Portfolio Planning
• Role of portfolio management
• Importance to Industry
• Tools, methods and models –• to make Go/No-Go decisions
• To help Prioritise
Portfolio management:Today, an important senior management function
• Rapidly changing technologies
• Shorter product life-cycles
• Heightened global competition
• A key part of business strategy • for R&D spending
• for Resource alignment
• for efficiencies in business
• for survival
R&D Investments and Portfolio management
• R&D investments (products) are like financial investments (stocks)
• Maximising the value of the portfolio
• Hence product Return on Investment (ROI)
• A balanced portfolio
• A portfolio investment strategy aligned with:• company’s overall business strategy
• therapy area expertise
• perception in the marketplace
• future aspirations.
What is Portfolio management?
• Dynamic decision process
• List of active new and R&D products constantly updated & revised
• New projects evaluated, selected and prioritised
• Projects accelerated, killed or de-prioritised
• Resources allocated and re-allocate to active projects
• Decision process characterised by:• Uncertain and changing information• Dynamic opportunities• Multiple goals and strategic considerations• Interdependence amongst projects• Multiple decision makers and locations.
Portfolio decision process
• Encompasses many and overlapping in-company decision-making processes:
• Periodic reviews of total portfolio (all projects; comparing between)
• Making Go / No-Go decisions on individual projects• Developing new product strategy for the business
• Strategic resource allocation decisions
Why do it?Negative consequences if you do poor portfolio management or not at all.• Strategic
• Projects not aligned with business strategy• Deficient project selection• Too many projects
• Low value projects• Mediocre pipeline projects• Too many extensions, modifications, short term projects
• No focus• Reluctance to kill projects• Too many projects, resources thinly spread
• The wrong projects• Decisions based on politics, opinion, emotion, not facts and objective criteria
Eight reasons why portfolio management is critical to business.• Financial
• Competitive positioning
• Resource allocation
• Strategic issues: ‘Strategy begins when you start spending money’
• Achieving better focus
• Right balance of projects
• Improved communication in organisation (vertically and horizontally)
• Providing objectivity in project selection
Methods used for portfolio management
• Financial
• Business Strategy
• Bubble diagrams or portfolio maps
• Scoring models
• Checklists
• Hybrids
Challenges in portfolio management
• Creating climate, culture and buy-in
• Better allocation of resources, project selection and balance
• Short-term / long-term balance
• Better input data & forecasting estimates
• Better strategy – portfolio linkage
• Better balance and resource allocations across business units, divisions and technologies
• Better balance across functions and level of involvement
• More credible financial metrics and tools
Benefits expected
• Common basis for discussion, discipline and consistency
• Focus on major projects, breakthrough projects
• Better strategic fit of portfolio
• Balances short and long-term goals
• Helps to concentrate on fewer more worthwhile projects
• Achieves improved times to market
• Unifies support and creates better buy-in
• Improves strategic planning
Acknowledgement
Portfolio Management for New Product Development: Results of an industry* practices study. *multiple industries.
Cooper R.G., Edgett S.j. and Kleinschmidt E.J.
R&D Management (Industrial Research Inst Inc.) 2001: Vol.31(4);
In-Licensing Opportunity
• In-licensing increasingly important to fill ‘product gaps’
• In-licensed products make up 25% of total revenue of top 20 companies
• Licensing deals increasingly significant over last 10-15 years• Pfizer and GSK are most active in-licensees
• In 2002 Pfizer generated 53% revenue from in-licensed products, inc. Lipitor, the world’s best selling medicine.
• In 2015 AstraZeneca had 20% of sales from Crestor (rosuvastatin), the company’s #1 product.
Commercial potential of in-licensed product
• Over 3-5 years following launch average Rate of Return for in-licensed product over in-house product:
• 8.2% for in-licensed Phase III product
• 4.0% for in-licensed Phase I/II product
• 3.9% for in-licensed pre-clinical product
• And
• 2.3% for in-house product
Mercer Management Consulting
Commercial potential for In-licensing opportunity• Over 20-year period, situation is different:
• Gross Margin Profit:• In-House product 42%
• Phase III purchase 24%
• In-House products eventually produce higher margins and make business more profitable as have no royalties to pay – but need to wait 14 years for this to happen!
• (which means business has cash tied up for years and is not liked by investors – in-licensed products generate more case in short-term.)
Mercer Management Consultancy
• Reasons for Licensing Agreements
• In-licensing
– To fill a pipeline gap
– To further enhance therapeutic focus
– As part of a strategic pre-launch plan
– To leverage expertise
• Out-licensing/divestment
– Lack of strategic fit or expertise
– A condition of Merger & Acquisition activity
– To fully realise commercial potential
Types of agreement
• Science agreements
– Research collaborations
– Contract research
• Co-development
• Marketing agreements
– Co-marketing
– Co-promotion
• Product Fostering
• Product Acquisition & Licensing
• Corporate Alliances
– Joint Ventures
– Mergers and Acquisitions
• Advantages
• Can fuel rapid growth by ‘buying’ turnover
• Usually gain access to trade name
• Disadvantages
• Usually only available for smaller & older products locally
• Acquisition of major brands as a result of M&A usually extremely expensive
Marketing Agreements – Product Acquisition
•Where a company 'purchases' an existing product licence fromanother company, obtaining the right to market an existing fullydeveloped product
Factors to consider for in-licensing target
• Portfolio fit
• Company Strength
– Corporate equity & competency
– Therapeutic expertise
– Available resource
• Market Attractiveness
– Level of unmet medical need
– Level of generic activity
– Price
– Market growth potential
– Competitive Intensity (number, barrier to entry, promotional noise)
– Long term profitability
• Agreements
– European, Global
– Short, medium or long-term
– Marketing agreement or other
– Size, growth and dynamic component (opportunities)
– Segmentation
– Persistence
• Competitive Environment
– Competitive Intensity (number, barrier to entry, promotional noise)
– Competitors – lifecycle stage
– Level of ‘ownership’ e.g. asthma
– Recent launch successes and response to innovation
• Product Potential
– Level of unmet need in the market
– Existing products, ‘competitors’ and Products in development
– ‘Target’ profile and likelihood of realisation
• Promotional Strategy– Segmentation, Positioning, Targeting
– Promotional spend and projected share of voice
• Lifecycle stage and patentlife
Evaluating PotentialSales Forecasts – Factors to Consider
• Market Size and Structure
• Review Development Programmes
– Manufacturing
– Pre-clinical Results
– Clinical Results
– Product Safety
– Compliance with Regulations
– Regulatory Strategy and Contacts
– Publications
Medical Due Diligence‘Data Room’• Manufacturing Investigative product
• Manufacturing Finished Product
• Pharmacology
• Toxicology
• Pharmacokinetics
• Clinical Trials
• Drug Safety
• Regulatory
• Commercial analysis
• Patents
• Publications and Media
Manufacturing Investigational Product
• supply of substance on hand for future research (GMP)
• cost of goods, bulk drug and final formulation
• final synthetic route, purity (impurity profile) and yields of steps
• enantiomers resolved
• scale-up and largest batches made currently
• any potential difficulties sourcing raw materials (see patents)
• stability of final products acceptable, reports available
• route of synthesis is ‘optimized’ with sufficient ‘due diligence’
• cost of supply of compound for R&D and its implications for future
pricing
• specifications and analytical procedures
• identification of routes used for different toxicology studies
• Obtain documentation from all studies - conducted / ongoing /
planned
• Are protocols applicable for WW regulatory agencies
• Trials completed / ongoing: has GCP been followed?
• Numbers of patients studied, ethnic group and/or sub-groups as appropriate
• Reports outstanding with dates and reports completed
• Reports in English, date and time for translation
• Mechanism from animal models consistent with data from humans
• Dose ranging study(ies) appropriate for dose used in clinic
• Human pharmacology including PK / metabolism
Clinical Trials 1
• Clinical investigation
• QA of studies already conducted
• Data handling / transferability to company
• Meet / interview clinical investigators
• Ethical considerations
• Identification of future studies required for registration and commercial
purposes, along with approximate dates for completion and reporting
• Estimate of development time-line (including both pre-clinical and
clinical)
• Outline plan with timings
Clinical Trials 2
• Which company holds recognised safety database (if more than one company, how
will differences in details be minimised)
• Responsibility for reporting
• Responsibility for follow-up
• Responsibility for scanning literature
• Reporting responsibilities to Agencies (who is responsible in which country)
• Preparation of Periodic Safety Update Reports
• Company core data sheet (CCDS) maintenance
• Responding to safety related or product-related Regulatory enquiries
• Handling of product complaints
• Who are contacts in each company – who is QPPV
• Signatories (one for each company ?)
Drug Safety
• General compliance
• Interactions with Regulatory Authorities documentation
• Check documentation for acceptability to authorities
• Are there any deviations to opinions obtained
• Are there regulatory / registrations / or compliance clauses that
require review by legal
• Strategy and timelines – is this consistent with clinical
development plans
Regulatory