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Portfolio ManagementUCB is a global biopharmaceutical company.
Their mission is to providenovel therapeutic solutions for patients
with severe diseases treated by
specialists, particularly in the fields of central nervous
system disorders,inflammatory disorders and oncology.
Business Problem
UCB manage a complex portfolio of projects inresearch and
development. To maximize thevalue of the development portfolio
frequentdecisions must be made: what priority shouldbe given to
different projects? Should a projectbe out-licensed to another
pharmaceuticalcompany? How should resources be allocatedin order to
maximize the return on investment?
In order to make the right decisions it isnecessary to have a
clear idea of the risks,costs and potential rewards associated
witheach project, and to understand these factorsin a
whole-portfolio context.
Tessella Solution
Working closely with staff at UCB, Analyticon(a wholly-owned
subsidiary of Tessella) hasdeveloped software tools to support
allaspects of the development portfolio analysisprocess. Data input
workbooks provide astandard format and guidelines on data entryto
help project teams prepare data on aconsistent basis across the
whole portfolio.They also assist with the quantification of riskand
help project teams to visualize how risk is
spread across the different phases of development.
A portfolio analysis tool quickly calculatesmeasures of project
and portfolio value. I tsgraphical user interface means that the
user can quickly select which projects, potentialportfolios,
strategies and indications are to beconsidered. Once an analysis is
selected, theresulting calculations are underpinned by
sophisticated mathematical methods to ensurethat the value of
potential portfolios isaccurately calculated. This takes into
accountthe possibility of project failure at each phaseand the
dependencies between separatebranches of development.
Many of the costs, risks and rewards used tocalculate project
value will be imperfectlyknown. Analyticons tools allow the level
of uncertainty on these inputs to be specified.They then rigorously
calculate the resultinguncertainty on outputs of interest.
Thisinformation can be used to provide confidence
levels on a measure of project or portfoliovalue such as
risk-adjusted Net Present Value(NPV), shown in the graph below.
Alternatively, sensitivity analyses can be used
CLIENT | UCB
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to show where uncertainty in the inputs is
causing the greatest uncertainty in the outputvalues. Effort can
then be focused onobtaining more information in those areaswhich
have the greatest impact on investmentdecisions.
The portfolio tool produces a large number of graphical outputs
designed to allow decision-makers assimilate data easily. The data
thatunderlies these graphs is not lost within thefigure it can be
automatically exported toExcel in case further analyses are
required.
Use of Analyticons tools to support a number of Development
portfolio reviews has allowedstaff at UCB to identify ways in which
theprocess of collecting data, performinganalyses and presenting
results to senior management can be made as streamlined aspossible.
Analyticon is responding to thesefindings by enhancing the
portfolio tool tofurther automate the analysis process.
Results and Benefits
Analyticons software tools have beensuccessfully used to support
a number of development portfolio reviews. The ability toanalyze
data using the portfolio tool meansthat decision-makers at UCB can
quicklyunderstand how a change or potential changein one of their
projects will impact the wholeportfolio. Because all projects are
valued in aconsistent manner and the effect of uncertaininformation
is clearly shown, decision-makerscan have confidence in the results
of theanalysis. These tools allow an objectiveapproach to
decision-making and maximizing
the value of the UCB development portfolio.
Jan05 Jan10 Jan15 Jan20-150
-100
-50
0
50
100
150
200
Time (Month and Year)
C u m u
l a t i v e
R i s k A d j u s t e d
N P V ( M )
Example Portfolio using Hypothetical DataCumulative Risk
Adjusted NPV as a function of time.
M 162
M 195
M 133
95% confidence levelMean value5% confidence level
