Incumbent Paradigm · Drug Development · Phase 4: Breaking

Eroom's Law

$2.6 billion per approved drug. 10–15 year timelines. Declining ROI despite increasing spend.

M31 Capital · February 2026
Phase 4
Status: Breaking
$2.6B
Cost Per Drug
↓
R&D Productivity
10–15yr
Avg Timeline

Eroom's Law: the number of new drugs approved per billion dollars of R&D spending has halved roughly every nine years since 1950. The pharmaceutical innovation model is becoming exponentially less productive. This is structural, not cyclical.

The Structural Crisis

The model was optimized for small-molecule drugs targeting single biological pathways. Remaining disease targets are complex, multi-system, and resistant to single-molecule intervention. But the regulatory apparatus, trial infrastructure, and business model all depend on the single-molecule paradigm. Non-patentable interventions cannot navigate the approval pathway because no entity will invest $2.6B in a product it cannot exclusively own.

Disruption
AI Drug Discovery
Insilico, Recursion, Exscientia — compressing timelines from years to months.
Disruption
Alternative Evidence
Real-world evidence and pragmatic trials as alternatives to traditional RCTs.
Signal
M&A Acceleration
Big pharma buying innovation — structural admission of internal R&D failure.
Signal
Biologic Shift
Pipeline shifting from small molecules to biologics, peptides, cell/gene therapy.
M31 Assessment

The Innovation Model Is Exhausted

Traditional pharma R&D is at Phase 4. AI drug discovery and alternative evidence frameworks are the replacement vectors. Long AI drug discovery platforms.