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How are new drugs created? Whether trying to understand the constant polemic around high drug prices, or aiming to gain a better understanding of your biotech investments, a solid understanding of the drug discovery process is essential. Each new potential compound must pass through a rigorous, standardized testing process before it can ever become lucrative for investors and helpful for patients. Understand the process, understand the path to profit. Biotech Analyst Aidan Asbill explains….

Life-changing medicines have impacted the world, but the path to get there isn’t a simple one. One example of this is Gilead HIV medication, which turned HIV from a death sentence, into a manageable disease. The most recent example of this was the many iterations of  covid-19 vaccines that have been produced and allowed us to return to normalcy. However, for every life-changing medicine, hundreds won’t make it past clinical trials. Clinical trials can make or break many Biomed stocks, with stocks being so speculative based on potential new products in the companies pipeline. These clinical trials also act as a proof of concept showing that these companies’ pipelines are realistic and backed by scientific data and are more than wishful thinking. Clinical research is an expensive, but necessary process in the development of medicine and treatments. Companies spend millions, even going into debt, in order to find the next big drug that can put their company on the map and pay back all that they spent tenfold. Before starting these trials, a company will first have to test its ideas in the lab, in what we call the preclinical stage.


When a drug is in its infancy, it must first be tested in a lab to see if it has a positive influence on treating whatever illness or diseases the drug is seeking to fix. To do this, clinical research starts with testing on cells taken from the human body. After testing for an effective response on the cells it goes on testing on animals and eventually in the next stage humans. The most promising treatments are moved into clinical trials, which are divided into phases, with each phase expanding the test pool to test how safe and viable the treatment is. The purpose of these clinical trials is to find out if the drug is a safe and effective way of treating the patients being tested. Clinical trials are performed on many different volunteers, some healthy and some with illnesses. Procedures on healthy volunteers are meant to develop new research and to help establish a baseline for the drug. This baseline of the healthy people is then compared to the volunteers with illnesses, which helps researchers analyze and refine the drug’s effectiveness. Clinical trials may also be performed as a last-ditch effort on people with severe illness that has no cure. After volunteers are found, the first phase of the clinical trial can begin.

Phase 1

During this first stage, researchers are testing to see if the drug is safe for wider use. In order to test the drug’s safety, this phase will typically consist of 50-100 volunteers who will be given the drug to test its efficiency and to determine if there are any adverse side effects. The researchers then decide if the drug needs to be recalibrated going into the next phase. The goal of Phase 1 is to assess the highest dose humans can take without serious side effects. Researchers will observe participants very closely to see how the patients react to the drug during this part of the trial. While preclinical research usually provides a good idea of the effects of the medication, the effects of the drug during the trial can be unpredictable for the patient. Another thing researchers need to consider is to find the best way to administer the drug, whether that be topically, intravenously, or orally. Not every drug makes it through this phase. According to the FDA, approximately 70 percent will move onto the next phase of clinical trials.

Many companies have an extensive amount of Phase 1 trials in their pipeline, however, AbbVie’s ($ABBV) looks very interesting with its acquisition of  Mitokinin. Mitokinin is a biotech company that has developed a technology to increase the PINK1 compound in our brains, which increases brain activity. However, this may have massive implications as a very effective treatment for Parkinson’s Disease. AbbVie has agreed to buy Mitokinin if they complete the study of their PINK1 compound and its effectiveness against Parkinson’s disease. If the PINK1 compound is proven effective, AbbVie has billions to gain. In 2026, it is estimated that the Parkinson’s disease market could reach $8.38 billion by 2026. With the addition of the PINK1 compound to the company’s already extensive pipeline, AbbVie could be positioned to become a star player in the biotech world.


Phase 2

In phase 2 the clinical trials start to gain traction, but most drugs won’t yield effective enough results to get past this phase. In fact, only 33% of clinical trials conducted will move onto Phase 3. This stage will expand the test pool to involve 100 to 300 patients. This phase will typically take 6 months to a year, in this time researchers will figure out the patient’s conditions and refine the proper dosages. To do this researchers split participants into groups and give each group a different dose. Researchers will even include a placebo to have a control to compare the research to. Doing this, allows researchers to determine which dosage is the most effective and will produce the best results. Another thing researchers have to consider is which dose produces the least amount of side effects. Even though phase 2 includes more volunteers than phase 1, it’s still not nearly ready to enter the market and still has to pass more rigorous FDA approval. However, this information will be invaluable to researchers going into phase 3 of a clinical trial.

A company with a very compelling phase 2 pipeline is Moderna ($MRNA). The company is mostly known for its Covid-19 vaccine, but its mRNA technology can be utilized to treat countless other illnesses. In its phase 2 pipeline, Moderna’s most ambitious project is to make a personalized cancer vaccine (PCV). The PCV will be unique to each patient and will be administered using mRNA, allowing a patient’s immune system to identify antigens. However, making a vaccine that is unique to each person and also identifies antigens in each unique patient seems like a very hard task to accomplish. The company is still in the early stages of testing, but if Moderna is able to accomplish this task, they can change the way cancer is treated forever. Moderna has already proved its mRNA technology with its Covid-19 vaccine, but only time will tell if it can utilize that same technology to help treat cancer.

Phase 3 and beyond

Phase 3 is where the most extensive testing begins to take place. This phase will have a group of hundreds or thousands of volunteers, often divided among many countries around the world. This is where the research is put into action, and proof of concept becomes reality. Be that as it may, proving the product is safe and effective is a very expensive endeavor. In Phase 3 alone, the average cost for a company is between 11.5 million and 52.9 million. After prevalent testing often taking years, the researchers will decide if the drug has proven to be a safe and effective method of treating the disease. If the company has proven that its proof of concept has shown to be an effective and safe method, they will submit a New Drug Application. This NDA will incorporate all the researcher’s findings, as well as all the scientific evidence done during their trials. This NDA will then be submitted to the FDA, where if approved the drug can finally be prescribed to patients as a treatment. After a drug is approved by the FDA, phase 4 of the clinical trial begins. With the drug being available to the public, researchers can monitor its safety on a wider scale and determine more information about the benefits of the drug. Phase 4 is often sometimes used to pull a product, with a recall or pause. This was most recently seen with the company Johnson and Johnson’s covid-19 vaccine, which was found to cause blood clots in some of their patients. 

There are many companies with compelling phase 3 pipelines, but one that stands out is Regeneron’s  ($REGN) Phase 3 trial investigating the PD-1 inhibitor Libtayo monotherapy in cervical cancer patients. If the drug is to gain FDA approval, it may greatly increase the survival rate in those suffering from the disease. In their phase 3 trial of the product, Regeneron found that their product is the first immunotherapy to demonstrate improved overall survival in patients with cervical cancer, reducing the risk of death by 31% compared to chemotherapy. The drug is even more effective with patients with Adenocarcinoma had a 44% reduced risk of death. Approximately 4,000 women die from cervical cancer a year, but Regeneron will aim to drastically reduce this number once their drug is approved.

Clinical trials are an essential process of getting a drug from an idea to the shelves of your local pharmacy. Clinical research is an expensive, but necessary process in the development of medicine and treatments. These trials do not only help qualify the research of the drug, but they also have the potential to change the lives of the volunteers that take place. Patients that take part in successful clinical trials can have their life expectancy greatly increased or even be cured of their illness. As each phase gets more in-depth the odds of a drug moving on to the next phase becomes harder to achieve. However, the drugs that will pass a clinical trial will have the potential to save and alter lives.


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