Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

The most anticipated pharma news of 2016 lived down to expectations.  

Following in the footsteps of nearly every other company that has sought to treat Alzheimer's disease, Eli Lilly announced Wednesday that its Alzheimer's drug solanuzemab (sola) failed a huge Phase 3 clinical trial, sending shares down 10.5 percent.

Much of the post mortem will likely focus on the beta amyloid holy war -- a battle between those who believe Alzheimer's is caused by the buildup of a particular type of plaque in the brain, and those who don't. Sola is the latest in a string of failures of drugs targeting this plaque. Biogen has another such drug in development, and its shares fell 4 percent on Wednesday. 

But the more broadly applicable lesson is one pharma seems incapable of learning: Digging through failed drug trials to find justification for moving forward with medicines is a recipe for failing again.   

Deja Vu
A third major clinical trial failure for Eli Lilly's investigational Alzheimer's drug sent shares down on Wednesday
Source: Bloomberg
Intraday times are displayed in ET.

Too rarely these days is a drug's clinical-trial failure the end of the line. Drugmakers almost always find a "but" -- "But the drug appeared to work in a certain population of patients." "But the placebo effect was unexpectedly large." "But, but, but." 

These are variations of post-hoc analysis, in which firms blame trial failures on everything but the drug itself in order to justify more trials, focusing on narrower sub-groups of data. It's the "this time is different" of the pharma industry, and it's endemic.  

Sola had failed in two previous Phase 3 trials. But in poring through those results, researchers came to believe the trials had failed the drug, not the other way around, and the latest trial selected patients more carefully. Sola was given every chance to succeed -- Lilly even moved the goalposts of success -- but it failed once again.

Sola joins a large graveyard of drugs that have repeatedly failed Phase 3 trials, including Takeda's motesanib. The list of drugs that have been pushed into Phase 3 trials despite iffy Phase 2 data is even longer. That group includes Lilly's own schizophrenia drug candidate pomaglumetad.

It's understandable that pharma companies might resist swallowing sunk costs when they've spent a decade and hundreds of millions of dollars on a drug. Sola in particular was a potential blockbuster that could have lifted Lilly's growth prospects; analysts recently expected 2020 sales to hit $1.6 billion. There's a massive unmet need for an Alzheimer's drug, and Lilly's scientists clearly still believed in sola. 

Dashed Hopes
Analysts had high expectations for the potential of Eli Lilly's Alzheimer's drug despite the risk it would fail
Source: Bloomberg

But the post-hoc analysis process seldom helps anyone. A Phase 3 trial is meant to confirm the findings of a Phase 2 trial. Moving forward based on post-hoc analysis of a failure means changing the trial, changing the question you're asking, and introducing a massive new set of unknowns. It's basically (and expensively) pursuing a whole new hypothesis based on flawed and limited data. 

The approach has failed so many times that when the phrase "sub-group analysis" is uttered by a biopharma company, klaxons should blare and the words "confirmation bias" should appear written in the sky in letters of fire. Yet the practice continues

Maybe this time will actually be different -- for Lilly, at least. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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