Author Topic: Next Generation Antibiotics: Failed business model or Value opportunity?  (Read 4132 times)

DocSnowball

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Re: Next Generation Antibiotics: Failed business model or Value opportunity?
« Reply #10 on: August 11, 2018, 04:03:52 AM »
First post here, been lurking for a while.

Great post. Doc.  I actually was reading up on paratek and their CAP candidate today and was curious if anybody discussed it here. Looking way into the future if it displays the C.diff sparing properties of the the tetracyclines (i.e. doxycycline) it could have a nice little niche/market. Considering taking a position but still doing my DD. I was reading a nice little summary on upcoming candidates on www.infectiousdiseaseadvisor.com but I can't seem to find the article. I'm curious if there's any signal re: mortality. I'm concerned if it exhibits any of the issues associated with tigecycline.  Any thoughts on the liklihood of approval?

Overall the sentiment for the antibiotics business continues to worsen. So when things improve, I hope we see improvement in prices both from an improved business viability standpoint, and improvement in sentiment for the sector. This can take years from where we stand unless the REVAMP act passes. 

Re: Paratek: advisory committee voted in favor of approving both skin/soft tissue infection and pneumonia indications, stating it met regulatory concerns for both indications, there is a need for new antibiotics. Those members with No votes wanted more data on the safety signal of 8 deaths in the pneumonia trial vs 3 deaths in the comparison group (not statistically significant, and in review of deaths no reason found). “We would recommend for you to require a follow on study of high quality in a population similar to that in which the risk signal was seen”. I see this is their getting the drug approved, but needing to do either one more iv to oral trial or an oral only trial in pneumonia including hospitalized patients. So period to becoming free cash flow positive may be extended a little bit (I had projected 2020, this may push it out to 2021). Full info here:
https://www.fda.gov/AdvisoryCommittees/CommitteesMeetingMaterials/Drugs/Anti-InfectiveDrugsAdvisoryCommittee/ucm587657.htm

I think the market is underestimating the selling potential of a new oral pneumonia drug. Total market is not only pneumonia, but 3-4 times bigger to include those individuals with a lower respiratory tract infection but not pneumonia like asthma exacerbation, acute bronchitis on the severe side, chronic lung disease exacerbation (take a look at these two studies on antibiotic prescribing in respiratory infections). This makes the upside potential much larger, but even with just pneumonia as the TAM my valuation gives me projections 20% above current market cap.
https://jamanetwork.com/journals/jamainternalmedicine/article-abstract/2687524?utm_source=twitter&utm_campaign=content-shareicons&utm_content=article_engagement&utm_medium=social&utm_term=072618
https://www.nejm.org/doi/full/10.1056/NEJMoa1802670

Re: Achaogen- the REVAMP bill is not moving, and although there was approval to get some extra reimbursement for inpatients, so did a competitor. The company laid off nearly its entire early research arm, focusing on core portfolio to reduce cash burn. The company is running out of cash in the next two quarters, so we will either see a raise at firesale prices, or selling of the EU rights, or sale of the entire company. I'm saving some capital in case of a fire sale.


DocSnowball

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Re: Next Generation Antibiotics: Failed business model or Value opportunity?
« Reply #11 on: September 14, 2018, 10:00:01 AM »
FDA Commissioner Scott Gottlieb's Full Statement on FDA's Strategic Approach for Tacking Antibiotic Resistance
https://www.fda.gov/NewsEvents/Speeches/ucm620495.htm

Excepts (emphasis mine):
"I’m deeply concerned that without stronger “pull” incentives that encourage more research and development, we’ll see a far less robust pipeline of products than we need to address antimicrobial resistance. The problem is that the ideal drug is one that will be seldom used.

Under the current reimbursement scheme for drugs, profits are driven off of the number of prescriptions that get written for a drug.

But when it comes to developing a medicine to treat multi-drug resistant microbes, the goal is to hold such a drug in reserve and try not to use it. In other words, the reimbursement scheme is in direct conflict to our public health goals.

And what we’re seeing, as a result, is a classic externality problem.


Creating new antibiotics isn’t any easier than developing any other drug class. And, the commercial challenges are more daunting. Generic antibiotics are also inexpensive and widely effective, making them first line treatments. Medicare’s in-patient prospective payment system for hospital care is pegged to the price of generics.

So novel drugs eat into the profits of hospitals. And when new and better antibiotics are available, these novel drugs are reserved for “last-line” cases when their unique profiles, and higher prices, are justified because “first-line” drugs have failed.

This is completely justifiable behavior. If a new product is overused, it can reduce effectiveness by increasing antimicrobial resistance. In-hospital stewardship has improved a lot.

This is all good news.

But holding a drug in reserve also shrinks product revenues early in its patent life, when those revenues are most valuable to companies and investors. So the economics of this category, and our public health prerogatives, are not entirely in sync.

Contrast this with markets for new antivirals for HIV and Hep C, where new medicines have rapidly replaced a number of older drugs, becoming first-line treatments.

And investment has followed these economic realities.

If we want to maintain a robust pipeline for antibiotics, it is necessary to change the perception that the costs and risks of antibiotic innovation are too high relative to their expected gains—without weakening antibiotic stewardship.

It is important to pursue new policies and reimbursement approaches now, to shift the investment landscape right away. And it is important to develop these products now, so they’ll be available when we need them later.

One constructive way to start would be to develop innovative payment mechanisms that allow companies to capture a greater upfront share of the social value of antibiotic drug development.

The long run human and economic cost of antimicrobial resistance is enormous, including: death and disability from sepsis; extended and expensive hospital stays; and the need for dialysis or organ transplant in the wake of systemic infections.

The CDC estimates that the direct costs of antimicrobial resistance on the U.S. economy is $20 billion annually. When you factor in the economic consequences of lost productivity, it adds an additional $35 billion in costs. 

Reimbursement reforms could include a mix of milestone payments and subscription fees for developers of FDA-approved products with high economic and clinical value, targeted at multi-drug resistant organisms and linked to proven clinical outcomes.

A subscription-based model could see hospitals paying a flat rate for access to a certain number of doses of an important new antimicrobial. These subscription fees could be priced at a level to create a sufficient return on the investment to develop drugs with a certain profile. This should have the effect of creating a natural market for drugs that meet certain important specifications.

The FDA is discussing potential approaches, and continued innovation in similar payment pilots, with other agencies, including CMS. New approaches to reimbursement that could be explored might also include new technology add-on payments for certain new antibacterial drugs that meet critical patient and public health needs
."

DocSnowball

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Re: Next Generation Antibiotics: Failed business model or Value opportunity?
« Reply #12 on: October 23, 2018, 10:07:33 AM »
Listening to Paratek's presentation about 1Q 2019 launch and strategy details for their new pneumonia drug - worth a listen. This is the right team, with the right drug and the right strategy IMHO. The entire sector is in the toilet, and it will not be until months 12-24 post launch that it will be clear whether the strategy is working or not. But if there is a bellwether in this sector, this is the company that may change the trend.

http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=253770&eventID=5275814

DocSnowball

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Re: Next Generation Antibiotics: Failed business model or Value opportunity?
« Reply #13 on: February 11, 2019, 05:49:29 AM »
Two recent developments:
Business model changes proposed in UK:
UK unveils new antibiotic buying plan, pharma incentives
http://www.pmlive.com/pharma_news/hancock_proposes_new_antibiotic_buying_plan_for_nhs_1276081?SQ_DESIGN_NAME=2

Health minister compares upfront payment model to Spotify
24th January 2019   
Health Secretary Matt Hancock has revealed the UK’s next five-year plan to handle the rising threat of antimicrobial resistance (AMR), estimated to claim at least 700,000 deaths a year worldwide.

US:
http://www.cidrap.umn.edu/news-perspective/2019/02/letter-urges-congressional-action-stimulate-antibiotic-development
Co-authors include the Infectious Diseases Society of America, the premier organization for ID physicians in the country
https://www.idsociety.org/globalassets/idsa/policy--advocacy/current_topics_and_issues/antimicrobial_resistance/10x20/legislative-efforts/020519-joint-letter-to-senate-help-and-finance-re-economic-incentives-for-antibiotics.pdf

"Calls for government action
The letter adds to the growing calls for government action to address antibiotic resistance, which is threatening many of the current antibiotics used to treat serious bacterial infections, and the dearth of new antibiotics. Of the 42 antibiotics currently in clinical development—a fraction of the 1,000-plus cancer drugs currently in development—only 11 target the pathogens on the World Health Organization's list of priority pathogens. And perhaps only two of those candidates will make it market.

The main issue is the lack of economic incentive for making new antibiotics. Compared with medicines for chronic conditions, which patients may have to take for many years, antibiotics are used for a short period of time. In addition, since most current antibiotics still remain effective, new antibiotics are kept in reserve to prevent development of resistance. Because the current drug reimbursement system links profits to the volume of drugs sold, this means that pharmaceutical companies don't get a significant return on their investment in new antibiotics.

As a result, many large drug makers—including AstraZeneca, Sanofi, and Novartis—have abandoned their antibiotic development programs in recent years in favor of more lucrative drugs. Only a handful of large pharmaceutical companies remain in the antibiotic development space.

And while there are many small biopharmaceutical and biotech companies working on new antibiotics, with financial support from government agencies like BARDA (the Biomedical Advanced Research and Development Authority) and public-private partnerships like CARB-X (the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator), these companies lack the financial resources to get drug candidates through late-stage clinical development and Food and Drug Administration (FDA) approval and on to the market.

To address these challenges, many antibiotic development advocates believes new incentives are needed. These incentives, the group writes, could include a mix of tax incentives, novel "pull" incentives that increase the value of new antibiotics, and changes in how pharmaceutical companies are reimbursed for antibiotics.

"We, the undersigned, believe the solution requires a package of incentives that address both the short-term need to stabilize the market and policies to address the broken market that makes antibiotic development economically infeasible for both small and large companies," the letter states. "The ultimate goal is to create an ecosystem that supports sustainable discovery, development, and commercialization of novel, innovative antibiotics in order to preserve these vital drugs and health care advances they make possible."

New reimbursement models
One potential idea to delink profits from the volume of antibiotics sold was presented by FDA Commissioner Scott Gottlieb, MD, in September 2018, when he announced the agency's strategy for fighting antibiotic resistance. Gottlieb suggested the development of a new reimbursement model that would combine milestone payments and subscription fees for new FDA-approved antibiotics that have high clinical and social value—such as drugs that target multidrug-resistant organisms. The subscription fees for access to the new drugs would be priced to create a sufficient return on investment.

Gottlieb said this idea and other potential payment strategies, which would be linked to the promise of effective stewardship efforts by hospital and drug makers, are being discussed with the Centers for Medicare and Medicaid Services.

Other governments are considering similar ideas to spur antibiotic development. Last week, the British government announced that it will launch a pilot program in which the National Health Service will experiment with buying an antibiotic "service" from pharmaceutical companies, paying them up-front for access to effective new antibiotics.

Among the other pull incentives that have been previously suggested are market entry rewards, in which companies would receive a large up-front payment for development and approval of a critical new antibiotic. DRIVE-AB, an international consortium of public health organizations, academic institutions, and pharmaceutical companies, last year proposed a market entry reward of $1 billion for regulatory approval of a new antibiotic, with funding coming from governments and philanthropic organizations.

The letter suggests that any pull incentive package approved by Congress should require that incentives be paid after FDA approval, should aim both to stabilize the current market for new antibiotics and ensure viability of future development, should provide predictability for drug developers, and should be aligned with appropriate antibiotic stewardship and surveillance."

PRICE vs VALUE:
Meanwhile Paratek sees its market cap decrease in the days after publishing the results of two of its trials as the lead articles in the New England Journal of Medicine. That's how loved this sector is right now  :'(

Omadacycline for Community-Acquired Bacterial Pneumonia | NEJM
https://www.nejm.org/doi/abs/10.1056/NEJMoa1800201

Jurgis

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Re: Next Generation Antibiotics: Failed business model or Value opportunity?
« Reply #14 on: February 11, 2019, 08:19:34 AM »
I think it's very hard to get the incentives right in such situation.

Perhaps the right way is to create a government-funded non-profit with a pot of money that would acquire approved "reserve" drugs. The non-profit could potentially recoup some money if/when the drugs go off-reserve. It might not if drug stays on reserve for 10-20 years...

But I'm still not sure this would be attractive to big pharmas or even smaller companies. I.e. wouldn't for-profit corporation work on a possibly multibillion blockbuster rather than on a drug that at best gets them XX million from government?
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