Is R&D Productivity Improving?
In the past few years, approvals of new drugs have reached levels not seen for decades. The superficial reasons for this are clear: a combination of benign financial market conditions that have enabled companies to raise substantial amounts of cash, and regulatory authorities in Europe and the US that are committed to ensuring that novel therapies reach patients as quickly as possible.
However, funding tends to be cyclical in nature and 2016 looks like a year in which financial gravity has reasserted itself, with external markets resembling those encountered in the 2012-2013 period. In addition, drug approvals are likely to moderate. The more fundamental issue for the entire bio/pharma sector is whether clinical development itself is becoming more productive as defined by an increase in trial success. Several commentators have suggested that the industry is becoming more disciplined at weeding out low quality candidates in early development, citing recent improvements in Phase I to Phase III success rates.
In order to explore this question in more detail, we examined data from the PharmSource Lead Sheet for the period 2012-2016, segmenting assets by type and focusing exclusively on the emerging biopharma sector, i.e., those companies dependent on external financing to fund their R&D. By examining pipeline progress from Phase II onward over this four year time horizon, it is possible to draw some preliminary conclusions regarding the efficacy of clinical development. For simplicity, we excluded a product entirely if development for a single indication was terminated.
Figure 1: Emerging Bio/pharma Company New Active Substance Clinical Pipeline 2013-2016 YTD
Figure 2: Termination of Emerging Bio/pharma Company New Active Substance Clinical Pipeline 2013-2016 YTD
These key themes emerged:
- An increase in the actual numbers of Phase II and III candidates over the past four years, consistent with the significant rise in external funding (consisting of IPOs, Secondary Offerings, Venture Capital and Partnering Revenue).
- A decline in termination rates for both Phase II and Phase III assets in the 2015-2016 time frame, as compared to the previous period.
The cause of this decline probably is multi-faceted: many of the pipeline assets are partnered with Big Pharma companies that are likely to take an active role in key areas of trial design, such as choice of endpoints and path to market. In addition, the rise in the development of orphan drugs to treat rare diseases in which current treatment is either inadequate or non-existent further reduces the threshold for go/no go decisions. Nonetheless, it’s also possible that the data discloses a better understanding of underlying safety and efficacy issues that are responsible for many project terminations. As a consequence, projects may be culled earlier in their development, prior to costly Phase III trials. These and other critical lessons in drug development elaborated by the AstraZeneca team were subsequently published (Cook et al, Nature Reviews Drug Discovery 13, 419-431).
The contract manufacturing and development organization (CDMO) sector, which seldom is in a position to dictate the development pathway of a pipeline asset, should be cautiously optimistic about this uptick in clinical success rates. Their next challenge is to avoid getting blindsided by the pricing and reimbursement issues that are increasingly a part of the overall landscape.