The Research Process 
The Research Process and Project Finance
Conducting drug research requires commitment, persistence and financial resources. It takes between 10 and 15 years to develop a new drug, and only a fraction of all the CDs tested result in new pharmaceuticals.
Drug Development Step by Step
Research starts with an idea of how a disease could be tackled. The introductory phase involves experimental investigation of whether a compound has the prospects of hitting the intended target for therapy. These activities are time-consuming, and multiple compounds are screened before one or more CDs are produced. Patents protecting the idea and/or CDs are filed as soon as possible. The designated compound is then studied and documented so it can be administered on humans. The whole preclinical phase usually takes three to five years. This is followed by the clinical phase, which in turn, is usually divided as follows:
Phase I
Trials intended to verify that a compound can be given to humans with an acceptable safety profile. Here, the dosages to be administered and how the compound is absorbed, distributed, metabolised and excreted from the body is defined.
Phase II
The compound is tested on patients suffering from the intended disease, with the aim of demonstrating that it has the postulated effect. Attempts are made to find an optimal dose, and obviously, documentation of safety and tolerability continues.
Phase III
Large-scale trials comparing the compound with current therapy, or if there is none, a placebo. The purpose is to demonstrate the effect of the compound compared to existing therapies. If the product has equivalent or better efficacy, onward development proceeds. A number of other studies into safety, the effect on other drugs, types of preparation and other considerations are conducted in parallel. After clinical trials, documentation is compiled in a registration application that is filed with the authorities in the relevant countries.
Phase IV
Trials are conducted after approval to document how the drug functions in the everyday clinical environment. On occasion, the authorities issue conditional approval, whereby the company must generate a specified amount of knowledge on the drug within a given time, which is frequently the purpose of phase IV trials.
Research Builds Knowledge and Value
New knowledge of CDs accumulates through the various research phases. Simultaneously, a range of potential risks can be progressively eliminated, such as the compound triggering unacceptable side-effects. Rising value corresponds to this increasing knowledge. The figure on the next page illustrates the schematic schedule of the various developmental phases, and how knowledge accumulates and deepens during development.
Regulators and potential business partners are applying more stringent standards to the documentation of research results. This implies time-consuming and resource-intensive activities. The cost of developing a complete new drug has increased with these more stringent standards, and is now estimated at an average of EUR 895 m (EFPIA) including investments in projects that never reach the market.
As value grows with increasing knowledge, trials become increasingly complex and extensive the further research progresses. The most costly portion of development are the large-scale clinical trials that conclude the process. Each step a project takes through clinical development means increasing likelihood of reaching the market. In standard terms, the likelihood of reaching the market is:
- After all preclinical approx. 20%
- After phase I approx. 30%
- After phase II approx. 65%
- After phase III approx. 90%
Funding and Partnerships
Most often, investments in the later research phases are funded wholly or partly by the major pharmaceutical corporations. A company like Tripep can seek partnerships at various points in development. The choice of timing to start partnerships is based on balancing a series of factors. The further successful research is conducted in-house, the stronger negotiating position ahead of a partnership. Accordingly, the company assuring sufficient access to funding for taking a project to the ideal point is a key issue.
However, it is seldom appropriate for a research company with limited resources and lacking cash flow to take a project right to commercialization itself. Time to market is also significant to value, because all patents are time finite. Major pharmaceutical corporations have specialist know-how and resources enabling them to maintain a high tempo in the final phases of development. They also have the necessary market presence to reach the market quickly when a drug is ready for sale. Moreover, a partnership agreement can generate revenues that the research company can use to develop other promising CDs it may have in its portfolio.
In practice, it is usually suitable and possible to reach partnership agreements in phase II, because the likelihood of reaching the market at this point is fairly high, while the costs of continued trials are accelerating. Usually, partnership agreements include the following components: down-payments, milestones and royalties on future sales, with or without guarantees. These various payments are mutually dependent, so for example, high milestones may imply lower royalties. But each agreement is unique and can contain components other than those stated above.
Example Royalties for a Specialist Drug with Estimated
Sales of over USD 500 m.
Developmental Phase Royalty (%)
Preclinical phase 5-10
Clinical phase I 8-15
Clinical phase II 10-20
Clinical phase III 18-25
Approved products >25
Source: Redeye Research