Boehringer Ingelheim to Optimize Current R&D Portfolio

Case Type: organizational behavior; operations strategy.
Consulting Firm: Siemens Management Consulting (SMC) first round summer internship job interview.
Industry Coverage: healthcare: pharmaceutical, biotech, life sciences.

Case Interview Question #00670: You are part of our management consulting team working for German pharmaceutical company Boehringer Ingelheim. Founded in 1885, the Boehringer Ingelheim group now is one of the world’s top 20 leading pharmaceutical companies. Headquartered in Ingelheim, Germany, it operates globally with 145 affiliates and more than 44,000 employees. The company’s key assets of interest are: respiratory disease, cardiovascular disease, Parkinson’s disease, HIV, thromboembolic disease, cerebrovascular disease, oncology, diabetes and hepatitis. Since it was founded in 1885, the Boehringer Ingelheim company has been committed to researching, developing, manufacturing and marketing novel products of high therapeutic value for human and veterinary medicine.

We’ve been retained by the CEO of Boehringer Ingelheim to look at their current research and development (R&D) portfolio and assess whether they’re maximizing their potential with their current projects. Specifically, the CEO’s questions to you are:

• How can you help them decide what information you would need?
• What components do you think would round out an R&D portfolio for Boehringer Ingelheim pharmaceutical company?

Additional Information: (to be given to candidate if requested)

• Current staffing needs at Boehringer Ingelheim are at equilibrium.
• Layoffs and hiring are not expected to be necessary.

Note to the Interviewer: Remember to make the interviewees brainstorm. You want them to come up with categories for this pharmaceutical company to consider when developing their R&D portfolio. For any questions, make sure you keep them on track with this goal. They should be naming different areas to look at, i.e. investing in current projects versus investing in creating new technology or starting new business.

Possible Answer:

For this case, a successful interview would follow this “logical path”:

• Develop a small framework from which they follow. Potential framework categories include Revenues and Expenses, Regulatory Environment, Internal Issues, etc;
• Start asking appropriate questions based on this road map. Example: “I would really like to look at the current state of finances for the client company. There is the possibility that for expense reasons, they may not be able to heavily invest in a lot of R&D Projects.”
• When prompted, conclusion should be short and sweet, like “In my opinion, this pharmaceutical company should really focus on 4 different categories. These are large investment versus short investment, longer projects versus shorter projects, new business versus existing business, and the mix over different business units. These will allow it to maximize its spending investment and reduce their risk by not being overly invested in one area.”
• The 2×2 matrix should follow. It doesn’t matter which areas they pick to compare but the math should be easy. If there is a problem with the math, an easy prompt can be given without too many “points” being taken off.

The client company should be considering looking at multiple areas of its business such as:

• whether the R&D is for new business or current business
• new technologies versus current technologies
• spread of R&D projects across business units
• big projects versus small projects
• high dollar investment versus low dollar investment
• short duration projects versus long duration projects

There may be a few others but these listed above are the pertinent ones.

Note to Interviewer: When the interviewee has provided their conclusion for the areas they think the pharmaceutical company should be looking at for a successful mix, please ask them to pick two and create a sample 2×2 diagram for you. Ask them: “If you were to look at these two areas, how would you suggest breaking up the expenditure.” See Exhibit 1 below for the appropriate 2×2 graph and sample calculations.

If asked how much the R&D expenditure is annually, answer with $100 million, but this information is not relevant to calculations and they can be done using percentages only.

Exhibit 1: Sample 2×2 matrix to break up R&D expenditure

The main point to make sure the interviewee gets correct is that all four boxes together should add up to 100% and that each of the columns and rows should equal the percentage allocated for that particular category, i.e. 40% for long term projects or 60% for low capital investment projects.