Optimal Timing for Interim Analysis in Phase 2 Drug Development: A Real Options Approach

• Activity Number: 686
• Type: Contributed
• Date/Time: Thursday, August 8, 2013 : 10:30 AM to 12:20 PM
• Sponsor: Biopharmaceutical Section
• Author(s): Ouhong Wang*+
• Companies: Amgen
• Keywords: Interim Analysis ; Drug Development ; Black-Scholes ; Real Options ; Decision Science

Abstract

There has been much research on the impact of interim analysis (IA) to drug development, especially on how to handle the inflated type I error when an IA is designed to happen at a given time. However, the merit of the IA taking place at one time point versus another has been largely ignored. The pharmaceutical/biotech industry has relied on convenience to conduct IA after 50% of patient enrollment or 33%/67% enrollment, for no other obvious reason. In this research, the financial aspect of drug development is taken into consideration to assess the IA timing effect on the financial health of the entire drug development process. Specifically, the start of phase 3 is considered a financial option that is bought with the decision to continue enrollment after the phase 2 IA. Similarly, the opportunity to conduct the IA is bought with the decision to start phase 2. Such nested financial options are modeled with different timing parameters using the Black-Scholes formula, and the optimal timing for IA is determined when the net value is maximized. Simulation results will be shown to demonstrate different scenarios, together with the advantages and pitfalls in using this approach.