THE OSD FACILITY (UNIT 1) GEARS UP FOR INCREASED DEMAND

An increase in demand at Unit 1, the FDA-approved OSD Facility at the Port Elizabeth site, resulted in the implementation of capital expenditure projects to unlock capacity in the constrained manufacturing areas. Unit 1 primarily manufactures high-volume products for domestic supply as well as products for Aspen’s international markets. Additional roller compaction, encapsulation and coating capacity was successfully installed during the first half of 2009 and has contributed towards doubling the output in the encapsulation and tablet coating areas. An investment in two high-speed bottling lines, which commenced production in April 2009, has increased packing capacity. Aspen’s continued growth in South Africa and its recent expansion into international markets has resulted in an increased requirement for manufacturing capacity for high volume products. Consequently, a capacity enhancement project has been initiated at Unit 1 to increase the current granulation and compression capacity. This project is anticipated to be completed during 2010.

RATIONALISATION AND OPTIMISATION OF THE FACILITIES IN
PORT ELIZABETH AND EAST LONDON

Small and medium volume products for domestic supply, including solid, liquid and semi-solid dosage forms, are manufactured at the Heritage Facility in Port Elizabeth. The East London site has historically been the manufacturer of oral contraceptives and selected consumer and OTC products. Owing to Aspen’s growing demand, investment has been made in capital expenditure projects to upgrade the Heritage Facility and to extend the manufacturing capability and capacity at the East London site to include pharmaceutical products.

These infrastructure upgrade projects, extending over three inter-dependent phases, will also be at enhanced levels of Good Manufacturing Practice ("GMP") compliance.

In the first phase of this project, the existing warehousing facilities in Port Elizabeth were expanded and upgraded to accommodate the growth in volume. This project was completed in 2008.

The second phase encompasses the replacement of the OSD manufacturing areas at the Heritage Facility. This new OSD Facility will be referred to as Unit 2. A high-rise structure, completed in June 2009, was constructed to house the granulation, fluid-bed drying, compression and coating areas. An investment has been made in new equipment and high calibre technical support services for this area. The implementation of advanced technology and world-class manufacturing processes is expected to increase and optimise throughput. Longer production runs, for higher-volume products, present an opportunity for realising economies of scale. Operating staff have received the necessary equipment and process training to empower them to work effectively in the upgraded environment. Unit 2 commenced commercial production in September 2009.

The completion of the third phase, for the refurbishment of Unit 3, will result in a manufacturing area for the production of lower volume OSD products, a limited range of semi-solids and liquids and an upgrade of the existing solids packaging areas. Pre-construction activities in this section commenced in May 2009 and the project is scheduled to be completed in 2010. In the last year, the packing capacity for patient-ready packs supplied to the tender market, has already been doubled through investment in additional equipment.

As a result of Aspen’s strategic focus on pharmaceutical products, the manufacture of selected fast-moving consumer goods such as aerosols, personal care and dental products has been transferred from the East London site to accredited third-party manufacturers. The resultant capacity at the East London site has been dedicated to the manufacture of core, low-volume pharmaceutical products. A capital expenditure project has been initiated to refurbish the relevant manufacturing areas to install new equipment which will meet existing demands and also to accommodate future growth. This project is envisaged to be completed in 2010.

THE STERILE FACILITY COMMENCES PRODUCTION OF EYE DROPS

The Sterile Facility extends Aspen’s manufacturing capability into the specialist manufacturing areas of sterile eye drops, freeze-dried lyophilised vials and sterile injectables, including the manufacture of injectable hormones. The multi-product suite producing eye drops was commercialised in August 2009. The facility is able to produce in excess of 30 million bottles per year, with close to 24 million units per annum to be exported into the United States under the manufacturing contract for Clear Eyes and Murine with Prestige Brands Inc. Manufacture of Aspen’s other ophthalmic products will also be phased into this facility over time.

The Sterile Facility has been constructed and validated in accordance with international standards.

Trials have been initiated in the injectable suite of the Sterile Facility. These areas are scheduled to be commercialised during 2010. Contracts are in place with leading multi-national pharmaceutical companies Eli Lilly and Bayer for the manufacture of products for international markets. The successful validation, commissioning and commercialisation of this highly specialised and sophisticated plant is testament to the efforts, skills and competence of the management and staff involved in the project.

CAPACITY ENHANCEMENTS AT THE NUTRITIONALS FACILITY

As a result of growing demand, a project is underway to increase the blending capacity by more than 50% at the Nutritionals Facility in Johannesburg. Following completion of this project in October 2009, this facility will be positioned to meet local and international demand.

An explosion, induced by the combustion of dust particles, occurred in the drying tower on 18 August 2009. The explosion and resultant fire caused extensive damage to this part of the facility.

However, production in the blending and packing areas remains uninterrupted. It is expected that the drying tower will recommence production in the second half of 2010. A contingency plan, utilising outsourced production, has been implemented to ensure continued supply of IMFs into the market. Aspen is fully insured against damage and loss of profits arising out of this incident.

CONTINUOUS IMPROVEMENT PROJECTS ENHANCE EFFICIENCIES

A number of continuous improvement projects have been implemented successfully across the South African facilities with a committed objective to increase efficiency and reduce costs. Continuous improvement targets are set and monitored periodically to measure progress. Achievements recorded to date include:

• The doubling of batch sizes to reduce set-up time between batches and thereby optimise equipment utilisation;
• Enhancement of cleaning validation studies to improve set-up times;
• Elimination of redundant in-process tests to improve throughput times;
• Automation of end-of-line packing to match the increased rate of manufactured output; and
• Improvement of product yields through manufacturing process improvements and advanced training of operators.

To implement and embed the improved manufacturing technologies and processes, a committed investment has been made in the training and development of all operating and support staff throughout the facilities. Accelerated skills development, on-the-job coaching and ongoing GMP training have contributed to the achievement of continuous improvement objectives.