Clinical Trial Phases - Derisking Each Phase
What are they, and how successful is each phase?
Note: This is a high-level look at the clinical trial phases.
There is good rationale for each clinical trial. And each trial phase presents it own challenges. Let's look at them below.
This phase focuses on the safety of a drug. They are usually conducted with healthy volunteers, and the goal is to determine the drug’s most frequent and serious adverse events (SAEs) and, often, how the drug is broken down and excreted by the body. These trials usually involve a small number of participants (10-30).
So what are the chance of a drug making it past Phase 1? Below is a chart showing the success rate of Phase 1 for different indications.
This phase gathers preliminary data on whether a drug works (efficacy) in people who have a certain condition/disease. For example, participants receiving the drug may be compared to similar participants receiving a different treatment, usually an inactive substance (called a placebo) or a different standard-of-care drug. Safety continues to be evaluated, and short-term adverse events are studied. This study is typically larger than Phase 1 and can involve between 30-100 patients.
Below is a chart showing the probability of Phase 2 success.
This phase gathers more information about a drug’s safety and effectiveness by studying different populations and different dosages and by using the drug in combination with other drugs. These studies typically involve more participants (100’s to 1,000’s). This is the most expensive of all the phases and will take the most time, due to the large number of patients being treated, and then evaluated.
Below is a chart showing the probability of Phase 3 success.
One can see the probability of success in Phase 2 is lower than Phase 3. This means that a drug in Phase 3 has overcome many obstacles to get to that point. It only has 2 more hurdles to overcome (Phase 3 readout and FDA approval).
After the successful completion of a Phase 3 trial, the pharmaceutical company must submit a New Drug Application (NDA), or Biologics License Application (BLA), to the FDA. This can often take months to complete. (See 2017 Keytruda Drug Application – 378 pages!)
After receiving the application, it normally takes 12 months for the FDA to approve or deny the application. But when a drug has been granted Priority Review, the FDA aims to deliver their verdict within 6 months. A few months after receiving the application, the FDA will give a PDUFA date, which is the deadline by which the FDA must review the NDA, or BLA.
So how do these charts help us de-risk biotechs?
Let’s look at it from a 5,000 ft view.
Here is a chart showing the Likelihood of Approval (LOA) going from Phase 1 to approval for different indications. This chart spans all 3 phases and filing for NDA/BLA.
This chart tell us there differing amounts of “headwinds” depending on the indication. Drugs on the left side are much more likely to get approved than drugs on the right.
All things being equal, investing in companies with drugs for hematology & infectious disease are less risky than drugs for psychiatry & oncology. This is not to say you can’t make money in higher-risk indications. You definitely can. But understand the overarching clinical trial success rates before making an investment.