Is AstraZeneca Making a Big Mistake With Its Pipeline?

AstraZeneca publishes data on its pipeline progress over five years, but investors in Merck, Vertex Pharmaceuticals, and other drug developers should be worried about using the average success rate.

Jun 6, 2014 at 2:30PM

AstraZeneca (NYSE:AZN) recently published some interesting data on the progress of its pipeline from 2005 to 2010, highlighting just how difficult it is to get a drug through the marathon of clinical trials. For the industry as a whole, just 6% of drugs in the preclinical stage make it through. And getting into the clinic doesn't help increase the odds, with just a 9% success rate for phase 1 drugs to make it all the way past phase 3.

Investors have to be careful using the average numbers, though, because the likelihood of success can vary widely depending on the disease the drug is being tested for. Antiviral drugs, for instance, have a very high rate of success for drugs that have activity in phase 1. No one should be worried about the efficacy of Merck's (NYSE:MRK) hepatitis C cocktail for its phase 3 trial, for instance. The only potential worry is that side effects might be observed as the drugs are used in a larger number of patients.

On the other end of the scale, investors are cautious about how Vertex Pharmaceuticals' (NASDAQ:VRTX) cystic fibrosis drugs will perform in its phase 3 trials despite having produced a statistically significant difference in the phase 2 trial.

In the video below, senior biotech specialist Brian Orelli and health care analyst David Williamson discuss the data including why AstraZeneca would just get rid of 8% to 9% of compounds even though there weren't issues with the drugs' efficacy or safety.

Drug development might be tough, but at least AsraZeneca and Merck offer a dividend
The smartest investors know that dividend stocks simply crush their non-dividend paying counterparts over the long term. That's beyond dispute. They also know that a well-constructed dividend portfolio creates wealth steadily, while still allowing you to sleep like a baby. Knowing how valuable such a portfolio might be, our top analysts put together a report on a group of high-yielding stocks that should be in any income investor's portfolio. To see our free report on these stocks, just click here now.

Brian Orelli has no position in any stocks mentioned. David Williamson owns shares of Merck. The Motley Fool recommends Vertex Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information