Abstracts

Probabilistic approach tor risk management
Palisade’s European Managing Director, Craig Ferri, will address the questions you’ve likely been faced with: “What is risk analysis, and ‘why’ do I need it?” Today many companies are still trying to figure out how to grapple with risk, and how to unlock the power of probabilistic analysis. Doug Oldfield, Palisade’s Business Development Manager for the UK & Middle East, will then illustrate ‘how’ the ideas discussed by Craig can be easily be translated into a model, using tools and methodologies available to practitioners today.

Managing project risk

Modelling technology risk
Innovative high growth technology based life science companies are widely recognised as being associated with high levels of risk, at least in the minds of investors.  Among several diversifiable risks technology failure is perhaps pre-eminent, a situation which is made more complex by the multiple stages through which development projects must progress.  This presentation will address approaches to modelling technology risk using Monte Carlo simulation to derive risk adjusted NPV, the gold standard for evaluating life science projects.  Models in which each stage of the development process is treated as a real option decision will also be described.

Forecasting a complex pharmaceutical portfolio
This presentation illustrates a simulation modeling approach to forecast a complex pharmaceutical portfolio, and is based on a real life consulting project. A decision-support tool was developed for the evaluation of current and potential new portfolios, representing the many uncertainties and risks of the development and sale processes that influence revenues and margins. The model includes systematic rules based on product characteristics and probability distributions for comparable evaluation of products. The model outputs give insights into the overall revenues and risks of the evaluated portfolio as well as into potential key products, helping managers to clarify portfolios’ risks and balance their composition. The principles of this tool can be applied to a variety of portfolio risk situations.

Monte Carlo simulation and market risk
Today, computational Monte Carlo simulation plays a role in decision making in areas well outside its nuclear physics origins, adding value to analysis in the areas of finance, transportation, pharmaceuticals, oil and gas, project management, and agriculture, to name a few. At the heart of this technique is the concept of explicitly modeling uncertainty and understanding and addressing its potential consequences.Probabilistic modeling is more welcoming of nuance than deterministic modeling, and opens new avenues of analysis. The @RISK program, used in conjunction with Microsoft Excel, provides the added value of probabilistic modeling for relatively little added effort.In this presentation, we will review the Monte Carlo technique and illustrate its usefulness, focusing on modeling techniques that tend to go unexplored in deterministic model building and add great power to probabilistic models.

Financial Risk

Decision trees and influence diagrams
Decision trees and Bayesian networks are tools designed to model causation and probability which have recently seen a surge in popularity within the sciences, and the life sciences are no exception to this trend. This session will provide a brief introduction to the concepts behind decision trees and Bayesian networks, discuss how they are applicable to drug development, and demonstrate how to implement these tools using Palisades’ Decision Tools software.