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What Constitutes an Optimal Portfolio of Pharmaceutical Compounds?
Author(s) -
Dimitri N
Publication year - 2011
Publication title -
clinical pharmacology and therapeutics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.941
H-Index - 188
eISSN - 1532-6535
pISSN - 0009-9236
DOI - 10.1038/clpt.2010.247
Subject(s) - portfolio , stylized fact , pharmaceutical industry , profit (economics) , clinical pharmacology , modern portfolio theory , pipeline (software) , economics , productivity , business , actuarial science , microeconomics , computer science , financial economics , pharmacology , medicine , programming language , macroeconomics
The business perspectives of a pharmaceutical firm (PF) are crucially affected by its portfolio of compounds under development. For this reason, companies strive to optimize the contents of their drug development pipelines. Can an “optimal portfolio” be uniquely defined? In this article, I discuss how the contents of an optimal, self‐funding, pipeline can change according to the economic goal adopted by a firm. I lay out my arguments within a stylized framework, by considering three common goals for the pharmaceutical industry: increasing the market share, maximizing the expected profit, and maximizing the expected productivity. I also discuss how the optimal portfolios typically exhibit different degrees of sensitivity with respect to the relevant parameters of the models. The analysis suggests that the goal of maximizing expected productivity leads to an optimal portfolio with fewer drugs, and therefore a smaller investment in R&D as compared with the other two goals. Clinical Pharmacology & Therapeutics (2011) 89 2, 304–311. doi: 10.1038/clpt.2010.247