The pharma industry, with decadal time lines and multi-billion dollar R&D budgets, is particularly sensitive to progressing projects that should have been killed.
Occasionally failure is perfectly obvious, and the decision to kill a project is trivial. But much more often, there is no certainty whether you are killing a future blockbuster or saving millions in wasted resources. “Kill or continue” is a critical decision that often has to be made with little hard evidence – and made multiple times over on each project as new material data is accumulated.
The efficiency of this decision – recognizing impending failure as early as possible – is key to improving capital efficiency in the pharmaceutical industry. Yet structural factors, as much as the quality of the team or the data that’s available, unwittingly bias this key decision in favour of continuing – often with disastrous consequences.
The key to improving capital efficiency in the pharmaceutical industry is to minimize the assymetries between a decision to kill a project or continue to invest in it
A “kill” decision, crystalizing a loss (of resource and of face), is inherently less attractive than continuing. Even if the outlook is weakening, there is always a possibility things can be turned around – and even if it fails eventually that will probably happen on someone else’s watch. Similarly, a “kill” decision requires active bravery, while continuing is usually the default.
Eliminating these systemic biases, making the “kill” and “continue” options feel equally attractive, and making “continue” an active decision like “kill”, is therefore the top priority for management in this industry, whether in small biotechs or global pharma companies. Progress is being made, but it is a tough problem and radical changes are still required.
The Cambridge Partnership is the only professional services company in the UK exclusively dedicated to supporting companies in the biotechnology industry. We specialize in providing a “one-stop shop” for accountancy, company secretarial, IP management and admin services. The Cambridge Partnership was founded in 2012 to fill a gap. Running a biotechnology company has little …
