Pharma & Healthcare Logistics Development Roadmap for Luxembourg

1. Pharma & Healthcare Logistics Development Roadmap for Luxembourg There is something going on in Luxembourg! TAS Trust Advisory Services

3. Introduction:Implications for LSP’s Overview on current trends in the pharmaceutical and healthcare (P&H) industry, affecting the sector. Analysis of the market and its development is necessary: • to understand the environment, in which Logistics Service Providers (LSP) targeting the P&H industrywill have to operate. • early detection of trends helping LSP to better adapt to changing business conditions. • and to maintain their competitiveness. • From LSP’s point of view,targeting the P&H industry,the question arises: • implications on their business. Purpose of this presentation is therefore to reveal: • Implications of the current changes in the P&H industry for logistics, and especially for LSP. • Analysis of information on the competitive environment regarding opportunities and risks can be used. • - Identifying adaptation needs of companies and to evaluate their positioning in the market, • which shall help LSP to foresee challenges, • as well as to take advantage of new market developments. • Therefore, each section will firstly illustrate opportunities and risks resulting from the conclusions. • Before deriving implications from the perspective of a European LSP. • Last section, statements on potential impact and probability.

4. Freight volume development in tons (and evaluation in %) 2009 2010 2011 CDG(1) 1.818.503 2.177.371 (+19,7) 2.087.952 (-4,1) FRA 1.837.054 2.231.348 (+21,4) 2.133.300 (-2,8) AMS 1.286.372 1.512.256 (+ 17,5) 1.523.806 (+0,8) LGG 482.121 639.343 (+32,6) 674.360 (+5,5) LUX(1) 628.462 705.079 (+12,2) 656.653 (-6,9) BRU 449.132(2) 476.135(2) (+4,8) 418.898 (-2,6) HHN 174.664 228.647 (+30,9) 286.416 (+25,2) TOTAL: 6.227.176 7.494.044 (+19,0) 7.781.385 (-2,0) 1 cargo excl. mail Source: ACI Airports Council International 2 flown + trucked Opportunities & Risks: P&H Industry Trends for LSPs • Risks • Considerable changes currently undergoing in the P&H industry also might have negative implications for the logistics services. Especially important seem the following: • Europe is losing its importance relative to the emerging markets, which might lead to a reduction of logistics activities in this market • Additionally, the diversification of products and producers might not only have positive, but also have negative effects on LSP: • 5. Loss of patent protection might force pharmaceutical companies to further reduce logistics costs and might put more pressure on LSP • 6. The increase in temperature-sensitive biotech drugs and biosimilars might further increase the requirements by companies and authorities • Opportunities • The general trends in the P&H industry will also affect to a certain extend the provision of logistics services: • Increasing global pharmaceutical demand will likely foster the demand for logistics services • 2. Outlooks especially for China, Brazil and India indicate new opportunities for LSP establishing supply chains to and from these markets • Furthermore, the increased demand for generics in developed and emerging countries will rise number of producers, who have to distribute their products: • Loss of patent protection of major blockbusters might increase the number of producers and therefore the number of supply chains • Another factor is the diversification of product types: • The increase in biotech drugs and the risks associated with their distribution (e.g. cold chain ruptures) might lead to increased outsourcing to LSP with qualified & certified GDP-based sevices.

5. Opportunities & Risks: • Main Global Supply Chain Trends for LSPs Opportunities During the next years, the global pharmaceutical market will change considerably regarding production and demand: • 7. The geographic diversification of production and demand will probably lead to more trade routes which have to be served by LSP since new production locations and new destinations will be added to current supply chain networks. Furthermore, the poor infrastructure of pharmaceutical logistics in emerging markets offers • 8. Opportunities for LSP to establish and enlarge their business in attractive markets The emerging markets pose many new challenges to P&H companies, but also to LSP. Risks Also risks associated with the changing P&H market: Since markets in developed countries become less attractiveregarding production and pharmaceutical spending, logistics infrastructures might not require expansion. This might lead to: • 9. Erosion of demand for current shipping lanes Furthermore, in the face of new markets where healthcare shall be provided to an increasing population, and where the production and demand of generics is already well established, • 10. LSP might experience rising competition of domestic LSP => Therefore, LSP demonstrating the ability to adapt quickly to new P&H markets and trends might gain a competitive advantage

6. Opportunities & Risks: • Strategic Logistics Targets of P&H Industries for LSPs Opportunities Challenges encountered in current P&H logistics, together with the strategic logistics targets of the major pharmaceutical companies might provide LSP with new opportunities. Possible effects are: • 11. The focus on emerging markets might increase outsourcing of logistics activities to LSP Due to rising number of markets and diversification of country-specific market characteristics, which will result in rising complexity to be handled by pharmaceutical companies • 12. The increasing importance of P&H logistics and the need to tackle current logistics challenges with the customer, might lead to more strategic partnerships • 13. LSP demonstrating P&H expert knowledge might create incentives for P&H companies to reduce safety buffers and to enhance logistics outsourcing Risks Even though the major logistics challenges in the P&H industry seem to be equally perceived by different sources, this does not lead to a general trend regarding out- or insourcing of logistics activities. • Counterfeit might lead to the desire to better control the supply chain and hence to reduce external participation in the chain 15. Increasing demand for flexibility might increase the pressure on LSP to provide redundant transport and storage capacity.

7. Conclusions The P&H industry will go through considerable changes during the next years:  Significant increases of demand by emerging markets Reduced growth of developed markets New production locations Patent expiries by major blockbusters Increasing market share of generics and Increasingly exigent handling requirements to ensure e-2-e temperature controlled S/C Enhanced capabilities, tools and processes for end-to-end product traceability Increased flexibility and efficiency Compliance with regulations and industry standards        

8. Pharma & Healthcare Logistics Development Roadmap for Luxembourg There is something going on in Luxembourg! TAS Trust Advisory Services