The process of approval

When talking about development-stage biotechs, we often refer to the three phases of clinical trials and new drug applications like the process of obtaining FDA approval for a drug is rather simple. However, it is much more complicated than just a four-step process. And today, I hope to explain the process a little further.

The process of getting a drug from the lab to patients takes 12-15 years on average. And the likelihood of a drug ever getting from the lab to market is 1 in 5000, while just making it to human testing is 1 in 1000.

The process of approval starts with discovery and pre-clinical testing. This stage, on average, takes 5-7 years. In a lab, scientists use synthesis and purification testing, seeking a drug that has potential value. There is also limited animal testing done at this time. Five out of every 5000 drugs that are tested in the lab, ever make it to the next stage.

If a drug is deemed to have some potential value, a company will file an Investigational New Drug Application (IND) with the FDA. This allows a company to begin clinical trials, which are broken up into the three phases that are commonly referred to. The clinical trial process lasts, on average, 5-7 years as well.

Phase I trials are short term (6-18 months), testing the drug in 20-80 healthy volunteers to determine basic safety and dosage profiles for the drug. If a drug is deemed safe, it will move to Phase II, where the drug is tested for a longer period of time (18-24 months) on 100-500 patients. These tests seek efficacy and safety. Phase II trials typically experiment with dosage levels to find the optimal level of dosage and also seek further safety information. Next, if a drug meets safety and efficacy goals, it will move into Phase III testing. Phase III is large-scale testing for safety and effectiveness. Approximately 1000-5000 patients are tested over a 2-3-year period, seeking long-term effectiveness information, and long-term side-effect information. Phase III trials are the most important, and are the primary information that the FDA uses in determining approval.

If a drug succeeds in meeting all of its goals in clinical testing, the company can then file a New Drug Application (NDA) with the FDA. Over the next 6-18 months, the FDA will review the drug's safety and effectiveness, along with recommended labeling. FDA approval will allow the drug to be marketed in the United States with approved labeling. Lastly, the FDA will monitor the drug while it is at market, gathering safety information, which can lead to changes in labeling or even pulling the drug from the market if long-term adverse effects are reported.

As we can see, the FDA approval process is long and requires a significant level of investment. It is very important for investors to understand this process because it can take a significant toll on small, development-stage biotechs with most of their cash riding on a few drugs in clinical trials.


Most of my information was obtained from FDAReview.org