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About Dan Smith

Dan Smith, a Vice President at Enrich, specializes in R&D portfolio management and enterprise software development.
6 04, 2016

Using EAP’s Project Prioritization Software to Allocate Technology Investments

By |2017-05-23T15:41:59-08:00April 6th, 2016|Blog|0 Comments

We’ve talked elsewhere about how EAP can provide sophisticated strategic resource planning and capacity planning. In those cases, the concerns were mostly around staffing—making sure key projects had the right people at the right time and anticipating and addressing staffing shortages. But other resources can benefit from this approach as well. Money, for instance—always needed and often in short supply. EAP’s strategic portfolio planning capabilities can help you figure out the best way to deploy a defined budget. The process isn’t far different from the kind of holistic portfolio review we generally advocate, but it is tailored to accommodate the strictures of a budget-driven R&D program.

Funding a Six-year Plan

One of our clients had a particularly well-defined investment cycle. Because it was federally funded, the organization worked on a six-year funding schedule. Each year, the government provided a budget detailing how much money would be available to the organization in each of the coming six years. With that information in hand, the organization’s yearly portfolio review involved prioritizing its technology initiatives and determining which ones it could afford to support given the promised funding. In the ideal process, the organization would create a plan for the entire funding period, which would then be updated and adjusted each year to account for the actual progress made by each initiative as well as changes in the actual funding, and then extended as the six-year plan rolled forward.


8 04, 2015

R&D Portfolio Management for Pipeline Strategy

By |2017-05-23T15:42:01-08:00April 8th, 2015|Blog|0 Comments

The past several months have seen a flurry of dealmaking in pharma and biotech. Pfizer, having been rebuffed by AstraZeneca, bought a manufacturer of biosimilars, increasing speculation that the company is planning to split itself in two. Shire, similarly stung by its failed attempt to buy AbbVie, is buying NPS pharmaceuticals. A very public drama also played out as Allergan staved off a buyout by Valeant and eventually sold itself to Actavis–itself a very aggressive dealmaker.

Such deals are among the biggest managers make. A successful acquisition or sale can redefine a company; a failed bid—or, worse, a bad acquisition—can haunt a company for years. Acquisitions can be made to promote growth or to prevent loss of market share. In the pharmaceutical industry, acquisitions are typically as much about acquiring a company’s projects as anything else. These companies are trying to remake their R&D portfolios—specifically they need to expand drug pipelines to drive future growth.

Pipeline expansion can look like a good reason to buy another company. It’s certainly quicker than developing a new drug from the ground up. But what often looks attractive at the 35,000-foot level can become far less convincing with closer scrutiny.

Fortunately, there are ways to anticipate the value of a potential deal. In fact, the tools and processes already established by R&D portfolio management can be used to assess the value of the combined companies, and help managers decide whether a deal is worth pursuing.

Case Study: Recast a Drug Pipeline’s Weakness as an Opportunity

A pipeline view of the company's portfolio showed that, while most TAs had a relatively full pipeline, the Dermatology TA had only two drugs. Would they be worth the investment?

A pipeline view of the company’s portfolio showed that, while most TAs had a relatively full pipeline, the Dermatology TA had only two drugs. Would they be worth the investment?

A large pharmaceutical client found itself with two promising mid-stage drugs in a therapeutic area (TA) in which the company had little expertise. The drugs seemed like a good fit with the R&D portfolio because they leveraged the company’s existing device technology, but the investment required to build up the research, sales and marketing, and manufacturing infrastructure to support the new TA was considerable. Further development  could only be justified if more assets were added to rapidly grow the company’s presence in the TA. That growth could come organically, by funding new research, or through the acquisition of individual assets or a division of another company devoted to that TA.

Which way to go? For answers, the company turned to its portfolio management (PM) group.

Layering the revenue of the future drugs (blue) on top of the existing drugs (orange) illustrated a relatively small, and distant, impact.

Layering the revenue of the future drugs (blue) on top of the existing drugs (orange) illustrated a relatively small, and distant, impact.

To evaluate the organic option, the PM group assumed a steady flow of drugs moving from research to the clinic over time. As these drugs did not yet exist, the team developed several drug profiles that included typical cost, risk, schedule, and sales data. Each potential drug was then mapped to a profile, and the resulting forecasts were combined with those for the existing drugs to paint a prospective financial picture for the TA.

For the acquisition option, the group identified a potential acquisition target and estimated financials for the target’s drugs based on publicly available information. (Obviously, the resulting analysis couldn’t include unannounced drugs in development, but the team felt they could generate a reasonable first-order approximation of the target’s value based on the data they had.)
In each case, the additional drugs for the new TA were combined with the company’s existing (and projected) portfolio of drugs to provide a complete picture of the potential pipeline, R&D budget requirements, and projected sales.

This analysis made it very clear that the anticipated cost of the proposed acquisition would outweigh the value added by the new drugs. The organic option was more attractive financially, but showed a 50-year payback period. More in-depth work demonstrated that the synergies with the existing device technology were insufficient to compensate for the infrastructure investment. As a result, the company abandoned the idea of expanding the TA and instead out-licensed the existing drug candidates.


For our client, the techniques of R&D portfolio management provided the information managers needed to make an informed decision—without overwhelming them with information. Other clients have employed similar analyses to determine whether or not to divest a mature TA, in-license a set of drugs, or acquire a company outright.

Licensing and acquisition deals often must be made quickly, as there are typically multiple suitors. There isn’t time to assemble a whole new set of models or tools to analyze potential deals. But when portfolio management software is already well established in the organization and well understood by executives, the PM group can use those tools to provide the insight that supports clear, rational decisions.

Our business forecasting software, the Enrich Analytics Platform, is employed by leading pharmaceutical and biotechnology firms for strategic R&D portfolio management. For more information, contact us, or follow us on Twitter.

16 05, 2014

Sales Planning Software in Pharmaceuticals and Biotechs

By |2017-05-23T15:42:01-08:00May 16th, 2014|Blog|0 Comments

What is sales planning software?

Sales planning software is used in the pharmaceutical and biotech industries to drive R&D, marketing, and manufacturing decisions both for in-market products and for medicines still in development. Functionally, it captures sales forecasts for each product in a company’s portfolio across geographies, patient segments, and product formulations. The forecasts are stored in a centralized database, and users have controlled, real-time access through a web browser or desktop application. Visualizations and dashboards provide both a means to validate the forecasts and insights that help drive decision making.

21 03, 2014

Pharmaceutical Portfolio Management Primer

By |2017-05-23T15:42:01-08:00March 21st, 2014|Blog|0 Comments

Why is Portfolio Management So Successful in the Pharmaceutical Industry?

R&D portfolio management has been embraced by the pharmaceutical and biotech industries more than any other because of the unique characteristics of drug development: Huge investments, long development timelines, extremely high risk, and a large number of products in the pipeline. Other industries possess some of these characteristics, but it is the combination of all of them that provides both ample time and motivation to actively manage the portfolio. For example, airplane manufacturers have both long lead times and high investment requirements, but they only develop a few planes at a time, so managing the “portfolio” is primarily achieved by managing the individual projects.


30 01, 2014

Project Prioritization is Not Enough: Why No One Uses Optimization for R&D Portfolio Management, and Why You Should

By |2017-05-23T15:42:01-08:00January 30th, 2014|Blog|0 Comments

R&D-driven organizations face the constant challenge of deciding whether to continue funding existing projects and when to start new initiatives. The overwhelming majority of firms will use project prioritization to rank the opportunities as part of that exercise, with a small minority suspecting that optimization is better suited to the task of project selection.

So if is it so well-suited to the task, why isn’t optimization used and how should it be used?

Why (Almost) No One Uses Optimization

Optimization seems like something for hard-core geeks, a method that would be hard to understand and even harder to explain to management. How could we possibly explain something that throws around terms like ‘simplex’, ‘branch and bound’, and ‘simulated annealing’?


5 10, 2012

A Case of Mistaken Priorities: Project Prioritization Gone Bad

By |2017-05-23T15:42:03-08:00October 5th, 2012|Blog|0 Comments

Tumblr-Two-HeadedMonsterIt’s no secret that projects in the earlier stages of the development lifecycle are evaluated and managed very differently than projects in the later stages. One major pharmaceutical company believed these differences to be so great, however, that they split their development organization in two. Over time, the structural gulf became a cultural gulf, leading to downright animosity between the early- and late-stage divisions. Making matters worse, both developed their own portfolio management processes that were not only distinct from each other, but also completely disconnected.

As projects were handed off from the early-stage side, the late-stage side perceived that they were receiving too many “low-value” projects. The late-stage side subsequently starved these projects of resources, which delayed them and reduced their chances for success. Diversion of resources, however paltry, to these “low-value” projects also impacted late-stage projects that the organization perceived to be valuable.

15 07, 2012

In R&D Portoflio Management, Failure is an Option

By |2017-05-23T15:42:04-08:00July 15th, 2012|Blog|0 Comments

Innovation is inherently risky. By definition, you’re doing something that you haven’t done before so there are no guarantees it will work. The mindset in many organizations is to “minimize” risk as if it were a disease, but it isn’t that simple. The best companies face risk head-on and manage it both systematically and transparently.


24 06, 2012

To Fund or Not to Fund: Helping Executives Get to “No”

By |2017-05-23T15:42:04-08:00June 24th, 2012|Blog|0 Comments

Another striking—and often underappreciated—aspect of

[Steve] Jobs’ success was his ability to say no. At a company like Apple, thousands of ideas bubble up each year for new products and services that it could launch. The hardest thing for its leader is to decide which ones merit attention. Mr Jobs had an uncanny knack of winnowing out the wheat from the mountains of chaff.

The Economist, “A genius departs“, 10/8/11

To fund or not to fund...

To fund or not to fund…

Asking most executives which projects should be killed results in Hamlet-like levels of self-introspection and angst. Why is it so difficult to say “no”?

The excuse we hear is that they don’t trust the forecasts, and without sound data can’t make a decision. Even if you believe this in your soul, the reality is that you’ll never have the “right” numbers. For the sake of argument, let’s say that a company possesses the only working magic 8-ball in the world, allowing their forecasts to be perfectly accurate. There are still a number of departments that contribute forecasts to each project’s valuation, and all of them operate on their own cycles for refreshing the data. This means there is never a point in time that the data is “fresh” from all of these departments, so the numbers are never perfect anyway.


17 06, 2012

Tied Up in Knots: Wasted Effort in R&D Portfolio Management

By |2017-05-23T15:42:04-08:00June 17th, 2012|Blog|0 Comments


“We can’t talk about the portfolio until you explain why Varmenase revenue is 5% less than last year’s forecast!”

In almost every large organization a huge percentage of the effort in the “portfolio” process is spent “tying out” the new project valuations with the old ones. Teams ardently create reports to explain why the net present value of cash flows (NPVs) have increased or decreased since the last reporting cycle, and exactly what assumptions caused the changes. They even have to explain in detail why the passage of time has changed each project’s value.

10 06, 2012

All the NPVs are wrong. Can we talk about the portfolio now?

By |2017-05-23T15:42:04-08:00June 10th, 2012|Blog|0 Comments

A review of Itanium server sales forecasts made over seven years reveals the same bias year after year after year.

A review of Itanium server sales forecasts made over seven years reveals the same bias year after year after year.

When the economist Kenneth Arrow was working as an air force weather forecaster during the Second World War, he and his colleagues found that their long-range weather predictions were no better than random. They informed the boss but were told, “The commanding general is well aware that the forecasts are no good. However, he needs them for planning purposes.”
David Orrell, The Science of Prediction, 2006

The first step in R&D portfolio management is to generate the list of projects that are under consideration and value them. Unfortunately, this is where many companies spend 99% of their effort, and too often this leads to countless wasted hours and benign neglect of the portfolio as a whole.


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