Is AstraZeneca Making a Big Mistake With Its Pipeline?

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.

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