On 1 May 09 Quote: 1) GSK has increased production levels for...

On 1 May 09 Quote:
1) GSK has increased production levels for Relenza and is now set to produce between 50-60 million treatment packs of Relenza per year. The company expects to achieve this rate of output (5 million treatment packs per month) within the next 12 to 14 weeks; and
2) As of 23rd April 2009, the company had fulfilled all orders received from commercial and public purchasers for Relenza. GSK currently has 6 million treatment packs of existing Relenza stock. This week, GSK prioritised orders to governments and is working with them to determine the best mechanisms for distribution of Relenza either through public or commercial routes; and
3) The company continues to maintain a close dialogue with governments to build stockpiles of Relenza. Going forward, all new orders will be met through an allocation of available stock and phased delivery of stock to be manufactured.

9 Jun 09 in Singapore, Andrew Witty stated: Quote: GSK is also increasing production of Relenza, a drug used to treat the H1N1 flu. It is expected to be able to deliver about 60 million packs a year in eight weeks.

Deductions:
The last quarter sales indicated clearly that demand was near production capacity. This is also supported by GSK having to phase the Japan import over the 3 months to April.
The 1 May indicates demand exceeding production capacity. If not, why would GSK meet new orders “through an allocation of available stock and phased delivery of stock to be manufactured” ?

The 9 June 09 announcement shows the increase in capacity is progressing as planned.

Assuming the increase in production capacity is on a straight line progression sales could be:
April: 3 million courses
May: 6 million courses (stock) + 3 m (assume production capacity at end of May: 40m. pa)
June: 4 million courses (assume production capacity at end of Jun: 50m p.a)
From the UK sales: 10.6m courses = $18 million royalties. Therefore 1 course = $1.70
Estimated Royalties = (3+6+3+4=) 16 m courses x $1.70 = $27.2 million