AstraZeneca - I suppose it could be worse

I have just heard from a reliable source that AstraZeneca is spinning out its EARLY antibiotic research effort.  It looks like “early” is defined as up to and including phase II.  One product in that pipeline is AZD0914 for the treatment of highly resistant gonorrhea. The spin out will be a wholly owned subsidiary of AZ and will be funded with $40 million from AZ. Although SOME of AZ’s current employees will go to the newco, 95 from Waltham, Mass apparently will not and will join the growing number of folks in the unemployed antibiotic research roles or will be retained in other areas of AZ. 

This news is confirmed by an article from John Carroll at Fierce Biotech.

This shows that AZ was unable to attract any partners under the terms it insisted on – a major stake – on the order of 50% - in a spin-off and a valuation that was probably unrealistic for most investors and for other pharma companies. If you build it on a shaky foundation – no one will come.

AZ has been consistent for almost two years – antibiotics do not provide a return on investment.  In my view, they are consistently wrong and will be shown to be so in the next five years.

There are two pieces of not so bad news here –

The LATE pipeline – phase III and later products, will continue to be supported within AZ.  This will include certain antibodies being pursued by AZ’s Medimmune, ceftazidime-avibactam, aztreonam-avibactam, and the marketed products ceftaroline and meropenem. Note that ceftaroline-avibactam is not mentioned.

Actavis/AZ’s ceftazidime-avibactam was just approved by the FDA based on phase II data and  following the advice from their advisory board last December.

Antibiotics as Orphans; The NY Times and Antibiotics

First, I would like to discuss antibiotics as orphan drugs. I received a note from Mark Grier recently asking why antibiotics, even those for relatively rare, highly resistant infections, are never considered for orphan status by the regulatory authorities.  As he points out, there are a few exceptions to the rule.  Antibiotics for cystic fibrosis get orphan designations.  Cempra’s fusidic acid was allowed this for oral fusidic acid in the US for the treatment of prosthetic joint infections. But I have discussed this, at least indirectly, with both EMA and FDA in the recent past. Both say that antibiotics are not considered orphan drugs.  At the time, I accepted this as just a fact of life. I always told my children and still tell my grandchildren that I don’t deal with “why” questions. But, like most children, I am occasionally drawn to the “why” of things – and this is the case for this regulatory stance.

Why might this be important?  The answer is that to obtain highly beneficial pricing and reimbursement, especially in Europe, the orphan designation is very helpful. The guidelines in Europe are very clear. The disease (not really defined) in question must occur in 5 or less individuals per 10,000 population in the European Community. But, I posed, what about carbapenem-resistant Acinetobacter infections for example? I believe that there will be about 100,000 such infections occurring each year in Europe –less than the 5 per 10,000 mark.  The disease is clearly devastating and current treatment, when it is available, is poorly efficacious and toxic.

So why couldn’t an antibiotic active against such infections be treated as an orphan under EU guidelines?  According to EMA - What you appear to be defining is a degree of severity of pneumonia, urinary tract infection and wound infections as these are carbapenem-resistant Acinetobacter infections. This would be considered a subset under the current legislation of a broader condition which would be defined as pneumonia, urinary infections or wound infections. As it would appear that these conditions would have a prevalence greater than 5 in 10,000 they would not meet the criteria for Orphan Designation so the Committee would not be able to designate the antibiotic.

My response is that this is now inconsistent with guidelines from both EMA and FDA on antibacterial drugs that allow registration for pathogen specific indications.  But whoever said that regulatory agencies were internally consistent?

Moving on to the New York Times –

The New York Times is my favorite newspaper.  I devour it every day.  I believe that it is the best in the world (some Londoners might argue this).  So I was both overjoyed and shocked to see an editorial in the times yesterday by Ezekiel J. Emanuel who argues that we need to offer prizes for antibiotics active against resistant pathogens. I am thrilled that the New York Times thinks this is an important enough topic to warrant an Op-Ed.  And I am impressed that an oncologist like Dr. Emanuel would take this on. Dr. Emanuel’s rationale is sound and his reasoning is mostly right on track.  The figure he eventually postulates ($2 billion), which is based on the cost of getting a drug to market, is probably way overblown given the complexities of the net present value calculation and the capital costs involved in the total cost of getting a drug to market.  I was just surprised to see this article published in the Times as if it were somehow a new idea.  This approach and many many other similar approaches have been discussed ad-infinitum for the last six years or so in a large number of US and international forums.

Mossialos and coworkers, in a report from the London School of Economics, elegantly described push vs. pull incentives (Ezekiel’s prize would be a pull incentive) for antibiotics in 2009. Recent meetings at the Pew Charitable Trust, the Chatam House and others discussed similar approaches. These discussion have been a frequent topic in this blog (1,2, 3). So how Emanuel’s idea is new or groundbreaking escapes me. 

But I still like the New York Times.

AstraZeneca - What'd I Say?

An article by John Carroll appeared in FierceBiotech yesterday on AstraZeneca’s efforts to exit antibiotics R&D.  First, the article confirms what I have been saying for a long time now – Astra Zeneca is cutting a running. He notes, as have I (1, 2), that AZ has shopped their pipeline to almost everyone imaginable from banks to venture funds to other pharma companies.  But what the FierceBiotech article provides are details that have heretofore not been public and that may explain why it is taking AZ so long to close the deal.  AZ wants to retain significant control retaining possibly 50% of the value of the franchise. John notes that his sources complain that the assets were late to market and not competitive.  I take issue with that.  If they are planning to sell off all their assets – this would include meropenem, ceftaroline, ceftazidime-avibactam, aztreonam-avibactam and possibly ceftaroline-avibactam (if it is still being developed). All of the latter would exclude North America that belongs to Actavis.  While meropenem is generic, it still brings in $2-300 million but that can be expected to decline. Ceftaroline has not been much of a seller, but I think there is potential for improvement with better marketing.  And the avibactam-containing combinations are all innovative, will make a real difference for patients and physicians, and could be important products for anyone’s bottom line.  So I think that overall, the FierceBiotech sources are wrong on their value assessment.  Where they might be correct is the potential objection to AZ retaining so much control. AZ has not marketed an antibiotic since meropenem.  One could argue that their lack of recent experience is showing in their lackluster performance with what should be a good product – ceftaroline. The 50% stake for AZ also reduces any gains for the potential partner and will be dissuasive from that point of view.  A straight spin-off keeping a much lower stake might have had more success more quickly. In spite of all this, FierceBiotech says that a deal appears to be imminent – but where have we heard that before? 

 

The final fallacy lies in the fact that all these considerations rely on the world’s least reliable sorts of data – marketing surveys and their resulting market projections.  I can’t tell you how often these have been completely wrong in all directions.

Mr. Carroll has uncovered information suggesting that over a third of AZ’s antibiotic R&D team have already headed for the Waltham, MA exits.  He goes farther than I did in my blog on the subject. AZ shut down its Bangalore research site focused on discovery of antibiotics for the developing world a long time ago now.

FierceBiotech also mentions, as have I, that antibiotics are making a comeback.  AZ’s CEO, Pascal Soriot, remains determined to ignore the potential of an antibiotics franchise to contribute in an important way to his company’s bottom line.

Obama and Antibiotics

The President’s Council of Advisors on Science and Technology (PCAST) issued a report last fall. This report recognized the clear threat of antibiotic resistant infections to the public health of the US and for populations around the world. The advisors made a large series of recommendations for dealing with the problem.  These included increase in surveillance capabilities, improved regulatory pathways, improvements in our ability to carry out clinical trials in seriously ill patients with resistant infections and solutions for the market failure of antibiotic R&D. The market failure is related to the fact that the industry does not believe that they will be able to achieve an appropriate return on investment for their research and development dollars in new antibiotics for resistant infections.  This week, the President released his budget request for dealing with antibiotic resistance.

In this blog, I want to explore two facets of the PCAST report and the President’s budget (as far as I understand it). The first is the industry view that they will never achieve a return on investment for antibiotics targeting very limited populations – those with highly resistant infections. This belief is based on two pillars of logic.  (1) Antibiotics have traditionally been low priced commodities within a generally saturated and satisfied market. High priced drugs in this environment will simply not be used regardless of their potential utility. (2) The numbers of patients available for treatment with these antibiotics are so small, that even very high prices ($20,000 per course of therapy) will not be sufficient to provide the required return on investment. 

First – a disclaimer.  I am not a commercial or marketing expert – but I have spent a lot of time with these experts and a little of their knowledge has rubbed off. So take the following with an appropriate grain of salt. In order to come up with their conclusion (1) above, companies carry out interviews with payers – in this case, frequently, pharmacy managers.  They are already burdened with high-priced oncology drugs.  The physicians in their hospitals are already dealing with resistant infections with toxic drugs that are less expensive and that might not work very well – but as pharmacy managers – do they see the downsides of this practice within their own budgets?  I think not. So their natural response to a $20,000 hypothetical antibiotic is a seizure of panic. Physicians are also interviewed – but in my view they are notoriously ignorant when it comes to pricing considerations. In the hospital where I work, the physicians have no idea how much the antibiotic they are ordering costs.  Furthermore, the byzantine billing system results in charges for an antibiotic that are completely unrelated to the cost in any case. So why speak to physicians?  Because they influence formulary decisions in hospitals. So when asked, physicians do pick a price point at which they think that the antibiotic would not be justified.  But, of course, they have no idea whether that is true or not.  They require education since it has clearly been shown that for certain resistant infections prices up to $50,000 per course of therapy can easily be justified. My conclusion for the commercial groups of companies that reject the idea of high-priced antibiotics is that they should rethink.

On assumption (2) above, one need only look at a real commercial expert’s evaluation of a hypothetical antibiotic for resistant Acinetobacter infections.  This analysis was only for US patients.  If I expand it to the world, assuming conservatively the same percentage of highly resistant infections, I can easily double the number of patients.  Therefore, at only $5,000 per course of therapy, capturing 50% of the potential market, my peak year sales will be $500 million.  At $10,000 per course of therapy assuming 25% market penetration I maintain that peak year sales figure. This kind of analysis should be attractive to large and small pharma alike.

I would argue, that if pharmaceutical companies would have some guts and push these therapies forward at risk, they would be rewarded. But guts are not to be found in today’s big pharma. Cubist, one of the gutsiest pharmaceutical companies, has just been gobbled by a less courageous large company, Merck.  Will this make things better or worse?

 

This brings me to Obama’s budget and the PCAST report.  President Obama has called for an additional $650 million for both Biomedical Advanced Research and Development Authority (BARDA) and the NIH. BARDA is the HHS group that has been funding antibiotic R&D within industry – providing a so-called push incentive.  Here the idea is to decrease the investment required to get needed antibiotics to market thereby increasing, by definition, the return.  The PCAST report called for an $800 million increase in the  investment in BARDA alone for both push incentives and for so-called pull incentives.  The latter incentive would be some sort of guaranteed market for the first few years of commercialization of a new antibiotic for resistant infections.  Again – this is designed to provide an immediate uptick to the company’s return on investment. The investments championed in the PCAST report would do the trick.  Those in the President’s budget fall short. 

Of course, it doesn’t matter since funding any of this would require a congress willing to invest in the health of the American public – and we still don’t have one of those.