Pharmascience Inc. v. Meda AB et al - Nov 17, 2021 - Part 3
4:57PM Nov 17, 2021
Speakers:
Sean Prouse
MR. de SOUSA
JUSTICE ZINN
MR. KLEE
Keywords:
document
pharma
correct
product
science
sap
customer
molecule
sales
launch
gabapentin
exhibit
planning
recorded
ims
market
witness
january
capacity
put
Good afternoon. The savings.
Are you. Good and you can still hear me and see me. Okay,
perfect.
Excellent. Thank you.
So now that that's confirmed, I'll just transfer you back into the waiting room. It shouldn't be too long.
Okay. Perfect. Thanks. Ready to resume yes, we're ready. Ready as well. Thank you recording in progress thank you for your patience, counsel. These are my rulings. The evidence of sales of pharma science. And Apotex. So pick zolpidem off after the proxy period is not relevant and not admitted. The evidence of sales of molecules other than zolpidem were pharma science entered the market prior to APA text may be relevant to what would have happened in the butt word but for world as between them and will be admitted. Subject to weight with respect to the witness in India I know that the ordered the case management judge provided that witness lists and will say statements were to be issued or were to be provided on September the 29th. And the supplemental witness list and we'll say statements that were to be provided no later than October the 15th. And in the will say statement provided by the plaintiff. It lists as a witness an employee from Glenmark will testify if necessary to the following. And then there are two bullet points, ability and willingness to provide zolpidem API for pharma science in the UK for world and prices opened an API for pharma science in the but for world and on that basis. I'll allow the witness to be called by the plaintiffs.
But I will
indicate that the defendants are going to be given significant latitude in terms of cross examination of that witness. Including what steps Glenmark truck to make a witness available when those steps were taken, and how long they've had the documents that he I gather will be tendering as exhibits and any other relevant question that may go to the weight of the evidence that this witness gives.
And with that, we can resume the examination have forgotten this Raymond?
Thank you, Your Honor.
Thank you for your patience again, Miss Raymond. Hopefully this is the last time we need to lock you out of the proceeding but one never knows.
Thank you very much.
Good afternoon. Now Miss Raman and apologies again for absence,
no worries.
When we last parted, I had asked you about your time at pharma science and examples where pharma science launched first sole source followed by a protects in the dual source market. I think you had identified three but can you just repeat them just for the benefit of the court and we'll we'll pick up from there.
Yes, I can. It would be Gabapentin valacyclovir and tetrabenazine.
Okay, and what was your role at pharma science when Gabapentin was launched,
when Gabapentin was launched, I was a product manager in Montreal. And what year was that? That was 2001. And then with valacyclovir, what was your role and what year was it launched? That was 2008. And I was a regional manager for Atlantic and Ontario.
And then with the third one tetrabenazine. Again, what was your role? What was the year
2013. It was the same rule and same responsibility.
Okay, thank you. So I'll just start by pulling up pharma science 196, which is FC 258 on the screen. And just let us know if we need to zoom in on that but just indicate to the court if you recognize what this document is, and what Yes,
this would be the raw data for from supplied by IMS, for valacyclovir.
Okay, and then there's another there's two tabs I see at the bottom. Can you just explain we'll just flip to the second tab and what does that data
okay, that is that would be the Gabapentin data. AF Exactly same thing from IMS.
Okay, and where does this data come from?
When if I if I may just ask for a point of clarification. The ruling that we had or the the position before lunch was that the data that was relevant as regards other molecules was just during the four year period that you mentioned is the ruling now that it is outside of those years.
The ruling now is that this is admissible subject to wait.
Thank you, Your Honor. You are about to tell me Ms. Raman. I think where the data comes from the data comes from IMS. Okay and how does pharma science come to acquire this data?
We have a market access department that would purchase the the data from IMS and then they would prepare it for the sales team. Is that where this data came from? Yes, that would be where this data came from. Okay,
can we mark that as the next exhibit just as in? Yes,
we can.
Mr. D'Souza, can you help me out here? What is our next exhibit? Is it 93?
Sorry, three should be the next 193.
Thank you. And how would we use this document? Miss Raman to calculate the market share of farm assigns relative to a protects and the brand companies is it done in the same way as what we looked at earlier this morning with with I sold them?
Yes it is exactly the same way. You would total the entire market and then divide by each of the each of the companies.
Okay, thank you. Now I'll put on the screen FC 300. And you recognize this document?
Yes, this would be the Gabapentin generic market share for for strengths but 100 200 304 100 milligram and it begins in February 2001 when a firm science launched gabapentin, and it goes until June 2002.
Can we just mark that as the next exhibit
just doesn't exhibit 94
And can you just explain to the court why the data stops at GNC 1002.
It stops at June 2002 Because after that Teva entered the market, so then it wasn't it was no longer a dual source situation with two suppliers it would have been three.
Okay, and what did you observe in this market when Pharmascience sold Gabapentin?
When from science for gabapentin, we when we launched in February 2001. Obviously we were the sole supplier so we had 100% of the market share. And then even after a protects launched seven months later in November, later that year, you see that they are not able to gain much, much market share. In fact, it's single digits
and what importance to gabapentin, the launch hub for pharma science at the company.
At that time. Gabapentin was our it was a huge launch and it actually put us on the map with pharmacies they had to purchase obviously our Gabapentin because we were the only supplier and that helped. Really, with our sales increasing we're able to bundle other products and it was a significant launch for us.
I'm going to put another graph on the screen which is FC 304. You recognize this document.
Yes this is the valacyclovir market share generic market share for the 500 milligram
and is this based on the IMS data that we looked at a few moments ago.
Yes, it is. And it goes from May 2008 until August 2010.
And what happened after August 2010. There were
other suppliers that entered the market at that time.
And when did a vertex enter the market relative to pharma science?
According to this, it shows that it entered a month later. So we launched in May 2008 and a protec sort of launched in June 2008.
Okay, does that fit with what you recall?
It was actually Apotex launched a few weeks after from science but because of the way IMS captures data, you only see it here represented by the month
and does this chart fit accurate with you accurately with your recollection of pharma sciences ability to compete in that market with a vertex?
Yes it does. It shows a lead a market lead and a continued market lead even after a little disruption in October 2009. Where there's a little blip, most likely due to a backorder situation.
And what do you recall about selling dollar psychology for pharma science?
I recall that it was a it was a very good launch for us and we were again first to market even though it was a shorter period of time.
I'm going to put up FC one six
D on exhibit 10. So
pardon me I thought we had marked it. My apologies. Yes. Can we mark that as an exhibit?
Exhibit 95.
And I've got on the screen an Excel document as RAM and you recognize this document
Yes, this would be the IMS data for tetrabenazine for the 25 milligram.
We mark that as the next exhibit
just as we look to FC document is that it's FC 160160 That's 90 exhibit 96.
And how would you use this document to calculate the market share of pharma science relative to a vertex in this particular market?
We would do the same thing you would you would total up the you would total the entire market with the extended units and then group the FDA protects sales, the farmer science sales and then you would you would divide by the total market to get a percentage of market share for each of the suppliers.
Let me put FC 302 Up on the screen. Do you recognize this document?
Yes, this is the the graph showing the tetrabenazine generic market share for the 25 milligram beginning March 2013 and ending September. I believe it's September 2019.
Okay, um, do you recall the brand company that sold this product?
Yes, that was a valiant
okay. And when did a vertex enter relative to pharma science?
They entered in November 2013.
And what did you observe in this market when pharma science sold tetrabenazine.
Again, we were able to to well gained and maintained our market share leads so it was difficult for a protector to displace farm science.
And what has your experience with Gabapentin tetrabenazine and valacyclovir demonstrated in terms of market share
in terms of market share, when you are first to market you will obviously become the the leader the market share leader and you will maintain and keep that unless there is a disruption in in stock.
Typically, just as in earlier today, my friend was giving evidence that was on the line of opinion evidence and I let it go but I think we're here again and I just like to object to that. Perhaps we could we could discuss
I think it is opinion evidence. Counsel.
I did preface the question. I'm mindful that there's a line between fact my opinion I asked the witness what her experience was with Gabapentin tetrabenazine and valacyclovir. And what that demonstrated
well I'm not going to exclude the witness the answer with respect to those three is acceptable, but the opinion that she expressed at the end of that statement is struck.
Understood. Miss Raman We'll move now to the new topic which is the but for world just can you tell the core what your role was in the company in January of 2015?
I'm sorry, counsel. I'm not sure we entered that last document FC 302 as an exhibit.
My apologies again that you're right. Correct.
So that's exhibit 97. You and Ms. Raymond,
can you just remind the court what your role was in the company in January of 2015.
In January 2015, I was the Regional Business Director for Ontario
and a farmer science had been planning to launch so put them in the 2015 fiscal year. When is the first that you would have planned for the launch?
We would have planned for the launch at the June 2014 a national sales meeting. And what
sorts of things would you have been doing at that meeting in order to prepare for launch?
At that point Third, we would have high level discussions about which corporate accounts we would target as well as the larger independent pharmacies.
And then in terms of after that June 2014, sales and marketing meeting, what sort of steps would you have been doing to prepare for launch?
We would have had discussions with our corporate accounts about the product and our pipeline and we would have been preparing the reps for the presentation for the for the product. Usually we would be looking at TSA data for the product about three months prior to launch.
And what role did you have in December 2015 in relation to customer investment or trade spat.
At that time, I was directly responsible for negotiating for the corporate accounts that had had offices in Ontario, as well as in supervising the sales team that were negotiating the rates at the at the store level, the independent pharmacies
and in your experience negotiating customer investment rates. How do rates compare when you are first and alone versus second to market?
It typically when you're first, the rates are much more conservative, they're lower. Because you're alone in the market. You don't have competition, as opposed to when you're second. And what happens when you're second. When you're second. You have to be a little bit more aggressive. But you still don't have to give away the farm because you're only two suppliers versus many suppliers.
Okay, now the court I expect to hear testimony later today from our financial record keeper at farmer science, who's done a calculation and I'm just going to ask you to assume that the average customer investment expense in the real world for zolpidem averaged out to approximately 37% For the first two years of farmer sciences sales when from a science entered after a vertex if farmer science had entered the market first in early January 2015, and a protects had not yet launched. Where would the customer investment rates be on average relative to what happened in the real world
had we been had we been first the rates and along the rates would have not been higher? In fact, they probably would have been lower than then that average.
Why is that?
Because again, you're your first market you don't have any competition and you don't have to. You don't have to have an aggressive customer investment rate.
Are there any particular strategies that you would have employed yourselves or put them in the bud for World entering first before any attacks?
We would have used the same strategies of targeting the larger pharmacies that sold the the brand some of the knocks, as well as we would have combined our efforts with Rs zopiclone molecule for the Z that sort of insomnia medication bucket.
When would you have started telling customers that you could accept orders relative to receiving Health Canada approval?
We would have once we had received approval from Health Canada.
Are your customers aware when a generic gets its noc?
Yes, typically they are and how
are they aware of a product is available for sale from for example a protects
traditionally it would be either from an Alex facts class or from their their sales reps would also inform them that they had NOC and if they would have product as well.
It protects how to NOC but it had not yet started selling product. What impact would that have on your selling strategy?
We would we would still be considered first market because we would have been talking about the the product
and the objection here. Oh,
that too would be opinion evidence. Just listen
to me to do this justice then but there is something I some evidence I think that is relevant that the witness aren't present to the court. I don't want to discuss it in front of her
this room and we're going to ask you to leave it
okay.
Now in the waiting room, thank you.
Thank you. Sorry, just as in it's my last section of questions. One of the scenarios is what happens when a protects has its NOC but doesn't actually sell wishes. What happened in the real world so it had its NOC doesn't appear to have put anything onto the market for six weeks. relevant question is what can customers know about that? Does that impact CI? Does that impact our ability to sell what do pharmacies want? Are they going to go with pharma science? Are they going to wait six weeks so this witness needs to be able to give relevant testimony to the court in terms of how that fact would impact how she would sell or what she would be able to say and how she would market and see i rates to which are a critical issue.
Just as it just as I got dressed to appear? I just want and this is only because my friend John stainsby argued the case it was before Justice O'Reilly it was the olanzapine section eight decision. Justice O'Reilly allowed the testimony in but ruled that it was opinion evidence and couldn't be given you know, people talking about what they would have done under different scenarios. The Court of Appeal reversed them on that point the decision was upheld. But on that evidentiary point, he said that justice arrivee was wrong. We can provide that to you but at the very least I would suggest that the evidence go in and then you can consider whether or not it gets any way.
Justice in May I respond
to that? may certainly respond to that.
Thank you. Um, we're now actually veering into hearsay evidence. I'm okay if my friend wants to take the witness to what Pharmascience would have done in certain positions but not to what Apotex would have done in certain positions nor to what the customers would have done and so what originally started, as I thought, opinion, evidence in terms of how the market would act and how other people would act, I think we're now also veering veering into hearsay and I think the questions should be targeted to what farm science might do in certain circumstances because that's what the witness is here to speak to.
I don't really have anything to add other than that, that what pharma science believes customers know and when is part of their business. And so my friend control how they know that on on cross examination, I suppose but I don't see this being an opinion. And certainly not pharmacists.
Won't be the first time I've disagreed with the Court of Appeal. And they with me? This witness can testify as to what farmer science would have done because she knows that and she in her role that was part of a bap. But anything else to what the market would have done is an opinion. And I don't think that this witness can give an opinion. She's a fact witness. Stick to the facts.
That my was my question to her is how would it have impacted your negotiations? Based on this fact?
Well, I'd have to go back to the transcript, but I think she was starting to veer into forbidden territory. Okay. Oh, let's let's call her back. You asked the question and if she starts viewing, one of us will stop her.
Okay, thank you
welcome back, Miss Freeman.
Thank you.
So I'll just re ask the question. If a protects had its noc, but he protects representatives we're not yet selling. How would that fact how would that impact your negotiations with customers over customer investment? Rate?
If if, in that scenario, the customers would have been negotiating with US based in it would be like a sole launch. If the FDA protects reps, we're not talking about it. Because sometimes they might not have product at the time of launch. So they would assume so if you can assume at that point that we would be the only player in the market. So they would have we would have been negotiating and they would have been purchasing the farm science product under that scenario,
no. Is there anything you can point to in the zolpidem markets that illustrate the power of first market in that specific market?
You saw, I think one of the graphs one of the exhibits that a Protex was first to launch and how they had gained and maintained a significant market share and how difficult it was as a second player. You know, when we entered that our market share remained pretty low.
Justice and I would say that that is now again, moving away from what Pharmascience position was in into opinion evidence.
Miss Freeman was referring to the graph that at the time period you allow justice in and her experience in what she saw was it's a repetition effectively of what she already said.
I I'm I allow it, it was fact.
Thank you. And what does that what does that experience tell you about a situation where a farmer science is first to the market and with a six week Headstart?
When you're again first to market with the six week Headstart, you would see the same thing where you would have that significant market share because the corporate accounts would have signed on for listings, and would have been first to market and the only choice and they don't like to make switch that
maybe just sorry, talk to you just because I see my friend.
Yeah, sorry.
Yeah, apologies. I don't mean to continuously interrupt. I also want to know that my friend here who is leading the witness in terms of the evidence that he would like her to respond with and and again, I do think that straight into opinion evidence we were talking about apex in the market and not from a science his position visa V. Tex.
Do like the question I asked was based on the real world occurrence, and if the witness went beyond it, we can remove that but that was my last question, your honor, and without will complete my direct examination.
Thank you. Are you ready for cross swords?
Hi, I'm Justin.
How you can start your cross examination. Your name is
Raymond.
Good afternoon.
My friends take you to a number of demonstratives and some documents in the record that I don't propose to take you to, at least if we don't need to, but I did want to ask you some questions about those drugs. Okay, so one of those drugs is Gabapentin and you are familiar with Gabapentin Correct? Yes. And you're familiar that that drug is not zolpidem. Correct. I? Yes. I am. And Gabapentin is manufactured in capsule form. Correct? Correct. Which is different than zolpidem which is manufactured in a tablet, correct? That's correct. And you'd agree with me that zolpidem is used to treat insomnia or sleep related issues? Correct? Correct. Whereas Gabapentin is used for certain therapies for those who have epilepsy, correct?
Yes. And also pain management with Gabapentin.
So they're treating different ailments right. They are. And these drugs, the parties who got NOC for these drugs, received those at different times than those in the zolpidem market, correct? Yes, yes. And the players that are in that market, whether it be brand or generic are different in the Gabapentin markets and they are in this open market.
The Gabapentin market, I believe that they the text was second to launch similar to the zolpidem market,
but there may as well have been other players that were on the market. And Gabapentin.
It would have been afterwards I believe that we were dual source for a while with with a protects
but at certain points in time there were activities that occurred including other players entering the market that made the market look different and Gabapentin that it did in this open market, correct.
Yes, I'm at a later date.
And we heard I think from you earlier, Ms. Raymond that Gabapentin was a huge product. It was very, very important to Pharmascience Correct. Yes, it was. And you would agree with me that zolpidem was was not in that same position it was a much smaller drug and much less important, correct.
It's a smaller market size.
And I don't intend to take you through all of those same questions for the other drugs but you would agree with me that it similarly valacyclovir for example, operates in a different market than then zolpidem. OPERS. Operates incorrect.
It's used differently as different different treatment,
different treatment, different players, perhaps some overlap, but these these drugs and valacyclovir if we were to capture the data, it looks different than the data does for zolpidem. Correct.
And sorry, in what sense? Do you mean that it's that it's different than it looks different?
Well, perhaps I am trying to put too many things in one question, but the idea is that the IMS data for example, is going to look different for valacyclovir than it does for so put them correct.
Meaning after the market share that was achieved with with each of the companies at the time of launch. Yes. Okay. They would, it would be it would be different. Yes.
Because every drug has a different market and has different factors that go into it correct.
Um, uh, traditionally, you still have like a first launch second to launch and then other players that will join or you can have a multi supplier launch as well, where you will have more than than one supplier when there's a launch. So that's a would look different. It really just depends on the players in the market at the time at the time of the launch.
And you'd agree with me that zolpidem is not on any public formularies correct. So potem is not but some of these other drugs including Gabapentin valacyclovir are in fact public drugs correct.
In some provinces? Yes, they are. They are public drugs.
And in some provinces they also would have achieved what we consider an Ontario as oh if I status but interchangeability, correct? Yes. And those those things such as the the public private distinction can affect what the market looks like, correct.
It can affect what the market looks like, but it doesn't really affect in terms of the sales or listings that you would have with the independent pharmacies or with the chains because they still have to purchase the product when it's OSI when there's interchangeability, so they would still list it.
And Miss Raman, the delay period in this case begins on January 2 2015. Correct.
Of which product are we talking about? Again,
apologies for Zilpah diamond but
for something okay. Yes, and
thank you, and that is because Pharmascience in the buffer world would have received its NOC on January 2 2015. Correct? Correct. Which means that farmer science would have been able to start marketing its products as of January 2 2015. Correct. And I believe we heard you say earlier that the in fact the sales reps would immediately after getting an NOC would would start trying to market and trying to get an obtaining sales for zolpidem immediately after getting an NOC Correct. Yes, we went. And in the real world, Apotex received its NOC on December 31 2014, correct? Correct. And so that's actually three days before Pharmascience would have received its NOC in the buffer world, correct. And as of December 31 2014, that would mean that Apotex would also be able to start marketing its generic zolpidem products,
correct. They would be able to Yes.
And they would be able to go out and start obtaining sales
Correct? Correct.
Which means then, for the entire delay period from January 2 2015 to December 6 2016, Pharmascience. And Apotex were competing for the generic zolpidem market. Correct.
That's in the platform world, correct? Yeah. That would be correct. We'd be competing together.
So just as they were in in the real world, in the but for world they were also competing, correct? Correct. And I know I'm jumping around a bit but in the real world, from science got its NOC on December 7 2016. Correct? Correct. And it made its first sale around December 15 2016. Right.
I guess because we were waiting for Health Canada's approval because it's a controlled substance. So there's, it's there's a different process with with that particular drug.
Right. I think we heard from some of your colleagues earlier that there's a delay of perhaps five to seven days in obtaining that narcotics license, which is which is what is reflected in that, that you're speaking, correct, correct. And if we could pull up what I believe is marked as exhibit 92, it's FC 306.
Miss Raymond, we saw this earlier during your testimony today, but I just want to confirm for you that that you recall seeing this
Yes, I do recall. And we heard from you.
And you see here that farm sciences first sale in the real world isn't recorded in IMS until as you can see there January 2017. You see that right? Correct. But we just heard from you that farmer science made its first sale in the real world and approximately mid December 2016. Correct? That's correct. Which means that there would be approximately a one month lag between the sale that was made in the real world and IMS recording, correct.
Yeah, exactly. It depends. IMS has a certain cutoff date. I'm not exactly sure exactly what date but they have a cut off date for recording prior to the month prior or it would be able to fall into the next one.
So if it wasn't in by that time, it would be it would be reflected but it would be reflected subsequently. Correct. Correct. And we heard from you and you you agree with me that Apotex in the real world got its NOC December 31 2014. Correct? Correct. And if we look here at the chart, which I believe the the blue line is representing apex, we can see that it shows that IMS reflects the first sale of APO Zopa dam in February 2015.
Right, that's, that's exactly right.
But the data pertaining to Apotex would have been subjected to the same lag that that Pharmascience was as well correct. It would have been so Apotex likely made its first sale prior to what IMS records it as here correct.
Um, it it depends. Yes, it could have been in in I would assume January after the cutoff date, provided they had product right for the launch. So I believe they received an OC you're saying December 31. They would have also had to have product when product would appear so you can have no see but not actually sell until you would have the product in stock.
Well, there's nothing you'd agree with me that there's nothing stopping Apotex from selling a product that you know selling to their customers that they have like a future product, for example, correct.
As long as they did have the stock phase. That's That's correct.
And as regards that lag that we were we were just talking about in the real world as reflected in the IMS data. We would expect that in the buffer world. Should we be looking at a chart similar to this? That same the same leg would appear in January to February 2015. In the butt for a world as it would as it did in the real world? Correct.
Do you mean the leg between the first the first sale so if if Pharmascience received NLC January 2 that there would be a lag date that I think that data would have been captured in the January sales for TSA because we would have met the if we're going to see and then we would have had sales prior to the cut off. Then it would have shown sales in January, and possibly February as well.
But you'd agree with me that there's nothing that's different in the buffer world about the recording of the data in terms of IMS than there would be in the real world. Correct? Um,
and I'm so sorry, but what do you mean by that by
I am confirming with you that there would be no difference in how the data was was recorded in the but for world as there would be in the real world. Okay, sorry.
I'm sorry. I understand yes, they would be recorded the same way different their respective deadlines and stock and product itself
and just as in if I may just have a brief five minutes and then come back. Thank you.
Apologies if I could actually get just a couple more minutes, Mr. D'Souza. If that is something that is available to me thank you
The defendants are asking for a few minutes more.
Sure. How much time do they want?
They said a few minutes. I don't know maybe until 1250. I would assume every sufficient
Well, I took a long time this morning. I'm happy to your counsel however long they need but
just as in I only need two or three more minutes if if the court will allow
it. You've got it. Thank you.
So, hi you can hear me clearly you can see me query very clearly.
Okay, perfect. Yep. phone
on vibrate.
Yes. Yeah. We're still not done with the previous witness. But we should be soon so I'll just transfer you to the waiting room for a few minutes. me well. Oh, yeah. That's good. If you can pan your camera down just a little bit more. That would be that should work. That should be
I have a laptop.
In addition, I was going to ask you I don't have your I'm gonna be asking you when I swear you in your professional address. I don't have it written down here. Would you be able to provide it to me in advance just so
you're talking about where I presently work or where I live?
Presently work? Presently work.
I'm at a company called convatec co NV at EC address 1425 Trans Canada Highway. Suite 100 Doorbell Quebec obviously. And postal code is haitch nine P has been Peter to be has been Victor three.
Thank you very much. I appreciate it. Did you have any questions for me before?
No. I guess I should keep my camera on correct.
If you can keep it on. I'll be putting you in the waiting room so you won't see or hear anything. No one will see you until I bring you in.
No problem. Okay,
thank you very much.
Thank you. I am Mr. D'Souza. Thank you.
You're healthy as well science.
recording in progress is now resumed
Thank you. Miss Raymond. We heard just a few moments ago that in the in the but for world both pharma science and Apotex received their NFCs within three days of one another. Yes. And you'd agree with me that in the buffer world, as is the case in the real world. Apotex has a history of launching products for which they get no C's for correct?
Yes, correct.
And you and your Salesforce team wouldn't necessarily know what's going on at Apotex at any given time Correct.
Um, you mean we would know if they had an OC or not it Do you mean that way? Or?
Certainly you would know if they had an NOC Correct. Yes, we would know if they had an NOC because that information is public and on Health Canada's website, correct. Exactly. And you would be you or someone within from a science would be watching to see when that an OCT was received, correct? Yes, correct. But you and your Salesforce wouldn't know how much sock Apotex had at any given time Correct.
Um, we wouldn't know unless we were hearing it from customers. If customers were sharing the information with us that yes, they protects hazard OC but they they don't have products or they won't be taking orders right away. So we you hear that? You would hear something like that from a customer.
So if you were to go out and speak to your customers to sell your product PMS, zolpidem you wouldn't have the same leverage in a situation where a vertex also had their NOC as you would if you were the only company that had an NOC correct
um and again, I'm sorry to to make the specifications but it would depend on having an OC and then ready to ready to sell having the product and taking orders.
You don't you don't know. You can hear from your customers. That Apotex doesn't have the stock but you can't confirm that information correct.
And the only way we would confirm it is either with you know the wholesaler is through their through the customers, the customers again the same thing but chains and the independent pharmacy
and you'd agree with me that it would be risky for pharma science to just assume that Apotex didn't have stock and therefore back off in their in their process of trying to sell PMS, zolpidem, correct.
Yeah, we wouldn't, we wouldn't back off it in selling the product.
And you particularly wouldn't do so when they competitor is a protects because a protects is known as one of your top competitors. Correct?
Correct.
And so that wouldn't change then your negotiating strategy with these customers? Because you would still want to gain as much sales as possible correct?
If and again what your dual source so you you would have a range with which with which and you would use because you know that you're only two suppliers and then again at that point when you're you're at a negotiation stand point in the process. They the customers kind of let you know as well. Whether Apex has approached them or not or whether you're that you're you're alone but it would it would be either sole launch or dual source launch strategies that would apply.
And in this circumstance, you're not Sol in the market because Apotex had an NOC as well Correct.
Um, yes, they had an NOC but if I'm not mistaken, they didn't sell right away or take orders right away. So if we're using the but for world and applying what actually happened at that point, they're not sure the reasons why they didn't but they didn't actually take orders till much later. And again, not sure if it was a supply issue or product issue, but at that point, a farmer science would have been taking orders first. So in terms of customer investment, it some it still would have been around this around the same or maybe a little less than would have it would have just depended on the circumstances
in his room and in the real world. I believe we heard from you earlier that you avoided Apotex friendly pharmacies and your strategy for selling PMS open them correct.
Um, it's not that we avoided we targeted the Teva stores first because they are they are not eco friendly. So it's the first way to get the, let's say the first strategy and then in Quebec, we targeted all farmers.
But I'm in the middle of a fire alarm here for some reason.
We all are
Yeah, I think it's one of the emergency alerts. Sorry. There we go.
Okay, okay, not just me. Know.
If we can also go back to that exhibit 92 that we were looking at a moment ago and to re situate you, Miss Raymond again, this is the real world zolpidem generic market share the blue being appetites and the orange being far from science. And so you were telling me earlier that in your submission, it was possible or you were hearing that Apotex had some supply issues
but I'm sorry,
that the as this chart shows, there were sales made at some point prior to February 2015. Correct.
Um, if it doesn't, we don't know that for sure that I guess for IMS tracking purposes, it shows us February 2015. And if there was something again, if there were any sales made, like at the kind of at the cutoff date in January, we wouldn't see that here would be captured by IMS. But I don't know when the first sales were were made for a protects back in in 2015. Apart from sorry, what's indicated here?
That's right. So you don't know when a protects made those sales but we know that at the very least they had stock as of February 2015 Because that is shown on the chart here. Correct? Yes. Correct. And we know that there is a possibility of the leg existing and that either late in January pass that cut off or early in February. There were so there were sales made by
Apotex Correct, correct.
I think those are my questions Mr. Aiman.
Thank you very much.
Thank you, Mr. drol. Did you have any redirect examination?
All right, take my frame and suffered it off and further.
Mr. Chairman, I appreciate your patience. And I'm only going to say this because when I was counsel, I had a witness that ended up being excluded from the courtroom a number of times and at the end of the day, he came to me and he said, was I doing something wrong? So just rest assured you did nothing wrong and we appreciate your patience with us today. Thank you very much.
Okay. Thank you very much and have a great afternoon, everybody. Bye for now
by Mr. Jerome doe, ready with your next witness?
believe we are It's Miss Joanne salvo. And I think she's in the right waiting room if I'm not mistaken.
Good afternoon Resava. Can you hear me? I believe you're on mute.
Okay, do you hear me now? Yes,
I do. Perfect. Thank you very much. So good afternoon. You doing well. Doing very well. Thank you. Excellent. Are you ready to be sworn in? Yes. Okay. So to start, would you like to make an oath on a religious text? Bible or other or make a solemn affirmation?
Selamat permission is fine.
Okay, perfect. In that case, I will ask you to first of all, state your name, occupation and professional address, please
perfect. Jovana. Joanne salvo, professional finance manager at convatec. Canada Inc. and you want the address of convatec Just one second. And the address is 1425 Trans Canada. Highway suite 100 and doorbell Quebec.
Thank you. You solemnly affirm that the evidence to be given by you to the court shall be the truth, the whole truth and nothing but the truth please say I do. I do. Thank you.
Good afternoon Mesaba.
Good afternoon.
Can you just confirm you're alone in the room and there's no one out there.
There's only a small dog in the house. So do come in. Hopefully he won't. He's downstairs. But there's no one in the house.
Thank you. Where do you presently work?
I presently work at convatec Canada. And what's your job title their finance manager the candidate division. How long have you been in your current position? Since May 2018.
And prior to convatec Where did you work?
I was at pharma science.
I'd like to ask you some questions about your employment with pharma. Fine. Can you just tell the court when you began working there
2001.
And what was your job title when you started?
I was first hired has financial planning manager in the corporate division of the finance division.
And what were your duties in that role?
The My duties were consolidation of the budgets the forecast So of all the divisions of pharma science,
and then and what year did you hold that position?
I held it for about a year I bout a 11 to 12 months later I was transferred to the pharma division in the generic division of pharma science.
And what was your job title at that point?
Finance Manager pharma division.
Okay. And in that role, what were your responsibilities?
Everything to do with the generic pharma division, whether it meant closing the financials Edmonton, working on the budget consolidating the budget for that specific division looking at the forecast profitability, royalty licensed partners etc. So functions of the finance department.
What year are you a financial manager in that division?
Well, I was in the position pretty much all of my career at pharma science, except that a few years later, I got promoted to senior finance manager, which is pretty much the same responsibilities but just at a higher level.
Okay, thank you. Now, during your employment at pharma science, did the company have any kind of financial record system? Yes, it did. What did pharma science use?
Since 2003? It used to SAP
and what sort of information is recorded in SAP?
It was fully integrated. All information was in there, including sales expenses, cost of goods revenues, ci, fully, fully integrated system.
How did SAP record sales?
Well, sales were recorded. Through the sales module, which is basically they're an order comes in through a call to the customer service department or through EDI, the order gets put in based on quantity and the price that is currently for that specific molecule. And and then when it ships out and records the sales.
How did I say pure record expenses?
Expenses could be through expense reports it could be through invoices in conjunction with purchase orders.
Was it part of the usual ordinary course of business record financial transactions and SAP? Yes, of course, it Pharmascience rely on the information in SAP for any purpose. Yes, of course. What sorts of purposes?
Well, our year end audit. We had urine audits so we had information for royalty partners, so profitability for the different businesses. We use SAP for every day to day transaction in terms of analysis of our business, etc.
And which individuals or which employment levels within the company would be using the data from SAP.
Well would be the finance team as someone like myself in in the division. In conjunction, I would share the information with the directors of the division vice presidents of the divisions or sales, high level sales directors. So those auditors obviously those are the type of people that will we will be sharing this information with and obviously the owners of the company.
Anyone external to pharma science, use the data and SAP.
Oh, yes. If we ever had an audit on one of our royalty or license partners, definitely they were they had access to our data. Our external auditors had access to our data. Those are a few of the examples of external external members having access to SAP
and Once data is entered into SAP, was it permanent? Yes, for sure. Was SAP capable of generating molecule specific information?
Yes, we made sure we developed it to try to get also our profitability by molecule which was very important for us, especially when we were dealing with royalty unlicensed partners. So this was set up in a very detailed method.
Okay, thank you. I'm gonna put a document up on the screen here. And it's FC 77. And bear with me, I'm working from my laptop. So there may be a bit of a lag but I'll just begin by asking you if you recognize this document on the screen.
Yes, I do. I'm just going to ask you a question. Are you okay if I hide the pictures of the individuals on the side since it's on my document and my love doing that,
that's fine by me just as in any any issue with that.
I don't see any pictures.
Well on mine I do. Okay, so maybe what I'll do is I'll leave them I'll leave them Mr. duality, but then maybe I might ask you to move the document more on the left the pictures on my right side of the screen. So I'll leave them as
I see. I see you on the right side of my screen. Nice. Okay, I apologize.
I know it's okay. I'll just make Mr. gerada just move it a little when I don't see the whole
screen. Yes. I'd like to I'd like to remain being able to see you.
Okay, perfect. Go ahead.
Can you see it? Fine. Now, Masako?
Yes. Could you do me a favor? Could you just scroll to the left? digerati and just put a title lock on the seven. Just put up just put your cursor on B seven, seven, B seven and do a freeze pane as freeze pane Okay, so it's a view Freeze.
Freeze top row or Yeah,
re Freeze Panes. Perfect. So that and then if you don't mind just scrolling a little bit to the right. Yes. Now I see the document and I see the headings. Thank you.
This may turn into an Excel lesson at the same time. Do you recognize this document?
Yes, this is an SA P document. Just go to the left a little bit. This is in SA P document for sa P them. Okay,
so what time period
and this one here is fiscal. It begins with December 2016 Since I see fiscal 2017 So begins with December 2016. Up to could you just go to the right a little bit up to December 2017.
That's the same can we mark this as the next exhibit?
Yes, that.
98 I believe
as Davo Did you have any responsibilities in relation to this record?
Yeah, analyzing these records. We had records like this one. For every single molecule and subdivision and farm of science. So basically analyzing the profitability of of these different molecules for different different time ranges.
Do you have any responsibility in relation to the expenses or sales or any of the items we see along here?
analysis, analysis and for the expenses just to make sure all the accruals are in in place for that specific period.
Okay. Does this document show the total? Well, you said all the expenses, does that include the total customer investment expense we see exactly and does this document show the total customer investment expense related to the sales of this product for this time period?
Yes, yes, it does. And when you're looking at the customer investment when a product is launched, it might take a few months to have a decent rate to analyze this molecule but with the type of period you have there, I believe you have about 12 months in this report. It's a good range in terms of looking at what the CI is for that specific molecule.
Okay, and can we use this record to determine the average customer investment expense for PMS? Zolpidem over this time period?
Yes, for sure. For sure. Because you have you have over four or five months of periods so usually added 12 months it's it is definitely giving you the profitability and the CI rate for that specific molecule.
Okay, and can you just guide me through that I'll make the change on the screen that need to but can you just describe to the court how to go about calculating the average customer investment for this time period for that for PMS, zolpidem,
perfect could you go? This is your lD to the right. Please and on cell oh seven. Could you just sum the whole line of seven please just highlight the whole line that it should. should sum all of it.
1.4 million and change
it to just go back to the right because the pictures are in the right or the number sorry. Just get on that formula on the 1.4. Just want to see what the formula is. It's B two and right perfect. So copy that formula. Down to line 14 or 14 Please. And then on Oh 15 Just do plus or 14 divided by seven please. And that gives you your range of the CI for that specific molecule for those 12 months 1213 months period, which is 32.4% Ci
and about an accurate representation of the customer investment expense for that time period.
Yes, definitely. Pharma science. Actually, I have to I have to state in terms of how the accruals and the actuals are being calculated in the financial statement. Very detailed, pretty amazing. All the accruals are in so it's not just a payment as we all know CI is paid on TSA sales. So both TSA and X factory are combined in this type of analysis to make sure your CI is accurate in terms of what is due to the customers for those specific sales.
Thank you. I'm gonna open up a second document. Now just bear with me, I will just switch to this document. And can you just tell me take it first of all, can you see that document on your screen? Yes, I do. And do you recognize it?
The same type of document as before, it's just that the period is different. This one is Starting with January 2018.
Okay, and is the source what is the source of this talk and where does this data come from?
This document comes from SAP. It is one of the profitability modules that we have in SAP.
Okay, just as in if we can just mark that as the next exhibit.
What's the FC number?
FC 249?
Exhibit 99.
And just for the record Mesaba, what time period are we seeing here?
So we're seeing January 2018, to December 2018.
And to calculate the average customer investment expense, is it the same exercise as what we did in the document we just looked at?
Yes. Would you like to do it? Would you like me to guide you to do it? Are you good
if you're worried it might be best? Yes.
Okay, so you're in column n. So just some B seven, two and seven
and then copy that formula on line 14. I believe and 14 and then you'll do plus and 14 divided by N seven
and you're going to have to scroll a bit to the right to the left. Perfect. Okay, and that one is 40.8% ci for that specific 12 month period.
We wanted to use two documents together to calculate the average CI over the two year period. How would I do that?
So just put your cursor on Oh 707 Okay, sorry. Oh, seven you're on in.
Oh seven. Oh, sorry.
Let's see if you do equal. Go get your total for the prior to worksheet. If you still have it open. You still have it open? I do. Yes. So just go get the total from them. Okay. And then hit enter. Yeah, and just hit enter. Okay, and do the same thing on there equals on the second on the first sheet. Okay, and now on P seven. Ad do equals and seven plus oh seven and copy that formula. copy that formula down. Could you just make your column feel a little bit smaller? So I said okay, it's fine. And then just put the formula in in there. Just copy your 40.8 formula to the P cell. Yeah. And now you'll see the weighted average of the full period of the two reports which is 37.2. And if you don't mind, just copy your formula from N to o the percentage formula, the percentage to 40.8 40.8 F to copy it over to the next note to the right, so that we see both so you can see that there's been a bit of a change in most probably the customer mix that's been buying this product. So you have an average since the beginning of time of about 37.2%, Seon
now, let me we did mark this as an exhibit and I'll just ask you this Miss Miss Sabo. valiance expert accountant, added customer investment amounts for the three months following this time period of sales to account for what she said was a delay in reporting of rebates. Can you just tell me what you think of that?
Well, the way I'm just going to try to explain to you how formas science works. And if I'm going into too much detail or not clear, just stop. The way the formal science systems are is some companies what they do is they'll do an accrual just on the total CI on a financial statement. They'll say, Well, we have this much of inventory on our wholesalers. Let me just put an accrual and they don't put it on the product level. But what Pharmascience does is we actually had it on the product level. So if there is usually your wholesaler might have, depending on the product between four to six weeks of inventory, depending on the product, obviously, it could be less than it could be a tiny bit more. But what we did is our accruals were on the product level because of that. You don't have to add more months in the future. Well, it's very important for us because when we are closing our financial statements, we there is an accounting principle that the expenses or CI has to be recorded based on the sales we're doing. It's not when you're you actually have to pay it but there is a matching principle and then matching principle for pharma science was in a lot of details. It was on the molecule level. So I believe that extra few months that they're asking for should not be taken. It's already integrated in our financials.
Actually, those are my questions Mesaba.
Okay, thank you. Are you ready for cross examinations towards
I am just as in Thank you.
Afternoon DiSalvo
afternoon
I understand that you were from usciences Senior final financial manager, correct? Correct. And of course, as we as we just saw, as a senior finance manager, you're aware of the amount of sales that were that were being made of PMS open them Correct, correct. And similarly aware of the customer investment expenses that pharma science incurred in order to make those sales Correct?
Yes, for sure.
And you are aware that when Pharmascience makes a sale to a wholesaler, for example, that sale is recorded in pharma sciences accounting system, correct? Yes, it's
an ex factory sale. Correct.
And we heard that as I believe you called it SAP. Correct.
SAP? SAP? Yes, yeah.
And that's recorded at the time that the sale is made, correct? Yes. And we heard from Mr. Goodman earlier in the week that most of the distribution of pharma science products isn't directly to pharmacies, but to wholesalers, correct? Yes. So most of the sales of of PMS OPM would be recorded when they were sold to wholesalers, right.
They are recorded when the product leaves from a science therefore sold to the end customer Yes, whether it's wholesaler or a direct and customer
and customer investment.
You could also have it direct and customer does not just wholesalers, we do do have some customers that do come direct.
You do have some customers that come directly but Mr. Goodman's evidence was that most of the distribution for pharma sciences through wholesalers and you don't have you don't disagree with that correct? Yes. And similarly, you know, as is required of a business expenses such as customer investment are recorded in SAP as well Correct? Yes. And they are recorded at the time that customer investment is paid, correct? No, not correct. The not not correct. Farmer science doesn't pay customer investment to wholesalers Correct.
Customer investment is at the end user. It's not to the wholesaler the wholesaler might just get a fee for service
and if we could pull up FC 256 Please. And I don't believe that we went to this one but we went to some similar profit center reports. You'd agree with me Miss salvo that customer investment is a farmer sciences. Most significant expense. As regards PMS open. I'm correct.
Correct. Could you do me a favor though? Could you scroll to the left because I don't see the headings because it starts on column p. So I don't see the front of the worksheet. Correct. Okay, perfect.
Then it just occurred to me, let me let the witness know that. She would like to open documents. I think my friends have provided them to them. I don't know if it just makes sense because it might be hard to manipulate these sheets.
I'm comfortable with that. Miss elbow, if there's any any time when you want to open up a document that I have referred you to specifically. You can you can do so.
I'll let you know. Thank you. Yeah, could you just go to a little bit more? Scroll up because I I see only rows. Yeah, perfect. Okay, now you're you could ask me your questions. Well, I
believe you answered the only question that I was going to ask, which is that customer investment for zolpidem was the most significant expense. Credit
investment. Yes, yes. Sure.
If we pull up FC Oh, apologies. Can we please mark this as an exhibit? FC 256
exhibit 100
If we could now pull up FC 148? Isabeau we haven't seen this yet. today. But yeah, you are familiar with this document Correct? Yes, it is. Tracking customer investment paid for PMS. Zolpidem, correct.
This one here is showing at the TSA level not at the ex factory level comparison. Yes. Correct.
And we see here that for pharma science, customer investment includes both rebate and client relations. Correct? Correct. Rebates being a percentage of sales of a certain product right?
rebates, meaning exact depending on the agreement and the time of the agreement correct.
And client relations being a lump sum payment that's made monthly Correct.
can't really go I wouldn't say it's a lump sum payment made monthly, the client relations of what I recall. It's actually relating to an invoice that's coming in. It's not a lump sum payment, just because it's a lump sum payment going going out there. Is an agreement or backup to this. A little bit more more detail than a lump sum payment.
So it's based on on the sales that
they found an agreement based on every customer could be different but it's not a lump sum payment. The first one your rebate, yes, it is an agreement based on timing, a time factor a percentage and the customer itself in the molecule. But the client relations is an agreement. It's not just a lump sum payment.
But rebates and client relations are separate.
Yes, they are. They were recorded separately. Yes.
And we can take that document down.
Miss I'm sorry, is
an exhibit Yes, Justice, then apologies
exhibit 101.
And Miss over the basis for both rebates and client relations amounts are negotiated verbally between the sales reps and their customers correct.
It is usually at a higher level than the sales rep itself. Usually when there's an agreement it's mainly either on the sales directors level and it's negotiated. It could be negotiated verbally or written and there's a document that is sent to head office to put that in the agreement.
These percentages are negotiated and they are they are distinct as per each customer Correct?
Yes, yes. And each molecule
and once rebates are set, they don't change often correct.
It depends they could change. It depends on the agreement on the timing of the agreement. If your agreement is for six months after six months, it's really looked at. It depends on a lot of factors. I wouldn't say they don't change often. No. It depends on the agreements and depends on the competitors going in. There's a lot of factors to consider.
If I told you that your colleague, Miss Jessica Zeidan had been asked the question, How often do the rebates change? Once they're set for a product and she answered, they don't change often. Are you saying that that answer is incorrect?
No, I'm just telling you what I feel the answer is and what I know the answer is and you're looking at the timeframe, pretty much when I was at pharma science 20 2017. And if I'm not mistaken, Jessica came in pretty much a few months after I left so I'm talking to the timeframe when I was at pharma science. I can't talk for Jessica
and on the rebates you are aware that pharma science as part of this litigation has produced documents that show the customer investment rebate rates on PMS all button correct. And for the reasons that we just discussed, these rates vary by customer, correct?
Yes, they could vary by customer.
And you would agree with me that customers that have many stores like big big name box stores would likely have more bargaining power when negotiating customer investment rates than say a one off pharmacy correct?
It really depends on your it depends more than it's not just related to how big the store is. It relates to that specific molecule. What is the intention of that customer to buy that molecule? Are we alone in competition? Are we first if we're first of all, you're not going to have to give too much CI on it. If you're first on the market. There's a lot of factors to consider consider the relationships so it's not just a matter of, well, you know what you buy 3 million from us and you're going to get the highest rates. There's a lot of a lot of different factors to consider. And it is actually pretty much on most cases it was at that time period negotiated by molecule and not has a bottom up or bottom down exercise.
You'd agree with me that one factor in terms of determining the customer investment rate would be how much sales a certain customer would likely bring in and correct
not on its own. No, I don't agree with that. It depends on the competition. How many competitors are out there. It's not how much sales that they're just bringing in it. Are you first to market there to market tend to market that makes a difference.
I asked you if it was one factor that the size of the store and the amount of sales you would make would would affect negotiation of customer investment rates. You'd agree with me on that correct.
It could be one of the factors but it has to be looked at all factors together.
And if we could pull up PMS Oh, apologies FC 247. Misawa Do you recognize this document
greement Yes, this is a this is a looks like an extract from SAP since you have your agreement number and your customer group level in there
and we see here that this is tracking the the trade spend rates for certain customers Correct?
Is there something on the right because right now I only see three columns I see comp four columns, I see a two column is or seven. Could you then just make it a little bit smaller so I could get to see the whole the whole report at least landscape wise. Just shrink it a little. Actually do the minus at the bottom of the minus just a little bit more on the left. Just a little bit more. Okay, so could you just Okay, good. All right. I don't I'm having to just to okay, just give me two seconds just to see the document could you just go on the right slowly?
Okay, so this is the document that shows what the customer is and what is the agreement timeframe. So you have your valid and to date and what is the the rate that you will be given on that specific SKU of caliente? Correct.
And so this is specifically for PMS, all of them correct.
Of what I see on on the screen. Yes. When caught on the row on column E. It seems to be also fidem. Yes.
And if we take a column C and organize it alphabetically, okay, which we will do for you here
we see here at the beginning, because it started with a dash London Drugs. This is here first and if we could scroll over a bit to the right we see that the customer investment rate during 2017 to 2000. Well, at the very least for 2017. The customer investment rate was 58%. Correct.
I'm sorry, could you just repeat that question? I don't see your 58%
under the rate column and as we see 58.00 for that specific customer for that specific customer. Yes, for London Drugs. If we can read scroll over to the left. Yes. Yes. And if we were just scroll down and locate Loblaws which should be alphabetical.
There it is there. There's a number of them. And if we scroll over to the right we can see that the rate for Loblaws is customer investment rate of 50%. And if we scroll down further and look for Costco,
yes
there it is there. We'll do the same thing. We can see that for the time period of Jan, I'm not sure how the dates are reflected here but in 2016 to 2020 the customer investment rate was 62%. Correct? Right. And if we scroll all the way down to the bottom the last customer that I want to take you to is is Walmart and similarly if we look at it, we can see the customer investment rate was 65%. Correct? Correct. Now if we can manipulate this document once more so as to organize it by the customer investment rates, perhaps with your highest to lowest Yeah. And we'll need to just scroll over a little bit so we can see the rates please. We see that the highest customer investment rate on this chart is reflecting 76% Correct? Correct. And if we do a little scroll, we can see that there are many customers that reflect this 76% Correct.
Correct. Those are all tiny customers by the way. They're one one offs. Pharmacy in Quebec.
And if we oppositely go down to the absolute very bottom to see the lowest rates that are recorded here. We see rates that that say 1.8 2.755% or 8% but these are not rebate rates correct.
The bottom ones are fee for service rates.
Right and fee for service rates are different than rebate rates. Correct? Correct. And on the left hand side there at the bottom we see ima and that that stands for inventory management agreement. Correct? Correct. And inventory management fee is paid to a wholesaler Correct? Right. And wholesalers, as we heard from you earlier, don't get the rebates that the end customers get? Correct.
Correct. I did specify that they get a fee for service.
Right and those fees were service or inventory management fees or we see service efficiency fee here as well. Those are in addition to any customer investment rebate rates that would be provided to the end customer as well Correct.
Those are still included in your financial statements. They're still under the section CI it's not over and above the CI rate that you're seeing in the profitability. They're actually mapped to those accounts.
But the rate isn't shown in the profitability the the profit center shows the actual amount paid Correct?
No the profit center shows the amount paid and accrued for a CI and CI includes client relationship. It includes rebates, it includes fee for service, it's all in all the CI on the pharma science financial statements will include your fee for service and it's not just a paid portion that you see it's actually you actually see your accrual portion. But it's like a normal financial statement.
But if we were to put this into the real world, if pharma science were to sell, PS, PMS, OPM or any other product to a wholesaler that they had agreed to an ima with and then the wholesaler sold it to a end customer from a science would be paying both that percentage to the wholesaler as well as to the end customer Correct.
We'll be paying the fee for service to the wholesaler but they're the CID rebate rate to the end customer. They're not paying a double to two vote. So each one has their separate type of agreement, a fee for services to manage the product and get your product out. And your rebate is to actually obviously an expense on selling the product. And that both of them are on your financial statements under CI did I answer that correctly? That I answered your question.
You answered my question. Okay cool. Justus in in the name of efficiency if I could have five minutes to overlook my outline to perhaps pare it back a little bit
let's keep five minutes then. Thank you
until 140,
do I stay on or do I?
You can stay on I'll transfer you back to the waiting room to salvo. And then at that we'll bring you back in as soon as we're ready. Thank you recording stopped Are you ready to resume? Already here
apologies for asking again. But may I have another five minutes please?
Just to say thank you?
The defendants have asked for a short extension just a couple of minutes more
that's fine.
Are you ready to resume?
I am thank you for that indulgence
wasn't my authorization and two things I just want one thing I just want to note with the price for your resume. I'm going to be replaced tomorrow by one of my colleagues and name is Cat sakellaropoulos. You should have been in CC for a few emails that were sent between the parties but this afternoon when I send the witness list that witnesses exhibit list told the party she will be in CC and I'll remind everyone that there's anything to be brought up you can contact her necessary it'll just be for tomorrow after that I'll take over again on Friday. Just an FYI. Thank you gets it and I guess I'll bring Mr. Justice can.
recording in progress resumes and if I can just know before you continue, I don't believe FC 247 was produced.
If we could please do that gestures just isn't
it will be exhibit 102.
Thank you Mr. Souza. Miss salvo you would agree with me that you said to us that there was no delay in the recording of the payment of the customer investment as compared to the sales Correct.
I said there was a matching principle whereby we tried our best to make sure the accruals are in place related to the ex factory sales correct.
So you'd agree with me that there is a delay in the initial recording of the customer investment being paid Correct?
No, the there's an accrual it's not the amount being paid because the amount being paid. You'll get the information one month later. So if you're selling TSA in for example, we are right now November so you're selling TSA November. Your TSA reports from IMS concern around he's to come in around let's say December 10. So what you're doing is you're doing an accrual, so you're doing an estimate on how much you're going to end up paying for the sales related to those TSS
Misawa you'd agree with me and you did earlier that the the large majority of the PMs open themselves were through wholesalers Correct?
I I'm not specifically saying on that molecule, but on most customers, the large the large volume of sales are at wholesalers.
And you'd agree with me that wholesaler sometimes need to carry inventory of a product to sell to retail pharmacies, correct? Yes, I
did mention sometimes it's 30 days sometimes it's 45 days depending on the molecule.
And when this product, whatever molecule it is, is sitting in the wholesalers inventory, no customer investment expense has been paid by Pharmascience. Correct? No, but it
has been accrued.
But you're not aware at that time, what the customer investment rate will be because you don't know who the final customer is correct.
You're not 100% aware and that's why I said at the beginning with Mr. Geraldo when you're taking about 12 months of data, you gotta get a good history of what you're doing. So when you're actually you when you're launching a product if it's especially if it's a pretty big product, you're you're having discussions with your sales team and saying okay, what do you think the volume is going to come from which type of customers what are you trying to negotiate, and you're trying to get a blended percentage, and that's where a manual accrual gets done to the CIO of that molecule, and then obviously, what months and months that goes in and adjust so I'll give you an example. On your on the nice just that you were in, in London, and all
right, sorry, we lost you there for just a moment. So I don't know how easy it is for you to remember what I was saying. But if you could go back, it would be appreciated. Maybe you could ask.
The last thing she said was I'll give you an example just to sin.
Okay, so I'm gonna give you an example. Do you hear me now? Oh,
I hear you No. Okay. So
I will give you an example. What I said is just a second. What I said it, it really depends on what we talked about. Did you get the part when I was talking to trying to get the average CI for a lot a new launch? Did you get that part already? Or do I have to repeat that to
know we got that part? Okay,
so, so what I wanted to to also let you know is when you are looking, for example, when we were looking at the spreadsheet that the lady showed us in terms of let's say the London and she's showing us the rates, the door, the different Costco, WalMart, etc. But you have to also take that into conjunction with what's the volume they're gonna buy. You could give someone a rate of 70% you could give someone a rate of 90%, but they might not even buy one molecule. So you're putting in the rates based on agreements, but it doesn't mean they're going to buy so that's why it's important to look at what is your mix of customers. So that's what we do when we launch a product. We'll talk to the directors and say, Did you sign any agreements? If they say no, we didn't sign any agreement, then we'll say okay, what do you think this molecule is going to be at the market? Is it going to be 10%? Because you're going in alone is it going to be 40 Is it going to be 70 And depending on what your gut is, we are going to start accruing has a manual accrual at that level. Then after two or three months of the product actually going to TSA we could actually see what what the rate is coming in at and that's when in that specific month you'll see an increase or a decrease in the CIA because we're adjusting based on reality. So yes, we don't know who is going to be buying the TSA for let's say for October, let's say for November. We'll know December, who's going to be buying it but we have a good estimate who's bought it in the past and this system will use the estimate of prior month's purchase and you're not talking a year ago purchase but the system was created with three months average on the last three months. So is it accurate is pretty accurate for an estimate? Does that Does that answer your question?
I think that answers a lot.
I'm sorry if I do. I'm just trying to get give you a more details.
You mentioned in that answer. And we went to this earlier agreements with a customer on customer rebates and you said that there would be agreements and they would be sent to head office. Do you remember that? Yes, of course. If I put to you that we examined Miss Sidon as part of discovery, in this case, whether or not these agreements would be documented, she responded that those were done verbally and that there's no agreements. Do you disagree with her statement?
I could tell you that the CI department has a control in that when an agreement has to put get put in into a CI system. There is a written document on it. It could be an email from the sales director but there is a documentation on it. I can vouch for what type of documentation is that this CI team is not allowed put in a raid in SAP without a hard document that I could vouch for. But I don't I can't tell you what examples of documents that are given to the CI team. But we do have a control there. It's not just anyone going into the system and putting in a rate without a hardcopy that's one of our accounting controls.
He said Well, if I told you that I have not seen any of those documents produced as part of this, this trial you would say that, that it's not because they don't exist? Correct
say that, to my recollection, and pretty I'm pretty pretty confident in saying that they would have at least an email telling them what the rates are because I do actually remember the emails going out to the trade business managers and saying, we're launching this molecule, please advise us by email with the radar on those specific ones. So I'm going with my past experience and what I've seen, I can't vouch with what has been given to you has evidence.
Thank you. Those are my questions.
Of any examination this dropping.
Oh no reexamination. Thank you myself for your time. Appreciate it.
Thank you. Thank you, Miss Savile. Thank you. Enjoy the rest of your day.
I will thank you. You too. Bye.
We ready with the next witness?
I believe we have the next one coming in. It'll be Mr. stainsby that's handling the afternoon. I guess we're already into it. So I'll just turn that next.
I haven't had a chance to check them with the witness. So I've just take the time to confirm there's audio and video working but there's no need to insure.
Okay, you just take whatever time you need Mr. D'Souza.
Thank you. Afternoon, sir, good afternoon. Can you see me well, can you hear me? Well?
Yeah. Can you see you and hear you well okay.
I can hear and see us. In that case, are you ready to be sworn in?
Yes, I am.
According to information I have here you have chosen to make to swear on the Bible. Is that correct? On solemn, solemn affirmation, but there's no change. In that case. Can you please state your name, occupation and your professional address please?
Okay, my uh, my name is Bruno GIBBO. And my occupation I am an accountant, finance business partner for the operation and pharma science. And I work in, in pharma science and on rail mounts in Montreal.
Um, okay, and that just, um, you solemnly affirm that the evidence to be given by you to the court shall be the truth, the whole truth and nothing but the truth please say I do. I do. Thank you.
sustains me
thank you justice in. Good afternoon,
Mr. Guilbeau.
Who is your current employer, pharma science,
Canada.
And when did you join pharma science?
I joined in September 2015. And what was your role when you joined? My role was a finance business business partner for the operation a global operation?
And that's your same role today?
Yeah. Does the same. Yeah, yes. Yeah.
And what are your responsibilities in that role? So my responsibility
in the role is to manage all the costs a good side of the operation, so it's basically all the production internally and the purchasing of Metro related to our operation. So that define inside of that support also distribution center that we have to deliver to customer.
And where did you work before joining pharma science in 2015?
I worked at before pharma science I worked in sickness Canada as a finance, finance director and supply chains chain I worked there for three years now. And before that I was working to in uni board Canada as a Corporate Controller for five year and a half and before that, it was a finance manager for Reuters, Canada for close to seven years.
And I talk to you about standard costs and variances generally. How does that farmer science plan for the cost for manufacturing a given product?
We usually do that on a yearly basis. So we're at the time of the jet we we make sure that all our standard are correct means the way to evaluate the cost of each product to do your budgeting process and after that to evaluate or, or financial, or do our budget basically.
And this results in what you call standard costs. Yes, exactly. Yes. And two deviations from standard costs come come up.
During the year there will be deviation, because there is nothing happening exactly exactly the way it is, but it does happen. Yeah.
And there's what is one of the most common causes of variances with respect to the pharmaceutical products.
The main variants that we would see is purchase price variance when you forget better price or there's a change in price of an EPI. The other one would be more related to an operation if we change the lot size or increase production of a product but usually these are two main variants that we would see.
And as far as I extract the variances, yes we do and how significant our variances do.
It's not a release if you get is three small on the dollar or total value as for the organization.
Okay, Mr. Guilbeau Are you familiar with pharma sciences zolpidem product?
Since I've joined in 2015? Yes, I can. Yeah, it's something we review.
Kick we put up SC 76. Please this is the document I wanted to talk to you about. And once it comes up, are you able to see that document? Well,
yeah, I can see it. Yep.
And do you recognize this document? Yes, I do. And what does it show?
This is basically the zolpidem format, five milligram and 10 milligrams and tablets. And basically this is for the year 2017 and 2018. And this is the costs their standard for that product. And it is the bright braided by type of expense within the data that was generated because of the one finished product.
And who created this document. It's my team. And where did this document. Where did you get this
from? This is a straight download. It's a download from SAP that we put into Excel to to be more user friendly, obviously but it's coming from straight from our SAP.
To your knowledge Sir, can the information stored in SAP be overwritten?
That it can be done on a yearly basis only a few people as access to that there's process to make if we want to make any change. There's processes for authorization before we can do any change many of these number.
Get back to the document itself. Oh, justice. And before I forget, we mark this as an exhibit, please. That's FC 76
exhibit 103
Thank you back to the document. What does this document in particular show?
It's basically show the if you would set if we have the car like the API of the product, which is on the columns, which are what are is the quantity the cost for of the API on on the cost of when we produce that product? And it would have all the type of the expensive there's variable cost to the left side to the right side there's the overhead cost basically.
And what's the difference between the variable and the overhead sir,
basically variable will follow with will move with usually where the volume and overhead will be more cost to support the organization. Sport a variable cost. Yeah.
So can you explain for the benefit of the court, what's included in the variable costs for the the last two in that? And then factoring in packaging machines?
Okay, no, so what we what we have is there a depreciation of the equipment and basically the cost of repair of the equipment. So if we,
okay, and then you have manufacturing and packaging overhead as well, what's included in that
it's sprues disapprobation, the director of production, the planning team, the people that support the operation and and making sure the product is produced.
Who can you explain for the benefit of the court Sir, why quality analysis and quality control are shown as overhead.
They are shown as overhead and that's the change that was done a few years ago. It's just because we want to track that cost but surely on our side of how much it's costing our CO LT on each product. So that's why we it's the same thing is the lab, the lab, the QC lab and all these things to support the operation so we wanted to separate that as as an expense.
If we take that down, please and put up FC 190 Can you tell me what this document is, sir?
Is the same thing for different but for different here. It seems to be it's for 2016 and 2017. And the rest is basically same concept. It's just a question of which here it is.
And and I take it these documents are created in the usual and ordinary course of business.
Yeah, we do create that once a year. And except if there's major change in the standard, we would modify that but it's something we do once a year.
Thank you just just a sink we mark FC 190 Please as the next exhibit.
Exhibit 104.
I will keep it up FCT 52. Please. You recognize this document Mr. Guilbeau? Yeah, do you tell us what it displays?
This is basically the variance of our actual production versus our standard. So every time we we produce something, we do compare against our standard to see if we are producing as expected, and this is where the variance would see the variance of any production. Order we have done.
Who created this document. This is created by my team.
And yeah, we do that on a monthly basis. Basically,
where did where would this document be be located? The audit
is coming from SAP. It's a download from SAP again that we
can you provide us with an explanation of what this document shows?
Yep, again, the first section the two first line from line five and line 13. These two are bulk product product that we have is this epidemic with different strengths. Under under ebene data there is category which is the type of a reason why we are we're not on at standard. So that's the way we look at it and to find to help us pinpoint where's the issue if there's an issue, and basically and the two last one which is the front line 22 to 30. That's the finished product side is not after it is when it's getting to it is packaged to the final format to be sell. And each month is basically one way each month that you see numbers that we had production and we can compare variants between the production
and there's red and black figures in there. Can you explain the difference? Yeah,
the red is basically means that we have beat the standard so we were better than standard and black is means we were above the standard.
So looking at this document, sir, can you explain when you see a difference between the standard and the actual cost?
Sorry, can you repeat the question?
Yeah, when do you when do you see a difference between standard costs and actual costs?
It's at the end of the day when a process is finished, when somebody we receive information, the standard has been that the job has been completed and all the information is entered. This is where we look at it and we will look at all the data and see that there's a difference.
And looking at Column A can you run through these and tell us what the entries are for labor efficiency, machine efficiency etc.
Basically, labor efficiency is if we are planning to do 10 hours on production and we do on eight so it's going to be positive impact. So we have use less labor and unexpected st eight and it's gonna be the same concept for machining overhead is if we do use less than expected this will be an efficiency if we use more it's gonna be an efficiency in this case. material input is basically it's the yield of the metric. Basically, if we say that we need 10 units to produce the final product and we have used 11 instead of 10. It will be a negative impacts with how many inputs we put as material in the process. structure would be in a case that we could decide to use different supplier of API for the same product. It could be a case or could be also a case of we're using a different equipment. So it's a different structure that versus that standard. We were expecting lot sizes basically we have produced more than expected or less than expected based on the size of the lot. And the last one is the basically is the final point if we have less cry a better scrap or less scrap for final product when we do the output.
Basically,
it was this document prepared in the usual and ordinary course. of business. Yet we
do that every month. It's something that we review it with operation on a monthly basis. I'd like
to adjust the Cinemark FC 250 chairs the next exhibit, please
105.
Thank you. Now going back to what you're talking about the packaging and manufacturing machines and the overhead components of that. Is there anything beyond support supporting teams that's included in that overhead?
No, it's not. It's only basically like I said planning operations. Or
yeah, basically, yes. Not the physical plant.
Not a physical planner.
We put up a SC 246. Please tell the court what this document is please.
It is I come in is a download from SAP from our system. That is the it is the all the Excipient that are used that are used to be to produce RPM, which some of them are common to other products that we have also
and and this document with time period, is it over.
And this one is starting 2014 to 2018 for if I remember
well. Yeah. And where does this information come from? Sir? It's coming from SAP
which is our ERP system. It's basically an enterprise resource. planning system that we use. And yeah,
and I understand there's some information in this document didn't come from SAP strictly speaking,
yes. Basically from the column A to P. This is a straight download from our from SAP from Q to R and n s and I don't want to I don't see to the right we have to do basically the column where's it's in green on the top q2 S is something that was added with other information. But the end Yeah, so just to be able to put everything in the same because as you can see on the column, oh, some are in kilograms or in grams. So we had to kind of convert that to be in in the same unit same units. Yeah.
Yeah. And was this? How would this document be used at pharma science?
Basically, it's used to track juices ation of the product for each of the end and to manage their inventory is this an aware of the project went and it's basically tracking of all our transaction of inventory.
And if you click on the tabs at the bottom, just quickly, if we click through those, these show, as I understand this are different excipients is that right?
Yeah, it is. Different Excipient Excipient that were you are used by the zolpidem product.
And when you reviewed this, these doc this document in the various tabs or did you come to any conclusion about the availability of excipients used for the manufacture of zolpidem.
Now one thing I see is that there is always a bit of variability of material. So
just as enquete Mark, this is the next exhibit FC 246 106
Thank you and if we could put up FC 189 Do you recognize this document Sir, Yes,
I do. And what
is this?
This is a copy of the download again from SDPs and it's showing the availability of the SOPs am taught which is the API used for those OPM that we had on hand at the end of each period
and the document covers what period
2014 to 2018.
And then what are the units in column C?
This is basically 2134 grams of VAAPI of that
molecule. Okay, and you said this came from SAP is it kept in the ordinary course. Like the mark FC when 89 is the next exhibit please justice
in 107
Put up FC 188 Please can you tell us what this document is? Mr. Guilbeau.
It is a same document. Same concept as the other document before. The only difference on this one is two differences. The on a column B instead of being in gram it's going to be in 1000 units, and Column C and D is the bulk product that we have for each of them. So the Kotlin is the first one the that is on a cell C sorry, at 186 means we add 186,000 of that pills or tablets in our in our inventory at the end of the first month.
So this is about does it include as well package kits.
It doesn't include package but it's only bulk tablet.
And if you go down in November to CES 2017 On this chart, there's some zeros. Can you explain those?
That means that we didn't have any bulk on and had that time so that that would mean usually that we would have enough stock to produce the demand is not there to to produce more at this moment.
So as I understand it, the status kept in SAP in the ordinary course of business. Yes, it is. Mark FC 188 is the next exhibit.
Please just send us exhibit one. Oh, wait.
Now can we put up FC 251 To recognize this document? Yes, I do. Where does it come from?
It's coming from SAP also our system. And basically this is the after the book is produced. We are converting that into a finished good package. So you so this is the same thing as the other one instead of but instead of being in 1000. It's going to be in each AMI package that we have of Annika let's say from the column C is how many package we have. So P damages are odd five milligram in tablets, blister three by 10. So you this is a finished good a unit we have an inventory for at the end of each of them.
In the the unit and in tab B it says each of that would be a box of can I say go ahead.
It's a box of three three Bluster of 10
and if we go down to November 2017 What do you see about the availability of finished goods there
that we do have a stuck in inventory to produce to sell product is that
and this is kept in the usual and ordinary course of business? Sorry, this document was prepared in the usual and ordinary
course of business. Yeah, it is. Yeah. Listen to us. Yeah.
And like the mark FC 251 is the next exhibit. It's finished. Good. Good inventory on hand.
Exhibit 109
of SC 266. Please Do you recognize this document you tell us what it shows?
It's basically shows the the amount of that product that of the the product 576060 to 4852587 that was destroy
this and in the final column what is that is
the amount is the value of the of the goods that we have destroyed? Yeah, if we
can flip down to the next page. What does this show us?
This is showing basically that the transaction and sap that was done to do the destruction movement from our inventory.
And how do we see that on this document?
Basically, I see it because it's a five by five code, which is the that is showing that that transaction code 555 means destruction. And it's an IC because it's also the GL account which is showing our that our GL account of destruction which is 600 100.
And can we go to the next page please? Page three. And does this explain why it was destroyed?
Explain the reason why it was this way is because if it was expired, it was no issue of quality. In other words,
okay, go to page four. And this shows what does this show us?
This is showing us the batch that was produced when the date of manufacture it was it was in 2016.
Do we know when this material was destroyed?
We would have to go back to the first page at the beginning but this is a day which the date not the first one the second one where it was a movement of inventory. Remember by art that was the date on the 15th 2019.
Mark this as the next exhibit please FCT 66 Justice and
I'll do that but can I ask you both if you could go back to the first the number on the far right 21,003 90 and 40 Is that what is that is that dollars is a tablets. What is it? It is dollar? It's dollars.
So it's basically that either the quantity inventory and inventory we have times are standard.
Okay. Yeah, that's exhibit 110.
Thank you very much. And if we could put up FC 78. And now justice and just as an opening to this line of questions. We have an agreement that this document actually records all of the examples of sales returns credits expired products reversal, their entry samples and other sales related transactions that were made in the usual and ordinary course of business. And this the defendants gave us this in response to our request to admit paragraph 136. Okay, do you recognize this document Mr. Guilbeau? Yes, I do. And tell us what it is.
This is basically the all the billing document that we have for the for the zolpidem is actually
and can you identify who the first two sales were, were made to from this document?
Yeah. To first sell were made to Kotaku and call them fresh.
Just as in I'd like to and the dates are as expressed on the billing date column calling me Yeah. I'd like to mark this SC 78 as the next exhibit, please.
Exhibit 111.
I'd like now to turn to FC 219. Can you tell us what this document is? We have the agreement justice in that we this document accurately records all sales, all of the zolpidem sales returns, credits, expired products, etc. Just as before. Do you recognize this document?
It is the same document as the other one. Shows sales but a different period of time. It started in 2018
mark this is the next exhibit please just as NFC 219
exhibit 112
Now are you put up FC 126 Please Do you recognize this document sir
yeah, this is a purchase order from our one of our customer and requesting product to be shipped to them.
Yeah, like this is that grew up Zhanka to negotiate equity. And that when was the order placement this purchase?
My friend is is leading the witness and has been for a while now if we could just make sure that questions are asked to open and only in a way that allows the witness to provide the evidence.
It's on the face of the document justice and I'm just trying to get through this expeditiously.
Let's try not to lead too much. stainsby I agree with you that these are just documents and
there have been other as well justice and thank you
oh, I've seen 126 What is his argument Mr. Chabot?
This document is a purchase order from John kuchi record requesting the product zolpidem the to strain to strain basically that we have
now I'd like to turn and ask you some questions about bonuses and commissions. Mr. GIBBO.
Can we do that is exhibit 113.
Yes. Thank you justice then. Now I think everyone understands that sales representatives are paid a base salary and incentive bonuses. Can you explain for the court how the bonuses are calculated?
The bonus are calculated based on our growth, another growth the revenue of the organization as a total group, basically.
Sorry, Grant,
it's a percentage that we have each of them at the employee has a person's age of of the profitability of the organization.
And how does the entry of a new product into the product offerings impact the calculation of bonuses,
it will impact the same way as any other product. There is no distinction from one product or another one. It's basically the profitability of the full organization. That we that is used.
And can you tell the court anything about pharma sciences gross revenues, as between 2007 and 2015?
The growth has been from I think it's whatever if I remember, well, it was 400 millions to close to 800 millions like a close 80 something percent more from that period of time as for the organization.
And just before I
think we have any objection here
I do. We heard earlier from Mr. Shi ball. I believe that he started the company in 2015. And now we're being asked to have him provide evidence about the gross revenues from 2007 to 2015, which is only when when he just started that would make this hearsay evidence from this witness.
And how did you come by this evidence Mr. Yubo
i It was a download from our system again from SAP from our financial statement from this the year 2077 And up to 2015.
I'm going to allow it, it's based on the financial information in the system.
Thank you. I wanted to clear up one thing I think I misspoke when I was asking you about the packaging and manufacturing machines and the inclusion of an element for space with that. Would that be included anywhere in the classic of that aspect of the operations? No. Okay. Thank you. Those are my questions.
Thank you. Ready for cross examinations torrents.
And just as in Mr. G, Bo, am I saying that correctly?
Can you help me with that? It's scalable. Yubo. Yeah. My apologies. But that's okay.
And I didn't get it right until today. So there you go.
Thank you, Mr. Gable. I will try. I will endeavor to get that right. But you'll have to bear with me. I do want to go back to some of the things that my friend took you to But first off, we were going back and forth between standard costs and variances and I want to make sure the record is clear. standard costs are an estimate of what of what the cost will be to manufacture a certain product Correct? Yes. And variances are after that product has been manufactured. You go back and correct in terms of how much was actually spent
correct. We on it, but we don't correct it on the system. We do that on a yearly basis on a yearly basis if there's a significant change,
and those those are different than what standard costs and variable costs are in terms of accounting terms, correct. Or rather fixed cost and variable costs. And it's in accounting terms.
Not sure I'm just sending a question. Can you
repeat? Yes, I? Yes. standard costs and variances are different than cost which is variable in that it would change with the increase or decrease of sales Correct?
Yes and no, I understand that there's part of it that will move based on volume variable some will be will stay fixed. But when we do that, the standard we do that on a yearly basis where we are expecting to be selling and create the standard based on that.
Right. So a standard A standard cost could be either fixed or variable Correct.
Center cost for us will be fixed on a full year we say this is what we're going to actually work on. We fix the rate on a yearly basis. And so everything is fixed for the Senate in the year. And that's why we do center cost variances to see if there we are off versus the reality.
If we pull up SC 190 And we didn't go to this with you Mr. Chabot. But I believe that this is going to be a similar document to the one that you saw. Just give it a moment and Do you recognize this document? Yes, I do
recognize this one.
And you see, thank you. You see at the top that the standard costs are grouped into variable or overhead, correct? Yes, exactly. And this document as we heard from is pulled from SAP, correct? Yes. And these are farm sciences classifications as to whether or not something is under variable or under overhead, correct? Yep. Yep.
And for those under variable, they vary with a level of production and sales Correct.
That's the way we consider that as a variable. Yes.
So when production and sales increase the items that are underneath the variable heading, those standard cost would increase to correct.
I would in for most of the case, yes. If you take KPI up to everything that is a purchase of material is reliefs. 100% variable, when you go to labor, it's direct labor is variable and semi variable, we can call that and same thing on medicine manufacturing, for machine and packaging. So it's kind of a mix of the two but mostly, especially labor or that variable. And when you get to machine is semi variable. That's the term we use. In the country.
And under the heading of overhead, the standard costs are fixed costs. So these would not change with the level of sales of a certain product, correct?
Well, 50 more they would be more slightly slightly. Yes.
And we heard from you earlier that the manufacturing machine under variable would represent one example you gave was depreciation, correct? Yes. And, and so that would be a variable or a very least semi variable
factor, as you mentioned. Yeah.
And then alternatively, manufacturing overhead on the other side I believe we heard from you was that it was supervision or planning that went into that. And so that would not change if sales were to increase or decrease Correct.
Yeah, and then, yeah, except if there's major big change in number but if no way, the they are really fixed. Morphix
and I don't, actually before we move on, can I please mark this as the next exhibit, please?
Exhibit 114. Thank you
and if we go back to exhibit 103, please, which is FC 76.
Okay, interrupt was what was the FC number last one? FC 190.
Yes,
that's already been marked as an exhibit. It's 1040. Okay.
Apologies. I do have that here. Thank you.
Mr. D'Souza.
So, Mr. Chabot, we did see this earlier and I just wanted to I don't intend to take you through it. But these headings, variable and overhead are the same on this document as they were on the other Correct. Yes. And each of the subheadings in terms of what's underneath a variable and overhead are the same as in the other document, correct? Yes. And so they would be in the same way they would be variable or fixed as we just discussed,
correct. Exactly.
And one thing that's not on here are commissions and bonuses, correct?
Yes, it is not because commission and bonus are not in the consider as inside of standard costs.
You would agree with me that if pharma sciences commissions and bonuses increased, when pharma sciences sales increased? That that would be considered a variable cost, as per the accounting standard Correct?
Yes, I cannot say the country
if we could please turn up PMS 187. I don't see it as a previous exhibit on my list. With FC numbering apologies to 49. I had them in backwards order. And it is an exhibit exhibit 99.
Thank you
so Mr. Chabot, I believe we took this to a colleague of yours but but not to you yet but are you familiar with this document?
I not very common already familiar I saw it but I because I'm taking care only of the cost of goods side of the production. So it's, I know it's funny. It seems to be the financial of the organization, but I can't talk too much about this document.
And on the left hand side at the at the bottom there we do see a reference to CGS that would be Cost of Goods Correct? Yep. And so though the items that are underneath of cost of goods, the destruction and rejects etc, those would be considered variable expenses Correct.
Which one sorry.
So under the cost of goods we have we have populated destroyed destruction of returns. That would be a variable expense correct.
It's becoming its destruction or returns from customer yes variable.
And so in that way, if sales of PMS OpenAM were to increase the destruct the amount of destruction the cost of the destruction would increase as well Correct.
Could be the other way around. Also, could be that if the cells decrease my customers, my decision will increase and if my cells increase, I would maybe have less destruction because that's for sure. No, I know the destruction were made. We're basically expiring Metro. So if this cell would have increased, I would have less disruption in this case.
Just as in if I may just have five moments to look at my outline and see what I have
left. Is this a 10 minute five minute break or a five minute five minute break?
We're doing it twice. If you have 10 minutes for me, I will take it but otherwise we could do we could actually try for five but well so I just as in we do. We are at a time where we could take an afternoon break. I recognize we only have one witness left which on the schedule is set to be an hour total so I'm in your hands.
Okay, we'll take our afternoon break then. 15 minutes.
Thank you.
Used to be put in a room for the balance and we won't talk to you.
Okay, I'm back in 15 minutes or?
Yeah, 15 minutes.
Okay. Perfect.
Thank you, Mr. stainsby.
stands adjourned until 249
recording stopped Check. One Two transcription test 123
and it's ready to resume.
I'm ready I'm ready as well. Thank you recording in progress
so
you changed. Jimbo, thank you. I really just wanted the opportunity to say your name one more time, but I have no further questions for you.
Thank you. Thank you very much. Do you have any we examinations restrains me?
I do not thank you Mr. Michel. GIBBO guilbeault
Merci beaucoup. Oh my god.
Thank you
and just as in as you would have seen my colleague, Mr. Mara is going to take over so I'm just gonna go on mute while he was over here.
Fair enough. And we have
Andre Bollea.
bullier you can
be on his way, Mr. stainsby.
Hi. He ought to be
he has not attempted to join yet. Okay.
Suggested then would you like to extend the break a little bit to domestic will your joints or would you prefer to wait?
Well, let's extend the break since he's not with us quite as well.
We haven't received the document book yet. If maybe Miss Murray. It's been sent. It's been sent over. I've got a copy of the email. Good timing.
Here now so.
Okay, let's go. On Mr. Justice, I understand Mr. Bhatia, what's to be affirmed?
Good morning I'm Mr. Boyd here
sorry, I was on mute.
You need to turn on your camera, sir.
Oh. Where's the camera on
that bottom left?
Yes. Okay, now? Yep. Okay.
Good afternoon, Mr. Bovie. Are you doing well?
Yes. Thank you, yourself.
I'm good. Thank you. Are you ready to be sworn in? I am ready. Okay. And have I've been informed that you have chosen to make a solemn affirmation. Is that correct? This is correct. Okay. In that case, I'll ask you to please state your name, occupation. And professional address please.
Honor the award year as of supply chain management Pharmascience Inc. 6101 rail mount in Montreal.
Once in case you solemnly affirm that the evidence to be given by you to the court shall be the truth, the whole truth and nothing but the truth. Please say I do. I do.
Thank you. Thank you, justice. Jim. Messina, buddy, can you confirm that you are alone in the room and you have no documents in front of you?
I am alone and no documents in front
of me. And you've told us that you're employed by pharma sciences, the head of supply chain management. How when did you start working there?
I started working for my science in 2007.
And what does your role there entail?
I'm in charge of the demand planning. So mainly forecasting on the supply side and charge of the planning of everything that is produced in our plants and also everything we procured from our CMOS contract manufacturers. Also in charge of issuing the POS when we purchased from those CMOS also in terms of projects, improvement projects, that we do in supply chain, and analytics.
And I understand that you had a slight you had an X edit other responsibilities. Up until 2016.
Yeah, that time I was in charge of the production planning and production planning includes managing the capacity requirements planning process.
And what did you do before you joined pharma science?
I did work at Johnson and Johnson for 25 years. I started there as a production supervisor implemented SAP and that's an ERP system enterprise requirements, resources planning system. And at the end, I was in charge of the I was director of planning and last function was director of strategic planning and strategic projects. And in terms of planning I was my responsibilities included the forecasting.
I want to talk to you generally about capacity. Can you explain how a farmer science plans production in its facilities?
Yeah. First, let's start by the sales forecast. So we were using an ERP system enterprise resource planning system that is called SAP farmer science. So we we do sales forecasting, up to an horizon of five years there are recipes that dictates where the products are manufactured, know which resource are used, how much time they require. And we input the planning parameters in there. The system takes that into consideration. And generates a plan that is eventually refined by the planners. So sedan, all of that is included in the system in the SAP system, and that's where you we can extract the CRP, the capacity requirements planning information.
And I've heard you speak of something called the capacity requirement planning process. Can you explain that for the court?
Got the it's a in general it's a it's a monthly monthly meeting that we have between the planning the planning people and the production people. So we meet and look at the capacity to ration and, and discuss about the how to manage those peaks. And valleys. And that's where the issues are discussed the decision are taken. Yeah, that's, that's about it.
You're familiar with the molecule zolpidem? Yes, I am. And what is your role then with respect to zolpidem?
Yeah, as the other molecules, where my team was planning that molecule and production, so that's why we're involved.
Okay, I'd like to turn that look at a document if you could put FC 92 on the screen please. Miss Murray. Do you recognize this document sir?
Yeah, I'll just move that document to my other screen.
By all means.
Yes, I do recognize that document.
Can you tell the court what it is and what it shows on the first page?
Yeah, it's a it's a recipe of the zolpidem, five milligram and it shows. That recipe shows the manufacturing process of that molecule. So we see in the resource column, the results that are used for the that specific molecule in production. And on the right, you see there's three standard first standard second standard and third standard that explain how much time is required on each resource. The first standard is for the setup of the resource. The second standard is for the run time, and the third standard is for the cleaning of that resource. I just kept the base quantity just on a little bit on the left let you see 470,000 This is the batch size for that molecule.
Okay, looking at the resource column can you tell the court what those I don't want to call them the numbers and letters in here what they represent what they tell you?
Yeah, the resource name for us is the it's the name of the resource in SAP. So for the first one you see one SLP s, this is for fuzzy so the waiting room. The second resource, you see three SL H es FP two, and this is the resource that is used for the ICF. With that point, what leaders are the mixing? A little bit below you will see that you see nine SL, C or m two for compression. This is the rooms for where we compress the product. And if we can't, if we continue down because it's within two, you will see the the PQ see
we have to go off of that sorry. In the bottom screen there Yeah,
yeah. Okay. That's right there. You see T QC 001 This one is not really an operation, the production operation, it's more just to capture the time that is released the QA release the product, so it's, it's used in planning for the field of product. It's not used in production and the last resort is 08 SL s any day and EP, so that's part two I actually rename and that cleaning is a part because we it's we don't do cleaning in the room. We take the equipment and bring it in another room. For cleaning. So it doesn't impact the overall the other resources we see above
and these pictures that we're looking at, where do they come from sir?
It's a snapshot a snapshot directly from SAP.
Just as you and I proposed to mark FC 192 is the next exhibit.
Exhibit 114.
Thank you turning to the second page please. Sorry, go back to the first page for a second. This is for the heading at the top it's which product is this for?
This is for the five zolpidem, five milligram or dt.
Okay, and what is the second page and what does this show us?
It says Same Same, same picture, same screenshot, but this time for the 10 milligram OBP.
Thank you. And when two pages four and five showed you both through those page four,
yeah. Yeah, this time, oh, you skip the one to go.
Go back to four. We could maybe talk about that for a second. You tell us what that is.
This one okay. This is the recipe for the packaging operation because we do manufacturing in one recipe and we do packaging in another separate resorts. So, so you see that it's the resources called a 4014. This is the blistering machine. And again, you see that resource that is called T QC 001 The same thing it's the time that is required to release we release the product it doesn't start a production operation.
You go to the next page, please Miss Murray. And what does this page show?
This is a screenshot of the transaction that is an S AP and VO for that is called the stock requirements list. So you see, you see in the on the left the first column you see the period and so it's a monthly snapshot in that case. So by month you see the plan independent requirements, the second column, that second column shows the the sales forecast in fact, that's the it's the term that we use for the planned independent requirements. And on the right you see receipts, it's it is what when we show that the stock will be released or received. So produced received and released. So it becomes available.
Jalen going down to page six what does this page show us?
It says this is a for the five milligram starting again it starts with April 2019. We see the planet dependent farmers the forecast we see also the receipts. Yeah, that's
okay. Then the next page explain what this document is.
Yeah, this is what we call the CRP capacity requirements planning this document is we, since it's not that easy to to, to see in SAP, what we do is we extract the information from SAP and we just transform that in an Excel format so it's easier to manipulate. So what you see in there is the if you look at the the middle around the middle, you see the result the resorts that I did talk about earlier, three SL H s FB two, that's the I should put them on the leaders. You see two lines for the load. So the load that we're currently looking at. It was extracted in 2015 January one and you see in the graph, that the first column is January so it's a sad snapshot of it was extracted in January starting in January, in that case 12 months. So the load represents the requirements in production so how many more hours are required for that specific resource during that specific period while you see another line with load images, because at the time we did want to compare the changes over time so we always did plus the previous month low to be able to compare to the new one. So that was for the role, part staff capacity that represented how much capacity we have available per month. So this staff means that we have the manpower to and those resources so we can operate at that million at that moment. Again, there's two lines just to compare what was there the previous month to four to do analysis. The three lines below represent three scenarios. So just to compare where we were exactly
stabbing you for moments, but he said there were three lights, these are the installed capacity lines.
Yeah, the install capacity lines, exactly. Those three lines within three scenarios. For comparison purposes. So the first line 24 Five meant 24 hours, five days a week. So when the resource if the resource would only be working weekdays 24 hours a day. The second scenario is where the machine is running 24 Five, so weekdays but we have the weekend shift, and that we can shift was 12 hours on Saturday and 12 hours on Sundays. And the third scenario is unreal. We're producing 24 hours a day. Seven days a week. So the machine the resource was always running. So bear with the stack
of SB and at the very bottom the last row there it says load MPP Can you explain that for us?
Yeah, MPP means new product pipeline. So for us, new products is always a priority for the organization. So the intent here was to show if there were many, and if we would have issues meeting those requirements. So we were seeing that with those numbers. There was no issue.
And if you look at the line, that's given the number 01 percentage month load. Explain that for the court. Yeah,
the percentage last month load is the percentage of the capacity that was used the cap the staff capacity that was you use in that specific month. So the first month shows 107% So slightly above. So in practice, what we would have done is push some of the load to the next month until we get rid of that negative. So yeah, that's it.
There are other things you can do where you are forecasting that the load will exceed capacity.
Yeah, the first thing we usually do is first we do we do overtime, when it's required if we don't, if we're planning to see that to see that the capacity doesn't meet the demand in the short term we do overtime. The second mechanism usually we do is we do what we call leveling so we we pull or push production from one month to the other in that case, what I was saying is that you see that minus 32 in line or two so but I knew that I had 21 hours free in the following month and 52 free in the in March. So I would just simply add push some production from January to February and the remaining in March. So that's that we call the leveling. There's other mechanisms that we can do, can use and in planning. We do campaigns we encouraged campaigns, campaigns, meaning that for products we will produce more than one batch at a time. So remember the recipe there was a setup and cleaning time. So when we do campaigns, so for sure we don't do setups because the if we produce the same product over and over. The setup is done once and you don't have to repeat it and the cleaning is very minimal. You we don't do a full cleaning because it's the same product.
Now just going down the next few pages, the next page page seven sorry the one we're this one can you tell us what this one is?
This one is the capacity, the CRP capacity requirements planning. It's a picture of SAP. This one was extracted on 2015 or 101, like you see in line 94 And it's for the period this time of fighting in 2000 1601. Fighting in January 16 up to December 2016.
And the next page should go to the next page was this document.
Yeah, this one is the it's for mobile mixing. Sometimes we can use I didn't mention that earlier. But sometimes if we we can instead of using the first resource that we call the H s FB two. So the issue of fluid Well, we can remove the portion of mobile mixing and do that in another room, which most of the time is available. So so that's why there's a screenshot of the mixing. This one is for mobile mixing mate same principle. This is a snapshot that was taken in January 2015. This one is for for the snapshot was for the year 2015
And the next page please this is the same thing. For 2016.
The same thing for 2016. Exactly.
And page, the next page
Yes, one is for the compression operation. So this one again is a snapshot snapshot taking in taken in January 15 or vo rising starting in January 15 for a year
and the next page
This one is for the same thing again for compression an extraction done in January 15 this time for the 2016 year.
Okay and the next page please.
This one This is a CRP for the blistering machine snapshot taking in January 15 for the year 50.
And then the last page
again the blistering machine for the snapshot taken in January 15. But this time for the year 16.
So we've seen mixing, compression and packaging. We don't see any CRP documents for weighing. Can you explain that?
Yeah, yeah, the way and we never, we never extracted because it's never an issue. We always have more than enough capacity at weighing, so we don't even talk about it in the index ERP meeting.
Thank you. We've already marked this justice and I'd like to move to the next document SC 127 Do you recognize this document sir.
Yes. Yes.
In tell us what it is.
So it could be for the zolpidem, five milligram and on the top you see a summary of their recipe
and can you tell us the origin of this document? Where'd it come from?
Again, it's coming the the bottom part is coming from SAP the topic John is somebody that wrote that did a summary of that.
And can you go to the second page please is this document
and this is another version of the instead of taking a snapshot of the recipe. In practice what we do we take the snapshot as shown before this one is when we use the transaction that is available in SAP to extract the information. But it's not that prettiest. That's why we don't use that.
And what is this recipe for what's the end product from this what's shown here?
Yeah, the there's the for the bad one is the the zolpidem five milligram blisters
Okay. Thank you the next page which is this show
same thing for that can be gone.
And the next page
and that transaction that I talked about, but this time for the selfie damn can be gram, the packaging portion. And lastly,
page five. Yep. And what does this show us?
The this is the again it's it's another snapshot of the CRP you just don't see the top graph portion. But again, it the the CRP for the different resources. The first one is the issue of the foreign leaders same concept as before with the load and capacity.
That clean Mark s FC when 20 says the next exhibit please just as Zen
115.
And what's the staffing capacity reflected in the this analysis
and this document when you see maximum capacity This is 24 hours a day, five days a week.
Thank you. We put up a document SC 245 Please Do you recognize this document sir.
Yes.
Can you tell us what it is?
Yeah, again, it's another tip of the just trying to put it Albert Becker is the CRP for the ICO footbed fund. Thank you. I should the 400 leaders. This time it starts in 2014 in January 2014 And it says snapshot that covers for years for that man
and what is the so this is a the the first graph and data table is for the fluid bed mixer. Yes. And second one is for the compression. And then scrolling down. Yeah, this the third one is for the blistering machine and this going to the top of this page, what's the period here?
Oh for three years on starting in January 14.
If you could just flip to the next page, please. And this is the same information for the next year.
Yeah this one is was extracted in January 2015.
And the next page same thing for 2016.
Same thing for 2016. Yes.
And the next page
same thing for 2017. Except I think the reason is a little bit shorter. It's only two years
and then going to the next page
this is for the blistering machine of snapshot taking taken in January 17 for reason of two years.
Can you go to the next page please? This is for January as of January training 320 2018. Can you explain why this looks different than the others?
Yeah, we just improve the mechanism to extract and manipulate the information so it's faster so that the information is the same it's just the the format that that change.
He can go back to page one. Now, can you expand it for the top? There, there's some pink boxes in there. Explain what those are?
Yeah, it's when the capacity was less or the the load was higher than the capacity. So so when we were going through the CIP by example, the capacity Crunchbang meeting, then we would take decision on that example we see in March minus 41. So one or two in 10% of the would be using one and 10% of the of the capacity. So that done leveling so pull a little bit products may be one or two months before so that was not a big concern.
Are there other options? Is it as opposed to pulling or pushing as usually referred to?
Yeah, depending on where we are with capacity, there's always you know, over time that we can do to to increase capacity. Campaigning like I talked, I talked before, because when we do campaigns we save setups and cleaning time. Ultimately, we can change palette from one resource to another. And we'd go up to, you know, purchasing machines and, and outsourcing products.
Now, you talked earlier, but 24 524 five plus two times 12 and 24/7. Which of those is used in in this kind of planning.
And in this one in that specific snapshot. It's 24 Five.
So, sorry, go ahead.
We could have increased to 24 or five plus to 12. The weekend said on Saturdays and Sundays or 24/7 if need be.
I don't recall whether it's marked this yet. Justice
and I don't believe you have it's exhibit 116
FC 246 I think it is 45 Five Yeah, yeah. Now, in this case, Mr. Bhalla when issue is whether farmer science would have been able to manufacture enough zolpidem for launch in 2015. Would you have been able with farmer science have been able to watch over them from batches manufacture that roll rail mount?
Yeah we did the we did the simulation to look at based on the validation requirements based on the shelf life of the product. We did a simulation where we would have launched in in January 15. So and we had we had enough capacity to support the launch, not only the validation patches, but also what was required in terms of launch quantities and replenishments after the fact. So yeah, we did and we did that for the tree. The tree work centers that we talked about.
to interject, I don't think
you have an objection I believe.
I'm not sure if Mr. Boyle yours speaking to any document in particular, but we haven't seen any simulations or anything of that sort. I'm not sure
if like what what did you rely on and coming up with your simulation? Mr. Boulia.
I did use the documents that were shown about you know, the capacity, the capacity profile that we looked at. I looked at the recipe that was shown on you know, the screen and the summary you know, for three hours in mixing 12 hours in compression and 14.5 hours in, in in on the blistering machine. And I just did very simple math. So to calculate if it would without for so justice isn't my issue here is that we haven't seen anything that
Mr. Boyer is speaking of and that hasn't been produced to us we've seen I think the documents that have been gone over with my friend Mr. stainsby, but any sort of calculations or evaluations on capacity, those haven't been provided to us or produced in this action.
If I may, justice, then all of the information relied upon and coming up with that analysis is before the the court today. It's all been marked as exhibits. There. It's all been available to my friends since it was producing this action. You know, I don't see the basis for the objection. Frankly, he looks at these documents and he's a bit if I might finish Mr. Mishra Bollea looks at these documents and he satisfies himself that they establish that there was capacity at the relevant time and that's what they were produced
for. Well, my issue justice in and Mr. stainsby is now we're getting Mr. Boies opinion on whether pharma science had capacity to do something and Mr. Boyer is not an expert qualified by this court. He hasn't tendered a report. And we haven't seen this analysis, so I'm not sure if this is admissible at all. And in any event, it's you know, I think it's irrelevant to what actually did occur in the real world, which is what Mr. Goya is supposed to be giving evidence on.
Just as a to go back to what my friend my colleague Mr. Cleese spoke of this morning. This is exactly the kind of quote unquote opinion evidence that people who are aware of the facts on the ground because of what they do for a living, are able to speak about as being a possibility that could have happened and would have happened in the but for world. And this is goes from olanzapine where justice O'Reilly disallowed that evidence to the Federal Court of Appeal where they said he was wrong to have done so. And this is exactly the kind of evidence that people who have the necessary experience exposure and and expertise can give on the basis of what they do from day to day.
You're entitled, if I may. Counsel, I think you're entitled to ask this witness the question. Had you been asked to January 2016. I think that's the relevant date. I'm I really don't know what's the beginning of the book for a period
2015
Had you been asked before January 2015, whether we have the capacity to manufacture XOpen What would you have told the executive? I think that's a legitimate question.
All right, Mr. Bollea, can you answer that question?
Yeah. That's, you know, for me, it's a very natural, very normal question, and I would reply Exactly. What I just said before, based on the information via the recipes that was in front of me, based on the volume that were provided, based on the capacity requirements planning that was seeing at the time, that just by looking at the CRP and where we were in capacity utilization, the answer would have been Yes.
Now the documents we've looked at so far, because you're bullier for the oil now facility, the similar information exists for the Abram Abrams facility and no
because SAP was not that the module that is required to do capacity planning was not implemented at at Abrams. So no, I don't have those such doctrines.
In your based on your experience, could pharmacist sighs science have accommodated producing batches as open in the value for validation and launch in 2450 and 15 2014 and 2015 at Abrams?
Although, you know, I'm not I wasn't physically at at the site. But what I know is the new products are always prioritize that from a science. So it's, for me,
but equally of another objection here. I think
Mr. Boyer just indicated he wasn't at the site at the time so I'm not sure if his evidence is any better than anyone else's.
Unless involved in production planning at farmer science, Your Honor, he has a significant knowledge about this. It's a fair question.
I'm going to allow the question that may be an issue but the weight that we can argue about at the relevant time, but right now he can answer that question. Sorry, the question Yes. Questions.
Supposing that prior to January 2015, you were asked whether pharma science could accommodate producing sufficient quantities of zolpidem for validation and launch at Abrams? What would your answer have been?
Yeah, but based on a couple of facts that nothing down the volume that was reported was that that's the count. And the fact that we always prioritize new products at from a science fair amount, but also at it brands. I would have said yes. Would that accommodate to support a launch in 2000?
And now Mr. Bhatia has in your experience as pharma science ever been delayed in launching a new product because of the capacity issue?
Not to my knowledge.
I'm going to ask you to assume that pharmacists would need approximately 200,000 tablets and 10 milligrams zolpidem for the first six months of sale. Would that present a problem in terms of manufacturing capacity of real amount? Nope. And as assuming the farmer sense needed approximately 500,000 tablets of five milligram zolpidem for six months and sales we've added presented a problem.
No, it's only one batch. Very small.
Thank you, Mr. Bollea. Those are all my questions for you today.
Demand.
Thank you, justice, Ed. And Mr. Boyle you about a couple of questions just at the outset. You indicated
that
the planning for production starts about five years in advance.
I said that the forecasting Arizer is up to five years in the future.
And so when Pharmascience is planning, its production schedule. It's generating into the future. Yes. Planning based on production requirements, how much product farmer science intends to sell, or predicts they will sell? Yes. And you consider all of the molecules that pharma sciences manufacturing all of the products that from a science is manufacturing.
Yes. And I think you said that you you input all of the demand into the SAP system. Is that correct? Yes, that's correct. And that gives you a general schedule that you're fine tuning. Yeah, it's a when we call them plan orders the system generates but based on the recipes based on the planning parameters, the system suggests production plan, okay? And pharma science doesn't
require goods before the drug is approved.
That Correct. I would like you to define required products because, you know, when we launched a product we may produce far add a fine and the requirement by itself
okay, well, you're when you're planning to launch products you're planning for when it will be approved. And that's when you need the quantities by Correct? Yes. Okay. And so you can't go back in time and say, well, we should have had this in January and not April. If you're in February
What if I can you just refine your question because I'm Yeah, apologies. No problem.
If you're planning to launch, perhaps four months or six months in advance, you're not going to for the schedule. Have you set relatively in stone at that point?
You know, is scheduled he's never fixed it. It depends. On the priorities we've put on a product on a launch or whatever. So it's, as soon as we understand you. I think we went to the different CRPS and we have CRPS every month so as soon as something is happening, something different happens in the requirements, like a new launch a new product, whatever. Then we review and we take action in that at that moment. So I don't know if it answers your question, but
thanks. And so if Pharmascience wasn't expecting to get approval until a couple months into the future and by chance their drug gets approved on that day, they could only work forward to manufacture product if they weren't planning to manufacture products beforehand.
Is I'm not sure I understand the question that if today I learned that I need to launch a product. I will take immediate actions to put the correct actions in place. That's
a couple things that you talked about. If Pharmascience is at capacity, there's campaigning and over time, those assuming that comes at a cost
Yeah, everything comes at a cost for sure. But those are, you know, those are regular mechanism that we use every single day in planning. This is normal. That's why it's you know, the plan that is generated by a system ever optimal. So the planning the function in planning is is to optimize all of that. So, for us, it's it's normal. We, by example, fluctuating the capacity month after month. times can be challenging. So we take a portion of that and do a plan that is easier to execute. So I'm sorry I should let you know that. Yeah, I was done. Thank you. in the ordinary course, Farmer science is operating 24 Five. That's what you plan to. Not necessarily it depends on the equipment. It depends on the time it vary. Quite a bit dependent depending on the work center we could be depending on the demand. Sometimes work centers are 24, five or less or sometimes they go 24 Five plus 12 times they go 24/7 It varies depending on the demand.
Okay. And I guess another aspect of being able to manufacture is if if you can procure adequate API, correct, correct. And so if you don't have API, you can't manufacture. Yeah. And I suppose another aspect of being able to manufacture is batch validation.
Yes. And if it's not validated, you can't manufacture Yeah, it's part of the long launch process. When I said I did the kind of a simulation just, I know that in general, we do three validation batches to be able to launch. So so it's part of that process. Yes, we do validation to be able to launch and is it a new API? Oh, the API is a new one. So we need to revalidation batches and, and yet it's part of the plan.
Okay, and are you aware of the validation process for zolpidem, OD odt?
Not specifically, I'm not the validation expert. I'm planning according to the strategy, the validation strategy, energy that is given to us. So you weren't involved in the validation of zolpidem. I was involved in the planning of the validation but I'm not involved in the strategy by itself.
Are you aware that as of February 2014, there had been no validation batches manufactured for zolpidem?
I don't recall. I I'm not sure I would have to go back in the in the notes in this car different that forms like like that today. I don't I don't, I don't know. I don't I don't recall.
Okay, and I think
we've heard and maybe you're aware from the planning perspective that the first validation batches are manufactured about a year or less normal. Yeah. Okay. normal practice. Yeah. Okay.
And so if if Pharmascience was was planning on launching in April of 2015 or March or 2015, it wouldn't be surprising that the validation batches hadn't been manufactured in February of 2014.
February, March, depending Yes. And it would be the first validation batch that would have been produced at that time. Okay. That process, but usually normal practice is Yes, about a year before. And further science does that a year before because there can be snags or production issues with the validation batches that need to be accounted for Yeah, there are multiple reasons for that. And, you know, it's a you because we do three validation batches, then we are to start at one point and then we need to report to see if their adjustments are reported because we're in the validation mode. So yes, we we need some time to to ensure that it will be completed on time and the product will be okay to show you release at the end for the lunch.
Okay, and that also takes into account the fact that farmer science has has other activities going on as well. And so this by planning a year in advance, you can sort of smooth out the production schedule.
Yeah, but in that case, it's it's not really for smoothing purposes that we do the first validation batch a year before. It's really because the usually the validation process is, if you would ask me today, I would validate a product I would say in general one, the first batch will be one year before the second batch will be about two months after and the third batch back to back or maybe a month after.
And in your role, were you involved? Or are you in Are you still involved with zolpidem?
As in planning Yeah, we're involved with all molecules. Okay. And thank you touched on it, but are you aware of there being a drug shortage for zolpidem in
February 25 2018 Sorry.
Frankly, this not specifically it's possible, but um, again, it's sometimes my team is taking that and I'm, check that specific time. Okay, that's not are you aware of any shortages for pharma science? In the recent couple years for zolpidem? I I don't know. I I don't recall. So I don't know I don't have any documents in front of me to check that.
Just as in if I could take 10 minutes maybe to gather myself.
Yeah, have 10 minutes. Thank you. Mr. BillyOh. You're not to talk with anyone from Mr. stainswhich. office until after you're off the witness stand. Okay.
No, problem.
Until 352 recording stopped Sound Check Check one Two. He's ready to resume. Yes, thank you. Mr. D'Souza. Yes, I'm ready. Thank you. recording in progress. If I resumed
my Mr. Ball you I just have a few more questions for you feel. Bear with me. Um, so earlier I'd given a hypothetical to you and I was not as clear as I could have been. So, just like to specify if pharma science is planning to launch zolpidem, ODT in April first 2015. And on January 2 2015, you receive your notice of compliance. At that point, firmer science would have to hurry to get ready for launch, correct? Yeah, because you'd be getting your NOC three to four months ahead of what you had planned.
Usually, we plan our launches at least a year before so we see those things coming. So it's not like we wait for NLC to start working on a project we were ahead of time.
Right and if you're planning on getting approval in April or even end of February 2015. You would still have to hurry at January 2, if that's when you get approval.
But would that work? At least one year before that because I would say that seen that coming? And say okay, I'm planning for the for that time. So I would put the mechanisms in place, including the validation batches and the procurement and so on, to be able to do that to accomplish that. Okay, but my question is, if you hadn't seen it coming in if the plan was to get approval in April,
or to launch in April, if I
if I understand what you're saying, If I learned today that I'm launching in I could be launching in the future, then I will start the process to the but it's usually in our process in generic process that we have projects years before so we were planning to do that right. We're developing the process it just the timing of when we execute can vary a lot. But it's in the works many years before. So I'm not sure exactly. I don't know exactly how to answer the question because the word before me before I get involved. There's a lot of work that has been done before me.
Okay. And, and so for whatever reason, if you're not expecting your notice of compliance or your approval, and you get it on that day, you can only move forward to try and get to market.
Yeah, but again, we we we work far in advance from that the all projects it's most of projects are developed without the that noc nrms. It's like we're working towards that. Okay.
And, Mr. Boy, you if if you did get your notice of compliance on that day and you had to work forward to come to market, how long would it take? Would it be weeks or would it be months to get your drug ready?
This is z and I can ask the object this question has been asked enough.
