Vertex Pharmaceuticals: R&D Portfolio Management Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Vertex Pharmaceuticals: R&D Portfolio Management Case Study Solution

Question 1: Which of the project portfolio options currently facing Vertex do you favor? Why? Specifically, what two projects would you pursue? What should they do with the other two?

Vertex is currently considering four candidates for its prospective product lines, that are, VX-148, VX-702, VX-765 and VX-950, which are under evaluation due to financial and management constraints of the company.(Vertex Parhmaceuticals, 2015)

Projects Favored

The projects that I would favor without considering the project portfolio initially would be VX-148 and VX-765. This is because these projects depict the greatest probability of success as per their success probabilities. Moreover VX-148 has already passed to phase II, which means it has greater chance of success along with higher profit margins. Whereas, VX-765 although at phase I but still has greater success chances at all stages.

Projects Pursued

Evaluating the projects on the basis of project portfolio formulated, the two projects that will be most likely to be chosen should be VX-148 and VX-950 in terms of their profitability index. The first candidate i.e. VX-148 is highly likely to be pursued as its profitability is significantly well above all four. Although VX-765 is estimated to generate highest profits but it also requires high initial funds to be spent on R&D which makes it less profitable in terms of ROI.

Moreover VX-950 is the second best option that can be pursued from the remaining three in terms of profitability index. With the remaining two projects, being profitable ones the company should delay them and re-evaluate them later on, when the company’s constraints are overwhelmed.

Vertex Pharmaceuticals R&D Portfolio Management Harvard Case Solution & Analysis

Question 2: What criteria would you use to make the decision? What other information do you think Bogner needs to make his decision?

Decision Criteria

In order to make decision regarding the prospective candidates, a detailed evaluation of each option would be made with respect to their given financial information and their chances of success. This has been done in the excel sheet.(Kodukula, n.d.)

After the evaluation of each candidate under consideration, the projects are then formulated in another table that portrays the costs of the projects that will need to be initially spent in terms of R&D costs along with their relevant expected profits that are estimated before. The profitability index of each candidate would then be calculated, by dividing the expected profits with R&D expenditure, in order to rank each of the project with respect to these ratios.

The ranks are then allotted on the basis of profitability index, or return on investment (ROI) depicting the most favorable candidate to have highest rank...............

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