Clinical Trials: What It Means, How It Works

Clinical Trials: An Overview

Clinical trials are scientific studies of the safety and efficacy of a new medical drug or other treatment, conducted on human volunteers.

In the U.S., the results of the studies are a key component of a pharmaceutical or biotechnology company's application for approval from the Food and Drug Administration (FDA) to introduce the drug to the market.

Clinical Trials In Depth

Clinical trials are undertaken to evaluate drugs, devices, and procedures. The studies are evidence that a treatment is helpful or harmful, and that it is more effective or less effective than an existing treatment or a placebo.

Drugs normally undergo three phases of clinical trials. In the first phase, a drug’s delivery method, dosage, and safety is tested on a small group of people. The second phase uses a larger test group. Most treatments fail in one of these phases.

There are several types of clinical trials. A single-arm trial has no comparison group. A randomized controlled trial (RCT) has two groups of patients, each of which may receive either the test treatment or a harmless placebo. Depending on the trial design, the allocation of the drug vs. the control may not be 50/50, often with the real drug being given to up to two-thirds of trial participants, especially at later phases.

If it is a double-blind trial, neither the patients nor the doctors know which group is which until the study is over. This type of study is designed to eliminate bias in both the patient and the observer, and the random assignment of drug vs. placebo is done via a computer program.

Phase 1 Trials

Phase 1 is the initial introduction of an experimental drug or therapy to humans. This phase is the first step in the clinical research process involved in testing new or experimental drugs. The main goal of phase 1 studies is to establish the new drug’s side effects, as well as its metabolic and pharmacologic action. This is achieved by administering increasing doses of the experimental drug to trial participants. Researchers subsequently perform detailed research and analysis on various aspects of the drug, including the body’s response to it, the method of absorption, how it is metabolized and excreted, and safe dosage levels.

Phase 2 Trials

Phase 2is the second phase of clinical trials or studies for an experimental new drug, in which the focus of the drug is on its effectiveness. Phase 2 trials typically involve hundreds of patients who have the disease or condition that the drug candidate seeks to treat. The main objective of Phase 2 trials is to obtain data on whether the drug actually works in treating a disease or indication, which is generally achieved through controlled trials that are closely monitored, while safety and side-effects also continue to be studied.

Phase 3 Trials

If a drug or other treatment reaches phase 3 of the trial, it will be tested on a larger group. Phase 3 trials are used to obtain additional information about the new drug’s effectiveness and safety to assess the benefit versus risk of the therapy and to use this information in the drug’s labeling, if it is approved by the FDA. These trials are large-scale studies that involve the participation of several hundred to several thousand patients across multiple study locations. The average duration of Phase 3 trials ranges from one year to four years, and only between 25–30 percent of tested medications make it through this final stage of testing.

The Investor View

Only about five percent of all drugs that are developed pass all three phases of clinical trials and are eventually approved for sale.

Investors in pharmaceutical and biotechnology stocks follow drug trials closely. This is not an investment choice for the faint-hearted, as a single failure could set a promising treatment back for years or forever. If a drug does succeed, it can be a huge boon for the company and its investors. If a drug fails at any stage in the clinical trials process it can sink a stock. As a result, drug stocks can be quite volatile and headline-driven.

The Drug Approval Process

Statistical analysis is a key component of evaluating the results of a clinical trial. The primary question is whether the treatment was proven to be more effective than a chance outcome.

That can be difficult to determine. The test subjects may generally be healthier or unhealthier than the patients who would actually use the treatment being tested. That is why a larger test group is preferred to a small one.

The FDA Approval Process

If a drug succeeds in the trials in the United States, a New Drug Application (NDA) is submitted to the FDA. This is the formal final step taken by a drug sponsor and seeks approval to market the new drug in the U.S. An NDA is a comprehensive document with 15 sections that include data and analyses on animal and human studies, the drug’s pharmacology, toxicology, and dosage, and the process used to manufacture it.

Once a drug reaches the NDA stage, the probability of it receiving FDA approval and being marketed in the U.S. exceeds 80%.

Filing of an NDA typically does not result in a substantial increase in the share price of a publicly held sponsor company. Most of the speculation about the promising new treatment is likely to have already occurred as it moved through the successive phases of its clinical trials.

An Abbreviated New Drug Application (ANDA) is a written request to the U.S. Food and Drug Administration (FDA) to manufacture and market a generic drug in the United States. Abbreviated New Drug Applications are “abbreviated” since they do not require the applicant to conduct clinical trials and require less information than a New Drug Application.