Operations Research, Systems Engineering and Industrial Engineering Commons^™

On Valuing Biopharmaceutical Product Pipelines: An Effectuation Model And Evidence, Mark J. Ahn, Anne S. York, Wei Wu, Yulianto Suharto, Tugrul Unsal Daim

Engineering and Technology Management Faculty Publications and Presentations

New creative approaches are needed to manage emerging biotechnology innovations, regulations, and payor environments to enhance product pipeline productivity, valuation, and risk management. Biopharmaceutical firms must make dynamic resource allocation decisions on their relative levels of internal R&D and external strategic alliances in furthering their pipelines. As the predominant method of using discounted cash flow (DCF) methodologies may lead to chronic underinvestment and performance, we evaluated the integration of traditional DCF with an effectuation model of analysis. Unlike traditional financial models that begin with the end goal of assumed known cash flows and recursively solve for portfolio optimization, the effectuation …