What challenges do pharmaceutical companies make regarding portfolio decisions?
The portfolio elements are high-risk, expensive, take a long time, and are fraught with time, cost, and revenue uncertainty. Generally, the level of risk in a portfolio is related to the number of independent elements. Pharma products often link to each other through correlation or causality, which means that the portfolio must be comparatively more extensive to give the same risk. Unfortunately, most portfolio analysis tools cannot handle uncertainty or interdependencies between products.
What are the advantages of a balanced portfolio in times of uncertainty?
The goal of portfolio management is to produce a high return with an acceptable level of risk. Having the ability to balance the portfolio means that as environmental uncertainty increases, you can change the level of risk and return and re-balance the portfolio accordingly.
COVID-19 had a significant impact on the pharmaceutical industry. It led to increased uncertainty regarding portfolio management. How can a portfolio be optimized efficiently?
The more knowledge and information you can use for your decision-making, the better the decisions. Uncertainty is one form of knowledge. Quantify it, use it in your models and analysis, and your decisions will benefit from it.
Mikael Palmblad
Co-Founder, Captario