[00:00:00] Gary Fischer: So, we’re going to move now, we’re going to switch industries, and we’re going to go from energy over to the life sciences sector. So, do we have Michael and Bob?
[00:00:12] Michael Batie: Yeah, I’m online. This is Michael Batie. I’m still waiting for the host to allow me to turn my video on.
[00:00:21] Bob Snyder: Same here.
[00:00:24] Gary Fischer: All right. Looks like you’re about ready to appear.
[00:00:26] Gary Fischer: There we go.
[00:00:28] Bob Snyder: Almost.
[00:00:31] Gary Fischer: We got Bob, now we’re waiting on Michael. Yeah, something going on with Michael there. Okay, here, we got it. Okay, well talk about a different industry. Life science companies have some really unique challenges. And moving from research through drug trials, finally through production facilities, validation, and then finally getting therapies to market.
[00:00:55] Gary Fischer: And today we’re really pleased to have two folks who are really in many different kinds of positions in this whole value chain: Bob and Michael. So let me introduce them and then we’re going to turn over. We’re going to have a really interesting discussion. So, Michael Batie is the Director of Project Management at Genentech’s Vacaville Biopharmaceutical production site, one of the largest bulk monoclonal antibiotic production plants on the planet.
[00:01:22] Gary Fischer: He leads the project delivery team executing commercial technology transfers, capital investments, and lifecycle projects. Prior to joining Genentech, he was a project director at Lawrence Berkeley’s National Laboratory on the integrative genomics building project. Michael’s previous experience includes 15 years at Bayer Pharmaceuticals with increasing levels of responsibility from senior project manager to director of plant engineering.
[00:01:45] Gary Fischer: So welcome, Michael. The second is Bob Snyder, CEO of Binsky & Snyder, as a fourth generation owner. Bob has worked and been involved in the mechanical contracting industry since his youth. His experience spans all aspects of business, including sales and estimating, project controls and management, engineering and drafting, purchasing, information technology, and financial management.
[00:02:08] Gary Fischer: He’s been around the block. Bob has a strong technical and design aptitude, and he really has a vast understanding of both conceptual and technical aspects of mechanical systems. He really brings a unique voice to this conversation, as his company are the people that do the real mechanical work on life science projects.
[00:02:27] Gary Fischer: So let’s start with Michael and get the ball rolling. Well, Michael, most of our audience are probably not familiar with life sciences and the challenges that you face. What’s involved in a company like Genentech bringing a product from research all the way through.
[00:02:43] Gary Fischer: Why is timing important?
[00:02:44] Michael Batie: Yeah, thanks. I think just a little bit more background in the capital project side, in the pharma world. There you can break it down into a couple different areas. Greenfield or Brownfield, right? New buildings, new plants, which is not my area.
[00:03:07] Michael Batie: There’s another area which is expansion, retrofit, asset lifecycle management, and tech transfers in existing GMP manufacturing buildings. That’s my area of expertise, really bringing projects and value into an operational facility. So the capital process for new products comes a bit later in the development stage.
[00:03:36] Michael Batie: Once a product has gone through, we call phase one, phase two, you know, the safety aspects of evaluating a molecule. Then the business starts trying to evaluate what are the risks to manufacture right? And this is where the capital aspect segregates itself from the molecule portion of the project.
[00:03:58] Michael Batie: Business is trying to do a couple things. One: manage risk first and foremost. And if you have a new molecule, how do you bring it to market? A couple very basic options. One: you can manufacture it internally or you can manufacture it externally. Externally there’s some really well-known companies out there that are in what we call the CMO or CDMO world contract manufacturing.
[00:04:27] Michael Batie: That route has some risks associated. First of all, you have to pay a significant amount of money. Essentially block out plant utilization time. And you’re locked into your contract, right? You’re essentially buying factory time at a premium. So that comes as an opportunity cost if your molecule doesn’t work.
[00:04:55] Michael Batie: The other option is really the other option in the maker-buy decision is internal manufacturing, which comes in two flavors, if you will, right? Build a new facility or modify an existing facility. And this is where my world starts. If you’re looking to do a greenfield, right, that could all start with a business decision, but goes from site selection all the way through building licensure.
[00:05:27] Michael Batie: And that could be a five year process. And it includes all the risks associated with a new building, but also the permit process and then ultimately licensure with the FDA, and if you’re a global organization, you have to go through the other couple dozen regulatory authorities in the world for pre-approval inspections and, by the way, it’s different for most countries or different regions.
[00:05:49] Michael Batie: So it does come down to where my world intersects with new products, and this is modification of an existing facility, offering some really key benefits. You have a trained workforce that knows how to manufacture the product.
[00:06:07] Michael Batie: You have a licensed plant, and with a licensed plant as a manufacturer, you’re always looking to increase your plant utilization. If your plant’s running 60%, 70% of the time, you’re underutilized. If you’re bringing a new product and you get to a theoretical 90% value, you’re bringing incredible value to your business.
[00:06:28] Michael Batie: However, the risk is you have to take the plant down to do a tech transfer. So this is where it’s not just a capital project where we’re putting up steel stainless tubing and wire. This is taking down an operational facility, putting a new product, and all the associated hardware and software modifications into the plant, returning that plant to service with all the modifications.
[00:07:03] Michael Batie: Ready to use at the end of your shutdown, not only for your new product, but for all the other existing products within the plant. So that window becomes the most important part of this project and the most risk. We essentially, not essentially, but it is a fact, we have to come out of that shutdown with 100% certainty that we can return to service.
[00:07:28] Michael Batie: So I think hopefully that answered your question at a high level where, how capital projects get started in bringing a molecule.
[00:07:37] Gary Fischer: Yeah, yes and no. That was very insightful. But I’d also like to understand the kind of timeline from when you think you got a good molecule to when you’ve got it into the market. Is that overall timeline important? Is it something you desire to have to be as small as possible, or just that overall picture at 10,000 feet is time important?
[00:08:04] Michael Batie: Yeah, of course. I think back in my construction days, I’m pretty sure every contract starts with the words.
[00:08:12] Michael Batie: Time is of the essence and that hasn’t changed in any sense in the business world. And most importantly in this business as well, the generally accepted numbers are 10 years and a hundred million dollars to bring a product to market.
[00:08:32] Gary Fischer: 10 years from idea to market?
[00:08:36] Michael Batie: 10 years. So it’s generally accepted that number can vary, but that’s a generally accepted number.
[00:08:47] Michael Batie: And the price is only going up, right? So where does that happen with capital projects? And this is that timeline of launch, right? So, differentiate between long-term manufacturing and launch. Launching a product, maybe a year’s worth of product to see how well it’s gonna sell and actually determine what kind of manufacturing you’re going to need.
[00:09:13] Michael Batie: So, in some cases, organizations will launch at one site and then do long-term manufacturing at another site or they’ll CMO out to the cap, to answer your question directly. When the decision is made to do a capital investment with the operating company, time is of the essence.
[00:09:38] Michael Batie: Having said that, the timing becomes critical in an operational plant mostly around plant availability. So, not certain how many folks keep up with the biotech news, but the company I worked for had a product called Gant, but the full molecule is Gantenerumab.
[00:10:09] Michael Batie: It’s an Alzheimer’s product and this particular product had gone through drug discovery clinical trials. You know, phase one, phase two, and we’re in a clinical trial – a large multinational clinical trial – that ultimately resulted in a failure for the molecule. At this point, though, the molecule had been in development or research and development for some seven years or so.
[00:10:50] Michael Batie: And at this point we’d reached the stage where, after phase two trials had been completed, we had enough of an indication to believe that this molecule would be successful, business decided to make the investment. And that investment is at the plant where I work, so we were actually in the middle of construction for the tech transfer.
[00:11:13] Michael Batie: We’re bringing in chromatography columns, skid columns, and beginning software recipe integration with our existing automation MES and distributed control system. When the news for the molecule failure was announced, we stopped tens of millions of dollars worth of construction in a three day period of time.
[00:11:42] Michael Batie: So we went 180-degree pivot from in the middle of a plant shutdown, right? Our plant’s not operational currently. We’re doing a tech transfer to a complete stop. So that’s the risk to the business: you’ve invested seven or eight years of researchers time capital investment research dollars from the business.
[00:12:06] Michael Batie: And this study, it’s called a graduate study for those that are interested. When that result, because the news is so big to the industry and to the company, it’s announced publicly, right? Because it will affect the equity valuation of your business. So it was announced publicly and we received the same news as the market received it, or the same day at our site.
[00:12:35] Michael Batie: And ultimately, as long as it takes to wind up a capital project, it’s amazing how quickly one can be stopped. Anyway, I think hopefully that answers the question.
[00:12:52] Gary Fischer: Oh, that answers your question really well. And teases out the risks and the challenges. Your life has been interesting since that announcement, I’m sure.
[00:12:59] Gary Fischer: So let’s move over to Bob. So Bob, you’re on the receiving end of all of this. You’re right in the guts of the mechanical systems that it takes to bring these new products to life. What do you see? What are your observations? What do you see going on? What are the challenges? What are the opportunities to reduce waste? So what’s on your mind?
[00:13:19] Bob Snyder: Well, I think and, thank you Gary, listening to Michael talk about the entire product pipeline is interesting because we do firmly sit in the middle. We’re kind of in the middle of now it’s time to build a building. How do we get to market quickly?
[00:13:38] Bob Snyder: The science even is changing as you’re building these buildings. And things like, you know, stuff happens, so to speak, where a drug fails, right? So this idea of variability and I think that’s, you know, I’m going to talk a little bit and try to bring in these, you know, kind of a PPM concepts and factory physics and operations science, but this idea of variability across the entire lifecycle of bringing a product to market is, there’s a lot of risk associated with that.
[00:14:02] Bob Snyder: So, the key to all of that is how do you create transparency across that entire lifecycle? The other thing that’s interesting about bringing a product to market is it tends to be very gated.
[00:14:21] Bob Snyder: And what I mean by gated, even to the extent that we build the entire building, pretty much finished. We handed it over to Genentech and we say, “We’re done.” You know, you got it. We substantially complete all this stuff. And all of a sudden now they got to start it up. The first thing that usually happens is the scientists come in and we start tearing pipe apart.
[00:14:44] Bob Snyder: Okay, because it doesn’t match. And so the reality is the entire project is in WIP. The whole investment is sitting there in WIP waiting for the validation process to complete where they can make a product. And that could be years. So I think the lesson to be learned is actually understanding all of these gated operational processes at a very high level.
[00:15:11] Bob Snyder: Obviously been drilling them down to a low level. But understanding how we actually manage that WIP across the entire project. We build a project, we’re not building like the heating system or the boilers or the process systems. We’re building them all. We’re building the full capacity. That plant, when that full capacity may not actually be used for five years, even in the initial startup phases of your project.
[00:15:38] Bob Snyder: You may take five years before you actually get to full capacity. You know, because you’re doing 10% and 20% and 30%. So the lesson here, I think, is: there is zero connection and transparency between what I’m doing day to day, what the engineers are doing day to day, and to the manufacturing aspects and the validation aspects.
[00:16:02] Bob Snyder: And I think what you want to do is start to think of it in terms of operation science, and start really applying methodologies like concurrent engineering. Arguably, in this kind of manufacturing industrialized contrasts world, we talk a lot about “how do we advise product design with process design?” and process design for us typically is making things in your fabrication shot, right?
[00:16:28] Bob Snyder: Or the installation process. And we take those two pieces of the puzzle and we bring that up into the engineering phase and create, we call them production packages, but you’re actually doing a true production engineering process and product design together so that you can create this, you know, this ultimate product.
[00:16:48] Bob Snyder: In the world of pharmaceuticals, the validation aspects are so critical. You really need to be advising your product design with that in mind as well. So you need to actually have your engineering being done. In a way that is talking about, well, how do we want this system isolated? How are we actually going to bring this part of the system and get it validated?
[00:17:13] Bob Snyder: We have very little conversation about any of those things, and the batching associated with each of the parts of the puzzle are completely different. They may want to bring things online in a better manufacturing cell way, where we’re actually bringing them in a system way, there’s a complete misalignment.
[00:17:33] Bob Snyder: So I think this idea of studying that and actually laying it all out using operation science and actually understanding the WIP associated with all of that is a really big deal. And I think that a lot of your opportunity sits with “how do you apply those principles and make that completely transparent across all of the stakeholders in the process?”
[00:17:53] Gary Fischer: Yeah, so you usually show up pretty late in the game is what I’m hearing, way after the design’s been done, way after the concept’s been selected. And then you’re handed a mechanical package. Give me a price, and your job is to just go build it and say, “I’m, you know,” and finish it. And what you’re saying is if you were involved upfront with the design, with the people that do validation, far better performance could be achieved in terms of time for sure.
[00:18:21] Gary Fischer: And probably in terms of rework and taking things apart and putting them back together and all the stuff that happens during validation then, is that what I’m hearing?
[00:18:27] Bob Snyder: Yeah, and I think the other thing is that you can, if you think about the amount of cash required to put a facility in play and then you have to wait three or four years before you put any of that cash to work, you can actually, you should be thinking about, “Do we need to build the entire facility day one?”
[00:18:42] Bob Snyder: “Do we have, do we need the giant boilers that we’re not going to need four or five years down the road? We only need half that size. Instead of putting one big boiler in, maybe we should consider having smaller boilers.” You wouldn’t necessarily make that decision if you didn’t understand the way in which you would, the validation process occurs and how that downstream stuff, and the decision still might be the same to build the whole thing, but it should be at least analyzed and in a way that takes all that into account.
[00:19:17] Bob Snyder: And I think it really needs to be looked at from the lens of an operation science.
[00:19:20] Gary Fischer: Right, it definitely would impact turn-down ratios and equipment and all those kinds of things. If you thought all the way through, that is really insightful. So, Michael, any thoughts in reaction to Bob’s perspective here?
[00:19:35] Michael Batie: Yeah, actually quite a few. This is a world that I live in daily. And I think one of, in a long-term operational plant on the procurement or contracting side, we’ve engaged in more of a partnership approach, if you will, a different type of contract with our general contractor, our key mechanical trade contractor, as well as our electrical.
[00:20:05] Michael Batie: So kind of a trifecta, if you will. The way we’ve modified our business is, we’ll come up with an internal conceptual design from our own internal process engineers. If it’s a permit package, we’ll bring in an external consulting firm typically to get us through the permitting phase and what we’ll call “basic design.”
[00:20:31] Michael Batie: If it is just a plant modification, bringing in a new buffer tank or new chromatography column where it’s not necessarily a permit permissible project, we’ll do an internal concept design, essentially PFDs and PIDs for our trade contractor. And at that point, once we come up with internal design, that’s where we bring our trade contractor in.
[00:20:57] Michael Batie: So our trade contractor not only evaluates the PIDs, but they will generate old school world, orthographics, you know, new school world, right? They’ll model our bioreactor and come up with installation 3D modeling as well as fabrication drawings. They’re an integral part of how we deliver projects.
[00:21:21] Michael Batie: So once that project gets funded, are two key CA trade contractors, right? And electrical’s really an umbrella for high voltage, low voltage, but also data cabling and instrumentation, which is a significant part of our operation. And then mechanical trade contractor as well, right? For installation of not only process pipe, process tube drains, but all the HVAC modification.
[00:21:47] Michael Batie: So we’ve taken to summarizing more of an integrated project approach to how we deliver. And then on the backend, if you will. So there’s different terms. I’ve heard “operational integration.” I’ve heard “transition operations.” What we’ve done to turn a construction project into an operational facility is our same internal process engineers that came up with the concept design.
[00:22:20] Michael Batie: They’re also responsible to do the qualification, so they’re the same folks that came up with the PIDs are the same folks that are out in the field verifying what the contractor installed. They’re also the same people that approve the shop drawings for the installation, right? So it’s the same people, the same team that’s responsible for the design, the installation, and the qualification.
[00:22:46] Michael Batie: Again, kind of making a narrow pool to facilitate a better integration. The other part that we found most effective is the actual operational segment. So most of our engineers – take no offense engineers – out there on the call, may be not the right people to operate bioreactors necessarily.
[00:23:12] Michael Batie: You know, we’ve got some trained technicians. We actually bring them in to operate the equipment to operational ranges, design ranges or qualification ranges so that our engineers can do the verification to ensure the equipment meets the design or the qualification requirements. So we bring our manufacturing folks in from the very time pressure tests are completed by their trade contractor and they turn over a system that’s full of argon or nitrogen being purged and we’ll stop the purge, fill it up with water.
[00:23:44] Michael Batie: Our manufacturing operations takes it that early in the ownership process. So a more, a much more integrated process than the traditional contract starts here, ends here. Then the next team comes in, they have to figure out what the previous team did and do that transfer of knowledge.
[00:24:06] Michael Batie: And so that becomes an experience to show that it becomes a very segmented process. And that effort takes an incredible amount of time, right for each contractual relationship to transfer the next.
[00:24:21] Gary Fischer: Yeah, it sounds like you and Bob are very much on the same page, driving, and similar things there.
[00:24:27] Michael Batie: Yes. I totally agree.
[00:24:30] Gary Fischer: We got one, we got a couple of questions. We’re getting pressed for time here, but I want to throw them out there real quick. Of the one question, of the 10 years to bring a new product to market, how much is in queue time? Do we even know?
[00:24:41] Michael Batie: I’m not sure what.
[00:24:44] Gary Fischer: How much is the queue time on the 10 years to bring a product from conception to product to market?
[00:24:49] Gary Fischer: How much is the big batch waiting during that whole process?
[00:24:57] Michael Batie: Nine years.
[00:24:59] Gary Fischer: Wow. That sounds like a huge opportunity to me.
[00:25:10] Michael Batie: Well it’s a little bit difficult because, the successive phases, you know, you start out with a molecule and you’re trying to determine if it’s safe and effective.
[00:25:05] Gary Fischer: Sure.
[00:25:17] Michael Batie: Then you have to scale it up and then you go through an iterative process to figure out how to manufacture this molecule. And while you’re in clinical trials, you’re still trying, you’re still in development trying to figure out “how do we actually replicate this molecule in a production environment?”
[00:25:35] Michael Batie: And then once phase three ends and everybody says, “Yay, go.” That’s when your queue starts.
[00:25:45] Gary Fischer: Yeah, so any opinions on that cue tied? What can be done about it? Point of view?
[00:25:48] Michael Batie: What the thought ultimately comes down to is the biological products have to be safe.
[00:25:45] Gary Fischer: Sure.
[00:25:50] Michael Batie: Effective and proven.
[00:25:55] Gary Fischer: Yeah.
[00:26:02] Michael Batie: And, and I think there’s a great case with, it wasn’t a – it was a modified biological, but if you take a look at the MRNA vaccine that came out, and that came out in just about a year’s time, but that was billions of dollars spent by the government with everybody on the same page along with FDA emergency authorization, which just doesn’t happen very often.
[00:26:19] Gary Fischer: Not the norm.
[00:26:29] Michael Batie: Yeah, not the norm. So you know that whole product lifecycle got squeezed from years into one year.
[00:26:39] Gary Fischer: Yeah, so Bob, what’s your perspective on Q time?
[00:26:43] Bob Snyder: Well, I think that the process is literally Q time. We’re, you’re always waiting for everything all the time. You’re always waiting for something in this process.
[00:26:54] Bob Snyder: You know, and I think, yes. You know, how did they bring the MRI Covid vaccine to market? They threw a lot of money at it. That was their way of buffering time. Right. And I think that that’s the interesting part of all of the conversations we have is if you start to think of it in terms or through the lens of operation science, you can start, you know, maybe it takes more than one year, but maybe it could be five years.
[00:27:20] Bob Snyder: And maybe you don’t have to push out as much cash as required over that five year period. If you understand truly, l Rrn last responsible moment, and you’re truly making this whole thing transparent and looking at it from a production lens, it’s a, you know, this is a production system, right?
[00:27:38] Bob Snyder: With we all, they’re all production systems. The question is, are you making them transparent and actually pulling the five liters the right way to create the outcomes you want? So, yeah, it all just makes so much sense. I think it’s going to, it just requires more people thinking in terms of the work, mm-hmm.
[00:28:00] Bob Snyder: And what the work really is. Whether it be figuring out what the molecules should be, whether it be how do you upscale it from a pilot plant up to manufacturing, whether it’s how should we design these facilities? That’s all the work that occurs.
[00:28:16] Bob Snyder: Including any other physical work attacks that, if we actually focus on that and actually really process map it out and really start looking at last responsible moment and WIP and that stuff, I think there’s just a tremendous amount of opportunity to bring these things to market a significantly less cash requirement, and I think that’s the end result, right?
[00:28:36] Gary Fischer: So we’re unfortunately guys, we’re at time here. We have some other questions. We’re going to get them to our panelists here so they can perhaps answer them directly with the folks that ask, because we don’t want to ignore any of the questions. Before we go though, Bob, you’ve got a lot of passion for this.
[00:28:53] Gary Fischer: Hopefully we, if you’re in the life science world, we’ve piqued your interest a little bit on the challenges and potential solutions of things to make it better. We mentioned earlier that we’re launching a life sciences business.
[00:29:07] Gary Fischer: And Bob, you want to give that a small pitch here?
[00:29:10] Bob Snyder: Yeah, I think there’s just such a lack of understanding across the entire process that we just need a lot of people in the game to try to figure out and, you know, learn about production management but then really expose all of the pitfalls and all the challenges and really start to map out.
[00:29:32] Bob Snyder: You know, this life cycle of “how do you bring a drug to market?” and start to work on that together. And I think there’s a lot of opportunity to make a big difference.
[00:29:42] Gary Fischer: Okay, so if you’ve got an interest in participating in a working group for Life Sciences, drop me a note and we’ll get you connected with these guys.
[00:29:51] Gary Fischer: So thank you both for your generous contribution of your time and your insight and your experience and your war wounds. Very much appreciated. So, thanks again, guys.