Lessons Learned From the Mistakes of Others

1. Lessons Learned From the Mistakes of Others Keisuke “Kaye” Suzuki March 30, 2007

2. Commercial Investment Risk + - Basic Market Entry Models • Direct Operation • Market Penetration • Operational Expenses • Joint Venture • Share and Board Balance • Transfer Price • Distributorship • Distribution Strength • Purchasing Commitment

3. Cultural Commercial Compliance Investment Risk Investment Risk Investment Risk + = = + + - Additional 2 C’s • Direct Operation • Joint Venture • Distributorship

4. Basic Model - Kaye’s View • Cultural • Code of Conducts • Core Value • Communications Compliance • Regulatory (PAL) • Pre-clinical (GLP) • Clinical (GCP & GPSP) • Quality (GQP & QMS) • Vigilance (GVP) Direct Joint Venture • Capability • Commitment • Channels • Commercial Distributor

5. Seizou-Hanbai Shonin (Market Release Approval) • YOUR distributor is the applicant - usual • Apply as the Market release Authorization license Holder (MAH, Seizou-Hanbai Gyosha) for the product • Changing distributor is a potential challenge as Shonin is granted to distributor, not YOU • YOU can be the applicant - alternative • Apply directly under the Foreign Special Exemption Approval System (PAL article 19-2) • Appoint distributor as Designated MAH (Sennin MAH) delegated on GVP compliance • Changing distributor is not prevented by regulatory issue • Can you have the distributor be your outsource? • Market Release = To originate Manufacturing, Importation, Distribution, Sale, Rent and/or Present

6. Lesson 1 • What are important criteria that Ace should evaluate and watch out for, during their selection process to identify the right-fit partner in Japan? • What can Ace do besides finding their distributor in Japan to speed up the market entry?

7. Assumptions • Japanese market (size, growth, therapy acceptance, competitors and price) is very attractive • US still needs continuous resource focus • Distributor candidates are identified with background check completed • All distributor candidates hold Class 1 Device MAH • Model A ventilator is classified as Controlled Medical Device without Approval Standard • Implantable breath assist device is first of its kind, classified as Highly Controlled Medical Device with Clinical data necessary

8. Criteria - Commercial (1) • Management • Value & Vision • Key Decision Maker • Sales • Structure • Incentives • Training • Marketing • Launch Strategies • Processes • Product Positioning • Monitoring Metrics • Alignment • Strategies • Customer Handlings • Customer Segmentation • English Capabilities • Customer Preferences • Market Intelligence

9. Criteria - Commercial (2) • Workforce Diversity • Age • Gender • Supply Chain • Inventory Management • Dealer Management • Voice of Stakeholders • Customers • Competitors • Dealers • Turnover • Tenure • Labeling Operation • After Service • Regulators • Present Manufacturers • Past Manufacturers

10. Criteria - Compliance & Cultural (1) • Demand and Observe • Alignment on Shonin strategy • Bilateral satisfaction of WHY before any action • Peer review on all documents PRIOR to submission • Participation on all meetings with MHLW/PMDA • Biweekly conference call to align on next step • Quarterly face to face meeting • Offer and Observe • Full dossier submitted to FDA and CE Notified Body • Training and Testing on products and dossiers • Drafting English respond to all inquiries as a base

11. Criteria - Compliance & Cultural (2) • Conduct an AUDIT on PAL & Ethics compliance • Just like FDA and/or CE notified body will to YOU • Audit the system, procedures, controls and records • Observe how the distributor, • handles the audit; • accepts the findings and observation; • develops CAPA plans; • reach for your advise; and • executes CAPA • Compare with YOURSELF • How you will handle this situation if you were on their shoes?

12. Lesson 2 • What are important criteria that Ace should evaluate and watch out for, during their selection process to identify the right-fit partner in Japan? • What can Ace do besides finding their distributor in Japan to speed up the market entry?

13. Basics for Quality • 5 S • Seiri, Seiton, Seisou, Seiketsu, Shituke • Arrange, Order, Clean, Neat, Habit • 5 MU • Muri, Muda, Mushi, Muchi, Mura • Overstressed, Waste, Ignorance, Untrained, Non-uniform • 5 GEN • Genba, Genbutsu, Genjitsu, Genri, Gensoku • On Site, Actual Thing, Reality, Theory, Principal

14. Good Preparation (1) • Understand PAL, GLP, GCP, GQP, QMS, GVP and GPSP • Understand the Shonin application review process • Organize FDA and CE Review History and Records • Obtain Copies of Similar Device Shonins • Compose Compelling Explanations on Safety & Efficacy • Conduct GCP Documentation Quality Check • Develop Detailed CRF Spreadsheet

15. Good Preparation (2) • Develop Detailed Material/Component List • Compile into A Product Master File • Review Complaint Records and MDRs • Review Field Actions and Associated CAPA • Conduct R&D Documentation Quality Check • Prepare for Foreign Manufacturer Accreditation Application • Prepare for Detail Oriented Audit by PMDA

16. Draft YOUR Thesis (1)

17. Draft YOUR Thesis (2)

18. Summary • YOUR distributor represents YOU; NOT ONLY your products to the stakeholders - Become Dynamic Duos with your distributor! • YOU need to be PROACTIVE, NOT REACTIVE; define and take the lead • YOU have to shift your perception; Japan is not fundamentally different from YOU - YOU need to take away your sunglasses • YOUR Compliance Risk is the same; Distributor, Joint or Direct • YOU need to invest time and money, do your homework to gain access to attractive Japan market; nothing come for FREE • YOUR overall cost will be higher later, if you compromise now; deal with it upfront

19. Quotes “Your most unhappy customers are your greatest source of learning.” - Bill Gates “The Quality is mental; Overall Functionality versus Sum of Individual Component Functionality” “The difficult part is to understand the true WHY? (min. 3 layers deep), then the rest if fairly easy!”