Friday, Jun 24, 2005
South San Francisco, Calif. -- June 24, 2005 --Genentech, Inc. (NYSE: DNA) is providing today 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 as well as reported on other manufacturing activities.
"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:
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.
Genentech will be offering a live webcast of a discussion by Genentech management of manufacturing activities on Friday, June 24, 2005, at 5:30 a.m. Pacific Time (PT). The live webcast may be accessed on Genentech's website at http://www.gene.com. This webcast will be archived and available on a replay basis until 5:00 p.m. PT on July 1, 2005. An audio replay of the conference call will be available beginning at 8:30 a.m. PT on June 24, 2005, through 8:30 a.m. PT on July 1, 2005. Access numbers for this replay are: 1-800-642-1687 (domestic) and 1-706-645-9291 (international); Conference ID number is: 7215200.
Genentech is a leading biotechnology company that discovers, develops, manufactures and commercializes biotherapeutics for significant unmet medical needs. A considerable number of the currently approved biotechnology products originated from or are based on Genentech science. Genentech manufactures and commercializes multiple biotechnology products directly in the United States and licenses several additional products to other companies. The company has headquarters in South San Francisco, California and is traded on the New York Stock Exchange under the symbol DNA. For additional information about the company, please visit http://www.gene.com.