Short Guide to Pharmaceutical Portfolio Management


The pharmaceutical R&D portfolio is usually formed by combining several assets. It can include discovery, pre-clinical and development stage small molecules and biologics (Phase I-IV) or medical devices. Less mature biotech companies, usually own either single project or platform and there is not yet a real R&D portfolio to manage. Large pharma or biotech organizations have actual and sometimes complex portfolios with numerous projects at various stages of development. Decisions around portfolio such as selection of the drug candidates, portfolio prioritization, and optimization are the most critical areas driving a total shareholder value for the organization. The portfolio management is a dynamic process and methodologies used vary among companies. The size of the company and portfolio dictates the complexity and work intensity of the portfolio management. Relevant decisions are made according to a predetermined process and by evaluating multiple parameters. Some of the portfolio management components may be outsourced if there is a need for it. Final accountability for the portfolio decisions stays with the R&D executive team and board of directors.

The majority of this article will focus on the relevant processes for portfolio management in biopharmaceutical research and development. One should not forget however that, more than a decade ago, pharma companies also started managing their strategies for commercial products portfolio. The last topic will be covered briefly, at the end of this article.

PART 1: R&D portfolio management 

3-step Portfolio Management

The usual pharmaceutical portfolio management process goes through three stages:

  1. Portfolio Evaluation: both R&D and commercial teams provide the relevant inputs and estimations of development, manufacturing, commercial costs, clinical risk-benefit, intellectual property (IP), competitive landscape analysis. Portfolio team provides the outputs that include the business valuations and related parameters used by executive leadership for further decision making. Executive leadership assesses asset development plan, TPP (Target Product Profile), risks, PTRS (Probability of Technical and Regulatory Success), PoS and commercial assumptions: eNPV (Expected Net Present Value), IRR (Internal Rate of Return), peak sale, peak revenue, market access constraints, etc.
  2. Portfolio Prioritization: projects are prioritized based on scientific and commercial opportunity, risk and uncertainty. The development of the agent that has the most potential to be successful should be prioritized.  Projects of the highest priorities should experience no shortages of the resources (budget and FTEs).
  3. Portfolio Optimization: Pharma companies use predefined selection criteria for decisions to select and advance their assets from drug discovery to pre-clinical stage and then to development. The best portfolios have various early stages candidates and backup agents that can be useful if a development of the lead compound is ceased. In any case, risk evaluation is critical for development decisions and part of portfolio management. By using a strict selection of preclinical agents, pharma executive teams ensure that only the most promising compounds reach the clinical phase. During the process, strategic decisions are made on which molecules will be in-licensed, out-incensed or abandoned. Portfolio optimization should always be a dynamic process with reoccurring evaluation at certain time points.

The importance of the portfolio decisions’ timing

Most of the pharma companies develop criteria that trigger a re-evaluation of the asset. The reassessment occurs during “regular” decision points for every project (e.g. during decision on progressing the development to the next phase or after reported changes in the competitive landscape, development plan, change to PoS, costs, etc. Reassessment of the portfolio is critical as it gives the executive leaders opportunity for timely strategic decisions in light of internal and external environment changes. Also, is necessary for meeting the relevant regulatory, capital requirements and investors’ expectations.

Driving forces for portfolio decisions

Several different factors are influencing the portfolio and pipeline decisions:

  • Strategic fit: the drug development pipeline is dependent on the organization’s strategy. Selection of the projects is contingent on company’s financial capacities, risk tolerance, overall strategic goals, and direction.
  • Value creation: the primary purpose of the pharma is the maximization of value and return. On a strategic level, this equals to securing portfolio sustainability and growth. Intellectual property (IP) protection management and regulatory exclusivity are critical in maximizing the product value.
  • Commercial landscape: competitive strengths and market attractiveness.
  • Clinical assessment: unmet medical need, safety, efficacy profile, risk/benefit, the uniqueness of the product, ease of use, etc.
  • Risks: long-term risks (10 years) in development (clinical, regulatory, safety) and commercial area.
  • Cognitive bias: Since there is a lot of human, subjective judgment coming into play, minimization of the cognitive bias and pressure-testing of both development strategies and project team commercial assumptions is necessary. A robust due diligence performed for internally developed assets as well that in-licensed is the best way to minimize (but not fully exclude) cognitive bias and risks.

On a personal note, portfolio analysis, and related decisions seem still to be more art than a science, despite formal analytical and modeling methods being available for the pharma industry. As long commercial modeling is broadly implemented, the same is not true for clinical and scientific aspects of product & portfolio management.

PART 2: Commercial portfolio strategies

Only within last 15 years, companies started optimizing their commercial portfolios. The strategies are reflected in the M&A across the industry.

The best example may be the Novartis-GlaxoSmithKlein deal, where first gained GSK oncology portfolio that was traded for the majority of Novartis vaccine business. The M&A allow companies to focus on specific therapeutic areas and to dominate the market.

Companies implement various portfolio strategies e.g.:

  • An approach based on a single backbone product in a particular disease and/or in combinations with new products coming off the R&D pipeline.
  • A strategy based on a “new generation” of a single backbone product in particular disease type and later, in combinations with new products.
  • Pursuing different/new indications with a backbone product.
  • Achieving dominant market position in one or multiple therapeutic areas (e.g. breast, lung cancer) or therapeutic class (e.g. checkpoint inhibitors) or by saturation of all known and relevant mechanism of action (MoA) in a specific disease.
  • Product reformulation.

The commercial strategy is usually established during a multi-step process and after completion of brainstorming workshops and competitive simulations. The strategy is then further aligned with existing pipeline, franchises and brands to ensure a successful implementation.

Summary: Corporate strategy determines the drug development pipeline with selected projects at different phases, and that then forms an organization’s drug portfolio. An optimized portfolio strategy and appropriate drug portfolio management methodology are the major must-have components and enablers of the commercial success of any pharma company. It is recommended that structured, modern decision-making methods should be employed in the industry to minimize the decision bias and investment risks.


4 thoughts on “Short Guide to Pharmaceutical Portfolio Management

  1. Ethelyn Fersner says:

    Oh my goodness! Incredible article dude! Thanks, However I am going through issues with your RSS. I don’t understand the reason why I can’t subscribe to it. Is there anybody else getting identical RSS problems? Anybody who knows the solution can you kindly respond? Thanks!!


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