The Impact of Failure and Success Experience on Drug Development

Key Takeaways: 

• Managers should pay more attention to both failures and successes to extract value for future NPD 

• Managers should pay attention to the success and failure of other firm’s to identify growth areas in their own projects and propel future success 

• While highly burdensome failures attract attention and can cause organizational change, less salient and more common failures should also be acknowledged and studied for NPD 

• Failure should not be seen as a setback rather an opportunity for organizational growth and change 

Summary: 

The Impact of Failure and Success Experience on Drug Development written by Antonio Garzón-Vico, Jan Rosier, Patrick Gibbons, and Peter McNamara makes compelling arguments on how the failures and successes of drugs in clinical trials affect management and company outcomes. The paper unwraps this concept through a case study of a drug failure and response of a leading pharmaceutical company, Pfizer and how the company and other industry players react to this failure. 

This paper explores the impacts of the failure of one of Pfizer’s most promising projects, torcetrapib, a cholesteryl ester transfer protein (CETP) drug developed to treat heart disease projected to be worth $20 billion USD. However in its phase III clinical trial, after investing roughly $800 million USD they discovered that torcetrapib had in fact increased the risk of death and heart problems. This colossal failure led to a halt in the development of torcetrapib and a widespread reaction among the pharmaceutical industry. Several other companies like AstraZeneca followed Pfizer in halting their research on CETP while others such as Roche and Merek worked to improve CETP programs, who were able to successfully develop those drugs and use Pfizer’s failure to their advantage.  Pfizer was left with a plummeting share price and needing to take drastic cost cutting measures. 

Based on an  attention-based view (ABV) statistical study of biopharmaceutical firms’ behavior and outcomes the paper came up with 4 hypothesis: 

1. “First-hand experience of late-stage NPD failure reduces the likelihood of future NPD being ceased more than first-hand experience of early- and medium-stage NPD failure.”

2. “First-hand experience of late-stage NPD failure reduces the likelihood of future NPD being ceased more than first-hand experience of NPD”

3. “Others’ related experience of late-stage NPD failure reduces the likelihood of future NPD being ceased more than first-hand experience of late-stage NPD failure.”

4. “Others’ related experience of NPD success reduces the likelihood of future NPD being ceased more than first-hand experience of NPD success.”

Additionally, the paper makes additional findings on the nature and impact of failure in the biopharmaceutical industry. It first differentiates between the impact of failures based on their salience. They found that the more salient a failure, such as a failure in a phase III clinical trial as opposed to in a phase I, the more likely it is to strike organizational attention and change future decision making. It is also not only failure that attracts attention but great success can attract attention and be better for future NPD over late-stage failure. Furthermore, other’s success in NPD has a greater impact on a firm over first-hand success as it acts as a motivator for other firms. Finally, the size of the firm may impact how they are affected by success and failure with smaller organizations benefiting more from first-hand success. 

The authors hope to implement this paper by helping management understand how to treat failure as a mechanism for growth and future NPD and increase their efforts on the study of failure, not only at a large scale but also smaller scale failures. Additionally firms should focus on extracting as much from success as they do from failure. Finally, managers must understand the impact of other’s success and failures and how these may be indicators for their own projects- both positive and negative. 

Discussion: 

I found this article quite fascinating in understanding the impact of failure in the biopharmaceutical industry. One point that stood out was the impact of negative emotion on NPD failure. The paper managerial emotion has a strong impact on the reaction to failure. As shown in the Pfizer case, Pfizer and AstraZeneca reacted dramatically by halting their development of CETP entirely. Simultaneously Roche and Merek continued developing CETP technology and were able to find applications without the negative impacts found in Pfizer’s clinical trial. I wonder how the upset of the failed clinical trial impacted the decision making of Pfizer. Their response was reactive- cutting costs and immediately turning away as opposed to exploring new pipelines for the drug or simply studying the failure. While I am not aware of the inner workings of the Pfizer organization, it seems from the outside that while Pfizer took this big hit, Roche and Merek seized the opportunity to further develop their products leading to future success. 

Additionally, I was interested in the attention to failure based on their size and salience. The paper argues that more salient failures like a phase III clinical trial are likely to spark organizational change while smaller failures make little impact. In such a volatile industry like biopharma and biotechnology where early-stage failure is the norm, I do wonder if there are managerial takeaways for early stage failure that might have a greater impact on NPD than rare and highly attention grabbing catastrophic failures.  

Finally, as the paper mentions in its limitations I am interested to understand how NPD failure impacts other industries. Biopharma is a very specific type of industry- high in cost, subject to scientific development and typically experience “all or nothing” results. I am interested in understanding this concept for other industries such as technology whose framework is extremely different from biopharma with a load of emerging startups developing new technologies with a range of successes and failures. 

Garzón‐Vico, Antonio, et al. “The impact of failure and success experience on drug development.” Journal of Product Innovation Management, vol. 37, no. 1, 28 Oct. 2019, pp. 74–96, https://doi.org/10.1111/jpim.12514.