1. OPIM 5894 Advanced Project management
OPIM 5894 Advanced Project management Vertex Pharmaceuticals: R & D Portfolio Management
Team 3
Richard Buskey
Jonathan Weiss
Daniel Mahzonni
Prashant Mishra
Vijay Gadigeppa
Jonathan Koenig

2. Vertex Pharmaceuticals
Which of the 4 projects portfolio options currently facing Vertex do you favor?
VX-148
PROS
It had the potential to treat a number of important diseases with unmet medical needs such as psoriasis, multiple sclerosis and even cancer
Market is established; psoriasis drugs already exist
Remaining development costs = $100 mill.
Already in Phase II
CONS
More competitors in the market

3. Vertex Pharmaceuticals
VX-702
PROS
Cheap and easy to make
75% of the drug stays in the system for therapeutically attractive periods. There are manageable side-effects
Oral drug instead of injectibles
Supported by management
CONS
Prone to toxicities
Many companies had tried without success
High mechanism risk

4. Vertex Pharmaceuticals
VX-765
PROS
As a small molecule, VX-765 could be taken orally and was thus thought to have excellent market potential
VX-765 was fully owned by Vertex;
Believed to play an important role in chronic inflammatory diseases
Largest potential for sales and profit margins
Completed the Phase I
CONS
High production costs
Uncertainty with the Dosages
If Vertex went ahead with another ICE inhibitor, with respect to pralnacasan (VX-740) it would
lose rights to a subsidized sales force in US/Europe and
sacrifice certain financial benefits of copromotion

5. Vertex Pharmaceuticals
VX-950
PROS
Billion $ drug
Current treatments for the disease were only effective in roughly 40% to 60% of chronically ill HCV patients. Most of these treatments were associated with significant side effects and none was a direct antiviral therapy. Potential for a significant breakthrough leading to boosted image.
Sell the drug to doctors thru’ a specialty sales force.
CONS
VX-950 was complex and costly to make.
For regulatory and medical ethical reasons, the company would be required to test VX-950 in combination with α-IFN. Acquiring adequate supplies of α-IFN significantly increased the cost of testing VX-950.
Decreasing number of new infections. Long Time to market (YR 2010)

6. Vertex Pharmaceuticals
Decision:
Top 2 Products: VX-148 and VX-702, since they were in Phase II.
Keep VX-765 and VX-950 as backup OR keep VX-765 as backup and partner with some other company for VX-950 since it was involved higher costs.

7. Vertex Pharmaceuticals
Specifically, which 2 projects would you advance in development? Why? Show analysis.
Candidate
Indication
Phase I Success
Phase II Success
Phase III Success
Approval Success
Probability Success
Probability Fail 1
VX-148
Psoriasis
100.0%
40.0%
65.0%
75.0%
19.5%
80.5% 2
VX-702
ACS
60.0%
50.0%
15.0%
85.0% 3
VX-765
RA/OA
80.0%
21.6%
78.4% 4
VX-950
HCV
70.0%
21.0%
79.0%
Candidate Choice
Both Successful
Both Failing
One Succeeding
Overall Success
1-2
2.9%
68.4%
28.7%
31.6%
1-3
4.2%
63.1%
32.7%
36.9%
1-4
4.1%
63.6%
32.3%
36.4%
2-3
3.2%
66.6%
30.1%
33.4%
2-4
67.2%
29.7%
32.9%
3-4
4.5%
61.9%
33.5%
38.1%

8. Vertex Pharmaceuticals
Would you license out the two others not chosen or keep them as backup?
Keep VX-765 as backup and partner with some other company for VX-950 since it was involved higher costs.
VX-765 is in Phase I, highest remaining dev costs, highest potential peak sales
VX-950 is in pre-clinical stage; the company would be required to test VX-950 in combination with α-IFN. Acquiring adequate supplies of α-IFN significantly increased the cost of testing VX-950.

9. Vertex Pharmaceuticals
How much should Vertex management rely on quantitative methodologies (such as real option valuation) versus qualitative approaches?
Qualitative Approach has higher buy-in
Quantitative Analysis is based on expert assumptions with all products having a high likelihood of failure.
Boger would need
Information on the existing products in the market and their comparison to the drugs in question
May need insight into the adverse events on VX-148 and VX-702 which are already in Phase-II
Significance of the results from Phase-I for the products