Genentech – Capacity Planning

Question
Huge variations in anticipated capacity requirements.
So to increase capacity without commissioning a new plant.

If Avastin is approved by FDA.

genentech has to expand his capacity.
Time needed for the clinical tests to complete is 5 years for Avastin.
 Capacity
 Manufacturing plant in Porrino,Spain manufacturing Avastin.
 2 contract manufacturing relationships.
 New cell culture production plant going live on 2009.
 Cost of $600 million for new plant.
 Avastin along with drugs Tarceva and Omnitarg in pipeline.

Revenue
 2003:
Total revenue $ 3.3 Billion.
Net Income $563 million.
Product sales $2.6 Billion
Rituxan $1.5 Billion.
Herceptin $425 Million.
Avastin clocks 15% of sales in 9 months
Growth Hormones $322 million.
 Manufacturing capacity
 Three facilities at SanFrancisco CA, Vacaville CA and Porrino Spain.
 As of November 2004 CCP1 had 12 X 12000 litre production vessels.
 For 12000nlitre vessel 9 Kg of protein was produced.
 Approx 20 % of batches was wasted due to sterility issues.
 Single recovery line leading to one product at a time.
 15 batches per vessel per year.(Total capacity 12 X 9kg X 15 batches X 0.80) =
1296 Kg of protein.(in ccp1)
 In November 2004, Genentech capacity 280,000 litres.
 Sanfrancisco plant with capacity 96000 litres not designed for high throughput.
 In 2004 CCP1 was producing drugs with high throughput.
 Porrino was entirely dedicated for Avastin manufacturing.
 CCP2 with 200,000 litre capacity(8x25000litres).
 2009 CCP2 will go live.
 Rituxan: Contract manufacturer from 2005
Herceptin: Contract manufacturer from 2006
 With high margins the company could afford to have idle capacity
 Market size for Avastin
 Number of patients with each type of transfer.
 Duration of treatment
Number of doses.
number of weeks.
 Total patient: fl : 40000 sl:20000 oth: 120000
patient penetrated: fl : 20000 sl: 7000 oth:6000
dosage needed 33000x 0.375= 12375 kg.
 Similarly we need to find penetration for other cancer types.
 Expansion Option
 Demand in 2005: 1000 kg in total.
 Product sales $750 million in product sales of new drugs i.e. 250 kg of new
products.
 Option 1: new facility of 200000 litres at about $600 million cost.
Risk: very less company will be interested in buying it if project fails.
too big to manage.
Cost significantly high for 25000 lt tanks.
High changeover costs.
 Option2: reengineer the process and get it FDA approved
Advantage: higher margins.
Disadvantage: higher time needed for approvals.
 Smaller products not so profitable as tanks will be larger.
 Doubling protein yields with new process innovation.