Phase 2 trials are often called the "proof of concept" stage, but some phase 2 trials are run better than others. Having the confidence to infer a successful phase 3 trial from positive phase 2 results is only possible if the phase 2 trial was run properly. Otherwise it isn't really "proof," now is it?

Threshold Pharmaceuticals' (NAS: THLD) phase 2b trial of TH-302 in pancreatic cancer is a textbook example of how to run a proof of concept trial. Investors seem to have noticed, sending shares up more than 40% yesterday and another 15% today.

First and foremost, a placebo control is essential to know whether a drug works. Single-arm trials that compare the drug to some historical measure of efficacy are difficult to interpret because you don't know if the trial enrolled the same types of patients as the historical average. And cancer treatments are continually getting better, so historical averages tend to be behind the curve.

Combining TH-302 with Eli Lilly's (NYS: LLY) Gemzar compared to Gemzar alone resulted in a 63% improvement in progression-free survival, a measure of how long it takes for a tumor to begin growing again. And nearly twice as many patients responded to the combination as those who took Gemzar alone.

The other thing to look for in a proof of concept trial is a dosage effect. If the higher dose works better, it's extra evidence that the results didn't happen by chance. Running multiple doses in a phase 2 trial isn't always possible, especially in cancer trials where the maximum tolerability might be discovered in a phase 1 trial, but Threshold was able to test two doses and claimed that the higher dose resulted in greater efficacy than the lower dose, although it's saving the details for a medical meeting.

Based on the phase 2 data, I think it's a safe bet to assume a phase 3 trial will be successful. The key thing investors should confirm is that Threshold and its partner Merck KGaA (OTC: MKGAY) enroll the same types of patients in the phase 3 trial as they did in the phase 2 trial that was just reported. Aeterna Zentaris (NAS: AEZS) and Keryx Biopharmaceuticals (NAS: KERX) , by contrast, only enrolled a subset of patients that were enrolled in the phase 2 trial into the phase 3 trial for their colon cancer drug perifosine, which has investors feeling a little uneasy as we approach the trial results expected in the next month or so.

Threshold is the prototypical biotech multibagger, up over 300% since the beginning of the year. Fool analysts think they've found another health-care company with just as much upside. You can read about it in their new free report, "Discover the Next Rule-Breaking Multibagger." You can get your copy for free by clicking here.

At the time this article was published Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. 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.

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