Abstract
As a company develops its business, resources will always be limited and risk
will always be involved. This is especially true for companies operating in
the high-risk life science industry. To stay on top of the changing
pharmaceutical R&D environment, certain measures must be implemented.
This report analyzes:
- Types of risk that must be faced;
- Ways that various risks can be assessed and managed;
- How corporate resources can be allocated to meet the goals and create
maximum value according to the corporate strategy.
Management of risks, resources, and portfolios are key challenges for any life
science company that seeks to survive the difficult times through which the
industry is now passing. There is ample evidence that the entire sector is in
the process of restructuring, initially taking a defensive stance to defend
earning streams but actually building momentum toward renewed initiatives on a
broad front. The restructured industry that will come roaring back within the
next few years will consist of leaner and more effective companies. Certainly,
all of these survivors will have learned how to manage their risks and
resources strategically.
For a life science company, risk comes in many forms, with compound attrition
being the most obvious. Strategic Management of Resources and Portfolios:
Structuring Risk to Maximize Opportunity in Pharmaceutical R&D examines the
types of risks that must be faced (e.g., candidate failure, regulatory risk,
legal risk, risk management for launched drugs, commercial and competitor
risk, intellectual property risk, operational risk) and shows that these risks
can be mitigated and managed if addressed proactively.
Intimately associated with the risk issue is the valuation of projects and
portfolios. We outline the major approaches by which objective and
quantitative valuation of drug development can be attempted.
Many resource-intense corporate operations show extensive potential for
streamlining. We present process optimization and quality control approaches
that can result in remarkable savings. These include the "Lean" and "Six
Sigma" concept, and the proactive management of laboratory equipment
(including service contracts) and inventories.
On a strategic level, resource allocation management can largely be equaled
with portfolio management. We evaluate models and approaches for optimal
portfolio planning and management, demonstrating that implementation of sound,
data-driven, transparent decision processes is paramount. Also described are
advanced software suites that are available to help manage the huge corporate
data streams on the operational plane (i.e., enterprise resource management)
and on the level of business intelligence, where internal data warehouses are
analyzed to provide key figures and profiles that aid in decision-making.
Case studies illustrate how companies of various sizes and types (including
Pfizer, Wyeth Pharmaceuticals, Bayer Schering Pharma, and Genzyme) have
addressed their portfolio management issues. Strategic Management of Resources
and Portfolios: Structuring Risk to Maximize Opportunity in Pharmaceutical R&D
concludes by distilling our evaluation of this mission-critical function into
actionable recommendations for sound project evaluation and portfolio
management.
Table of Contents
Chapter 1
ACCEPTING STRUCTURED RISK TO REALIZE OPPORTUNITY: THE ESSENCE OF ENTREPRENEURSHIP
- 1.1. Nature and Dictates of the Risk/Resource Relation
- 1.2. Business Complexity: “Home-Grown” Risk or Business
Perspective
- 1.3. Projects, Portfolios, and Strategy
- Development Strategies of Life Science Companies
- Portfolios: High-Level Implementation of Strategy
- Projects: Tactical Materialization of Strategy Within the Portfolio
Chapter 2
DRUG R&D AS AN ENVIRONMENT TASKED TO DELIVER EFFICACY
- 2.1. From Return on Resources to Return on Investment
- 2.2. Proactive R&D Inventory Management and Optimization
- 2.3. Outsourcing Equipment Asset Management
- 2.4. User-Based Management of Consumables and “Soft”
Assets
- 2.5. Process Engineering and the Six Sigma Concept
- Six Sigma in Pharmaceutical Marketing and Sales
- Six Sigma and Clinical Development
- 2.6. Reporting and Reviewing in R&D
Chapter 3
UNDERSTANDING AND ASSESSING DRUG DEVELOPMENT RISK/BENEFIT BALANCE
- 3.1. Real Options Analysis: Financial Metrics for R&D Valuation
- Valuation in Development Projects
- Real Options Analysis as a Solution to the Valuation Dilemma
- Implementing Real Options Analysis
- 3.2. Valuation of Intellectual Property
- Patents
- Patent Valuation
- 3.3. Predictive Safety from Discovery to the Phase I Clinical Stage
- 3.4. Phase II Study Designs and Relevance of Data
- 3.5. Phase III Programs and Prediction of “Field
Performance”
Chapter 4
RISK AND RESOURCE REQUIREMENT THROUGHOUT THE DRUG LIFE CYCLE
- 4.1. Scientific and Clinical Development Risk
- Risk and Resources from Discovery to IND
- Phase I Risks and the Consequences of the TGN-1412 Affair
- Phase II
- Phase III
- 4.2. Regulatory Risk
- 4.3. Legal Risk
- Legal Challenges During Development
- Lawsuits Concerning Approved Drugs
- 4.4. Risk Management for Launched Drugs
- Formal Postmarketing Surveillance Systems
- Handling Unexpected Adverse Events
- 4.5. Commercial and Competitor Risk
- Market Risk from New Scientific Data
- Market Risk from a Changing Competitive Situation
- 4.6. Intellectual Property Risk
- Evolving Patent Regulations
- Patent Reform Act of 2007
- Circumvention of Patents and Challenge by Claiming Different Use
- Circumvention Risk Case Study #1: Amlodipine
- Circumvention Risk Case Study #2: Viagra and Levitra
- Circumvention Risk Case Study #3: Gabapentin
- 4.7. Operational Risk: Failure of Execution
Chapter 5
PORTFOLIO MANAGEMENT: ACTING ON PORTFOLIO RISK/RETURN-ON-INVESTMENT BALANCE
- 5.1. Prioritization as the Key Issue
- 5.2. The Human Factor in Portfolio Management
- 5.3. Portfolios and the Planning Process: Building the Models
- Benchmarking in a Dynamic R&D Environment
- Managing Portfolio Resource Bottlenecks
- Classical Decision Analysis
- Monte Carlo Simulation of Outcomes
- Robustness Against Multiple Outcome Scenarios
- Adaptive Clinical Trials: An Emerging Challenge to Resource Management
- 5.4. Enhancing the Portfolio Through M&A and Inlicensing
- 5.5. Decision Support Software from Contact Management to Business
Intelligence
- CRM, PLM, SCM: Operating with Basic Resources
- Enterprise Resource Planning Software: The Great Operative Integrator
- Portfolio Management Software for the Life Sciences
- DecisionIris (Visual i/o)
- Enrich Portfolio System
- PDWare Portfolio
- ProModel Portfolio Simulator and Pharma R&D Solutions
- Data Warehouses and Business Intelligence Software for Strategy Support
- Explicit Risk Analysis Software Tools
- Product Life Cycle Management
- 5.6. Managing Data Security in the Digital Business
Chapter 6
CASE STUDIES IN PORTFOLIO RESOURCE ALLOCATION
- 6.1. Pfizer
- 6.2. Wyeth Pharmaceuticals
- 6.3. Bayer Schering Pharma
- 6.4. Genzyme Corporation
- 6.5. Three Examples from the Strategic Decisions Group
Chapter 7
SYNOPSIS AND RECOMMENDATIONS
- 7.1. Evaluation of a Project
- 7.2. Portfolio Management
- References
- Company Index with Web Addresses
