Why Products Fail in Phase III
Half of the small-molecule drugs that fail pivotal trials can't prove better efficacy than placebos. The most important predictor of failure: a drug with a novel mechanism of action. But for the most part, companies are pursuing a one-size-fits-all development strategy, using the same methods for developing drugs that modulate novel and precedented targets. Companies need to better differentiate their development strategies based on risk.
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Is there an explanation for the recent spate of biotech Phase II and Phase III clinical trial failures? It's almost impossible to give general reasons for specific clinical failures. Several hypotheses, borrowed from the tenets of behavioral finance, however, may help explain some recent, unanticipated later-stage setbacks. They may also support other studies that suggest that small biotech companies fail more often in clinical development than their larger biotech and pharma brethren.
Does in-licensing improve attrition rates? It hasn't reversed the R&D productivity decline-in part because while in-licensed candidates are less risky than internally invented ones, they generate lower average revenues. But companies can do better: we show statistically that they need to place more emphasis on licensing products early. Moreover, to be successful at early-stage licensing, drug firms need focus, not on specific therapeutic areas, but on specific biological mechanisms.
By and large, drug companies have sharply reduced their emphasis on novel targets and, they assume, pipeline risk. But detailed analysis shows that more important risk-reducers are the molecular approach (biologics targeting novel mechanisms fail less frequently than small molecules targeting precedented mechanisms) therapeutic approach (targeted is less risky than broad), therapeutic area, and stage of development.