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.