OVERCOMING

LIMITS

ANNUAL REPORT 2017

EN     PT

EFFICIENCY

AND CONTINUOUS

IMPROVEMENT

Operational excellence is one of the five pillars of the Company’s Strategic Planning and focuses a series of initiatives to improve performance related to our manufactured capital, that is, our structure, quality, processes and systems, which ensure the manufacture and distribution of Aché products.

Since the beginning of the Operational Excellence Program (PEO) in 2015, we have generated a 16% increase in Aché’s productivity. The program was extended to other areas beyond industrial and quality. The Company also invests to evolve in eco-efficiency.

In 2017, the program had continuity with the formation of 28 improvement teams, composed of employees prepared to act proactively in the management and resolution of problems. There was also the training of 443 employees in one of the program’s modules, totaling more than 3 thousand hours of training.

Solids packing line at Guarulhos

The PEO has already extended to the areas of Quality, Procurement, Logistics, Packaging Development and Financial. In October 2017, it arrived at Nortis, with the training of all employees in the production and administration areas. Throughout 2018, the PEO will continue in Nortis and other areas of Aché.

In 2017, we produced 265.2 million units in all of our plants, 4% above the volume registered in the previous year. The line of solids at the Guarulhos plant reached two production records in March and August. More than 14 million units were manufactured in August only.

Throughout the year, BRL 41.1 million was invested in favor of operational excellence, which meant gains in capacity, technological innovation, productivity, quality and the environment. The amount of BRL 11 million less than in 2016 reflects the effectiveness of the PEO, which should continuously reduce the need for investments. Out of the total made, the volume directed toward the purchase of new equipment in the Nações Unidas plant was highlighted, which resulted in an important technological leap, improving the efficiency and control of the production process.

Production of antibiotics at Nortis

In the beginning of 2017, we prepared the Nortis plant, located in Londrina (PR) and acquired by Aché in 2016, to receive the Good Manufacturing Practices Certificate (cGMP), obtained in the month of May 2017. The plant has already begun production of penicillin antibiotics, with the Aché quality and safety standards, increasing our industrial and technological competence. With an installed capacity to produce 15 million units/year, in 2017 we began to transfer the production of antibiotics to Nortis, and we closed the year with nearly 1 million produced units.

Novocilin production line in Londrina

NORTHEAST

MANUFACTURING

SITE

Construction of the plant in Pernambuco evolved in 2017. All phases foreseen in the schedule were completed with excellence: acquisition of the land in the Metropolitan Region of Recife, elaboration of the plant’s conceptual project, definition and hiring of the engineering company, elaboration of the compatibilized executive project, start of earthworks and conduction of the biddings for start of civil works. The manufacture of drugs is expected to be fully operational in 2021.

In line with execution of the engineering project, the Quality area has been working to ensure that the new plant complies with the requirements of Anvisa and international agencies, such as US Food and Drug Administration (FDA) and the European Medicines Agency (EMA). The new industrial plant in Pernambuco is also being designed based on the concepts of the Operational Excellence Program (PEO).

New plant in Pernambuco, currently under construction

New Aché plant: reference in eco-efficiency

Among other initiatives, the design of the new plant in Pernambuco contemplates:

ECO-EFFICIENCY

The responsible use of natural capital guides the environmental management of Aché, which guarantees the monitoring of processes, identification of risks and the adoption of measures of efficiency and mitigation of impacts. Our Integrated Management System for Occupational Health, Safety and Environment is ISO 14001 – certified for environmental management and OHSAS 18001 – certified for health and safety. A number of eco-efficiency projects were conducted in 2017 – several of which are part of the newly structured Strategic Sustainability Plan (read more in the Sustainability chapter). Check out our performance in 2017 and the highlights:

Lake and wooded area in Guarulhos’ plant

Packaging with less environmental impact

[GRI 301-2]

With integrated management of all stages of production, we seek to identify opportunities to reduce environmental impacts right from the selection of materials, which prioritizes the adoption of certified raw material, from responsible management or that favor post-consumer recyclability. This effort involves investments in technological development and work in partnership with our supply chain, in addition to being strongly aligned with regulatory issues in the sector.

There are already several ongoing initiatives focused on the packaging of Aché products, which represent one of the most consumed materials at the company. Secondary packages (cardboard packs, not in direct contact with the drugs) are made with cellulose from reforestation areas and use nontoxic paints and varnishes. Another good example comes from the anti-inflammatory Acheflan, a phytodrug based on the extract of Cordia verbenacea, which is the result of Aché’s radical innovation work in partnership with academic institutions in Brazil. Today, 100% of Acheflan’s secondary packaging is made from recycled paper.

Other advances

To further improve production efficiency, we began to adopt a new system of packaging material supply in our manufacturing lines. The methodology allows the supply to be conducted by Logistics, keeping the operational teams fully focused on the production process. We also started implementing a new system that will integrate all of the Company’s platforms, focusing on improving process management and optimization of resources.

Result of the Operational Excellence Program (PEO) in 2017

+13%

in the Overall Equipment Effectiveness (OEE) index, which measures the overall efficiency of equipment at our manufacturing sites (Guarulhos and Nações Unidas).

+6%

in overall Company productivity compared to 2016.

R$ 6,4 millhões

Amount saved with the improvement projects of the operational teams.

R$ 52 millhões

Amount saved in investments for the purchase of new equipment due to the gains in operational efficiency.

Oral liquids prroduction in Guarulhos

Quality, safety and efficacy

[GRI 416-1]

Systems, tools, initiatives and policies allow Aché to monitor the entire lifecycle of development and use of products to ensure the portfolio’s quality and efficacy and the health and safety of consumers.

This process, which is based on different methodologies, begins at the development stage of new products. In the production plants, we follow the best manufacturing practices, while the development and quality control labs have cutting-edge technology and trained staff. The evaluations cover 100% of the portfolio, from the analysis of inputs and packaging materials supplied by the partners to complete evaluation of the products manufactured. Periodically, we conduct studies to certify the stability of products during their shelf-life and invest to improve the quality system, ensuring that it remains in line with the best laboratory and manufacturing practices, in compliance with national and international regulatory guides.

The suppliers of inputs have the support of Aché to improve their internal procedures, and they are audited annually (read more in the chapter Dialogue – Business Partners). The same guidelines must be followed by partners from the storage and distribution chain.

In order to maintain the safety and efficacy of products, we have the Pharmacovigilance area, which evaluates the data reported by healthcare professionals and consumers to our consumer service. We also have a structure of the Quality area that analyzes possible reports of deviations and internally addresses the necessary measures for continuous improvement of the Company’s products and processes.

BUSINESS

PARTNERS

[GRI 102-9]

In 2017, we had 3,197 business partners, distributed among suppliers of products and services, which are subdivided into:

• Direct: directly integrate Aché’s final product;
• Indirect: are not in the composition and manufacturing process of Aché’s final product;
• MRO (maintenance, repairs and operations): linked to the Company’s production activities and/or facilities.

In the year, the volume of purchases reached BRL 1.2 billion. Among the most representative items are the raw materials (active pharmaceutical ingredients – APIs) and packaging materials. With a diverse geographic distribution, about 80% of the active pharmaceutical ingredients (APIs) purchased by the Company in 2017 were imported and were subject to foreign currency fluctuations. The main supplier country was India, which accounted for 30% of the total volume purchased in the period. We work toward long-term partnerships and seek to cooperate with the development and growth of our partners’ businesses. Much of this effort can be seen in the event Partnerships for Excellence, of which 11th edition took place in November 2017. At the time, we certified nine new suppliers and aknowledged the companies that most aligned with our practices and our quality standards in 11 categories.

Based on an increasingly complete vision of the value chain, in addition to product suppliers, service providers and customers, in 2017 we included the aknowledgement of the best clinical research centers. All contracts include environmental, quality and safety clauses, and guarantee the non use of child labor.

Each year, the Quality area conducts in loco audits at its input suppliers of materials, service providers and third parties in Brazil and abroad to ensure the quality of products and processes, compliance with Good Manufacturing Practices and with the requirements of the ISO 14001 (Environmental Management System) and OHSAS 18001 (Occupational Safety Management System) standards. In 2017, 174 audits were concluded (85 abroad and 89 in Brazil). [GRI 102-43 e 416-1]

Proximity and support to the value chain

Internal improvements

Currently, the Procurement area works to implement a new e-procurement platform, which will bring together in a single virtual environment the main steps involved in the Company’s purchase processes, such as requisitions, contract and invoice management. In 2017, the area reviewed and updated the policy for purchase of goods and services, including the procedure for regularization of non-negotiable payments. E-learning was also made available to all employees to facilitate the understanding of processes, new guidelines and purchase modalities.

Expenses with suppliers

The charts consider major suppliers according to each category, which represents 503 of 3,197 business partners previously mentioned (equivalent to 80% of purchases made).

Qualification of API manufacturers

As a result of a work involving the areas of Quality, Regulatory Affairs, Procurement and Analytical and Pharmaceutical Development, Aché launched the Gold Sites program in 2017, focused ib inspection and qualification of the manufacturer.

All the API production plants undergo audits, which evaluate compliance with the technical, environmental, commercial and occupational safety criteria demanded by Aché. The supplyers can be rated as Gold, Silver or Bronze standards. Those with the Gold Site seal receive priority as suppliers - in the first edition, ten obtained this classification. In the categories Silver and Bronze, the Company support the partners in the implementation of improvement plans.

Waste management

In line with the Operational Excellence Program (PEO), we work to make operations increasingly efficient from the point of view of waste management, minimizing losses in the production process and waste generated in industrial processes and tests, which undergo decharacterization, and can be recycled, reused or incinerated in a subsequent phase, according to the characteristics of each material. The packages (cardboard, glass, blisters, etc.) are separated in the manufacturing plants. For 2018, Aché will structure even more efficiently the internal area dedicated to the treatment of solid waste in the Guarulhos plant, of which separation and grinding activities will be carried out on a consolidated basis. In Guarulhos, effluents are also treated and returned to the water bodies, following environmental legislation.

Waste disposal (t)

[GRI 306-2]

1 Contaminated waste of production origin. Example: placebo, wastes from pharmaceutical products not subject to special regulatory control or expired raw materials, excess from analyses, packaging, wastes from sweeping with contaminated material, adhesive printed material or labels and personal protection equipment (PPE).

Energy Efficiency

Energy Consumption

[GRI 302-1]

Since 2016, Aché has been acquiring in the free market, directly from generators, energy for the Guarulhos and Nações Unidas plants, an initiative that generated a savings of BRL 3.2 million in the first year alone. In 2017, the Nações Unidas plant started using 50% of clean electricity from renewable sources.

More efficient LED lamps were also installed in the Guarulhos and Nações Unidas plants, resulting in the replacement of 10.2 thousand light bulbs, with a reduction of 65% in electric power consumption and gains of BRL 1.5 million. In 2018, the LED lamps will arrive at the facilities of the Londrina plant (PR).

In 2017, the Company’s total energy consumption increased by 4.8% compared to 2016, but the energy intensity remained at 0.15 kWh/unit produced, in line with previous years. [GRI 302-3]

Guarulhos Plant entrance: the architecture privileges natural light

Reverse logistics

[GRI 301-3]

Establishing mechanisms aimed at the use and proper destination of Aché products along the value chain is one of the Company’s objectives. This concern guides different actions, such as the already established processes that ensure the receipt and correct destination of returned products. In 2017, reflecting the guidelines of the Operational Excellence Program, the rate of returns recorded a decrease. For final consumers, we disclose information about the correct disposal of drugs in the package inserts of products and in Aché’s communication channels, such as our website. Further clarifications can be obtained in the Consumer Service Center (CSC).

Water resources

In 2017, the water balance of the Guarulhos plant was carried out, which mapped 31 water consumption points. The next phase provides for the extension of the mapping to 50 points, allowing the company to adopt, in 2018, some efficiency measures, such as reutilization of water from industrial processes.

Water consumption (m³)

[GRI 303-1]

Aché Generation Awareness

At the Guarulhos and the Nações Unidas plants, there are actions that promote the correct disposal of waste and environmental awareness, including encouraging employees to bring specific waste from home, which is then destined properly by Aché. In 2017:

Environmental responsibility in cultivation

Sintocalmy, an anxiety treatment product, is made from passiflora extract, grown by Aché partners according to ISO 22000 food safety criteria, without the use of pesticides or chemical fertilizers. The water used in the extract production is treated and reused in the irrigation of organic garden.

Aché

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