Managing Risk and Value in Bio/pharmaceutical R&D

1. Defining and Managing Risk

Risk is what can go wrong. Risk is related to the probability of failure POF and is the inverse of success.  In science we tend to focus on the probability of success, POS, which is the percentage of experiments that succeed over all attempts (both successes and failures).

At the beginning of the pipeline a project starts with little proof that any experiment will succeed.  It would be a daunting and discouraging task to sum up all of the risk in order to mathematically calculate POF or POS in early Drug Discovery.  So, we need to use Risk and POS in a general qualitative, non-quantitative manner.

While it may not make sense to identify all risks that stand in front of a newly launched Discovery project, there can be certain areas that tend to suffer a larger amount of failure.  It would be worthwhile from a process improvement perspective to identify the routine failures and modify processes to reduce failure and enhance the potential for project success.  The principles of Lean Six Sigma[1] can be applied to many of the processes in Drug Discovery.[2]

Risk continues to be qualitative in Drug Development, but Value can begin to be treated quantitatively.  Risk can be used to discount value (eNPV)  Clinical or post-launch risk should be considered in terms of probability vs severity, or Harm.[3]

2. Estimating Value in Drug Discovery

In the early stages of drug discovery risk is high, so it would be absurd to discount any estimation of value by risk.  Still, the development pipeline is established by early discovery projects.  So, it is important to consider the potential value of a project even in early drug discovery.  Since project value in Drug Discovery cannot be quantified – it must be considered qualitatively.  Project Value in Drug Discovery must focus on factors that could affect the potential value of the drug, not factors involving the potential to create the drug – these are project risks or attributes of the drug candidate or current lead compounds (e.g. potency, selectivity) – these help to determine the potential efficacy and safety of the potential drug in humans.

3. Estimating Value in Drug Development

Of course, risk and value are critical components of the Drug Development portfolio.  Once efficacy is established in clinical trials, the project team can begin to estimate the potential value of the product that may be developed, the so-called ePNV (estimated net present value). [4],[5],[6]  At this end of the pipeline risk has been reduced to a short list of challenges for which risk management plans can be developed.  The potential for eliminating such risk can be determined and used as a negative weight on the estimated value.

We have developed a whitepaper, entitled “Managing Risk and Value in Bio/pharmaceutical R&D”. Please go to Services Provided and read more about this whitepaper under “Whitepapers, eBooks and Webinars on Discovery Management from James Samanen Consulting“.

[1] Mike George, Dave Rowlands and Bill Kastle, “What is Lean six Sigma?”, McGraw-Hill, New York, 2004.

[2] Fredrik Ullman and Roman Boutellier, “A case study of lean drug discovery: from project driven research to innovation studio and process factories”, Drug Discovery Today 13, 543- 550, 2008.

[3] Stephen Williams

[4] Mohan Pandey, “Invetment Decisions in Pharmaceutical Projects”, Drug Discovery Today, 8, 968-971 (2003).

[5] Grabowski, H., Vernon J. & DiMasi, J., “Returns on research and development for 1990s new drug introductions. PharmacoEconomics” 20, S3 11–29 (2002).

[6] “Pricing Medicines: Theory and Practice, Challenges and Opportunities, N. Gregson, K. Sparrowhawk, J. Mauskopf, J. Paul, Nature Reviews Drug Discovery, 4: 121 (2005)