Biomedical Engineering Reference
In-Depth Information
Chapter 3
Portfolio Management in New Drug
Development
Min Ding, Songting Dong, Jehoshua Eliashberg, and Arun Gopalakrishnan
Abstract
The pharmaceutical industry leads all industries in terms of R&D spend.
Portfolio management in new drug development is extremely challenging due to
long drug development cycles and high probabilities of failure. In 2010, a pharma-
ceutical company like GlaxoSmithKline (GSK) spent over USD 6 billion in R&D
expenditure and managed a total of 147 R&D projects across 13 therapeutic areas in
different stages of development. There are a lot of challenges in deciding on how
to allocate resources to these projects in order to achieve the maximum returns.
For example, how to evaluate the value and risk of each project, how to choose new
projects for both short-term cash flow and long-term development, how to decide
which projects to prioritize and which projects to remove from the portfolio, how to
design drug development unit and incentive schemes to maximize the likelihood of
success, and so forth.
This chapter reviews both practice and the state-of-the-art research and summa-
rizes the latest insights from both industry and academia. For a manager, it provides
a guide to the tools they need in portfolio management in the new drug development
context. For an academic, it provides a quick overview of the extant research and
points out some promising research directions.
M. Ding (
*
)
Smeal College of Business, Pennsylvania State University, University Park, PA, USA
School of Management, Fudan University, Shanghai, China
e-mail: minding@fudan.edu.cn
S. Dong
College of Business and Economics, Australian National University,
Canberra, ACT, Australia
J. Eliashberg • A. Gopalakrishnan
The Wharton School, University of Pennsylvania, Philadelphia, PA, USA
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