Genentech Boosting Manufacturing to Full Capacity

06/27/2005

On June 24, Genentech, Inc. (South San Francisco, Calif.) an update on recent manufacturing activities designed to support its short- and long-term manufacturing capacity planning. The company announced the closing of the acquisition of Biogen Idec’s NIMO Oceanside, Calif. biologics manufacturing facility but also noted it will be boosting production to nearly 100 percent of capacity at it other facilities.

“Recent multiple positive Phase III clinical trial results will likely drive increasing demand for our products, and we are continuously assessing our manufacturing plans and capacity to meet that demand,” said Patrick Y. Yang, Ph.D., senior vice president, Product Operations. “We believe we have the right portfolio of manufacturing capacity enhancement projects that, if implemented successfully, will enable us to meet our internally forecasted demand for all our products. In order to maintain adequate supply, we will need to implement all our priority capacity expansion projects and achieve licensure on schedule, successfully adhere to an aggressive production plan that will utilize nearly 100 percent of our capacity in the near-term, and maintain a state of regulatory compliance at all our production sites.”

Yesterday, Genentech completed its acquisition of the Oceanside biologics manufacturing facility from Biogen Idec for approximately $408 million in cash plus $9 million in closing costs. The company expects to incur additional capital costs at Oceanside over the next 24 months, including upgrades, and start-up and validation costs. Including the Oceanside costs, the company now expects capital expenditures in 2005 to be approximately $1.7 billion. In addition, the company expects approximately $15 million in operating expenses associated with the Oceanside facility to be incurred in the second half of 2005.

Genentech also announced that it will pay Amgen $30 million as part of an agreement to cancel the remainder of its Enbrel manufacturing obligations. Separately, the company resolved an open issue with another manufacturing collaborator for an additional $11 million payment from Genentech. Genentech will incur the combined $41 million in expenses as part of cost of sales in the second quarter of 2005.

“Cost of sales will be higher than we had previously forecasted due to these manufacturing agreements; we anticipate cost of sales will be 22 to 23 percent of net sales for the second quarter of 2005, and approximately 19 percent of net sales for the full year 2005,” said David Ebersman, senior vice president and chief financial officer. “We are excited about the benefits to the company of these arrangements in terms of significantly increasing our available manufacturing capacity.”

The company also provided an update on key manufacturing projects:

• Oceanside: Upon U.S. Food and Drug Administration (FDA) licensure expected in the first half of 2007, the Oceanside facility will add 90,000 liters of capacity that will be initially dedicated to producing Avastin bulk drug substance. The Oceanside facility will continue to be led by David Broad, Ph.D., who will join Genentech as vice president and general manager (the same title held at Biogen Idec) and will report into Yang.
  
  
• Lonza: In the second quarter of 2005, Genentech filed a supplemental Biologics License Application (sBLA) with the FDA requesting licensure of Lonza’s Portsmouth, N.H. facility to manufacture Rituxan bulk drug substance. The company is planning for approval in late 2005. Lonza is expected to produce approximately 50 percent of Genentech’s Rituxan bulk requirements for the next several years.
  
  
• Porriño, Spain: Genentech expects to file an sBLA by the end of the second quarter of 2005 for licensure of two 10,000-liter bioreactors at its Porriño facility to produce Avastin bulk drug substance for commercial use, and the company is planning for licensure by the end of 2005. The company is also implementing plans for an additional two 10,000-liter bioreactors in Porriño for Avastin production, with licensure expected in 2006.
  
  
• Novartis: The companies plan to file an sBLA for Xolair bulk drug substance production in the third quarter of 2005 and anticipate licensure in early 2006.
  
  
• Wyeth: Start-up activities continue on schedule, and the company expects licensure by the end of 2006 to manufacture Herceptin bulk drug substance at Wyeth’s Andover, Mass. facility.
  
  
• Yield improvements: The qualification and licensure of process changes designed to improve yields for Avastin and Rituxan continue to move forward in process development. Initial FDA approval of yield improvements for Rituxan is expected by the end of 2006 and for Avastin is expected in early 2007.
  
  
• CCP2: The addition of a new manufacturing facility at the company’s Vacaville site continues on schedule, with licensure planned for 2009. The expansion will add 200,000 liters in capacity.

Overall, by early 2007 Genentech expects to have 370,000 liters of licensed manufacturing capacity, in addition to licensed capacity at several contract sites. Licensed internal capacity should increase to 570,000 liters by the first half of 2009.