Bristol-Myers Prioritizes Drug Candidates to Cut R&D Cycle Time

Case Type: operations strategy, optimization.
Consulting Firm: IMS Health Consulting Group first round summer internship job interview.
Industry Coverage: healthcare: pharmaceutical, biotech, life sciences.

Case Interview Question #00727: Bristol-Myers Squibb (NYSE: BMY) is a U.S. pharmaceutical company headquartered in New York City, NY. The firm manufactures prescription pharmaceuticals in several therapeutic areas, including cancer, HIV/AIDS, cardiovascular disease, diabetes, hepatitis, rheumatoid arthritis and psychiatric disorders. Your client for this case is the Chief Scientific Officer of Bristol-Myers Squibb who is in charge of the company’s research and development.

Currently, Bristol-Myers Squibb’s R&D process works like this: the company’s satellite research labs located all over the country send potential drug compounds to a centralized analysis center. Analysis center draws blood from animals, do all the testing work, analyzes the results, and then sends results back to satellite research lab — this is an iterative process for each drug compound (5 to 15 reviews per compound). 15 year patent begins after the 1st review/iteration if the compound passes initial tests during the 1st review/iteration. There tends to be a long queue of potential drug compounds waiting to be analyzed.

Your client, the Chief Scientific Officer of Bristol-Myers Squibb, wants to reduce the R&D cycle time. What are ways to reduce the cycle time and what are the benefits to the company of doing so?

Additional Information: (Provide the following information if requested by interviewee)

• The company’s centralized analysis center recently hired more people (can also think about increasing capacity at the analysis center), but cycle time did not change.
• The research scientists at the company’s satellite research labs heard that more people were hired at the analysis center, so they sent more drug compounds.
• Number of compounds that passed the 1st review did not increase.
• Scientists are starting sending low quality compounds (likelihood of going to market is very low) and queue remained long.
• Scientists can usually predict the likelihood of each compound passing the 1st review.
• There was no prioritization of the queue — it was first come, first serve.

Possible Answer:

The interviewee should come up with the idea of “prioritizing drug compounds”.

Prioritize compounds: by using previous results or scientist’s confidence of passing review a compounds with highest likelihood of going to market should jump the queue. This discouraged scientists from sending low quality compounds. Note that the specific method of prioritization is less important than understanding the need to prioritize.

Once the interviewee determines that prioritization is needed, the interviewer should provide the following information, and ask the interviewee to quantify the R&D cycle time decrease.

Currently:

• 30% of compounds require 15 cycles
• 70% of compounds require 5 cycles

After the prioritization:

• Cycle time was 3.5 weeks per iteration, went down to 2 weeks.

How many weeks on average will this save per compound?

Possible Answer:

(15 cycles * 30% + 5 cycles * 70%) * (3.5 – 2) weeks/cycle = 12 weeks

Recommendation

The interviewee should translate R&D cycle time decrease into business implications.

By prioritizing drug compounds, it will save 12 weeks for an average compound. If a drug ever goes to market, 12 weeks of revenue is captured. The key issue is that revenue for a drug has a short life, based on the 15 year patent. Adding 12 weeks of revenue is a significant increase to the company’s revenue stream.