Product development and especially drug development is a complicated, highly regulated and expensive process. In 2003, DiMasi et al., published a paper estimating that the cost for developing a new drug is $800m (https://doi.org/10.1016/S0167-6296(02)00126-1). In 2010, Paul et al. in the paper entitled "How to improve R&D productivity: the pharmaceutical industry’s grand challenge", concluded that many new and novel molecules are being developed by smaller biotech companies and estimated that the cost of bringing a new molecule to the market costs $1.8bn (https://doi.org/10.1038/nrd3078).
In our view, the real cost of developing a drug should not include the cost of other drugs failures but be the total of the spend of the development costs of the particular drug.
The point which is very valid however is that a biotech company (i.e. not a multinational pharma company) must carefully and cleverly plan the development to the next inflection point, which does not necessarily have be the final approval, but the point in time when a drug can be licensed to a pharma company for further development.
This early testing begins after the lead molecule is optimised and final. It includes lab in-vitro and in-vivo studies to show biological activity of the compound against the targeted disease, including safety evaluation.
Following a successful outcome in preclinical tests, an IND is filed with the FDA to allow the test of the compound in people. The IND includes detailed information on the preclinical tests, as well as details in chemistry, manufacturing etc.
The main objective of the first phase of clinical development is to test the safety of the NCE in a small number (usually 15-50) of healthy volunteers and also provides an indication of the potential dosing range and some information on the NCE's pharmacokinetics and metabolism. Compounds in phase I have a 15-20% chance of making to the market.
If phase I is completed successfully, the NCE is then progressed into phase II, where it is adinistered under a detailed protocol to a larger number of patients to test the NCE's efficacy and safety. Sometimes, phase II is split into IIa and IIb, providing a little distinction between an early indication of proof of concept and a more robust one. Numbers of patients for a phase II vary, but as a guide, tend to be 20-50 in phase IIa and up to 200-300 in phase IIb. Compounds in phase II have a 25-35% chance of making to the market.
If proof of concept has been established in phase II satisfactorily, the compound then progresses to a detailed and large phase of clinical development, that basically confirms all the findings and expectations in a setting that provides enough data to show statistically significant difference in the efficacy of the NCE and also test safety to a great extent. Numbers of patients in phase III vary based on the disease, sometimes reaching thousands and the studies (may be combination of multi-center, multi-country trials) may last for a few years - depending on the chronic nature of the disease. Compounds in phase III have a 60-70% chance of making to the market.
Finally, all the data is compiled into a large volume of documents in a special format that comprise the NDA which is filed with the FDA, and the equivalent regulatory authorities around the world (e.g. a Marketing Authorisation Application (MAA) is filed with the EMA in Europe). The files tend to take 1-2 years to review and approve (or reject) and the process is rarely shortened for an expedited review if there is a large unmet medical need.
The Marketing Authorisation is the successful outcome of a compound's development and is the pre-requisite to market the new pharmaceutical. The approval is followed by a pricing and re-imbursement process.