Tuesday, September 4, 2012
New Antibiotics? Go Public!
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.