4P Framework: Performance

Innovation is the foundation on which Crucell was built, and the fuel driving us forward. It is the key to achieving the virtuous cycle of sustainable business and health gains that lies at the heart of our strategic and CSR ambitions. 2009 was a breakthrough year in this regard.

The revolutionary influenza antibody research going on in our innovation & discovery (I&D) group, led by Chief Scientific Officer Jaap Goudsmit, attracted the world’s largest healthcare company, Johnson & Johnson (JNJ), to sign a truly extraordinary agreement with Crucell in September, 2009. Crucell’s scientists have discovered antibodies that cross-neutralize influenza viruses of different subtypes (including H5 and H1) and provide immediate protection against a broad range of flu strains in pre-clinical models.

The agreement with JNJ guarantees full funding for bringing our flu antibodies to market as quickly as possible and expanding our I&D programs. A payment of more than €300 million for JNJ’s minority stake in Crucell also provides an immediate cash injection for our other pipeline programs, which are developing much-needed solutions for malaria, tuberculosis, rabies and other major threats to human health.

The partnership with JNJ is the latest in a string of partnerships Crucell has forged over the past few years with leading industry and academic organizations. For more information on Crucell’s agreements with strategic business partners (including DSM Biologics, JNJ, MedImmune, Merck, Novartis, sanofi pasteur and Wyeth) go to www.crucell.com/partners. There you will also find a full listing of our numerous research & development partners and licensees.

We choose our business and scientific partners carefully, seeking above all a shared commitment to healthcare innovation and integrity. We invest significant time and energy into building and maintaining good relationships with these partners. Open communication and regular evaluations are an essential part of this.

The Flex Factory^®: a paradigm leap offering exciting benefits

The Flex Factory^® can most simply be described as a modular system of mobile clean rooms containing lightweight, mobile equipment based on disposable technology—that is, all parts of the equipment that come into direct contact with the biological material are disposable.

In contrast to a traditional manufacturing facility, with its cumbersome stainless steel bioreactors and separate, airlocked clean rooms for the various manufacturing steps, the Flex Factory^® is extremely compact, flexible and mobile. It is also highly cost- and energy-efficient, as the use of disposables eliminates the need for complicated cleaning and sterilization of equipment between production batches.

What makes this ‘lean and green’ innovation truly revolutionary, however, is that it transforms the approach to product development—in ways that reduce the risks inherent in biopharmaceutical innovation and the time required to bring a new product to market.

At present, biopharmaceutical manufacturers invest in equipment and a facility specifically designed for the manufacture of a new product long before that product reaches Phase III (the last phase of testing in humans, and the final hurdle before regulatory approval for commercialization of a new product). This is necessary because the regulatory authorities require that Phase III clinical trial material is manufactured in the same set-up—using the same process—that will be used for manufacturing the commercial product.

The Flex Factory^® breaks this traditional paradigm. Because of its mobility and flexibility, the Flex Factory^® can be recreated in any location.

“ This ‘lean and green’ innovation reduces the risks inherent in biopharmaceutical innovation.”

“Once you have a positive outcome with a candidate product in Phase III, you go to the final manufacturing site and install the same equipment used for Phase III manufacturing,” explains Alain Pralong, Crucell’s Senior Director Process Development. “As well as saving a lot of time, this continuity will allow us to develop a process that fits our manufacturing platform—the Flex Factory^®—rather than building expensive facilities to fit a process.”

It is estimated that full implementation of the Flex Factory^® will substantially reduce capital expenditure, cut operating costs and possibly shrink the average development time for a new, best-in-class compound to as little as eight years, compared to the current 11–15 years.

In 2009, Crucell took an exciting, proactive step in anticipation of future development by starting to introduce a revolutionary approach to manufacturing called the Flex Factory^®. This is a pioneering move: when the Flex Factory^® is fully implemented, Crucell will be the first in the world to have a biotech manufacturing process that is conducted from start to finish using only disposable equipment. This approach will significantly reduce development timelines for our pipeline products and slash energy consumption during manufacturing, compared to traditional facilities.

“The disposables strategy brings down operational costs so significantly that it enables us to consider making therapies for indications that we could not have considered before,” says Chief Executive Officer Ronald Brus. “And it is a perfect fit with our high-yield, cost-efficient PER.C6^® human cell line technology, which was designed to make affordable and innovative new therapies possible.”

In recognition of the visionary leadership that has made Crucell the world’s largest independent vaccine maker, Ronald Brus was named Biotech CEO of the Year at the Vaccine Industry Excellence Awards, held in Washington in April, 2009.

PER.C6^®

Designed to make affordable and innovative
new therapies possible.

In 2009, Crucell distributed more than 115 million vaccine doses in more than 100 countries around the world, with the vast majority of doses (94.7%) going to developing countries, where the burden and impact of infectious diseases are greatest. Crucell’s current portfolio of marketed vaccines provides protection against a total of 12 major diseases. Based on the best available evidence regarding vaccine efficacy, disease incidence and case fatality, in 2009 Crucell’s ‘top five’ vaccines* prevented 3.6 million cases of infectious disease and 819,000 deaths that would have been caused by these diseases in unvaccinated populations. This calculation assumes a vaccine waste rate of 2%.

Comparison with previous-year figures demonstrates that Crucell has strengthened its impact on global health in 2009 by expanding vaccine sales and markets. In 2008, we reported more than 100 million vaccine doses had been distributed for the protection of people in more than 80 countries. This translated into the prevention of an estimated 3.1 million cases of infectious diseases and over 700,000 deaths among these cases in 2008.

*Crucell’s top five vaccines in terms of sales are Quinvaxem^®, Hepavax-Gene^®, Epaxal^®, Inflexal^® V and Vivotif^®.

Sales of Crucell’s lead product Quinvaxem^® showed strong growth in 2009, continuing the trend seen since the launch of this innovative pentavalent (five-in-one) vaccine towards the end of 2006. Quinvaxem^® combines the vaccines against five deadly childhood diseases into a single injection. Developed specifically to meet the needs of the world’s poorest communities, Quinvaxem^® is making an important contribution towards achieving the United Nations Millennium Development Goals, in particular the target of reducing the under-five mortality rate by two-thirds between 1990 and 2015.

“In 2009, Crucell distributed more than 115 million vaccine doses in more than 100 countries. Crucell’s ‘top five’ vaccines prevented 3.6 million cases of infectious disease and 819,000 deaths.”

The initial success of Quinvaxem^® owed much to its innovative formulation and presentation. It was the first fully liquid vaccine of its kind, ready for use without further preparation by healthcare workers in the field, and its presentation in single-use vials reduces the risks of vaccine contamination or waste. These are key considerations for communities struggling to cope with hygiene problems and to make the best use of limited healthcare resources. Now that other manufacturers are starting to bring similar vaccines to market, Crucell’s outstanding track record for quality, productivity and reliability—all along the supply chain—is becoming increasingly important for maintaining our competitive advantage. The new awards for supply of Quinvaxem^® placed by supranational organizations in 2009,* confirm Crucell’s added value in this regard.

Throughout 2009, Crucell’s Korean organization achieved remarkable results in upscaling the production of Quinvaxem^® and Hepavax-Gene^® while simultaneously making rapid progress on the construction of a new manufacturing facility in the Incheon Free Economic Zone. The new plant will enable further increases in production capacity and efficiency in order to meet anticipated growing demand for Crucell’s pentavalent and hepatitis B vaccines.

Meanwhile, Crucell continued to work on life-cycle development of our existing products in order to maximize the creation of value—measured in human and commercial terms. Examples are our efforts to launch Epaxal^®, Crucell’s hepatitis A vaccine, on the US market and to widen the indications (registered medical uses) of our vaccine Dukoral^® in those countries where it is only registered for the prevention of cholera. Dukoral^® also has proven efficacy for preventing traveler’s diarrhea caused by ETEC, an E. coli bacterium common in resource-limited regions. We made important progress in both areas during 2009.

*Since the launch of Quinvaxem^® in October 2006, Crucell has received awards of US$0.8 billion for the supply of Quinvaxem^®; US$0.5 billion for the tender period 2007-2009 and a further US$0.3 billion in the first round of awards for the 2010-2012 tender period. The supranational organizations have so far awarded approximately half of the volume for this tender period.

€30 mln

“The Healthy Ambition program delivered over €30 million in run-rate savings.”

Crucell’s operational excellence program, Healthy Ambition, headed by Cees de Jong, Chief Operating Officer, was successfully completed in 2009, delivering valuable efficiency improvements and the targeted run-rate savings of over 30 million Euros. All the money saved is being reinvested into building the business, with a key focus on investments in research & development (R&D). This is in line with our strategy to use strong operating cash flow to accelerate new product development.

However, this is only the beginning of Crucell’s efforts to create value through operational excellence. Through Healthy Ambition we have set in motion a program that is expected to gather momentum for the years to come, as initiatives emerging from the program are fully implemented and trigger further improvements.

One of many examples is the restructuring of Crucell’s global business into three franchises (paediatric, travel & endemic, and respiratory), each with its own Business Manager. This structure provides overview, facilitates planning and enables processes to be managed more efficiently, with even closer cooperation between our scientists and our business people.

As an organization, we made a big leap forward in development and implementation of global policies and global systems in 2009. These are essential tools for achieving further, sustainable improvements in operational efficiency, information management, transparency and strategic decision making. They lay the basis for embedding sustainability in our organization.

Crucell sees the continuous improvement of its own operational processes as a key aspect of responsible supply chain management. We also recognize that optimal management of our supply chain, from a CSR perspective, goes beyond this focus on operational excellence. Our ambition is to continue developing in this area, so that issues relating to CSR can be systematically incorporated into our choice of suppliers and our relationships with them in 2011.

Important progress towards this goal was achieved in 2009 through the professionalization of Crucell’s procure-to-pay (P2P) organization. First, an in-depth analysis of Crucell’s global spending patterns was conducted, using an automated tool for data collection and analysis. This provided an overview of all Crucell’s suppliers, together with the costs, volumes and categories of goods and services purchased worldwide. It also highlighted opportunities for improvements, over and above those achieved in the first phase of our operational excellence program.

These insights formed the basis for a strategy aimed at achieving sustainable excellence in the way we purchase equipment, supplies and services. A key focus was to leverage our power as a global organization by introducing common procurement practices throughout the company, rationalizing suppliers, bundling order volumes, aligning terms and conditions, and so on.

Crucell moved swiftly to implement these improvements, starting with a global procurement policy incorporating best practices. This has been communicated to all employees worldwide. A tool for monitoring P2P performance and promoting employees’ adherence to global policies has been introduced. This system of ongoing data collection and category-based analysis, at the global level, is an essential prerequisite for greening the supply chain.

We have also drawn up new general terms and conditions for vendors, which specifically refer them to Crucell’s Code of Conduct and require that they comply with this code in their dealings with Crucell. This is a first step in the continuous improvement of responsible supply chain management from a CSR perspective.

At our site in the Netherlands, a tangible benefit of smarter procurement practices has been the reduction of chemical waste. By centralizing the purchase and management of chemicals used in the Leiden laboratories, the facilities group has significantly cut the amount of chemicals that are purchased and can make sure that supplies are used before their expiry dates. The environmental, safety and efficiency gains are obvious.

Dealing with CSR dilemmas

Corporate social responsibility lies at the heart of Crucell’s mission to bring innovation to global health and make a meaningful difference to the lives of people worldwide. In general, what is good for Crucell’s business is good for society. Nevertheless, we are sometimes confronted with difficult choices between opposing responsibilities.

What to do, for example, if we see the opportunity to develop a life-saving product that does not look attractive from a purely commercial point of view? Crucell was faced with that dilemma several years ago, when our scientists discovered a mix of monoclonal antibodies (mAbs) with the ability to neutralize the rabies virus. “Initially, the market for this rabies product appeared to be small and unprofitable,” recalls CEO Ronald Brus. “But with 55,000 people dying in terrible suffering from rabies each year, and solid evidence that our rabies antibodies could prevent these deaths, we decided to proceed with development, in partnership with sanofi pasteur.”

It soon became apparent that in taking this humane course, Crucell also made a sound business decision: the potential commercial value of this innovative rabies product is significant.

Using Crucell’s highly cost-effective production method based on PER.C6^® technology, the rabies mAbs can be produced at much lower cost than the blood-derived antibody product now on the market. The cost reduction is so substantial that many countries that cannot afford the currently available antibody treatment will be able to buy the mAb product. This will open up new markets, making our rabies program a profitable venture as well as a humanitarian one.

The example of rabies illustrates the ideal resolution of a dilemma: achieving the optimal balance between different responsibilities. More often, one responsibility must take priority over another. For example, it is not always possible to give equal attention to operational and environmental concerns.

The construction of Crucell’s new manufacturing facility in Incheon, Korea, illustrates this sort of dilemma. We have a responsibility to get this new production plant for Quinvaxem^® and Hepavax-Gene^® up and running as soon as possible, in order to meet the growing demand for these vaccines and ensure continuity of supply. Crucell therefore made the decision to design the new plant along the lines of the old one—while incorporating efficiency and capacity improvements—rather than starting from scratch to design a ‘green’ facility. This approach has enabled very fast progress on the construction of the new plant and should facilitate its approval by the regulatory authorities. At the same time, Crucell is moving towards ‘lean and green’ manufacturing of its future products by introducing the Flex Factory^®, a revolutionary approach to biopharmaceutical production.

Packaging is another area where we have to weigh up conflicting interests. See Packaging section for an example.

Our Swedish organization has launched a very successful program for recycling cool boxes—the temperature-controlled containers that keep vaccines in good condition during transport. Normally, customers throw the boxes away once they have unpacked the vaccines. Crucell employees in Sweden came up with the idea of asking their customers in the Nordic region to return the boxes for reuse. Crucell pays for the return transport, which amounts to approximately half the cost of purchasing the cool box, and reuses each box up to four times before disposing of it in an environmentally responsible way. When the project started in September 2009, the target return rate was 60%. The response has far exceeded expectations, reaching 94% within three months. Crucell is now looking into the feasibility of widening the program to include other regions.

Since the start of 2009, 100% of the electricity consumed at our Dutch site has been ‘green’ energy, generated by sustainable sources. This is a good example of how our local managers are already working on responsible sourcing. With the roll-out of the global CSR policy and reporting manual in 2010 we aim to build on this foundation.

Animal welfare. Before any candidate medical product can be given to humans, it must be rigorously tested in pre-clinical (non-human) models. Crucell performs animal testing to the minimum extent that is required by law. We conduct essential safety studies in animals in accordance with the highest international standards, which are designed to prevent or minimize any suffering of the animals tested. Simultaneously, we apply the 3R principles—Reduce, Refine and (ultimately) Replace—to pre-clinical studies involving animals. Crucell has been working over many years to replace animal tests with cell-based assays, and these efforts have already resulted in the significant reduction of animal testing. ...

“What is good for Crucell’s business is good for society.”

100%

Since the start of 2009, 100% of the electricity consumed at our site in the Netherlands has been 'green' energy.