This image shows a lab technician measuring the zone of inhibition during an antibiotic sensitivity test, 1972. The zone of inhibition is measured and compared to a standard in order to determine if an antibiotic is effective in treating the bacterial infection. (Gilda Jones/CDC via Getty Images)

Bio­phar­ma has aban­doned an­tibi­ot­ic de­vel­op­ment. Here’s why we did, too.

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Tim­ing is Every­thing

When we launched Oc­ta­gon Ther­a­peu­tics in late 2017, I was con­vinced that the time was right for a new an­tibi­ot­ic dis­cov­ery ven­ture. The com­pa­ny was found­ed on im­pres­sive aca­d­e­m­ic pedi­gree and the man­age­ment team had known each oth­er for years. Our first pro­gram was based on a com­pelling ap­proach to tar­get­ing cen­tral me­tab­o­lism in the most dan­ger­ous bac­te­r­i­al pathogens. We had al­ready shown a high lev­el of ef­fi­ca­cy in an­i­mal in­fec­tion mod­els and knew our drug was safe in hu­mans.

At the time, 12 of the largest 18 bio­phar­ma com­pa­nies had aban­doned all an­tibi­ot­ic de­vel­op­ment ef­forts, fo­cus­ing in­stead on dis­ease-mod­i­fy­ing ther­a­pies for chron­ic dis­eases or can­cer. Rather than a neg­a­tive sig­nal, we be­lieved this thin de­vel­op­ment pipeline pre­sent­ed an op­por­tu­ni­ty for small biotechs to fill the void. Week­ly head­lines were scream­ing about the rise of “su­per­bugs,” the mul­ti-drug re­sis­tant bac­te­ria that can­not be treat­ed with ex­ist­ing med­i­cines. Pew Trusts had pub­lished an ex­ten­sive re­por­thigh­light­ing su­per­bugs as the next lead­ing glob­al cause of death, even­tu­al­ly claim­ing more lives than all can­cers com­bined. I was con­vinced that this clear clin­i­cal need would re­sult in re­al re­form in the an­timi­cro­bial de­vel­op­ment space, and that larg­er play­ers would cor­re­spond­ing­ly re-en­ter the mar­ket, hun­gry to pick up first-in-class an­tibi­ot­ic pro­grams.

In ad­di­tion to a clear clin­i­cal need, there had been re­al move­ment on gen­er­at­ing in­cen­tives for an­tibi­ot­ic de­vel­op­ment, and new fund­ing mech­a­nisms were be­com­ing avail­able. The GAIN Act had re­cent­ly been signed in­to law, pro­vid­ing stream­lined re­view and oth­er de­vel­op­ment in­cen­tives for prod­ucts tar­get­ing qual­i­fy­ing pathogens. CARB-X, a pub­lic-pri­vate ef­fort backed by Gates and BAR­DA (and oth­ers), had been cre­at­ed specif­i­cal­ly to fund pre­clin­i­cal an­tibi­ot­ic de­vel­op­ment ef­forts. Ear­ly com­pa­nies re­ceiv­ing mil­lions of dol­lars from CARB-X in­clud­ed Achao­gen and Melin­ta, as well as lo­cal Mass­a­chu­setts play­ers such as Spero, Macrolide, and Tetraphase.

In Short: I Got it Wrong

Oc­ta­gon was able to raise Seed fi­nanc­ing based on our strong da­ta pack­age and founder CVs. How­ev­er, as we put our heads down and be­gan op­ti­miz­ing our in­ter­est­ing chem­i­cal hit, we watched the space fur­ther de­te­ri­o­rate:

  • Spero ($SPRO) had a suc­cess­ful IPO but lost half their mar­ket cap in the sub­se­quent 12 months.
  • No­var­tis an­nounced that they, too, were aban­don­ing all an­tibi­ot­ic de­vel­op­ment ef­forts.
  • Achao­gen ($AKAO) and Paratek ($PRTK) both had NDAs ap­proved for nov­el an­tibi­otics and saw their stock prices drop sharply in re­sponse to the news, as in­vestors an­tic­i­pat­ed all those pesky ex­pens­es re­lat­ed to com­mer­cial­iza­tion.
  • Months lat­er, Achao­gen filed Chap­ter 11. Com­mer­cial stage an­tibi­ot­ic de­vel­op­er Melin­ta is head­ing that way as well.
  • Macrolide piv­ot­ed and re­brand­ed to Zikani (their web­site now has no men­tion of an­tibi­otics).
  • Tetraphase ($TTPH) has a new CEO fo­cused on com­mer­cial­iza­tion but has not been able to make their an­tibi­ot­ic prod­uct prof­itable. They have less than 9 months of cash on hand and pub­lic mar­kets are bet­ting against them.

And these are the suc­cess sto­ries: drug de­vel­op­ment com­pa­nies with the skill and good for­tune to ad­vance a nov­el med­i­cine all the way to ap­proval!

An­tibi­ot­ic com­pa­nies com­pared to the Biotech In­dex in 2018

Click on the im­age to see the full-sized ver­sion

Like so many larg­er bio­phar­ma com­pa­nies, Oc­ta­gon changed course, putting our promis­ing an­tibi­ot­ic pro­gram on the shelf and fo­cus­ing all ef­forts on a re­lat­ed ap­proach to treat­ing au­toim­mu­ni­ty. The choice was not prof­it-max­i­miz­ing; it was ex­is­ten­tial.

Why Did This Hap­pen?

How has the space gone from bad to worse while rates of mul­ti-drug re­sis­tant in­fec­tion and deaths caused by su­per­bugs steadi­ly in­crease? Well, it’s ac­tu­al­ly not en­tire­ly clear how many lives are claimed by lack of ef­fec­tive an­tibi­otics. Pa­tients who con­tract, or suc­cumb to, a re­sis­tant in­fec­tion are se­vere­ly un­der­count­ed. Un­der the Af­ford­able Care Act, hos­pi­tals must pay a penal­ty for each hos­pi­tal-ac­quired-in­fec­tion (HAI) oc­cur­ring with­in their in-pa­tient pop­u­la­tion. As a re­sult, if a pa­tient dies from a su­per­bug con­tract­ed dur­ing a pro­ce­dure such as surgery, the of­fi­cial cause of death may be in­stead list­ed as “Com­pli­ca­tions from Surgery.” Con­sis­tent and sys­temic un­der­count­ing of ill­ness­es and deaths from re­sis­tant in­fec­tions fur­ther dis­cour­ages the de­vel­op­ment of new an­tibi­otics as the num­ber of pa­tients who need these med­i­cines may ap­pear to be very small.

The fail­ure of the mar­ket for new an­tibi­otics has al­so been caused by sev­er­al eco­nom­ic and com­mer­cial fac­tors. Ap­proval in­cen­tives were not the on­ly pol­i­cy in­clud­ed in the GAIN Act. There were al­so mea­sures de­signed to pro­mote stew­ard­ship, or ap­pro­pri­ate use, of new an­tibi­otics. In short, when a new an­tibi­ot­ic be­comes avail­able, it should on­ly be used as a last re­sort to pre­vent new re­sis­tance from aris­ing. This kind of re­spon­si­ble use is a good thing! But stew­ard­ship se­vere­ly lim­its the num­ber of pa­tients who will re­ceive a new an­tibi­ot­ic and, cor­re­spond­ing­ly, the po­ten­tial sales vol­ume.

In­sur­ers pay for in-pa­tient an­tibi­otics as part of a lump sum to hos­pi­tals known as a Di­ag­no­sis Re­lat­ed Group (DRG). Us­ing a cheap an­tibi­ot­ic in­creas­es hos­pi­tal prof­it mar­gins, while us­ing an ex­pen­sive new drug could mean that a hos­pi­tal might lose mon­ey by treat­ing a giv­en pa­tient. As a re­sult, hos­pi­tals are in­cen­tivized to use cheap­er an­tibi­otics when­ev­er pos­si­ble. This puts sig­nif­i­cant pric­ing pres­sure on new an­tibi­otics, which are one of the on­ly type of med­i­cines paid for like this.

As a re­sult, new an­tibi­otics typ­i­cal­ly end up with list prices in the $2,000 — $3,000 range (for a one-time cure!) while pay­ers glad­ly shell out tens or hun­dreds of thou­sands for can­cer drugs or med­i­cines for rare ge­net­ic dis­eases. Low sales vol­umes (due to stew­ard­ship) and low price points (due to DRG-dri­ven pric­ing pres­sures) re­sult in min­i­mal sales for nov­el an­tibi­otics. Achao­gen’s new an­tibi­ot­ic was see­ing unim­pres­sive sales of around a mil­lion dol­lars per quar­ter be­fore the com­pa­ny fold­ed. At these sales fig­ures, the com­pa­ny would have nev­er re­couped the cost of de­vel­op­ing the drug.

Smart Mon­ey is Stay­ing on the Side­lines

This is a com­plete fail­ure of the mar­ket for these crit­i­cal­ly im­por­tant prod­ucts. Pro­grams like CARB-X and the No­vo RE­PAIR Fund, de­signed to fund risky pre­clin­i­cal work and pro­mote da­ta shar­ing, are well-mean­ing but in­suf­fi­cient. An­tibi­otics are just not worth the cost of de­vel­op­ment. With­out a func­tion­ing mar­ket, CARB-X and oth­er grant pro­grams are a bridge to nowhere. Ven­ture cap­i­tal in­vestors know this. VCs will tol­er­ate bi­ol­o­gy risk, they like clin­i­cal risk, but they will not go near a ven­ture where there is ma­jor com­mer­cial risk of fail­ure. Risk cap­i­tal is bet­ter de­ployed to­wards pro­grams ad­dress­ing large num­bers of pa­tients or those that can be ex­pect­ed to re­ceive high price points. No amount of non-di­lu­tive fund­ing can make up for the lack of ven­ture cap­i­tal and growth cap­i­tal in­vest­ment in de­vel­op­ing these med­i­cines. Oc­ta­gon pitched dozens of ven­ture cap­i­tal firms and watched part­ners im­me­di­ate­ly tune out at the men­tion of an­tibi­otics; there is noth­ing worse than an in­vestor meet­ing that is over be­fore it starts.

The lack of ven­ture cap­i­tal in­vest­ment in­to de­vel­op­ing these prod­ucts has fur­ther neg­a­tive con­se­quences. Com­pe­ti­tion for tal­ent is fierce in the biotech ecosys­tem. Cash-strapped an­tibi­ot­ic de­vel­op­ers may be un­able to com­pete with high pro­file VC-backed com­pa­nies on com­pen­sa­tion. The most skilled and am­bi­tious sci­en­tists will rein­vent them­selves, join­ing mi­cro­bio­me com­pa­nies or syn­thet­ic bi­ol­o­gy star­tups where they can ap­ply their mi­cro­bi­ol­o­gy smarts. Oc­ta­gon lost one of our best sci­en­tists to or­gan­ism en­gi­neer­ing com­pa­ny, Gink­go Bioworks. If this trend con­tin­ues, an­tibi­ot­ic dis­cov­ery and de­vel­op­ment may well be­come a lost art.

Pub­lic mea­sures de­signed to in­cen­tivize de­vel­op­ment of new an­tibi­otics are woe­ful­ly in­ad­e­quate. No amount of grant fund­ing will make up for a mar­ket that is hope­less­ly bro­ken. Mer­ck CEO Ken Fra­zier put it well: “Some­times new drugs are not avail­able, not be­cause the price is too high, but be­cause it is too low.” New ideas are be­ing ex­plored, such as sub­scrip­tion mod­els that de­cou­ple sales from vol­ume while guar­an­tee­ing an­nu­al min­i­mums, but these are lit­tle more than thought ex­per­i­ments at present and may on­ly work in sin­gle-pay­er health­care sys­tems.

If our in­dus­try tru­ly be­lieves we have a re­spon­si­bil­i­ty to put pa­tients ahead of prof­its, we need to work to fix this bro­ken mar­ket rather than ig­nor­ing the prob­lem in fa­vor of more prof­itable dis­ease ar­eas. There are ma­jor ex­ter­nal­i­ties dri­ven by ac­cess to new ef­fec­tive an­tibi­otics. With­out the abil­i­ty to treat in­fec­tions, sim­ple pro­ce­dures such as C-sec­tions or hip re­place­ments will present enor­mous risk, and can­cer mor­tal­i­ty rates will sky­rock­et. Sav­ing lives should be good busi­ness but, in this case, it’s not. With­out re­al mar­ket re­form, an­tibi­ot­ic de­vel­op­ment will con­tin­ue to be un­in­vestable, and these med­i­cines will not be avail­able to pa­tients who des­per­ate­ly need them.


Isaac Ston­er is the co-founder of Oc­ta­gon, a drug dis­cov­ery com­pa­ny de­vel­op­ing tar­get­ed meta­bol­ic in­hibitors for au­toim­mune dis­ease. He has spent his ca­reer build­ing ear­ly stage life sci­ences com­pa­nies as a sci­en­tist, op­er­a­tor, and in­vestor. 

Orig­i­nal­ly post­ed on Medi­um

ZS Per­spec­tive: 3 Pre­dic­tions on the Fu­ture of Cell & Gene Ther­a­pies

The field of cell and gene therapies (C&GTs) has seen a renaissance, with first generation commercial therapies such as Kymriah, Yescarta, and Luxturna laying the groundwork for an incoming wave of potentially transformative C&GTs that aim to address diverse disease areas. With this renaissance comes several potential opportunities, of which we discuss three predictions below.

Allogenic Natural Killer (NK) Cells have the potential to displace current Cell Therapies in oncology if proven durable.

Despite being early in development, Allogenic NKs are proving to be an attractive new treatment paradigm in oncology. The question of durability of response with allogenic therapies is still an unknown. Fate Therapeutics’ recent phase 1 data for FT516 showed relatively quicker relapses vs already approved autologous CAR-Ts. However, other manufacturers, like Allogene for their allogenic CAR-T therapy ALLO-501A, are exploring novel lymphodepletion approaches to improve persistence of allogenic cells. Nevertheless, allogenic NKs demonstrate a strong value proposition relative to their T cell counterparts due to comparable response rates (so far) combined with the added advantage of a significantly safer AE profile. Specifically, little to no risk of graft versus host disease (GvHD), cytotoxic release syndrome (CRS), and neurotoxicity (NT) have been seen so far with allogenic NK cells (Fig. 1). In addition, being able to harness an allogenic cell source gives way to operational advantages as “off-the-shelf” products provide improved turnaround time (TAT), scalability, and potentially reduced cost. NKs are currently in development for a variety of overlapping hematological indications with chimeric antigen receptor T cells (CAR-Ts) today, and the question remains to what extent they will disrupt the current cell therapy landscape. Click for more details.

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