Reference no: EM139320

Biolyses is a biotech division of Alphacon Pharmaceuticals. In its 8 years of survival Biolyses has had only one drug make it into clinical examination. That drug is nearly through clinical trials, and is expected to produce an acceptable return on the investments that have been and will still need to be made in it. Unfortunately those profits will not be large enough to outweigh the years of negative profits that Biolyses has delivered to Alphacon over the past eight years. Some of Alphacon's executives argue that now is a good opportunity to close the Biolyses division. In the words of one of executive, "Sunk costs don't matter. Alphacon should not keep Biolyses open in the vain attempt to try to gain back some of the previous losses. We shouldn't keep after bad throwing good money." Is the executive right? Do you think this is the right time to close Biolyses.