>The Phase 3 trial is the `offspring' of the `successful' Phase 2 trial so I would think the probability of success of the phase 3 should be better than the a-priori average.<
Underlying efficacy and probability of success in a given trial are two separate things. The latter obviously depends on the former but it also depends on the trial design.
Program-survival bias refers only to the underlying efficacy per se—not to the clinical-trial design. To reiterate: the efficacy observed in phase-2 programs that end up advancing to phase-3 is biased on the high side relative to the true efficacy of the drugs in question. This bias is either underestimated or not understood by many biotech investors.
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