How a Small Biotech Survives Amid Looming Antibiotic Crisis

What if the drug that could save you or a loved one from a case of drug-resistant bacterial pneumonia was invented, approved and for sale, but you couldn’t get it?

What if there were several new approved drugs that could fight against a growing threat of aggressive bacterial infections, but the companies making them either have gone bankrupt or they’re struggling to get doctors to prescribe them?

It couldn’t happen, right? Think again.

“Bankruptcy is destroying antibiotics much faster than resistance,” said Kevin Outterson, a Boston University health and disability law professor, in an email to TheStreet.

In the U.S. and around the globe, creating new antibiotics is becoming failing business model — and it’s hurting health care as much as the drugs’ makers. Almost half of the Food and Drug Administration-approved antibiotics in the last decade have suffered an “economic wipe-out” in the past two years, said Outterson, who’s followed the industry for nearly two decades.

The obstacles are many: A broken marketplace for new antibiotics, unrealistic drug pricing expectations and a pervasive belief that new artillery against bacteria should be held onto tightly instead of firing on the front lines.

One outlier is Paratek  (PRTK) – Get Report, a biotech whose main product is Nuzyra, a tetracycline-class antibiotic that’s considered an upgraded weapon in the battle against bacterial pneumonia and acute skin infections. It’s surviving, but struggling to get its drug to patients. Its stock currently trades on Nasdaq for around five bucks — a fraction of its value years ago.

Outterson says the problem is so bad that only two of the new small public companies with FDA-approved antibiotics have avoided bankruptcy or getting bought up at fire-sale prices. One is Paratek and the other is a biotech called Nabriva  (NBRV) – Get Report, whose main product is Lefamulin, a partially synthetic compound that prevents bacteria from growing.

“The companies behind five other antibiotics have gone through either bankruptcy or a sale at a steep discount,” said Outterson. 

The cost of developing new antibiotic drugs can get close to $1.5 billion overall, according to a 2017 paper funded by AstraZeneca. Yearly revenues for the new products, however, are a crumb of that amount.

“With antibiotics, people still believe that you should be getting them for a buck,” Dr. Evan Loh, chief executive of Paratek, told TheStreet during a recent phone interview. But, he said, “with small biotechs like Paratek now accounting for about 95% of the innovation in antibiotics, we just don’t have the ability, nor are we able, to sell our products at a loss.”

The pricing for antibiotics, he and other industry experts say, is far different from, say, drugs used for cancer treatment. 

“On day-one, with a new oncology product that extends someone’s life for six weeks – but that is not life-saving like antibiotics are – you can charge $50,000 or $60,000 and doctors and health systems are willing to pay for that,” said Loh.

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