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Monday, April 11, 2011

Public-Private Partnerships for Antibiotics - by Brad Spellberg

David, you’ve written extensively over the years about the egress of industry from antibacterial discovery, research, and development.  Economic incentives are needed to bring industry back into the R&D game, and hopefully meaningful incentives will be passed in a strengthened Generating Antibiotic Incentives Now (GAIN) Act.  Meantime, another concept needs to be acted on.  In IDSA’s recently released policy paper (, non-profit public-private partnerships (PPP) are proposed as a means to complement for-profit industry.

The advantage PPPs would have from a public health perspective is the ability to prioritize R&D expenses on molecules that address a critical public need, irrespective of market size.  Thus, PPPs could fill a gap in the public health need by addressing molecules that are critically needed but simply not of sufficient profit value for for-profit companies to focus on.  In addition, because they would not need to maximize sales/profit, PPPs would be able to seek small market indications and more selectively market their drugs than for-profit companies, resulting in slower development of resistance and a longer effective lifespan of the drugs.  In this way, PPPs could converge society’s need to simultaneously promote antibiotic stewardship and promote new antibiotic development, two concepts that may be in conflict in the for-profit setting.

The singular issue regarding PPPs is how to fund them.  All companies, for-profit or non-profit, only exist if capital is available.  From where does the capital come in the PPP model? Public sources of capital could include direct appropriations (very difficult in the current environment, but still should be discussed), via grants or contracts from currently existing federal programs that already have annual appropriations, by philanthropic donation, or by an Antimicrobial Innovation and Conservation (AIC) fee, as discussed in IDSA’s newly released policy paper.  The AIC fee is particularly attractive because it would result in stable, long-term funding, and also because it is funded directly from sales of antibiotics, without draining existing appropriations or requiring new appropriations.
Private assets may come in the form of molecules or technology moved into the PPP from industry.  Industry’s motive to do this would be to “de-risk” their early stage molecules without having to financially support them through the riskiest stages of development.  The originating company would have “claw-back” rights, such that if the PPP successfully developed the molecules through phase II clinical trials, the originating company would have right of first refusal to partner back with the PPP in phase III.  The originating company would then fund the phase III trial and, if the molecules were approved, would manufacture and distribute the molecules using a revenue-sharing license from the PPP.  In this way, the PPP complements and has the potential to greatly assist the originating companies to reduce their up front R&D costs and de-risk their technology all the way through phase II trials.  Other forms of private capital could come in the form of milestone payments from industry attached to their molecules, as well as investment from VC into virtual start-up companies built to house individual technology either developed internally within the PPP, or in-licensed to the PPP from other sources (academic or industry).

Ultimately, the goal is to create PPPs that serve as long-standing public health entities, whose mission is to develop critically needed new antibiotics irrespective of market size.  The PPPs should become self-sustaining from royalty streams, milestone payments, grants, contracts, and any other potential funding source.  The PPPs would have at least three pathways for R&D and discovery: 1) the PPPs would conduct their own internal discovery programs to find their own technology, filling the void in this area left by exiting big pharma; 2) the PPPs would serve as ready access vehicles for translation of molecules from academia (offering far friendlier terms than traditional venture capital, as well as a goal of completing development to commercialization, rather than a short-term goal to build substantial value/wealth before cashing out prior to commercialization); or 3) transfer of IP from industry for the explicit purpose of de-risking molecules and reducing R&D costs but allowing industry claw-back rights as discussed above.

Finally, the PPP would hopefully provide more stable employment opportunities to retain scientific talent in this field, and could even begin to rebuild the talent base shattered by massive brain drain from antibacterial R&D as experts have been forced out of the field by the massive egress of industry from antibacterials.

We are at the beginning of exploring this concept.  PPPs may be a critical pathway to the long-term future of antibacterials.  We need political leaders to fund the PPP concept for antibacterial agents, and we need industry, academia, and philanthropy to draw together around the concept.