$1.$ Introduction

Matching the supply and demand represents one of the first strategic decisions that companies are facing,

especially at the starting stages. An under$-$capacity will results in a loss of sales while over$-$capacity represents an excess cost that hampers a firm$$s financial viability. Capacity planning influences the firm$$s facility

locations. Facility location represents a strategic decision that has an impact on organizations$$ performances.

It is critical in manufacturing as well as service industries to minimize logistical costs and improve customer

service levels. In the healthcare context, the location decision is even more critical because the level of liability goes beyond the loss of profit to involve patients$$ lives.

In the pharmaceutical industry context, the decision variable can be a warehouse location or a manufacturing

site. The traditional $($small molecules$)$ pharmaceutical supply chain relies on the intermediaries to ensure

products$$ availability at the pharmacies. However, the location problem is more critical in the case of biologics

medication $($large molecules$).$ Biologics are expensive medication that requires special handling and are timesensitive. It is even more critical in the case of extremely personalized medication where the patient inputs

$($blood cells, genome map, DNA...$)$ are part of the input into the production process. In this case, the processing location facility is critical because of the cost of transportation and products$$ perishability.

$2.$ Dendreon Corporation

Drs Edgar Engleman and Samuel Strobber established Dendreon in $1992$ in Mountain View, California. In the

beginning, the company$$s main activity consisted of isolating hematopoietic stem cells from blood for use in

patients with cancer who require transplantation. The firm later started developing therapeutic products that

fight cancer by manipulating aspects of the immune system. Dendreon went public in $2000$ with shares listed

at $$10.$ In April $2010,$ the Food and Drug Administration sent the approval letter to Dendreon for its prostate

cancer treatment medicine$\mathrm{.}1$ Following the news, the company stock price exceeded $$50$ per share making

the company$$s market capitalization more than $4$ times the average industry. Dendreon mainly focusing was

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$2020$ NeilsonJournals Publishing

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on cancer treatment development. The financial reporting in Exhibit $1$ shows that the firm$$s revenue neared

$$350$ million in $2011$ which represents a substantial increase from the nearly $$50$ million revenues realized in

$2010.$ After the approval of PROVENGE in $2010,$ Dendreon had increased its investment in production facilities and product commercialization infrastructure.

Exhibit $1$: Dendreon Income Statements $($in thousands of $$)$

Dendreon

Period Ending $201120102009$

Total Revenue $341,61348,057101$

Cost of Good Sold $159,09028,5200$

Gross Profit $182,52319,537101$

Operating Expenses

Research Development $74,29075,94161,586$

Selling General and Administrative

Facility Operational costs $105,00087,0000$

Others $256,342148,76038,556$

Non Recurring $38,58700$

Total Operating Expenses $474,219311,701100,142$

Operating Income or Loss $291,696292,164100,041$

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$2\mathrm{.}1.$ The Market: Prostate Cancer

Prostate cancer is the most common and deadly cancer for men in the U$.$S$.,$ leading to more than $30,000$

deaths a year.

$2$ The American Cancer Society estimates that in $2013$ approximately $240,000$ new cases of

prostate cancer will be diagnosed in the United States. Approximately, $1$ in $6$ men will be diagnosed with

prostate cancer during his lifetime, and prostate cancer is the second leading cause of cancer death in American men, behind only lung cancer. Treatments for prostate cancer are showing more promising results and

significant improvement. The medical field showed a multitude of therapeutic options for prostate cancer in

recent years. The prostate cancer vaccine has positioned itself as one of the most prominent new trends in

oncology. The advances in immunology have led to the development of more complex personalized medication that aims at tailoring the drug$$s active ingredients to the patient$$s specific genetic characteristics.

$2\mathrm{.}2.$ The Product: PROVENGE

PROVENGE was the first FDA$-$approved vaccine treatment for advanced$-$stage prostate cancer. It is the first

drug of its kind to use the body$$s immune system to fight cancer. A patient prescribed PROVENGE must have

a sample of their white blood cells extracted. Then they are sent to a processing facility where they are incubated to create the vaccine. From there, the vaccine must be transferred to the doctor$$s facility or to the

infusion center to be infused into the patient. PROVENGE me