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How a Small Biotech Survives Amid Looming Antibiotic Crisis

TheStreet logo TheStreet 10/26/2020 Adam Smith
a person looking towards the camera: How a Small Biotech Survives Amid Looming Antibiotic Crisis © TheStreet How a Small Biotech Survives Amid Looming Antibiotic Crisis

What if the drug that could save you or a loved one from a case of drug-resistant bacterial pneumonia was invented, approved and for sale, but you couldn't get it?

What if there were several new approved drugs that could fight against a growing threat of aggressive bacterial infections, but the companies making them either have gone bankrupt or they're struggling to get doctors to prescribe them?

It couldn't happen, right? Think again.

"Bankruptcy is destroying antibiotics much faster than resistance," said Kevin Outterson, a Boston University health and disability law professor, in an email to TheStreet.

In the U.S. and around the globe, creating new antibiotics is becoming failing business model -- and it's hurting health care as much as the drugs' makers. Almost half of the Food and Drug Administration-approved antibiotics in the last decade have suffered an "economic wipe-out" in the past two years, said Outterson, who's followed the industry for nearly two decades.

The obstacles are many: A broken marketplace for new antibiotics, unrealistic drug pricing expectations and a pervasive belief that new artillery against bacteria should be held onto tightly instead of firing on the front lines.

One outlier is Boston-based Paratek , a biotech whose main product is Nuzyra, a tetracycline-class antibiotic that's considered an upgraded weapon in the battle against bacterial pneumonia and acute skin infections. It's surviving, but struggling to get its drug to patients. Its stock currently trades on Nasdaq for around five bucks -- a fraction of its value years ago -- and its market cap is just $224.67 million.

Outterson says the industry's problem is so bad that only two of the new small public companies with FDA-approved antibiotics have avoided bankruptcy or getting bought up at fire-sale prices. One is Paratek and the other is a biotech called Nabriva , whose main product is Lefamulin, a partially synthetic compound that prevents bacteria from growing.

"The companies behind five other antibiotics have gone through either bankruptcy or a sale at a steep discount," said Outterson.

The cost of developing new antibiotic drugs can get close to $1.5 billion overall, according to a 2017 paper funded by AstraZeneca. Yearly revenues for the new products, however, are a crumb of that amount.

"With antibiotics, people still believe that you should be getting them for a buck," Dr. Evan Loh, chief executive of Paratek, told TheStreet during a recent phone interview. But, he said, "with small biotechs like Paratek now accounting for about 95% of the innovation in antibiotics, we just don't have the ability, nor are we able, to sell our products at a loss."

The pricing for antibiotics, he and other industry experts say, is far different from, say, drugs used for cancer treatment.

"On day-one, with a new oncology product that extends someone's life for six weeks - but that is not life-saving like antibiotics are - you can charge $50,000 or $60,000 and doctors and health systems are willing to pay for that," said Loh.

This is not the case, however, with antibiotics.

"New antibiotics have the double-whammy of low prices and low volumes," said Outterson, adding that the pricing system used by Medicare and some insurers to figure out patient costs is helping fuel the crisis.

At the same time, hospitals and doctors generally avoid using the newer, better medicines, out of fear they too will become weaker against bacteria, like the old ones have, experts say. Also, when antibiotics are used, they are generally prescribed for brief periods.

But all this is coming at not just a financial cost for drug developers, but at a human cost for those infected with deadly bacteria. Diseases caused by pathogens that have built resistance to current drugs is responsible for around 700,000 deaths globally every year, according to a paper published last week in the journal Nature titled, "Why big pharma has abandoned antibiotics."

If the world continues on this path, these deaths could balloon to 10 million by 2050, according to a recent report from a United Nations group on antimicrobial resistance.

Backed by around $285 million in funding from the federal agency BARDA -- the Biomedical Advanced Research and Development Authority -- and with a Chinese licensing collaboration in the works, Paratek is currently working to get on the formularies of about 600 hospitals in the U.S.

"That's a small fraction of the overall 6,000 hospitals, and to be honest with you, the level of utilization of my product today is at a .0001% of the patients that might be at risk for certain types of resistant infections - and we're not going to change the resistance pattern," said Loh. "It could take my company, for my product, maybe three, four, even five years to get to profitability, and that's a big cash drain for us to be able to weather the storm… to get to the other side of the commercial abyss and to profitability."

Still, he and other experts agree, the crisis that is causing Paratek's pain could soon cause global hurt.

"We've been talking about antibiotic resistance for decades, but it's really the unspoken pandemic. It's something that everyone expects to get better, but unless you are affected by it directly - a family member or yourself - you won't care about it," said Loh. "If we don't recognize this antibacterial crisis that's in front of us, and this current pandemic, and the way the marketplace is currently structured, these antibiotic companies are going to go away."

Paratek and Nabriva, said Outterson, are the survivors in a crumbling industry.

"But these public companies are still not out of the woods yet," he said. "When the companies responsible for most of the approved FDA antibiotic pipeline for a decade are struggling or worse, there is a systematic problem."

That problem could also hurt health care further as scientists leave the field.

"If these companies go away, you have a massive brain drain," said Loh. "These scientists - who have been steeped in the tradition of how to develop antibiotics - are going to go work in other areas. The U.S. for sure, and the world over all, need some type of government support, for this market place to be successful."

This story has been updated.

This article was originally published by TheStreet.

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