Leadership in Manufacturing and Engineering Organizations

Reliable, cost-effective production

Leadership in Manufacturing and Leadership in Manufacturing and Engineering OrganizationsEngineering Organizations

Patrick Y. Yang, Ph.D.

Executive Vice President, Product Operations

January 26, 2006

ISPE Bay Area Subchapter Meeting

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Genentech - a cool company by the bayGenentech - a cool company by the bay

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Thirty Years Science-based Thirty Years Science-based GrowthGrowth

GenentechFounded

(for use with the Nutropin AQ Pen Cartridge)

‘76 ‘85 ‘87 ‘93 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘042005 & Beyond

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$6,633

$4,621

$3,300

$0

$2,000

$4,000

$6,000

$8,000

2003 2004 2005

Total Operating Revenues

Total Operating RevenuesTotal Operating Revenues

• For the full year 2005, total operating revenues exceeded $6.6 billion, doubling our total operating revenues in the 2 years since 2003.

($ in millions)

A 44% increase over 2004

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Our CultureOur Culture

• As of December 31, 2005, we have ~9,500 employees, an approximate 25% increase over 2004.

• In 2005, we were named by Science magazine as “the top employer and most admired company in biotechnology and the pharmaceutical industries” for the fourth year in a row.

• This month, FORTUNE magazine named Genentech as the #1 company on the 2006 list of "The 100 Best Companies to Work For". We have earned a place on the FORTUNE list for eight consecutive years.

• We remain focused on working to protect and nurture our culture.

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Genentech’s Executive CommitteeGenentech’s Executive Committee

Richard Scheller Art Levinson Ian Clark Pat Yang

Sue Hellmann David Ebersman Steve Juelsgaard

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Genentech’s Executive Committee Genentech’s Executive Committee Dressed up for HalloweenDressed up for Halloween

Sleepy Grumpy Snow White Happy Sneezy Doc Bashful

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Our key business challengesOur key business challenges

• Successful new product launches• Pricing/Reimbursement• Manufacturing execution• Supply chain risks• R&D Productivity• Culture: being innovative and efficient• Competition/Follow-On Biologics

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Excellence Means Excellence Means Being Innovative Being Innovative andand Disciplined Disciplined

(The key word is “(The key word is “andand”, not “”, not “oror”… The risk is we become a ”… The risk is we become a “big pharma”)“big pharma”)

Innovative / Entrepreneurial

Dis

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lined

/ E

ffic

ien

t

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Genentech’s Cell Culture Capacity Growth Genentech’s Cell Culture Capacity Growth ChallengeChallenge

0

100,000

200,000

300,000

400,000

500,000

600,000

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Ca

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Big Pharma vs. Great BiotechBig Pharma vs. Great Biotech

• What are the differences?–Sizes and scales

–Success rates

–Priorities

–Cultures

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Big Pharma’s ManufacturingBig Pharma’s Manufacturing

• Complex Supply Chain• High Inventory• Long Cycle Time• Non-responsiveness• Good/Fair Customer Service• Islands of Excellence• High Priority of Quality and

Compliance• Over capacity

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Typical Big Pharma “Reengineerging” or Typical Big Pharma “Reengineerging” or Cost Cutting Solutions (usually too late)Cost Cutting Solutions (usually too late)

Order-to-Cash Process Reengineering

Procure-to-Pay Process Reengineering

Clinical Process Cycle Time Reduction

Research productivity improvement

Capital effectiveness improvement

IT project effectiveness improvement

Leadership development Improvement

Performance management improvement

Cost structure improvement (capital, headcount)










Simplify. Mandate common processes.

Create one source of global information

Provide ease of access to key operational data

Focus resources on high-value added activities

Analyze expeneses and eliminate wastes

Eliminate redundant functions

Apply Six Sigma and Lean Manufacturing

Reduce Work

Close plants, cut overhead, sell assets.








Reduce Work


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Typical Big Pharma “Reengineerging” or Typical Big Pharma “Reengineerging” or Cost Cutting Solutions (usually too late)Cost Cutting Solutions (usually too late)








Reduce Work









Reduce Work




















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Other Big Pharma Reactions when Things Don’t work: Where did Other Big Pharma Reactions when Things Don’t work: Where did all the money go? How do we spend it?all the money go? How do we spend it?

IT Systems Support $600

$1021Up $101 / 13% Human Resources $68

Finance/Bus. Dev./Licens. $109

9% Of Total Executive/Admin $159

MRL Other $264

$1,600 Up $176 / 13 % Administrative $142

Depreciation $121

15% Of Total

$4,300 Up $766 / 22 %

42% Of Total

MMD Period Costs $1,176

$3,176 Up $97 / 4 % Manufacturing Expenses $700

Other Division Support Exp. $127

33% Of Total Depreciation $350

$10,000 Up $1,140 / 13 % $5,000

Sales & Marketing

$3,000

Benefits

$1,600

Other

$317

Administration (G&A)

$443

Clinical Development

$994

Basic Research

$342

Administration/Other

$740

BUSINESS INFRASTRUCTURE

DRUG DISCOVERY/DEVELOPMENT

ORDER GENERATIONMARKET DEVELOPMENT AND Promotion

$1,446

Clinical Programs

International

MATERIALS & PRODUCTION

TOTAL EXPENSES

Direct Selling

$1,686

Cost of Sales

$2,111

Payroll

Why wait until

you are

in trouble?

Why wait until

you are

in trouble?

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Two perspective of Genentech’s cultureTwo perspective of Genentech’s culture

• Informal• Genuine• Authentic• Intensive• Hard working• Nimble• Fun• Fair

• Informal• Genuine• Authentic• Intensive• Hard working• Nimble• Fun• Fair

• Patients• People• Science

• Patients• People• Science

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What’s hard to imitateWhat’s hard to imitate

1. Employee’s passion for their jobs

2. Productive dialogues

3. Effective decision making

4. Follow Through and Feedback

5. Operating system

6. Innovation (not just creativity)

7. Leaders at all levels

8. Right people in the right jobs

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What does success for me look like?What does success for me look like?• Best place to work

• Most admired manufacturing organization

• 10X productivity in 10 years

• Strong pipeline: many new molecules into Development

• Many new products successfully launched

• #1 in Oncology in the U.S.

• High annual earnings growt

• Significant positive cumulative free cash flow

• Most innovative, most efficient company

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The Ultimate Measure of Our SuccessThe Ultimate Measure of Our Success

• We are committed to developing products that address significant unmet medical needs

• We are committed to ensuring our marketed products are available to qualified uninsured or underinsured patients in the United States

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Final Thoughts: Manufacturing and Final Thoughts: Manufacturing and Engineering Leader’s ProfileEngineering Leader’s Profile

• Passion for what they do.

• Ability to facilitate, teach and lead.

• Principle centered - thus, ethical and predictable behavior.

• Trustworthy, candid and transparent.

• Responsible and responsive 360 degree - always connected with reality.

• Flawless follow-up - always meeting commitments.

• Attention to details - nothing falls through the crack.

• Great judgment and excellent decision making.

• Emotional strength – having the courage to make tough decisions and the heart to implement it thoughtfully.

• Emotional intelligence – having the skills for interpersonal productivity, conflict management, collaboration and team achievements.

• Always learning

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In conclusion…In conclusion…• What are my best learning experiences:

– General Electric• Execution: get the job done• HR development processes• Speed, simplicity, self-confidence• Management as a feedback control system• Employability: always learning

– Merck• Passion: “medicine is for the patients”• Integrity and honesty• Systems thinking• Curse of the Most Admired: lessons learned• Globalization

– Genentech• Real passion• Authenticity: being self and genuine• Work hard, play hard• Feet on the ground

Leadership in Manufacturing and Engineering Organizations

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