The antibiotic market hasn’t enticed many drug makers.Research in the space has always been spotty but it ground to a halt five years ago in the wake of the safety scandal involving Sanofi-Aventis’ Ketek (telithromycin): deaths and liver-related adverse events stemming from an approval based on fraudulent trial data. Some big pharmas like Pfizer Inc. and Johnson & Johnson abandoned discovery research in the space or significantly reduced R&D investment, as industry turned its focus to more profitable therapeutic areas with less regulatory risk, like oncology and inflammatory disease.

But demand for new antibiotics that target resistant bacteria has only grown, and a handful of start-ups and a few mid-to-large pharma still believe in the commercial potential of novel antibiotics that address the critical unmet need.

The launch of two antibiotics in the last two years - Forest Laboratories Inc.’s Teflaro (ceftaroline) and Optimer Pharmaceuticals Inc.’s Dificid (fidaxomicin) – highlight the commercial obstacles that await candidates now in late-stage development, namely push-back from payers looking to curb the use of premium-priced drugs over cheaper generics and resistance from physicians who try to reserve new drugs.

Forest, Optimer and others are challenging the existing business paradigm for antibiotics, currently driven by high-volume, low-cost generics. To create an investment-worthy return, they are pricing new antibiotics at a premium, and will need to lay out a solid case to payers as to why the therapies offer a pharmaco-economic advantage over cheaper generic alternatives. If new examples of multi-million dollar antibiotics emerge in the cost-sensitive hospital market, this could go a long way to reigniting the broader industry’s interest in antibiotic development.

No Easy Fix For Commercial Disincentives

“We need to be thinking about a new commercial model for antibiotic R&D,” said David Payne, VP of the Antibacterial Discovery Performance Unit at GlaxoSmithKline PLC, one of the few big pharmas that remains committed to antibiotic development. “If the return on investment were based on the innovative aspects of what you created with that medicine and were more rewarding for the appropriate use of those antibiotics, it would work a lot better.”

Changing the long-held view of antibiotics as cheap and widely-used won’t be easy. “A single company cannot achieve that on its own; it needs to be a partnership approach with input from the key stakeholders,” Payne added.

Market Snapshots

This is the latest in a series of snapshots of key therapeutic areas at an intriguing point of regulatory and business development.. Recent snapshots include:

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The regulatory pendulum at least appears to be shifting more positively in industry’s favor, as regulators have come under pressure from health officials and governments to approve new antibiotics to tackle resistance. Congress included Generating Antibiotic Incentives Now (GAIN) provisions in the FDA Safety and Innovation Act that became law this year, encouraging faster review of antibiotics by FDA and granting other incentives to encourage antibiotic development, like additional marketing exclusivity for qualifying drugs Also see "With GAIN In Place, Antibiotic Improvements Depend On FDA Implementation" - Pink Sheet, 13 August, 2012..

FDA has been working to clarify approval requirements for new antibiotics and has released several draft guidance documents on the topic, though the challenges of demonstrating the safety and efficacy of antibiotics remains immensely challenging. New antibiotics must demonstrate non-inferiority to existing drugs in two large Phase III trials, a costly undertaking given that they will be used to treat only the most serious infections once they are on the market. Recruiting enough patients to show a statistically significant benefit is also a hurdle.

Nonetheless, commercial obstacles are daunting. Gaining acceptance for an antibiotic once it is on the market is a slow, uphill climb. Not only is the market flooded with generic versions of popular medicines like azithromycin, ciprofloxacin, amoxicillin, clindamycin and vancomycin, but antibiotics are mainly used for short-course therapy, just days, as opposed to drugs for chronic diseases, which are used for years. Adding to the challenge is the longstanding resolve of doctors to hold new antibiotics effective against resistant bacteria in reserve to treat only the most serious infections after other options have failed in order to preserve their effectiveness.

“One of the key factors [influencing] long-term investment in antibiotics is how the infectious disease community embraces new technologies,” Optimer CEO Pedro Lichtinger said. “We need their help to make these products viable. Extending the life of a drug through the GAIN act will help nobody if new products are not used.”

Vancomycin Rules The Hospital Roost

Most antibiotic development is focused on the hospital market, particularly Gram-positive infections and mainly methicillin-resistant Staphylococcus aureus (MRSA), though by far the greatest unmet need is for antibiotics that treat resistant Gram-negative infections for which there are limited treatment options. The structure of Gram-negative bacteria has presented a scientific hurdle in that it provides another layer of defense against antibiotics, which, along with the regulatory and commercial challenges for all antibiotics, has largely kept drug makers at bay. That is changing, and drug makers including GSK, AstraZenecaPLC and Cubist Pharmaceuticals Inc. have drugs in the pipeline targeting Gram-negative infections, but the current market and industry’s late-stage pipeline is mainly focused on the Gram-positive spectrum.

Hospital infections run rampant and pose a serious health hazard; an antibiotic that can get patients out of the hospital faster represents a compelling pharmaco-economic story payers will listen to. The cost to the U.S. health care system of infections caused by antibiotic-resistant pathogens versus antibiotic susceptible ones is $21 billion to $34 billion each year, and they account for more than 8 million additional hospital days, according to the Infectious Disease Society of America.

The antibiotic most often used to treat MRSA infections in hospitals today is vancomycin, a low-cost generic intravenously administered antibiotic that is still largely effective against MRSA. But MRSA’s susceptibility to vancomycin is decreasing, opening the door for new antibiotics that can treat MRSA infections. A report released in July by BioTrends Research Group and Arlington Medical Resources concluded that decreasing susceptibility of MRSA to IV vancomycin, along with other shortcomings of the drug, is resulting in increased use of other antibiotics like Pfizer’s Zyvox (linezolid) and Cubist’s Cubicin (daptomycin).

“It’s clear that physicians go to vancomycin first,” BioTrends’ Associate Therapeutic Class Director of Infectious Diseases Brenda Perez-Cheeks said in an interview. “If you look at skin infections, 70% of physicians we surveyed said they go to vancomycin first; about one-third say they will go to daptomycin or linezolid.” The study surveyed 103 infectious disease specialists.

Zyvox and Cubicin demonstrate how novel antibiotics can be compelling commercial opportunities, despite high prices, when they address high unmet need and offer advantages over existing treatments. Zyvox and Cubicin were the third and fourth best-selling anti-infectives in the U.S. in 2011 based on sales, according to data from IMS Health, behind Medicis Pharmaceutical Corp.’s Solodyn (minocycline), used in the dermatologic setting, and Johnson & Johnson’s Levaquin (levofloxacin). The first generic versions of Levaquin, a fluoroquinolone that is not generally effective against MRSA, launched in July 2011, pushing Zyvox and Cubicin up in the rankings in 2012. Pfizer reported $1.28 billion in worldwide sales of Zyvox in 2011, up 9%, while Cubist reported Cubicin global sales of $735.5 million, up 18%. The vast majority of Cubicin sales come from the U.S. market, however.

Both drugs are approved for the treatment of certain infections caused by MRSA. Zyvox is available as a once-daily IV infusion and as an oral pill, a significant competitive advantage because patients who start IV treatment in the hospital can be discharged on the oral pill. Zyvox is expected to face generic competition in 2015, however, which will put further pressure on the market. Cubicin, meanwhile, is administered as a once-daily IV infusion, while vancomycin is administered twice daily. Dosing of vancomycin is further complicated by the fact the drug can impact renal function, and thus dosing is adjusted based on patient weight and renal function.

OPAT Provides Opening For Novel Antibiotics

As hospitals look for ways to cut costs, mainly by getting patients out of the hospital faster, outpatient parenteral antibiotic therapy (OPAT), where patients are treated in clinics or at home, has become commonplace. Cost aside, it’s also an advantage for patients, who are generally otherwise healthy and pleased to avoid a lengthy hospital stay, where they risk being exposed to other infections. But in the OPAT setting vancomycin can be more challenging to use than some alternatives, said Helen Boucher, MD, associate professor of medicine at Tufts Medical Center.

“Vancomycin is a hard drug to use and often toxic. It’s very complicated to manage safely, and some of the newer drugs are easier,” she said. “That has a lot to do with the way we make our choices, especially for patients that are at home with IV antibiotics.”

Zyvox and Cubicin are priced at a substantial premium to generic vancomycin. Pricing for these drugs varies by indication, dosing and patient weight in most instances, but the retail price of Cubicin, for example, is about $205 per day for complicated skin and skin structure infections, assuming a 90 kg patient weight and a dose of 4mg/kg, according to Cubist. The drug is used for seven to 14 days, translating to a cost of $1,435 to $2,870 for treatment. But if expensive antibiotics can help get a patient out of the hospital quicker, the overall value of the product is hard to ignore.

The case is one Optimer has been building for the launch of its first product, the premium-priced antibiotic Dificid for Clostridium difficile-associated diarrhea. Optimer launched the antibiotic in the U.S. in mid-2011 under a co-commercialization deal with Cubist Also see "Labeling For Optimer's Dificid Includes Data On Ability To Sustain Cure Post-Treatment" - Pink Sheet, 27 May, 2011.. First-year sales of the drug were $50.1 million, exceeding analyst expectations for the niche indication, as the product stole share from vancomycin, largely based on clinical trial data included in labeling showing the antibiotic is more effective at delivering a sustained response 25 days post therapy.

The sustained response offers a compelling value proposition if Dificid helps reduce the rates of hospital recurrence, which literature shows is about 20% to 30% in CDAD, according to Optimer. Dificid is an oral pill dosed twice daily. It competes against generic IV vancomycin, as well as ViroPharma Inc.’s oral version, Vancocin, which is approved for CDAD and staphylococcal enterocolitis, but no other infections. Dificid’s wholesale acquisition cost is $280 per day, or $2,800 for a 10-day course of treatment, compared to a cost of about $1,000 to $1,500 for 10 to 14 days of treatment with Vancocin. The cost of generic IV vancomycin is even lower.

Dificid And Teflaro: Case Studies

Although Dificid got off to a reasonably swift start, its cost still represents a significant barrier to hospital penetration, acknowledged Optimer’s Lichtinger. “There is a significant issue of recognition of the burden of our particular disease and its cost implications,” he said. “We have seen a slow-down in the adoption, which we are now addressing with new initiatives. The hospital market is highly cost sensitive, and as a result of that it becomes extremely difficult for any new product coming to the market.” Optimer unveiled a 25% discount to hospitals and a copay assistance program for patients in October to address the issue of cost Also see "Optimer Continues Dificid Push In Hospitals With Discount Programs" - Pink Sheet, 8 October, 2012..

Forest’s Teflaro has flat out struggled. The intravenously administered next-generation cephalosporin was approved by FDA for two larger indications, skin infections and community-acquired bacterial pneumonia, including MRSA, in late 2010 and the product launched in March 2011 Also see "FDA Raises Breakpoints In Final Labeling For Forest's Ceftaroline" - Pink Sheet, 8 November, 2010.. Forest reported sales of $22.4 million for Teflaro in fiscal 2011 (ended March 31, 2012). The company set its sights on sales of $65 million for the antibiotic for fiscal 2012, but was forced to revise expectations to $45 million after the drug generated just $10 million in sales in the fiscal second quarter (ended Oct. 31). When the antibiotic launched in 2011, management highlighted the very large market opportunity, with 23 million annual therapy days each for the two indications accounting for a $4 billion market.

Since Teflaro is administered twice daily intravenously, it’s facing a fierce battle to take share from cheaper generic alternatives because it doesn’t offer the convenience of an oral switch or once-daily dosing to help get patients out of the hospital faster. And the drug’s approval was not supported by any data demonstrating superiority to facilitate faster discharge of patients. But Teflaro launched at a price below some other brand therapies, $82 per day, and Forest remains committed to Teflaro’s long-term sales potential. During an investor day in June, Forest VP-Marketing William Meury said, “The question here is do we have a product problem or is it a matter of time, and the answer is it’s a matter of time. The adoption process for hospital antibiotics is long and slow relative to retail products.”

The drug was approved in Europe in August, where it is being marketed by Forest’s commercial partner AstraZeneca as Zinforo. The companies are developing the drug in combination with a novel beta-lactamase inhibitor avibactam, which they expect will extend the spectrum of coverage to certain Gram-negative pathogens as well. The opportunity for a drug that treats resistant Gram negative infections could be significant.

“Gram negatives represent the huge unmet need right now,” said John Rex, VP, clinical infection at AstraZeneca. “For Gram positives, we have a reasonable number of IV choices. We could certainly do with some oral choices, but with Gram negative infections we could just use choices.” AstraZeneca’s pipeline includes several antibiotics that would work against Gram-negative infections, and its biologics arm, MedImmune LLC, is working to develop the first monoclonal antibodies to fight bacterial infections Also see "MedImmune Deploys Targeted Antibodies In Battle Against Superbugs" - Pink Sheet, 24 September, 2012..

Start-Ups Step In

But the many challenges aren’t dissuading some start-ups from trying to make a go in the space by developing novel antibiotics that offer pharmaco-economic advantages. Companies like Melinta Therapeutics Inc., Durata Therapeutics Inc., PolyMedix Inc., Cempra Inc. and Trius Therapeutics Inc. all have antibiotics in clinical development. The hospital-focused specialty firm The Medicines Co., though not a start-up, does also has a late-stage candidate in development, oritavancin, in Phase III development for the treatment of skin infections, including those caused by MRSA. The company released positive data from its first Phase III trial in December, demonstrating non-inferiority of oritavancin at a single intravenous dose to vancomycin dosed twice daily for seven to 10 days.

Start-Ups Push Ahead

Mid- To Late-Stage Antibiotics In Development For MRSA Resistance

Company

Drug

Development Stage

Commercial Edge

Cempra

solithromycin

Phase III

Oral and IV formulas; potential short-course therapy

Taksta (CEM-102)

Phase II

Oral formula; potential to treat patients who need chronic therapy like those with prosthetic joint injury

Durata

dalbavancin

Phase III

Two-dose IV regimen, administered once weekly

PolyMedix

brilacidin

Phase II

First-in-class defensin-mimetic that could stave off resistance; short-course therapy

Rib-X

delafloxacin

Phase III

IV and oral formulations; broad spectrum coverage

radezolid

Phase II

Oral and IV formulas

Trius

tedizolid

Phase III

IV and oral formulations; short-course therapy

Source: Company Announcements

Durata and Trius also have drugs in Phase III development for skin infections, and both expect to have data available in early 2013, with plans for a regulatory filing shortly thereafter. Trius is developing a second generation oxazolidinone tedizolid as a six-day short-course therapy administered once a day versus 10 days of treatment with Zyvox twice daily. Like Zyvox, tedizolid is available in both IV and oral formulations, allowing for an IV to oral switch. Durata’s dalbavancin, a second-generation lipoglycopeptide, is administered in two doses once a week, which the company believes will help to hasten moving patients out of the hospital and into outpatient clinics.

“The value proposition is pretty dramatic,” Durata CEO Paul Edick said. “With dalbavancin, you don’t need a [peripherally inserted central catheter] line, which for most vancomycin patients you do. You don’t need to do blood draws twice a day. You don’t need labs twice a day. You don’t have to mix the drug 28 times and all of the associated costs, so the cost of delivery is dramatically lower.” Durata hasn’t determined a final price for dalbavancin but expects it will be priced on par with the cost of a course of therapy with other premium-priced antibiotics like Cubicin, he said.

Rib-X is developing delafloxacin as a novel fluoroquinolone with both IV and oral formulations and expects to begin Phase III studies in the first half of 2013 for skin infections after raising $67.5 million in venture funding in November Also see "Without an IPO, Rib-X Raises $67.5 Million In Venture Funding" - Pink Sheet, 29 November, 2012.. The company is looking to position delafloxacin as a front-line “work horse” priced at a discount to current premium brands like Zyvox and Cubicin, CEO Mark Leuchtenberger said.

Broad spectrum activity is most important for an antibiotic, he said. “The second thing we think is important to physicians and hospitals is convenience, and the other is cost … If you have an IV oral switch, you hit both of those two-way propositions at the same time – as long as pricing is reasonable.”

Still, with so many big pharmas scared off from antibiotics, start-ups need to be prepared to launch independently if necessary. Examples of pure play companies like Cubist and Optimer going it alone and doing well are helping to make the business proposition more compelling to start-ups and their investors. But it raises questions about who today’s antibiotic market opportunity is right-sized for: small to medium-sized pure plays or big pharmas. There are mixed opinions about whether big pharma’s interest in antibiotics will ever truly be piqued again, given the scientific and commercial risks.

Most start-up execs still believe antibiotics hold blockbuster promise, and some say big pharma still wants to talk. “Pharma does its analysis,” said Rib-X’s Leuchtenberger. “They don’t operate overnight, but they move us into the analysis, and I think we see signs of increased interest,” he said. Rib-X signed a discovery collaboration with Sanofi in 2011, focused on antibiotics [See Deal].

Investor Brent Ahrens, general partner at the venture firm Canaan Partners agreed. “Big pharma’s appetite still seems to be there. It waxes and wanes. That’s no surprise as the strategies change….but there is no question [antibiotics] are still a mainstay.” Canaan has invested in antibiotic companies like Calixa Therapeutics, which was acquired by Cubist in 2009, Durata and Kalidex Pharmaceuticals Inc.

But GSK’s Payne is more skeptical. “I think it will take a lot for the big companies that have left this area to come back to this area,” he said. A commercial winner in today’s challenging market could be the best inducement of all.

Antibiotic Market Snapshot: In Exchange For Higher Prices, More Value

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