Implementing Portfolio Management Tools to Improve BusinessDecision Making

Ed Couch, Simon PrestonAPM Portfolio Management SIG AGMLondon May 2013

Providing an environment for good decision making

AstraZeneca

Who are we?An innovation driven, global, biopharmaceutical company

Our mission?To make a meaningful difference to health through great medicines

> We employ over 57,000 people 44% in Europe, 30% in the Americas, 22% in Asia and 4% in ROW

> We have over 11,000 people in our R&D organisation and last year we invested $5 billion in R&D

> In 2011, our worldwide sales totalled $33.6 billion

> We are committed to driving success responsibly to deliver value for our stakeholders, for society and for our business.

Pharmaceutical Development

Pharmaceutical Development

Develop Analytical Methods

Develop Formulations and Device

Develop Manufacturing Methods

Product care;knowledge transfer;processing options,exploratory work

Expert evaluation of potential drug compounds from iMeds

Develop Synthetic Route, Drug Substance

Manufacturing, packing and logistics of pre clinical and clinical materials

Develop Packaging

CMC Documentation, and Quality Assurance

5

Portfolio & Project ManagementOur contribution

6

To ensure that Pharm Dev maximises the value it adds to patients& AstraZeneca by bringing innovative pharmaceutical science based

business opportunities to the business

• To ensure optimal and integrated Pharmaceutical Development contribution to drug projects and the overall R&D/Pharm Dev portfolio

• To provide professional project management capability to delivery of drug projects & improvement projects

Our ToolsetPlanisware Integrated Portfolio Management Software

Capacity & Actuals

Forecasts

Schedules

• Delivery confidence

•Managementinformation

•Value add

To ensure that Pharm Dev maximise the value it adds to patients & AstraZeneca by bringing innovative pharmaceutical science based business opportunities to the business

PRODUCTIVITY = VALUE ADDEDRESOURCE USED

This is the easy part

Management Information

… so far, so what ?

Capacity & Actuals

Forecasts

Schedules

• Delivery confidence

•Managementinformation

•Value add

Example : Timecard Summary

• Category X on track for 10%• Category Y on track for 10%• Category Z time higher than expected

R&D All

PharmDev

Category

Example : Actuals vs. Forecast

•Forecast is split into categories such as• Early development• Late development, • Management & Admin

•We can review differences between forecast and actuals

• to identify issues and improvement• To increase understanding e.g. levels of

slippage can vary between types of project

•People in large organisations can work where not expected e.g. purple box

Category

Example : Timecard ComplianceBroken down to function or project

Dept Sub-Dept

Example : Identifying efficiency areas

19%

13%

12%

6%

<1%

3% 3%

1%

3%2%

4%

2%

7%

2%

9%

6%

5%

2% 2%1%

Low % on project work

Overhead and small gains

Functions

Category

Delivery Confidence

… starting to benefit from integration

Capacity & Actuals

Forecasts

Schedules

• Delivery confidence

•Managementinformation

•Value add

Actual vs. Demand: What we do vs. What we plan ?

Individual Project List

Reviewing Project Actuals sheds light on planning and technical issues

Which Skill Groups are struggling ?

2012 Q4 actuals by function compared with Sep 12 forecasts

An emerging problem ?

Functions

… and what’s the impactSkill group X, Location YLooking back at Q4 Demand vs. Actuals

Appear to be constraining AZDxxxx and yyyy because of poor forecasting elsewhere

Individual Project List

… and Forward looking – Demand vs. Capacity

•Pinch Points in Functional Resource Demand vs. Capacity for next quarter

Resource Levels

Skill groups

Identification of Demand capacity gaps in key skill groups is more useful than looking at gross capacity

Breakdown by skill groups and disease area

Value AddCapacity &

ActualsForecasts

Schedules

• Delivery confidence

•Managementinformation

•Value add

… and now for the hard bit

To ensure that Pharm Dev maximises the value it adds to patients & AstraZeneca by bringing innovative pharmaceutical science based business opportunities to the business

PRODUCTIVITY = VALUE ADDEDRESOURCE USED

How do you measure value add ?

The Value Curve

$

TimeLaunch

0

Adding value to products at every stage!

Revenue stream of new product

$

Time

Reduce developmentcosts

ReduceTime tolaunch

Accelerate uptakeand improve margins

ExtendProductlife

Launch

1

2

3

4

Reducing Development Costs

$

Time

Reduce developmentcosts

Launch

1

Reduce Development costs

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Nomination,4 kg required

Routedecision

Agreeddelivery

Start ofFGLP tox

Actual FTE

Est. FTE

Actual LSL man.

Est. LSL man.

Outsource quote

New route scouting, ~$85,000 New route development, ~$85,000New route development, ~$85,000

7 stages, 30 batches, ~$240,000

RM lead time

$15,000Morpholine, $62,000

$20,000Morpholine, $125,000

6 stages, 19 batches, ~$152,0004 stages inc. flow microwave, $487,000Route familiarisation and/or development, ~$165,000

Other CD dev.

Plan based on scaling up C1c route:

$949,000 (est.)

Shortlist,3 CD’s

Probable outsource:Additional ~$200,000

SFC?

Timeline in Months

Delivery of Campaign 2 by new route:

$572,000

Investment in new route innovation for Tox Material delivery pays for itself immediately and speeds up delivery

The Easiest One – Reduce Costs in the current phase of development.Application of resource to reduce costs before an attrition point is a simple ROI calculation.

Reduce Development costs

Reducing Development Costs by delaying work beyond attrition points is also attractive

BUT

Need to balance

Reduce Development Costs vs.

Reduce Time to Launchvs.

Increased risk of failure

A Tricky Balance

$

Time

Reduce developmentcosts

ReduceTime tolaunch

Launch

1

2

Our Answer : Increase Visibility of Options

• Risk Perception

• Cost Transparency and Project Options

• Deployment of Effort and Portfolio Options

Project and Portfolio Level

Differing views of RiskReal Data ( project names removed)

Tech

nica

l cha

lleng

e/R

isk

Priority/Urgency

Project X Phys

Sci

Tec

hnic

al C

halle

nge

Project X

Priority/Urgency

Chemical science Physical Science

1 month tox results

1 month tox results

SAD results

SAD results

MAD results

MAD results

Ph2A results

Ph2A results

Ph2B results

Ph2B results

Ph3 results

Ph3 results

PRESENT THE PROJECT OPTIONS

PORTFOLIO OPTIONS : Where are we spending our effort ? Top 30 projects per quarter by Resource demand

IndividualProject List

IndividualProject List

IndividualProject List

Projects with Key data readouts in

time frame

What are the key investment decision points in the portfolio ?

Integrated data on initiation points and cost of work, across the portfolio, lets you make intelligent choices based on knowledge of risk and project

Future : Fully Integrated Data

Through integrated data, we can see the options across the portfolio for releasing resource and reapplying to the most value adding projects

Project 1

Project 2

Project 3

Decision Point in October

Resource profile before and after October

The amount of effort by skill group, committed to this project, and therefore available if it stops, or we delay work to after the attrition point

Skill A Skill B Skill C Skill D Skill E Skill F Skill G Skill H Skill J Skill K Skill L Skill M Skill N Skill P Skill Q Skill R

Another easy(ish) call

Revenue stream of new product

$

Time

Accelerate uptakeand improve margins

Launch

3

External Spend DataFunction Specific Spend data is provided to target cost reduction activities

AZD8186 PI3 Kinase Beta Inhibitor

BLI

AZD1419 TLR9 asthma

Olaparib (AZD2281) development in BRCA Ovarian PSRAZD2624 NK3 antagonist Polycystic Ovary SyndromeAZD7594 Inhaled SGRM COPD

ATM-AVI Aztreonam-Avibactam

AZD4547 FGFR TKI Gastric Cancer

AZD7624 ip38i COPD

AZD5363 AKTi Prostate

AZD1722 NHE3 inhibitor ESRD

Individual Project

List

Eleven Projects account for 70% of external spend

Learning from Implementation of an Integrated System

Information

Confidence

Delegated Decision Makers

What do you need ?

IntelligentDecisions

How to make Intelligent Decisions

• Information- Don’t focus on gathering data. Share it - Invest in reporting more than any other area

• Build Confidence- It’s easy to pick holes in the detail. - Get confidence of decision makers in the big picture first

• Delegated Decision Makers- Project teams need to make the decisions- Given the right big picture, they’ll make the right call

• Make it clear how you cascade problems upwards

Learnings

Issues with Integrated Systems

• Complex- Need regular use to become proficient

• Project leader not always the most interested in learning the tool- Yet he’s the decision maker that can benefit from the data, and

add insight

• Everyone needs to be compliant- Not a natural state for most innovators

Portfolio and Project OfficeA way to fix the system

• Great Ideas• Plan Ownership

Project Leaders

Project Office

• Heavy Lifting• Standards

Portfolio Office

• Balance• Insight

Good Decisions require Good DataDecisions need to be taken in the context of what the organisation is trying to achieve

•R&D Productivity is a key goal for Pharma that an integrated approach can support

•Implementing a system is not straightforward or quick

•Focusing on simple reports facilitates engagement with the organisation

•Project and Portfolio Management is a contact sport• Decisions need to be made in project teams

Intelligent Decisions made by knowledgeable people with the right information will always beat templates and algorithms.

Acknowledgments

All of the staff in AstraZeneca’s Pharmaceutical Development Function

The members of the Projects and Portfolio Management Group

The portfolio and planning experts in the Project Office in P&PM, in particular Simon Preston, our Portfolio Analyst

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