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“Financial valuation methods for biotechnology”

Consistent with previous studies of drug development phase transition success rates, we found Phase II success rates to be far lower than any other phase.1 Phase I and III rates were substantially higher than Phase II, with Phase I slightly higher than Phase III. The highest success rate of the four development phases was the NDA/BLA filing phase. The Phase I transition success rate was 63.2% (n=3,582). As this Phase is typically conducted for safety testing and is not dependent on efficacy results for candidates to advance, it is common for this phase to have the highest success rate among the clinical phases across most categories analyzed in this report. Phase I success rates may also benefit from delayed reporting bias, as some larger companies may not deem failed Phase I programs as material and thereby not report them in the public domain. The Phase II transition success rate (30.7%, n=3,862) was substantially lower than Phase I, and the lowest of the four phases studied. As this is generally the first stage where proof-of-concept is deliberately tested in human subjects, Phase II consistently had the lowest success rate of all phases. This is also the point in development where industry must decide whether to pursue the large, expensive Phase III studies and may decide to terminate development for multiple reasons including commercial viability. The second-lowest phase transition success rate was found in Phase III (58.1%, n=1,491). This is significant as most company-sponsored Phase III trials are the longest and most expensive trials to conduct. The probability of FDA approval after submitting a New Drug Application (NDA) or Biologic License Application (BLA), taking into account re-submissions, was 85.3% (n=1,050). Multiplying these individual phase components to obtain the compound probability of progressing from Phase I to U.S. FDA approval (LOA) reveals that only 9.6% (n=9,985) of drug development programs successfully make it to market (Figure 1). 63.2% 30.7% 58.1% 85.3% 9.6% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Phase I to Phase II Phase II to Phase III Phase III to NDA/BLA NDA/BLA to Approval Phase I to Approval