Coréalis – Quebec Court of Appeal confirms that putting pharmaceutical companies’ drugs into capsules for clinical tests qualified as manufacturing for sale

Coréalis entered into “service agreements” with pharmaceutical companies pursuant to which it would develop and manufacture clinical lots of solid oral dosage forms (tablets, capsules and granules) containing an active pharmaceutical ingredient (API) provided by the companies. These along with placebos, which were also manufactured and provided by Coréalis, were used in clinical trials of the drugs by the companies.

Hamilton JCA affirmed the trial judge’s finding below that the equipment which Coréalis had purchased and used in manufacturing the clinical lots qualified for Quebec investment tax credits based on its having satisfied the requirement under the description of a Class 29 property that the equipment had been acquired “to be used directly or indirectly by him in Canada primarily in the manufacturing or processing of goods for sale.”

First, the production of clinical batches for the drug companies were distinct transactions from the services of Coréalis in formulating the product so that (subject to the second point below) the capsules were to be considered as sold to those companies rather than being assimilated to a provision of services to them.

Second, although the API was a specialized high-value product, the trial judge had made a non-reversible finding that it represented only a small part of the total property provided by Coréalis to the drug companies, so that the property in the capsules was transferred to them by sale rather than by accession to the API.

Neal Armstrong. Summary of Agence du revenu du Québec v. Pharma Coréalis Inc., 2025 QCCA 1346 under Class 29.