Submitted by: Submitted by kotakmegha
Views: 364
Words: 1703
Pages: 7
Category: Business and Industry
Date Submitted: 09/04/2011 11:25 PM
Managing a Portfolio of Interdependent New Product Candidates
in the Pharmaceutical Industry
Gary E. Blau, Joseph F. Pekny, Vishal A. Varma, and Paul R. Bunch
Highly regulated industries such as pharmaceuticals and agrochemicals face the
challenge of maintaining a 0continuous stream of new products. This is difficult
because of low probabilities of technical success, high development costs, uncertain
market impact, a scarcity of good new product ideas, and limited human and capital
resources available to develop them. The problem of evaluating and selecting which
new products to develop and then of sequencing or of scheduling them is complicated
further by the presence of dependencies between products both in the market place
and in the development process itself.
This study proposes a portfolio management approach that selects a sequence
of projects, which maximizes the expected economic returns at an acceptable level
of risk for a given level of resources in a new product development pipeline. A
probabilistic network model of distinct activities is used to capture all the activities
and resources required in the ‘‘process’’ of developing a new drug. A prioritization
scheme suggesting sequences for developing new independent drug candidates with
unlimited resources is generated with a conventional bubble chart approach. These
sequences initiate a genetic algorithm (GA)-based search for the optimal sequence
in the presence of product dependencies and limited resources. By statistically
evaluating the sequences generated during the GA search using a discrete event
simulation model, it is possible to construct an economic reward-risk frontier that
illustrates the trade-offs between expected rewards and risks. The model ideally is
suited to answer various ‘‘what if’’ questions relative to changes in the resource level
on pipeline performance.
The methodology is illustrated with an industrially motivated case study, involving
nine...