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CANADArsquoS COST AND TAX ADVANTAGES ndash CLINICAL TRIALS

Canada represents a global player in the field of clinical trials According

to the website centerwatchcom as of October 2016 Canada had more

than 4500 clinical trials in progress ranking seventh in the world One of

the keys to Canadarsquos success in this field is a competitive environment for

business costs and business taxes

In its 2016 study of global business locations Competitive Alternatives 1

KPMG found that Canada offers the lowest business cost structure and

the lowest business tax burden among the G7 countries for clinical trials

Details of these findings are presented below reflecting business costs

and taxes for a firm providing management services for the operation of

clinical trials in a private (non-hospital) facility

CLINICAL TRIALS MANAGEMENT COST INDEX G7 RESULTS (US = 1000)

CANADA 704

FRANCE 721

ITALY 803

UNITED KINGDOM

JAPAN

833

903

GERMANY 911

UNITED STATES BASELINE

200 40 60 80 100

CANADArsquoS COST HIGHLIGHTS Clinical trials administration firms based in Canada benefit from total labour costs 304 percent lower than equivalent costs in the US Competitive salary levels and lower healthcare costs in Canada contribute to these savings

Leasing costs for suburban office space in Canadarsquos major cities are low relative to most G7 countries with savings of 34 percent compared to the G7 average for this facility

Power-hungry servers benefit from affordable electricity in Canada with power costs that are 34 percent below the G7 average

Taxes and incentives represent the final component of Canadarsquos cost advantage as detailed on the next page

Combining all cost factors Canada has the lowest business cost environment among all G7 countries with total business costs 296 percent below the US

IMPACT OF EXCHANGE RATES The 2016 edition of Competitive Alternatives was released in March 2016 The results from that study including the results reported here reflect exchange rates that were in effect in the fourth quarter of 2015 These results are sensitive to exchange rate changes

During 2016 the Canadian dollar has appreciated modestly in value relative to the US dollar For the model clinical trials firm Canadarsquos cost advantage relative to the United States decreases marginally from 296 percent to 280 percent at September 2016 exchange rates The continued strength of the US dollar provides Canada with a clear cost advantage for clinical trials management firms

11

9

17

15

418

6

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LOW-COST HOT SPOTS Rank among 103 G7 cities and business cost index (US = 1000)

4 Halifax 649

6 City of Queacutebec 653

9 Vancouver 687

11 Montreacuteal 690

15 Edmonton 703

17 Toronto 718

18 Calgary 723

CANADArsquoS TAX HIGHLIGHTS2

Clinical trials operations are highly RampD-intensive As a result Canadarsquos generous RampD tax credits reduce the effective rate of corporate income tax for this model firm to just 36 percent the second lowest in the G7

Canadarsquos statutory labour costs are the lowest in the G7 and its costs for other corporate taxes are also low ranking third among the G7 countries

Overall Canadarsquos total tax index for this clinical trials management firm is 353 This gives Canada the lowest net tax position in the G7 by a wide margin and reflects total tax costs 647 percent lower than in the United States

CLINICAL TRIALS MANAGEMENT TOTAL TAX INDEX2 G7 RESULTS (US = 1000)

CANADA 353

UNITED KINGDOM 566

FRANCE 568

UNITED STATES BASELINE

JAPAN 1498

GERMANY 1695

ITALY 1749

0 30 60 90 120 150 180

SUMMARY OF OPERATING PARAMETERS

BUSINESS OPERATION CLINICAL TRIALS MANAGEMENT

Facilities requirements Class A office space leased (929 m2) 10000 ft2

Workforce Management 3 Sales and administration 9 Dedicated product development 38

Total employees 50

Other initial investment requirements Office equipment - US $rsquo000 Equity financing - of project costs

$150 85

Energy requirements Electricity monthly consumption 25000 kWh

Other annual operating characteristics Sales at full production - US $rsquo000 $8000 Operating costs - of sales 5 Investment in tax-eligible RampD - of sales 58

1 Competitive Alternatives KPMGrsquos Guide to International Business Location Costs and Competitive Alternatives Special Report Focus on Tax Available for download from CompetitiveAlternativescom 2 Calculations by MMK Consulting Inc based on detailed data from Competitive Alternatives Special Report Focus on Tax as that report only published sector-level tax results

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