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Strategic Portfolio Management Session
CBI’s Bio/Pharma Strategic Portfolio
Management Summit
August 8, 2017
2
Regulatory Submission
Phase I Phase
IIa Phase
IIb Phase IIa Phase IIb Phase III
Go/No-Go? Go/No-Go? Go/No-Go? Go/No-Go?
Resources &
Investment
Resources &
Investment
Resources &
Investment
Resources &
Investment
Resources &
Investment
Decision Making
Pressures
• Culture & Governance
• Individual Agendas / Organizational Alignment
• Operational Impacts
Feasibility & Risks
• Clinical & Commercial
• Technical & Operational
• Regulatory
Valuation
• NPV
• Budgeting
• Degree of Innovation
Str
ate
gic
Po
rtfo
lio
Man
ag
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Objective: Identify and share lessons learned to advance
and enhance strategic portfolio management
3
Session Construct
Identify and share lessons learned
to advance and enhance strategic
portfolio management
Presentation by panelists on
current strategies deployed
Interactive question and
answer session
Group brainstorming and
perspective sharing
4
Participants
Panelists:
Ivan Kugener, MD
Vice President, Global Head of Portfolio Management, Valuation and Analytics
EMD Serono
Chris Franco, PhD
Director, Global Portfolio Strategy
Takeda
Soomin Park
Managing Director, Lilly Chorus
Eli Lilly and Company
Daniel Rosan
Director, R&D Resource and Performance Management
Biogen
Moderator:
Rob Liebman
Managing Director
Converge Advisory Group
Ivan Kugener, MD MSc MBA
VP, Head of Global Portfolio Management, Valuation & Analytics
Ranking andPrioritization ofpipeline projects
2
A well-defined Portfolio Strategy is essential in achieving the goals of our Healthcare Strategy
IncreaseOpportunity
DecreaseRisk
ReduceUncertainty
IncreaseOpportunity
OurPortfolioStrategy
Decrease RiskReduce Uncertainty
Pipeline (non-financial)
Pipeline(Financial)
Existing business
StrategicInitiatives
CST assessment
Commercial assessment
Non-financial value assessmentNFVA
calibration
Ranking
&
Priority
Commercial assessment
Commercial assessment
Financial assessment
Final P&L
submission
Financial assessment
Financial assessment
CA review
CSTcalibration
Strategy Development and Pipeline Review process overview
3
4
Portfolio Analysis
Data Quality Control and
Calibration
▪ Quality control process with key
stakeholders
▪ Input data calibration and
approval by Governance
▪ External views
Data Analysis by PfM
▪ Financial :
Risk Reward Index
Productivity Index (Return Ratio)
Monte Carlo and others
▪ Strategic imperatives
▪ Non-financial: Qualitative
scoring of scientific robustness
and commercial attractiveness
Portfolio Review Process (PfR)
Project-level information is analyzed by the Portfolio Group
Once calibrated asset-level evaluation compiled in portfolio view
Evaluation drives value/risk tracking and management
V
O
UR
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▪ RANKING
FLT proposes to the DOC a ranking of its projects based on a combination of strategic and financial considerations
DOC reviews/adjusts and endorses a final ranking that combines all franchises per phase of development
Rank order is a guiding framework to adress resource conflicts (budgetary framework), i.e. in case of budget limitations the lowest tierof projects could be considered for alternative financing or outlicencing or could be put on hold.
▪ PRIORITY
Priority status has immediate operational implications, providing guidance to functions for resource allocation
High Priority projects have priority over Continue and Clarify projects, when it comes to operative resource conflicts
Projects with high priority status are ranked in the upper tier of the biopharma portfolio (per respective phase)
OBJECTIVES of RANKING and PRIORITIZATION
200 400100 500450300250150 350 550
100
0
200
700
800
600
300
400
900
1.000
500
1.200
1.300
1.100
0 50
C
Cum
ula
ted e
NPV
[m €
]
A
B
Cumulated eDC [m €]
E
F
D
650
400
150
350
600
550
250
200
500
450
2015107 306
300
0
100
25
700
5
50
Net
Pre
sent
Valu
e [
EU
RM
]
Probability of Success [%]
F
B
C
A
E
D
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Phase X Post POC Project Ranking & Priority
Cross-franchise integration
€200M
NRA remaining development costs
PoS benchmark TA1.
PoS benchmark TA2
TA2
TA1
TA3
NA A 1 C
NA B 2 B
NA C 3 F
NA E 4 A
NA F 5 D
NA G NA E
Current DOC Priority (alphabetical, not ranked)
Updated FVA Priority &
Ranking
Key (Priority)Green HighBlue Continue
Project eNPV RR*
C 300 6.3
B 150 6.0
F 450 3.8
A 100 2.9
D 30 2.5
E 150 1.6
Forced Ranking per FLT
TA2
TA3
TA2
6
7
8
9
10
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12
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14
5 6 7 8 9 10 11 12 13
J
K
M
N
L
C B
A
H
GE
DI
F
Innovation potential
Scie
nti
fic r
ob
ustn
ess
NFVA Programs
Phase X Pre-POC Programs/Projects
Cross-franchise integration
Key (Priority)
Green High
Blue ContinueTA2
TA1
TA3
Key (Priority)
Green High
Blue Continue
FVA FVA
1 1
2 2
3 3
4 4
5 5
6 6
NA 7
NA 8
NA NA
Current DOC PriorityDraft proposal updated
NFVA Priority & Ranking
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Achieved DPX
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A well-defined Portfolio Strategy is essential in achieving the goals of our Healthcare Strategy
IncreaseOpportunity
DecreaseRisk
ReduceUncertainty
IncreaseOpportunity
OurPortfolioStrategy
Decrease RiskReduce Uncertainty
Evolution of Takeda’s Approach to Portfolio Prioritization
Chris Franco, PhD Director, Portfolio Strategy
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Identification of all anticipated investment decisions
Cross-TA rank with quantitative metrics (e.g., cost, risk, time, value)
Budget exercise at the margins
Takeda used to rank-order project activities based on quantitative criteria to facilitate a budget exercise.
CONFIDENTIAL FOR INTERNAL USE ONLY 2
2014 – Algorithm-based ranking
• False sense of precision • Metrics were inaccurate
• Too much attention on the least important programs in our pipeline
• Not aligned with real-time decision-making (e.g., latest data or new BD)
Strategy over budget exercise
Innovation and rebuilding our pipeline
Budget planning separate
Priority categories meant to inform differential resourcing 2015
Bottom-up 2016
Hybrid: bottom-up / real-time
Communication and culture challenged us when we pivoted to a more strategic program prioritization.
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2015/16 – Program prioritization
Simplify your categories
Ensure culture supports the intent
Communicate prioritization decisions
Ensure plans reflect priority
Lessons learned
Takeda’s R&D transformation kicked off in 2016 and has informed our approach to decision-making and prioritization.
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Focus Our Core Therapeutic Areas
Optimize Our Pipeline
Enhance Our Capabilities
Transform Our Culture
R&D Strategy
Patient-centric Science-driven
Externally-facing organization High innovation bar
Differentiated Meaningful clinical benefit Accessible
We are simplifying prioritization by integrating it into individual governance decisions and placing greater accountability on teams.
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2017 – Individual investment decisions
Assumption: ALL investments are a priority
Governance approves plans in context of pipeline
Multiple investment paths and outcome scenarios
assessed
Teams and TAs are accountable to execute
Target state: on-demand resourcing
Elements for success
Culture of agility and entrepreneurship
Clear accountabilities
Robust strategies and plans
Greater data quality and transparency
Communication process to manage acute resource constraints
Session 2: Strategic Portoflio Management
Lilly Chorus: Value-Driven Alternative Drug Development Engine to Enrich Lilly Portfolio
Soomin Park, Managing Director- ChorusAugust 8, 2017
Lilly Chorus: 15 Years of R&D Innovation
Harv Bus Rev. (2008) 86(3):96-102, 134.
Nat Rev Drug Discov. (2015) 14(1):17-28.
Full-service, autonomous R&D unit within Lilly; Specializes in lean to POC clinical development.
2CHORUS Confidential © 2017 Eli Lilly and Company
Evolution of Chorus Strategy
2002 Chorus 1.0
Focused on internal Lean-to-POC, mostly low p(TS) asset development
2009 Chorus 1.1
Became a development arm for external assets via capital fund strategy
2016 Chorus 2.0
External Innovation –Inbound and Outbound
White/grey space, novel targets, disruptive science & emerging technology
CHORUS Confidential © 2017 Eli Lilly and Company 3
Lilly’s Focus Area: Diabetes, Oncology, Immunology, Neurodegeneration, Pain
♦ L2PoC assets• Novel targets with uncertain clinical indications
(First-in-class vs Best-in-class)• Gray/White Space: projects outside of Lilly’s core
area of interest• Can answer key questions with a limited budget
and timeline (e.g. <250 patients, <$15M, <3-4 years)
♦ Pilot new development models/technology ♦ Capacity play
Chorus Internal Portfolio
4CHORUS Confidential © 2017 Eli Lilly and Company
Chorus External Innovation OpportunitiesIllustration of Inbound Case
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Capital Fund StrategyExternal
molecule (in Lilly’s core areas or in grey space)
De-risk potential inbound assets
Alternative development engine for in-licensed assets
oo
o
Company Confidential Copyright © 2016 Eli Lilly and Company
Working with External Companies
External Company(Strategic Interest
to Lilly)
Lilly CHORUS
Development
Lilly Corporate Business
Development
Capital Funds
Deal Alignment Development Potential Acquirer
6CHORUS Confidential © 2017 Eli Lilly and Company
Chorus Progress and Portfolio Flow
2002 2004 2006 2008 2010 2012 2014 2016 2018
Chorus launched as a pilot
Capacity increased to 15 molecules
Work initiated on external assets with
external funding
Piloting new working models
with Lilly
10th asset acquired
20th asset acquired
50th asset acquired
5th
POP/POC
POP: Proof of PharmacologyPOC: Proof of Concept
1st asset to matriculate to Phase 3
2nd asset to matriculate to Phase 3
20th
POP/POC
67th asset acquired
Portfolio mix: 50/50 int./ext.
7Company Confidential Copyright © 2016 Eli Lilly and Company
♦ Clear understanding and alignment of the Chorus model by TA leadership• e.g. serial process
♦ Clearly defined asset placement process♦ Asset exit process
Challenges
8Company Confidential Copyright © 2016 Eli Lilly and Company
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“Just make the place run better” Implementing a lean resource, portfolio, and performance management capability in times of change
August 8th 2017
Daniel Rosan
Director of R&D Resource & Performance Management
2
Forward-Looking Statements
This presentation contains forward-looking statements, including statements relating to: Biogen’s strategy and plans; potential of our commercial
business and pipeline programs; plans relating to clinical trials and the potential safety and efficacy of our pipeline products; the status of current
and anticipated regulatory filings, the potential for regulatory approvals and the timing thereof, and statements relating to timing for potential
commercial launches. These forward-looking statements may be accompanied by such words as “anticipate,” “believe,” “could,” “estimate,”
“expect,” “forecast,” “intend,” “may,” “plan,” “potential,” “project,” “target,” “will” and other words and terms of similar meaning. You should not place
undue reliance on these statements.
These statements involve risks and uncertainties that could cause actual results to differ materially from those reflected in such statements,
including those risks and uncertainties that are described in the Risk Factors section of our most recent annual or quarterly report and in other
reports we have filed with the SEC.
These statements are based on our current beliefs and expectations and speak only as of the date of this presentation. We do not undertake any
obligation to publicly update any forward-looking statements.
Note regarding trademarks: ALPROLIX®, AVONEX®, BENEPALI®, ELOCTATE®, FLIXABI®, PLEGRIDY®, RITUXAN®, TECFIDERA®, TYSABRI®,
and ZINBRYTA® are registered trademarks of Biogen. SPINRAZATM is a trademark of Biogen. The following are trademarks of the respective
companies listed: FAMPYRATM – Acorda Therapeutics, Inc., GAZYVA® and OCREVUS® – Genentech, Inc. Other trademarks referenced in this
presentation are the property of their respective owners.
All opinions expressed in this presentation are those of the speaker only and do not necessarily reflect the views of Biogen
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Consistent R&D Focus On Transformative Neurological Treatments
4
2004 2011 2012 2013 2014 2016 1996 2017 and Beyond
PARKINSONS
ALZHEIMERS
MS REPAIR
2006
ALS
Restructure oncology partnership Divest hematology
5
Building a Neuroscience Leader
It is our belief that no other area of medicine holds as much
promise with as much need as neuroscience.
Significant Opportunities in Neuroscience
Core Growth Areas Emerging Growth Areas
Acute
Neurology
Neuro-
psychiatry
Ophthal-
mology Pain
Neuro-
muscular
Disorders
Movement
Disorders
Alzheimer’s
Disease &
Dementia
Neuro-
immunology
& MS
6
The Program Lifecycle
•How important is the asset relative to other internal or external options?
•What does it take to execute?
•Is the data sufficient to progress the asset?
•How do we best generate new data?
Execution Governance
Prioritization Resourcing
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Governance Approach
R&D Program Leader
• Peer leader
• Single point of accountability for each asset
Research Units (RUs)
• Combining clinicians and biologists
• TA-aligned
• Responsible for internal and external innovation
Stage Gate Governance
• Committees by stage (not by TA)
• Budget authority
• Small, closed discussions
Decisions broadly communicated within 24 hours
Execution
Governance
Prioritization
Resourcing
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Quarterly Prioritization Approach
Force Rank Prioritization
• Crisper decision making
• Reduces temptation that “everything is a priority”
Individual Accountability & Portfolio Mindset
• RU Heads prioritize across their portfolios, then collectively across research units
• Assets assessed by those closest to the work
Prioritization Drives Resourcing
• Prioritize before budgeting, so resourcing follows strategy
• Discretionary investments follow governance: prioritization then drives day to day trade offs
No Algorithms
• Qualitative criteria to support expert judgment
• Evolution of criteria as assets progress through stages
Execution
Governance
Prioritization
Resourcing
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Resource & Execute
Foundational Infrastructure
Provided by annual operating plan
Maintaining world class neuroscience drug development capabilities
Incremental External Spending
Authorized by governance committees
Marginal investment to develop an asset:
• Preclinical & clinical studies
• Manufacturing • Partner milestones
People Resources
Feedback loop between program and functional leadership
Goal: field the best team given asset priority and development needs
Deliver for
patients
Execution
Governance
Prioritization
Resourcing
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The Clarity Business Process & System
I M P R O V E
User Experience
Integration of employee
& project metadata
reduces administrative
burden
Improved performance
reduces time needed to
manage data
C O N T R O L
Vocabulary &
Timelines
Builds on Master Data
Management of program
metadata
Consolidates R&D
program & functional
timelines into single,
accessible, authoritative
source
P R O V I D E
Portfolio
Transparency
Collect & actively
manage program
status, timeline, &
resource data
Improve governance
decision-making
E N A B L E Scenarios &
Portfolio Analytics
Through new
functionality & robust
resource algorithms,
enable scenario
modeling
Program, functional, &
portfolio level analysis
to support investment
decisions
F O R E C A S T Internal FTEs &
Costs Better
Biogen program P&Ls
will have more
meaningful internal cost
estimates
Systematically capture
resource assignments,
in addition to resource
demand & supply
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Program 360° Dashboard
Our goal is to provide visibility into portfolio progress by consolidating data from multiple
sources in an asset-centric approach
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What We’ve Learned, So Far
Leaders must lead
People before process
Process before technology
Problems are solvable:
dilemmas are not
Prioritize the portfolio
Communicate more
Free the data
1
Interactive Q&A
Ivan Kugener, MD
Vice President, Global Head of Portfolio Management, Valuation and Analytics
EMD Serono
Chris Franco, PhD
Director, Global Portfolio Strategy
Takeda
Soomin Park
Managing Director, Lilly Chorus
Eli Lilly and Company
Daniel Rosan
Director, R&D Resource and Performance Management
Biogen
2
Group Brainstorming: What lessons can you share?
Your experience prioritizing current assets and projects
What has worked well in your organization?
What challenges do you face and what has been done to address them?
How do you drive or help to influence organizational alignment?
Has you approach changed over time, and if so how?