GETTING HOLD of penicillin in 1943 was a lottery in America. The “miracle drug” had been discovered 15 years earlier but production capacity was limited, and most went to the war effort. What remained was rationed, and a single injection cost at least $40 (about $600 in today’s prices). By 1949 better manufacturing methods allowed the price to fall to 20 cents. The use of penicillin exploded.
Antibiotics subsequently became a staple of modern medicine. Massive volumes offset low margins. No longer. Finding new molecules is getting harder, which means higher development costs. At the same time, growing awareness that overuse accelerates development of bacterial resistance to the drugs has led to “antibiotics stewardship”, the practice of using the newest antibiotics only for infections untreatable with older ones. Volumes, in other words, are often disappointing. With returns from antibiotics down, big pharmaceutical companies have abandoned them for more lucrative drugs. GlaxoSmithKline, Pfizer and Merck are the only three doing clinical research in the field.
Small biotechnology firms tried to pick up the slack. In the past ten years, as the world began to panic about the rise of resistant superbugs, governments and charities provided early-stage financing. Like big pharma, though, the biotech startups have struggled to make money from antibiotics. An American one, Achaogen, filed for bankruptcy on April 15th; plazomicin, a novel antibiotic it began selling in 2018, sold barely any doses in the first eight months. Melinta, another antibiotics startup, is restructuring. Share prices of similar firms have plunged, in some cases below their liquidation value.
The demise of Achaogen has been blamed on the peculiar features of the antibiotics market, rather than the poor business decisions of its managers. The low number of cases that are suitable for potential treatment with novel antibiotics makes it hard to recruit enough patients for clinical trials. Take carbapenem-resistant Enterobacteriaceae (or CRE for short), which Achaogen went after. These bacteria kill half of those whose bloodstream they infect. But CREs cause only a tiny fraction of bacterial infections in American hospitals.
Firms get around this by having their new antibiotics approved for more common ailments treatable with existing drugs, such as urinary-tract infections. At the same time, they publish results from small observational trials of the new drugs showing good recovery rates for hospital patients with CRE infections—counting on doctors to prescribe the medicines off-label for CRE. In the case of Achaogen, a small study showed that plazomicin was indeed safer and more effective for CRE than colistin, a highly toxic antibiotic of last resort from the 1950s. Yet plazomicin did not make a dent in colistin use. A CRE antibiotic by Melinta that has been on the market for over a year is not selling well, either.
That could be because few doctors know about the new treatments. The firms which sell them lack the marketing dollars that big pharma firms shower on new drugs, says Alan Carr, an analyst at Needham, an asset manager in New York. It takes time for new antibiotics to make it into clinical guidelines, such as those of the Infectious Diseases Society of America, which are updated infrequently.
American hospitals, meanwhile, avoid new antibiotics because they end up footing the bill, which can run to several thousand dollars per patient. Federal programmes like Medicare, which provides health care for the elderly, often pay hospitals for antibiotics as part of bundled payments for hospitalisation, not as reimbursement for a particular treatment, as in the case of cancer. Aleks Engel of Novo Holdings, another asset manager, cites this model as a perennial gripe among fellow investors in antibiotics.
Antibiotics which fall flat in the first few years can eventually become profitable, notes Bibhash Mukhopadhyay of New Enterprise Associates, an American venture-capital firm. Until tests pinpoint the specific bug causing an infection (which may take days), doctors try several common antibiotics that usually work for the microbial culprit they suspect. For example, when a first-line antibiotic stops working for most cases of pneumonia caused by bacteria that grow in hospital patients’ breathing tubes, the third-line antibiotic starts selling briskly.
Many investors are too impatient to wait that long. Lacking other products on the market to turn a profit, firms like Achaogen struggle to raise capital to cover their costs. Higher prices might help, but the debate in America is about how to lower the cost of drugs, not raise it. Even if new antibiotics were paid for separately, many investors think that patients for drugs like plazomicin are too few to make these drugs commercially viable in the near term.
Making them profitable for firms will take ingenuity. This week a UN commission mused about granting large cash prizes for companies that create such drugs, or paying them a subscription that guarantees fixed revenues regardless of use. Given the X Prize and Netflix, these are at least familiar to venture capitalists.