The key importance of portfolio management in the pharmaceutical and medical industries

A pharmaceutical research and development portfolio is often created by combining multiple resources.

16:41 14 December 2023

The growing financial costs of drug development require scientific research organizations to contribute to increasing the efficiency of the process of developing new drugs. In recent years, the pharmaceutical industry has made enormous efforts to solve these problems and has taken certain actions to significantly improve the efficiency of the drug development process. There is no doubt that significant progress has been made in some efforts.

For example, this is an early assessment of the toxicological profile of a drug and early studies to determine whether or not a new drug candidate can be put into mass production. Further process changes should be aimed at improving the efficiency of the processes in use, not at improving efficiency. In this case, it is very important to manage the portfolio using the available capabilities and functionality of the Portfolio Management Tool for Pharmacy.

What is the phenomenon of portfolio management in the pharmaceutical industry?

The process of portfolio management in the pharmaceutical industry is a set of sequential steps to maximize the value of the R&D portfolio through the efficient allocation of resources, while strategic portfolio management (SPM) is the process of maximizing the value of the portfolio, which is R&D with the efficient allocation of resources. A key objective is to define work processes, skills, and overall strategy. Within the framework of value orientation, the project and portfolio management process is individual projects and portfolios that are subject to quantitative financial and risk analysis. This assessment enables:

• Significantly improve the cost and risk structure of individual projects;
• Significantly improve the structure of therapeutic areas and institutional portfolios.

A pharmaceutical research and development portfolio is often created by combining multiple resources. This applies not only to medical devices but also to small molecules and biological agents in the discovery, preclinical, and development stages. Less mature biotech companies do not have a large R&D portfolio to manage and are likely to have a single project or platform. The largest pharmaceutical and biotechnology companies actively manage their portfolios with various projects at various stages of development. 

Portfolio decisions, such as drug selection, key prioritization processes, and optimization, are key drivers of a given pharmaceutical company's total shareholder value. Epicflow provides a comprehensive and universal solution for resource and portfolio management in the pharmaceutical industry, which significantly reduces project planning time in this industry. The solution includes a module library, which is necessary to create a collection of typical project elements and apply them as templates for solving tasks in similar projects. A solution for resource and portfolio management in the pharmaceutical sector reduces planning time and provides increased resource management capabilities.

The problem of methods of planning a portfolio of research works

A small problem with R&D portfolio planning methods is that they are often used for short-term budgeting purposes rather than as a strategic tool. While the practice of budgeting is quite important in the pharmaceutical industry, it does not help companies objectively define long-term goals for their portfolio or measure success. Managers trying to implement long-term plans and explain them to employees, investors, and other stakeholders face obstacles due to the lack of long-term goals based on quantitative indicators.

Portfolio management in the pharmaceutical industry step-by-step

Evaluation step. Commercial and research teams provide development, manufacturing, commercial costs, clinical risks/benefits, intellectual property (IP), and competitive analysis through Portfolio Management in Pharmacy, this enables outputs such as company ratings and relevant metrics that managers use to make decisions and solutions Managers evaluate asset development plans, risks, likelihood of technical and regulatory success, and business assumptions such as internal rates of return, sales peaks, revenue peaks, and barriers to entry.

Prioritization step. In pharmaceutical project portfolio management, projects are classified based on their scientific and commercial key aspects, as well as their associated risks and uncertainties. Prioritize projects that have the greatest chance of success. For larger projects (budget and staff), resource restrictions should not be imposed.

Steps for optimization and further development. Pharmaceutical companies actively use certain key criteria for selection and resource management, from drug discovery to final development through preclinical research. In both cases, risk assessment is an important aspect of portfolio management and development decisions. Thus, pharmaceutical company executives ensure that only the most promising compounds reach the clinical phase. During this process, strategic decisions are made about which compounds to approve, allow, or reject. Portfolio optimization should always be a dynamic process that requires regular review.

Key methods of pharmaceutical portfolio management

Financial analysis became the basis for one of the first project portfolio management techniques used in the pharmaceutical industry. Project planning can be useful in initiating the risk management process early in the project life cycle, rather than delaying it until later in the project life cycle. This approach is risky for the company and allows for better project management.

Discounted cash flow is the most widely used pharmaceutical portfolio management method, but its drawback is that it does not provide sufficient quantitative information about the risks associated with drug candidates. DCF is a valuation method that considers future cash flows when determining the value of an investment. A project can bring a positive return if it exceeds the current investment costs.

Key benefits of strategic portfolio management in pharmaceutical companies

The main principle of portfolio management in pharmaceutical companies is the need for a systematic evaluation of projects from the point of view of investment portfolio management. This allows you to group investments in a portfolio and compare them. In the absence of portfolio management, these assessments are usually performed by a separate CFO or project manager for each project, which avoids changes in the financial management of individual projects. Using a portfolio management approach in the pharmaceutical industry reliably ensures consistency and increases confidence in growth figures. In addition, assumptions are no longer hidden on hard drives, making designs clearer and easier to compare, and providing a higher level of transparency.

Optimized portfolio strategies and appropriate drug portfolio management methods are key elements and drivers of business success for every pharmaceutical company. The industry is encouraged to use advanced decision-making processes and structured portfolio management to avoid biased selection and investment risks. Epicflow's PM tools, which are designed for the pharmaceutical industry, provide opportunities to reduce planning time, provide opportunities to use predictive analytics to predict project deadlines with the help of artificial intelligence, manage pharmaceutical company resources in real time, and prevent any time delays.

Portfolio decisions such as drug selection, prioritization, and optimization are key drivers of a given pharmaceutical company's total shareholder value. Reviewing the research and development portfolio requires an assessment of costs, clinical risks and benefits, intellectual property, sales excellence, profitability, and other equally important factors. Project prioritization helps assess project risk and success. Optimization ensures that only the most promising compounds reach the clinical stage and that strategic decisions regarding licensing or discontinuation are made promptly. Strategic portfolio management brings clarity, strategic direction, potential, and emotional value to decision-making and project development. Given the high risk of pharmaceutical research and its compatibility with portfolio management approaches, strategic pharmaceutical portfolio management should play an increasingly important role.