I am now contemplating a talk I have to give at ICAAC this
year (Intersciences Conference on Antimicrobial Agents and Chemotherapy for the
uninitiated – the biggest infectious disease meeting of the year in
general). My topic is New
Antibiotics – what should PhRMA be doing?
In my view – they should either spin off what assets they have, or form
independent business units with their antibiotics franchises or just get out of
the way. As I have been saying for years – for antibiotics in PhRMA companies –
smaller is better. A product with
peak year sales of $300 million is not even a rounding error for a company like
Pfizer that brings in $67 billion a year in sales. As they and many others have demonstrated since 1999 – they
couldn’t care less. In the battle
of public health vs. shareholders – guess who wins? Of course – I don’t argue that this view is somehow
perverted – its not – its just the way business is run. These companies exist to provide a
return on investment for their shareholders and not to run a public health
non-profit.
Amazingly – some companies like Astra-Zeneca and perhaps GSK
and now, maybe even Sanofi-Aventis, are apparently convinced that antibiotics
can still provide enough of a return that they can justify an effort to advance
the cause of the public health.
Bravo! I am still not exactly sure what is going on at Merck – the other
company that is (at least sort of) in the antibiotics R&D business.
But take heart.
There are other ways to bring antibiotics to market. Look at Cubist and Cubicin
(daptomycin), their anti-MRSA and -VRE (superbugs) drug. After being unable to find a partner to
finance their late stage trials, Cubist went to the public markets and raised
enough money to get them to an approval for a single indication, serious skin
infections for their antibiotic. They then went on to obtain approvals for
other indications like blood stream and heart valve infections all of which
increased sales. Cubicin is on its
way to be a billion dollar seller – the gold ring for an antibiotic. Cubist has
even in-licensed a new antibiotic, ceftolozane, for the treatment of severe
infections caused by resistant Gram negative bacteria like Pseudomonas aeruginosa (another superbug). Ceftolozane is now in
phase III trials in preparation for registration for market.
When Cubist went public in 1996 it raised $15 million. Of course, at this price, Cubist’s
investors and the after-market must have had to put in more money to allow
Cubist to move forward. Not much
has changed. Nevertheless, this remains a viable strategy for biotech –
especially in the US market. I say
this because the IPOs recently have still been meager in terms of ultimate
share price but the after-market has remained robust.
Trius, with their new oxazolidinone, tadezolid, was, like
Cubist, unable to find a partner to take the compound into phase III
development in preparation for an application for market approval. Tadezolid is a compound similar to
linezolid from Pfizer that has garnered a $1.4 billion market. Linezolid goes generic in 2015. There
are many reasons for the fact that Trius was unable to partner their product. The
FDA was lost (and still is to a certain extent), thus raising the regulatory
risk for antibiotics. In addition, in my view, their early proof
of concept trial was flawed and may not have provided the kind of risk
reduction that potential partners wanted. So Trius bravely went forward to the
public markets since they obviously had confidence in their product. Trius was forced
to cut their offering price by over 40% and raised only $50 million. This
forced them (I think) to take a stepwise approach to phase III by running one
phase III trial at a time (two are required for registration). They have now completed both trials. Tadezolid
now has a partner in Bayer. Trius was, with all this, able to maintain a
discovery effort and now has drugs in the preclinical phase of development.
Cempra is a biotech with two products in clinical
development. Solithromycin is a
compound for the treatment of community-acquired pneumonia so far only
available in oral form. It is
active against resistant pathogens and so far looks quite safe. Taksta is
fusidic acid – an antibiotic that is marketed in every country in the world
except the US and is used primarily for skin and bone infections. Like Trius,
Cempra has been unable to partner either product. And,
like Trius, Cempra was forced to shave their IPO asking price – this time from
$11-13 down to $6 per share. They
ultimately raised $48 million. But they will have to go to the after-market, their investors
and may have to prioritize which trials they do when in order to make it to
market with their first product.
Nevertheless – they are on their way and at least one, if not both, of
these antibiotics may ultimately find their way to patients and physicians
around the world.
Finally, there is Durata. I love telling this story. George Horner was the CEO of Vicuron, a biotech that was
acquired by Pfizer for $1.9 billion!
Pfizer acquired two products from vicuron one of which was dalbavancin
for the treatment of skin infections.
Dalbavancin’s differentiating feature was that it could be given once a
week instead of daily. But the trial package submitted to the FDA was not
satisfactory to the agency and Pfizer halted development. George Horner offered to take the asset
off the hands of Pfizer and complete development. Thus Durata was formed and is back in George’s hands (or at
least sort of). Again – Durata was
apparently unable to partner dalbavancin and decided to go to the public
markets. Like everyone else, they had to take a bit of a haircut but still raised $68 million. Dalbavancin is now in phase
III trials and headed to market.
Durata, with a revenue stream, may then be able to in-license other
products to expand their hospital presence.
So – PhRMA –
get out of the way! These small
companies can afford to market niche products and accept lower returns than the
giant conglomerates that are PhRMA today. They can bring needed antibiotics to
market and, in my view, they can frequently do it faster and smarter than the
large, bureaucratic behemoths of PhRMA.
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