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I need some guidance with the following prompt:

 Instructions

Organizations have resources to complete projects. They include people, materials, knowledge, and money. They invest these in developing and delivering projects that can grow and sustain the business organization.

In this milestone, you will complete a resource management plan and you will update your project using MS Project software.

More detailed guidance:

 Overview: For the final project in the course, you will analyze the case study Value-Driven Project and Portfolio Management in the Pharmaceutical Industry and  additional course resources to create a program performance report for a hypothetical organization. The completion of this assessment will allow you to  demonstrate your knowledge of program-level management and your ability to develop key executive reporting following standard frameworks. In this milestone, you will develop a resource management plan and update your project using MS Project software. 

When building a project plan, project  managers use the resources an organization makes available to complete the work necessary to deliver the project. When a project manager builds a project  plan, work packages are created that define the specific work activities that need to be completed. It is essential that a project manager understand what work  needs to be completed so he or she can determine what resources (people, materials, knowledge, money) are needed, for how long (duration), and when these  resources are needed (schedule). Some of this will be known and some unknown. During the early stages of a project (initiation phase), there are many unknowns, so planning is not precise. During the execution phase, accuracy of managing  resources is essential for project and program management success. A project manager wants to use organizational resources as efficiently as possible. Ideal resource management ensures the project manager has the right people working on the right work packages at the right time. 

Prompt I: Thus far in the course, you have completed a case study overview, a project charter, and a project scope statement. You have also set up your project using MS Project software. In this milestone, you will develop a resource management plan and update your project with this material using MS Project software. An Excel spreadsheet template has been provided for your use in creating a resource management plan. If you prefer a different format, you are free to use the format you prefer. 

You will determine what your resource management plan will need, but at a minimum it should include the following critical elements: I. Provide a list of human resources required for the project. II. Identify the specific skill set needed. III. Describe the roles and key responsibilities for each job type. IV. Provide a list of equipment items to be used. 

V. Identify the purpose of each equipment item. VI. Identify the types and quantities of equipment needed. 

VII. Provide a list of materials needed. VIII. Identify people or resource constraints (dates of availability). IX. Identify the specific planning dates when resources are needed. 

Prompt II: Once you have completed your resource management plan, you will use this resource plan to update your project using MS Project software. Using the file you created in Milestone Two, update your project to include the following critical elements: I. Assign resources to tasks. 

II. Create a project calendar. III. Create calendars for each resource. IV. Apply any of the constraints you identified in your resource plan. 

V. Add to the task Notes field any additional or new information. VI. Document any assumptions you made regarding resources and turn that in (as a Word document) with your assignment. 

VII. Assign yourself as the project manager and assign your instructor as the project sponsor. This file, which is a combination of Milestones Two and Three, should be submitted as an MS Project (.mpp) file. Do not submit it as a .pdf. 

As needed, use the following Atomic Learning tutorials to help you set up your project using MS Project software: Infobase: Project 2016 Training D. Resources 

Here is the link to the case study:  Value-driven project and portfolio management in the pharmaceutical industry: Drug discovery versus drug development – Commonalities and differences in portfolio management practice – ProQuest  

Thanks so much for your support in helping me navigate this. 

Finally, I’ve uploaded the excel template that was included. 

Resource Management Plan

Project Resource Plan
Name
Focus Area:
Process:
Prepared By

Resources

Project Resource Plan
Project Name: xyz
Process:
Focus Area:
Prepared By:
Prepared On:
Authorized By:
Project Skill Requirements
Task/Deliverable Resource Type Source Skill Level Quantity Hours Required Controller
Phase-1
From Date
To Date
Phase-2
From Date
To Date
Phase-3
From Date
To Date
Phase-4
From Date
To Date
Non Human Resources
Task/Deliverable Resource Type Source Cost Estimate Quantity Hours Required Controller
Phase-1
From Date
To Date
Phase-2
From Date
To Date
Phase-3
From Date
To Date
Phase-4
From Date
To Date
Resource Assumption
Resource Risks and Mitigation Strategies
Detailed List of Sources
Source Name Address Contact Person Contact Details

© 2008 PALGRAVE MACMILLAN 1462-8732 J O U R N A L O F C O M M E R C I A L B I OT E C H N O L O G Y. VOL 14. NO 4. 307–325 OCTOBER 2008 307

www.palgrave-journals.com/jcb

INTRODUCTION
The increasing discussion about rising
healthcare cost is fuelled by reports that
General Motors paid more for healthcare than

Value-driven project and
portfolio management in
the pharmaceutical industry:
Drug discovery versus drug
development – Commonalities
and differences in portfolio
management practice
Kerstin M. Bode-Greuel and Klaus J. Nickisch
Date Received (in revised form): 31st January, 2008

Kerstin M. Bode-Greuel
is founding and managing partner of Bioscience Valuation in Germany and USA, and of Bioscience Market Research, USA. Her 20-year
experience covers virtually all therapy areas in pharmaceutical R & D and strategic marketing. She held senior positions at Bayer AG,
and after fi ve years of independent management consultancy, co-founded Bioscience Valuation. Her publications include two expert
SCRIP reports, professional journal articles and chapter of a textbook. She is Associate Lecturer at University of Essen ’ s Masterclass
programme, as well as speaker / workshop leader in international conferences. Kerstin studied medicine in Germany and UK, and was
educated in corporate fi nance at the Wharton School of the University of Pennsylvania.

Klaus J. Nickisch
received his PhD in Organic Chemistry from the Technical University Berlin in 1979. He then joined the Schering AG as a medicinal
chemist doing research work in the endocrinology and cardiovascular fi eld for fi ve years. In 1985 he moved into development and
fi nally led the chemical development department for many years. In 1999 he moved to project management and became head of
project- and portfolio management of Specialized Therapeutics, a business unit of Schering AG located in the US. He fi nally got
promoted to heading global project management. After the acquisition of Schering AG by Bayer AG, he joined the Berlin School
of Economics where he is now in charge for building a new MBA programme for pharmaceutical management.

Abstract
The concept of portfolio management has been widely used in the pharmaceutical industry. It is used
to evaluate the commercial value and the risk structure of development projects. The fi nal goal is to
select a portfolio of projects that addresses the strategic objectives of the organisation optimally
and that leads to the highest overall portfolio value. Companies now start to apply the portfolio
management concept on their research portfolios. Although the basic principle remains the same, the
methodology applied has to be adapted to the greater uncertainty that early research projects carry.
Commonalities and differences of the portfolio management process in research and development
are described and recommendations are given how to harmonise the two different approaches.
Journal of Commercial Biotechnology (2008) 14, 307 – 325. doi: 10.1057/jcb.2008.6 ;
published online 4 March 2008

Keywords: portfolio management , research , development , pharmaceutical industry , risk management

Correspondence: Kerstin M. Bode-Greuel, Bioscience Valuation BSV
GmbH, Am Zigeunerbergl 3, Grainau 82491, Germany
Tel: + 49 8821 966979 0
Fax: + 49 8821 966979 29
E-mail: [email protected]

Bode-Greuel and Nickisch

© 2008 PALGRAVE MACMILLAN 1462-8732 J O U R N A L O F C O M M E R C I A L B I OT E C H N O L O G Y. VOL 14. NO 4. 307–325 OCTOBER 2008308

for steel per vehicle in 2004, 1 and Starbucks
paid more for health insurance than for coffee
in 2005. 2 The continuing rise in development
costs for drugs has increased pressure on R & D
organisations to contribute to higher effi ciency
in the overall process of coming up with new
drugs.

In the last few years the industry has made
signifi cant efforts to address these challenges 3
and to increase the productivity of the drug
development process. Some of the initiatives
have without doubt led to considerable
improvements. Examples are the earlier
determination of a drug ’ s toxicology profi le
and early tests to investigate the suitability of
a new drug candidate for oral administration
or once a day dosing. The question is no
longer how good we are in what we are
doing but whether we are doing the right
things. Further improvements of the overall
process should shift from attempts of
enhancing effectiveness to a greater
emphasis on the effi ciency of the processes
applied.

In this context a lot of emphasis is put
on portfolio management. In the broadest
defi nition, portfolio management describes the
process of maximising the value of R & D
portfolios through proper resource allocation.
This requires an alignment of portfolio
management with strategic business objectives.
Such objectives should not only be general
(e.g., innovation) and quantitative (eg ROI or
sales targets). They should also defi ne disease
areas of interest, clearly outline the remaining
medical needs, and specify the indications that
are considered worth pursuing. This will
enable decision makers and functional R & D
managers to identify projects with both
strategic fi t and a high value proposition.
Depending on the size of the organisation,
either a corporate or therapeutic area strategies
need to be developed, approved, and
endorsed by the entire organisation.

Value-driven project and portfolio
management implies quantitative fi nancial and
risk analysis of individual projects and overall
portfolios. Such analyses elucidate options for

improving the value and risk structure of
individual projects on the one hand and
therapeutic areas or overall corporate
portfolios on the other hand. They are
applicable and relevant to companies of any
size. Value-driven project and portfolio
management is a methodology enabling the
alignment of project decisions with corporate
strategy and defi ned business objectives.

Although portfolio management has been
applied in the fi nancial industry for many
years and Harry Markowitz was honoured
with the Nobel Prize for outlining this
concept it was only around the end of the last
century that the application of value-driven
portfolio management in the pharmaceutical
industry was published. 4 Around the same
time, an investigation across various industries
provided evidence that portfolio management
based on quantitative fi nancial analyses using
the net present value (NPV) algorithm
correlates well with value creation. Value
destruction, however, was observed more
frequently in companies that built their
portfolio decisions only on simplifi ed scoring
methods or semi-quantitative portfolio
matrices such as those introduced in the
1980s. 5

Most pharmaceutical companies have
implemented portfolio management in drug
development. 6 – 9 An increasing number of
companies is now making efforts to apply it
to discovery research and early development.
Not surprisingly, given the relatively short
period of use, the inherent complexity of the
issue has prevented the establishment of a
broadly accepted best practice in R & D
portfolio management.

This review focuses on the entire portfolio
management process with special emphasis on
commonalities and differences in the research
and development environment. For aspects
where, based on the authors ’ experience, a
best practice emerges this is clearly stated.
Otherwise, different approaches are described
and compared. We begin with the description
of portfolio management in development
because there it has a longer history than in

Value-driven project and portfolio management in the pharmaceutical industry

© 2008 PALGRAVE MACMILLAN 1462-8732 J O U R N A L O F C O M M E R C I A L B I OT E C H N O L O G Y. VOL 14. NO 4. 307–325 OCTOBER 2008 309

The four tools mentioned above provide
information required to evaluate and prioritise
projects, and to analyse whether the portfolio
is aligned with corporate objectives. TPPs
are generally applied, but not always in an
effective way. The stage-gate decision process
is related to the major preclinical and clinical
development milestones and is also a well-
established principle in the pharmaceutical
industry. At each stage-gate, it is decided
whether the achieved results support
continuation of development, and the project
may be reprioritised depending on other
projects competing for resources. Time line
and budget management has been the
responsibility of project management for a
long time. Sales forecasting and fi nancial
project evaluation is undertaken to a variable
extent and level of detail, depending on
companies ’ policies at which development
stage quantitative analyses should commence.

In addition to the four tools mentioned
above, risk analysis has become a particular
point of concern for about fi ve years, both in
project and in portfolio management. 10 In
the context of the pharmaceutical and
biotechnology industry, it is helpful to
differentiate two different categories of risk as
they are managed by different stakeholders:
strategic and operative risk. 11 In brief, strategic
risks typically affect go / no-go decisions and
may have a signifi cant impact on value;
therefore, they are matters of concern
predominantly for project and portfolio
management. Operative risks represent issues
that may lead to deviations from the
development plan and budget. They require
particular attention by line functions and
coordination by project management, as they
are often cross-functional. Operative problems
may eventually gain strategic relevance.
Strategic risk analysis has been applied for
some time in R & D portfolio management
and is usually represented as estimates of the
probability of achieving milestones. The
systematic management of operative risk has
been initiated more recently; here, risk is
often not represented as probability but rather

research. This has led to a signifi cant body
of experience on which portfolio management
in early R & D can build.

CURRENT BEST PRACTICE OF
PORTFOLIO MANAGEMENT
IN DEVELOPMENT (BEYOND
PROOF OF CONCEPT)
There are two major tasks for implementation
of value-driven portfolio management:
evaluation methodology and metrics on the one
hand, and the corporate evaluation and
prioritisation process on the other hand. There
is a general agreement in the pharmaceutical
industry that the evaluation of projects
entering ‘ full ’ development after successful
proof of concept (PoC) should include
quantitative fi nancial parameters. Furthermore,
there appears to be a generally accepted set
of portfolio management metrics. 6 – 9 The
portfolio management process, however,
differs, as well as the degree of
implementation, refl ecting individual
companies ’ corporate structure and culture.
There are some prerequisites for successful
portfolio management that apply to all
systems: the evaluation of projects must
be suffi ciently detailed, interdisciplinary,
consistent, and embedded in a practicable
corporate process.

Value-driven project management
in development
The fi rst step towards value-driven portfolio
management is the establishment of effective
project management. Project management is
the predominant operative instrument for
the execution of portfolio decisions. Four
common tools are applied to align project
management with portfolio decisions:

Target product profi le (TPP)
A stage-gate decision process
Timeline and budget management
Sales forecast aligned with TPP and
development plan




Bode-Greuel and Nickisch

© 2008 PALGRAVE MACMILLAN 1462-8732 J O U R N A L O F C O M M E R C I A L B I OT E C H N O L O G Y. VOL 14. NO 4. 307–325 OCTOBER 2008310

as semi-quantitative categorisation and plotted
against categories of impact.

In the following, ways towards effective
application of TPPs and strategic risk analysis
(in the format of decision trees) are described.
In addition, sales forecasting procedures and
fi nancial analyses adapted to the needs of
portfolio management are outlined.

Target product profi le (TPP)
A TPP serves as a blueprint of the desired
future product. It defi nes the disease category
and targeted patient population, the requested
effi cacy, safety and tolerability characteristics,
and technical details such as, for example,
formulation and mode of application of the
product to be developed. The TPP describes
features of the future marketed product that
can realistically be expected based on the
properties of the compound and the
pathophysiology of the disease to be treated.
It takes into account both regulatory and
market requirements, as the profi le should
refl ect both a registrable and a commercially
viable product. Ideally, TPPs for individual
projects and their respective targeted disease
categories are well aligned across discovery
research, development, and marketing
functions. The FDA has recently defi ned a
template for TPPs to facilitate communication
with the agency. 12 This is an extensive
document of several pages not only requesting
target criteria but also a description of trial
designs and obtained development results. As
internal tool for value-driven management,
focused TPPs are more suitable, summarising
the features that drive development and
marketing plans. Such TPPs do usually
comprise not more than 1 – 2 pages.

TPPs defi ne the desired label in the packet
insert and therefore serve as outline for R & D
with respect to the required clinical trials and
development activities, that is, TPPs defi ne
the scope of investment. In order to fulfi l this
task, effi cacy and safety / tolerability parameters
are defi ned in a commonly agreed and, as far
as possible, quantitative way, as they will drive
trial design and cost.

The TPP outlines the development targets,
but it does not always indicate to what extent
results would be allowed to deviate from the
target until further development is not worth
while any more. Therefore, companies often
defi ne a minimum product profi le (MPP)
alongside the TPP to establish a common
understanding of the minimum study results
required for continuation of development. All
of the MPP criteria must be achieved, and
they must respect regulatory requirements.
While the TPP outlines the scope of
investment, the MPP represents stop / go
criteria.

TPPs can play a benefi cial role in aligning
project activities between the development
functions and marketing and sales. This is best
achieved if they are established through an
interactive cross-functional process. TPPs also
facilitate the communication of project issues
and the alignment of senior management ’ s
expectations. As such, they are an important
element of value-driven management.

Decision tree analysis
Decision tree analysis is an effective tool to
illustrate R & D decision points, the
probabilities of uncertain outcomes at each
milestone, and potentially resulting decision
options ( Figure 1 ). It is well established in
pharmaceutical development. 4,12 As investment
decisions are made with respect to milestones,
it is useful to examine the risk and cost of
individual milestones and the value gained
assuming successful completion. Decision trees
serve as communication tool for portfolio
management and for project management
and line functions. They are also used for
risk adjusted net present value analysis
( ‘ augmented NPV ’ ).

Decision tree analysis focuses on those
activities that are essential for successful
development and for achievement of the
TPP. If milestones are composed of several
independent uncertain activities undertaken in
parallel, individual probabilities are multiplied
to provide the overall probability of success

Value-driven project and portfolio management in the pharmaceutical industry

© 2008 PALGRAVE MACMILLAN 1462-8732 J O U R N A L O F C O M M E R C I A L B I OT E C H N O L O G Y. VOL 14. NO 4. 307–325 OCTOBER 2008 311

circumstances of the individual case. An
interactive and systematic discussion process
has proven to be most effective as participants
refl ect their opinions against others. This leads
to a fruitful knowledge exchange among
experts and in most cases to a common
agreement. It is sometimes believed that the
interactive process consumes too much time,
there may not be access to professional
moderation capabilities, or expert teams are
considered overly optimistic. Therefore, some
companies prefer simplifi ed procedures, for
example, the distribution of templates that
have to be fi lled, or they use published
average success rates. However, this may
result in overlooking critical project issues that
arise from the interaction of functions and
that would not be recognised by individuals

for the respective milestone. Decision trees
usually extend up to approval. Market
scenarios and commercialisation uncertainties
are often refl ected in probabilistic sales
forecasts (see below).

Best practice decision tree analysis is
conducted with the project teams and
additional experts when appropriate. The
analysis benefi ts from a neutral moderator,
often a representative of the portfolio
management function. The development plan
is evaluated along the TPP / MPP and its
milestone structure. For those uncertain
elements that affect go / no-go decisions, the
probability of success is estimated. Benchmarks
can be used as orientation to outline a
plausible range to the team. Probabilities are
assessed based on available knowledge and the

54%

Phase III

Carcinogenicity

46%

Phase III: efficacy at least according to minimum
profile (6 months treatment, p=80%), 12 months
safety trial OK (p=80%), carcinogenicity study

OK (p=85%)
– GO TO Registration –

Phase III and/or 12 months safety trial and/
or carcinogenicity study failed

– STOP –

54%

Phase III

Carcinogenicity

46%

Phase III: efficacy at least according to minimum

profile (6 months treatment, p=80%), 12 months
safety trial OK (p=80%), carcinogenicity study

OK (p=85%)
– GO TO Registration –

Phase III and/or 12 months safety trial and/
or carcinogenicity study failed

– STOP –

40%

Phase I
go

60%

stop
65%

Phase IIa

(PoC)
go

35%

stop

46%

Phase III
L.T. Tox

go

stop
10%

Registration
go

90%

stop

Phase IIb

CMC
go

stop

54%

72%

28%

Figure 1 : Example of a decision tree. Decision trees are tools to illustrate the potential outcomes at
development milestones and the risk structure of projects. Outcomes are differentiated according to
available decision options. For use in portfolio management and for valuation purposes, the layout is
usually simplifi ed as it assumes that development will be continued and the project will fi nd an investor
if milestones are achieved. The Phase III milestone in the present example is comprised of three
uncertain studies whose outcomes are considered independent, while all studies must be successful in
order to proceed. Probability estimates can then be multiplied to achieve the overall probability of
success of the milestone. If several studies are undertaken at a milestone, care must be taken to identify
potential interdependencies between studies in order to avoid an overestimation of risk. 11 Decision
trees may sometimes refl ect more than two decision options at a milestone. For example, a Phase II
milestone may lead to more than one way forward: if effi cacy is as outlined in the TPP, it may be
decided to go directly to Phase III; alternatively, Phase II results may suggest to investigate another
treatment schedule before going to Phase III in order to maximise the chance of success of the latter.

Bode-Greuel and Nickisch

© 2008 PALGRAVE MACMILLAN 1462-8732 J O U R N A L O F C O M M E R C I A L B I OT E C H N O L O G Y. VOL 14. NO 4. 307–325 OCTOBER 2008312

alone. Furthermore, published benchmarks are
averages across a sample of companies, and
the method applied to generate them differs
among sources. In addition, there is evidence
that individual companies deviate signifi cantly
from average success rates, indicating
differences in R & D productivity within the
industry. Finally, success rates differ across
therapeutic fi elds, and the available statistics
do not provide reliable data for individual
disease entities.

Very often, alternative options exist for the
development of projects. These may comprise
a broader or restricted target patient group, a
fast and risky development to achieve earlier
launch versus a step-wise, risk reduced
development strategy, the cheapest possible
way towards registration, or a more or less
ambitious TPP with respect to effi cacy or
safety. Such alternatives differ with respect to
cost, risk and risk structure, timelines, and
commercial value. Decision tree analysis is
an ideal tool to facilitate the analysis of
alternative options.

The relevance of project risk structure . A project ’ s
risk structure is defi ned as the resolution of
risk per milestone. Risk structure may be
front-loaded (low probability of success in
early development), balanced, or back-loaded
(high risk in late development). Alternative
development plans usually differ in risk
structure. Mostly, but not always, this is also
associated with a difference in overall
probability of development success. Risk
structure affects the fi nancial value of projects
because the relative weighting of outcomes is
different.

This applies even if overall probability of
success is not different, in cases where the
relative weighting of expensive versus cheap
failure scenarios is changed. In essence, it
would always be advisable to reduce risk as
early and quickly as possible in order to put
the signifi cant investments in the later stages
at the lowest necessary risk.

R & D projects can be classifi ed in different
categories, such as, for example, fi rst-in-class

highly innovative new products, ‘ fast
followers ’ with validated mechanism of action,
or added-value generics, that differ in risk
structure. Highly uncertain innovative drugs
undergo signifi cant risk resolution only after
Phase II (PoC) or even Phase III, depending
on the therapeutic category and clinical trial
endpoints. Fast followers are projects of
moderate risk in Phases II and III; risk will
mostly be driven by the incremental benefi ts
the sponsor wishes to establish to make the
product competitive vis- à -vis the market
leader. Added-value generics are copies of
products with a commonly known benefi t /
risk ratio, while effi cacy, safety, or
convenience is enhanced, for example,
through an innovative formulation. Such
projects have a comparatively low
development risk and often a shorter
development time. The analysis of project risk
and the proactive selection of projects with
complementary risk structure offer
opportunities to balance portfolio risk. A risk-
balanced portfolio is more likely to meet
productivity goals. Furthermore, projects with
favourable risk structure may have a
comparatively high fi nancial value in early
development (with less pronounced
incremental value increase upon completion
of development milestones), thus balancing
not only productivity but also portfolio value.

The analysis of project risk structure
facilitates the understanding of the impact
of the chosen clinical trial plan and trial
endpoints on risk ( Figure 2 ). Development
risk is infl uenced by the reliability and validity
of individual studies, and by the quality of
development execution. Examples are the
potentially low reliability of encouraging but
small pilot studies that may carry forward risk
into later stages of development, leading to
unexpected late stage failures. If trial results
remain unclear, development may be
terminated because additional investments and
further trials would delay launch to an extent
that the value proposition is lost. If the
expected knowledge gain of particular trials
and its impact on the level of confi dence in

Value-driven project and portfolio management in the pharmaceutical industry

© 2008 PALGRAVE MACMILLAN 1462-8732 J O U R N A L O F C O M M E R C I A L B I OT E C H N O L O G Y. VOL 14. NO 4. 307–325 OCTOBER 2008 313

COST (EUR mill.)* ; probability of success

discount rate: 10%
tax rate: 40%

Peak
sales
(EUR
mill.)

Years to
peak Preclin Ph I Ph II Phase III Reg Phase IV

CMC/
Product
devel.

Marketing
(year of
launch)

% sales
reduction
in year of

patent expiry
Phase II/III

Added value generic 250 5 3 6 44 39 – 5 38 –

90% 85% 85% 90%

Standard product 500 5 7 9 22 98 66
5% of peak sales
(years 1-5 after

launch)
13 125 75%

70% 75% 60% 80% 95%

Blockbuster product 3,000 7 7 10 32 258 452
5% of peak sales
(years 1-5 after

launch)
13 450 90%

45% 60% 35% 65% 90%

Launch

Value
(EUR million)

103

163

272

577

1,001

214
261

376

635

145

357

734

2,608

5,664

3
6

44

7

9

22

98

7
10

32

258

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Development Stage

P
ro

b
a
b

il
it

y
o

f
L

a
u

n
c
h

Preclin Phase I Phase II Phase III Reg

Cost per stage
(EUR million)

Value
(EUR million)

103

163

272

577

1,001 1,315

214
261

376

635

806

7,326

145

357

734

2,608

5,664

3

6

44

7

9

22

98

7
10

32

258

Added value generic

‘Standard’ product (validated
MoA, incremental innovation)

1st in class (blockbuster,
breakthrough innovation)

Figure 2 : Portfolio risk structure. R & D projects can be classifi ed according to risk / cost / value
characteristics. For the three examples shown, both overall probability of success and risk structure is
different. (a) shows three examples of development projects with different risk structures: (1) Innovative
NCE ( ‘ breakthrough innovation ’ ): high risk, high cost, blockbuster potential; (2) ‘ Standard ’ product
( ‘ incremental innovation ’ ): for example, a product of a class with clinical PoC; moderate development
risk, moderate development cost, moderate sales potential; (3) Added value generic (generic with added
benefi ts through, eg, innovative formulation): low risk and cost, low to moderate sales, faster
development. (b) illustrates the expected fi nancial value, the probability of launch, and the cost per stage
of the projects at particular development milestones. For example, a project with low risk and fast
development may have a higher fi nancial value in early development than a highly innovative project,
emphasising the impact of risk structure on value. The expected value uptake of the latter is, however,
much more pronounced when risk is resolved through the completion of milestones. Innovative projects
usually experience their highest relative value uptake after successful PoC, whereas the value uptake of
clinically validated development candidates or value-added generics is less pronounced at PoC. Value
uptake profi les may also vary depending on the chosen clinical development strategy and the unique
selling proposition to be established. Taking into account the effects of projects with different risk
structures, R & D portfolios may be designed to achieve optimum productivity and diversifi cation. Analysis
of the risk / cost / value structure of individual projects facilitates proactive portfolio planning with respect
to overall portfolio value, effi cient resource allocation, and sustained growth.

Bode-Greuel and Nickisch

© 2008 PALGRAVE MACMILLAN 1462-8732 J O U R N A L O F C O M M E R C I A L B I OT E C H N O L O G Y. VOL 14. NO 4. 307–325 OCTOBER 2008314

forthcoming development stages is analysed,
the understanding of risk along the sequence
of clinical trials will be enhanced.

Commercial analysis and sales forecast
In fully integrated corporations, commercial
analyses and sales forecasts are usually
provided by (strategic) marketing.
Representatives of the portfolio management
function sometimes generate sales forecasts
for projects that have not yet passed PoC or
that are of low priority. In such cases, it is
advisable to seek alignment of the key
assumptions with marketing to ensure their
buy-in.

Assuming contemporary forecasting
capabilities (see below), the major issue of
value-driven management is the proper
alignment of commercial expectations with
the planned R & D activities and clinical trials.
Furthermore, project managers and decision
makers benefi t from investigations how
product sales may change if uncertain trial
outcomes move to the optimistic or
pessimistic direction, related to the likelihood
of the respective scenarios. As outlined above,
the TPP / MPP is a valuable tool to facilitate
the establishment of trustworthy forecasts and
expected sales scenarios.

As a consequence of the translational
medicine approach, more and more
companies choose an organisational model
that separates research and early development
until POC from full development. As a
consequence this leads also to a split of the
portfolio management function. …