Portfolio Management in the pharmaceutical industry by Dr John Bennett, 10th June 2014

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Information about Portfolio Management in the pharmaceutical industry by Dr John Bennett,...

Published on July 4, 2016

Author: assocpm

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1. ©2012 Volt. All rights reserved. Proprietary & Confidential. Portfolio Management in the Pharmaceutical Industry. Dr John Bennett APM Presentation !0th June 2014

2. Overview • Brief overview of the Pharmaceutical Portfolio environment. – What is the R&D process? – What are the industry challenges? • Pharmaceutical Portfolio Management – Is it unique?

3. Pharmaceutical Industry background • High investment in R&D – $700 bn for top 20 companies over 10yr. – Each drug can be up to $1bn. • High risk – High attrition rates though R&D. • Even at late stages – Even ‘successful’ drugs can fail on the market e.g. Vioxx • High return – Lipitor peak annual sales $13bn – But 70-80% drugs never return on investment. • Highly regulated – GCP, GLP, GMP. – FDA, EMEA regulators approval – NICE approval

4. The drug discovery and development process Medicine 0 Idea 10 - 15 Years Research Exploratory Full Phase I Phase II Phase III 155 10 Development RegnPreclin

5. Clinical Development Phase Characteristics Healthy volunteers Patients Safety Efficacy, Safety, Dose & Regimen Efficacy, Safety, Comparative performance, Health Economics Phase I Phase IIIPhase II 10s 100s 1000s (up to 25k) Patients Local National / Regional Global < $1m $1.0 - $10m $10 – $500m

6. Drug Development is Risky Candidate Attrition 0 4 12 25 No.candidates 0 1 2 3 4 5 6 7 8 9 Years Preclin. Phase I Phase II Phase III Registration animal toxicity, chemical stability, efficacy/safety, differentiation, human PK, toleration, formulation long-term safety non-approval On average, it takes 25 drug candidates to yield one marketed product

7. Pre-clin Phase I Phase II Phase III Approval / Launch Survival of candidates and cost of development Cost at launch approx. 50% of total spend.

8. Evolving needs for Industry • Well known industry wide challenges – Productivity – Escalating costs – Pressure on R&D budgets – Risk • Evolving market conditions – Continued price pressures – Technology assessment groups – Competition – No longer sufficient to get market approval

9. Evolving needs for Industry • More opportunities than resources. – Reductions in R&D budgets. – Focus on areas of high promise. • More important than ever to ‘do the right projects’ – ‘Optimised’ portfolio content.

10. View of Portfolio Management Doing the right projects Doing the projects right The right people doing the right things at the right time Portfolio Management Program & Project Management Work Management

11. Developing the framework: example model Each project is scored against each attribute Weights are applied to each attribute Each project has an overall score (weighted sum of attributes) Graphics show up strengths and weaknesses of each project Can explore how project ranking changes with different scores and weights on attributes. This will highlight those projects that always remain attractive under different scenarios, and it will also flag areas of weakness to address in individual projects This understanding supports project funding decisions

12. Efficient Frontier as a portfolio tool Investment Efficiency Chart Project 1 Project 2 Project 3 Project 4 Project 5 Project 6 Project 8 Project 7- Project 9 Project 10 Project 11 Project 12 0 500 1000 1500 2000 2500 3000 0 100 200 300 400 500 Cumulative eCosts, $m CumulativeeNPV,$m

13. Portfolio Value assessment Baseline - August 200x Target Forecast - August 200y Program Name Phase PTRS eNPV ePI Phase PTRS eNPV ePI 1 P I 5% 204.6$ 14.8 P IIa 7% 289.2$ 19.5 2 P IIa 29% 15.5$ 0.9 P III 29% 19.3$ 1.2 3 P IIa 33% 154.2$ 6.4 P IIa 33% 179.3$ 10.7 4 P IIa 19% 835.0$ 20.1 P IIb 54% 2,733.6$ 26.6 5 P IIb 8% (1.2)$ (0.0) P IIb 8% 4.8$ 0.2 6 P IIb 58% 505.0$ 9.5 P IIb 58% 575.1$ 14.9 7 Ph III 85% 122.1$ 30.4 Reg 85% 138.3$ 327.8 8 Ph III 42% 724.8$ 33.7 Reg 60% 1,167.3$ 212.6 9 Reg 85% 76.1$ 19.1 Launch 100% 103.6$ N/A 10 Reg 90% 351.2$ 285.1 Reg 90% 387.2$ 996.2 Total Baseline: 2,987.2$ 14.2 Key: = Projected Phase changes from Aug to Aug

14. What is Portfolio Management? Quality Tools Governance Process Objectives Data Stakeholders Constraints Priorities Politics Risk Investment Value Strategy Goals Decision Making Resources Metrics Deliver the highest value Its more than the maths

15. Finance Portfolio Info Prioritization Project Information FTEs Portfolio Management •Strategy Alignment •Delivery Against goals •Resource Management •Governance •Project & Protocol Prioritization Organizational Performance •Performance Metrics •Performance Targets •Performance Gaps Candidate Team Project Management •Project details •Schedules •Issues •Risks •Resource Demand Portfolio Management, Project Management, Governance & Performance Management Are Integrated Portfolio R&D Productivity

16. Pharmaceutical Portfolio characteristics • High degree of uncertainty. – Project level • Science / experiment driven – many projects fail. • Changes of direction not infrequent (e.g. Viagra) – Activity level • E.g clinical trials • Dynamic – Projects entering and leaving continuously • Multi-year projects – annual budgets. – Balancing across the portfolio. • Mix of early and late development entities. – Very different characteristics. • Inevitable ‘gaps’ in pipeline delivery

17. We’ve ‘chosen’ the portfolio – now what? Managing a dynamic drug portfolio. • Clear and agreed priorities. • Attrition based budget. • Agile decision making.

18. Clear and agreed priorities • Process and tools to define the ‘Priority List’ – Critical but not sufficient. • Ability to translate priorities into consistent action – Business rules for projects • ‘High’ = continuously seeking buy up opportunities to reduce risk and or time and quality. Plan for success. • ‘Low’ = deliver to agreed plan, seek opportunities to reduce time if no additional resource required. Plan to nearest risk inflection point only. – Dialogue with service providers • Internal – sequencing of activities • Priority v urgency of activity.

19. ‘Attrition’ based budgeting • Many companies underspend annual budget. • Failure to take loss of projects and inevitable delays into account – If 10 early projects start the year – 5 will die by year end…… • Start the year with demand higher than budget. – Manage the difference through the year. – What buy up and buy down options are available? – What would the impact be on goals, etc? – What is the ‘best by’ date for options? • Use priorities to guide early in year investments

20. Agile decision making • Portfolio management is an ongoing, day to day, active process. – It cannot be done as an annual review. – Impossible to allocate resource to projects on an annual basis. – Its never perfect. • Clear decision authority – Governance – project team – functional line. – Respect for decision rules • With emerging data, confidence and priorities can change dramatically. – What mechanisms are in place to check on allocation against priority and urgency? • Mechanisms to understand impact of decisions and options. – Opportunity to in-licence new drug candidate – but if we allocate resources to it – what happens to the current portfolio?

21. This presentation was delivered at an APM event To find out more about upcoming events please visit our website www.apm.org.uk/events

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