Leadership in Manufacturing and Engineering Organizations

1
Leadership in Manufacturing and Engineering
Organizations

• Patrick Y. Yang, Ph.D.
• Executive Vice President, Product Operations
• January 26, 2006
• ISPE Bay Area Subchapter Meeting

2
Genentech - a cool company by the bay
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Thirty Years Science-based Growth
4
Total 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
5
Our 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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Genentechs Executive Committee
Richard Scheller Art Levinson
Ian Clark Pat Yang
Sue Hellmann David Ebersman Steve
Juelsgaard
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Genentechs Executive Committee Dressed up for
Halloween
Sleepy Grumpy Snow White Happy Sneezy
Doc Bashful
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Our key business challenges

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

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Excellence Means Being Innovative and
Disciplined(The key word is and, not or
The risk is we become a big pharma)
Innovative Disciplined Efficient/effective
Disciplined / Efficient
Innovative / Entrepreneurial
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Genentechs Cell Culture Capacity Growth Challenge
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Big Pharma vs. Great Biotech

• What are the differences?
• Sizes and scales
• Success rates
• Priorities
• Cultures

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Big Pharmas 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 Cost
Cutting Solutions (usually too late)

• 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.

• 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)

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

• 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.

• 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)

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Other Big Pharma Reactions when Things Dont
work Where did all the money go? How do we spend
it?
BUSINESS INFRASTRUCTURE
IT Systems Support
600
International
1021
Up 101 / 13
Human Resources
68
Administration (GA)
Finance/Bus. Dev./Licens.
109
443
9
Of Total
Executive/Admin
159
DRUG DISCOVERY/DEVELOPMENT
MRL Other
264
Clinical Development
Basic Research
1,600
Up 176 / 13
Administrative
142
994
342
Depreciation
121
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Of Total
Why wait until you are in trouble?
MARKET DEVELOPMENT AND
Sales Marketing
Promotion
Clinical Programs
Direct Selling
ORDER GENERATION
317
Administration/Other
1,446
1,686
4,300
Up 766 / 22
740
42
Of Total
MATERIALS PRODUCTION
MMD Period Costs
1,176
Cost of Sales
3,176
Up 97 / 4
Manufacturing Expenses
700
2,111
Other Division Support Exp.
127
33
Of Total
Depreciation
350
Benefits
Other
TOTAL EXPENSES
Payroll
10,000
Up 1,140 / 13
5,000
3,000
1,600
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Two perspective of Genentechs culture

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

• Patients
• People
• Science

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Whats hard to imitate

• Employees passion for their jobs
• Productive dialogues
• Effective decision making
• Follow Through and Feedback
• Operating system
• Innovation (not just creativity)
• Leaders at all levels
• Right people in the right jobs

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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 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 Engineering
Leaders 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

• 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