Threading the Needle: Taggart McGurrin on Navigating Profit and Ethics in Pharma and Biotech Startups

There are few sectors more complicated than pharmaceuticals—especially for new companies. To succeed, startups must master a complicated arithmetic that balances business decisions against the ethics of providing life-saving drugs.

Taggart (Tagg) McGurrin, a CFO/COO in the pharmaceutical space, compares leading a startup to managing air travel. Modern flight relies not only on skilled pilots, but on fully coordinated efforts of highly skilled people across various disciplines, who do everything from monitoring the weather to building reliable aircraft.

Like airlines, pharmaceutical startups often contend with last-minute changes that affect the journey, although not the destination. 

No matter what new government regulation, stakeholder concern, or market disruption occurs, new businesses must “understand the headwinds that you face and pivot seamlessly to continue flawlessly executing on the corporation’s goals and objectives,” McGurrin said.

Patients as a Priority

Typical startups worry about two concerns: connecting with clients and becoming profitable. Pharmaceutical businesses are different. Their success and failure predominantly depend on how well their medicine works.

And while a tech company can regularly update its product, pharmaceutical companies are bound by strict regulatory timelines and massive cash burn. As a result, high-growth start-ups can be a bit like building a plane while trying to fly it.

“The bottom line starts and ends with the human impact the pharmaceutical industry has on people—current and future patients,” he said. “Think about us when we were kids: My mother brought me in for vaccines and gave me medicine when I was sick. We entrusted other people to develop medications properly, the FDA to apply their regulatory authority to grant companies the approval to commercialize medications properly, and doctors to prescribe them. So, when you look at the human impact, you have to say, ‘Look, patients depend on and entrust pharmaceutical leaders with their health and well-being, just the same way they entrust doctors and nurses with their medical care and treatment.’”

Patient trust is sacred, McGurrin said, but it comes at a steep cost. Investors can grow impatient because of the tremendous cost of new drug development—from research to iteration to a long and complex approval process. It’s not unusual for pharmaceutical startups to feel constantly strapped for cash as they navigate a costly and lengthy journey toward drug approval.

McGurrin believes the key to keeping investors engaged throughout the process is to transparently identify and communicate developmental challenges, associated risk mitigation strategies, and long-term and impactful solutions to the hurdles.

“The industry allows me to do well by doing good. I like money because money is a great motivator. That’s what gets many people out of bed in the morning,” he said. “But at the end of the day, is it clean money? Would you be proud to say that you earned it and did it by doing good and benefitting others?”

Yet, while patients are the ultimate priority, pharmaceutical CEOs can only make some decisions solely based on patient needs. The system forces them to consider investors’ financial needs, and this balancing act is an ongoing challenge.

Balancing the Needs of All Stakeholders

The market doesn’t necessarily reward companies for making good medications. 

McGurrin emphasized that pharmaceutical companies operate within a for-profit model, which comes with its own pressures. 

“Pharmaceuticals are a for-profit business with two prongs,” McGurrin said. “One is that people expect to get a return from sizeable investment because developing a drug costs a ton of money. On the other hand, there are people who are investing in certain areas of the pharmaceutical industry or certain drugs because they have a connection to an unmet need. Perhaps it’s something they or a family member have had to deal with from a health perspective, and they want to see certain drugs come forth to help in that area. And that might be a mission-driven investment for them. But nonetheless, their investment isn’t a charitable contribution. People expect a return from investing in drug development, especially investors who make their livelihoods from deploying capital into highly risky development programs. They expect returns commensurate with the risk profile of their investments..”

This pressure becomes especially intense when development processes take longer or cost more than expected. Investors may push for speedier development and market access, but management often faces unexpected challenges. 

 “I think a time where the rubber meets the road with those two competing interests—returns for investors versus what you’re doing to move things forward for the patients—what it really comes down to is how you’re managing the overall timeline to approval,” he said.

For McGurrin, leadership must remain committed to the long-term efficacy and safety of the drug. In some cases, that means extending timelines or requesting additional funding rounds. 

“I think that people often want to take the path of least resistance, but that could result in lower returns for investors, a limited label for patients, or both. It’s critical to be transparent with investors and say, ‘Look, we spoke to the FDA and they requested additional data, or there is additional regulatory work required. As long as you approach investors with a revised plan and timeline, the relevant risks, and the capital required to execute, you can effectively address investors’ concerns while preserving the integrity of the drug you are trying to deliver to patients,” McGurrin said.

Striking the Right Balance

Encountering turbulence is simply part of the journey for pharmaceutical startups. The industry offers attractive rewards for investors and amazing results for patients—but only so long as the dynamic path from research to market is managed with finesse. “If startups want to bring the most effective medication to market on a timeline that suits investors, the best tool for the job is constant, comprehensive, and transparent communication to all stakeholders,” McGurrin said. 

“You need to set realistic expectations and be very upfront and honest with your investors. As long as investors are fully informed, I truly believe management will be given the requisite support to deliver for both investors and patients.”

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