Project Portfolio Management at XYZ Pharma
Part 1 – Framing the Project Portfolio Management Problem
* What are the objectives?
To prioritize the research & development selection based on the selection that maximizes value
* What are the constraints?
Extremely risky drug discovery and development, lengthening development times which increase development cost, return on investments, and generic competitors.
* What are the risks involved?
Technical risk, a large portion of all development costs are spent on drugs that never reach the market.
Commercial risk, even of the drugs that reach the market, only 30% are successful enough to recover the development costs to yield a healthy return.
* What are your alternatives?
Optimal research and development with lower cost, increase sales, reduce other cost.
* What information is required for project portfolio management at XYZ and how can it be ...view middle of the document...
What additional information would you collect?
I would collect similar previous research and development success and failure ratios from internal or competitors, previous pre-launch cost and net sales (from company reports, interviews with personnel, or marketing and production management) to calculate appropriate averages. This data can be used to forecast the value of the project.
Which quantitative tool(s) might help you in determining the value of the project?
The quantitative tools that might help could be Linear Programming and Forecasting.
Part 3 – Project Risk
When implementing project 1, you face technical and market risk. How would you assess the risks embedded in Project 1?
Project 1 embedded risk can be assessed by evaluating the market risk, success/failure rate of the project.
What additional information would you collect?
I would collect the risk of similar projects.
Which quantitative tool(s) might help you in determining the project risk?
The quantitative tool that might help in using the averages of other similar projects risk is forecasting.
Part 4 – Project Portfolio Decisions
Suppose that next year’s R&D budget for the oncology area has been reduced to $50 million. How would you decide which projects to continue, and which to put on hold?
If the R&D budget for next year has been reduced to $50 million, the project with highest return on investment (ROI), in terms of the organization as a whole, should be selected. The projects to be placed on hold should be ranked according their (ROI) ability to maximize value. The project with the highest ROI should be given first priority and all other projects placed on hold are ranked according to its ROI—its ability to maximize the value of the organization as a whole.
What additional information would you collect?
I would collect the ROI for all projects to determine which one will maximize the value of the organization as a whole.
Which quantitative tool(s) might help you in determining the best portfolio?
The quantitative tool that might help in determining the best portfolio is deterministic decision model.
