Post on 29-Jan-2016
• $191B Industry• Drugs awarded 17 year patent• Need to cut costs
– Sales volume decreasing– Less pricing flexibility– More competition– Manufacturing costs increasing
• New Plants needed for new drugs• Two types of plants
– Specialized plant• Capacity 20000kg• Cost $37.5M• Cannot be modified
– Flexible Plant• Capacity 14625• Cost $150M• Easy to switch to new drugs
0 1 2 3 4 5 6 7 8 9 10 11
Pre clinical
Clinical
Process Development
Facilities Design & Construction
FDA Review
Key Project Points
Produce Clinical Trial Supplies
Process R&D Process Optimization
Product Decision & Final Process
Lockdown Facility CompleteProduct Launch
Chemical Product created
Profits: $37.5MM
Chemical Product not created
Costs: $SUNK
Product moves to Human Trial
Costs: $
Chemical Product created
Chemical Product created
Chemical Product created
Chemical Product created
Chemical Product created
Product does not move to Human Trial
Costs: $SUNK
9990/10000
10/10000
1/10
9/10
Specialized Facility
Chemical Product created
Costs: $150MM
Chemical Product not created
Costs: $Partially Recoverable
Product moves to Human Trial
Costs: $
Chemical Product created
Chemical Product created
Chemical Product created
Chemical Product created
Chemical Product created
Product does not move to Human Trial
Costs: $SUNK
9990/10000
10/10000
1/10
9/10
Flexible Facility
Specialized
Successful
Not Successful Succ
essf
ul
Not Successful
Retro-fit Retro-fit
• Our proposal– Start each new drug in flexible plant– Assess demand and viability of new drug
• If Demand meets or exceeds forecast:– Option to build specialized facility
• If Demand is less than forecast:– Discontinue production– Design specialized plant with many small run drugs
– When demand drops at end of patent protection, move production back to flexible plant
Flex-Plant
SpecializedSuccessful
Not Successful
New Drug
Successful
Not Successful
Specialized
New Drug
S
S S SS S
S
SSS
SSSS
F
• Benefits– Process Optimization
• Flexible facility easier to optimize/adjust• Mass Production available within weeks of Process
R&D completion
– Mass Production matches end of Phase III• Never wait for a plant to be constructed
– Up to 1 extra year of Patent protected sales• Nearly $50MM in profits
– Fewer facilities need to be constructed