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Yearly Archives: 2022

October 17, 2022 no comments

#Unshackled: The evolving definition of asset-centricity

Asset-centric is a term coined by Medicxi founding partner Francesco De Rubertis to describe an investment strategy he pioneered, together with Kevin Johnson and Michele Ollier, in the early years of the 21st Century.  The key was focusing investment on a single asset to avoid the problem with pipelines in early-stage biotech companies.  While it seemed superficially attractive to hedge against failure of the lead asset by having a second or a third program in the wings, the reality usually turned out differently: when the lead failed and the pivot came, far too frequently the follow-on assets didn’t pass scrutiny.  “In short, we ended up developing things we would never have chosen to invest in had they been a lead asset” De Rubertis explains.

Over the next few years, the practice of asset-centric investing was honed through various iterations all designed to counter the inherent progression bias that damages returns in pharmaceutical R&D.  Biology is unavoidably complex and always provides a plausible explanation for any failure, allowing managers with a natural aversion to crystalising losses to keep trying.  Maybe it was the wrong patient population?  The wrong dose? Not long enough treatment?  The wrong end-point?  Of course, Occam’s razor suggests the simplest explanation is likely to be right: the drug just doesn’t work well enough – but many millions are often burnt before the inevitable conclusion is reached.

One of the principal causes of progression bias is the creation of infrastructure – if you have a team of employees, a lease on a building and so forth it can be painful to call a halt even if the enthusiasm is draining away.  As long as there is a plausible route forward, and there nearly always is, then further investment become almost inevitable – a phenomenon often described as “the hand in the mangle” (referencing a long-defunct apparatus comprised of two rollers used to squeeze water from clothes during laundry, which, if it caught your hand, it was almost impossible to escape from without a painful injury).

Asset-centric investment used out-sourced infrastructure to reduce the drag of progression-seeking behaviours, and over a decade delivered the ultimate asset-centric company: the zero-person biotech.  Capital was dripped in slowly, so none was “trapped” inside a company that had begun to deviate from a stellar trajectory.  Over the years, Medicxi switched the progression heuristic from “nothing has yet killed the opportunity” to “we are still excited and want to further back the opportunity”.  It sounds subtle, but the impact is enormous.

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