End of Phase 2

Phase 3 drug development may be the expected climax of a long story, but phase 2 is where the seeds are sown and the ending is set in motion. By the time phase 2 is half way through, one would have a pretty good idea about whether the drug would theoretically work. In other word, the concept is proved or disproved.

Yet, theory and reality often slip away from each other like two pieces of iceberg in the middle of an undercurrent. Any tiny or potential glitch --- a seemingly insignificant side effect, or a slightly messy or low receptor binding profile, for example --- could be blown up exponentially in phase 3 clinical trials, when many more subjects present many more real-life variations on the controlled laboratory/clinical environment. Some may have other clinical or subclinical conditions or genetic predispositions that negate the efficacy of the drug. Some may throw away the study drug and report they have complied with all instructions. Some may be hypochondriac and report every little discomfort as a side effect. Welcome to the real world.

The crux at the end of phase 2 is whether to abandon a drug or move it into phase 3. In today's pharmaceutical environment, the psychological incentive is overwhelmingly biased toward moving it along rather than letting it go. Look, it is easier to throw out a molecule when you've only spent a million dollars in animal studies or tens of millions in phase 1 trials. But when you've already sunk fifty million into the molecule, your psychological scale is inevitably tipped to the side of success. Of course, if the drug is clearly a dud in phase 2, the choice is easy if painful. Many times, however, the choice is just not clear. The drug might look good on a couple of efficacy endpoints but fail in another endpoint. Or the overall efficacy is no better than placebo, but it beats placebo in a couple of biomarkers. To phase 3, or not to phase 3, that is the question.

I have heard one theory that is unproven but rings true. In most companies, the same team fosters a molecule from start to finish. They feel psychologically invested in the drug after years of development and tons of their sweat and tears. By the end of phase 2, they see the drug less as a molecule, but more like a baby --- worse, their own baby! How can they resist throwing another hundred million dollars (often more) into phase 3 trials to see if the baby would turn out just fine?

If you do the math though, a few hundred million dollars could have run a few more molecules through phase 1 and phase 2 and potentially home in on one that works unequivocally. On the other hand, this could mean a delay in the rush-to-the-market arms race. Again, the mind is biased in favor of pushing into phase 3 despite all the doubts and questions.

To abandon a possible dud by the end of phase 2 makes everyone look bad. For a large company, it's an ugly truth that would send Wall Street analysts into a selling frenzy. For a small company, it could mean survival or bankruptcy. Thus all the more reason to put on a happy face and throw more good money after bad. 

Perhaps this is why we are seeing so many phase 3 flops lately --- the financial stakes are higher, the scrutiny is tighter, and the hypes more unrealistic. The chips are stacked against objective, ruthless decisions.