Pharmaceutical Company Restructures R&D Portfolio

(Wall Street Journal, 2 February 2012)

In Brief: A major pharmaceutical company is restructuring its R&D group to rein in costs and shrink operations. The reorganization is intended to create a more focused portfolio as the company aims to become “a simpler and more innovative R&D organization with a lower and more flexible cost base.”

Our View:  More than 50% of executives are dissatisfied with the returns on their innovation portfolio despite steady or growing R&D spending. This is because most manage their incremental project portfolio in isolation from their long-term R&D portfolio to protect the latter from short-term business pressures. However, this segregated approach prevents either part of the portfolio from generating maximum returns. Progressive companies, instead, adopt a holistic portfolio management approach that recognizes project interrelationships and synergies to mitigate the risk-return tradeoff.