OPTIMIZING THE R&D PROCESS USING SPIN-OUTS: CASE STUDIES FROM THE PHARMACEUTICAL INDUSTRY

OVERVIEW: R&D spin-outs offer pharmaceutical companies an increasingly attractive mechanism for increasing the effectiveness of R&D activities by allowing companies to maintain a clear focus on core activities and yet still exploit discoveries that are less central to the core business. This study analyzed 42 European R&D spin-outs with regard to background, realization, and further development. Interviews were conducted with key personnel in both parent companies and spin-outs to explore the underlying strategy and success factors. Key aspects of successful spin-outs are a clear focus on core activities and a cadre of highly motivated employees. The use of spin-outs has resulted in increased activity along the entire pharmaceutical value chain, producing an increase in drugs introduced to the market in recent years. However, spin-outs are also responsible for the disintegration of established value chains, resulting in higher coordination and transaction costs. Spin-outs offer managers a potential option to refocus their activities and reduce costs. The successful examples and potential pitfalls offered here illustrate best practices for managing spin-outs to maximize R&D productivity.