Stuart R. Gallant, MD, PhD
In the last three decades, how pharmaceutical drug development occurs has changed dramatically. Prior to this change, a significant share of new drugs was developed by integrated pharmaceutical firms, companies like Pfizer and Johnson & Johnson in the United States and Bayer in Europe. Drug development occurred in a stage-gate process:
Today, frequently drug discovery occurs at a university or a startup pharmaceutical company. IND filing and Phase 1 & 2 clinical trials may occur at a startup pharmaceutical company. And, often later stage clinical trials and launch occur at an integrated pharmaceutical firm with experience in the treatment area or type of molecule (small molecule or biologic) of the drug to be licensed.
The advantages of the new system include:
- The startup mentality (a small group of professionals focused on one or two closely related projects) promotes efficiency and good communication within the project team.
- More accurate cost accounting and minimization of over-head costs early in a project.
However, it is important to remember that this system, which improves project efficiency and ensures accurate cost accounting, does not change the fundamental economics of pharmaceutical development. Hingorani suggests the ratio of licensed drugs to drugs entering preclinical development is around 2%, a figure that is commonly cited in the literature [1]. In fact, that number is likely overly optimistic.
From 2010 to 2018, the FDA licensed an average of 38 new molecular entities (NMEs) per year. From 2014 to 2020, the FDA received an average of 1695 new Investigational New Drug applications INDs per year. The resulting ratio of licensures to INDs (2.3%) seems to support Hingorani, but that ratio does not take into account molecules that are patented and for which pre-preclinical work is started, but which never reach the IND stage. In this author’s experience, failures prior to IND filing are not uncommon. Reasons for these failures include: lack of efficacy in the in-vitro or in-vivo test system, toxicity which is evident prior to the GLP toxicology study, unacceptable net present value of the project, and other reasons.
Because investor expectations for investment multiples contain the full cost of both successful and failed development programs, these costs are baked into the overall development costs of licensed pharmaceuticals.
This series of three posts looks at the costs of pre-clinical development. Pre-clinical development is not the largest line item in the budget of a successfully licensed pharmaceutical, but it is a critical element because so many molecules fail at that stage. Developing an understanding of these costs is critical to the success of an overall program.
In the other two posts in this series, intellectual property and non-clinical and CMC (Chemistry, Manufacturing, and Controls) are examined.
[1] Hingorani, et al. “Improving the odds of drug development success through human genomics: modelling study,” Scientific Reports | (2019) 9:18911 | https://doi.org/10.1038/s41598-019-54849-w
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