As Threat of Antibiotic Resistance Mounts, Biotechs Are Running Out of Cash and Time

While the pharmaceutical industry’s powerhouses continue wrestling with lawmakers to gut drug pricing measures from the agenda, biotechnology companies deep in the antibiotic space are desperate for Capitol Hill to take decisive action on an issue somewhat less likely to command center stage: “superbugs.” The handful of drugmakers focused on developing new antibiotics to combat these drug-resistant bacteria are running dangerously low on cash, and run the risk of declaring bankruptcy.

The public health community has long fought to raise awareness of the imminent threat posed by superbugs. Every year, about 2 million U.S. residents become infected with drug-resistant bacteria; tuberculosis, malaria, HIV and other drug-resistant infections kill nearly 700,000 people worldwide. It’s been just over 30 years since scientists last discovered a new class of antibiotics. If another three decades pass without meaningful progress, experts warn, the annual death toll from drug-resistant infections is estimated to hit 10 million.

Without new treatment for infections that can arise from procedures ranging from caesarean sections to hip replacement surgery, what are now common medical operations could rapidly become life-threatening. But despite the looming risk, which has pushed a wave of young biotechnology companies to seek aggressive congressional and regulatory action, investors still aren’t biting. 

“I've been speaking with a lot of potential investors on the private side and on the public side,” said Zach Zimmerman, chief executive officer at San Diego-based Forge Therapeutics Inc. “The message I'm hearing about antibiotics is loud and clear: There's going to be no more investment in the antibiotic sector until there is substantial change in the marketplace.”

In many ways, the escalation of antimicrobial resistance is the product of a collision between two omnipresent threats facing the pharmaceutical industry: the scientific challenge of developing new treatments and market failures that thwart their pathway to commercial success. 

Zimmerman is at the helm of one of the biotech companies developing “truly novel” antibiotics, rather than new iterations of existing classes. But Forge — along with companies such as Entasis Therapeutics Inc. of Waltham, Mass., Melinta Therapeutics Inc. of New Haven, Conn., and Tetraphase Pharmaceuticals Inc. of Watertown, Mass. — is not exploring uncharted territory. And top executives are acutely aware of how this story ends in the absence of a market fix. 

Achaogen Inc., a drugmaker based in South San Francisco, Calif., that spent years developing an antibiotic for a drug-resistant infection commonly found in intensive care settings, filed for Chapter 11 bankruptcy in April, less than a year after its treatment Zemdri won federal approval. Several other companies with late-stage antibiotics have already undergone rounds of layoffs, gutted research programs or begun selling laboratory equipment.

Greg Frank, the director of infectious disease policy at the Biotechnology Innovation Organization, said Achaogen’s fate sent a grave signal to companies in this space that are clamoring to prove their products’ success before cash runs out.

“Achaogen was the first to go bankrupt. If three or four more companies also go bankrupt, the ripple effects this will have on what’s left of the antimicrobial pipeline will be quite dire,” Frank said. “We need to have swift action and signs from the U.S. government, Congress and the administration that they are really acting on this issue and trying to address it comprehensively.”

Frank is spearheading "Working to Fight AMR," the first public-facing coalition sounding the alarm on this issue in Washington. The group’s first order of business is advocating for legislation to catalyze development of new medication, most notably Sens. Johnny Isakson (R-Ga.) and Bob Casey’s (D-Pa.) DISARM Act, which would adjust how Medicare reimburses hospitals for certain antibiotics and offer additional funding to hospitals when qualifying drugs are appropriately deployed. 

Eric Kimble, chief commercial officer at Entasis, said that by nature, antibiotics — short-term drugs intended to be a lifesaving last resort — face a unique set of “perverse” incentives riddling the health system that threatens investment in this arena. For one, hospitals are reimbursed at lower rates for using novel, pricier medications, even if lower-cost generics are drug-resistant. The disincentive for buying new products means antibiotics don’t drive profit, and financial backers don’t see a solid return on their investment.

“Big pharma likes long therapies that you take for the rest of your life,” Kimble said. “These acute-care, short-term products are not as commercially attractive.” 

In fact, Entasis’ origin story begins when AstraZeneca PLC, a pharmaceutical company that surpassed $22 billion in revenue in 2018, left the antibiotic space four years ago and Entasis took one of its abandoned assets, Kimble said.  

The DISARM Act is no silver bullet, but industry leaders say the investor community has indicated its passage would send a message in favor of giving these antibiotic-focused companies a lifeline. Until then, biotech companies are trying to make their limited financial resources last.

Boston-based Paratek Pharmaceuticals Inc. has a drug for urinary tract infections in phase two of a clinical trial now, but Adam Woodrow, the company’s president and chief commercial officer, says it will be very difficult to raise the financial capital for phase three — despite the fact that Paratek is in a relatively healthy position compared to others in its peer group and is currently selling that drug to treat community acquired bacterial pneumonia and acute skin infections. Ruben Tommasi, chief scientific officer at Entasis, said the drugmaker has just enough on hand to “crack the envelope” for one of its products to determine whether it’s been successful, but no more after that. 

Most of the companies in this space hardly have cash to last 12 months, Woodrow said.

From a public health perspective, there are frightening parallels between the rise of superbugs and the opioid epidemic, Zimmerman noted. The government was warned by federal scientists of the mounting risk of opioid addiction and abuse; in the same vein, infectious disease experts have been monitoring drug-resistant bacteria across the globe and the United States for decades and “know it’s only going to get worse.”

“Just like opioids, you knew it was coming,” Zimmerman said.

For the infectious disease community, it’s a race against the clock. According to Frank, to ensure the death toll from superbugs doesn’t surpass the estimated 10 million worldwide by 2050, the time to develop new products was “yesterday.”

What’s more, drug resistance is already here. The Centers for Disease Control and Prevention has changed its guidelines for gonorrhea treatment six times in the past 20 years because of the infection’s aptitude for developing resistance. The risk of bankruptcy for companies desperately seeking funding to develop antibiotics is a matter of a couple years, if that.

According to Zimmerman, Forge has heard some positive news from federal agencies about a market stabilization initiative — perhaps a fixed-purchase or stockpile process that would guarantee companies some flow of revenue. That’s critical, he said, because companies need ammunition to show investors that even if a product isn’t a blockbuster, it can deliver solid returns on investment.

Experts acknowledged that recent action by the Centers for Medicare and Medicaid Services on addressing reimbursement challenges has been promising, but they aren’t stopping to celebrate any victories just yet. In the meantime, some companies are eyeing opportunities for consolidation.

“We’re all rooting for each other, because these bugs are mutating at a rate faster than we can develop drugs,” Kimble said.