Why do drugs fail? Why success rates haven’t improved for over a decade

Despite significant advances in biology, chemistry, and drug development platforms, drug attrition rates have remained stagnant in recent years. Dr Duncan McHale, co-founder of Weatherden, explores some of the ways big pharma has tried to tackle this problem – and why they’ve largely fallen short.  

Stagnant success rates. 

With the exception of the COVID-19 pandemic, the number of approved drugs entering the market has sat at around 65 a year since 2018. Whilst this is an improvement from 2011 the composite success rate – the total success rate of drugs from Phase 1 through to approval – has not changed over the last 13 years, sitting at around 10.5%.  This 90% failure rate is one determining factor in the high price of innovative medicines but attrition is not equal when we look at the impact on drug development efficiency of failing at each phase of development.   

If we look more closely at the success rate of drugs in each phase, it becomes clear that Phase 2 is the most critical in determining the overall cost per drug approval, with success rates hovering around 40% since 2011.  

The cost implications of Phase 2 success and failure rates are significant. Companies with high (upper quartile) success rates in this phase spend around $380 million less per drug approval compared to the median, while those with lower success rates face costs around $821 million more than the median.​​​​ Overall, the difference in cost per approval between the top and bottom quartiles in Phase 2 is over a billion dollars – a much wider range of efficiency than is seen in Phase 1 or 3.  

This disparity underscores the importance of optimising Phase 2 trials. By improving success rates in Phase 2, companies can potentially save hundreds of millions of dollars per drug approval – and this is exactly what Big Pharma has attempted to ​​​​do.  

How has Big Pharma tried to tackle the problem? 

In response to a Phase 2 success rate of just 15% (2005 to 2010), AstraZeneca developed a 5-pillar framework to improve their outcomes. This framework listed their requirements for drugs to transition into phase 2 clinical trials, which included factors such as uncovering and validating the right target, ensuring good bioavailability, and targeting medicines to patients who will derive the most benefit.   

With this framework in place, AstraZeneca did manage to increase their Phase 2 success rate to 43% between 2012 and 2016. However, the industry average at the time was around 38-39%. So, despite big improvements for AstraZeneca relative to their earlier performance, their success rate remained relatively close to the industry average. 

Pfizer also introduced a similar framework, this time with 3 pillars aimed at streamlining the transition from Phase 1 to Phase 2 development. Their three pillars were focused on pharmacokinetic (PK) and pharmacodynamic (PD) evidence requiring clear demonstration of drug exposure in blood and tissue, binding to the intended target, and measurable positive effects.  

According to Pfizer, their success rates improved significantly after implementing these pillars and through focussing on certain therapeutic areas. The percentage of new molecular entities (NMEs) transitioning from Phase 2 to Phase 3 reached as high as 53% in 2020 and the cumulative success rate from Phase 3 to approval reached 80%, both of which are above estimated peer benchmarks. These were within core focus areas Pfizer at the time.  
However, a broader analysis of their full pipeline including all therapeutic areas shows Pfizer's overall success rates in advancing drugs beyond Phase II aligned with industry averages, at around 34​​​​%. Moreover, the company's withdrawals in certain therapeutic areas highlight significant challenges, with no successful drugs among 29 candidates across five therapeutic areas. 

Why have attrition rates remained high?  
Despite an increase in pharma investment in R&D – up 50% since 2018 – attrition rates persist. There are several factors that appear to be contributing to this pattern.  

One key reason is the continued focus on severe, refractory patient populations. Pharma companies often aim to demonstrate superior efficacy over existing treatments, leading to the inclusion of challenging patient groups and more complicated clinical trials. 

The failure of precision medicine (outside of oncology) is another contributing factor. While advances in genomics and other technologies promised to better stratify patients in complex diseases, this has not yet materialised as hoped.  

Pharmaceutical companies also have a tendency to focus on similar indications. Often, a breakthrough in one area leads to a wave of fast-follower research, resulting in a crowded field with multiple companies pursuing the same targets. We've witnessed this trend in rheumatoid arthritis, psoriasis, hidradenitis suppurativa, inflammatory bowel disease and currently, obesity.  The potential to differentiate becomes increasingly hard with the large number of reasonably effective molecules in these diseases. 

Additionally, the industry's tendency to focus on monotherapy and chronic treatment, driven by commercial considerations, can be limiting. This emphasis on high-priced, long-term treatments can hinder the development of more targeted or potentially curative therapies.  It can also result in the termination of drugs which could offer significant patient value if used intermittently rather than chronically or in combination with other therapies.  Clinical trials evaluating intermitted dosing are rarely considered by Pharma with the exception of developing new, longer acting formulations.  

The standardised development pathways prescribed by regulatory guidelines can also constrain innovation. While these guidelines are crucial for ensuring comparability of safety and efficacy across different molecules, they can make it difficult to demonstrate unique benefits for drugs that deviate from the standard path.  

Proving a clear benefit of a new drug over the current standard of care often requires large-scale studies. But because of the way studies are commonly run – standard parallel arm designs with composite end points – a lack of confidence in demonstrating differentiation in Phase III trials can lead to many promising drugs being abandoned after Phase II. 

This is a real challenge for smaller biotech companies, who can only afford to run smaller studies. While many biotech drugs show promising efficacy, it might not be sufficient to attract a large pharma partner. If the effect size is not large enough, pharma partners cannot justify the high costs of acquiring the drug and then running the programme. This leads to missed opportunities for biotech companies, who have limited resources and may not demonstrate the potential of the drug due to having to run small studies. These limited resources means that biotech companies rarely get a second chance at evaluating another indication in which a drug could show a real benefit to patients. As a result, there is significant pressure on biotech companies to ensure they deliver the right trial in the right indication.  

Charting a new course in drug development 

At Weatherden, we offer a fresh perspective. Our framework employs a more rigorous, quantitative evaluation of key factors, focusing on identifying specific stop signals and quantifying the risks associated with each drug. 

With this approach, we can ensure that only the most promising candidates proceed to clinical trials, achieving an over 65% success rate in early-stage drug development over the past seven years.  

Want to learn more? Contact us at services@weatherden.co.uk