Pharmaceutical portfolio management teams concentrate their limited resources on niche compounds. A report by business intelligence firm Cutting Edge Information found that surveyed portfolio management teams spend 53% of their time supporting niche products, or those with less than $500 million in annual sales.
“As more blockbusters go generic, niche compounds treating conditions with lower rates of incidence become more attractive targets for pharmaceutical companies.”
The data in the study, “Pharmaceutical Portfolio Management: Selecting Targets, Filling Pipelines and Preparing for Post-Launch Success,” also show an average 59% of the portfolio management budgets are spent on niche compounds. Potential blockbusters, on the other hand, receive only 18% of the portfolio planning money.
“The focus on niche drugs makes sense, as drugs with the potential to become blockbusters lose that opportunity as they progress through the development cycle,” noted Jason Richardson, CEO at Cutting Edge Information. “As more blockbusters go generic, niche compounds treating conditions with lower rates of incidence become more attractive targets for pharmaceutical companies.”
Portfolio management teams often make do with scarce resource support, however. The study found that surveyed companies’ portfolio management teams have an average of only 4 FTEs; the team with the most portfolio management staff reported only 10 FTEs. In addition, 48% of executives surveyed say that their portfolio management teams would be far more successful if they had more money to carry out their objectives.
Despite their small size, portfolio management groups “have a significant strategic impact at their companies, portfolio managers focus on the risks individual compounds face,” said Richardson. “These groups are more likely to make recommendations to advance or discontinue research on compounds — decisions that could mean millions in made or lost revenue.”
“Pharmaceutical Portfolio Management: Selecting Targets, Filling Pipelines and Preparing for Post-Launch Success” (http://www.cuttingedgeinfo.com/research/portfolio-management/strategy-resources/) contains structural models and resource allocation metrics for teams managing both developing compounds and marketed brands. It outlines how these factors should be evaluated and how market trends affect the planning process.
