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June 4, 2015 no comments

A DrugBaron Glossary

To mark the fifth anniversary of this blog, as well as the launch of the new website, DrugBaron has collated some of his favorite phrases, each encapsulating an important concept in pharma R&D. Most of these terms were initially coined by DrugBaron in these pages, but have entered the wider biotech lexicon, and frequently feature in discussions of R&D strategy on Twitter, in articles and at meetings.
 
Here then is the definitive guide to the meaning behind the label:
 
Acceptable Failure     There is more than one way to fail, and they are not all equivalent. In drug development, sometimes the candidate fails for reasons that could never have been predicted.   The team did all the right things. With luck they managed to demonstrate the hidden problem with the asset quickly and cheaply. Failure of this kind, which DrugBaron labeled “acceptable failure”, should be embraced, even celebrated (though not actually encouraged, since even acceptable failure creates losses rather than value).
 
In contrast, failure due to poor experimental design, bad implementation or other avoidable mistakes by the team trusted to progress the asset, is the cardinal sin. There are enough unavoidable reasons for programs to fail without adding wholly avoidable ones.
 
The challenge for the R&D management is to distinguish the two. Teams always argue the failure was unavoidable, and the complexity of biology always provides a hiding place. And the best solution to that problem is to create the right incentive structure, overcoming the inherent cultural bias towads continuing projects.
 
Asset-centric     Asset-centric is a term coined by my partners at Index Ventures to describe companies that are focused on the development of a single asset (companies that have comprised the majority of Index investing since 2005).

And that’s all it means. It doesn’t mean the asset is more important than the people. Quite the reverse – the limiting factor for pursuing an asset-centric strategy is the availability of great teams who can take those single assets forward.
 
There are two principle advantages for asset-centric companies. First, with only one asset there is no insurance policy. No second asset to fall back on the event the lead fails. That sharpens the focus of the team (whose returns depend entirely on the lead asset) and prevents wasted dollars developing an asset that would never have made the grade as a lead asset.
 
Second, with only one asset to develop it makes no sense to build specific infrastructure.   Asset-centric companies are therefore typically also virtual (or at least semi-virtual), with all the advantages that implies.
 
A decade into investing …

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