Operational Excellence

Healthy Ambition

We have transformed our company from one focused on research and licensing to being a fully-integrated vaccine business. That is already delivering results: gross margins improved from 31% to 34% in 2007. Our next challenge is to improve operational excellence. Starting in 2008, our Healthy Ambition program will do exactly that by setting a target of 15% cost savings (excluding research and development costs), further improving gross margins.

1,000+. Acquisitions of Berna Biotech, Berna Products Corporation and SBL Vaccines Our workforce grew to over 1,000 employees and we became a global organization.

Healthy Ambition

As a result of the acquisitions of Berna Biotech, Berna Products Corporation and SBL Vaccines in 2006, our operations expanded considerably. Our workforce grew from just under 300 to well over 1,000 employees and the number of worldwide locations where we operate increased five-fold – an increase in the scale, scope and complexity of the company.

Having integrated these new businesses, it is now appropriate to look at opportunities to improve our operational excellence – an integral part of our strategy for accelerating growth. Our Healthy Ambition program, which includes a rigorous review of our business processes around the world, includes a target to find savings of approximately 15% on the 2007 cost base, excluding research and development.

Three triggers for operational excellence

The growth in workforce, locations and complexity triggers three potential drivers for operational excellence,

  • Capturing synergies relating to both costs and resources.
  • Reducing costs to create a competitive cost position.
  • Funding growth, by creating cash to fund our biotech pipeline.
“Targeting annual savings of 15% (excluding R&D) by the end of 2009.”

Phases of the program

Healthy Ambition started in January 2008, and consists of three initial phases prior to being rolled out in the second half of our 2008 financial year. Accordingly, while there will be some savings coming through during the second half of 2008, the bulk of the savings will not be realized until 2009.

Capturing synergies relating to both costs and resources. Reducing costs to create a competitive cost position.

Healthy Ambition: preliminary findings

  • A detailed analysis of our procurement processes and spending found that our spendbase is fragmented and therefore under-leveraged. As a result, there is significant potential for cost reduction.
  • Additionally, we have assessed our true ‘cost-to-serve’. We have found that complexity in our product portfolio is a major cost driver. Again, this suggests there is considerable potential to reduce costs.
  • Finally, we have started looking into our business processes. We believe there are opportunities to improve the alignment of, and to centralize, some functions.

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