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ANNUAL REPORT 2016
ANNUAL REPORT 2016
pcas.com
ANNUAL REPORT 2016
Our Mission ................4
PCAS’s Values ..............6
An active policy across all regions ............7
Gouvernance ................7
Interview with Christian Moretti, Chairman of the Board of Directors, and Vincent Touraille, Chief Executive Officer ..........8
Highlights 2016 ...........10
A new leading R&D center ................12
Division Life Pharma Synthesis Generic APIs Fine specialty chemicals Advanced Specialties .................... 14
Enersens ...................19
Protéus ....................20
R&D: Strategic Expertise Driving Profitable Growth ...22
Industrial performance the driving force behind PCAS’s success ............24
Safety & Quality ............26
Human Resources ...........27
Finance and investor relations ..................28
Employee Life .............30
Glossary ...................36
Contact ....................38
Contents
Our mission
Vincent TourailleChief Executive Officer
“PCAS has set itself the goal of being a recognized, irreproachable player on its markets ten years from now, via its performance, innovation and long-term responsibility”.
Provide safe, innovative, competitive and sustainable industrial solutions to turn its customers’ needs into industrial reality and thereby create value
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A range designed to meet the highest quality standards in the fields of pharmaceuticals and innovative chemistryPCAS specializes in complex molecules for Life Sciences and Innovative Technologies. The group channels its cutting-edge expertise into the development and production of active pharmaceutical. In order to address the fundamental challenges specific to its markets, PCAS is dedicated to providing safe, innovative, competitive and sustainable industrial solutions to turn its customers’ needs into industrial reality and thereby create value.
A vast portfolio of products adapted to the demand for the most complex moleculesBe it in the field of pharmaceutical synthesis (production of active ingredients and generics, biomaterials, etc.), or fine specialty chemicals (polymers, super-insulating materials, organic and printed electronics, etc.), PCAS provides comprehensive ranges of innovative solutions. The health product portfolio includes active pharmaceutical ingredients (APIs), patented drugs and their advanced intermediates. It also covers proprietary products for generic drugs. Ultimately, this variety enables industrial companies to optimize their product development by outsourcing some or all of their molecule development and production activities. PCAS’s global offer, which covers a broad spectrum of industrialization and production processes, is supported by a permanent focus on performance and quality, essential to address the growing complexity of molecules.
Flexible industrial facilities serving the world’s leading groupsOne of PCAS’s major commitments to the world’s leading industrial groups is its capacity to deliver large quantities of products meeting the highest possible standards at a competitive price. This capacity hinges around a policy targeting the constant optimization of industrial facilities to ensure they are capable of adapting to evolving global demand in the different markets as well as the production deadlines imposed by customers. PCAS is committed to mobilizing considerable production capacity within tight deadlines on behalf of leading global groups, meeting any increased demand for their products quickly and ensuring the continuity of the production cycle for industrial customers.
An entrepreneurial spiritPCAS was established more than 50 years ago by two entrepreneurs. We are determined to perpetuate this spirit within our teams, irrespective of roles and responsibilities.
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AmbitionThe PCAS Group has a resolutely international outlook and capitalizes on the most up-to-date knowledge in its key areas of expertise. Our ambition is sustained by the constant will to increase customer satisfaction and added value for our partners, through large-scale and increasingly global projects that succeed by mobilizing all our teams.
InnovationOur constant aim of improving our technological expertise leads our organization to go beyond conventional production and management processes. To achieve this goal, the group endeavors to foster the open-mindedness and innovation capacity of its staff, whose experience and practical sense are the real driving force behind PCAS’s development.
EngagementJoining PCAS involves mobilizing all one’s capacities and sense of responsibility to achieve a common goal: the best quality of service for customers. Teamwork and pooled talents enable our organization to meet our customers’ requirements while at the same time leading all our staff forward towards this same goal.
IntegrityOur international ambition, underpinned by our need to innovate and our commitment to customer satisfaction, cannot be legitimate without the spirit of integrity that characterizes PCAS. Our staff act in accordance with the most basic rules of accountability and uprightness expected of a group committed to quality of service for its customers.
PCAS’s valuesA constant will to go further and to improve ourselves, in strict accordance with our four fundamental values: ambition, innovation, engagement and integrity.
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An active policy across all strategic regions
PCAS : a strategic network to satisfy a global and heterogeneous demand
An industrial presence in Europe and America and sales offices on the 3 key continents
The unique industrial dynamism of Germany in Europe explains PCAS’s choice to have a specific commercial site there.
As part of its development strategy in the healthcare industry, PCAS launched with success its new industrial workshop at its site in Couterne to meet, in particular, the global demand for pharmaceutical intermediates.
The Porcheville Research and Development Center pools all the skills and tools needed to support the development of PCAS’s complex molecules for its various markets. Its close proximity to the industrial plant of Limay will support significantly the innovative strategy aimed at reducing delays in development time and introducing powerful synergies.
PCAS reinforced in 2016 the operating excellence of its Canadian site at St Jean sur Richelieu; located in the south of Montreal (Quebec). As a long standing specialist in microelectronics, PCAS can now capitalize on its advanced technological expertise to meet the needs of pharmaceutical businesses, and notably the high demands of Biotechs in North America.
In Asia, the dynamism of the sales team in Shanghai, in continental China, has helped to strengthen close ties with the Asian market players, who continue in 2016 to be the driving force behind the world growth, particularly in the specialty chemical sector.
GovernanceThanks to a wealth of complementary experience and talent between them, the senior executive managers are proactive and diligent contributors to the work of the Board and the Review Committees reporting to it. The directors, independent in their thinking, maintain the highest quality standards and are convinced that diligent governance represents a source of value. Discussion and debate are essential ingredients in any constructive, collective reflection process. The deliberations of the board of directors are governed by long-term thinking, which is key to the effective implementation of the group’s strategy and the policy directions stemming from it.
The board of directors meets whenever it is deemed necessary, but at the very least, three times a year.
The Executive Committee defines the strategic targets of the group and prepares the decisions that will then be submitted to the Board of Directors which is the ultimate decision maker. Its core mission is to evaluate the human, industrial and financial resources required to pursue organic and/or external growth. The Executive Committee meets three times per month.
“Complementary talents and experiences”
New York PCAS America
QuébecPCAS Canada
TurkuPCAS Finland
Orne PCAS Couterne
Yvelines PCAS Limay Centre R&D Porcheville
Hauts-de-Seine PCAS Villeneuve- la-Garenne
FrankfurtPCAS GmbH
LongjumeauPCAS France
Isère PCAS Bourgoin
Bourgoin-Jallieu Enersens
Gard PCAS Aramon
Nîmes Protéus
ShanghaiPCAS China
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Production site
Christian MorettiChairman of the Board of Directors
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Christian MorettiChairman of the Board of Directors+Vincent TourailleCEO
“How would you describe 2016?”
Christian Moretti: It was a good year in terms of sales. We could have done better still had it been possible to invest in the structuring of our equipment in phases and strengthen our teams faster. We opted for a well-thought-out structuring process geared towards quality, as demanded by our customers.
Vincent Touraille: In the end, we recorded strong growth in the field of Pharmaceutical Synthesis, i.e. 7.6%. In Fine Specialty Chemicals, up 6.4% in 2016 despite a market that was globally more sluggish, we were able to take advantage of our much-sought-after expertise in the microelectronics sector, which fueled growth.
Interview
“The increases in our quantitative and qualitative production capacities, as well as the further growth in our activity, particularly health, are the highlights of 2016.”
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“What were the other highlights of 2016?”
C. M: We pursued the structuring of our industrial network and the development of the supply chain across the entire group. The creation of dedicated logistics teams at each of our sites is a very important step aimed at achieving greater fluidity and flexibility in the production of increasingly complex molecules. As well as the structuring process, the improvement in our production capacities enabled us to get rid of bottlenecks throughout a varied chain that includes multiple batch reaction, separation and product drying steps. Product finishing represents one of the many crucial challenges in terms of meeting customers’ increasingly demanding quality requirements. Finally, as scheduled, we replaced the smaller reactors with bigger ones to cope with our customers’ expanding volumes.
V. T: These industrial structuring efforts were also associated with further training for our teams, combined with new organizational methods to integrate workflow management, as well as the recruitment of new profiles, particularly in the field of analytical development to reinforce R&D teams. These efforts are designed to optimize the control process for complex molecules, the compliance of which must systematically be verified at every stage, from manufacture through to delivery to the customer.
“In terms of structuring strategic initiatives, can you tell us more about the acquisition of the Porcheville site?”
C. M: The acquisition of the Porcheville site, which is located close to our Limay industrial site, is a unique opportunity, both in terms of the additional capacity - a surface area of more than 10,000 m² -, and its cutting-edge equipment that is vital to the development of complex molecules. Of particular interest are the kilo-lab and industrial pilot facilities. Crucially, Porcheville has expert units specializing in crystallography and analytical methods.
V. T: This is a structuring initiative for the Group insofar as Porcheville will become the new center for all R&D projects with a view to targeting the expansion of our customer and product portfolios and the development of proprietary solutions. Moreover, these capacities strengthen PCAS’ upstream positioning in the drug manufacturing chain, enabling us to offer our customers complete solutions, from development through to production in kilo labs and pilot units, guarantees of commercial and logistical synergies. We are going to assemble all of our R&D teams at a single site to roll out our innovation strategy. It is aimed at reducing production launch times and introducing
development processes between all our sites and for all our customers. This represents a major strategic step for PCAS, perfectly complementing the optimization of our industrial production capacities conducted at our sites in 2016, a process that is set to continue for a further 2 to 3 years.
“Have you continued to develop on international markets?”
V. T: International activities are a vital component for groups in our industry, to support customers on 3 continents and offer the most innovative technologies. In 2016, the international share of net sales grew once again. The export market generated around 70% of income, in line with growth in the major pharmaceutical group market in North America and Asia. Both North America and Asia remain our priorities for export market development.
C. M: We plan to establish an active presence in the USA in 2017, but not any old how. We have identified numerous acquisition opportunities in the country, but, so far, we have not been impressed by either the prices or the degree of obsolescence of the infrastructure. We will continue to study the opportunities in this key country for our continued development and leadership, all the while considering the priorities of value creation for our shareholders and synergies with our now solid industrial bases in Europe.
“What is the outlook for the current year?”
V. T: Markets appear to be reasonably strong in our industry, particularly in the health sector where demand from start-ups and major pharmaceutical groups is strong: the areas with the strongest growth remain oncology, along with all the diseases of the central nervous system or linked to population aging around the world. Generics continue to represent one of the major challenges for the future of the pharmaceutical industry. The acquisition of Porcheville and the optimization of our industrial facilities provide us with the opportunity to pursue our development to add to our international market share this year.
C. M: The market opportunities are even more accessible to PCAS since barriers to entry to our industry continue to grow and many players, particularly in Asia, have been denied access to the market by the American regulatory authorities for reasons of quality or production reliability over time, or on the basis of health and environmental criteria. Hence we anticipate that we will be able to comfortably pursue growth in our various sectors and, despite continued investments to improve our productivity; our margins should also continue to grow.
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Highlights 2016
Q2’16Q1’16 Q4’16
12 JULY 2016PCAS signs a global distribution agreement with MilliporeSigma, enabling a better access to its polymers line expansorb® for Sustained Release Injectables
4 NOVEMBER 2016PCAS at China INTER LUBRIC 2016
PCAS at CPHI Barcelona 2016
21 OCTOBER 2016FDA Inspection at Villeneuve la Garenne (no comments)
21 NOVEMBER 2016Acquisition of the R&D site at Porcheville
SEPTEMBERFinishing Investment in Limay plant
Inspection positive ANSM Couterne
23 SEPTEMBER 2016FDA Inspection at Aramon (no comments)
Q3’16
6 JUNE 2016A new collaboration for enzyme optimization between syngenta and Protéus SA
25 APRIL 2016PCAS enters into a manufacturing agreement with ABIVAX for ABX464 thus ensuring drug candidate supply for upcoming clinical trials
27 APRIL 2016The company Produits Chimiques et Auxiliaires de Synthèse decides to change its corporate name to PCAS.
29 APRIL 2016Positive FDA inspection at Limay
JUIN Positive ANSM inspection at Limay
12 APRIL 2016Us patent granted for pcas new cinacalcet production process
20 JUNE 2016Inauguration of a new workshop at the couterne site
1ST JANUARY 2016Cession de l’activité Matières Premières aromatiques à Nactis.
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31% France
37% Other Europe
15% North America
14% Asia Pacific
3% Other
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Highlights 2016Sales BreakdownKey Figures
By region
By market
43% Pharma Synthesis Exclusive & Pharma Chemicals
25% Pharma Synthesis Generic APls
16% Performance Chemicals
16% Advanced Specialties
€192mNet sales
€27.3mEBITDA
7 production facilities
982employees
7%dedicated
to R&Doutside of France
69%of net sales
7+93+H 69+31+H
All figures in €m 20152015
restated** 2016
Net sales 179.1 179.1 192.0Pharmaceutical synthesis 120.8 120.8 130.0Fine Specialty Chemicals 58.3 58.3 62.0EBITDA* 27.0 27.0 27.3EBITDA margin 15.1% 15.1% 14.2%
Current Operating Income* 15.6 15.6 16.2Other operating income & expenses 0.4 –3.1 –2.3
Financial result –5.1 –5.1 –6.4Taxes –2.1 –1.5 –0.9Share of profit/loss of associates – – –Net income 8.8 5.9 6.6
Equity 89.1 97.0Net debt 34.7 48.7Gearing 0.39 0.50
Net assets attributable to the Group per share
6.41 6.85
* Including Research tax credit (€3.1M in 2015 and €3.3M in 2016)
** Excluding the effect of non-recurring insurance revenue net of tax
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A new leading R&D centerPorcheville’s Research and Development Center brings together the range of skills and necessary tools to support the development of PCAS’s complex molecules for its different markets (Pharma, Advanced Specialties and Performance).
The site includes a 2000m2 lab surface area, 6 kilo-labs and a 1000m2 of pilot units (12m3 of reaction volume) enabling PCAS to produce from a few milligrams to a 100 kg per batch.
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The Center is organized by areas of expertise (PhD, Engineers, Technicians)
Recherche & Innovation
Organic Synthesis
• GMP Pharma Synthesis Team• Intermediate Pharma Synthesis Team• Generic Pharma Synthesis Team• Advanced Specialties Synthesis Team• Perfomance Synthesis Team
Analytical Science
• Analytical development team• Analytical validation team (in a
GMP context) and quality control
Crystallization/Solid state characterization
Kilo/lab
Pilot
For the small molecules market targeted for pharmaceutical companies with EHS and GMP regulations
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Division life
Vincent TourailleChief Operating Officer
“PCAS’s international positioning and its focus on technological innovation within a framework of outstanding quality standards support the group’s growth in the develop-ment of complex molecules.”
International growth driven by innovation and an active quality strategy throughout the group
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Didier CombisPharmaceutical Synthesis
Pharmaceutical Synthesis
In 2016, we further reinforced our partnerships with pharmaceutical and biotech companies to support and accelerate their development programs, either for drug substances or for critical intermediates. PCAS enables its customers at every development stage, from early clinical development through to commercialization, via an integrated offer that is perfectly structured to meet ever-changing industrial needs.
The growing outsourcing of pharmaceutical R&D and production (now being observed at earlier stages in the active ingredient development process) and increasingly rigorous quality demands are structural trends that will continue to prevail in the coming years.
In both the biotech/ emerging pharma segment an important growth reservoir for PCAS or with large pharmaceutical companies, the group is perfectly placed to meet the challenges associated with the complexity of molecules and production deadlines, which is essential to guarantee that the clinical development schedules specified by customers are adhered to. PCAS, which provides comprehensive drug substance services and also drug delivery solutions, has the capabilities to accommodate flexible production, meaning it can ramp up output as required over the course of the various clinical phases. This year, PCAS has contributed to the development of a diverse range of therapeutic solutions targeting major global health problems, such as hepatitis C, non-alcoholic steatohepatitis (NASH) and cancer.”
PCAS has continued to consolidate and strengthen its positioning on the API production value chain, taking on major strategic development projects in key therapeutic areas
“Our expansion in the development and production of new chemical entities has established PCAS as a reference partner for pharmaceutical and biotech players.”
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Laurent AlexandreGeneric APIs
Generic APIs
Generic drugs are one of the fundamental pillars of public health policies around the world since they pave the way for reduced healthcare spending without compromising treatment quality. Supported by this structural trend, PCAS has continued its development in strategic markets while strengthening its offer.
In Asia and the USA, the group has demonstrated its capacity to offer generic drug manufacturers production solutions that have been validated and certified by the regulatory authorities, such as the FDA, whose requirements and control capacities are increasing each year. This policy of heightened control is reflected in the return of generic drug manufacturing to Europe, a phenomenon that has been observed over the past few years. The trend, which is unlikely to be reversed given the production volumes currently outsourced to “low-cost” countries, represents another opportunity for PCAS to further strengthen its positioning in this value-creating sector. In 2016, 16 drugs received GDUFA accreditation, which is vital in order to validate a marketing authorization. PCAS’ excellence - reaffirmed each year - in terms of the certification of production sites in Europe is a key advantage for its customers and its range of proprietary products.
As an innovation partner of its major customers, PCAS has clearly responded to the pharmaceutical development and production needs of tomorrow. For example, the group has successfully supported players in the field of pleotherapy. This new paradigm refers to therapies based on combinations of drugs that already have marketing authorizations to treat other diseases. Finally, the acquisition of the Porcheville R&D site considerably increases its innovation capacity on the generic API segment due to the creation of a dedicated team.
Our capacity of innovation and the excellence of our quality standards represent major competitive advantages in this strategic market.
“A leading producer of generic drugs, PCAS supports their strategic development via a unique positioning serving both major manufacturers and intermediate-sized players.”
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Sébastien TaillemiteSpecialty chemicals
Fine specialty chemicals
In 2016, PCAS contributed to numerous projects in the field of micro-electronics - one of the group’s long-standing segment -, particularly relating to the manufacture of silicon-based integrated circuits. The group gained market share with major global players present in the USA and Asia, especially Japan and South Korea. The latter zone presents considerable development potential for PCAS. The group also performed well in the organic electronics segment, replacing silicon with polymers or other organic molecules in order to obtain materials with new functionalities.
Across all electronic segments, PCAS has taken advantage of its capacity to offer solutions with very low metal content, an area in which its cutting-edge technological expertise is recognized around the world by the most demanding industrial players. This growing demand stems from the phenomenon of the increasing miniaturization of electronic components, which in turn requires higher purity levels.
In the toll production segment, which covers diverse sectors such as cosmetics, aviation, defense, inks and paints, PCAS meets the needs of the different industries via its capacity to produce high-performance polymers and complex molecules. 2016 was a growth year in this segment, buoyed by an increase in sales to numerous existing customers, satisfied with the outstanding quality PCAS is able to provide.
In the field of Performance Chemicals, PCAS benefited from the dynamic nature of its range of proprietary products for industrial lubricants, particularly a new range of “extreme pressure” additives, supported by investments to reinforce production capacities and the technological performance of products.
Development of market share on the micro-electronic market
“Our numerous electronics projects and our range of proprietary additives for performance chemicals drove growth in 2016.”
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Advanced specialties
Gerard GuillamotGroup Scientific Director
The group continued to consolidate and strengthen its cutting-edge technological expertise in 2016. PCAS has significantly increased its analytical development capacities in order to meet the analysis requirements of pharmaceutical companies associated with the growing complexity of molecules. For example, the group strengthened its GMP analytical development team and invested in the latest generation chromatography equipment. In parallel, PCAS gained new expertise thanks to the acquisition of the Porcheville site and specific tools dedicated to the exploration of solid forms. Finally, the acquisition of the Porcheville site gives PCAS increased kilo-lab and pilot unit capacities, the latter of which are now equipped with high-throughput reactors.
This acquisition makes it possible to structure and enhance PCAS’ service provision in the support of complex molecule development projects; R&D services recorded solid growth in 2016. As part of his new responsibilities as Director of R&D at PCAS, Christophe Eychenne Baron successfully oversaw the operational deployment of the new Porcheville site. He is replacing Gérard Guillamot, who has been promoted to Group Scientific Director.
PCAS thus saw sustained demand from outside the health sector, particularly for projects requiring the group’s expertise in the field of fine specialty chemicals applied to new technologies: photosensitive films for screens, polarizing films, integrated microcircuits, etc.
PCAS’ expertise in the analysis and development of complex molecules for the health sector represents a prestigious showcase as far as electronic hardware and equipment sector players are concerned.
Innovation serving growth
“In a context of increasing outsourcing of development projects in the fields of Health and Fine Specialty Chemicals, PCAS continued with its technological investments in order to capture strong demand.”
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The innovative entity dedicated to superinsulating materials
In the favorable context established by reinforced government initiatives, facilitating the energy transition, PCAS is positioned in the high-potential superinsulating materials market, via its subsidiary ENERSENS. As a reminder, the acquisition by ADEME (the French Environment and Energy Management Agency) of a stake in the company in 2015 reflected the recognition of ENERSENS’ technological expertise in the manufacture and integration of silica aerogels in construction materials, while validating the strong market growth observed on these superinsulating components. A true breakthrough technology, ENERSENS’ silica aerogels will be marketed under the Kwark® brand to the construction sector starting from 2017. PCAS is expecting demand to be strong and sustained given the major challenges surrounding thermal insulation.
In order to raise the profile and universality of its product further, in 2016, ENERSENS laid the groundwork for its future development and marketing phases, highlighting its expertise in several projects.
Among them is the flagship project Wall-Ace, which brings together an ecosystem of European players with the aim of developing sustainable insulation systems through insulating renovation plaster and promoting them to the construction sector. As well as playing a decisive role in this project, ENERSENS has continued to develop its production facilities - and investing in additional equipment. These facilities are a welcome addition to the pilot unit, which has already been operating for several years. Finally, the acquisition, among others, of a patent in the USA reinforces PCAS subsidiary’s patent portfolio.
Pierre-André MarchalExecutive Director of Enersens
“In 2017, Enersens will be overseeing its first commercial launches”.
Didier SchneiderChairman of Enersens
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The technological R&D platform dedicated to biotechnological solutions for industrial applications
Juliette MartinChief Executive Officer, Protéus
“Protéus will continue its proprietary developments offering solutions to industrial, energy and environmental issues from biological systems”.
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Didier SchneiderChairman of Enersens
“Enersens and Protéus are powerful levers for innovation capable of generating growth levers for PCAS. In 2017, Enersens will be overseeing its first commercial launches while Protéus will continue its proprietary developments offering solutions to industrial, energy and environmental issues from biological systems”.
In 2016, Protéus, PCAS’ other subsidiary, focused on living systems technological innovation, enhanced its expertise based on biocatalysis. Protéus, involved with health players as an organization selling contractual research, enjoyed a successful year through its solutions that are relevant alternatives to traditional synthesis, from the chemical and economical gain or environmental points of view. Biocatalysis makes it possible to simultaneously reduce the number of synthesis steps and increase the purity yield of the obtained molecules, while operating in mild pressure conditions and temperatures with a minimum of organic solvents (often even without any solvents). The industrial pharmaceutical actors reckon that in the very near future, more than 30% of API synthesis operations will incorporate this enzyme technology. In this highly favorable market context, PCAS and Protéus have been able to develop numerous synergies with a view to promoting this unique expertise to major companies. In this respect, the acquisition of the Porcheville site represents a crucial strategic link, with human and technological resources channeled into the development of proprietary products in the field.
Finally in the Fine Specialty Chemicals segment, biocatalysis technologies also benefit from considerable development potential. This movement stems from a need to substitute fossil resource with a sustainable resource while reducing the carbon and environmental footprint thanks to procedures based on biological processes.
In the continuation of its historical activity in selling contractual Research, Protéus continues to offer exclusive services to major industrial actors covering all fields, such as Food & Feed, Agrobusiness, Chemical industry, or in the Environment.
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R & D
Christophe Eychenne BaronDirector of R&D
“The Porcheville R&D center is becoming our global complex molecule research and development platform, in order to support PCAS’ expansion on the health and advanced technologies markets.”
Strategic expertise driving profitable growth
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PCAS is strengthening its complex molecule development capacity via improved yields and the advanced control of cutting-edge chemical processes.
The acquisition of the Porcheville site represents a unique lever for increasing R&D capacity and supporting the group’s future growth. Research teams have been beefed up and given the latest generation technological equipment to reinforce PCAS’ expertise in key fields such as crystallographic analysis. Since the efficacy of molecules is directly related to their crystalline form, possessing such expertise - a rarity among CROs/CDOs - represents a unique asset for health players. Moreover, the acquisition provides PCAS with significant additional pilot unit capacity - an increase of 13m3 - as well as 6 new kilo-labs: these facilities reinforce the group’s capacity to produce intermediate quantities, against a background in which players are trying to outdo each other in terms of greater flexibility. It will also be possible to use the kilo-lab to develop generic drugs, in line with the group’s policy of pooling R&D resources. More generally, as far as customers are concerned, this additional technological capacity and the excellence of PCAS’ operators constitute a further guarantee of quality and safety.
While this international platform underpins the major reinforcement of the group’s R&D service provision - the department enjoyed strong growth in 2016 -, it also acts as a showcase for PCAS’ technological expertise and will contribute to the promotion of commercial synergies between development and production activities.
Synergies in terms of logistics will also be rapidly implemented thanks to Porcheville’s geographic proximity to the Limay plant and, more generally, the fact that the site is located close to Paris and the transport networks, in the heart of chemical valley.
The trend towards increasingly exacting and efficient development standards is emerging as one of the principal challenges facing the health industry. PCAS is extremely well placed to meet the challenge thanks to its quality strategy founded on this new R&D platform, serving the development and validation of drug manufacturing processes prior to any production launch in the group’s plants.
In the field of Fine Specialty Chemicals, particularly in new technologies, the need to develop complex compounds, with a very low level of impurities, has become the norm. As a result, the major industrial players are inclined to turn to renowned subcontractors, such as PCAS, with advanced expertise in some of the critical development and production phases. One such example is low metal, whose advantage is the generation of minimal levels of metal impurities. This expertise is currently present at the Quebec site in Canada where cutting-edge equipment enables PCAS to meet the very high level of associated demand from the microelectronics industry.
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Pierre SchreinerChief Operating Officer
Industrial performancethe driving force behind PCAS’s success
“Beyond industrial assets, people lie at the heart of PCAS’ industrial strategy. In order to optimize its industrial organization, the group supports its employees via an empowerment policy, aimed at reinforcing their skills in terms of autonomy, management and operational excellence”.
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Better allocation of industrial facilities
Industrial capacity optimization has also been supported by the introduction of a shift system based on five 8-hour shifts, making it possible to ensure continuous production, 24 hours a day, 7 days a week. A major component in the strategy to increase production flexibility, this measure has been successfully rolled out, thanks to the support of employees.
The acquisition of the Porcheville R&D site also adds to our production capacities. As a result, CDO/CRO projects, traditionally handled by the group’s long-standing sites, will now be developed at Porcheville. These developments were the initial and intermediate steps required to validate the configuration of the production process prior to the industrial phases, and necessitated improvements to infrastructure that, by their very nature, reduced the utilization rate of industrial facilities.
Organization designed to optimize production costs without compromising quality
The purchasing function at production centers has been significantly reinforced with a view to optimizing supply costs. And the first benefits of this were seen in 2016, with a reduction in the average cost of raw materials. These efforts have not been to the detriment of quality investments in production facilities, far from it. Several upgrading projects took place in 2016, including the finishing workshop at the Limay site for API production and another project associated with the installation of “light sulfur” production capacity for performance chemicals.
Lean management and employee empowerment: key prioritiesIn 2016, the group continued to roll out and reinforce the organizational methods that have proved so effective in the car industry. Founded on workflow management, this policy resulted in the creation of the post of supply chain manager at each production site. The measure provides the group with greater visibility - up to 24 months - with respect to its production capacities. In parallel, a paradigm shift has been performed in terms of the management system, which is now governed on the basis of a bottom-up approach, i.e. a reversal of information flows, which now flow from operators on the ground up to managers. From this point of view, individual aptitudes for autonomy and responsibility are valued as the principal lever for quality excellence and organizational fluidity. Starting from the premise that the operator is the person best placed to have an effective impact on product quality and performance, and consequently to satisfy customers’ needs, decisions are taken by the production team, since they are the ones who are best placed to manage everyday operations and incidents.
Reduced bottlenecksAs a result of all these measures, particularly those giving greater responsibility to employees, bottlenecks will be reduced automatically. This issue is a major priority for PCAS as it seeks to reinforce flexibility in its production capabilities in order to meet its customers’ requirements, i.e. increasingly tight production deadlines for increasingly variable quantities.
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Safety: Surpassing standards to minimize the risks associated with industrial activities
HSE (Health, safety and Environment) policy is a major priority for PCAS. Audit procedures designed to ensure compliance of group practices with the highest standards of individual and environmental protection continued in 2016. In addition to this audit program, and conscious of the strategic importance of being ahead of the game in this field, PCAS aims to position itself as the industry benchmark in terms of reducing negative external factors. Moreover, procedures were reinforced following the events of 2015, in line with the safety measures and regulatory requirements imposed on sensitive industrial sites.
Concerning PCAS’ environmental commitments in particular, in 2016, the group ramped up its investments in VOCs (Volatile Organic Compounds). The objective is to minimize the impact (whether direct or indirect) of substances generated by PCAS’ industrial activities on the environment and health. This investment program consists in optimizing emission capture and condensation systems with a view to processing waste emissions in accordance with regulatory requirements.
Quality: A constant commitment and a permanent drive for improvement
In 2016, PCAS pursued the investment program aimed to improve its pharmaceutical chemical workshops, particularly finishing areas housing the active ingredients. For example, the drying
workshop at the Limay site was completely renovated and the facility is fully operational again since November 2016.
The organization of the project quality function, created in 2015, continued to take shape. PCAS is currently supporting several pharmaceutical customers through phase III clinical studies. These clinical studies require optimal performance in terms of the quality process, as well as advanced expertise in the fields of Quality Assurance, Quality Control and Regulatory Affairs. Like the other group functions, the project quality function will be based at the Porcheville site, recently acquired by the group.
Lastly, 2016 was a busy year in terms of inspections conducted by the regulatory authorities. Sites were inspected on 6 occasions, with no major observations: twice by the French National Health Authority (ANSM), 3 times by the American FDA and once by Brazil’s health surveillance agency (ANVISA). These routine inspections were to ensure activities complied with legally-binding Good Manufacturing Practices applicable to the pharmaceutical chemical sector. PCAS also successfully navigated the transition to the new ISO 9001 standard.
Safety & quality
26
Operating in a rapidly evolving world and in a growth sector, PCAS is in the midst of its own transformation via the overhaul of its business processes, sustained support for the development of its employees’ skills and the reorganization of its businesses structured around smoother flow management.
2016 was a year marked by a wealth of structuring initiatives designed to support all our employees in a context of change.
The awarding of Vocational Qualification Certificates has been an effective means of reinforcing and promoting our employees’ skills and expertise, initially covering management and production activities. These skills training programs were a highlight of 2016, particularly at the Aramon site where the commitment and professionalism of employees led to a success rate of 100%. In 2017, we will be pursuing these professionalization initiatives by extending them to maintenance and supply chain activities.
At the same time, we have stepped up our training efforts for personnel responsible for change management. These training programs are crucial during this period of transformation, made necessary by the increased production capacities and workforce, as well as the geographic redeployment of teams. Our brainstorming on change management was conducted in partnership with our managers, via innovative educational tools such as the business theater.
Potential issues relating to the effective integration of teams at the Porcheville site, which now houses most of PCAS’ R&D staff, were handled upstream via social dialog and the implementation of an ad hoc support project called Nova. This positive initiative augurs well for the success of the redeployment operation and the satisfaction of the majority of our employees.
We pursued our structuring policy targeting function networks together with the Operations Department. For example, the supply chain function, in the spotlight in 2016, will be contributing to the continued increase in production rates. The first step in the ramp-up has already been taken, following the successful introduction of the five 8-hour shift system, optimizing the use of our industrial facilities.
Human Resources
Corinne Fischer-Gode,Director of Human Resources
“Our human resources policy has been rolled out on the ground via numerous initiatives aimed at promoting the individual commitment and autonomy of our employees.”
PCAS Annual Report | 27
Eric MoissenotSenior Vice-President, Finance and Administration
“Managing the significant development of our activities in order to ensure our results progress and that we seize external growth opportunities”
Pursuing value creation by delivering a profitable growth in all activities
Net sales increased in 2016, both in Pharmaceutical Synthesis and Fine Specialty Chemicals. The Group’s Current Operating Income was slightly higher than in 2015 (€16.2 million compared to €15.6 million), bearing, as expected, additional expenses incurred by the introduction of a new industrial organization to cope with a sustained increase in activity. At €6.6 million, net income was up compared to that of 2015, i.e. €5.9 million following pre-consolidation adjustment for the impact of a net insurance payment of €2.9 million (published net income of €8.8 million).
The Group’s net debt was €48.7 million, compared to €34.7 million on December 31, 2015, partially due to strong sales in the last two months of the 2016 financial year, as well as higher stock levels associated with high
activity levels in the first few months of the 2017 financial year.
2016 was also marked by the implementation of an ambitious investment program across all of the Group’s sites, as well as the purchase of the Porcheville R&D site, representing a combined investment of €17.2 million in 2016, compared to €15.7 million in 2015.
The Group’s transformation is under way and, thanks to its solid financial foundations, PCAS is well equipped to pursue its ambitious development plan, while remaining attentive to external growth opportunities.
Finally, PCAS’ stock market performance was commendable once again, with the share price rising 88% in 2016, following the 109% increase recorded in 2015, reflecting investors’ confidence in the Group’s development strategy.
(Adjusted figures by share, in Euros) 2015 2016
Highest price 8.00 14.06Lowest price 3.60 6.75Price at the end of December 7.97 14.02Net Sales 11.83 12.68Current Operating Income 1.03 1.07Net profit attributable to the Group 0.59 0.45
PCAS’ shares are listed on Euronext Paris—C Segment.
The share is listed since October 17, 1996 and a market-making contract has been signed with Kepler Cheuvreux.
PCAS and the stock market
Finance and investor relations
28
PCAS’s share value
Breakdown of PCAS capital Key Numbers
Code ISIN FR 0000053514 – PCA
At Wednesday, February 15, 2017:
Number of shares 15,141,725
Excluding treasury shares 13,820,874
Compartment Euronext C market
Share price €13.50
Net assets per share in 2016 €6.85
Market capitalization €204.4 million
Analysts coverage Kepler Chevreux, Portzamparc and Midcap Partners
�����������44.7% Public
29.5% Eximium
14.7% Christian Moretti / Anblan
8.7% Treasury Shares
2.4% Management
15 Feb 15 Apr 15 Jun 15 Aug 15 Oct 15 Dec
PCAS
SBF 120
2016 2017
80
120
160
200
(100-point basis evolution/vs. SBF 120)
PCAS Annual Report | 29
Employee testimonialsThe main driving force for PCAS ‘success, their commitment is our most precious asset
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The management culture established by PCAS is based on knowledge transfer, support and empowerment to allow employees to express their skills, and to instill a meaning to their actions.
PCAS Annual Report | 31
“The passing on of knowledge and capacity for autonomy are the pillars of innovation at PAS.”
The trust placed in employees at PCAS creates a stimulating and empowering work environment.
When I was doing my work-study program, as a chemical engineer, I was lucky enough to join a talented team passionate about what they were doing. During my time with them, I contributed to the development of a ready-to-use solution for the lubricant industry. I also helped design the packaging for this innovative new product that we promoted ourselves directly to our customers.
At PCAS, I discovered that a company’s expertise and reputation for excellence are a work in progress, built up day by day via the commitment of the employees on the ground. But establishing such a dynamic can only ever be possible if people are given the opportunity to exercise their talent via an empowerment policy, whereby the employee is placed at the heart of the decision-making system. Having witnessed for myself the progress made in this area, I’m proud to have carried out my internship at PCAS, where the concrete application of this philosophy gives meaning to the idea of the constant commitment of all operators.
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PCAS Annual Report | 33
“The sole purpose of technology is to serve employees and boost their expertise, providing maximum support as they go about their day-to-day tasks.”
José Munoz,Information Systems Director
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“Forecasting and understanding PCAS’ growth in order to allocate resources effectively in line with profit improvement objectives”
Eric CheypeDirector of
Management Control
Support functions such as management control and information systems play a pivotal role in growth strategy.
Accordingly, a far-reaching policy was rolled out in 2016 to reinforce business monitoring tools and increase information exchange between the various entities. The growth in commercial momentum within a context of tightened flow management demanded the introduction of new, more relevant activity indicators, as well as closer collaboration between management control and business units. These measures will provide greater short- and medium-term visibility with respect to the group’s activities and ensure the optimized allocation of resources. Hinged around three major priorities - support for growth, customer satisfaction and productivity -, the roll-out of the new technological platform, the PCAS information system nerve center, is really set to pay dividends in 2017. Benefiting from the latest standards in terms of safety, accessibility via cloud and interactivity, this new tool will represent a major technological lever serving PCAS’ employees and growth.
PCAS Annual Report | 35
Glossary
A Active pharmaceutical ingredient: the active substance in a drug.
Additives: chemicals which impart specific properties to the fuels, lubricants, paints etc. to which they are added.
B BARC (Bottom Anti-reflective Coating): the anti-reflective coating improves the photolithography process by suppressing, during exposure, deterioration caused by light diffusion and reflection.
Biocatalysis: synthesis of a chemical substance using an enzyme as a catalyst*.
Biotechnology: the use of life sciences for industrial applications.
BPF: Good Manufacturing Practice (see cGMP).
Building Block: basic element for the development of more complex substances.
C Catalysis: action of increasing the speed of a chemical reaction and reducing the level of energy required to complete it.
cGMP (current Good Manufacturing Practices): production standard in accordance with prevailing US standards, published by the FDA. These are mandatory in order to be able to export active pharmaceutical ingredients (and some synthesis intermediates) to the USA.
Clinical development: set of medical investigations defining the therapeutic activity of an active ingredient, delivery method, dosage, side effects, etc.
Clinical trial: any systematic drug trial conducted in humans in order to demonstrate or verify the effects, identify all the adverse effects, study the absorption, distribution, metabolism and excretion to establish the efficacy and safety of use of the drug in question.
E Enzyme: protein with a catalytic activity. Enzymes are usually characterized by the very high specificity of their catalytic power (substrate or transformation specificity).
F FDA (Food and Drug Administration): US state organization which issues authorizations for launching new drugs.
G Generic: a drug for which the patent(s) protecting it has/have fallen into the public domain and for which the data protection period attached to its marketing authorization has expired. GMP: Good Manufacturing Practices (see cGMP).
I IDL (Import Drug License): drug import authorization.
N
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NDA (New Drug Application): marketing authorization application for a new drug in the United States.
O OLED (Organic Light Emitting Diodes): new flat-screen technology using organic molecules which, subject to an electric field, are able to emit light directly.
OPV (Organic PhotoVoltaic): third generation of photovoltaic panels manufactured using printing processes on plastic media.
P Peptide: polymer of amino acids linked together by peptide bonds.
Photosensitive materials: materials that react on a molecular level with light or part of the light spectrum, or with other types of radiation.
Photoresist: photosensitive formulation for use in the process of transferring an image or pattern onto a substrate.
Photovoltaics: technology converting the energy from sunlight into electrical power.
Pilot: intermediate plant between the laboratory and industrial-scale production unit consisting of medium-sized equipment which is required for industrial testing of new syntheses before scaling up to real production.
PLGA/PLA: poly (D, L-lactide-coglycolide) from the EXPANSORB® range are copolymers of lactide and glycolide.
Potentiate: for a drug, its «potentiation» by another substance refers to the fact that its effect is enhanced by the substance in question to such an extent that this effect is far superior to the ordinary combined respective effects of the two products.
Princeps: Latin word meaning «occupying the first place». This term is used for an original drug, invented by an innovative pharmaceutical company which has exclusive rights to it throughout the period of its patent protection. The term is used in contrast with «generic» drugs.
Precursors (of advanced materials): molecular entity generally containing a metal which may be applied by various techniques to form a film or thin layer imparting functional properties to a material so that it may be used in high-tech applications.
Proprietary: used to describe a product whose manufacturing process was independently developed by PCAS which can therefore freely manage its marketing, production and any associated intellectual property rights.
Protein: biological macromolecule composed of one or more polypeptide chains in a defined three-dimensional organization.
R RFID (Radio Frequency Identification): radio-identification is used to store and recover data remotely using RFID tags.
S Synthesis intermediate: defined chemical substance used as a raw material in a subsequent synthesis step.
V VOC: Volatile organic compounds that may be directly or indirectly harmful to health.
PCAS Annual Report | 37
PCAS
Head OfficeBP 181 23 rue Bossuet PA de la Vigne-aux-Loups 91160 Longumeau France
33 (0) 1 69 09 77 85
pcas.com
Plants
Bourgoin Plant15 avenue des Frères Lumière cs 52009 38307 Bourgoin-Jallieu Cedex France
33 (0) 4 74 93 63 33
Couterne PlantPCAS, Usine de Couterne, Haleine 61410 Rives d’Andaine France
33 (0) 2 33 37 50 20
Limay Plant19 route de Meulan 78520 Limay France
33 (0) 1 34 78 87 87
Porcheville
R & D CentreZI de Limay 2-8 Rue de Rouen 78440 Porcheville France
00 33 1 34 79 50 00
Expansia
Head Office23 rue Bossuet PA de la Vigne-aux-Loups 91160 Longjumeau France
33 (0) 1 69 09 77 85
PlantRoute d’Avignon 30390 Aramon France
33 (0) 4 66 57 01 01
PCAS Finland OyMessukentänkatu 8 20210 Turku Finland
00 358 2 330 51
pcasfinland.com
VLG Chem
Head Office and Plant35 avenue Jean-Jaurès92390 Villeneuve-La-GarenneFrance
33 (0) 1 46 85 91 91
PCAS Biosolution
Head Office23 rue Bossuet PA de la Vigne-aux-Loups 91160 Longumeau France
33 (0) 1 69 09 77 85
pcas-bio.com
Protéus
Head Office23 rue Bossuet PA de la Vigne aux Loups 91160 Longjumeau France
33 (0) 1 69 09 77 85
proteus.fr
Plant70 allée Graham Bell Parc Georges Besse 30000 Nîmes France
33 (0) 4 66 70 64 64
proteus.fr
PCAS Canada725 Trotter St-Jean sur Richelieu QC J3B 8J8 Canada
00 1 450 348 09 01
sjpc.com
PCAS America Inc.315 Madison Avenue 3rd Floor, Suite 3007 New York, NY 10017 USA
00 1 201 633-0290
PCAS GmbHDe-Saint-Exupéry-Straße 8 60549 Frankfurt am Main Germany
33 (0) 1 69 79 60 33
PCAS BioMatrix Inc.725 Trotter St-Jean sur Richelieu QC J3B 8J8 Canada
00 1 450 348 09 01
pcasbiomatrix.com
Enersens
Head Office23 rue Bossuet PA de la Vigne-aux-Loups 91160 Longumeau France
33 (0) 1 69 79 60 48
enersens.fr
Plant15 avenue des Frères Lumière cs 52009 38307 Bourgoin-Jallieu Cedex France
33 (0) 4 74 93 63 33
enersens.fr
PCAS ChinaBaohua City Jingdian Building Room 806 No. 518, Anyuan Road Putuo District 200060 Shanghai People’s Republic of China
上海普陀区安远路 518号 宝华城市晶典大厦 806室 200060 上海 中国00 86 21 52 53 00 16
Contact
38
Z.I. de la Vigne aux Loups23, rue Bossuet 91160 Longjumeau — France pcas.com
