1. Navigating the Complexity of Life Sciences Dave Medina Vice President – Life Sciences QAD, Inc. West Coast User Group Meeting

2. This presentation includes forward-looking statements about QAD and its business. These statements are subject to risks and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties are detailed in QAD’s SEC filings, including its Form 10-K for the fiscal year ended January 31, 2013. The company undertakes no obligation to update forward- looking statements. Safe Harbor Navigating the Complexity of Life Sciences

3. The Complex Life Sciences Environment U.S. Healthcare Reform and Life Sciences Manufacturers Serialization - The Regulations -UDI and ePedigree – The Business Impact of Serialization, Track and Trace Agenda

4. Globalization -From sourcing to new markets in emerging countries -Global price regulation and reduced reimbursement Complex global regulatory environment -Innovation while managing current offerings. Global collaboration -Changing business models -Controlling quality, compliance, governance and risk Life Sciences Industry Trends The Complex Life Sciences Environment

5. Increased focus on patient safety -Anti-counterfeiting (e-Pedigree / UDI) QbD and PAT initiatives -Automate QMS into manufacturing processes Reimbursement and price pressures -Better contract and revenue management -Accurate trade activity management Demand -Supply chain visibility Life Sciences Industry Trends The Complex Life Sciences Environment

6. The U.S. Healthcare Supply Chain The Complex Life Sciences Environment Sample size = 1120; Source: 2009, Nachtmann and Pohl 1 – Ad Hoc SCM unstructured and loosely defined Process measures not in place 2 - Defined Basic SCM defined and documented Process changes thru formal process 3 - Linked Managers employ SCM with strategic intent and results SCM measures horizontal 4 - Integrated SCM ecosystem cooperation to the process level SCM deeply embedded in organization 5 - Extended Routine Supply Chain collaboration between legal entities

7. The Complex Life Sciences Environment Leveraging Technology – Manufacturer Plans *Excerpted from IDC Report: “Best Practices: 2012 Life Science Manufacturing and Supply Chain IT Benchmark Guide” Rank Technology ERP Vendor 1 Data mining / analytics 42.3% 2 Business intelligence / dash boarding 44.1% 3 Quality control 40.6% 4 Track & trace / serialization / ePedigree 42.4% 5 Strategic sourcing 37.5% 6 Process Analytical Technology (PAT) 20.3% 7 Warehouse management 37.3% 8 Data warehousing 18.6% 9 Demand forecasting 35.5% 10 Supply chain visibility / monitoring 35.5% Top 10 Planned SCM Technology Purchases 2012* In order of preference from ERP Vendor

8. 8 U.S. Healthcare Reform and Life Sciences Manufacturers

9. Effective Jan 1, 2013 – 2.3% -Final / Interim rule issued Dec 5, 1012 Complex rules challenge internal processes -Convenience kits -Rebate management -Constructive sales price -Reporting compliance -Exemptions Challenges internal processes Medical Device Excise Tax U.S. Health Care Reform and Life Sciences Manufacturers

10. How healthcare makes money - Today – by filling hospital beds and doing more things to/for patients - Tomorrow –by keeping people out of hospital beds and doing less things to/for patients Accountable Care Organizations (ACOs) -Move delivery systems from silo to multi-provider -From “fee for service” to shared payments -Understanding and managing costs critical Your Customers U.S. Health Care Reform and Life Sciences Manufacturers

11. Providers -Large IDNs leveraging GPO contracts -IDNs consolidating - Regional Purchasing Co-ops -ACO’s acting as GPO’s Manufacturers -Supply chain efficiency, visibility -Partnerships with customers Better contract management -Understanding impact on financials -Better visibility downstream to customer behavior Near-term impact U.S. Health Care Reform and Life Sciences Manufacturers

12. Future QAD Functions: Trade Activity Management Manufacturer w/TPM Life Science GPO (Buying Group) Indirect Customer Distributor Invoices at List Price – Std disc Invoices at Contract Price Customers Order from Distributor Admin Fee ($) $$ Chargeback (List – Contract Price ) Contract Price Definition Indirect Customer Distributor Orders from Manufacturer

13. The supply chain: -Expenditures are 20 – 50% of cost of care -Tie up capital – restricting investment -Influences choice of patient care technologies Engagement in customer supply chain -Know every treatment-essential product used for care of patient? -Study the impact of products on outcomes? -Identify cost/quality trade-offs Focus on demand planning Long-term impact U.S. Health Care Reform and Life Sciences Manufacturers

14. Regulatory mandates Reimbursement Group purchase (GPO, IDN, ACO) Cost pressures Seasonality (e.g., flu season, etc.) Patient demographics Visibility to LS enterprise Shelf life (e.g., consignment) Global Distribution National regulatory issues Regional reimbursement issues No LS enterprise visibility into… …Inventory levels …Shelf life …Provider demand Wholesale/ Distribution Partners No LS enterprise visibility into… …Inventory levels …Shelf life GPO Contract Management Raw Materials Suppliers Quality control Regulatory governance Global dispersion Long lead times Contract Manufacturing Lack of visibility to manufacturing schedules Multiple supply chain partners Lack of forecast collaboration Increased regulations Quality system management Regulatory governance API Payers Demand Planning Challenges - Life Sciences U.S. Health Care Reform and Life Sciences Manufacturers The Life Sciences Enterprise U.S. Healthcare Providers

15. Demand Planning Challenges - Life Sciences U.S. Health Care Reform and Life Sciences Manufacturers Patient Life Sciences Enterprise Healthcare Provider External Sources Social Media Payer Economics Employer Incentives Patient engagement in healthcare will drive decisions on alternatives Influences on patient decisions are varied Understanding a patient’s demand drivers will be critical to success

16. Reliable forecasts -Mathematical modeling -Collaborative input -Responsive to change Inventory-efficient supply chain -Reduce inventory -Improve customer service -Increase promotional effectiveness Demand Planning 7.0 U.S. Health Care Reform and Life Sciences Manufacturers Enabling the Effective Enterprise!

17. 17 Serialization, Track and Trace

18. Food & Drug Administration Amendments Act (FDAAA) – Sep 2007 Reduce medical errors -Rapid and accurate device ID Improve accuracy of data in IT systems -Streamline supply chain processes -Useful EMR application in clinical environments Adverse events and recalls Anti-counterfeiting Unique Device Identifier (UDI) Serialization, Track and Trace

19. Unique code -Unambiguous ID of a specific product Consists of two parts: -Device Identifier (DI) – Specific model -Production identifier (PI) – Lot or batch no., serial number, expiration date, or date of manufacturer What’s a UDI? Serialization, Track and Trace

20. Must be presented in 2 forms on label: -Plain-text, and -Automatic Identification and Data Capture (AIDC) tech Plus - direct device marking on… -Long-term implantable devices -Reusable devices – sterilized routinely -Devices that may get separated from label Convenience kits & devices in kits Exemptions (retail, class I devices) What’s Required in a UDI? Serialization, Track and Trace

21. Example of a UDI on a device label Source: http://www.fda.gov/medicaldevices/deviceregulationandguidance/uniquedeviceidentification/default.htm Unique Device Identifier (UDI) Serialization, Track and Trace

22. Who must comply? -Manufacturers, reprocessors, specification developers, repackagers, relabelers and kit assemblers Standards-based – ISO15459 Manufacturers create their own code Format - 2 standards organizations -GS1 & HIBCC (Healthcare Industry Business Communication Council) How will UDI system work? Serialization, Track and Trace

23. Global Unique Device Identification Database (GUDID) -Quickly identify devices to reduce errors -Track devices in event of a shortage -Integrate data with electronic health records Final FDA rule before May 7, 2013 How will UDI system work? Serialization, Track and Trace

24. What are the implications? Serialization, Track and Trace FDA UDI Compliance ERP System Quality Management System Production & Process Design Supply Chain Partners ERP serialization functionality with easy track and trace essential to compliance with UDI requirements

25. Why? -Anti-counterfeiting -Brand security and protection -Supply chain optimization -Trade activity management Contract manufacturers -Level of technical infrastructure varies -Some may see as a value-added differentiator Drug ePedigree Serialization, Track and Trace

26. California ePedigree – The Basics Drug ePedigree Serialization, Track and Trace DatePlayerRequirement Jan 1, 2015Pharmaceutical Manufacturers Serialize and ePedigree 50% of their prescription drug packages Jan 1, 2016Pharmaceutical Manufacturers Serialize and ePedigree remaining prescription drug packages July 1, 2016Distributors and Repackagers Receive ePedigrees and serialized drug packages Update ePedigrees Repackagers must link incoming and outgoing serial numbers Ship serialized drug packages Pass on the updated ePedigrees July 1, 2017Pharmacies Receive ePedigrees and serialized drug packages Update ePedigrees Ship serialized drug packages (returns) Pass on the updated ePedigrees (returns)

27. 27 The Business Impact of Serialization and Item Attributes

28. Business Process Impact Manufacturer Indirect Customer Distributor Invoices at List Price – Std disc Invoices at Contract Price Customers Order from Distributor Indirect Customer Distributor Orders from Manufacturer Serialization Integration Trade management Product safety Supply chain integrity Recall Non-conformance/CAPA Serialized products $$ Chargeback (List – Contract Price) Manufacturer checks serialization against invoice to detect counterfeit, gray market, double counting and accurate discount Allows for easier recall by tracking to end user Visibility in case of CAPA investigation due to non- conformance CAPA Investigation

29. Item level serialization Track and trace -Lot trace workbench -Serial data history -Lot and sub-lot data Item attributes for quality control Sample Use Case The Business Impact of Serialization and Item Attributes

30. Recall – QAD Serialization The Business Impact of Serialization and Item Attributes FDA First Alert Company discovers problem - contacts FDA FDA inspection FDA receives report (AER) CDC contacts FDA FDA First Alert Company discovers problem - contacts FDA FDA inspection FDA receives report (AER) CDC contacts FDA Distributors Reviews stock for affected product Returns undistributed, affected stock Advises affected clients Distributors Reviews stock for affected product Returns undistributed, affected stock Advises affected clients Pharmacy Identifies affected product Returns affected product Pharmacy Identifies affected product Returns affected product Patient Takes suspected recall product to pharmacy Pharmacy reviews ePedigree with item level serialization Pharmacy determines part of affected lot Pharmacy recalls product and returns to distributor / manufacturer Class I Recall FDA Alerts Public Manufacturer Recall initiated Identify affected shipments Contacts distributors with appropriate serialization CAPA investigation initiated Manufacturer Recall initiated Identify affected shipments Contacts distributors with appropriate serialization CAPA investigation initiated Recall Effectiveness

31. Send data to CAPA Data Lot Trace Workbench The Business Impact of Serialization and Item Attributes Manufacturer Problem confirmed Affected lots ID’d FDA notified (prior slide) Recall (prior slide) Manufacturer Problem confirmed Affected lots ID’d FDA notified (prior slide) Recall (prior slide) Original Complaint Originator of complaint to company (AER) ePedigree ID‘s item Manufacturer notified Original Complaint Originator of complaint to company (AER) ePedigree ID‘s item Manufacturer notified Supplier Impact analysis Other product lots (finished goods shipped)? Inventory? Review QC history of supplier, etc. Supplier Impact analysis Other product lots (finished goods shipped)? Inventory? Review QC history of supplier, etc. Lot Trace – Back Raw materials and component history Associated QC data (testing, etc.) Suspect raw materials batch(s) Supplier identified Other Distributors and Supply Chain Partners Advised of recall Other Distributors and Supply Chain Partners Advised of recall Lot Trace – Forward Other product from suspect raw materials? Where shipped? (Extend recall) Any inventory or WIP? Remove/quarantine/destroy Extend recall

32. CAPA Support and Item Attributes The Business Impact of Serialization and Item Attributes FDA Effectiveness Check Review entire recall process Reasonable removal/correction effort? Product destroyed/recondition? Investigate cause of defect FDA Effectiveness Check Review entire recall process Reasonable removal/correction effort? Product destroyed/recondition? Investigate cause of defect CAPA Process Root cause analysis Take Action Document CAPA Process Root cause analysis Take Action Document Investigation Product history Material/Supplier Analysis Supplier Investigation Product history Material/Supplier Analysis Supplier Action Disqualify supplier Destroy remaining product Destroy quarantined materials Replace with new supplier Action Disqualify supplier Destroy remaining product Destroy quarantined materials Replace with new supplier Data Documentation Data from various sources Supplier history (QAD Item Attributes) Quality attribute history (QAD Item Attributes) Statistical analysis Additional testing, etc. CEBOS

33. Trade Management Functionality Demand Planning 7.0 Item level serialization Lot trace Work Bench Item Attributes for Quality Control CEBOS – QMS Software QAD Functionality Meeting the Complex Needs of the Life Sciences Industry

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