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Analysis: Shifts In The Therapeutic Industry — Impact On MedTech and Digital Health

 

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In the previous article, we discussed using the clinical trials listed on clinicaltrials.gov as a metric to track healthcare industry growth, with a focus on the therapeutic industry. We uncovered that the increase in the number of therapeutic clinical trials conducted in the U.S. is a result of university- and hospital-sponsored trials, while industry-sponsored trials have remained reasonably steady over the last decade.

Delving further into industry-sponsored clinical trials, we seek to understand where large therapeutic companies and earlier stage companies are spending their efforts. One of the significant takeaways is that there has been a roughly 60% decrease in the number of clinical trials needed per new therapeutic approval and that there has been a noticeable change in the distribution of clinical trials conducted by large therapeutic companies. This information is highly applicable to medtech and digital health companies that interact with therapeutics companies, like those developing technology that can be used in clinical trials or for patient monitoring.

Industry Financial Growth Compared with Industry-Sponsored Clinical Trials

According to Silicon Valley Bank’s 2019 annual report, healthcare venture funding for companies in 2018 hit $9.6 billion, up 85% from 2009, the earliest year that Silicon Valley Bank includes in its recent reports. The Biomedical Research and Development Price Index (BRDPI), which accounts for the increase in costs for developing medical products, increased 23% over the same period. This means that the average venture capital investment per clinical trial initiated increased 51% overall since 2009 when adjusted for BRDPI.

On first glance, it appears as if the cost per clinical trial has increased dramatically from 2009 to 2018. However, the number of clinical trials conducted by large therapeutics companies goes a significant way to explain this discrepancy.

The top 20 largest therapeutics companies by revenue in 2018 reduced the number of clinical trials that they conducted between 2008 and 2018 by 38%. The reduction of in-house products under development is likely greater than this figure as the market has shifted towards acquisitions and a number of the large therapeutics companies’ clinical trials come from external companies that were acquired.

In 2008, the 20 accounted for 29% of all industry-sponsored clinical trials conducted in the U.S. In 2018, the 20 companies accounted for just 18%. The 38% reduction in the clinical trials conducted by the top 20 therapeutics companies and the increased venture capital funding highlights the market shift from large pharmaceutical companies developing new products in-house to startups taking an expanded role in driving new therapeutics.

The Shifting Therapeutic Landscape

With the reduction in clinical trials conducted by the top 20 therapeutics companies, it would seem intuitive to expect that the majority of the decrease in clinical trials comes from Phase 1 and Phase 2. With increased acquisitions in the ecosystem, it seems reasonable to predict that large therapeutics companies are using startups by proxy to conduct their earlier stage development and clinical studies. However, getting definitive data on this topic is complicated by the 2008 financial crash. In 2009, the number of Phase 3 clinical trials decreased 14.5% from 2008, with evidence that this decrease was directly connected to the crash. At the same time, Phase 2 remained steady and Phase 1 saw a 3.6% increase.

If we use 2008 as the initial year, the reduction in clinical trials from the top therapeutics companies was much lower for Phase 1 trials as compared with Phase 2 and Phase 3 trials. Using 2009 as the initial year, the reduction in clinical trials from the top therapeutics companies was much lower for Phase 3 trials as compared with Phase 1 and Phase 2 trials. No matter which year we use as the baseline year, Phase 2 trials have seen the greatest percentage reduction, large therapeutics companies have had a significant reduction across the board and smaller therapeutics companies as a combined group have seen an increase in the number of trials across Phase 1, 2 and 3.

Change in the rate of clinical trials 2008-2018

Phase 11Phase 21Phase 31Combined1
Top 20 therapeutics companies change in new clinical trials (2008 to 2018)-26.7%-48.2%-41.0%-38.3%
All except the top 20 therapeutics companies (2008-2018)30.0%15.8%33.6%24.2%
All therapeutics companies change in new clinical trials (2008-2018)14.6%2.7%3.1%6.6%

1These numbers do not include Phase 1/2 and Phase 2/3 clinical trials, which combined make up 4.2% of all clinical trials.

Change in the rate of clinical trials 2009-2018

Phase 12Phase 22Phase 32Combined2
Top 20 therapeutics companies change in new clinical trials (2009 to 2018)-42.8%-49.5%-26.2%-40.0%
All except the top 20 therapeutics companies (2009-2018)37.8%17.5%49.5%30.3%
All therapeutics companies change in new clinical trials (2009-2018)10.5%3.3%20.6%10.5%

2These numbers do not include Phase 1/2 and Phase 2/3 clinical trials, which combined make up 4.2% of all clinical trials.

Among the smaller therapeutics companies and startups, there has been a significant increase in the number of clinical trials, especially in Phase 1 and Phase 3. What this suggests is that smaller companies are taking their product through FDA approval instead of being acquired by large therapeutics companies. This aligns with the strong market for taking therapeutics companies public that we have seen over the last few years.

The smaller increase in Phase 2 as compared to Phase 1 and Phase 3 suggests that therapeutics companies are more effective at selecting the right products to move forward so that fewer products are falling out of the pipeline in Phase 2, with more being selectively removed in Phase 1.

Of note, on an industry-wide scale, Phase 4 trials have faced the most significant decreases, ranging from 35% to 67% across all applicable company types and both timeframes.

Industry-Sponsored Clinical Trials and New Therapeutic Approval Rates

Despite the low overall growth in the number of trials, there were 59 new small molecule and biologic approvals in 2018, well over double the 24 approved in 2008. In 2008, there was a therapeutic approval for every 101.3 industry-sponsored clinical trials conducted and listed on clinicaltrials.gov. In 2018, there was a therapeutic approval for every 40.8 industry-sponsored clinical trials conducted and listed on clinicaltrials.gov. This measure is not exact and approvals are connected to completed clinical trials not active clinical trials; however, the trends towards approval are slow and reasonably consistent, so it serves as an acceptable tool for evaluation.

What the Changing Clinical Landscape Means for Medtech and Digital Health Companies

For medtech and digital health companies where business relationships with therapeutics companies are essential, it is useful to understand how this shift impacts these business relationships. The landscape shift towards Phase 1 and Phase 3 trials and the increase in trial efficiency based on clinical trials needed per approval presents opportunities for startups to support targeted trial endpoints to increase trial efficiency and predictive value. Given the relative decrease in Phase 2 trials, Phase 1 is becoming increasingly valuable to support therapeutics companies to make more informed decisions about pipeline products going into Phase 2, so that they can move forward with the right projects that have a higher probability of success.

Despite the decrease in Phase 2 therapeutic clinical trials relative to Phase 1 and Phase 3 trials, Phase 2 trials still make up approximately 43.4% of all trials, with Phase 1 coming in at 33.9% and Phase 3 at 22.7%. As a result, Phase 2 therapeutic clinical trials remain a very large market for medtech and digital health companies and that shouldn’t be overlooked.

The expanded number of therapeutics under study at smaller companies creates increased opportunity to partner or work with smaller companies that are likely to be quicker moving and more open to innovation.

Specifics of the Indicator

The number of clinical trials initiated was collected from clinicaltrials.gov. Under FDAAA 801, all clinical trials initiated in the U.S. since Sept. 27, 2007, must be submitted to clinicaltrials.gov. Despite FDAAA 801, the list of clinical trials on clinicaltrials.gov is not a complete list but should function as a highly representative sample of the whole. Data collection was focused on interventional trials conducted in the U.S., which used the keyword “drug.” Drug is a term used on clinicaltrials.gov under the intervention category to label therapeutics. “Biological” is also a label but is used much less frequently and is often used alongside drug when it is used. All analyses used 2008 as the starting year because it was the first complete year where FDAAA 801 was in effect.

David Saxner

David Saxner

    David Saxner is a consultant at Longfellow Associates where he focuses on earlier stage medical device, diagnostic, and digital health companies.

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