast and effective company with

the global sales and marketing strength to
realise the full potential
from productive R&D thereby delivering
sustainable top tier financial growth…..
Underpinned by world class supply!
17
- 17 -
AstraZeneca - Operations
Friday, 17 October 2003
AstraZeneca Supply System
Julian Amey – Vice President Supply Chain
Historically, Pharma manufacturing not
seen as a source of competitive advantage
Operations
Top level Management Operating
View Focus Consequences Outcome
High inventories
Delivery
Buffer stocks
performance
Long lead times
“Stay out of Product Poor
Poor
High investment
trouble” quality
and infrastructure
Productivity
Productivity
Avoid process
Lack of process
change
improvement
Source: Derived from Doug Dean, IBM
19
- 19 -
Pharma Manufacturing therefore evolved
to be "internally neutral"
Externally Competitive - Drive Business Strategy
Externally Supportive - Customer Service Advantage
Internally Supportive - Cost Advantage
Internally
InternallyNeutral
Neutral--Cause
CauseNo
NoProblems
Problems
Internally Negative - Quality & Delivery Problems
Source: Prof. S. W heelwright, The Harvard Model of Manufacturing Competitiven ess
20
- 20 -
Competitive Advantage from the supply
chain
• Profitable growth
• Cash generation
21
- 21 -
AstraZeneca supply system
Excellence in customer service and supply performance
Consistent
Responsive Life Cycle
Ways of
Supply Management
Working
Chains of Supply
Supply Supply Chain

Governance Principles
Network
Technologies People IS/IM
22
- 22 -
Developing AstraZeneca’s supply chain
• Consistency
• Aligned goals
• Customer focus
• Supply mindset
• Inter-dependent network
23
- 23 -
Essential steps
• Common ways of working

• Schedule ‘push’ to demand ‘pull’
• Life cycle management
• Governance and decision framework
• Capability development
24
- 24 -
AstraZeneca supply system
supply system
Supply Leadership
Lifecycle Management Supply Points
Supply Chain Design Demand Driven Supply
Excellence in Customer Service
and Supply Performance
25
- 25 -
Demand Driven Supply: learning from
other industries

26
- 26 -
Demand Driven Supply is changing the
way our supply chain operates
• Uses demand triggers, KANBANs and visual planning
• A consistent way of working
K
• Means of driving lead time and stock improvement
• ..and it’s simple Inter-site
Kanban
K K
Bulk Packing Market
W W
Demand
Bulk
RIP IPK Tablet Finished Packs
RIP
Formulation
27
- 27 -
Demand Driven Supply
DDS ensures that material and supporting information flow
through the supply chain at a rate determined by demand.
DDS covers:
• Creation of “Flow lines”
• Intra and inter site planning
• Suppliers
• Facilities design & layout…
28
- 28 -
Demand Driven Supply supply supports
lead time reduction
Benefits of lead time reduction

• Lower safety and policy stocks
• Lower stock holding costs
• Reduced stock write-offs
• Improved resource allocation
- e.g. particularly potential bottle-neck areas
29
- 29 -
Supply chain needs change through the
life cycle
Asset management
outsource
Managing complexity
“Lean” Supply chain
Dual sourcing
contingency plans
Defender
Line extensions
“Keeping up” Range rationalisation

capacity vs demand
Increase pack Patent expiry, Cash Cow
range generics, price
Ma
Manage for na
Uncertainty Profit Ca ge f
sh o r
of forecasts
Responsive
Supply
th r
o w fo
Global
Gr a g e
Divestment
Coordination
n
Ma
Product withdrawal
New product introductions
rapid launches – Speed to market
Launch Growth Maturity Post-Patent Expiry
30
- 30 -
Using supply to deliver maximum benefit
via:
• Excellent customer service, shortened lead times and

responsiveness giving …
• Increased stock turns, lower stock-holding costs &
improved productivity
• Product lifecycle management integrated with other
business processes giving …
• Cost of goods improvement through lower materials
costs, improved yields and lower cost sourcing
31
- 31 -
The AstraZeneca supply system
32
- 32 -
The Compliance Environment
Compliance: The legal framework
• Highly regulated
- Licences – Products and Facilities
- Regulations – GMP (Good Manufacturing Practice)

GDP, GLP, GCP
34
- 34 -
What is Good Manufacturing Practice (GMP)?
• GMP is that part of QA which ensures that

products are consistently produced and
controlled to the quality standards appropriate
to their intended use and as required by the
marketing authorisation and/or product
specification
35
- 35 -
What is GMP?
GMP covers:
• Quality Management
• Personnel
• Premises and Equipment
• Documentation
• Production
• Quality Control
• Contract Manufacture and Analysis
• Complaints and Product Recall
• Self-inspection
36
- 36 -
History …
1820 US Pharmacopoeia - Colleges of Pharmacy established

1848 First federal drug law (Import Drug Act) -Bureau of Chemistry
1902 Diphtheria antitoxin contaminated with tetanus - 12 children die
1902 Biologics Control Act - Public Health Services
1906 First Food and Drug Act -Drugs must not be MISBRANDED or
ADULTERATED
1927 Formation of the Food and Drug Administration

1937 Sulphonamide elixir tragedy - 107 people die
1938 Federal Food Drug and Cosmetic Act - Factory Inspections

1959 Thalidomide tragedy in Europe
1962 Kefauver - Harris amendments – First USA GMP regulations (CFR)
1963 Formation of Dunlop Committee in UK – voluntary controls
37
- 37 -
History …
1968 The UK Medicines Act – controls manufacture, supply and sales

1971 First UK Guide to GMP published
1972 Devonport Hospital disaster – 6 patients killed with contaminated IV fluid
1973 2nd UK Guide to GMP published
1975 EC Directive 75/319 – QPs, Inspections,.Manufacturers Licences
1988 Generic Fraud scandal in USA
1989 UK Medicines Control Agency formed
1989 Barr Judgement in USA
1991 EC Directive 91/356 Compliance with GMPs legalised in EU
1992 FDA Pre-Approval Inspection Programme
1998 TSE controls introduced
2003 FDA Quality Initiative – GMPs for the 21st Century
…most legislation has been reactive….

38
- 38 -
EMEA v FDA
EU - EMEA USA - FDA
Marketing Authorisation Application (MAA) New Drug Application (NDA)

-Mutual recognition and centralised approval
Licences _
-Manufacturers:Wholesalers:Specials
GMP regulations 91/356/EEC CFR 210 and 211
Inspections
-GMP GMP and Pre-approval inspections (PAI)
Change
- Single batch variation Annual updates
- Type I and II CBEs
sNDA
39
- 39 -
Change
Making changes is highly legislated and often requires

regulatory approval before it can be introduced
•Do
•Tell and do
•Tell, wait and do
DISCOURAGES INNOVATION
40
- 40 -
FDA Enforcement – Recent Examples
• Abbott Laboratories
- Warning letters, consent decree several locations
- $100m fine, loss of sales, share price drop
- Estimated total costs $200m
• Wyeth Ayerst
- $30m fine
- Consent decree sterile drugs / vaccines
• Schering Plough
- Warning letter related to US and Puerto Rico sites
- Major new product launch delayed
- Consent decree - $500m fine
- Share price drop, CEO resignation
41
- 41 -
FDA Enforcement – Recent Examples
• Eli Lilly
- Warning letters Indianapolis
- Delayed US launches new products
- Plant shut 30 days
• Pharmacia
- Warning letters two major Swedish sites
- Major corporate reorganisation / improvement plans
• Aventis
- Site of API manufacture not notified
- $33m fine
• Merck
- Warning letter two sites
- Plant shut for a time
42
- 42 -
Inspection Preparation – key concepts
• Site co-ordination
• Core team (QA, Production, Development, Engineering)
• Pre-inspection audits
• Front people identified and in place for all areas
• 4 week plans for areas
• Expert package library
• Checklists
• Coaching
43
- 43 -
How do we work with the agencies?
• MHRA
- Through UK Marketing Company Regulatory Department
- Licence renewals
- Licence variations
• Type 1 – minor changes requiring notification (tell and do)
• Type 2 – major changes that may require inspection (feel, wait, do)
- Inspections
• Dialogue on quality issues, changes and audit programme
• Build relationship with inspectors
- Defective Medicines Reporting Centre
• Complaints
• Major Quality Incidents and potential product recalls
44
- 44 -
How do we work with the agencies?
• FDA inspections
- Handled corporately
- Many inspectors
- Not necessarily specialists in drug manufacture
- Credibility built centrally – in Washington – rather than with
individual inspectors
- ‘Compliance-oriented’
• Other agencies
- Very variable expectations
- Handled on an individual basis
45
- 45 -
Medicines & Healthcare products
Regulatory Agency (MHRA)
• An approval Agency
• MHRA inspections (on behalf of EMEA)
-GMP surveillance inspections
-Focus on changes and quality issues
-Facilities
• Sanctions
-Letter detailing non-conformances as Critical, Major or Other
-Recall of product
-Revocation of Licence
-Prosecution of individuals
46
- 46 -
The Food and Drug Administration (FDA)
• An Enforcement Agency
• Inspection
-Regular general GMP inspection (2 years)
-Pre-approval inspection (PAI) for NDAs and sNDAs
-Systems based (Quality Management System + selected others)
-Focus is on documentation
• Sanctions
-Observations (Form FD 483 a ‘non-conformance’ report) - VAI
-Warning Letters for serious violations - OAI
-Seizure of product
-Consent Decrees
-Fines
47
- 47 -
Where’s AstraZeneca?
• Culture of quality and compliance.

R&D - manufacturing - supply
• Good record with agencies worldwide.
• Respected by regulatory inspectors.
• Influential with governments and industry
organisations.
• Recognises importance of compliance to maintain
‘Licence to Operate’, and acts accordingly.
48
- 48 -
Summary
• Heavily regulated industry
But inconsistency globally FDA/EU/WHO
Developing markets
•Brazil, Argentina, Taiwan, China, Korea
• Cost of compliance is high

But cost of non-compliance is much higher
Success depends on
•Robust Quality Management Systems
•Regular audits/inspections
•Maintaining credibility with the regulatory agencies
•Active involvement with opinion forming groups
•Culture
49
- 49 -
Future
• Bilateral agreements (MRAs)

Canada, Australia, New Zealand, Japan, USA
• EU enlargement – another 10 states
• FDA – ‘21st Century’ risk-based GMPs
• Science based – PAT (step change)
• EU Directives and Guidelines:
Clinical Trials
APIs
Sterile manufacture
50
- 50 -
Thought
TODAY’S DECISION IS TOMORROW’S HISTORY
HISTORY IS DOCUMENTED !
51
- 51 -
life inspiring ideas
www.astrazeneca.com

Astrazeneca - Operations: Friday, 17 October 2003 Barrie Thorpe - Executive Vice President Operations

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AstraZeneca - Operations

Friday, 17 October 2003

Barrie Thorpe – Executive Vice President

A creative, fast and effective company with

• Create a single unified company

Base Expiry Growth Launch

• Create a single unified company

What role does the Supply Chain play?

• 32 plants in 20 countries + contractors

‘Our customers and our

Create enduring shareholder value EPS

Fast effective organisation Supply

Build the talent base

Primary Secondary Packaging

Secondary Regional and Global

Packaging Regional or local

Pilot Typically close to R&D

Supported by appropriate Outsourcing

• Excellent customer service, shortened lead times and

1% point COS ≈ $150-200m ; 3 Stock Turns ≈ $500m

• Global decision making

• Regulatory environment in the industry

A creative, fast and effective company with

AstraZeneca Supply System

Julian Amey – Vice President Supply Chain

Source: Derived from Doug Dean, IBM

Externally Competitive - Drive Business Strategy

Externally Supportive - Customer Service Advantage

Internally Supportive - Cost Advantage

Internally Negative - Quality & Delivery Problems

Source: Prof. S. W heelwright, The Harvard Model of Manufacturing Competitiven ess

Supply Supply Chain

Technologies People IS/IM

• Common ways of working

Benefits of lead time reduction

“Keeping up” Range rationalisation

• Excellent customer service, shortened lead times and

- Licences – Products and Facilities

- Regulations – GMP (Good Manufacturing Practice)

• GMP is that part of QA which ensures that

1820 US Pharmacopoeia - Colleges of Pharmacy established

1927 Formation of the Food and Drug Administration

1938 Federal Food Drug and Cosmetic Act - Factory Inspections

1968 The UK Medicines Act – controls manufacture, supply and sales

…most legislation has been reactive….

EU - EMEA USA - FDA

Marketing Authorisation Application (MAA) New Drug Application (NDA)

GMP regulations 91/356/EEC CFR 210 and 211

Making changes is highly legislated and often requires

•Tell, wait and do

• Culture of quality and compliance.

• Cost of compliance is high

• Bilateral agreements (MRAs)

TODAY’S DECISION IS TOMORROW’S HISTORY

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