Question What is your evaluation of Genentech’s production capacity requirements g

Assumption The expected growth in each of the product is given as 25% by the end of 2010 and another 25%
Growth rate in other drug demand 25%
Other Drug Demand 1000
2005 2010 2015
Other Drug Demand 1000 1250 1562.5

2005 2006 2007 2008 2009 2010 2011

Avastin Demand 303 492 681 870 1059 1248 1270
Other Drug Demand 1000 1050 1100 1150 1200 1250 1313
Omnitarg 0 50 100 150 200 250 300
Total Expected Demand / production capacity requirements 1303 1592 1881 2170 2459 2748 2882

st dev as % of mean
Assumption of 85%-ile demand 1

85%-ile demand 2605.1 3183.2 3761.2 4339.3 4917.3 5495.4 5764.2

Adapted from Exhibit 12

Estimated Number of
Expected Penetration Patients Using Avastin
Cancer
Patients 2005 2010 2015 2005

Colorectal Cancer Treatment

front-line 40,000 55% 60% 65% 22,000
second-line 20,000 35% 35% 35% 7,000
other 120,000 5% 10% 15% 6,000
35,000

Grams per dose 0.375

Doses per year 20
Total grams per patient treated 7.5

Total grams for colorectal patients 262,500

Total kg for colorectal patients 263

Probabilit
Trial y of Trial
Other Cancer indications Stage Success
Lung
front-line 100% 75,000 5% 30% 30% 3,750
other 100% 35,000 2% 15% 15% 700
Breast
front-line 100% 140,000 30% 30% 0
 other 100% 80,000 15% 15% 0
Kidney
front-line 100% 18,000 30% 30% 0
other 100% 18,000 15% 15% 0
Pancreatic
front-line 100% 16,000 30% 30% 0
other 100% 16,000 15% 15% 0
Other
front-line 100% 25,000 15% 30% 0
other 100% 25,000 8% 15% 0

Total patients 4,450

Grams per dose 0.75

Doses per year 12
total grams per patient treated 9

Total grams to treat other cancer indications 40,050

Total kg to treat other cancer indications 40

Total kg required for colorectal and other

cancer indications 303
duction capacity requirements given expected demand in 2010 and 2015 for Avastin and Genentech’s other products as per EXHIBIT 3? Do

5% by the end of 2010 and another 25% by the end og 2015 as par the case data.

2012 2013 2014 2015

1292 1313 1335 1357
1375 1438 1500 1563
350 400 450 500
3017 3151 3285 3420

6033 6301.8 6570.6 6839.4

Estimated Number of
Patients Using Avastin

2010 2015

24,000 26,000
7,000 7,000
12,000 18,000
43,000 51,000

0.375 0.375
20 20
7.5 7.5

322,500 382,500
323 383

22,500 22,500
5,250 5,250

42,000 42,000
 12,000 12,000

5,400 5,400
2,700 2,700

4,800 4,800
2,400 2,400

3,750 7,500
2,000 3,750

102,800 108,300

0.75 0.75
12 12
9 9

925,200 974,700
925 975

1248 1357
products as per EXHIBIT 3? Does your evaluation change if Genentech wants to cover the 85th -percentile level of demand? (See the sprea
vel of demand? (See the spreadsheet on VC)
Question Assuming Genentech decides to proceed with CCP3, what size of production lines (tank sizes) would you r

Should Ebersman move forward with CCP3 now?

Kg/Batch
Tanks Capacity/Tank Liters Batches/yr Kg/batch Recovered
SSF 8 12000 15 9.0 5.9
CCP1 12 12000 15 9.0 5.9
CCP2 8 25000 15 18.8 12.2
CCP3
Porrino 4 10000 15 7.5 4.9
Rituxan Outsource
Herceptin Outsource

st dev as % of mean
85%-ile demand 1

2005 2006 2007 2008 2009

SSF 561.6 561.6 561.6 561.6 561.6
CCP1 842.4 842.4 842.4 842.4 842.4
CCP2
CCP3
Porrino 234.0 234.0 234.0 234.0 234.0
Rituxan Outsource
Herceptin Outsource

Genentech Capacity 1638 1638 1638 1638 1638

Outsource Capacity 0 0 0 0 0
Total Capacity 1638 1638 1638 1638 1638
Total Demand 1303 1592 1881 2170 2459

ANSWER As per the demand, It is not required to go for any further expansion that is to not go for CCP3 now. It can be covered by using the cu
The right time for starting the operation in CCP3 will be in nearby FY 2015. So the construction and other formalities can be started in F

Analysis of size of production lines / tanks

12,000 L
Advantages
It will give us the flexibility to produce a range of products
Less risky as the technique is already tested.
25,000L
Advantages
Better margins and hence more profitability when compared to the 12,000 litres tank.
Make the company efficient to take care of the growing demand

ANSWER If Genentech wants to bulid manufacturing capacity in CCP3, the size of production line can be opted as 25

Criteria to select the location

ANSWER Distraction of managers to devote time to both the plants.
The motivation for the employees is to help their patients and of the monetary benefits.
If the company adds more employees to the family of 550 employees in the same village, they might feel
Specialized knowledge and skill set are available to run the plant
The Ease of FDA approval
ines (tank sizes) would you recommend? Why? What criteria should Ebersman use in selecting a location? Why? Should Ebersman move f

Kg/Batch
Recovered
Less Bad
Batches
4.7 96000
4.7 144000
9.8 200000

3.9 40000
0
0

2010 2011 2012 2013 2014 2015

561.6 561.6 561.6 561.6 561.6 561.6
842.4 842.4 842.4 842.4 842.4 842.4
1,170.0 1,170.0 1,170.0 1,170.0 1,170.0 1,170.0

234.0 234.0 234.0 234.0 234.0 234.0

Capacity vs Demand
4000
2808 2808 2808 2808 2808 2808
3500
0 0 0 0 0 0
2808
3000 2808 2808 2808 2808 2808
2748 2882 3017 3151 3285 3420
2500
2000
w. It can be covered by using the current capacity and additionaly using outsource if required.
1500
d other formalities can be started in FY 2010 and by then we will get results from the capacity expansions of tanks as well from CCP2
1000
500
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total Capacity Total Demand

uction line can be opted as 25000 if this experiments gives the right set of result in CCP2. Since by going for 25000 capacity, the production

ry benefits.
ame village, they might feel loss in their importance
Why? Should Ebersman move forward with CCP3 now? (If not, when?)
5000 capacity, the production can be just doubled with a slight increase in investment.
Question What recommendations do you make to Ebersman regarding the process he and his team should use in deciding ho

To meet the deamand for Avastin, Ebersman should

1 Since the plant's capacity can meet current Avastin and existing product demand, the team should not rush to expa
2 The team should also consider the trade-offs in outsourcing. While it may be cheaper in the short term, transferring
3 The team should have enough time to expand CCP3 to test the 25000 capacity vessel output. So it will help finalise
4 The team can work on technology improvement since the recovery output is lower. No additional capital investmen
5 This will also hold the fact that Genentech as a company could not afford to invest the money i.e. the capital sub op
6 The team should have their process development team focusing on improving the yield in the current manufacturin
eam should use in deciding how best to meet the demands for Avastin?

team should not rush to expand capacity. Waiting 2-3 years will reveal the post-clinical demand for Avastin and will help to decide on the
in the short term, transferring skills and technology can be difficult and time consuming.
output. So it will help finalise CCP3's cessel capacity.
o additional capital investment is required.
e money i.e. the capital sub optimally as it would cause less money going into research and development
ld in the current manufacturing process
and will help to decide on the capacity of tanks.
 A contract manufacturing firm has had an unexpected reduction in demand
for a drug it produces. It is now offering to devote four 10,000-liter lines to
the production of Avastin at a price similar to Genentech’s existing contract
Question manufacturing agreements. How should Ebersman respond.

Avastin has shown early success in treating colorectal cancer. But it's still in
trial for other cancers. If Genentech's expectations are met and it receives
FDI approval for all other expected fields, it will be a major revenue
contributor in the near future. Contract manufacturing of a well-known drug
is not advised due to the risk of skill and technology transfer. Contract
manufacturing early in the drug development process can harm the
organisation. Keeping skill and technology within the organisation should be
ANSWER a priority.