Supply Chain Resilience - BioCSL

BioCSL - A Case Study on Supply Chain Resilience

IEORE4211 Applied Consulting Group 1: Cedric Canovas, Shravan Kumar Chandrasekaran, Michelle Liu, Xiaomeng Luo, Andrew Tang, Ran Wang, and Ruyue Xu

➔ Agenda

BioCSL-A Case Study on Supply Chain Resilience

Industry Overview

BioCSL Overview

Demand Forecast

Supply Chain Analysis

Cell-based vs. Egg-based Technology

Overall Risk Analysis

Risk Mitigation Strategies

Final Recommendations

➔ Industry Overview


Projected Vaccine Production for 2015-2016

★ The biggest competitor in the U.S. is Sanofi Pasteur, which offers four kinds of flu vaccines among the 65 million doses it distributed during 2015-2016 season. BioCSL+Novartis combined are estimated to supply around 54 million doses.★ BioCSL+ Novartis makes up about 30% of the influenza vaccine market in 2015-2016 season.

Projected Vaccine Production by Manufacturer, 2015-2016

➔ bioCSL Overview


CSL

Corporate Function Operational Businesses

Research & Development

CSL Behring

CSL Plasma

Seqirus

Novartis bioCSL

Addition of state-of-the-art cell culture and egg-based manufacturing capabilities

★ Australia, USA & NZ 1,000+ employees★ Manufactures & markets seasonal & pandemic influenza vaccine globally★ The US market represents 40% of its sales★ Provides specialist cold chain logistics & distribution services

Liverpool, UK Holly Springs, US

Overall Network★ Pandemic and seasonal capability★ Advanced facilities

UK Plant★ Egg-based production★ UK’s only injectable flu vaccine facility★ Capacity of 40m seasonal doses

US Plant★ Cell culture production, 1st major advancement in flu vaccine production in over 40 years★ Result of joint partnership with U.S. Department of Health and Human Services★ Capacity of 50 m seasonal doses, can produce 150 million doses within 6 months after the declaration of a pandemic

➔ bioCSL/Novartis Influenza Vaccine Products

Product Description Approved Time & Special Info

Age Group

Afluria/Fluvax(Egg-

Based)

an inactivated influenza vaccine against influenza disease caused by influenza virus subtypes A and

B

2007(Originally developed by BioCSL; their only

flu product)

≥ 9yrs via needle

18-64 via injector

Fluad(Egg-

Based)

active immunization against influenza disease caused by

influenza subtypes A and type B

12/19/2015(Very new; not widely

used)

≥ 65yrs

Flucelvax(Cell-

Based)

active immunization for the prevention of influenza disease caused by virus subtypes A and

type B

2012(Originally developed

by Novartis)

≥ 18yrs

Fluvirin (Egg-

Based)

a trivalent, inactivated subunit influenza virus vaccine

1988(Originally developed

by Novartis)

≥ 4yrs

Rapivab indicated for the treatment of acute uncomplicated influenza in

patients who have been symptomatic for no more than 2

days

11/24/2014(Very new; Very

expensive: > $1000/dose; not

wildly used)

≥ 18yrs

Source: bioCSL and FDA

New Technology:★ The first mammalian cell-based influenza vaccine in the U.S.★ Novartis shipped the first full batch of the vaccines in October, 2014. Plenty of potentials in the future.


Medium-term Product Portfolio Expansion

➔ Evolution of Influenza Vaccine Demand

Vaccine Dosing Trend in the U.S.

Source: CDC, FluView, and CNBC

★ Number of total seasonal influenza vaccine doses distributed in the U.S. is 8 times higher compared to the 1980s★ The percentage of Americans vaccinated has skyrocketed in every age group.★ Severe supply shortage during the 2004-2005 season due to bacterial contamination → big impact on the market: reduction in supply by 48 million doses


25-Year Trend of Total Doses Distributed and reported positive tests

Source: CDC, FluView, and CNBC

★ Still a lot of contaminations every year, no decreasing trend★ The average growth rate of demand is around 14% annually.

➔ Demand Forecast for Next Season


Method: Time Series Analysis: ARIMA★ Input: data on the timeline of doses distribution in the US in the 5 past winters★ Takes into account:: the evolution of the mean across periods, the distribution each year, and the seasonality effect★ Increasing demand with a total of 152 million doses, up from 146.4 million doses last year★ Upper estimation of 188 million doses★ bioCSL (Afluria): 10% market share predicted in 2016-2017 (cf. appendix)

Target for next season demand:

18.8million doses

★ Most of the demand concentrated at the beginning of the season (peaks occur at early September)★ Low latitude for on-season production, everything must be ready by August Source for 2011-2015: CDC | only september-february period are

represented

Raw Material Facts:★ Eggs from specific farms which only provide bioCSL, not the consumer market

★ Chickens raised not in a typical co-op but under heightened sanitary and biosafety measures

★ Farms secured and protected from the outside not to be infected by viruses (such as avian flu)

★ bioCSL processes 1 million eggs per week, its suppliers breed 250,000 hens across the year

★ One to two eggs required to make one vaccine

Risks:★ Small room for maneuver: to scale its production bioCSL would need much more eggs, which means new facilities for its suppliers

★ Still a risk of contamination in one of the farms, and this would strongly affect the ability for bioCSL to make vaccines

➔ Egg Supply and Risks


➔ Egg-based Manufacturing Process


Week 1-3 Week 4 Week 5-7 Week 8 Week 9-11 Week 12 Week 13

Develops virus seed for each strain.

Fertile fresh eggs inoculated with diluted virus seed and incubated to grow the virus.

Sterility and potency

testing of concentrate.

Virus concentrates diluted to

appropriate vaccine dosage.

Sterility and potency testing of finished

vaccine.

Production records and quality control test results verified for batch release.

Regulatory approval and release.

Distributed by cold chain network

bioCSL Vaccine Production

Process

Risks★ Bacterial contamination in the facility★ FDA change in its strains predictions

➔ Vaccine Transportation to the US


Ratio Air Freight Ocean Freight

Unit Cost 10 1

Capacity per Shipment 1 1500

Speed 30 1

Safety 1000 1

Domestic Transportation Method: Refrigerated Vehicles

International Transportation Methods

bioCSL products are manufactured in Parkville, Australia, and then shipped to the US

RisksImproper temperature

★ too high/low

★ exposed to sunlight/fluorescent light

Improper storage

★ inadequate storage capacity

★ unqualified storage infrastructure

Improper handling procedures

★ improper training of employees

Delivery delay

★ unfavorable weather conditions

★ freight accidents

➔ Vaccine Transportation to the US

Innovative MethodsSolar direct-drive refrigerators

Domestic refrigeration equipment

★ freeze-safe vaccine carriers and cold boxes

★ engineered PCM packs

★ large passive cooling boxes

★ small-volume passive cooling devices

Temperature monitoring

★ vaccine vial monitor (VVM)

Controlled temperature chain


➔ Distribution in the US


★ Retailers anticipate shipment delays and may commit to smaller orders than ideal★ Manufacturers reluctant to produce a large amount before the FDA’s final announcement★ Possible Measures

★ Buy back unused doses★ Pay rebates for late deliveries

★ Different providers receive their vaccines from different sources★ Some routes of distribution are more direct, affecting timing of delivery and lowering risk of cold chain break

➔ Quantitative Analysis


★ Parameters: demand forecast per week, failure rates and duration of each step of the supply chain★ Decision variables: orders of eggs each week★ Results: up to 700,000 eggs needed during peak weeks to meet demand★ Sensitivity analysis: - if success rates of shipments were brought to .999, we would need 400,000 less eggs

- if there is a 2% shortage of egg supply, bioCSL would be 360,000 doses short compared to the demand

Decision to make: How many eggs does bioCSL need every week?

Success rates Quantities needed Time in weeks

Egg supply 1 24,078,109 0

Eggs validation on receival 0.9999 24,078,109 0

Eggs injected with virus 0.999 24,075,702 0

Eggs harvesting 0.999 24,051,626 1

Potency of concentrate 0.999 24,027,574 2

Number of vaccines per egg 0.8 24,003,547 1

Potency of vaccine 0.9999 19,202,837 2

Ground transportation 0.99 19,200,917 1

Shipment to the US 0.99 19,008,908 2

Delivery 0.999 18,818,819 1

Final demand (target) Overall: 0.77 18,800,000 Total: 10 w

Demand and supply in millions doses

➔ Dynamic Model for Better Decision-making


Vensim: system dynamic model flow graph to simulate the vaccine production and distribution process

Raw Material Supply

Shipment Process

Production Process

➔ Comparison of Cell-Based and Egg-Based Technologies

Cell-Based Egg-Based

Advantages

Production time reduced by half compared to egg-based technology ➝ the capability and flexibility to increase production with ease

Ability to rapidly produce vaccine supplies in large quantities during an impending pandemic

Avoidance of egg-based allergy reactions

Ability to be grown in synthetic media avoiding animal serum ➝ prevent the spread of transmissible spongiform encephalopathies(TSE)

Limitations

A lengthy six- to nine-month complete the entire manufacturing process

The need to forecast and select the virus strains to be used in the vaccines at least six months ahead of the flu season -> decisions about which viral strains to include in the vaccines might not always be correct ➝ midcourse corrective action is virtually impossible due to the long lead time to acquire eggs

The annual high demand for egg supplies incurs supply risk concerns

People who are allergic to eggs cannot receive needed vaccination

Limitations

Higher production costs ➝ more expensive vaccines

Volumetric yield of the cell-based flu virus is four-fold lower ➝ more initial capital investment to build bioreactors

Relatively new ➝ lack of long-term safety records

Advantages

Over sixty years of history ➝ safety and effectiveness have been well established

➔ Risk Analysis


Plant Location

Allocation Production Flow

Transport Mode

Facility Capacity

Production Level

Inventory Level

Technology SchedulingOrder

Quality

Strategic Tactical Operational

Macroeconomic/Geopolitical risk

Natural Disasters

Labor Disputes

War/Terrorism

Supplier Bankruptcy

Single Source Risk

Disruptions Delays Forecast RiskProcurement

RiskReceivables Risk Capacity Risk Inventory Risk

High Capacity Utilization at Source

Inflexible Supply Source

Poor Quality of Yield at Supply Source

Charge/Excessive Handling from Cross-border Authorities

Transportation Risk

Inaccurate forecasts due to long-lead times, seasonality, short-life cycle and small customer base

Bullwhip effect/Information distortion due to varying information rates

Lack of Supply-chain visibility

Exchange-rate variations

Industry-wide capacity utilization

Long-term/Short-term Contracts

Financial Strength of Immediate Customers

Customer Size

Capacity Flexibility

Cost of Capacity

Rate of Product Obsolescence

Inventory Holding Cost

Product Value

Demand/Supply Uncertainty

➔ Risk Mitigation Strategies



RiskReceivables

RiskCapacity Risk Inventory Risk

Add Capacity

Have Redundant Suppliers

Increase Responsiveness

Increase Flexibility

Aggregate/Pool Demand

Increase Existing Capacity

Increase Distributors/Retailers

Add Inventory

➔ Final Recommendations


Have Redundant Suppliers

Increase Responsiveness

Increase Flexibility


RiskReceivables

RiskCapacity Risk Inventory Risk

Have back-up suppliers for the egg supply, in case of delivery failure

Increase the capacity of cell-based manufacturing in the US → meet in-season demand if underestimated

Use several different independent production lines to limit the influence of a contamination in the facility

Leverage Novartis capabilities to support bioCSL activities → ability to produce directly in the US/UK

Using Fluad technologic advances will improve effectiveness of the vaccines produced in Australia adding a competitive advantage to bioCSL

Thank you

Questions?

➔ Influenza Disease Trend:

Source: CDC

➔ Appendix: Influenza Disease Trend

➔ Influenza Disease Trend:➔ Appendix: High Spread of Vaccine Efficiency Over Years

➔ Influenza Disease Trend:➔ Appendix: Current/New Technologies & Novartis Acquisition

Flucelvax, a Novartis vaccine:★ First FDA approved cell-based flu vaccine, aimed at 18 and above

★ Holly Springs facility can produce 150 million doses within 6 months after declaration of pandemic => supply chain resilience in event of sudden pandemic

★ Reduced production timeline: more flexible, less inventory and waste

Fluad, a Novartis vaccine:★ First FDA approved flu vaccine to include an adjuvant

★ Aimed at people over 65, who typically have a poor immune response to vaccines

★ Improve the overall efficiency of the doses

R&D Pipeline (under review):★ Cell culture influenza vaccine for pediatric populations (18 and below)

★ Quadrivalent cell culture influenza vaccine

➔ Influenza Disease Trend:➔ Appendix: Predicted Vaccine Production in 2016

➔ Appendix: cell-based vaccines production process