Why Scott Gottlieb, venture capitalist, sees opportunity in antibiotics
A drug developer investor saying she’s very excited about antibiotics right now is about the equivalent of a trader telling you in 2008 the housing market looks attractive. It’s not just that almost no new antibacterials have been developed in decades; the ones that make the market don’t stand to make a lot of money.
But when a Reuters reporter asked ex-FDA chief Scott Gottlieb what he was excited about now that he’s back in venture capital, Gottlieb named the long-neglected class.
“I’m very interested in finding opportunities in the anti-infective space, particularly around multi-drug resistant organisms,” Gottlieb, now at New Enterprise Associates, told Reuters. “Anti-infectives have been unloved for a very long time. There’s a huge clinical need.”
Of course, everyone agrees on the clinical need. Report after report continues to highlight the risk from the rise of drug-resistant bacteria and the growing danger they represent to public health. It’s how you meet it that’s been the question.
Gottlieb has had ideas in the past, but as a regulator, not a venture capitalist. Before his April departure, he used his perch at the FDA to push for new plans that would change the fundamental economics that has disincentivized “superbug” research: Drug companies are paid per drug, and antibiotics are more effective the less you use them. There’s just not much demand for new antibiotics right now, leaving the bulk of the market to cheap generics.
Facing that logic, Novartis, AstraZeneca and Sanofi all recently jettisoned their antibiotics program. Bristol-Myers Squibb — one of the three companies, along with Merck and Pfizer, that originally made penicillin possible in the 1940s – shuttered their arm in 2006. And small biotechs hoping to gain traction have found a funding desert.
Gottlieb, though, said the vanishing dollars have created an opportunity. He singled out Achaogen, the once-promising biotech that spiraled dramatically after the its new antibiotic Zemdri won an approval in a highly limited patient pool and failed to secure a label expansion. The company went bankrupt and auctioned Zemdri off in June.
“After the Achaogen episode, a lot of valuations have been driven down quite dramatically,” he said. “I think there’s an opportunity to try to find some existing assets and maybe build a company around those assets.”
There are still some big players left, including Pfizer, which acquired AstraZeneca’s antibiotics branch in 2016, and Merck. GSK just began Phase III trials on a new antibiotic for urinary tract infection and gonorrhea.
Part of what they’re hoping for is the rise of new reimbursement models like the ones Gottlieb had pushed for. In Britain, the government is testing a program would pay companies according to the value of the drug to the NHS and not the amount doled out. GSK has endorsed that model.
As FDA chief, Gottlieb pushed other models designed for the US healthcare system, including an extended patent window granted by Congress and a licensing system where acute care institutions paid a flat fee to give out a specified number of doses of the drug.