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

3. Genentech Founded ‘76 ‘85 ‘87 ‘93 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 2005 & Beyond (for use with the Nutropin AQ Pen Cartridge) 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.

6. Genentech’s Executive Committee Richard Scheller Art Levinson Ian Clark Pat Yang Sue Hellmann David Ebersman Steve Juelsgaard

7. Genentech’s Executive Committee Dressed up for Halloween Sleepy Grumpy Snow White Happy Sneezy Doc Bashful

8. Our 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

9. 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

10. CCP2 Oceanside B3B Porrino Vacaville SSF 2007 2009 2000 2005 Genentech’s Cell Culture Capacity Growth Challenge

11. Big Pharma vs. Great Biotech • What are the differences? • Sizes and scales • Success rates • Priorities • Cultures

12. Big 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

13. 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)

14. 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)

15. Other Big Pharma Reactions when Things Don’t 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 (G&A) 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 15% Of Total Why wait until you are in trouble? MARKET DEVELOPMENT AND Direct Selling Promotion Clinical Programs Sales & Marketing ORDER GENERATION $1,686 $1,446 $317 Administration/Other $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 TOTAL EXPENSES Payroll Benefits Other $10,000 Up $1,140 / 13 % $3,000 $1,600 $5,000

16. Two perspective of Genentech’s culture • Patients • People • Science • Informal • Genuine • Authentic • Intensive • Hard working • Nimble • Fun • Fair

17. What’s hard to imitate • Employee’s 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

18. 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

19. 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

20. Final Thoughts: Manufacturing and Engineering 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

21. 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