Vertex Pharmaceuticals, Inc. is a global biotechnology company based out of Cambridge, MA. The Company’s strategy is to commercialize its products both independently and in collaboration with major pharmaceutical companies. Vertex’s product pipeline is focused on viral diseases, cystic fibrosis, inflammation, autoimmune diseases, cancer, and pain.
Given the uncertainty of outcomes in the biotech industry, consideration of variability is an inherent part of the decision process. Often, the mean (average) is not a relevant decision criteria. This is especially true for smaller biotech companies like Vertex – the opportunity costs are extremely high because scarce capital resources would be invested elsewhere, with a higher probability of realistic return. For example, a company may reject a project which is profitable on average (positive Net Present Value) because some of the possible outcomes are unacceptable to the decision maker. Consideration of variability allows a decision maker to bring in their own risk tolerance into the decision. A similar argument applies when estimating a safety margin above a base case (e.g. in cost budgeting).
Vertex’s strategy and analytics group within the corporate finance division seeks to provide the senior management with dynamic revenue and profit forecasting methodology that helps to identify types of drugs that should be developed given a finite amount of cash and resources. A traditional financial view allows the user to identify scenarios and potential outcomes, but lacks the ability to show the range of potential values within each and every outcome. Vertex’s team uses the DecisonTools Suite to establish the average outcome, the variability of outcomes and to pressure-test risk and uncertainty of a particular scenario throughout the decision process.
Vertex’s team built a complex financial risk analysis model using @RISK to enhance its portfolio process. Monte Carlo simulation and optimization are used to analyze and optimize project and portfolio decisions, given short and long-term corporate strategy. @RISK is also frequently used throughout the business development process: simulating across multiple sales forecasts provides BD team with a range of potential outcomes, making it easy to pinpoint a particular scenario on a curve, along with its probability and value. TopRank turns the sensitivity analysis into a quick and seamless exercise, answering multiple what-if questions within minutes. Franchise and program leaders can now see a dollar effect of their program being delayed or advanced, adding supplementary indications to the development plan and even addressing the price uncertainties all at the same time. The simple interface of PrecisionTree along with tornado chart outputs makes it easy to explain the effect and importance of a particular assumption / decision to an audience with no finance background.
As the company continues to grow, adding more drugs and collaborations to its development pipeline, we will see in this free live webcast how the DecisionsTools Suite remains one of Vertex’s analytical tools of choice to enhance and guide the decision making process.