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MovingParts

ANNUAL REPORT2015-2016

Table of contentsA message from our chief executive officer and our chair . . . . . . . . . . . . . . 1

Board of directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Executive management team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5

Patient outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Responding to the Zika virus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Managing plasma products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Organ donation and transplantation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Rethinking blood donor eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

System performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Building donor engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

The evolution of stem cells . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Banking on cord blood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Securing our plasma supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Cost-efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28

Improvement never stops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Advancing quality management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31

Driving productivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Enhancing our infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Our impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37

Management analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39

Management’s report to members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64

Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65

From cover:

LAURA LANGRIDGE

As a transport driver for Canadian Blood Services in central Ontario, Laura understands better than most how critical timing can be when blood is urgently needed . She experienced the lifesaving difference blood donations can make first-hand when her partner, Georgia, delivered their son, Adam, two and a half months early and he needed a blood transfusion .

Laura recently received Canadian Blood Services’ national Living Our Values award, a peer-nominated award, for continuously going the extra mile to ensure blood is delivered where and when it’s needed .

MOVING PARTS | ANNUAL REPORT 2015–2016 i

A message from our chief executive officer and our chairManaging complexityAs we’ve refined the strategic focus of Canadian Blood Services over the past several years, our management structure and work processes have evolved to reflect the complex role we play in Canada’s health system . Our organization has many interconnected dimensions: we’re an advanced biologics manufacturer, a provider of clinical services and an innovative leader in research, education and professional practices . We address today’s diffi-cult health-care challenges with multidisciplinary responses that draw upon the knowledge, skills and experience of people right across our organization .

As we once again tackled a wide range of issues in 2015–2016 — each of them, as the theme of this annual report suggests, with many moving parts — the unifying thread was our ability to manage complexity . The progress we’ve made is a testament both to the breadth of talent within Canadian Blood Services and the vision and complementary expertise of our partners throughout the health system .

Efficiency and productivityOver the past year we continued to deliver value in three ways: by working constantly to improve patient outcomes with the products and services we provide; by helping to drive improvements in health-system performance across Canada; and by enhancing our capacity to create positive impact with optimum cost-efficiency .

We exceeded our target of realizing $13 million in efficiencies for the 2015–2016 fiscal year by maintain-ing our focus on improving systems and processes in every area of operations — from the automation of information gathering in blood donor clinics to the elimination of redundant procedures in production areas and labs .

These savings realized through productivity and efficiency improvements were complemented by our continued success in negotiating highly favourable contracts with key suppliers, most notably for the plasma protein products we purchase and distribute on behalf of Canadian health-care providers . At year-end we reached an agreement that we project will result in more than $60 million in cost savings and cost avoidance through 2017–2018 . This is in addition to existing contracts that have yielded cost savings and avoidance totalling approximately $600 million over a five-year period .

Another highlight of our productivity journey has been a unique partnership with Toyota Canada at our manufacturing and distribution facility in Brampton, Ontario . For much of the past year, the automaker’s experts worked alongside our teams, sharing their proven approaches to streamlining processes and driving continuous improvement . As a result, we’ve achieved a series of remarkable productivity and efficiency gains, including a 40 per cent improve-ment in order fulfilment time . Now the insights we’ve gained are being extended to all of our other facilities as we roll out our Blood Supply Chain Excellence initiative nationwide .

MOVING PARTS | ANNUAL REPORT 2015–2016 1

Donor eligibility The nuanced issues highlighted in this annual report — from our risk-based decision-making in response to the Zika virus to our repositioning of Canadian Blood Services’ Cord Blood Bank in light of changing medical practice — illustrate the value of our collaborations with other leaders in health care, nationally and globally .

One area where we made significant progress over the past year was in further evolving the blood dona-tion criteria for men who have sex with men (MSM) . In March 2016, we formally sought approval from Health Canada to reduce the ineligibility period for MSM from five years to one year after a donor’s last sexual contact with another man .

This is an important step forward in an incremental process that should be seen in its historical context . When the risk of HIV-infected blood donations came to light in the 1980s, blood system operators decided that the safest option, in light of available research, was to accept no MSM donations . In 2013, Canadian Blood Services, reassured by evidence-based assess-ments of potential risk, moved to a five-year deferral period . Our goal for 2015–2016 was to marshal further evidence confirming that a one-year deferral is in fact no less safe — and we achieved that goal . Now the evolution of our eligibility criteria continues, as we assess the latest research and consult patient advocacy and LGBTQ organizations with the aim of moving from a time-based deferral model to one that simply seeks to preclude all high-risk sexual activity .

Security of the plasma supplyAnother discussion that dominated our agenda in 2015–2016 was the need to ensure a secure supply of plasma for fractionation, as well as the special-ized products derived from this plasma . Currently 75 per cent of our requirements are fulfilled by U .S .

manufacturers, whose plasma collection capacity may be reaching its limits in the next few years, as they seek to keep up with steadily growing worldwide demand for plasma protein products, particularly immune globulin . In this context, simply maintaining the status quo poses a significant risk — perhaps not imminent today, but with the potential to loom large quickly if changing patterns of global demand lead to disruptions in supply or insufficient supply to meet the world’s requirements .

Canadian Blood Services has therefore embarked on developing a comprehensive national plasma collec-tion business plan . We plan to significantly increase the amount of plasma collected through our domestic blood system while maintaining the rigorous stan-dards of quality and safety we've established on behalf of all Canadians . This will be a critical area of focus during the coming year .

Refining governanceAn additional milestone of progress that should be highlighted here is the work by our board of directors in reviewing and updating governance policies and procedures to align with widely accepted best prac-tices . Thanks to the committed efforts of all directors, guided by the expertise of outside consultants, we now have an exemplary governance framework for board-level oversight and decision-making, with clearly articulated guidelines enshrined in a com-pletely revised board members’ manual .

This concern for sound governance also extends outward to the relationship between Canadian Blood Services and our funding partners . We continue to seek a pan-Canadian accountability agreement that better delineates our complementary roles . In 2016–2017, we hope for collaboration with our corporate members on clarifying the essen-tial arm’s-length relationship, aiming for a national governance framework that will further protect both governments and the blood system from repeating the missteps of the past .

2 CANADIAN BLOOD SERVICES | ANNUAL REPORT 2015–2016


This overarching challenge mirrors those we face in every area where we work to deliver value to Canadians . The issues are complex and sometimes daunting — if only because they matter so much to so many people . In striving to improve patient out-comes, system performance and cost-efficiency, we must constantly weigh competing priorities, balance the interests of multiple stakeholders and manage the interconnections between myriad related factors .

As always, our success in driving change and delivering value depends on strong, effective partnerships — with our funders, with the other key players in Canada’s health system, and with other blood operators, biologics manufacturers and innovation leaders around the globe . Even more fun-damentally, we could not hope to realize our vision without the continued support, commitment and engagement of Canadian Blood Services staff, our dedicated volunteers and, of course, our loyal and generous donors .

We look forward to making additional progress toward our strategic goals — while managing all of their complexities — in the months and years ahead .

Leah Hollins Chair, Board of Directors

Dr . Graham D . Sher Chief Executive Officer


Board of directors

Dunbar Russel (Toronto, Ontario)

Dr . Gary Glavin (Headingley, Manitoba)

Kelly Butt (ICD .D) (London, Ontario)

Robert H . Teskey (Edmonton, Alberta)

Mike Shaw(Hamilton, Ontario)

Elaine Sibson(Halifax, Nova Scotia)

Leah Hollins Chair(Victoria, British Columbia)

Craig Knight (Victoria, British Columbia)

Henry J . Pankratz (FCA)(Toronto, Ontario)

Dr . Kevin W . Glasgow (Toronto, Ontario)

R . Wayne Gladstone (CA, CPA, ICD .D) (Whitby, Ontario)

Dr . Jeff Scott (Halifax, Nova Scotia)

Suromitra Sanatani (Edmonton, Alberta)


Executive management team

Dr . Graham D . SherChief Executive Officer

Dr . Christian ChoquetVice-President, Quality and Regulatory Affairs

Dr . Dana DevineChief Medical and Scientific Officer

Mark Donnison Vice-President, Donor Relations

Andrew PatemanVice-President, Talent Management and Corporate Strategy

Rick PrinzenChief Supply Chain Officer

Jean-Paul BédardVice-President, Public Affairs

Watson GaleVice-President, General Counsel and Corporate Secretary

Ralph Michaelis Chief Information Officer

Pauline PortChief Financial Officer and Vice-President, Corporate Services

Patient outcomes

DR . SHEILA O’BRIEN

Dr . O’Brien is associate director of epidemiology and surveillance at Canadian Blood Services . She conducts risk assessments, monitors infectious diseases such as HIV, hep-atitis, the Zika virus and babesiosis and carries out research to enhance blood safety . When work began to evaluate the length of time donors would be ineligible to donate blood after returning from a Zika-risk area, her risk assessments helped to determine the three-week restriction . Her work is frequently published in scientifi c journals, reaching a broader audience .

Canadian Blood Services is committed to developing and delivering safe, relevant, high-quality products and services, all aimed at improving the care and treatment of patients. To illustrate this strategic commitment in action, here are four challenging issues we wrestled with over the past year.

Responding to the Zika virusOur risk-based decision- making process and quick, coordinated actions are keeping the blood supply safe from this potential threat — and others that may be on the horizon .

A sudden outbreak of the Zika virus in the Western Hemisphere — beginning with a few cases in Brazil and then spreading through much of Latin America and the Caribbean — was monitored closely by Canadian Blood Services throughout 2015–2016 . Reports linking the virus to serious health impacts, and particularly to severe birth defects in some babies born to infected women, were naturally a serious cause for concern .

Although at this time there is limited evidence that the mosquito-borne virus can be transmitted by blood transfusion, initial reports from affected regions, coupled with findings from an earlier outbreak in French Polynesia, have led most blood operators to conclude that the risk must be taken seriously .

Immediate actionWhen it became clear the outbreak was escalating rapidly, Canadian Blood Services took immediate action . Concerned as always for the safety of both recipients and donors, we consulted with our col-leagues at Héma-Québec to determine how we could best mitigate any risk to Canada’s blood supply . We quickly concluded that the number of people who might travel to Zika-afflicted areas and then donate blood within a few days of returning to Canada was extremely small . Still, as a precaution, in late January 2016 we announced a temporary deferral period of one month . At the same time, we continued our intensive efforts in research and risk analysis .

Using all available scientific information, along with data on the travel behaviour of Canadian blood donors, our team of experts developed sophisticated risk models . These were built on reasonable assump-tions about everything from the incidence of the Zika virus, to the odds of a traveller contracting it, to the likelihood of that traveller going on to donate blood . In many areas we purposely overestimated risk to ensure the safest possible inferences . The net result was a risk management strategy we believe is unique among developed countries responding to the Zika crisis .


After sharing our proposed mitigation measures with Canadian Blood Services’ international Scientific and Research Advisory Committee, we presented them to Health Canada . In February 2016, again coordi-nating with Héma-Québec, we announced a new formal guideline for blood donation reflecting the potential (albeit slight) risk of Zika infection: Canadian residents who have travelled outside the continental U .S . and Europe are ineligible to donate blood for 21 days from the date of their return to Canada .

21 versus 28 daysOur recommended waiting period is in contrast to the 28-day period set by the U .S . Food and Drug Administration and most other blood system regula-tors worldwide . Our shorter deferral window, which reduces the negative impact on Canada’s pool of potential donors, reflects the rigorous risk analysis we apply in protecting the blood system, and ultimately patients, from transmissible diseases . In the case of Zika, the 21-day deferral period was based on the following considerations:

. What was known about the duration of Zika symptoms and how long the virus remained in the bloodstream .

. The estimated risk of an infected unit of blood entering the Canadian blood system .

. The potential impact on the sufficiency of the blood supply (using 2014 survey data on donors’ travel behaviours) .

. The need for an approach that remained constant even if Zika spread to more countries .

. Alignment of the waiting time with existing data models to enable rapid implementation .

Most importantly, we needed to gauge the proportionate level of risk mitigation to ensure a minimal effect on the security of Canada’s blood supply . With a 21-day waiting period, the risk of a unit of Zika-infected blood entering the system is calculated to be one in 38 million . As a benchmark, the residual risk of transmission for HIV, hepatitis B and hepatitis C combined is one in 3 .8 million, and this is deemed to be an acceptable level of safety . In our view, the 28-day waiting period adopted by other countries brings only a negligible increment of added safety — at the cost of compromising supply . Constantly maintaining this balance between blood system safety and security of supply is the key to delivering the best possible patient outcomes .

Other dimensionsSome jurisdictions have also implemented a waiting period for the sexual partners of people returning from areas where Zika is present . After extensive risk modelling, Canadian Blood Services has concluded — in line with Australia’s blood operator, which used similar models — that the chances of Zika-infected blood entering the Canadian system as the result of sexual contact are remote . A waiting period for partners would significantly reduce the number of eligible donors with no meaningful increase in blood safety .

We’ve also considered the impact of Zika on prospective stem cell donors — both those registered in our OneMatch Stem Cell and Marrow Network and new mothers donating cord blood . Because there is an extensive international dimension to both donor searches and the provision of stem cells for transplant, we’ve chosen to follow the more restrictive FDA guidelines that most countries have adopted . We’ll continue to review that decision as new information becomes available .

“OUR RESPONSE TO THE ZIKA VIRUS SHOWED THE EFFECTIVENESS OF OUR RISK-BASED DECISION-MAKING MODEL . FOR THIS OR ANY PATHOGEN, WE CAN ACT QUICKLY AND WITH AGILITY TO DO WHAT’S BEST FOR CANADA, GIVEN OUR ENVIRONMENT AND OUR CONTEXT .”Dr . Christian Choquet, Vice-President, Quality and Regulatory Affairs, Canadian Blood Services


Specifically with regard to cord blood, because the Zika virus appears to be more highly concentrated in the fetal circulatory system, stem cells from new mothers could pose a greater risk to transplant recip-ients than those from other donors . We’re therefore working with cord blood banks in other countries on a coordinated assessment of eligibility criteria .

While Canadian Blood Services does not screen the prospective organ donors in our registries (this is done by organ procurement programs), Health Canada has provided guidance for organ, tissue and cell donations that aligns with our 21-day waiting period .

Continued vigilanceAs we monitor the evolving situation with the Zika virus, Canadian Blood Services regularly confers with other blood operators, as well as international epi-demiology and surveillance groups . We also use our established networks of provincial public health units to stay vigilant on new cases and determine whether any patients are blood donors .

The Zika virus is just the latest of many pathogens we’ve had to evaluate as potential threats to the safety of the blood system . Moving forward, we anticipate implementing new pathogen inactivation technologies — subject to government approval — that have proven helpful in other jurisdictions for protecting against bloodborne pathogens .

In the meantime, the 21-day waiting period for travellers to Zika-risk regions has reduced our total number of eligible blood donors by just over one per cent . (That figure rises slightly when we estimate additional donors who may choose to extend the deferral period significantly beyond our 21-day mini-mum .) The fact that we’ve made the area of potential risk purposely large — not knowing where else the Zika virus may spread — adds to the challenge of maintaining supply . To help make up the shortfall, we’re encouraging Canadians to donate before they travel, and we’re also reaching out to new and returning donors who haven’t journeyed recently to regions of risk .

Taking all of these actions together, we believe our response to the Zika virus has shown Canadian Blood Services at its best, as we work to protect the health of all Canadians . By using risk-based decision-making and acting quickly and decisively, while coordinating with various partners — from Health Canada and Héma-Québec to providers across Canada and blood operators around the globe — we’ve mitigated the risk of the Zika virus entering our blood supply and upheld Canadians’ expectation of a safe and secure system .

An unfamiliar threat

The Zika virus is named for the Ugandan forest where it was first discovered by scientists in 1947 . In the decades since, there has been very little investigation of how the virus affects humans . Like its biological cousins, dengue and chikungunya, Zika is normally transmitted by mosquitoes . It is believed to cause clinical disease in only about 20 per cent of infected people . In most cases symptoms are mild, typically including fever, rash, joint pain and conjunctivitis, and recovery usually takes about two weeks .

In a small number of adults, the immune response to Zika infection produces antibodies that attack the patient’s nervous system, causing Guillain-Barré Syndrome, a form of transient paralysis . This has also been observed with other viral infections, including influenza, though it is very rare .

As the Zika outbreak in the Americas gained world attention throughout 2015, a more trou-bling consequence emerged . In some pregnant women, the virus appears to interfere with fetal development, and babies are born with micro-cephaly, or unusually small brains . It’s unclear what factors lead some Zika-infected expectant mothers to develop fetal abnormalities while others have seemingly normal pregnancies . This aspect of Zika, largely unrecognized before the outbreak in Brazil, is now being closely studied .


Managing plasma productsAs we continue to control the cost of these high-demand products, steadily increasing demand calls for closer collab-oration among key players on effective utilization .

Growing demand for plasma protein products continues to present a major fiscal challenge, not only for Canadian Blood Services, but for govern-ments and health-care providers across the country .

The new contracts we negotiated with suppliers toward the end of 2015–2016 will yield substantial future savings, adding to those already realized through similar agreements over the past few years . That said, managing supply and demand for plasma protein products is a complex task . We’ve made unprecedented progress in cost containment, effec-tively reducing the prices we pay for plasma protein products to 2009 levels or lower . However, the key to managing this challenge over the longer term is to focus on utilization of these products by provincial and territorial health systems, which face constant upward pressure on budgets from rising demand .

There must be better coordination of efforts among all players to ensure the right products get to the right patients at the right time — and for the right treatments and indications — as cost-effectively as possible . To place this commitment in context, we need to illuminate some of the surrounding issues in more detail:

Negotiating value Canadian Blood Services is responsible for manufacturing, acquiring and distributing about $600 million of plasma protein products annually . These include immune globulin, which is used to treat infections and immune disorders; albumin, mainly used in burn and trauma care; and clotting factors for many bleeding disorders . (Many of the coagulation factors used by hemophiliacs are not made from plasma; they are synthesized from recombinant DNA .)

Biological drugs produced from human plasma are manufactured through a process called fractionation . There are no large-scale commercial fractionators currently operating in Canada, although at least two such facilities are in the planning stages . Canadian Blood Services sends plasma to contract suppliers in the U .S . and Europe; the finished products are then shipped back for use by Canadian patients . We also purchase some plasma-derived products and synthetic alternatives from manufacturers abroad, subject to the stringent safety and quality standards of regulators such as Health Canada and the U .S . Food and Drug Administration .

10.4%Record annual increase in the use of plasma-derived immune globulin across Canada in 2015–2016 .


In 2015–2016, we completed negotiations on a supplier agreement that will yield savings of $33 million against our budget for plasma protein products in the coming year . We have forecast that by the end of 2017–2018, new contracts for recombinant products will yield cost savings and avoidance totalling $93 million .

We believe we can count on the continued support and engagement of patient and physician com-munities across Canada to helps us fully realize the benefits of this new agreement . It is the latest mile-stone in a rigorously managed procurement process that has already produced cost savings and avoid-ance of approximately $120 million annually since 2013–2014, leading to a projected five-year total of $600 million .

Finding the right balance Our efforts to rein in costs help ensure that physicians can continue delivering a range of safe and effective plasma protein products to patients in need . We’re pursuing other strategies as well, including foreign exchange hedging and seeking more Canadian-dollar contracts . However, any potential savings we realize will not be enough to keep pace with rising demand (see sidebar) . In 2015–2016, use of immune globulin across Canada grew by 10 .4 per cent . This is the highest year-over-year gain to date, continuing a trend that has persisted for at least a decade . And as more and more research explores the use of these products to treat a diverse range of diseases, we expect the number of patients being treated, and the volume of products being used, will continue to rise .

To meet this challenge over the longer term, we need to advance the conversation on product utiliza-tion among the principal players in Canada’s health system . Several provinces have already made signifi-cant progress in establishing more robust guidelines for physicians prescribing plasma protein products . Their success stories will help to guide the broader coordination and collaboration that must follow .

Canadian Blood Services, as a recognized leader in managing the supply of plasma protein products, will continue to collaborate closely on this file with the provincial and territorial health ministries, as well as with the clinicians who prescribe these lifesaving therapies and the patients who use and depend on them . Together, we can achieve a reasonable balance between fiscal realities and the most promising opportunities for improving patient outcomes .

Demand for immune globulin

The growing use of plasma-derived immune globulin (lg), both intravenous and subcuta-neous, is a global challenge . A core group of immunocompromised patients counts on lg to maintain their health and, in some cases, to survive . Other patients have illnesses whose symptoms are demonstrably alleviated with lg-based treatments . And there is a growing group of patients whose conditions may be improved by the use of lg, even though we don’t yet have widely accepted clinical proof; nevertheless, some physicians prescribe these expensive biological drugs in the hope that further research may ultimately prove their effectiveness . All of these factors taken together contribute significantly to driving up health- system costs .


Organ donation and transplantation Transplants have increased, a more robust registry is nearly complete and we now report nationally, but there’s still work to do in coordinating efforts among organ dona-tion and transplantation stakeholders .

When organ and tissue donation and transplantation were added to the purview of Canadian Blood Services in 2008, it was another milestone in our evolution from a blood products manufacturer and distribu-tor to a partner in many related areas of health-care delivery . Since then, we’ve worked closely with other key stakeholders to help evolve an array of decentral-ized efforts spread across multiple jurisdictions into a coordinated national system .

In 2015–2016, we saw significant progress in a range of tissue-related activities, including professional education, the promotion of leading practices and the first national report on tissue data .

As for organ donation and transplantation (ODT), there have been important advances over the past eight years as we’ve managed the aspects of ODT that fall within our mandate — coordinating efforts among various service providers, agencies and levels of government to connect appropriate donors with patients in need .

Continued successIn 2015–2016, more organs for transplant were identified than ever before . Health officials reported record transplant performance in many regions, including the three most populous provinces . A growing num-ber of patients are getting the organs they need .

The Kidney Paired Donation program — led by Canadian Blood Services since 2010 with the support of all provinces, including Quebec — is now recog-nized as one of the best programs of its kind in the world, reporting an extremely low rate of organ rejection thanks to the coordinated efforts of many players across the health system .

The complementary Highly Sensitized Patient program helps identify kidney donors for patients whose medical history has elevated their risk of rejecting new organs . In 2015–2016, the program found matches for more than 70 Canadians who in the past might have spent years on dialysis (and in some cases would have died while waiting for transplants) .

At the same time, our education programs have been preparing more medical professionals to speak with families about donation, and also supporting a new cohort of donation specialists in hospitals across the country . As we continue to promote leading ODT practices, rates of donor recruitment and successful transplantation are steadily moving higher . However, some serious system challenges persist .


Significant challengesAt the end of 2015, more than 4,600 patients across Canada were on wait-lists to receive kidney, heart, lung, liver, pancreas or bowel transplants . Nearly three-quarters were waiting for kidney or simultane-ous kidney-pancreas transplants . And the demand for transplantation continues to grow .

Last year 262 prospective organ recipients were reported to have died before appropriate donors could be found . The actual number is believed to be much higher, as many patients who become too ill are deemed ineligible for transplants and removed from wait-lists . Across the country, health authorities are working to improve referral practices, and many now employ specialist teams to better support the donation process .

Canada’s rate of donation from deceased donors has risen by 29 per cent in the past decade . ODT programs in Nova Scotia, Quebec, Ontario and British Columbia all report donation rates at or above 20 per million population (pmp) — mirroring rates in the U .K . and Australia . Still, we are well behind the U .S . (at 28 pmp), and all countries aspire to the remarkable benchmark of 40 pmp set by Spain .

More than half of Canadian transplants are from living donors, primarily of kidneys . The Kidney Paired Donation program has significantly improved the chances of patients whose loved ones are willing to be living donors but are not compatible matches . Even then, Canada’s kidney donation rate has decreased by eight per cent in the past decade .

As with most health-care challenges, the collective will is there, and the research and expertise are avail-able . But budgets are tight, and it can be difficult to get everyone working together in different types of organizations across the country . Over the past year, Canadian Blood Services has helped to move the ODT agenda forward by continuing to focus on our four main areas of responsibility:

1 Clinical programs and services

We operate three programs supporting ODT in Canada: the Kidney Paired Donation program, the Highly Sensitized Patient program and the web-based National Organ Waitlist — a continuously updated listing of patients who need major organ transplants .

These interprovincial programs are supported by a common data engine: the Canadian Transplant Registry (CTR), a comprehensive online resource that provides critical real-time information on organ listing and sharing for the entire country . While the basic structure of the CTR dates back to 2008, we’ve been engaged in a multi-year project to complete and enhance the services it provides . A crucial goal is the development of a flexible architecture to support more agile information sharing and sophis-ticated approaches to reporting and analyzing data . This transformation is in its final stages of testing and refinement, with a formal launch scheduled for spring 2017 .

2 National reporting

As the CTR has evolved, we’ve developed the more advanced data analytics capabilities required to list and match recipients with donors . This has reduced the need for secondary data-reporting solutions, allowing far more robust and timely data capture across the board . Going forward, we have the systems platform and analytics expertise to generate timely reporting on all dimensions of ODT across Canada .

Armed with our reports, ODT system operators and researchers gain deeper insights into the patterns of organ availability, donor behaviour and post- transplant patient outcomes as they map out future strategy . And now, to provide an even broader perspective, we’ve produced a 10-year report on the ODT system in Canada . Released in September 2016, this landmark report examines progress against a range of performance indicators . It also outlines critical improvements that are still needed, and the actions required to achieve them, as all players work to advance our collective ODT goals .


3 Leading practices, professional education and public awareness

Another important part of our ODT mandate is identifying and sharing leading practices that reflect the best current thinking and research insights from ODT experts worldwide .

Backed by rigorous, evidenced-based studies, each of our leading practices has received extremely pos-itive evaluations from organizations such as Health Canada for offering proven pathways to change . In the past year, we continued to take every possible opportunity to share them with physicians and other primary care providers — as well as with provincial program leaders, to help inform future policy development .

The need to mobilize emerging knowledge also drives our work with various ODT partners on professional education for health-care workers . The courses and programs we develop together focus not only on building technical expertise, but also on the “softer” skills required to communi-cate effectively with donors, recipients and their loved ones .

The latest insights into such issues also inform our public awareness efforts, as we work to change behaviours in a social context where about 90 per cent of people say they support organ donation but less than half have actually registered as donors — and even fewer have shared that decision with their families or partners .

Across Canada, social media efforts focus on inspiring willing organ donors to register with an official registry . The unique donor registries in each province, while not directly linked to the patient registries supported by Canadian Blood Services, are crucial to the success of the ODT system . However, a critical area of future system improvement will be finding better ways to ensure that the explicit intent of registered donors is endorsed by their loved ones . At the same time, more potential donors must be directed to ODT programs and guided toward clear expressions of consent .

4 Strategic direction

In 2011, Canadian Blood Services, with input from principal stakeholders, developed a national strat-egy setting out priority initiatives to advance organ donation and transplantation . Where those rec-ommendations have been implemented, we are already seeing improvements in ODT practices . Underpinning everything we do in the ODT arena is the same dedication to continuous improvement that drives our own quality journey .

In that spirit, we’ve been advocating for a clinical governance framework that further clarifies respon-sibilities among organ procurement organizations, transplant and donation programs, provincial and territorial health ministries, and our own organization — specifically related to interprovincial organ listing and sharing, as well as data reporting . As we all work together in the best interest of Canadian transplant patients, we need to ensure greater trans-parency and accountability across the system . The will is no doubt there . And notwithstanding the chal-lenges of fiscal restraint and jurisdictional complexity, ongoing collaboration among ODT stakeholders has yielded significant progress .

A pan-Canadian futureIn our federated health system, with multiple governments developing policy and setting targets, it can be challenging to get all parties working in concert toward common goals . Even a widely shared commitment to expedite change can be slowed down in execution . And the effect is magnified when national programs and services link with myriad organizations responsible for managing the work of ODT at the provincial or territorial level .

However, the diverse stakeholders in Canada’s ODT community do not have to move forward in lock step . One provincial health ministry may pilot a spe-cific initiative, for example, and then share the results with its counterparts nationwide . But at a certain point, ensuring an effective national system requires coordi-nated effort and consistently prioritized activities .


Canadian Blood Services is well positioned to facilitate further interprovincial collaboration, precisely because it has been so fundamental to our own success — whether in managing the collection and distribution of blood products or in negotiating bulk purchases of biological drugs on behalf of the provinces and territories .

We believe other ODT stakeholders see the value in establishing a governance framework . And we’re confident that provincial and territorial governments will find the appropriate balance between funding front-line regional ODT services and investing in areas where interprovincial collaboration will yield greater value . In the coming year, we look forward to providing whatever help we can to that end, backing the insights of first-hand experience with evidenced-based guidance from expert colleagues worldwide .

87Transplants enabled by the Kidney Paired Donation program in 2015–2016 .

113Kidney transplants for highly sensitized patients facilitated through the Kidney Paired Donation and Highly Sensitized Patient programs .

Tissue: A progress report

In 2015–2016, Canadian Blood Services continued to advance the national agenda on tissue donation and transplantation in three key areas of our mandate:

Professional education

In March 2015, we launched a new web-based tool, “Optimizing Tissue Donation Out of Hospital,” designed to educate members of the medical and legal communities on how they can help promote more tissue donations from patients who die outside of the hospital environment .

Leading practices

Through an ongoing initiative called Tissue Bioburden Reduction and Control, we’re identifying a leading practice — the first of its kind — aimed at developing new sampling, testing and processing methods to minimize the number of microbes living in donated bone, skin and cardiac tissue . Over the past year, this effort moved forward through a series of background reviews that will serve as a foundation for future consultations and recommendations . The ultimate goal is a national agreement on standardized approaches to reducing the risk of disease transmission in Canadian tissue recovery and processing programs .

Data reporting

In 2015–2016, we completed the first national report on tissue activity among health ministries and transplantation programs across Canada . From the comprehensive data we’ve gathered and analyzed, health-care providers gain new evidence-based insights that will help to improve outcomes for patients receiving tissue grafts .


Rethinking blood donor eligibilityA reduced waiting period of one year for men who have sex with men is the next step in a long and cautious process as we explore new possibilities in behaviour-based screening .

In March 2016, Canadian Blood Services submitted an application to Health Canada to reduce the blood donation ineligibility period for men who have sex with men from five years to one year . It was the latest incremental step in a story that has been evolving since the risk from blood donors infected with the human immunodeficiency virus (HIV) became evi-dent more than three decades ago .

The question of whether men who have sex with men (MSM) should be able to donate blood has prompted a national conversation about how to strike an acceptable balance between evi-dence-based risk assessment and donor-screening policies that are reasonable, inclusive and fair . It has also allowed us to look at how we engage with distinct groups in the wider community of potential donors, respecting their points of view and their interest in helping patients while we continue to uphold the overall safety of Canada’s blood system .

Evolving criteriaDonation eligibility criteria for men who have sex with men were introduced by the world’s blood operators beginning in the mid-1980s, in some cases even before the use of HIV testing to reduce the risk of infection from tainted blood products . According to the criteria adopted for Canada’s blood system, men who had had sex with other men even once since 1977 were not eligible to donate .

Canadian Blood Services has regularly revisited this question over the past decade as part of our ongo-ing review of all donor eligibility criteria . In May 2013, Health Canada approved our application (with Héma-Québec) to reduce the blood donation ineligi-bility period for MSM from an indefinite period to five years from a male donor’s last sexual contact with a man . Research conducted over two years following the criteria change in 2013 showed there was no shift in HIV rates or any other infectious disease markers . We therefore recommended further reducing this waiting period to one year from a male donor’s last sexual contact with a man . Our application, which was approved by Health Canada in June 2016 and became effective two months later, represents the next incremental step as we strive to impose the minimum possible restrictions on blood donation in light of current scientific knowledge .


Vital dialogue In assessing the eligibility of MSM to donate blood, we’ve reviewed a wealth of evidenced-based scientific and epidemiological research . Just as sig-nificantly, we’ve consulted with stakeholders across the country who have a strong interest in the issue, including groups and organizations representing patients who are heavy users of blood and blood products, as well as those that speak for lesbian, gay, bisexual, trans and queer (LGBTQ) individuals . We’re hopeful our efforts to address concerns within the trans donor community in particular will continue to deepen engagement over the coming year .

Members of the LGBTQ community often ask why we can’t simply accept donations from men who have sex with men, when all of the blood we collect is tested for HIV (along with hepatitis B, hepatitis C and other infectious diseases) . Scientists have identified a number of problems in this regard, from the possible impact of currently unknown patho-gens to the fact that there is a brief period shortly after infection when HIV is not detectable, even by sophisticated testing technologies . While our goal is to welcome as many potential donors as possible, safety remains paramount; avoiding the risk of infec-tion, however remote, must be our first priority . In our communications, and through a national work-ing group comprising patient advocacy and LGBTQ organizations, we reinforce this understanding while fostering the kind of open dialogue that will help inform future changes to these criteria .

Continuing progress Our consultations with advocacy and other stakeholder groups are now focused on determining whether we can identify potential male donors who have had sex with other men but who pose minimal risk to the blood system . Rigorous research in this area is critical as we explore the possibility of moving from what we call a “time-based deferral” — that is, defined by when a prospective male donor last had sex with a man — to a screening standard that simply seeks to preclude all high-risk sexual activity, regardless of individuals’ sexual orientation or preferred practices .

It will be some time before we can present to Health Canada what all agree is unequivocally persuasive evidence . Upholding the most stringent test of safety also requires a significant test of patience .

“WE WANT TO BE AS MINIMALLY RESTRICTIVE TO DONORS AS POSSIBLE WHILE ALSO MAINTAINING THE SAFETY OF THE BLOOD SUPPLY . WE’RE ALWAYS CON-SCIOUS OF THE FACT THAT IN THE END, IT’S PATIENTS WHO BEAR ALL OF THE RISK WHEN WE CHANGE OUR DONATION CRITERIA .”Dr . Dana Devine, Chief Medical and Scientific Officer, Canadian Blood Services


System performance

BAILEY PHILLIPS

Two-year-old Bailey has received more than 200 blood transfusions since she was born . Her mother, Kristen, contracted cytomegalovirus (CMV) when she was pregnant, and although CMV is common and can infect almost anyone, it can have serious impacts on an unborn child . As a result of the infection, Bailey struggles with low platelet counts and a weak-ened immune system . Her platelets are constantly monitored and any injuries are taken very seriously as they could cause severe bleeding . She currently receives weekly transfusions .

Building donor engagementWe’re using digital channels to better connect with donors and offering more ways they can give life — but we still need more insights into changing behaviours around donation .

In 2015–2016, we focused more intensely on transforming how Canadian Blood Services attracts, interacts with and retains donors . Taking advantage of new tools and channels, we’re getting to know our donors better and building long-term relationships . At the same time, we’re broadening our recruitment and retention efforts, moving from an emphasis on blood donation to offering Canadians more ways they can contribute to a robust health system — and ultimately help deliver superior patient care .

As digital technologies and mobile communications permeate Canadian life, we’re making it easier than ever for donors to connect with us through their preferred channels . Our award-winning GiveBlood mobile app, launched in May 2014, had been down-loaded more than 200,000 times by the end of the fiscal year — an adoption rate far beyond our original expectations . The app is a critical first step in building donor engagement, enabling busy people to check eligibility criteria, find their nearest clinics and make donation appointments on the move . They can also receive automatic reminders as the time they’ve

reserved draws near . By the end of March 2016, nearly 100,000 donors had booked clinic appoint-ments through the digital self-serve channel and 14 per cent of all bookings were being made online .

We’re now developing sophisticated communi-cations plans tailored to individual priorities and lifestyles . The result will be a personalized experience comparable to those that donors have come to expect from their favourite consumer brands . This is both an advantage and a challenge, as it means we’re now vying for donors’ attention with the most sophisticated digital communicators in the marketplace .

Making donation easy In the messages we direct via digital channels, the watchword is simplicity . The home page of our blood .ca website maps out the donation process in three easy steps: complete a donor questionnaire online; visit a clinic; book the next appointment . And for those not sure whether they can donate blood, our eligibility quiz — one of our most-visited web pages — is just a click away . Web visitors can also take advantage of the live chat feature to ask ques-tions and receive immediate answers .

Over the past year, the number of appointments made through the mobile and web channels contin-ued to grow steadily to 14 per cent of total bookings . This strengthens loyalty, as donors appreciate the

In addition to providing reliable access to safe, effective blood products, we also facilitate organ, tissue and stem cell transplants and share innovative research and leading practices. Here are four focal points from 2015–2016 that show our dedication to improving Canada’s health system.


convenience of being able to book appointments quickly whenever they wish . Equally important, it drives cost-efficiency, as transactions that would generate an average handling cost of $15 per call in our National Contact Centre are instead processed for pennies .

More ways to help Another key area of focus in 2015–2016 was extending the scope of donors’ engagement by highlighting other ways they can contribute . People who have traditionally given whole blood, for instance, can be encouraged to donate blood products that are in higher demand, such as platelets and plasma .

Presenting readily accessible alternatives is especially important as donor interactions shift to digital chan-nels and self-service tools . People who learn through our web-based questionnaire that they don’t meet the eligibility criteria for blood donations are imme-diately given options, such as donating blood for research, or registering as stem cell or organ donors, or providing financial support .

Give Life A new national advertising campaign launched in 2015 features blood donors from various walks of life united by their trademark red bandages . Their shared motivation to help others is summed up in the tagline: “You Have the Power to Give Life .” Across our marketing and promotional efforts, the refrain “Give Life” extends to other forms of giving as well, stressing that all of our donation choices answer the same fundamental desire to make a difference .

This message is especially important to reinforce at blood donor clinics, where last year some 140,000 potential donors were regretfully deferred because they did not meet our criteria . Offering donors alternate opportunities to Give Life is an important reminder that there are many ways they can help . Indeed, in many cases the unique

contribution someone is able to make — for exam-ple, a young ethnic male who signs up to be a stem cell donor, or an expectant mother who consents to donate her umbilical cord — provides even more value to the health system . But the key in all of this is understanding better what motivates people to donate in the first place .

Retaining donors Although the number of whole blood donors remains relatively steady, totalling 387,515 in the past year, this stability masks the continuing challenge of a high annual turnover rate . This year, ensuring an adequate blood supply will require the recruitment of about 100,000 new donors to replace those who have lapsed for a range of reasons, from changes in eligibility to waning interest .

Adding to the complexity, in the past year we continued to face challenges from disease-bearing pathogens that required us to turn away more donors — a develop-ment that obviously had not figured in our planning . We estimate that establishing a 21-day waiting period for blood donors potentially exposed to the Zika virus reduced the total number of eligible donors by just over one per cent, which represents about 10,000 donations .

But a still greater challenge is the fact that even the successful recruitment of a prospective donor does not necessarily yield an actual donation . A growing number of people are making donation appointments and then cancelling closer to the date — or simply not showing up at the booked time . In 2015–2016, we experienced a record 379,500 can-cellations and no-shows . This trend reflects the demands of a fast-paced society, which are reshap-ing how we’ll recruit, interact with and retain donors going forward .


Adjusting targetsThe ability to send multiple reminders via donors’ channel of choice — phone, text or email — undoubt-edly helps to ensure people keep their commitments . Recent data reveals that appointments booked through our mobile app or website have the highest attendance rate: nearly 14 percentage points higher than for bookings made by phone or in person . And while mobile users have a higher number of cancel-lations, in most cases they rebook . Still, as we work to better understand donors’ changing behaviour, for now we must set much higher recruitment targets to offset the phenomenon of having tens of thousands of unfulfilled appointments .

Worldwide, demand for whole blood has been steadily shrinking in recent years as utilization improves and medical practices evolve . Canada has experienced a similar overall decline; however, data at the end of 2015–2016 showed demand starting to increase again, and projections indicate a slight upward trend continuing through the coming year . In light of this, and despite the fact that we’ve expanded our donor community, we continue to lag behind current demand . As a result, we fell short of our overall donor target by 22,500 in the past year . This is placing more expectations on existing donors to help us maintain a sufficient supply of blood prod-ucts in Canada .

Deeper connectionsWith the introduction of our mobile app and the web self-service portal, as well as our use of social media and other tactics, we’re beginning to see improvements in our ability to recruit, engage and retain blood donors — and indeed donors of all types . Now we need to build on that foundation, fostering deeper connections with donors and using insights gained from data analytics to fine- tune those relationships .

Most importantly, we need to use the information they share with us to better understand their moti-vations and priorities — not just as donors, but as people — as we work to create the kind of trusted, personalized experiences that people increasingly expect in a digital world .

“WE WANT TO BUILD DEEPER CONNECTIONS WITH DONORS, AND WITH CANADIANS IN GENERAL . BY BETTER UNDERSTANDING PEOPLE’S PREFERENCES AND BEHAVIOURS, WE CAN PERSONALIZE HOW WE COMMUNICATE WITH THEM AND TAILOR THE DONATION EXPERIENCE TO FIT THEIR PRIORITIES .”Mark Donnison, Vice-President, Donor Relations, Canadian Blood Services

#2 on FacebookIn the past year, Canadian Blood Services’ Facebook page moved from 5th to 2nd place in the engagement rankings of Canadian charitable organizations, driven by a strong social media content strategy .


The evolution of stem cells Whether extracting stem cells from infant cord blood or connecting donors to transplant patients through our national registry, we’re shifting our focus from quantity to quality .

For Canadian Blood Services, stem cells are both a biologics product line and the focus of a key clinical service offering in the form of our national donor registry . Through these two complementary ave-nues, we’re responding to the growing demand for lifesaving stem cell transplants to treat more than 80 blood-related diseases and disorders, along with many other health challenges, from congenital heart disease to Type 1 diabetes .

Canadian Blood Services’ Cord Blood Bank, officially launched in June 2015, is rated among the high-est-quality banks of its kind in the world, measured by vital factors such as ethnic diversity and cell count per unit . And while recent rapid advances in science and medicine have reframed the original business case for creating it, the new bank has a critically important role to play as emerging stem cell ther-apies and other treatment options are adopted by physicians . The country’s national public cord blood bank is a foundational investment in the future of Canadian health care .

Complementing our growing inventory of stem cells derived from umbilical cord blood is the OneMatch Stem Cell and Marrow Network, a national registry of adult donors . One of the 10 largest such registries in the world, with 382,222 registrants at the end of March 2016, OneMatch is evolving to better reflect the ethnic diversity of Canada’s population, as well as changing transplant practices .

382,222Registrants in the OneMatch Stem Cell and Marrow Network at the end of March 2016 .

30%Proportion of OneMatch registrants from ethnically diverse backgrounds in 2015–2016, double the percentage seven years earlier .


Recruiting for optimal outcomes Over the past year, we continued to focus much of our ongoing donor recruitment activities on specific ethnic communities, recognizing that the best match for a stem cell transplant patient is typically some-one of similar ancestry . These efforts have paid off: today 30 per cent of OneMatch registrants are from ethnically diverse backgrounds, up from 15 per cent in 2008–2009, which greatly increases our chances of finding matches for potential recipients across Canada and beyond .

At a broader level, we continue to target our optimal demographic: younger donors aged 17 to 35 . About 46 per cent of total registrants are now in this seg-ment . Among younger donors we’re focusing on males, as stem cell transplants from young men have been shown to produce better patient outcomes . About 20 per cent of OneMatch registrants are males under age 36 — a gain of 13 percentage points over 2008–2009, affirming the success of our recent efforts to recruit more prospective donors in this key category .

As for the segment where these two valued attributes intersect — ethnically diverse males under age 36 — the proportion of OneMatch registrants rose slightly to eight per cent in the past year but fell short of our 10 per cent goal . This group will continue to be a primary target in our future recruiting initiatives .

Donors without borders Of the 339 stem cell transplants from unrelated donors performed in Canada during 2015–2016*, 39 benefited from Canadian donations, while the remaining 300 relied on contributions from interna-tional stem cell banks (286 from adult donors, 14 from infant cord blood) . This international cooperation is vital, as finding a rare match often requires searching through a large and diverse pool of possible donors .

Both OneMatch and Canadian Blood Services’ Cord Blood Bank participate in Bone Marrow Donors Worldwide, a network of 75 registries in 53 countries that enables us to seek potential matches among more than 28 million adult stem cell donors and nearly 700,000 units of cord blood .

This global network also facilitates donations of Canadian stem cells to patients far beyond our borders . In the past year we saw a 50 per cent increase in such opportunities, for a total of 61 peripheral blood stem cell transplants . Our ability to help more patients abroad speaks to the growing strength of our registry and reinforces our commit-ment to a multi-nation reciprocal agreement that has been hugely beneficial to Canadians .

A sustainable futureOver the past year, Canadian Blood Services has made significant progress in our efforts to build a comprehensive, long-term stem cell program integrating both umbilical cord blood and a robust national registry of adult donors . As we shift our emphasis from quantity to quality, our ultimate goal is to maximize fair access by ensuring that our reg-istry and cord blood bank reflect the unique ethnic diversity of Canadian donors — and patients .

There is still much work to be done . On any given day, nearly 1,000 Canadian patients are waiting for stem cell donations that will help to alleviate their chronic and often very serious health challenges . We’re confident the right building blocks are in place . By further integrating the OneMatch registry and Canadian Blood Services’ Cord Blood Bank — along with our capabilities in HLA (human leukocyte antigen) typing, and our evolving strategies to recruit adult registrants and cord blood donors — we’re working with our health-system partners to build a more cohesive and sustainable stem cell program for all Canadians .

* Patients listed in Quebec through Héma-Québec are not included in stem cell transplant totals for Canada but are included in Canadian data relating to the international registry network .


Banking on cord bloodWe’re adapting the original model for our national pub-lic cord blood bank to reflect a rapidly evolving field and position Canada as a future leader in stem cell innovation .

June 2015 marked the official launch of Canadian Blood Services’ Cord Blood Bank, a national public health-care resource that had been several years in development . Expectant mothers who give birth at participating collection hospitals can now help build an ethnically diverse reserve of stem cells by donat-ing their babies’ umbilical cord blood .

Cord blood collected from newborn infants is a rich source of stem cells that can be used to treat more than 80 diseases and disorders . Demand for stem cells has grown steadily over the past five years, with the number of Canadians awaiting stem cell transplants tripling . Moreover, among the nearly 1,000 patients who are in need of donated stem cells on any given day, many are from ethnically diverse backgrounds, which can make it that much more difficult to find a match . Even with access to more than 28 million adult donors and nearly 700,000 publicly banked cord blood units around the world, we’re unable to find matches for about half of Canadian patients .

Canadian Blood Services’ Cord Blood Bank was designed to help address these challenges . Cord blood is collected at five hospital sites across the country — two in Ottawa and one each in Vancouver, Edmonton and Brampton — and transferred to production and storage facilities in Ottawa and Edmonton . Because donations increasingly mirror Canada’s unique ethnic diversity, these banked stem cells should be well matched to the 75 per cent of prospective transplant recipients who have to look outside their families for unrelated donors . As a result, we will be far better positioned to meet the needs of Canadian patients who require stem cell transplants . Inventory data from the new bank is also integrated into the international database of adult stem cell donors .

Changing practices Over the past two decades, as cord blood banks have been established in many countries worldwide — and especially in the last three years, as Canada’s national public bank was being devel-oped — we’ve seen a dramatic evolution in scientific research and medical practice with regard to stem cells . For example, it is now possible to adjust the immune systems of many transplant recipients, enhancing their compatibility with unrelated donors who in the past would have been categorized as mismatched . As a result, demand for some types of stem cells has proven to be lower than anticipated .

At the same time, many physicians in obstetrics and gynecology have changed their perspective on how long a baby should continue to receive blood from the mother’s placenta immediately following birth, before the umbilical cord is clamped off . Recent practice has increasingly favoured clamping later to maximize a newborn’s access to placental blood; as a result, there is less blood in donated umbilical cords . This in turn means that fewer qualifying units are being banked, slowing the rate at which inventory targets can be reached .

This evolution has inevitably had an impact on the growth of Canadian Blood Services’ Cord Blood Bank . In the long run, though, we believe the refinements we’re making to our original business model will produce a distinct advantage — not only in our ability to match changing needs but, even more significantly, in the overall quality of our cord blood . Globally, many long-established cord blood banks hold large inventories of units that have low cell counts or have not been subject to sufficiently rigorous testing . The demonstrably superior quality of the supply we are building will position Canada as a world leader while reinforcing the value that Canadian Blood Services delivers in improving health-system performance .


Future-focused We had originally hoped to build an inventory of 7,500 cord blood units by 2015–2016 . However, in light of the changing medical practices outlined above, the actual number collected fell about one-third short of that target . On the other hand, the proportion of units of sufficient quality to be included in the bank significantly exceeded expec-tations: 21 .4 per cent were found to be bankable, compared to our target of 12 .8 per cent .

Indeed, the donations to date have been of remarkably high quality, measured both by cell count and diversity . By March 31, 2016, over 54 per cent of cord blood units were from donors with ethnically diverse backgrounds . And as the new bank completes its first full year of operation, we’re solidly on track to establishing a resource that reflects Canada’s unique demographics while boosting the bank’s international profile as a valued source of superior-quality stem cells .

Even more importantly, the new public cord blood bank has been designed to support the next gener-ation of stem cell-based therapies and technologies . The starting material required for many emerging

procedures, particularly those that provide individually tailored medical treatment, is precisely the type of stem cells we’ve been gathering . So whereas older banks now have to reinvest in developing higher- quality assets, we’ve been collecting them from Day 1 .

Canadian Blood Services’ Cord Blood Bank has been accredited by AABB, the respected global organiza-tion that works to advance transfusion and cellular therapies . And in a retrospective analysis comparing our cord blood inventory data to the findings of a landmark international study in the journal PLOS ONE, we found that Canada’s national public cord blood bank ranks among the highest-quality facilities in the world .

Quality versus quantityOur focus on quality presents its own unique challenges — beginning with donor recruitment, given that we must sustain a higher rate of donations to yield the calibre of stem cells we’re seeking . This insight is driving our awareness campaigns aimed at key ethnic groups, which in the past year included offers of translation services for potential donors in Chinese and Punjabi-speaking communities .

The principle guiding all of these efforts is quality over quantity . From the outset we’ve developed Canadian Blood Services’ Cord Blood Bank as a future-focused institution, uniquely positioned to learn from and surpass those who came before us — and that vision is becoming a reality .

“THIS IS A SIGNIFICANT ACHIEVEMENT FOR CANADA’S HEALTH-CARE SYSTEM . THROUGH OUR HOSPITAL PARTNERS, EXPECTANT MOTHERS CAN NOW DONATE TO A NATIONAL PUBLIC CORD BLOOD BANK, INCREASING THE CHANCES FOR STEM CELL TRANSPLANT PATIENTS TO FIND A MATCH .”Dr . Graham Sher, Chief Executive Officer, Canadian Blood Services

Funding the bank

In 2011, the ministries of health in Canada’s provinces and territories (except Quebec) agreed to establish and fund a national, publicly supported stem cell bank to collect and store donations of umbilical cord blood . This reflected a total investment of $48 million of which Canadian Blood Services committed to raise $12 .5 million .

To meet this target and realize our vision of an ethnically diverse public cord blood bank, we embarked on our first major fundraising initia-tive, the Campaign For All Canadians . Thanks to generous support from individuals and corpo-rations across the country, we raised more than our $12 .5 million target by the time the campaign came to a close in 2015 . In June 2016, Canadian Blood Services’ Cord Blood Bank shipped its first cord blood unit to a waiting recipient in Europe . And in September 2016, a Canadian patient was matched to one of the banked units . These are the first of many lifesaving deliveries to come .


Securing our plasma supplyFaced with rapidly rising global demand for plasma, we’re moving to decrease Canada’s reliance on foreign sources as part of a compre-hensive new national plasma collection business plan .

In 2015–2016, we continued to address an issue that has become increasingly challenging for Canadian health care: our need to ensure a secure supply of plasma in the face of growing global demand for plasma protein products and the possibility that traditional sources of supply could be disrupted . We will be intensifying our focus on this challenge over the coming year, as Canadian Blood Services develops a new national plasma collection business plan .

Supply and demand Last year, we collected slightly more than 200,000 litres of plasma . While some of this was distributed to hospitals for transfusion, most was used to manufac-ture plasma protein products . Because Canada does not currently collect enough plasma to meet demand for such products, particularly immune globulin (Ig), we purchase them from manufacturers that rely on U .S . sources of supply . In 2015-2016 about 83 per cent of the Ig that Canadian Blood Services distributes for use by Canadian patients comes from plasma obtained from U .S . donors .

Canada is not alone in this; most of the world’s plasma comes from the U .S . Indeed, our continen-tal neighbour is home to 80 per cent of all plasma collection centres, which together provide more than 70 per cent of the global supply of source plasma collected through apheresis . Given this intense con-centration, there is growing concern that depending

on one country to be the primary provider of plasma is not sustainable . As demand for plasma protein products continues to rise dramatically worldwide, the longer-term stability and security of the plasma supply needed to produce them are at risk .

Global demand for Ig, for example, is expected to double compared to 2010 levels by the end of this decade . With the forecasted steady rise in Ig require-ments globally, it’s projected that the world will need 40 per cent more plasma by 2020 . As uncertainty grows over whether U .S . plasma suppliers can match this ongoing upward curve, many countries are developing plans to increase their levels of domestic supply to ensure access for their patients . Australia, for instance, has set a target of 70 per cent sufficiency to ensure “strategic independence” in plasma .

Canada must do the same . Therefore Canadian Blood Services, as the organization responsible for the sup-ply of blood and blood products in all provinces and territories except Quebec, is developing a compre-hensive plasma collection business plan .

What's aheadCanadian patients and their health-care providers count on us to ensure the supply of plasma protein products is not vulnerable to potential disruptions so that access to these products is maintained . Over the next several years, we will more than triple the amount of plasma we collect to between 600,000 and 700,000 litres annually . We will also be estab-lishing plasma collection sites across the country, with the first two planned to open in 2017–2018 . At the same time, we believe many more Canadians are ready to follow the example of the generous donors who currently supply our blood system . That’s why we’re reaching out to a broader pool of potential donors — understanding what motivates them, finding innovative ways to get better connected — as part of our ongoing donor engagement efforts .


Our overall objective is clear: where currently only 17 per cent of Ig used by Canadian patients is made from domestically sourced plasma, we want to achieve approximately 50 per cent sufficiency as quickly as possible .

These efforts to secure a more robust Canadian supply of plasma are underpinned, as always, by our commitment to the highest standards of quality and safety . We will meet the plasma challenge as

we manage all aspects of Canada’s blood system: by constantly maintaining the right balance among a diversity of options, ensuring current sufficiency while being ready to respond quickly in the event of an interruption or threat . In pursuing these goals, we know we can count on the generosity of Canadians — and our long tradition of volun-tary, unpaid donations — to meet the needs of the patients we serve .

Context: Payment for plasma

Canadian Blood Services does not pay donors for plasma or any other blood products, and we have no plans to modify our longstanding position in this regard . We depend upon and deeply appreciate the hundreds of thousands of Canadians who each year give the gift of life — voluntarily, and with no incentive beyond the personal satisfaction they take from helping patients in need .

In early 2016, a private, for-profit Canadian company, in compliance with Health Canada regulations, opened a plasma collection clinic in Saskatoon . Canadian Blood Services does not purchase plasma from this company, nor do we have any future commitment to do business with it . But to be clear: while we collect plasma from unpaid donors at our clinics across Canada, we also import many plasma protein products from the U .S . (see main story) — and the latter are manufactured using plasma collected from paid donors .

Safety first – always

The public debate over payment for plasma hinges on ethical considerations that are clearly very important to many Canadians . But from a scientific and clinical perspective, paying donors to obtain a source of supply for the manufacture of immune globulin (Ig) and other specialized plasma protein products is not a safety issue .

Based on the experience of the biologics industry over the past three decades — in manufacturing processes that have been rigorously studied and are subject to strict standards of regulatory compliance — products made from plasma that comes from paid donations are as safe as those that use plasma from unpaid donors . Collection practices for paid donations follow a robust set of safety and quality requirements that mirrors what we follow in the non-remunerated blood system — and what the industry reinforces in its own standards .

All major Canadian groups representing patients who rely on plasma protein products — including the Canadian Hemophilia Society, the Canadian Organization for Rare Disorders and many organizations devoted to specific immunodeficiency conditions — agree that products made from plasma donations from paid and unpaid donors are equally safe . Instead the primary concern of these organizations, which we share, is ensuring a secure supply of safe products for the patients who rely on them . Without access to products from the commercial, paid plasma industry, many patients who depend on these lifesaving products would not consistently and reliably receive the therapy they need .


Cost-effi ciency

DONNA JONES

Donna has worked in various roles within blood donor clinics since joining the blood system in 1978 . As a donor care associ-ate, she screens donors and draws their blood, but she is also qualifi ed to work anywhere in the clinic . When Canadian Blood Services fi rst introduced the donor care associate role, Donna worked in the pilot site and saw the benefi ts right away, including being able to move around the clinic and help perform various roles .

Improvement never stopsAcross our organization, we’re working more productively and delivering products and services more efficiently — by constantly managing processes, systems and costs .

At Canadian Blood Services, our corporate focus on maximizing productivity directly aligns with our commitment to optimizing cost-efficiency — a key component of the value we provide to Canadians . But the search for smarter, more effective ways of working is equally vital to achieving our other strategic goals: enhancing patient outcomes and improving the overall performance of the health system .

Productivity initiatives may initially be centred on building capabilities and skills in specific areas . But to be sustainable and have a broader business impact, continuous improvement must permeate the orga-nization . A good example is our collaboration with Toyota Canada at our Brampton facility . Applying the insights we’ve gained from the Toyota Production System methodology and culture, we’re now devel-oping continuous improvement processes, skills and capabilities that can be scaled up at other Canadian Blood Services facilities across the country .

Modernizing the clinic environment A crucial area of focus for our productivity efforts is the blood donor clinic, where we’ve been testing and refining solutions to automate the initial data-gathering steps in the blood supply chain . We now have donors complete a digital Record of Donation, either at the clinic or online before they arrive . This replaces a complicated paper-based system that was susceptible to errors — which in turn would create delays as they were corrected later in the process . The new technology captures donor information more accurately and adds to that single record at each stage in the collection process . Specially trained donor care associates and other staff members enter data on everything from phlebotomy history to consent forms while maintaining a smooth, efficient flow of donors through the clinic .

The launch of this new automated supply chain solution in July 2016 comes after intensive collabo-ration among our donor relations, clinical services, logistics, facilities and IT teams . Before we were prepared to change our clinical procedures, we first had to resolve several complex systems compatibil-ity challenges to meet our stringent criteria . Going forward, we expect to see significant gains in quality, productivity and the overall donor experience — in what we believe is the blood clinic of the future .

Recognizing the continued budget constraints of our provincial and territorial partners, we remain committed to creating opti-mum positive impact as economically as possible. Underlining our efforts to prudently manage the resources entrusted to us, here are four areas of focus from the last fiscal year.


The journey continuesCanadian Blood Services has set multi-year productivity targets for donor recruitment and the collection, production and testing of blood, as well as in other areas of our organization . We constantly measure our progress against these targets, which are based on benchmarks and best practices that reinforce our own high standards . They guide our decision-making as we strive to achieve further gains through more effective process design, automation and cost management . We’re underpinning this commitment by evolving business practices and an overall leadership culture focused on continuous improvement and the elimination of waste .

Some of the tasks we’ve identified will take longer than originally expected to complete, for the very reason that they’re worth tackling at all: their achievement will be transformative for our organization and the health system we serve . We also recognize that there are more avenues to explore, and possibly some tough decisions to make, as we strive to meet the rigorous productivity stan-dards set by the best of our international peers .

Our recent efforts in this regard have yielded millions of dollars in cost savings . And there are additional efficiencies to be realized as we continue pursu-ing our goal of $100 million in cost reduction and avoidance — just the next milestone in a journey of continuous improvement that by definition will always be leading to new opportunities .

“OUR CONTINUOUS IMPROVEMENT AGENDA IS ENABLING ALL OF OUR TEAMS, FROM SENIOR MANAGE-MENT TO FRONT-LINE EMPLOYEES, TO DEVELOP SKILLS AND CAPABILI-TIES AT THE INTERSECTION OF THREE CRITICAL OBJECTIVES: A LEANER APPROACH TO SUPPLY CHAIN MAN-AGEMENT; A HEIGHTENED FOCUS ON QUALITY IN OUR INTEGRATED BUSINESS PLANNING; AND THE DEVELOPMENT OF STRONG LEAD-ERSHIP PRACTICES THAT MODEL A CULTURE OF CONTINUOUS IMPROVEMENT ."

Rick Prinzen, Chief Supply Chain Officer, Canadian Blood Services


Advancing quality managementWe’re evolving our quality management system to rival the best in the biolog-ics industry, maintaining the highest standards of safety while consistently meeting customers’ needs .

Quality has always been the guiding principle in every product, every transfusion and transplantation service, every innovative process — every initiative we undertake at Canadian Blood Services . It’s the hallmark that unites the various dimensions of value we deliver to Canada’s health system . We earn the right to serve Canadians by providing quality prod-ucts and services that improve patient outcomes and overall system performance .

In 2014, we formally embarked on a multi-year journey to advance and mature our quality man-agement system (QMS), aiming to match the recognized standards of excellence established by the global biologics manufacturing industry . We’re setting aggressive performance targets, deploying new technologies and making meticulous process improvements — and then measuring our success against an index of objective quality indicators .

Over the past year, the systematic implementation of improvements to our QMS has been a top priority throughout Canadian Blood Services . We’re identify-ing, tracking and eliminating potential impediments to achieving optimum quality in every aspect of our operations .

A stronger linkMore specifically, in 2015–2016 we launched a new program called Link: Strengthening Our Quality Management System and Culture, which brings added focus to the ongoing introduction of quality enhancements across our organization . One of the first major components of the Link program is a set of corrective and preventive action (CAPA) require-ments for processes or procedures that are deemed “non-conforming” relative to established guidelines . This new level of rigour has been embraced by managers, who are now working with their teams to integrate the CAPA requirements with existing quality management practices . Additional compo-nents of the Link strategy will be rolled out through 2016–2017 .

The larger planThe specific focus of the CAPA initiative reflects the broader goals of our QMS implementation . We are driving continuous improvement in all of our business processes, including:

. Simplifying our standard operating procedures to fulfil complex needs effectively, efficiently and consistently .

. Eliminating layers of documentation, retaining only what is required to maintain our rigorous safety standards .


. Automating more processes to ensure effectiveness, efficiency and consistency in both execution and reporting .

. Embracing more evidence-based decision- making to ground our quality management actions in current, accurate and relevant data .

. Defining clear specifications for all products and services to ensure we deliver what patients need .

. Collaborating with health-care providers to improve product utilization while balancing efficiency with safety .

Rewarding progressThe full implementation of our QMS strategy over the next few years will transform every dimension of how we work, building capacity in our organization and, more importantly, benefiting the stakeholders we serve . As we place more emphasis than ever on

foresight, planning and preventive strategies, we expect to see even fewer non-conforming products, discards, rework and recalls . This underscores the strong connection between our quality agenda and our productivity agenda: robust quality systems help to drive more productive operations, and vice versa .

The transformation we envision will take time, but we’re already seeing noteworthy performance improvements as we consistently deliver against our quality indicators . These demanding targets are more than data points; they embody our commitment to constantly driving to exceed our best — in an organi-zation that has always upheld exemplary standards of excellence .

Our quality journey does not lead to some ultimate “reward,” with all of the boxes ticked on a static record of achievement . Rather, quality management is a perpetual quest to take what is already working well and make it even better — which is why this work is so important, and so rewarding, for everyone in our organization .

“AS WE LEARNED FROM TOYOTA, OUR PEOPLE BECAME ACTIVE PARTICIPANTS IN ANALYZING PROCESSES, STANDARDIZING PRACTICES AND WORKING THROUGH IMPROVEMENTS — ALL OF WHICH HAS SIGNIFICANTLY INCREASED EMPLOYEE ENGAGEMENT .”Rick Prinzen, Chief Supply Chain Officer, Canadian Blood Services


Driving productivityBuilding on our unique collaboration with Toyota, we’re adapting the auto-maker’s proven techniques to improve production and distribution processes at all of our facilities .

At first glance, it was an unlikely partnership . What could Canada’s blood operator have in common with an automotive giant like Toyota? But in fact, as two large-scale manufacturers — admittedly in very different sectors — we share a common focus on maximizing productivity while setting the highest standards of quality and safety . And Toyota, after seven decades as a global leader, has a wealth of knowledge to share on streamlining business processes and developing a culture of continuous improvement . The company is widely admired for its integration of philosophical principles, management practices and specific tools and techniques to enable “lean” operations .

So we were delighted when the Canadian subsidiary of the world’s largest automaker selected Canadian Blood Services to partner on a unique project at our manufacturing and production facility in Brampton, Ontario . Beginning in March 2015 and over the course of the next year, a team of experts from Toyota Canada “lived” at our location for one week each month . They worked alongside our teams, familiarizing them with the proven methodologies and management practices employed by the Toyota Production System to enhance quality, service and safety . The result is a series of process improvements that have made Canadian Blood Services a more effective biologics manufacturer while helping to increase the efficiency of the Canadian blood system .

Making every step countThe Toyota Production System combines innovative management approaches with specific tools and techniques, all within a crucial philosophical frame-work that can be distilled down to four principles:

. The customer comes first .

. People are our most valuable resource .

. Strive for continuous improvement .

. Focus on the shop floor — working alongside those closest to the process .

Translating these broad principles into practical solutions begins with observing how people cur-rently perform tasks and then working together to identify processes and procedures that contain “sources of waste .” The team then collaborates on removing wasted effort to improve process flow — or in some cases, dispensing with procedures entirely . For example, when the Toyota team watched the “picking and packing” process for blood product orders being shipped to hospitals and clinics, they often observed people constantly walking back and forth, crossing over their own and others’ paths . Those needless steps added extra time to order fulfil-ment and also took a toll in employee fatigue .

40%reduction in order fulfilment time

30%improvement in effective use of production equipment workflow

30%fewer unnecessary steps in streamlined workflow


With the Toyota team’s guidance, staff in that area worked to devise a circular path that placed all of the required steps in a logical sequence, with no over-lapping or doubling back, and no unnecessary steps . The most efficient sequence was then standardized to ensure it would always be executed consistently, with everyone working in a continuous loop .

As these kinds of strategies were applied throughout the Brampton facility, the tangible productivity gains were dramatic:

. 40% reduction in order fulfilment time as reorganized storage areas allow employees to find the right products quickly and accurately .

. 30% fewer unnecessary steps and movements after employee workstations were relocated to create better workflow .

. 30% improvement in effective use of production equipment .

. Reduced employee time inside -20°C freezers following a rethinking of storage configuration and process flow .

. Two hours per day in additional production time, thanks to overall improvements in product manufacturing and sorting .

Keeping up the momentumWhile these immediate productivity gains clearly add value, our Toyota colleagues emphasize, based on the company’s long experience, that two factors are critical to sustaining them:

. A continued focus on customer needs; we must be constantly reassessing every process to see what more we might be doing to help hospitals and clinics do their jobs more effectively .

. Working to ensure strong support from every-one on the team, so the lessons of this fruitful collaboration can be applied to other areas of our operations across the country . Indeed, we’re now looking at ways to integrate the Toyota productivity principles into management practices at other sites and our overall leadership development process as we pursue our broader productivity goals across Canadian Blood Services .

A unique cross-sector partnership that initially prompted a few quizzical looks — even within our own organization — has proven to be hugely beneficial not only in terms of measurable produc-tivity gains but, even more importantly, in creating a deeper sense of empowerment . As team members look for ways to further improve efficiency, service and quality, they have a positive influence on their own work environments .

“SHARING KNOWLEDGE AS A MEANS OF GIVING BACK TO THE COMMUNITY IS A DIFFERENT APPROACH — AND WE’RE EXCITED TO MAKE AN IMPACT IN THE LIVES OF CANADIANS IN THIS INNOVATIVE WAY .”Larry Hutchinson, President and CEO, Toyota Canada Inc .

Giving more than advice

Our unique partnership with Toyota Canada has not only given us tools and techniques to boost productivity across our operations . In January 2016, the automaker made a $320,000 donation to Canadian Blood Services’ Cord Blood Bank — a generous contribution that will have a significant impact on patients’ lives for years to come .


Enhancing our infrastructureThe evolution of our physical facilities reflects two comple-mentary strategies: enhancing our productivity as a biologics manufacturer and fine-tuning efficiency in a safe, secure blood system .

In 2015–2016, Canadian Blood Services moved into Phase II of our multi-year National Facilities Redevelopment Program, which shifts the focus of capital investment toward updating and optimizing our infrastructure in Western Canada . (Phase I, which focused on our facilities in Atlantic Canada and Ontario, will conclude with the completion of a new testing lab integrated with our Brampton facility, scheduled for mid-2017 .)

We’ve identified a site in Calgary for building a combined production, testing and distribution facility . By the beginning of the current fiscal year we had completed our due diligence; the property

was purchased in August 2016 . A report on user requirements for the site has been prepared, along with an initial design concept . These will provide the foundation for the next phase of intensive architectural work . The new facility will incorporate many design features and technological capabili-ties required for biologics manufacturing and the optimal storage and distribution of blood and plasma protein products . It will also integrate a number of operating features aimed at maximizing environmental sustainability .

Housing several components of our Western production, distribution and warehousing operations — currently spread among sites in Calgary, Edmonton and Regina — in one new location will further our ongoing efforts to improve standardization, effec-tiveness and efficiency . The purpose-built facility will significantly enhance our ability to work produc-tively and deliver superior service to client hospitals and clinics . And as an added bonus, creating a more attractive work environment for Canadian Blood Services staff will help to strengthen employee engagement . The new Calgary facility is expected to be fully operational by 2020 .


Making the right decisionsIn the past year we also announced several clinic openings and closures, along with other adjust-ments to our blood collection network . While these changes to our locations are focused on improving the input side of supply chain management, as distinct from our renewal of manufacturing and distribution infrastructure, they point to a common strategic goal: finding new ways to improve our effi-ciency and productivity while continuing to operate a safe, secure and sustainable national blood system . By strategically selecting new locations in densely populated areas that can be conveniently accessed by large numbers of donors, we’re maximizing the gain from these investments .

A new clinic in Saskatoon, under construction through the past year and officially opened in July 2016, provides a more advanced collection site integrating the latest time-saving capabilities of our automated supply chain . Meanwhile, at year-end design was underway and a lease had been secured for another new clinic at the Eau Claire Market shopping centre in downtown Calgary . This location replaces an older site that will ultimately close once other operations have moved to the new Calgary production and distribution facility .

At the beginning of the fiscal year we announced the closure of three permanent clinics in Corner Brook, N .L ., Sydney, N .S ., and Prince George, B .C ., and the replacement of the permanent site in Sarnia, Ont ., with a mobile clinic . We also discontinued our Bloodmobile program in three cities and began phasing out mobile clinics in 16 other communities across Canada . While some of these changes were in response to demographic shifts, notably the migration of rural populations toward urban centres, they were nevertheless difficult decisions to make .

Across the country, we continue to seek ways to deepen our engagement with existing and new donors . However, after weighing factors such as the volume of units collected, the limited numbers of potential donors, labour and transportation costs, and the distance from each of these permanent sites to the nearest production facility, we believe the choices we’ve made are the best ones for the overall efficiency, quality and safety of Canada’s blood system .

“OUR NEW MANUFACTURING AND DISTRIBUTION FACILITY IN CALGARY IS BEING DESIGNED TO ADDRESS ALL OF OUR QUALITY NEEDS . WE’LL ALSO BE ABLE TO WORK MORE PRODUCTIVELY, IMPROVE SERVICE AND REDUCE OPERATING COSTS . THIS IS FUNDAMENTAL TO ACHIEVING OUR TARGETS IN THE COMING YEARS AND, MORE IMPORTANTLY, DELIVERING IMPROVED VALUE TO ALL CANADIANS .”Rick Prinzen, Chief Supply Chain Officer, Canadian Blood Services


MANPREET KALER AND SON AMAR

When Manpreet had her daughter, Simer, seven years ago, she wanted to donate her baby’s cord blood, but there was no national public cord blood bank at the time to receive her donation . Five years later, while pregnant with her son, Amar, she learned from her doctor that she could

donate to Canadian Blood Services’ Cord Blood Bank . Having known friends and family members with serious illnesses, she wanted to help . Manpreet is eager to spread the word to her community about this important resource and encourages others to donate .

STEPHEN AND JIM MCCARTHY

When Stephen discovered he would be ineligible to donate blood, his father, Jim, offered to donate on his behalf . Inspired by his father’s gesture, Stephen worked with Canadian Blood Services and the les-bian, gay, bisexual, transgender and queer (LBGTQ ) community to create “Ally Blood Donor” clinics to encourage friends and family to donate on behalf of those who are currently ineligible .

In addition to creating these clinics, Stephen facilitated dialogue between Canadian Blood Services and tleaders in the LBGTQ community regarding the sensitive subject of blood deferral criteria, and how they impact recipients, their families and patient advocacy groups .

NATHALIE RANDALL

In grade 10, after doing a research project on organ donation, Nathalie decided to donate a kidney . As soon as she turned 18, she began the process of becoming a kid-ney donor . In early 2014, at the age of 19, Nathalie underwent laparoscopic surgery to remove one of her kidneys .

Altruistic kidney donors like Nathalie — living donors who donate a kidney to someone unrelated and unknown to them — have a big impact on reducing the number of patients on the organ

donation wait-list . After her donation, Nathalie joined the Kidney Foundation of Canada as a summer student . There, she met many people who had received a kidney or were on a waiting list, as well as others like her who had donated a kidney anonymously .

Today Nathalie leads a healthy post- donation life and holds the position of Kidney Car Program coordinator at the Kidney Foundation of Canada .

Our impact


DONOVAN GAYLE

In 2013, Donovan Gayle, a former Brandon University basketball player, was diagnosed with acute myeloid leukemia . After under-going multiple rounds of chemotherapy, Donovan was told he needed a stem cell transplant to save his life . Fortunately his sister was a match, and he received a stem cell transplant soon after . In 2015, Donovan relapsed and received another stem cell transplant from his sister . Following his first diagnosis, he became involved with

Canadian Blood Services to help recruit stem cell donors and raise awareness about OneMatch .

He continues to support recruitment efforts and has organized multiple swabbing drives, including an annual charity bas-ketball tournament, “ballin’ for the cure”, which raises money for cancer research and promotes blood and stem cell donation .

MACKENZIE CURRAN AND ALEXANDER TÜRK

When she was a teenager, Mackenzie’s busy life —filled with school, friends, and her passion, basketball — was slowed down suddenly by what her family thought was a virus . After months without improve-ment, she was diagnosed with a type of pre-leukemia that was quickly evolving into leukemia . To prevent the disease from progressing, Mackenzie needed a stem cell transplant . In the course of her treatment, she would also need 27 blood transfusions .

Through Canadian Blood Services’ OneMatch Stem Cell and Marrow Network, Mackenzie was matched with a donor, and less than a year after her transplant, she has made an incredible recovery . In May 2016, Mackenzie got to meet and thank Alexander, the stem cell donor who saved her life, in an emo-tional meeting in Ottawa .

JOYCELYN KAHL

Joycelyn has worked at Canadian Blood Services as a laboratory assistant for more than six years . When Toyota staff began working at the production site in Brampton, Ont ., in early 2015, she was skeptical of the value the partnership with the automaker would bring . After joining a working group and learning to apply Toyota principles, she quickly saw the benefits of incorporating practices like standardized work, which allows staff to quickly identify problem areas . By wit-nessing the positive changes to her work

environment, she became a supporter of the project and was invited to present to her peers at a summit later that year .

When Joycelyn was first hired, she was asked why she wanted to work at Canadian Blood Services . She said it was because she cared and wanted to make a difference . Following her involvement with the Toyota partnership and her contributions to the working group, she’s proud of the difference she and the team have made to ensuring patients receive high-quality blood products .

CANADIAN BLOOD SERVICES | ANNUAL REPORT 2015–201638


Management analysisThis financial report includes forward-looking statements . By their nature, forward-looking statements require the organization to make assumptions and are subject to important known and unknown risks and uncertainties that may cause the organization’s actual results to differ from those disclosed . While the organization considers its assumptions to be reasonable and appropriate based on current information, actual results may vary from those predicted in the for-ward-looking statements .

OVERVIEWCanadian patients depend on Canadian Blood Services to manage a safe, secure and cost-effective blood system . We bring quality to every aspect of our work — from collecting, testing and manufacturing blood, blood products and stem cells to creating and disseminating knowledge and conducting groundbreaking research .

Our products include:

. Fresh blood products

• Red blood cells

• Platelets

• Plasma

. Plasma protein products, including two primary products:

• Immune globulin (Ig)

• Albumin

. Umbilical cord blood

Our services include:

. Developing and managing donor registries for stem cells (OneMatch Stem Cell and Marrow Network) and organs (Canadian Transplant Registry) .

. Diagnostic services for patients and hospitals across Western Canada and in some parts of Ontario . Services include prenatal testing, red cell serology reference testing (antibody inves-tigations), human platelet antibody testing, and pre-transfusion and compatibility testing .

. Supporting policy development, data analytics, leading practices development, professional education and public awareness for transfusion practices and for organ and tissue donation and transplantation .

. Conducting and supporting research, through the Centre for Innovation, in key areas span-ning the bench-to-bedside cycle . The focus is on transfusion science and medicine, but also emerging related fields, such as cellular therapies (in particular hematopoietic stem cell transplan-tations) and organ and tissue transplantation .

GOVERNANCECanadian Blood Services is unique in Canada’s health-care system . We supply blood products and services across all provincial and territorial jurisdic-tions excluding Quebec, with the exception of the organ registries in which Quebec does participate . We were created in 1998 and operate under a mem-orandum of understanding between the federal, provincial and territorial ministers of health . We func-tion as an independent, not-for-profit organization that operates at arm’s length from government .

Governance at Canadian Blood Services is guided by the principles of accountability, safety, engagement and transparency .

Members

The provincial and territorial ministers of health provide the majority of the funding for Canadian Blood Services and are the organization’s corpo-rate members . The ministers have the authority to appoint the organization’s board of directors and approve Canadian Blood Services’ three-year corpo-rate plan subject to annual budget approval .

The Provincial and Territorial Blood Liaison Committee provides support and advice to the ministers and deputy ministers of health on issues affecting the blood system . The committee com-prises a representative from each funding province and territory, and a lead province is designated every two years . The current lead province is Manitoba .


Board of directors and committees

Board of Directors

Finance and Audit

Committee

Governance Committee

Pension Committee

Talent Management

Committee

Safety, Research

and Ethics Committee

Elected by the provincial and territorial ministers of health, the board of directors comprises 13 members, including:

. a chair of the board

. four regional nominees

. six nominees from the medical, scientific, technical, business and public health sectors

. two nominees with relevant consumer experience

The board meets at least six times per year; two of those meetings are open to the public .

Board and committee meetings held this year

Number of meetings held

Board of directors 8

Talent Management Committee 8

Finance and Audit Committee 4

Governance Committee 4

Safety, Research and Ethics Committee* 4

Pension Committee** 3

Information Technology*** 3

* This Committee was renamed in 2015–2016 . It was previously called the Safety, Science and Ethics Committee .

** Effective June 2016, the Pension Committee was dissolved and the responsibilities under the Pension Committee terms of reference were transferred to the Finance and Audit Committee .

*** This ad hoc committee was formed and disbanded in 2015–2016 .

Board members’ attendance at meetings and honorariums paid this year

Board compensation

Canadian Blood Services’ bylaws provide that directors be remunerated for attendance and participation at meetings of the board of direc-tors and committees as set by the members . The chair receives an annual retainer, other directors receive meeting honorariums and all directors are

reimbursed for their travel expenses . Directors are also entitled to per diems when they are required to conduct business on behalf of the board .

The following table shows the structure of honorariums paid to the directors of the board . These rates have remained unchanged since they were established in 1998 .

Board of directors’ retainer and honorariums

Director(1) Chair Number of board meetings attended

Number of committee meetings attended

Honorariums paid

Leah Hollins Board of directors 8/8 16/18 $53,275

Kelly Butt 6/7 11/11 $17,750

R. Wayne Gladstone Finance and Audit Committee and Pension Committee 8/8 8/8 $29,875

Dr. Kevin W. Glasgow 6/7 11/12 $22,250

Dr. Gary Glavin Safety, Research and Ethics Committee 7/7 12/12 $30,250

Craig Knight Talent Management Committee 7/7 15/15 $25,625

Henry J. Pankratz Governance Committee 7/7 8/8 $17,625

Dunbar Russel 7/7 8/8 $19,135

Suromitra Sanatani 6/7 14/15 $21,125

Dr. Jeff Scott 7/7 12/12 $18,625

Mike Shaw 7/7 11/11 $17,875

Elaine Sibson 7/7 15/15 $25,625

Robert H. Teskey 7/7 12/12 $22,125

Annual retainer for the chair $15,000 per annum

Meeting honorarium $750 per diem

Meeting preparation honorarium Two days for chair @ $750 per day

1.5 days for committee chairs @ $750 per day

One day for directors @ $750 per day

Travel to meetings Up to two days (depending on origin and destination) per meeting @ $500 per day

Days on business honorarium $750 per diem (for events such as meetings on behalf of Canadian Blood Services)

Travel Travel costs according to Canadian Blood Services’ board expense policy


Executive management team compensation

Canadian Blood Services is founded on the principles of safety, openness and transparency — traits deeply rooted in our culture . The manner in which we compensate executives reflects these principles . As such, Canadian Blood Services has a comprehensive and rigorous executive performance management and compensation program, following best-practice principles in corporate governance .

Each year, the performance of members of the executive management team, including the CEO, is measured through the use of executive performance agreements . These agreements contain goals linked directly to achieving collective corporate perfor-mance goals, as well as specific and measurable individual goals . Performance against these goals is used to derive the specific calculations for either merit increases or performance awards .

The CEO’s performance is overseen by the Talent Management Committee of the board and validated by the full board of directors . Every two years, the Talent Management Committee commissions an independent study to gather comparative compen-sation data for the CEO and conducts a detailed review of the CEO’s performance against objectives . Every third year, the committee independently commissions outside expertise to lead a 360° perfor-mance review of the CEO . The committee’s review is validated by the full board, which ultimately decides whether to make any compensation adjustments .

Members of the executive management team are reviewed through a similar process . The CEO meets with all of the executive management team mem-bers, who report directly to him, and reviews their performance based on the corporate performance indicators contained in their respective performance agreement . The CEO’s recommendations for com-pensation adjustments are presented to the Talent Management Committee of the board for approval and subsequent validation by the full board .

Components of the compensation program

The compensation program for executives comprises several elements, referred to as “total compensation .” Total compensation includes:

. base salary

. annual pay at risk

. pension plan

. benefits and perquisites

Canadian Blood Services aims to align its total compensation for executives with the market median for comparator groups .


Total compensation for executives

continue on next page

Base salaryCompensation at

risk as a percentage of base salary

Annual vehicle allowance

Dr. Graham D. Sher Chief Executive Officer

2015 – $560,000

2014 – $560,000

2013 – $560,000

2012 – $560,000

2011 – $560,000

30%

25%

$18,000

$18,000

Ian Mumford Chief Supply Chain Officer

2015 – $343,687

2014 – $335,304

2013 – $335,304

2012 – $335,304

2011 – $335,304

(1) 22.5% $10,000

Rick Prinzen Chief Supply Chain Officer

2015 – $275,000 (2) 25.0% $10,000

Watson Gale Vice-President, General Counsel and Corporate Secretary

2015 – $293,815

2014 – $286,649

2013 – $286,649

2012 – $286,649

2011 – $286,649

22.5%

20%

$10,000

$10,000

Pauline Port Chief Financial Officer and Vice-President, Corporate Services

2015 – $350,794

2014 – $342,238

2013 – $342,238

2012 – $342,238

2011 – $342,238

25.0%

22.5%

22.5%

20%

$10,000

Dr. Dana Devine Chief Medical and Scientific Officer

2015 – $335,062

2014 – $326,890

2013 – $326,890

2012 – $326,890

2011 – $326,890

22.5%

20%

$10,000

$10,000

Dr. Christian Choquet Vice-President, Quality and Regulatory Affairs

2015 – $259,051

2014 – $252,733

2013 – $277,812

2012 – $283,060

2011 – $283,060

(3)

(4)

(4)

22.5%

20%

$10,000

$10,000


Total compensation for executives (continued)

Base salaryCompensation at

risk as a percentage of base salary

Annual vehicle allowance

Andrew Pateman Vice-President, Talent Management and Corporate Strategy

2015 – $299,300

2014 – $292,000

2013 – $292,000

2012 – $292,000

2011 – $292,000

22.5%

20%

$10,000

$10,000

Jean-Paul Bédard Vice-President, Public Affairs

2015 – $282,854

2014 – $263,120

2013 – $295,757

2012 – $302,588

2011 – $302,588

(4)

(5)

(5)

22.5%

20%

$10,000

$10,000

Ralph Michaelis Chief Information Officer

2015 – $232,200

2014 – $216,000

2013 – $216,000

22.5%

20%

$10,000

$10,000

Mark Donnison Vice-President, Donor Relations

2015 – $237,375

2014 – $225,000

2013 – $225,000

22.5%

20%

$10,000

$10,000

(1) Ian Mumford retired Oct . 2, 2015 . His base salary and annual allowance were prorated and paid up to his retirement date .

(2) Rick Prinzen was appointed chief supply chain officer Sept . 1, 2015 . His base salary and annual allowance were pro-rated starting September 2015 .

(3) Temporary responsibility pay of 12 per cent included from January to October 2013 .

(4) Temporary responsibility pay of 12 per cent included .

(5) Temporary responsibility pay of 15 per cent included from January to October 2013 .

Vacation entitlement: Year 1 – four weeks; Year 2 – five weeks; Year 3 – six weeks

Severance terms: First year – 12 months; >1 year – 18 months

Standard benefits package: Executive benefit package covering health, dental, life insurance, long-term disability, defined benefit pension and health-care spending account .


OUR BUSINESS

Operational resources

As a pan-Canadian biologics manufacturer and clinical services provider, we utilize many operational resources to deliver our products and services effectively and efficiently . We schedule more than 18,000 clinic events annually through permanent and mobile collection sites . We also operate two blood testing facilities and nine manufacturing facilities .

National Facilities Redevelopment Program

The National Facilities Redevelopment Program (NFRP) is a comprehensive, 10-year strategic initiative to upgrade our facility infrastructure and operational resources to better meet the current and future needs of our business, customers and patients .

NFRP Phase I

The first phase of our redevelopment program is a $126 million investment in our production and distri-bution facilities in our Ontario and Nunavut region, and in our Atlantic region .

The single outstanding project from Phase I is a donor testing laboratory in the Greater Toronto Area . As one-half of a two-site donor testing model, the new testing facility is vital to the overall safety and security of the national blood supply . Canadian Blood Services will conclude Phase I of the NFRP in 2017–2018 with the completion of the new state-of-the-art production and testing facility in Brampton .

NFRP Phase IIa

In 2011, Canadian Blood Services transitioned from an inefficient three-site donor testing model to a consolidated two-site model (Toronto and Calgary) . The limitations of the current Calgary facility expose Canadian Blood Services to significant risk in dealing with new and emerging threats . The Calgary facility has insufficient and inappropriate space for existing and new production and testing requirements and is also located in a flood plain . Canadian Blood Services felt the impact of this risk when the facility’s operations were disrupted during the 2013 Calgary flooding .

Phase IIa of the program includes building a new facility in Calgary to house a testing laboratory; consolidating blood production and distribution from Edmonton, Calgary and Regina; leasing new spaces; and selling existing buildings .

The new Calgary facility is needed to provide long-term sustainability for redundant testing services between Calgary and Toronto . Funding for the project, to a maximum estimated project cost of $138 .1 million, was approved at the Annual General Meeting in October 2015 .

Our carbon footprint

As an organization dedicated to improving the health of Canadians, it is Canadian Blood Services’ respon-sibility to improve the health of the environment we operate in . Climate change will have an impact on our business, with extreme weather events fuel-ling natural disasters and potentially increasing the demand for blood . At the same time, longer warm seasons are expected to allow mosquito-borne dis-eases to thrive .

Over the past few years, Canadian Blood Services has been tracking its corporate carbon footprint . In 2015–2016, the executive management team made a unanimous decision to further integrate environ-mental sustainability into the organization under the CEO’s executive sponsorship . In 2015–2016, Canadian Blood Services:

. Continued to use the carbon footprint calculation to track our impact on the environment . A seven per cent reduction target was set for 2017 and was achieved by the end of 2015–2016 .

. Introduced an environmental sustainability policy to support championing a mindset of sustainability .

. Increased employee engagement through grassroots initiatives and socialization of the environmental program .

. Developed a sustainability strategy to support and guide the environmental program .


Working capital – Cash

Canadian Blood Services’ liquidity is largely influenced by the timing of funds received from the provinces and territories, the volume of inventory held, for-eign exchange fluctuations, increase in demand, the amount of deferred contributions and the num-ber of large capital-intensive projects, such as the National Facilities Redevelopment Program . Running a national system, we are also exposed to varying payment terms on balances owed to and owed by Canadian Blood Services in each jurisdiction . These varying terms and balances place pressure on our working capital and may require us to access our line of credit and incur interest charges .

Delays in provincial funding over the current year resulted in cash constraints and interest expense incurred on the line of credit accessed for operational needs . Interest expense is charged to provinces and territories with outstanding balances . At March 31, 2016, cash and cash equivalents balances declined by $20 .5 million to $129 .9 million largely due to an increase in amounts receivable from members as well as in inventory . In particular, the Province of Ontario had a receivable balance of $64 .9 million out-standing at March 31, 2016, compared to $32 .8 million at March 31, 2015 . Payments totalling $56 .2 million were received through July 2016 from the Province of Ontario .

Cash and cash equivalents of $140 .3 million are reserved for specific projects and the post- retirement and post-employment liability leaving negative $10 .5 million in unreserved operating cash .

(50)

0

50

100

150

200

250

Days o

f cash$ M

illio

ns

Actual2011–2012

Post-retirement and post-employment

Days of cash available

Actual2012–2013

Actual2013–2014

Actual2014–2015

Actual2015–2016

-10

-5

0

5

10

15

20

25

30

35

Unreserved operating cash

Total deferred

$199.5

$90.1

$20.7

$88.7

$190.7

$98.5

$22.3

$69.9

$180.4

$105.2

$26.9

$48.3

$150.4

$96.3

$31.6

$22.5

$129.9

$105.8

$34.6($10.5)


Inventory

This year, Canadian Blood Services received approval to apply savings of $5 .8 million achieved through effi-ciencies to offset the provinces and territories’ cost of plasma protein products . When combined with the $6 .9 million from the last two years, Canadian Blood Services has provided $12 .7 million to offset the increased utilization by provincial and territorial health systems and costs of plasma protein products .

Plasma protein products represent almost 79 per cent of our inventory — one of our larger cash draws . The weakened Canadian dollar and increased prod-uct utilization by health systems have resulted in a $13 .9 million increase in inventory . To lower the amount of inventory held and mitigate pressures on working capital, Canadian Blood Services is proac-tively managing the days of plasma protein product inventory on hand . For major product categories, such as Ig and recombinant factor VIII, the inventory

weeks on hand are at, or below, levels seen at the end of 2012–2013 . However, as utilization and foreign exchange rates increase, so does the inventory value, which offsets some of the reductions gained from product inventory management . Nonetheless, we are proactively pursuing inventory reductions to effectively manage what is in our direct control .

Canadian Blood Services also completed contract renegotiations for recombinant factors VIII and IX products toward the end of this fiscal year . The competitive tendering for these two product lines resulted in both significant cost-per-unit decreases and the conversion of payments to Canadian dollars from U .S . dollars . Converting contracts from U .S . dollars to Canadian dollars is a longer-term strategy to manage currency risk that will increase the predictability of funding for our members .

0

20

40

60

80

100

120

140

160

2011–2012 2012–2013 2013–2014 2014–2015 2015–2016

Fiscal year

Am

ou

nt

in $

mill

ion

s

Medical supplies Fresh blood products Plasma protein products

$115.2

$19.0

$86.6

$129.8

$18.0

$103.0

$115.1

$15.5

$91.2

$123.2

$24.1

$92.2

$137.1

$9.6

$8.8

$8.4$6.9

$6.2

$23.2

$107.7


Total consolidated costs

The total consolidated costs per Canadian Blood Services, consolidated financial statements (total con-solidated costs) to run the business are highlighted below . Plasma protein products represent our largest cost, at 53 per cent of total cost compared to 49 per cent in 2014–2015 . This cost is driven by product utilization, the price of the products and foreign exchange . At 27 per cent of total costs, staff costs incurred to deliver our products and services are

our second largest cost . Our remaining costs are for general and administrative expenses, depreciation, and medical supplies, which include supplies such as blood bags used in the collection .

During the year, Canadian Blood Services entered into forward currency contracts to mitigate its foreign exchange exposure on a substantial portion of its 2016–2017 U .S . dollar purchases of plasma protein products . The forward currency contracts were recorded at fair value on the financial statements resulting in an unrealized loss during the year .

Total consolidated costs In thousands of dollars

Cost of plasma protein products $623,198 (53%)

Staff costs $315,063 (27%)

General and administrative expenses $122,138 (10%)

Medical supplies $66,585 (6%)

Depreciation $19,237 (2%)

Change in cumulative fair value of forward currency contracts $25,023 (2%)

Change in fair value of investments measured at fair value $5,252 (0%)


Core fresh blood products cost per unit compared to inflation Using 2009–2010 as base

Productivity and efficiency journey

Canadian Blood Services continues its productivity and efficiency journey . Since 2008, our efforts focused on bending the cost curve through process improve-ment, lean methods, consolidation, organizational redesign, technology and successful procurement practices . Our national health-care product and service delivery model ensures cost effectiveness and contributes to benefit the overall national health services delivery model .

Canadian Blood Services has committed to finding significant operational efficiencies . When comparing the actual results in the current year to the previous year, we achieved approximately $13 million in cost savings and cost avoidance efficiencies through various improvements to the integrated supply chain .

Improvements in donor testing included decreased discard rates and a substantial reduction in the cost of medical supplies due to a successful tendering process that resulted in lower unit costs .

The effectiveness of our productivity and cost management gains are demonstrated using the cost per unit shipped (CPU), a macro level produc-tivity metric . The productivity gains achieved since 2009–2010 have resulted in a minor cumulative increase of only $6 per unit (1 .8 per cent) in the CPU over the last eight years versus a $43 (12 .7 per cent) per unit increase, had the CPUs tracked to general inflationary increases . This result demonstrates our ongoing commitment to deliver a cost-effective national health-care system .

Actual2009–2010

Actual2010–2011

Actual2012–2013

Actual2014–2015

2009 CPU using Consumer Price Index inflation

Core fresh blood products CPU

Actual2011–2012

Actual2013–2014

Actual2015–2016

Budget2016–2017

$300

$310

$320

$330

$340

$350

$360

$370

$380

$390

$383

$375

$350

$371

$364$360

$356

$334

$341

$346$340

$340$343

$351 $351$346


At a macro level, when compared to the Canadian Institute for Health Information’s National Health Expenditure Trends report (1975 to 2016), a proxy of public sector health expenditure trends, costs for fresh blood products have risen only 5 .1 per cent

since 2007, compared with a 39 .1 per cent rise in health expenses in the public sector . This modest increase further demonstrates and confirms Canadian Blood Services’ commitment to bending the cost curve .

95

100

105

110

115

120

125

130

135

140

Health expenditures in the public sector less drug and physician expenses(per CIHI report)

Canadian Blood Services’ fresh blood program

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Co

st o

f fr

esh

blo

od

pro

du

cts

$139.1

$105.1$100.0

$100.0

$107.7

$102.4

$114.0

$104.6

$120.1

$104.2

$123.6

$107.0

$127.6

$108.2

$130.1

$112.3

$131.9

$107.2

$136.4

$104.9


FINANCIAL PERFORMANCE OF OUR PRODUCTS AND SERVICES

Fresh blood products and support services

Canadian Blood Services manufactures and delivers fresh blood products derived from whole blood and apheresis collections . The activities required to supply these products include demand planning, recruitment, collection, testing, manufacturing and distribution, and support activities .

Our past productivity results demonstrate our commitment to bending the cost curve, and we have been able to deliver a flat or declining fresh blood products budget over the last seven

years . Fresh blood products funding notably declined from a high of $466 .9 million in 2012–2013 to $448 .1 million in 2015–2016 and is budgeted to decrease 0 .2 percent despite inflationary pressure .

The demand for red blood cells, platelets and plasma and the associated number of whole blood collec-tions have the greatest influence on activities associated with fresh blood products . The main factors affecting costs are labour and materials needed to collect and produce each unit of product . Additional expenses, such as fuel, utilities, information technology, facilities and support functions, also influence these costs .

440

445

450

455

460

465

470

Percen

t chan

ge

$ M

illio

ns

Actual2011–2012

Province and territory funding Percent change

Actual2012–2013

Actual2013–2014

Actual2014–2015

Actual2015–2016

-10

-8

-6

-4

-2

0

2

4

6

8

10$466.7*

+0.1%

$466.9*

+0.0%

$465.8*

-0.2% $452.3*

-2.9% $448.1*

-0.9%

* excludes National Facilities Redevelopment Program


Costs: Fresh blood products and support services

In thousands of dollars

Before the adjustment for fresh blood inventory, expenses associated with these products decreased by $6 .6 million compared to last year . This decrease is mainly due to lower costs for medical supplies .

The costs for medical supplies were lower due to efficiencies and lower demand while lower staff costs resulted from vacancies in support services .

Staff costs $284,296 (61%)

General and administrative expenses $104,296 (22%)

Medical supplies $59,272 (13%)

Depreciation and amortization $19,237 (4%)


Demand and collections: Fresh blood products

Demand for red blood cells in Canada declined by 1 .7 per cent for the year 2015–2016 . However, a stronger demand environment has been seen in the latter part of 2015–2016 and in early 2016–2017 . This trend is consistent with an increase in the demand for red blood cells also seen by our international counterparts .

Uncertainty in demand has made forecasting more challenging as we try to accurately project collec-tion and shipment needs for future years . Incorrect demand forecasts impede us from meeting our financial and efficiency targets, such as cost per unit (CPU) and labour hours per unit (LHU) . We need to book clinics and schedule staff months in advance, and it is difficult to change our clinic plan once the demand targets are established .

600,000

650,000

700,000

750,000

800,000

850,000

-8%

-6%

-4%

-2%

0%

+2%

+4%

+6%

+8%

+10%

Per

cen

t ch

ang

e

Un

its

Actual2011–2012

Red blood cell shipments Percent change

Actual2012–2013

Actual2013–2014

Actual2014–2015

Actual2015–2016

832,178

-0.1%

817,397

-1.8%

801,595

-1.9%

771,485

-3.8%

758,322

-1.7%


Whole blood collection, red blood cell shipments and discard rate

Fresh blood productsWhole blood collection (excluding autologous and directed)

Along with a forecasted increase in demand in 2016–2017, whole blood collections are projected to increase 1 .6 per cent to 820,264 to build inventory from the low level that we began the year with and to provide a cushion for the implementation of the Automated Supply Chain project .

This year, management focused on reducing discard rates resulting in a decrease from 8 .6 per cent last year to 7 .6 per cent this year . This decrease resulted in 8,000 fewer collections needed in 2015–2016 . Although discards will never be zero — some prod-ucts must be discarded during the supply chain process due to a variety of factors — continuing to lower our discard rate remains a priority . We continue to focus on low-weight and underweight collections as well as product expiry .

500,000

550,000

600,000

650,000

700,000

750,000

800,000

850,000

900,000

Percen

t chan

ge

Un

its

Whole blood collections (actuals)

Excludinginventory

build808,264

Percent change

Whole blood collections (budget) Forecast percent change

Actual2013–2014

879,940

-2.4%

Actual2014–2015

850,218

-3.4%

Actual2015–2016

806,972

-5.1%

Budget2016–2017

820,264

+0.2%

+1.6%

-6

-4

-2

0

2

4

6

8

10


Platelets

Total platelet shipments include platelets collected through apheresis and those derived from whole blood collections using the pooled production method . Demand for platelets remained relatively flat compared to 2011–2012 with 2015–2016 experi-encing a slight increase from 2014–2015 .

Platelets derived from apheresis are often preferred to treat sensitized patients for various medical rea-sons . These platelet doses are sourced from a single donor, which enables more precise matching and avoids multiple donor exposures . Platelets derived from apheresis, however, are much more expensive to collect than those manufactured through pooled production . The continued expansion of cardiac and oncology services suggests ongoing demand for platelets in the coming years . However, this demand must be balanced against new medical innovations and therapies and more patient blood management programs, which may reduce the overall need for blood products . For example, new chemotherapy agents are less toxic on patients’ bone marrow, thereby reducing the need for platelet transfusion support in cancer care .

Through platelet apheresis technology, we can collect a single dose or, if the donor qualifies, a large-volume platelet (LVP) dose . A LVP dose is twice the volume of a single collection, which means that increasing the proportion of LVP collections reduces the required number of donations . The LVP split rate for this year increased from 69 to 73 per cent .

Canadian Blood Services expects the LVP split rate to improve to more than 80 per cent in 2016–2017 . To achieve this target, donors must be carefully managed to ensure their safety while meeting our demand requirements for human leukocyte antigen (HLA)/human platelet antigen (HPA) matched units . As part of the work to refresh the platelet strategy, Canadian Blood Services is determining which donors have critical HLA types that will keep them in the system even if they cannot donate an LVP (“double”) . If we reduce the percentage of platelet doses coming from apheresis by reducing waste and optimizing the production of platelets from whole blood, we will still need to retain donors with unique HLA types who can only donate “single” doses, and as a result, our LVP percentage could decline . The overall cost of meeting patient needs for platelets, however, should decline . This apparent paradox simply reflects an intended shift away from the status quo for platelet production .

Platelet shipments by source

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

-9%

-4%

+1%

+6%

+11%

+16%

Percen

t chan

ge

Un

its

Actual2011–2012

Pooled platelets Percent change

Actual2012–2013

Actual2013–2014

Actual2014–2015

Actual2015–2016

Platelets derived from apheresis

119,528

+4.7%

114,977

-3.8%

114,206

-0.7%

113,899

-0.3%

116,259

+2.1%


Plasma

Plasma can be manufactured from whole blood or apheresis collections . It can either be transfused, used to make platelets derived from pooled pro-duction or diverted to our commercial fractionators for further manufacturing . The drugs manufactured from fractionated plasma are generically referred to as plasma protein products . There are many different types of plasma protein products . The major catego-ries include albumin, which is used to treat fluid loss in burn and trauma patients, Ig, which is used to treat infections and immune disorders and factor VIII to enhance clotting in patients with hemophilia and other bleeding disorders .

Demand for plasma protein products continues to be strong internationally, growing at a compound annual rate of almost 12 per cent in the past decade . In 2014, total sales in the plasma protein industry were US$18 .5 billion, and just under half (47 per cent) of sales were for Ig . Since 2000, Ig usage has increased globally at a compound annual growth rate of 7 .9 per cent . Eighty per cent of the world’s

plasma collection centres are in the U .S . These centres contribute 70 per cent of the world’s source plasma supply . The reliance on the U .S . plasma collection industry is causing a worldwide concern that the capacity of one country to continue as the world’s primary supplier of plasma is not sustainable, and that the risks of a stable and secure supply of plasma protein products are increasing . This concern is prompting some international blood operators to develop strategies to manage these risks . Canadian Blood Services is developing its plan to significantly increase the volume of Canadian plasma shipped for fractionation . A business plan is being prepared that will outline the approach to collecting approximately 700,000 litres annually of source plasma annually, within five years . This multi-year plan will include the requisite analysis of optimal clinic sizes and loca-tions, strategies to recruit voluntary, unpaid plasma donors and the most efficient operating model . The experience and knowledge of blood operators with substantial plasma collection operations will be leveraged, as will the expertise of commercial plasma collectors . A comprehensive stakeholder engage-ment plan is also being developed .

Plasma shipments for fractionation by source

130,000

150,000

170,000

190,000

210,000

230,000

250,000

270,000

-100%

-80%

-60%

-40%

-20%

0%

+20%

Percen

t chan

ge

Litr

es

Actual2011–2012

Recovered plasma

Cryosupematant plasma for fractionation

Percent change

Actual2012–2013

Actual2013–2014

Actual2014–2015

Actual2015–2016

Source plasma

U.S. recovered plasma

26,904

187,520

+21.8%

31,476

176,945

-4.2%

26,904

175,896

+7.3%

31,476

169,247

-0.0%

47,157

154,939

9,530

6,655 4,3114,877

6,135

5,492

4,659 5,3016,771

9,601

+2.5%


Our formulary of plasma protein products includes plasma-derived, recombinant and therapeutic prod-ucts such as Ig, albumin and various clotting factors (e .g ., recombinant factor IX [rFIX], recombinant factor VIII [rFVIII], recombinant Von Willebrand factor [rVWF], factor VIII inhibitor bypassing activity (FEIBA) or recombinant factor VIIa [rFVIIa]) .

Plasma protein products represent more than half of our total funding . Following is the breakdown of the total 2015–2016 program by product lines compared to 2014–2015, which highlights actual product utiliza-tion increases experienced in 2015–2016 .

In thousands of dollars2014–2015

Actual2015–2016

Actual

Variance analysis

Volume over

(under)

Price over

(under)

FX over

(under)

Total over

(under)

Albumin 15,057 18,930 731 (26) 3,168 3,873

Ig 237,434 289,269 24,730 (22,277) 49,382 51,835

Recombinant factor VIII 104,061 130,655 8,630 9,936 8,028 26,594

Factor VIII/VWF 26,768 31,537 204 (132) 4,697 4,769

Recombinant factor IX 34,219 37,629 3,106 304 – 3,410

Factor XIII 3,085 3,923 635 (47) 250 838

FEIBA/recombinant factor VIIa 36,791 42,074 1,652 884 2,747 5,283

C1 esterase 24,896 39,410 8,141 711 5,662 14,514

Prothrombin complex 7,008 8,587 487 (249) 1,341 1,579

Immune globulin 11,076 12,018 93 241 608 942

Solvent detergent plasma 3,006 3,810 346 (14) 472 804

Other plasma protein products 4,859 8,304 2,467 78 900 3,445

Plasma protein products 508,260 626,146 51,222 (10,591) 77,255 117,886Program administration (1,028) (5,912) 109 1,753 (6,746) (4,884)

Total program 507,232 620,234 51,331 (8,838) 70,509 113,002Unrealized gain/loss foreign exchange contracts – 25,023 – – 25,023 25,023

Total cost 507,232 645,257 51,331 (8,838) 95,532 138,025


Cost variables

A number of variables influence the costs of plasma protein products, including:

. Product utilization — the volume and mix of product used .

. Price of products and annual contractual increases in the consumer price index (CPI) and price reductions related to negotiated contracts .

. Foreign exchange — approximately 70 per cent (down from 85 per cent prior to the end-of-year contract renegotiations) of all products are pur-chased in U .S . dollars; this practice exposes us to fluctuations in the foreign exchange markets .

This year’s total costs increased by $113 million compared to last year . Growth in product utilization, combined with a weaker Canadian dollar, are the main contributors to the increase in program costs . These costs were partially offset by negotiated price reductions .

Patterns in product demand vary substantially . This variability adds significant pressure to funding these products . Savings obtained through favourable price renegotiations are eroded by increases in utilization and potential increases in foreign exchange rates .

Growth in demand from 2014–2015 to 2015–2016

-40%

-20%

0%

+20%

+40%

+60%

+80%

2014 versus 2013 2015 versus 2014 2016 versus 2015

Ig

Recombinant factor IX

Recombinant factor VIII

Recombinant factor Vlla

C1 esterase

+6.8% +8.2% +10.4%+6.4%+2.1%

+8.2%+9.1% +12.8% +9.1%+7.7%

-31.8%

+3.5%

+64.6%

+36.5%+32.6%

Gro

wth


Demand for Ig has grown consistently for many years in Canada . Ig use is expected to continue to rise, and manufacturers and physicians are anticipated to continue to explore Ig as a therapeutic option in new clinical situations . Global and Canadian demand for lg continues to grow at almost seven per cent per year as the population ages and researchers continue to find new and effective therapeutic uses for this products . Canada is one of the highest per capita users of Ig in the world, with demand increas-ing by 10 .4 per cent from 2014–2015 to 2015–2016 .

rFVIII utilization increased by 8 .2 per cent year over year . Overall usage and category growth is shared between the standard-acting products (Xyntha, Nuwiq, Kogenate/Kovaltry) and the new extended half-life product (Eloctate) . Utilization of rFVIII is forecasted to increase by 9 .9 per cent in 2016–2017 .

C1 esterase inhibitor (human) is used to treat adult or adolescent patients with ongoing, acute attacks of hereditary angioedema (HAE) affecting the abdomen, face or throat . HAE is a rare, potentially life-threatening genetic disorder caused by the deficiency of C1 esterase inhibitor, a protein in the blood that helps prevent swelling . C1 esterase inhib-itor utilization increased by 32 .6 per cent year over year . Demand for C1 esterase inhibitor is forecasted to increase by 13 .4 per cent in 2016–2017 with the steady growth continuing for the outlying years as more patients are diagnosed with HAE and more specialists are trained and treating patients .

Growth in demand for the largest-volume products — Ig, rFVIII, and C1 esterase — by province and territory was as follows .

Growth in demand by province and territory for 2015–2016 versus 2014–2015

-10%

0%

10%

20%

30%

40%

50%

60%

70%

Gro

wth

+12.7% +11.7% +5.4% +6.1% +3.9% +10.8% +33.3% +6.9% +10.4%

+10.2% +7.8% +3.3% +5.2% +9.8% +6.8% -1.2% +15.8% +8.2%

-1.4% +45.0% +31.5% +39.4% +6.2% +43.9% +13.8% +63.2% +32.6%

Ig

rFVIII

C1

Alb

erta

Brit

ish

Co

lum

bia

Man

itob

a

New

Bru

nsw

ick

Nov

a Sc

oti

a

On

tario

Prin

ce E

dw

ard

Isla

nd

Sask

atch

ewan

Tota

l

+3.4% +19.9% 24.88% 477.78%

+57.2% +100.8% 27.76% 27.26%

+235.9% 0% -100% 2525%

Ig

rFVIII

C1

New

foun

dla

nd

an

d

Lab

rad

or

No

rth

wes

t Te

rrito

ries

Yuko

n

Nun

avut

-100%

0%

100%

200%

300%

400%

500%

2,600%


Foreign exchange risk

The plasma protein products program is exposed to foreign exchange risk through contracts for prod-ucts in U .S . dollars . We manage this risk through a combination of forward currency contracts and spot purchases . 2015–2016 was a challenging year because of extreme volatility in the exchange rate . The Canadian dollar reached a low of $1 .19 and a high of $1 .46 in the fiscal year . The volatility in the exchange rate is a result of crude oil prices, a weaker Canadian economy, two interest rate cuts and a stronger U .S . economy . Oil prices fell to an 11-year low in 2015 and back to mid-$30 levels in early 2016 . Through the effective use of forward currency contracts and strategic buying, Canadian Blood Services achieved an average U .S . dollar purchase rate of $1 .28 compared to the actual market average of $1 .31, resulting in an estimated cost avoidance of $12 .3 million .

In 2015–2016, Canadian Blood Service secured US $350 million in forward currency contracts to mitigate the foriegn exchange risk on the majority of our 2016–2017 budgeted U .S . dollar plasma protein product purchases .

Demand for plasma for transfusion

New licensed protein product substitutes, such as prothrombin complex concentrates (PCCs) and

solvent detergent plasma, as well as more conser-vative transfusion practices, have contributed to the decline in demand for transfusion plasma in Canada . Although Canada is not self-sufficient in fractionated plasma product, Canada is self-sufficient in plasma for transfusion, meaning patient demand is com-pletely met within the country . This year, the total number of litres shipped for transfusion fell 9 .7 per cent .

Key performance indicators

Labour hours per unit

LHU is the ratio of total labour hours to collections of all fresh blood products . This ratio is an integrated measure of our performance for the supply chain and support services . The supply chain comprises our costs incurred in demand planning, recruitment, collection, testing, manufacturing and distribution . Collections include the collections of all equivalent units and are categorized into three groups: whole blood collections, platelet collections and plasma collections . The following graph summarizes our LHU since 2013–2014 .

LHU was 6 .78 compared to 6 .64 in the prior year . Although productivity efficiencies were achieved, the lower level of collections offset the positive impacts of these savings on the LHU .

Labour hours per unit

6.0

6.1

6.2

6.3

6.4

6.5

6.6

6.7

6.8

6.9P

erce

nt

chan

ge

LHU

Actual2013–2014

LHU (budgeted) Percent change

Actual2014–2015

Actual2015–2016

Budget2016–2017

-6%

-4%

-2%

0%

+2%

+4%

+6%

LHU (actual)

6.71

+1.4%

6.64

-1.1%

6.78

+2.3%

-5.3%

6.42


Cost per unit

CPU is the ratio of total expenses to shipments of all fresh blood products . The CPU links the inputs and outputs of the activities associated with fresh blood products . The inputs are staff costs, costs for medical supplies, general and administrative expenses and the amortization of capital assets . The outputs are the shipments of fresh blood products .

The core fresh blood CPU is on target at $350 for the year ended March 31, 2016, and within the predefined corridor of $331 to $351 . By increasing our collections and managing our inventory lev-els, Canadian Blood Services met its CPU target . Inventory levels have been replenished in the first quarter of 2016–2017 .

Stem cellsThrough the OneMatch Stem Cell and Marrow Network, Canadian Blood Services coordinates the search for stem cells on behalf of all Canadian patients (except those in Quebec), who require stem cell transplants from unrelated donors . We manage all logistics related to collection and ensure trans-port of stem cell products to transplant centres or international registries . Stem cells may be sourced from bone marrow, from peripheral blood of healthy adults or from umbilical cord blood . All three prod-ucts are used in transplants for Canadian patients .

As with fresh blood products, demand for stem cells is volatile and uncertain . But in the case of stem cells, the uncertainty is more focused on the rate of growth and the source of products, be it from cord blood or peripheral blood . We work closely with transplant centres and physicians to better under-stand trends and changes in practice and to ensure we are recruiting the right donors to optimize the likelihood of finding matches for patients .

In June 2016, Canadian Blood Services’ Cord Blood Bank achieved another milestone with the shipment of the first umbilical cord blood unit for transplant .

Diagnostic servicesCanadian Blood Services provides diagnostic services for patients and hospitals across Western Canada and in some parts of Ontario . Services include prenatal testing, patient reference red blood cell serology (antibody investigations), human platelet antibody testing (HPA) and pre-transfusion and compatibility testing .

Member funding matches the cost of diagnostic services received . This year, revenue and costs for diagnostic services were consistent with last year . Expenses include staff, general and administrative charges and medical supplies required to complete patient laboratory and patient therapeutic services . The number of procedures performed in 2016 — as compared to 2015 — are included in the table below:

Procedure volumes

British Columbia

Alberta Saskatchewan Manitoba Ontario

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Red cell serology 72,724 71,190 107,930 108,707 24,941 25,296 223,107 230,242 – –

Platelet immunology – – – – – – 2,193 3,829 – –

Immunohematology – – – – – – – – 4,737 6,060

Stem cell – – 290 319 – – – – 336 290

Autologous – – – 12 – – – – – –

72,724 71,190 108,220 109,038 24,941 25,296 225,300 234,071 5,073 6,350


FundraisingThis past year, the fundraising department wrapped up the Campaign For All Canadians by acknowledg-ing and thanking financial donors for their support in ensuring the goal of $12 .5 million was reached . Building on the momentum of the campaign, a new strategic plan was developed for the department that includes transitioning current donors from the campaign to support other opportunities across the organization .

Cash donations received this year totalled $2 .8 million (including donations to the Campaign For All Canadians), compared to $4 .1 million last year . This marked decrease was due to the completion of a large number of cam-paign pledges .

Canadian Blood Services was honoured to work with the following major financial donors and participate in activities to raise funds and awareness of the blood system and stem cell programs, including the new cord blood bank .

Major corporate financial donors

Captive Insurance ProgramCanadian Blood Services’ Captive Insurance Program comprises two wholly owned insurance corporations: Canadian Blood Services Insurance Company Limited and the Canadian Blood Services Captive Insurance Company Limited . The policies of insurance issued to Canadian Blood Services consist of comprehensive blood risks liability in the amount of $1 billion; a stock throughput in the aggregate amount of $10 million, renewable on a one-time basis; and a contingent risk indemnification policy in the amount of $20 million .

CBSI tracks premium net assets which are net assets after policy, regulatory and market volatility reserves . At March 31, 2016, premium net assets amounted to $66 million . During the year ending March 31, 2016, a claim of $9 .4 million was submitted against the primary blood risk policy and the claim was paid in full in the year . CBSI reinstated the policy limit to $250 million .

Pension plansEvery three years, an independent actuary reviews the defined benefit plan’s funded position to inform the board of trustees responsible for the governance of the plan of exactly how the plan is doing . The last valuation conducted was at Dec . 31, 2013, showing a funded basis at 98 per cent on a going concern basis . The next valuation will be conducted at Dec . 31, 2016 .

Partner Donation

Toyota Canada Inc. $320,000 designated to Canadian Blood Services’ Cord Blood Bank

Standard Life $97,000 gift-in-kind donation of rental space for the permanent Standard Life Blood Donor Clinic in Vancouver

FedEx $60,000 over three years to sponsor the Young Blood for Life national high school program

Manulife Financial – long-standing partner contributing to saving lives for more than 60 years

$35,000 to pay for the rent for the permanent blood donor clinic held in the Manulife Centre in Toronto

All fundraising amounts are rounded to the nearest $ thousand for reporting purposes .


Enterprise Risk Management ProgramCanadian Blood Services continues to mature and refine our Enterprise Risk Management Program to reflect our continuous focus on the understanding and management of enterprise risk . We have made significant advancements in integrating the program with our strategy man-agement and execution processes . We are actively advancing our risk management reporting to provide the board of directors and executive management team members with clear, concise and actionable information on key risks . The new components, along with our existing processes, should allow us to proactively manage risk to improve performance and achieve corporate objectives .

Risk-based decision-making framework The Alliance of Blood Operators sponsored development of an integrated risk-based decision- making framework for blood safety with the goal of improving decision-making, facilitating proportional responses to risk, ensuring decisions are evidence- based, increasing trust in investment decisions and allowing for the redirection of resources to improve effectiveness . As a member of the ABO, Canadian Blood Services has adopted the framework as an important tool for making and documenting deci-sions, sharing the decision documents with other ABO member organizations (as appropriate) to profile the credibility of the framework, build blood operator capability to use the framework, and increase knowl-edge sharing .


Management’s report to membersThe consolidated financial statements contained in this report have been prepared by Canadian Blood Services’ management team in accordance with accounting standards for not-for-profit organizations . Management is responsible for the integrity and reliability of the data in these statements and for ensuring that all other information in this report is consistent, where appropriate, with the financial statements .

Management maintains a system of internal control to provide reasonable assurance as to the reliability of the financial information and safeguarding of assets . The board of directors is responsible for ensuring that management fulfils its responsibilities for financial reporting and internal control . The board exercises this responsibility through the Finance and Audit Committee of the board, which is composed of directors who are not employees of the Corporation . The Finance and Audit Committee meets periodically during the year with management and the external auditors .

The external auditors, KPMG LLP, conduct an independent audit in accordance with Canadian generally accepted auditing standards and express an opinion on the financial statements . The external auditors, whose report follows, have full and free access to the Finance and Audit Committee of the board and meet with the committee regularly .

Dr . Graham D . Sher Pauline Port Chief Executive Officer Chief Financial Officer and Vice-President, Corporate Services

June 23, 2016


Consolidated Financial Statements

Consolidated FinancialStatements of Canadian Blood Services

YEAR ENDEDMARCH 31, 2016

66

INDEPENDENT AUDITORS’ REPORTTo the Members of Canadian Blood Services

We have audited the accompanying consolidated financial statements of Canadian Blood Services, which comprise the consolidated statement of financial position as at March 31, 2016, the consolidated statements of operations, changes in net assets and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information .

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error .

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit . We conducted our audit in accordance with Canadian generally accepted auditing standards . Those standards require that we comply with ethical requirements and plan and perform an audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement .

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements . The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error . In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control . An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements .

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion .

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Canadian Blood Services as at March 31, 2016 and its consolidated results of operations, consolidated changes in net assets and its consolidated cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations .

Chartered Professional Accountants, Licensed Public Accountants June 23, 2016 Ottawa, Canada

MOVING PARTS | ANNUAL REPORT 2015–2016 67Consolidated Statement of Financial PositionAs at March 31, 2016, with comparative information for 2015(In thousands of dollars)

2016 2015

AssetsCurrent assets:

Cash and cash equivalents (note 3) $ 129,884 $ 150,396

Members’ contributions receivable 72,563 43,906

Other amounts receivable 19,071 14,609

Inventory (note 4) 137,060 123,183

Prepaid expenses 9,123 9,921

367,701 342,015

Investments, captive insurance operations (note 5) 413,662 414,190

Capital assets and intangible assets (note 6):

Land, buildings, software and equipment 198,883 197,381

Right to the blood supply system 19,802 20,682

218,685 218,063

$ 1,000,048 $ 974,268

Liabilities, Deferred Contributions and Net Assets Current liabilities:

Accounts payable and accrued liabilities (note 7) $ 98,179 $ 89,875

Forward currency contracts (note 14) 25,023 –

Current portion of obligations under capital leases 125 349

123,327 90,224

Provision for future claims (note 15) 250,000 249,886

Employee future benefit liabilities (note 8) 94,981 77,430

Obligations under capital leases 488 –

Deferred contributions (note 10):

Expenses of future periods 185,951 177,841

Capital assets 203,555 202,574

389,506 380,415

Net assets (note 11):

Invested in capital assets 15,281 15,281

Restricted for unrealized fair value of forward currency contracts (25,023) –

Restricted for captive insurance purposes 162,992 164,062

Unrestricted net deficit (11,504) (3,030)

141,746 176,313

Guarantees and contingencies (note 16)

Commitments (note 17)

$ 1,000,048 $ 974,268

See accompanying notes to the consolidated financial statements.

On behalf of the Board

Leah Hollins, Director and Chair R . Wayne Gladstone, Director

68Consolidated Statement of OperationsYear ended March 31, 2016, with comparative information for 2015(In thousands of dollars)

Canadian Blood Services Captive Insurance Consolidated (note 13) (note 15)

2016 2015 2016 2015 2016 2015

Revenue:

Members’ contributions $ 1,115,379 $ 999,825 $ – $ – $ 1,115,379 $ 999,825

Federal contributions 8,580 8,580 – – 8,580 8,580

Less amounts deferred (36,410) (32,167) – – (36,410) (32,167)

1,087,549 976,238 – – 1,087,549 976,238

Amortization of previously deferred contributions:

Relating to capital assets 19,495 21,649 – – 19,495 21,649

Relating to operations 12,458 27,072 – – 12,458 27,072

Total contributions recognized as revenue 1,119,502 1,024,959 – –

1,119,502

1,024,959

Stem cells revenue 13,698 11,413 – – 13,698 11,413

Net investment income (note 12) 874 1,972 14,230 49,651 15,104 51,623

Other income 2,099 2,157 – – 2,099 2,157

Total revenue 1,136,173 1,040,501 14,230 49,651 1,150,403 1,090,152Expenses:Cost of plasma protein products 623,198 506,934 – – 623,198 506,934

Staff costs 315,063 324,531 – – 315,063 324,531

General and administrative (note 14) 121,532 114,748

606

383 122,138 115,131

Medical supplies 66,585 74,003 – – 66,585 74,003

Depreciation and amortization 19,237 20,285 – – 19,237 20,285

Total expenses 1,145,615 1,040,501 606

383 1,146,221 1,040,884

Excess (deficiency) of revenue over expenses before the undernoted

(9,442)

–

13,624

49,268

4,182

49,268

Change in fair value of forward currency contracts (25,023) –

–

– (25,023) –

Change in fair value of investments measured at fair value – – (5,252) (16,860) (5,252) (16,860)

Excess (deficiency) of revenue over expenses $ (34,465) $ – $ 8,372 $ 32,408 $ (26,093) $ 32,408


MOVING PARTS | ANNUAL REPORT 2015–2016 69Consolidated Statements of Changes in Net AssetsYears ended March 31, 2016 and 2015(In thousands of dollars)

March 31, 2016Invested in

capital assets

Restricted for unrealized fair value of forward currency contracts

Restricted for captive insurance Unrestricted Total

Balance, beginning of year (note 11) $ 15,281 $ – $ 164,062 $ (3,030) $ 176,313

Deficiency of revenue over expenses – – (1,070) (25,023) (26,093)

Re-measurements and other items related to employee future benefits – – – (8,474) (8,474)

Change in fair value of forward currency contracts – (25,023) – 25,023 –

Balance, end of year (note 11) $ 15,281 $ (25,023) $ 162,992 $ (11,504) $ 141,746

March 31, 2015Invested in

capital assets

Restricted for captive insurance Unrestricted Total

Balance, beginning of year (note 11) $ 15,579 $ 131,654 $ 15,847 $ 163,080

Excess of revenue over expenses – 32,408 – 32,408

Re-measurements and other items related to employee future benefits – – (19,175) (19,175)

Change in investments in capital assets (298) – 298 –

Balance, end of year (note 11) $ 15,281 $ 164,062 $ (3,030) $ 176,313


70Consolidated Statement of Cash FlowsYear ended March 31, 2016, with comparative information for 2015(In thousands of dollars)

2016 2015

Cash and cash equivalents provided by (used for):

Operating activities:Excess (deficiency) of revenue over expenses $ (26,093) $ 32,408

Items not involving cash and cash equivalents:

Depreciation and amortization of capital assets and intangible assets 19,237 20,285

Amortization of deferred contributions (31,953) (48,721)

Gain on sale of capital assets (92) (1,038)

Net realized gains on sales of investments, captive insurance operations (5,498) (39,595)

Change in fair value of equity investments, captive insurance operations 5,252 16,860

Interest amortization of bonds, captive insurance operations (13) (50)

Change in provision for future claims 114 –

Employee future benefit expenses in excess of cash payments 9,077 4,910

Change in fair value of forward currency contracts 25,023 –

(4,946) (14,941)

Change in non-cash operating working capital:

Increase in Members’ contributions receivable (28,657) (25,391)

Increase in other amounts receivable (4,462) (3,476)

Increase in inventory (13,877) (8,123)

Decrease (increase) in prepaid expenses 798 (1,772)

Increase in accounts payable and accrued liabilities 7,259 1,890

Deferred contributions received for expenses of future periods 20,568 25,019

Total operating activities (23,317) (26,794)

Investing activities: Proceeds on sales of investments, captive insurance operations 136,959 299,092

Purchases of investments, captive insurance operations (136,172) (306,215)

Deferred contributions received related to capital assets 20,476 13,677

Proceeds on sale of capital assets 350 2,700

Purchases of capital assets (18,459) (12,140)

Total investing activities 3,154 (2,886)

Financing activities: Repayment of obligations under capital leases (349) (300)

Total financing activities (349) (300)

Decrease in cash and cash equivalents (20,512) (29,980)

Cash and cash equivalents, beginning of year 150,396 180,376

Cash and cash equivalents, end of year $ 129,884 $ 150,396

Cash and cash equivalents are comprised of:

Cash on deposit $ 129,527 $ 150,046

Butterfield Asset Management Money Market Fund 175 116

HSBC Money Market Pooled Fund 182 234

$ 129,884 $ 150,396


MOVING PARTS | ANNUAL REPORT 2015–2016 71Notes to the Consolidated Financial StatementsYear ended March 31, 2016(In thousands of dollars)

1 . Nature of the organization and operations:Canadian Blood Services/Société canadienne du sang (Canadian Blood Services) owns and operates the national blood supply system for Canada, except Québec, and is responsible for the collection, testing, processing and distribution of blood and blood products as well as the recruitment and management of blood donors . Canadian Blood Services also recruits volunteer donors for both Canadian and international patients requiring stem cell transplants and delivers an array of diagnostic services throughout Canada . Since 2008, Canadian Blood Services assumed a new mandate for organ and tissue donation and transplantation in Canada . This mandate includes the development of a set of recommendations for an integrated national donation and transplantation system, national registries to facilitate organ transplantation and leading practice and system performance initiatives . In addition, recognizing the impor-tance of cord blood stem cell transplantation as a treatment for Canadian patients, Canadian Blood Services has been given the mandate to establish Canada’s (excluding Québec) national public cord blood bank .

Canadian Blood Services was incorporated on February 16, 1998, under Part II of the Canada Corporations Act . Effective May 7, 2014, Canadian Blood Services continued its incorporation to the Canada Not-for-Profit Corporations Act . It is a corporation without share capital and qualifies for tax-exempt status as a registered charity under the Income Tax Act (Canada) . The Members of the Corporation are the Ministers of Health of the Provinces and Territories of Canada, except Québec . The Members, as well as the Federal government provide contributions to fund the operations of Canadian Blood Services . Canadian Blood Services operates in a regulated environment, pursuant to the requirements of Health Canada .

Canadian Blood Services has established two wholly-owned captive insurance corporations; CBS Insurance Company Limited (CBSI) and Canadian Blood Services Captive Insurance Company Limited/Compagnie d’assurance captive de la société canadienne du sang limitée (CBSE) . CBSI was incorporated under the laws of Bermuda on September 15, 1998, and is licensed as a Class 3 reinsurer under the Insurance Act, 1978 of Bermuda and related regulations . CBSE was incorporated under the laws of British Columbia on May 4, 2006, and is registered under the Insurance (Captive Company) Act of British Columbia .

2 . Basis of presentation and significant accounting policies:Significant accounting policies:

The consolidated financial statements have been prepared by management in accordance with Canadian accounting standards for not-for-profit organizations in Part III of the CPA Canada Handbook – Accounting .

A summary of the significant accounting policies used in these consolidated financial statements are set out below . The accounting policies have been applied consistently to all periods presented .

(a) Consolidation:The consolidated financial statements include the results of the operations of Canadian Blood Services and the accounts of its wholly-owned captive insurance subsidiaries (the Corporation) . Significant inter-company transactions have been eliminated .

(b) Use of estimates:The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses in the consolidated financial statements . Estimates and assumptions may also affect disclosure of contingent assets and liabilities at the date of the financial statements . Actual results could differ from these estimates . Significant estimates include assumptions used in measuring pension and other post-employment benefits and the provision for future insurance claims, which are described in more detail in notes 8 and 15, respectively .

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(c) Revenue recognition:The Corporation follows the deferral method of accounting for contributions .

Members’ and Federal contributions are recorded as revenue in the period to which they relate . Amounts approved but not received by the end of an accounting period are accrued . Where a portion of a contribution relates to a future period, it is deferred and recognized in the subsequent period .

Externally restricted contributions are recognized as revenue in the year in which the related expenses are recognized . Contributions restricted for the purchase of capital assets other than land are initially deferred and then amortized to revenue on a straight-line basis, at a rate corresponding with the depreciation rate for the related capital asset . Contributions restricted for the purchase of land are recognized as direct increases in net assets invested in capital assets .

Unrestricted funding is recognized as revenue when received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured .

Restricted investment income is recognized as revenue in the year in which the related expenses are recognized . Unrestricted investment income is recognized as revenue when earned .

Revenue from fees and contracts is recognized when the services are provided or the goods are distributed .

Restricted donations are recognized as revenue in the year in which the related expenses are recognized . Unrestricted donations are recognized as revenue in the year received .

(d) Donated goods and services:The Corporation does not pay donors for blood donations . Additionally, a substantial number of volunteers contribute a significant amount of time each year in support of the activities of the Corporation . The value of such contributed goods and services is not quantified in the financial statements .

(e) Inventory:Inventory of the Corporation consists of plasma protein products, fresh blood components, cord blood and supplies related to the collection, production and testing of fresh blood components . Plasma protein products and collection supplies inventories are recorded at average cost and are charged to the statement of operations upon distribution to hospitals and usage . Fresh blood components and cord blood inventory includes an appropriate portion of direct costs and overhead incurred in the collection, production and testing processes . Fresh blood components inventory is charged to the statement of operations upon distribution to hospitals .

An inventory valuation allowance is estimated for slow moving or obsolete inventories . Management reviews the estimate regularly . Any change in estimate will impact the inventory valuation allowance .

(f) Capital assets and intangible assets:Purchased capital assets are recorded at cost . Contributed capital assets are recorded at fair value at the date of contribution . Assets acquired under capital leases are amortized over the estimated life of the assets or over the lease term, as appropriate . Repairs and maintenance costs are expensed . Betterments, which extend the estimated life of an asset, are capitalized . When capital assets and intangible assets no longer contribute to the Corporation’s ability to provide services, their carrying amount is written down to their residual value .

Capital assets and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the asset no longer has any long-term service potential to the Corporation . In this event, recoverability of assets held and used is measured by reviewing the estimated residual value of the asset . If the carrying amount of an asset exceeds its estimated residual value, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the residual value of the asset . When a capital asset is written down, the corresponding amount of any unamortized deferred contributions related to the capital asset would be recognized as revenue, provided that all restrictions have been complied with .

Notes to the Consolidated Financial StatementsYear ended March 31, 2016(In thousands of dollars)


Depreciation is recorded on a straight-line basis over the estimated useful lives of the assets at the rates indicated below:

Asset Useful life

Buildings 40 to 65 years

Machinery and equipment 8 to 25 years

Furniture and office equipment 5 to 10 years

Motor vehicles 8 years

Computer equipment 3 years

Computer software 2 to 5 years

Leasehold improvements are depreciated on a straight-line basis over the shorter of the lease term or their estimated useful lives . Assets under construction are not depreciated until they are available for use by the Corporation .

The right to the blood supply system represents the excess of the purchase price of the system over the fair value of the tangible net assets acquired in 1998, and is being amortized on a straight-line basis over 40 years .

(g) Asset retirement obligations:The Corporation recognizes the fair value of a future asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets . The Corporation concurrently recognizes a correspond-ing increase in the carrying amount of the related long-lived asset that is amortized over the life of the asset . The fair value of the asset retirement obligation is estimated using the expected cash flow approach that reflects a range of possible outcomes discounted at a credit-adjusted risk-free interest rate . Subsequent to the initial measurement, the asset retirement obligation is adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation .

Changes in the obligation due to the passage of time are recognized in the consolidated statement of operations as an expense using the interest method . Changes in the obligation due to changes in the estimated cash flows are recognized as an adjustment of the carrying amount of the related long-lived asset that is amortized over the remaining life of the asset .

(h) Foreign currency transactions:Foreign currency transactions of the Corporation are translated using the temporal method . Under this method, transactions are initially recorded at the rate of exchange prevailing at the date of the transaction . Thereafter, monetary assets and liabilities are adjusted to reflect the exchange rates in effect at the consolidated statement of financial position date . Gains and losses resulting from the adjustment are included in the consolidated statement of operations .

(i) Employee future benefits:The Corporation sponsors two defined benefit plans, one for employees and the other for executives . In addition, the Corporation sponsors a defined contribution pension plan and provides other defined retirement and post-employment benefits to eligible employees . Benefits provided under the defined benefit pension plans are based on a member’s term of service and average earnings over a member’s five highest consecutive annualized earnings .

The Corporation accrues its obligations under employee benefit plans as the employees render the services necessary to earn pension and other retirement and post-employment benefits .


74

The cost of the defined benefit obligations for pensions and other retirement and post-employment benefits earned by employees is actuarially determined using the projected benefit method pro-rated on service and management’s best estimate assumptions including inflation rate, salary escalation, retirement ages and expected health care costs . The measurement date of the plan assets and defined benefit obligation coincides with the Corporation’s fiscal year . The most recent actuarial valuations for the two benefit pension plans for funding purposes were as of December 31, 2013, and January 1, 2014 . The next required valuations will be as of December 31, 2016 and January 1, 2017 respectively . The most recent actuarial valuation of the other retirement and post-employment benefits was as of April 1, 2015, and the next valuation will be as of April 1, 2018 .

Plan assets are measured at fair value as at year end .

The defined benefit pension plan for employees is jointly sponsored by the employer and participating unions . To reflect the risk-sharing provisions of this plan, the Corporation recognizes the 50 percent of the defined benefit liability or asset that accrues to the employer .

The Corporation also has a defined contribution plan providing pension benefits . The cost of the defined contribution plan is recognized based on the contributions required to be made during each period .

(j) Financial Instruments:Upon initial recognition, financial instruments are measured at their fair value . Financial assets and financial liabilities are recognized initially on the trade date, which is the date that the Corporation becomes a party to the contractual provisions of the instrument .

Fixed income securities and short-term notes are measured on the consolidated statement of financial position at amortized cost . Interest income is recognized on the accrual basis and includes the amortization of premiums or discounts on fixed interest securities purchased at amounts different from their par value .

Mutual funds and pooled funds are measured at fair value with changes in fair value recorded directly in the consolidated statement of operations . Dividends and distributions are recorded as income when declared .

Forward currency contracts not in a qualifying hedging relationship are measured at fair value with changes in fair value recorded directly in the consolidated statement of operations .

All other financial instruments are measured at cost or amortized cost .

Transaction costs incurred on the acquisition of financial instruments measured subsequently at fair value are expensed as incurred . All other financial instruments are adjusted by transaction costs incurred on acquisition and financing cost, which are amortized using the effective interest rate method .

Transaction costs are comprised primarily of legal, accounting, underwriters’ fees and other costs directly attributable to the acquisition, issuance or disposal of a financial asset or financial liability .

Financial assets measured at cost or amortized cost are assessed for indicators of impairment on an annual basis at the end of the fiscal year . If there is an indicator of impairment, the Corporation determines if there is a significant adverse change in the expected amount or timing of future cash flows from the financial asset . If there is a significant adverse change in the expected cash flows, the carrying value of the financial asset is reduced to the highest of the present value of the expected cash flows, the amount that could be realized from selling the financial asset or the amount the Corporation expects to realize by exercising its right to any collateral . If events and circumstances reverse in a future period, an impairment loss will be reversed to the extent of the improvement, not exceeding the initial carrying value .



3 . Cash and cash equivalents:Cash and cash equivalents include deposits with financial institutions that can be withdrawn without prior notice or penalty and units held in money market funds .

Cash and cash equivalents include $357 (2015 – $350) that is restricted for captive insurance operations . Cash and cash equivalents also includes Members’ contributions received in advance for expenses of future periods (note 10(a)) .

4 . Inventory: Inventory consists of raw materials, work in process and finished goods . Raw materials include medical supplies available for use in the collection, manufacturing and testing of fresh blood components . Work in process consists of plasma for fractionation . Finished goods include plasma protein products, red blood cells, platelets and plasma for transfusion and cord blood inventory that are available for distribution to hospitals . Work in process and finished goods inventories include direct costs and overhead incurred in the collection, manufacturing, testing and distribu-tion process .

Inventory comprises:

2016 2015

Raw materials $ 6,167 $ 6,915

Work in process 11,672 9,828

Finished goods 119,221 106,440

$ 137,060 $ 123,183

5 . Investments, captive insurance operations:All investments are restricted for captive insurance operations . The amortized cost and fair value of investments are as follows:

2016 2015

Measured at amortized cost:

Short-term notes $ 2,588 $ 13,121

Fixed income securities 242,182 219,600

Measured at fair value:

Mutual funds 25,825 27,651

Pooled funds 143,067 153,818

$ 413,662 $ 414,190


76

6 . Capital assets and intangible assets:

CostAccumulated depreciation

2016 Net book value

2015 Net book

value

Buildings $ 167,129 $ 46,422 $ 120,707 $ 122,568

Machinery and equipment 89,531 67,025 22,506 21,660

Land 15,281 – 15,281 15,281

Furniture and office equipment 28,585 19,348 9,237 10,465

Leasehold improvements 22,137 16,602 5,535 6,607

Computer equipment 48,059 42,987 5,072 5,981

Motor vehicles 16,663 8,299 8,364 9,671

Computer software 33,924 32,343 1,581 2,911

Equipment under capital leases 3,872 3,259 613 174

Assets under construction 9,987 – 9,987 2,063

435,168 236,285 198,883 197,381

Right to the blood supply system 35,203 15,401 19,802 20,682

$ 470,371 $ 251,686 $ 218,685 $ 218,063

During the current year, capital assets were acquired at an aggregate cost of $20,117 (2015 – $13,319) of which $613 (2015 – $Nil) was acquired by means of capital lease . Cash payments of $18,459 (2015 – $12,140) were made to capital assets .

7 . Accounts payable and accrued liabilities:Included in accounts payable and accrued liabilities are government remittances payable of $3,653 (2015 – $3,571) which include amounts payable for sales and payroll taxes .

8 . Employee future benefits:The Corporation sponsors two defined benefit pension plans, one for employees and the other for executives . In addition, the Corporation sponsors a defined contribution pension plan and provides other retirement and post-employment benefits to eligible employees .

(a) Defined benefit pension plans:Information about the Corporation’s defined benefit plans are combined and summarized as follows:

2016 2015

Defined benefit obligation $ 455,588 $ 426,322

Fair value of plan assets 338,708 336,842

Defined benefit liability before adjustment for risk sharing provisions (116,880) (89,480)

Adjustment for risk sharing provisions 56,540 43,687

Defined benefit liability $ 60,340 $ 45,793



The defined pension benefit liability is included in the employee future benefit liability in the consolidated statement of financial position . The defined benefit plan for regular employees is jointly sponsored by the Corporation, as employer, and the participating unions . To reflect the risk-sharing characteristics included in the provisions of the plan, the Corporation recognizes the 50 percent of the defined benefit liability or asset that accrues to the employer .

The significant actuarial assumptions adopted in measuring the Corporation’s defined benefit plans, defined benefit obligation and benefit cost are summarized as follows:

2016 2015

Defined benefit obligation:

Discount rate 3.90% 3.80%

Inflation rate 2.25% 2.25%

Rate of compensation increases 3.25 – 3.75% 3.25 – 3.75%

Mortality table CPM 2014-B CPM 2014-B

Benefit cost:

Discount rate 3.80% 4.60%

Rate of compensation increases 3.25 – 3.75% 3.25 – 3.75%

Other information about the Corporation’s defined benefit plans is combined and summarized as follows:

2016 2015

Employer contributions $ 12,723 $ 12,703

Employee contributions 8,550 8,533

Benefits paid 11,360 12,203

Net expense 19,414 15,441

Remeasurement gains 7,857 16,640

(b) Defined Contribution Plan: The expense for the Corporation’s defined contribution pension plan was $4,251 (2015 – $4,385) .

(c) Other retirement and post-employment benefits:Information about the Corporation’s other retirement and post-employment benefits is as follows:

2016 2015

Benefits paid $ 1,304 $ 1,228

Net expense 3,691 3,400

Remeasurement losses 617 2,535

Defined benefit liability 34,641 31,637

The defined benefit liability is included in the employee future benefits liability in the consolidated statement of financial position .


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The significant actuarial assumptions adopted in measuring the Corporation’s other retirement and post-employment defined benefit obligation and benefit cost are as follows:

2016 2015

Defined benefit obligation:

Discount rate 3.50 – 4.00% 3.30 – 3.80%

Rate of compensation increases 3.75% 3.75%

Mortality table CPM 2014-B CPM 2014-B

Benefit cost:

Discount rate 3.30 – 3.80% 4.30 – 4.70%

Rate of compensation increases 3.75% 3.75%

Hospital costs – 4 .50% per annum;

Drug costs – 7 .58% per annum, with an ultimate rate of 4 .50% reached in 2029, starting in 2015;

Other health costs – 4 .50% per annum .

Termination benefits have been recognized in accounts payable and accrued liabilities on the consolidated statement of financial position and in staff costs in the consolidated statement of operations . At March 31, 2016 $6,833 is accrued on the consolidated statement of financial position (2015 – $16,102) . During the year ended March 31, 2016, move-ment relating to the accrual included payments of $3,122, a net reversal to opening accrual of $10,277 and the establishment of new termination benefits of $4,130 .

9 . Credit facilities:(a) Demand installment loan:A demand installment loan in the amount of $25,000 (2015 – $25,000) was arranged to cover contingencies or events not anticipated in the annual budget . At March 31, 2016, no amounts had been borrowed under this facility .

(b) Demand operating credit:A line of credit in the amount of $50,000 (2015 - $50,000) was arranged to provide working capital for inventory . At March 31, 2016, no amounts had been borrowed under this facility .

(c) Demand bridge facility (Facilities redevelopment project):A demand revolving bridge facility of $15,000 (2015 – $15,000) was arranged to finance a portion of the redevelopment of the Corporation’s facilities . At March 31, 2016, no amounts had been borrowed under this facility .

(d) Demand installment loan (Facilities redevelopment project):A demand installment loan for the redevelopment of the Corporation’s facilities has been arranged . The credit limit established under this loan is the lesser of $15,000 (2015 – $15,000), the outstanding balance on the demand bridge facility or an amount confirmed by the borrower . The facility was arranged to refinance the demand bridge facility . At March 31, 2016, no amounts had been borrowed under the demand installment loan . Any amounts borrowed under the facility will be repayable on demand .

(e) Standby letter of credit:Standby letters of credit in the amount of $2,000 (2015 – $2,000) were arranged to cover municipal requirements with regard to the redevelopment of the Corporation’s facilities . At March 31, 2016, $82 (2015 – $82) had been issued under the facility .



Pursuant to the arrangements above, the Corporation has provided a general security agreement in favour of the bank over receivables, inventory, equipment and machinery, a floating charge debenture over all present and future assets and property and a fixed charge over the Brampton and Dartmouth properties . Amounts deferred for contin-gency purposes are excluded from the general security agreement and debenture .

10 . Deferred contributions:(a) Expenses of future periods:Deferred contributions represent externally restricted contributions to fund expenses of future periods .

2016 2015

Balance, beginning of year $ 177,841 $ 179,894

Increase in amounts received related to future periods 30,128 26,439

Less amounts recognized as revenue in the year (12,457) (27,072)

Less capital assets purchased from deferred contributions (10,158) (1,692)

Add income earned on resources restricted for contingency 229 272

Add income earned on other restricted resources 368 –

$ 185,951 $ 177,841

The capital assets purchased represent purchases from contributions that were deferred at March 31, 2015, as well as contributions received and deferred in the year ending March 31, 2016 .

At March 31, deferred contributions comprise:

2016 2015

Members’ funding received in advance $ 31,998 $ 25,504

Deferred contributions restricted for specific projects or programs:

Fundraising:

Campaign for all Canadians 1,885 3,396

Donations - other 1,496 1,088

Programs - Members funding:

National Facilities Redevelopment 19,958 12,207

Diagnostic Services - Manitoba 710 654

Inventory:

Plasma protein products inventory working capital 47,653 47,653

Medical supplies 6,167 6,915

Fresh blood components inventory 23,226 24,104

Projects:

Automated supply chain and donor testing 14,144 15,937

Laboratory Information System - Manitoba 1,467 1,464

Other:

Prepaid rent 3,125 3,175

Research and development 13,940 15,792

Contingency 20,182 19,952

$ 185,951 $ 177,841


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(b) Capital assets:Funds received to acquire capital assets are recorded as deferred contributions – capital assets on the consolidated statement of financial position . They are amortized to revenue in the consolidated statement of operations at the same rate as capital assets are depreciated to expenses .

2016 2015

Balance, beginning of year $ 202,574 $ 210,546

Deferred contributions received 20,118 13,319

Capital funding received for leased assets 358 358

Less capital assets sold (258) (1,364)

Less amounts amortized to revenue (19,237) (20,285)

$ 203,555 $ 202,574

11 . Net assets:Net assets restricted for captive insurance purposes are subject to externally imposed restrictions stipulating that they be used to provide insurance coverage with respect to risks associated with the operations of the Corporation .

Net assets restricted for forward contracts are subject to internally imposed restrictions on the unrealized fair value of the forward currency contracts not in a qualifying hedging relationship . This restriction will be released once the forward currency contracts mature .

12 . Net investment income:

2016 2015

Interest income on unrestricted funds $ 874 $ 1,972

Net investment income earned on investments restricted for captive insurance 14,230 49,651

Interest income on restricted resources 597 272

15,701 51,895

Less amounts deferred (597) (272)

$ 15,104 $ 51,623

Included in net investment income earned on investments restricted for captive insurance is $549 (2015 – $1,076) of dividend income, $9,025 (2015 – $9,618) of interest income, $5,498 (2015 – $39,595) of realized gains on sales of investments, $13 interest amortization of bonds related to captive insurance operations (2015 – $50) net of $855 (2015 – $688) of investment management fees .


13 . Canadian Blood Services revenue and expenditures detail:

Fresh Blood Components &

Support ServicesPlasma Protein

ProductsDiagnostic Services Stem Cells

Organs and Tissues

Intercompany Transactions Total

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Revenue:

Members’ contributions $ 466,324 $ 455,967 $ 610,659 $ 507,069 $ 17,106 $ 16,529 $ 17,710 $ 16,680 $ 3,580 $ 3,580 $ – $ – $ 1,115,379 $ 999,825

Federal contributions 5,000 5,000 – – – – – – 3,580 3,580 – – 8,580 8,580

Less amounts deferred (30,837) (24,220) – – (156) (173) (1,837) (4,191) (3,580) (3,583) – – (36,410) (32,167)

440,487 436,747 610,659 507,069 16,950 16,356 15,873 12,489 3,580 3,577 – – 1,087,549 976,238

Amortization of previously deferred contributions:

Relating to capital assets 19,495 21,649 – – – – – – – – – – 19,495 21,649

Relating to operations 5,505 12,743 – – 10 466 3,373 7,786 3,570 6,077 – – 12,458 27,072

Total contributions recognized as revenue 465,487 471,139 610,659 507,069 16,960 16,822 19,246 20,275 7,150 9,654 – – 1,119,502 1,024,959

Stem cells revenue – – – – – – 13,698 11,413 – – – – 13,698 11,413

Investment income 874 1,972 – – – – – – – – – – 874 1,972

Other income 740 619 9,575 163 382 205 – – 844 1,170 (9,442) – 2,099 2,157

Total revenue 467,101 473,730 620,234 507,232 17,342 17,027 32,944 31,688 7,994 10,824 (9,442) – 1,136,173 1,040,501

Expenses:

Cost of plasma protein products – – 623,198 506,934 – – – – – – – – 623,198 506,934

Staff costs 284,296 293,640 1,620 1,585 13,579 12,876 10,581 11,199 4,987 5,231 – – 315,063 324,531

General and administrative (note 14) 104,296 92,908 (5,435) (2,212) 743 1,458 18,921 17,002 3,007 5,592 – – 121,532 114,748

Medical supplies 59,272 66,897 851 925 3,020 2,693 3,442 3,487 – 1 – – 66,585 74,003

Depreciation and amortization 19,237 20,285 – – – – – – – – – – 19,237 20,285

Total expenses 467,101 473,730 620,234 507,232 17,342 17,027 32,944 31,688 7,994 10,824 – – 1,145,615 1,040,501

Revenue over expenses before change in fair value of forward currency contracts $ – $ – $ – $ – $ – $ – $ – $ – $ – $ – $ (9,442) $ – $ (9,442) $ –

Change in fair value of forward currency contracts $ – $ – $ (25,023) $ – $ – $ – $ – $ – $ – $ – $ – $ – $ (25,023) $ –

Deficiency of revenue over expenses $ – $ – $ (25,023) $ – $ – $ – $ – $ – $ – $ – $ (9,442) $ – $ (34,465) $ –

81 CANADIAN BLOOD SERVICES | ANNUAL REPORT 2015/2016


14 . Financial instruments:Risk management:

The Board of Directors has responsibility for the review and oversight of the Corporation’s risk management framework and general corporate risk profile . Through its committees, the Board oversees analysis of various risks facing the organization that evolve in response to economic conditions and industry circumstances .

The Corporation’s financial instruments consist of cash, members’ contributions receivable, other amounts receivable, accounts payable and accrued liabilities and forward currency contracts .

The Corporation is exposed to risks as a result of holding financial instruments . The Corporation does not enter into transactions involving financial instruments, including derivative financial instruments such as forward currency contracts, for speculative purposes . The following is a description of those risks and how they are managed .

(i) Market risk:Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices . Market risk comprises three types of risk: interest rate risk, foreign exchange risk and other price risk . These risks are discussed below:

Interest rate risk:

Interest rate risk pertains to the effect of changes in market interest rates on the future cash flows related to the Corporation’s existing financial assets and liabilities .

The Corporation is exposed to interest rate risk on its cash and cash equivalents and investments . At March 31, 2016, this exposure was minimal due to low prevailing rates of return and due to majority of fixed income invest-ments having fixed rates .

Foreign exchange risk:

Foreign exchange risk is the risk that the value or future cash flows of financial instruments will fluctuate as a result of changes in foreign exchange rates . The Corporation is exposed to foreign exchange risk on purchases that are denominated in currencies other than the functional currency of the Corporation . To mitigate this risk, the Corporation has a formal foreign currency policy in place . The objective of this policy is to monitor the market-place and, when considered appropriate, fix exchange rates using forward contracts to reduce the risk exposures related to purchases made in foreign currencies . Generally, forward currency contracts are for periods not in excess of eighteen months .

In addition to operational foreign exchange risk, investments held by CBS Insurance Company Limited denomi-nated in currencies other than the Canadian dollar expose the Corporation to fluctuations in foreign exchange rates . Fluctuations in the relative value of foreign currencies against the Canadian dollar can result in a significant impact on the fair value of investments . The Corporation’s exposure to foreign currency arises from its investment of $101,831 in pooled funds which hold international equities and global fixed income of which $100,007 is denominated in foreign currencies .

Notes to the Consolidated Financial Statements (continued)Year ended March 31, 2016(In thousands of dollars)



In addition to the pooled funds, at March 31 the Corporation had the following instruments denominated in $US dollars:

2016 CDN 2015 CDN

Accounts receivable $ 56 $ 61

Accounts payable and accrued liabilities 7,378 4,131

Forward currency contracts liabilities 25,023 –

During the years ended March 31, 2016 and 2015, the Corporation entered into forward currency contracts to hedge its foreign exchange exposure on a substantial portion of its U .S . dollar purchases of plasma protein products . The contracts are intended to match the timing of the anticipated future purchases of foreign currencies . The Corporation did not designate the forward currency contracts as hedges of firm commitments or anticipated transactions in accordance with CPA Handbook Section 3856 – Financial Instruments and, accordingly, did not use hedge account-ing . As a result, the forward currency contracts are recorded in the consolidated statement of financial position at fair value and changes in fair value of these contracts are recognized as gains or losses in the consolidated statement of operations . The fair value of the forward currency contracts are determined using a quote from its forward exchange dealers . At March 31, 2016, the contracts fix the currency rate at 1 .37 on USD 350 million notional amount (2015 – nil) and one twelfth of the forward currency contracts mature monthly from April 2016 through March 2017 .

Included in general and administrative expenses in the consolidated statement of operations for the year ended March 31, 2016, were realized foreign exchange losses of $11,643 (2015 – gain of $4,711) .

Other price risk:

Other price risk is the exposure to changes in the value of mutual funds and pooled funds in its investment portfolio as a result of market conditions . Other price risk comprises general price risk which refers to fluctuations in value of the mutual funds, pooled funds and equity securities due to changes in general economic or stock market condi-tions, and specific price risk which refers to equity price volatility that is determined by entity specific characteristics . These risks affect the carrying value of these securities and the level and timing of recognition of gains and losses on securities held, causing changes in realized and unrealized gains and losses . The Corporation mitigates price risk by holding a diversified portfolio . The portfolio is managed through the use of third party investment managers and their performance is monitored by management and the Board of Directors of the captive insurance operations .

(ii) Credit risk:The Corporation is exposed to the risk of financial loss resulting from the potential inability of counterparty to a financial instrument to meet its contractual obligations . The carrying amount of cash and cash equivalents, Members’ contributions receivable and other amounts receivable, and investments, captive insurance operations represent the maximum exposure of the Corporation to credit risk .

Cash and cash equivalents are held with a Canadian financial institution rated by Standard & Poor’s credit rating as A+ with a negative outlook . All foreign exchange contracts must be transacted with Schedule I or Schedule II financial institutions as per the Corporation’s foreign currency policy .

The Corporation is also exposed to credit risk on fixed income securities investments . The investment policy requires an average credit rating of ‘A’ on the credit quality of its fixed income portfolio, related to captive insurance operations .

Members’ contributions receivable are current in nature and management considers there to be minimal exposure to credit risk from Members due to funding agreements in place and third party Member credit ratings . Standard & Poor’s available credit ratings for Members range from A credit watch stable to AAA credit watch stable .


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Credit risk associated with other amounts receivable is considered to be minimal based on past experience with bad debts as these accounts represent a small portion of the total amounts receivable by the Corporation . The carrying amount of amounts receivable for these parties represents the Corporation’s maximum exposure .

(iii) Liquidity risk:Liquidity risk is the risk that the Corporation will not be able to meet its financial obligations as they fall due . The Corporation’s approach to managing liquidity is to evaluate current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash and cash equivalents . In addition, the Corporation has credit facilities described in note 9 that it can draw on as required .

At March 31, 2016, the Corporation’s accounts payable and accrued liabilities and forward currency contracts are all due within one year .

The provision for future claims has no contractual maturity and the timing of settlement will depend on actual claims experience in the future .

The liabilities for employee future benefits are generally long-term in nature and fall due as eligible employees in the Corporation’s defined benefit pension plans retire or terminate employment with the Corporation .

15 . Captive insurance operations:The Corporation has established two wholly-owned captive insurance subsidiaries, CBS Insurance Company Limited (CBSI) and Canadian Blood Services Captive Insurance Company Limited/ Compagnie d’assurance captive de la société canadienne du sang limitée (CBSE) . CBSI provides insurance coverage up to $250,000 with respect to risks associated with the operation of the blood system . CBSE has entered into an arrangement whereby the Members have agreed to indemnify CBSE for all amounts payable by CBSE under the terms of the excess policy up to $750,000, which is in excess of the $250,000 provided by CBSI . No payment shall be made under CBSE until the limit of the liability under the primary policy in CBSI, in the amount of $250,000, has been exhausted . As a result, Canadian Blood Services has $1,000,000 total in coverage .

The results of operations of the two subsidiaries are as follows:

CBSI CBSE Intercompany transaction Total

2016 2015 2016 2015 2016 2015 2016 2015

Gross premiums written and earned $ 654 $ 571 $ 60 $ 60 $ – $ – $ 714 $ 631

Net premiums earned 654 571 60 60 – – 714 631

Net investment income 14,219 49,641 11 10 – – 14,230 49,651

14,873 50,212 71 70 – – 14,944 50,282

Expenses:

General and administrative 10,702 955 60 59 (9,442) – 1,320 1,014

Net insurance Income before undernoted 4,171 49,257 11 11 9,442 – 13,624 49,268

Change in fair value of investments measured at fair value (5,247) (16,866)

(5) 6 – – (5,252) (16,860)

Net insurance income (loss) $ (1,076) $ 32,391 $ 6 $ 17 $ 9,442 $ – $ 8,372 $ 32,408



The provision for future claims is an actuarially based estimate of the cost to the Corporation of settling claims relating to insured events (both reported and unreported) that have occurred to March 31, 2016 .

A significant proportion of both the future claims expense for the period and the related cumulative estimated liability of the Corporation for these future claims at March 31, 2016, of $250,000 (2015 – $249,886) covers the manifestation of blood diseases, which is inherently difficult to assess and quantify . There is a variance between these recorded amounts and other reasonably possible estimates .

16 . Guarantees and contingencies:(a) Guarantees: In the normal course of business, the Corporation enters into lease agreements for facilities and assets acquired under capital leases . In the Corporation's standard commercial lease for facilities the Corporation, as the lessee, agrees to indemnify the lessor and other related third parties for liabilities that may arise from the use of the leased premises where the event triggering liability results from a breach of a covenant, any wrongful act, neglect or default on the part of the tenant or related third parties . However, this clause may be altered through negotiation . In the Corporation’s assets acquired under capital leases both the lessee and the lessor agree to indemnify each other for death or injury to the employees or agents of either party, where the event triggering liability results from negligent acts, omissions or willful misconduct .

The maximum amount potentially payable under any such indemnities cannot be reasonably estimated . The Corporation has liability insurance that relates to the indemnifications described above . Historically, the Corporation has not made significant payments related to the above-noted indemnities and, accordingly, no liabilities have been accrued in the financial statements .

(b) Contingencies:The Corporation is party to legal proceedings in the ordinary course of its operations . In the opinion of management, the outcome of such proceedings will not have a material adverse effect on the Corporation’s financial statements or its activities . Claims and obligations related to the operation of the blood supply system prior to September 28, 1998, and the Canadian Council for Donation and Transplantation prior to April 1, 2008, are not the responsibility of the Corporation .

17 . Commitments:At March 31, 2016, the Corporation had the following contractual commitments:

(a) Future minimum payments under operating leases of approximately $22,895 with payments in each of the next five years of: 2017 – $6,268; 2018 – $5,325; 2019 – $3,800; 2020 – $3,233; 2021 – $1,550; and thereafter $2,719 .

(b) Research and development project grants of approximately $5,478 (2015 – $7,250) to be funded from the contributions deferred for future expenses .

(c) Construction commitments of approximately $5,775 (2015 – $10,860) funded by Members’ contributions .(d) Vendor commitments of approximately $151,000 (2015 – $142,000) funded by Members’ contributions .

18 . Research and development: For the year ended March 31, 2016, the Corporation incurred $13,661 of expenses related to research and development (2015 – $13,846) . These costs are included within Fresh Blood Components & Support Services .

19 . Related party transactions:The Members provide funding for the operating budgets of the Corporation . The Corporation enters into other transactions with these related parties in the normal course of business .


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20 . Capital disclosures: The Corporation is a non-share capital corporation and plans its operations to essentially result in an annual financial breakeven position . The Corporation considers its capital to be the sum of its net assets . This definition is used by management and may not be comparable to measures presented by other entities . The Corporation manages capital through a formal and approved budgetary process where funds are allocated following the underlying objectives below:

(a) to provide a safe, secure, cost-effective and accessible supply of blood and blood products to all Canadians;(b) to support the Corporation’s ability to continue as a going concern;(c) to meet regulatory and statutory capital requirements related to captive insurance operations; and(d) to ensure the funding of working capital requirements .

The Corporation evaluates its accomplishment against its objectives annually . The Corporation has complied with all externally imposed capital requirements and there were no changes in the approach to capital management during the period .

The Corporation’s captive insurance operations are required to maintain statutory capital and surplus greater than a minimum amount determined as the greater of a percentage of outstanding losses or a given fraction of net written premiums . At March 31, 2016, the Corporation’s captive insurance operations were required to maintain a minimum statutory capital and surplus of $37,500 (2015 – $37,483) . The actual statutory capital and surplus was $176,665 (2015 – $188,237) and the minimum margin of solvency was therefore met . The Corporation’s captive insurance operations were also required to maintain a minimum liquidity ratio whereby the value of its relevant assets is not less than 75% of the amount of its relevant liabilities . At March 31, 2016, the Corporation’s captive insurance operations were required to maintain regulatory assets of at least $188,352 (2015 – $187,813) . At that date, regulatory assets were $427,801 (2015 – $438,654) and the minimum liquidity ratio was therefore met . The value of regulatory assets differs from that reported on the consolidated statement of financial position as it is determined under a different accounting framework, International Financial Reporting Standards.

21 . Statutory disclosures: As required under the Charitable Fundraising Act of Alberta, included in staff costs is $632 (2015 – $509) paid as remuneration to employees whose principal duties involve fundraising .


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