Portfolio Management in New Drug Development - Innovation and Marketing in the Pharmaceutical Industry - page 84

under development from 5,995 compounds in 2000 to 9,737 compounds in 2010, an
increase of 62 % despite turbulent economic conditions (PharmaProjects 2010 ).
No shortage of ideas and opinions exist given the scale and stakes of new drug
development on how portfolio management should be done (Garnier 2008 , etc).
However, some of these ideas are beliefs and experiments-in-progress. In this chapter,
we present findings of multidisciplinary research on portfolio management in relation
to key managerial questions. We believe, upon sifting through the research, that many
important managerial questions remain open for new research (as also noted by
Stremersch and Van Dyck 2009 ). Our goal in this chapter is to offer industry practitio-
ners current state-of-the-art know-how that can add to portfolio management practice,
and to stimulate researchers to explore topics requiring greater attention.
With the goal of having a self-contained introduction, we organize the chapter as
follows. The remainder of this section will provide definitions of portfolio manage-
ment and how we categorize managerial issues, review relevant facts about the phar-
maceutical industry and current portfolio management practices, and close with a
summary of what has been explored in the academic literature to date. We then
probe deeper into specific managerial issues within portfolio management, detail
the key research papers that provide useful perspectives, and summarize the insights
that practitioners can take away from research. Finally, we conclude with open
questions ripe for further research.

3.1.1 Definitions and Categorization

Portfolio management is at the heart of mapping an organization's innovation
strategy to the objective and balanced selection of programs and projects to
maximize portfolio value to the organization. We focus on portfolio management
methods relevant to the pharmaceutical industry, drawing from both industry-spe-
cific and general literature on this subject.
Cooper et al. ( 1998 ) define portfolio management as a dynamic decision process
which facilitates the evaluation, selection, and prioritization of new projects, and the
acceleration, discontinuation, or deprioritization of existing projects in the presence of
uncertainty, changing external dynamics and strategic considerations. This definition
applies well to the ethical drug industry for which R&D portfolio management holds
the key to future survival as existing drugs lose patent rights and market exclusivity.
A typical pharmaceutical firm organizes its R&D portfolio by therapeutic cate-
gory (Yeoh 1994 ), with each category containing various medical conditions tar-
geted by research programs (also known as indications). Since each indication can
be targeted by multiple projects/compounds, 2 R&D portfolio management in the

2 The same compound could target multiple indications. Each compound-indication combination is
a separate project that follows the pharmaceutical regulatory approval process. In other words, a
compound that is approved by a body such as the FDA for one indication can only be marketed for
that indication.