Editorial

10.1517/13543784.14.2.107 © 2005 Ashley Publications Ltd ISSN 1354-3784 107

Ashley Publicationswww.ashley-pub.com

Monthly focus: Anti-infectives

Innovative antibacterial drugs: nothing ventured, nothing gainedJeffrey SteinQuorex Pharmaceuticals, Inc., 1890 Rutherford Road, Suite 200 Carlsbad, CA 92008-7326, USA

The current paradox of the widespread clinical demand for novel anti-bacterial drugs and lack of commensurate industrial research activity isunprecedented in modern drug discovery. Although the root causes of thepharmaceutical industry’s disengagement from antibacterial drug discoveryhave been discussed at length and attributed largely to a lack of productivitycoupled with pharmacoeconomic and regulatory considerations, the chal-lenges faced by privately held biotech companies in addressing this therapeu-tic need originate from the conflict between the capital intensive nature ofearly-stage drug discovery and the current venture capital funding paradigm.Continued innovation of antibacterial drugs will require a fundamental shiftin how discovery through preclinical research is supported.

Keywords: antibacterial, antibiotic resistance, venture capital

Expert Opin. Investig. Drugs (2005) 14(2):107–109

1. Introduction

If bacterial pathogens had Social Security, the year 2004 would mark a period whentheir future was made more secure. Despite the market approval of two antibacterialdrugs, Cubicin™ (Cubist, MA, USA) and Factive™ (Oscient, MA, USA), the yearsaw the liquidation or sale of several privately held biotech companies (Elitra, CA,USA; Adaptive, CA, USA; Quorex, CA, USA) developing innovative approaches totreat bacterial infections. Several other discovery-stage companies with a similarfocus are likely to follow before the end of the new year. What is puzzling about thistrend is that the demise of these companies was not due to a failure of underlyingtechnology, leadership or strategic execution (the usual correlates of biotech flame-outs) but rather because their financing needs were out of synch with the currentventure investment predisposition towards companies with products already in theclinic. Although this funding bias should not selectively target companies develop-ing antibacterial drugs, it is clear that this therapeutic area has been disproportion-ately influenced. Why do antibacterial companies appear to be more sensitive to theventure funding cycle, and what are the societal consequences if alternative means ofsupporting innovation are not found?

2. Evaluation of research to date

A hallmark of the pharmaceutical industry over the past 60 years has been its effec-tiveness in creating and exploiting large market opportunities within diverse thera-peutic areas. The antibacterial drugs represent one of the industry’s earliest andbiggest success stories and the majority of antibacterial drug classes have their originsin the natural product pharmacophores discovered in the 1940’s, 50’s and 60’s. It iswidely recognised that the success of these drugs spawned a concomitant evolutionof drug-resistant pathogens and a resultant ‘boom or bust’ cycle of discovery activity,complacency and renewed interest as each new drug class was introduced, widelyadopted and inevitably rendered obsolete by new resistance mechanisms [1]. Within

1. Introduction

2. Evaluation of research to date

3. Future prospects

4. Expert opinion and conclusion

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Innovative antibacterial drugs: nothing ventured, nothing gained

108 Expert Opin. Investig. Drugs (2005) 14(2)

the past 4 years, however, this cycle has been broken due tothe diversion of pharmaceutical discovery activities to morelucrative chronic disease areas [2-6].

This does not represent an indictment of the pharmaceuti-cal industry but, rather, as an acknowledgement of the reali-ties of business consolidation and shareholder demands onlarge publicly held companies.

Unfettered by such restrictions, privately held biotechcompanies represent a seemingly ideal venue to exploit theopportunity to discover next-generation antibacterial drugs.In addition, this therapeutic area has many of the requisiteelements of a venture quality biotech investment: an enor-mous ($30 billion), constantly renewing (due to resistance)market, early valuation inflection points due to the strongcorrelation between animal test results and clinical outcomeand a clear and incentivised regulatory path for novel anti-bacterial drugs. In addition, although the large pharmaceuti-cal companies had attenuated their own discovery efforts,they are still actively seeking in-licensing and partnering rela-tionships with companies with demonstrably new and effec-tive compounds once animal efficacy is achieved, therebyproviding biotech investors with validation and potentialfinancial exits.

So why are these companies not thriving? The problem liesin the fact that discovery research is an expensive undertakingand requires a long-term financial commitment before a clini-cal candidate is produced [7]. Antibacterial drug discovery isarguably the most difficult therapeutic area in the discoveryphase because of the requirement to identify a compound thatwill effectively bind and inhibit the multiple subtly differentvariants of its biological target that exist in different strains orspecies of bacterial pathogens. Once such candidate com-pounds are identified they must also traverse bacterial cellmembranes and cell walls, avoid efflux pumps and resist inac-tivation by bacterial enzymes in order to reach the target. Thepharmacokinetic and pharmacodynamic properties of thecompound must also be tuned such that the concentrationand timing of its accumulation in infected tissues coincidewith the susceptibility, growth and distribution characteristicsof the pathogen in vivo. Once this antibacterial-specificgauntlet is passed, add on the safety, cost of goods and patentprotection requirements shared with any other therapeuticarea and the scope of the challenge becomes truly breath-taking. This challenge is not lost on potential pharmaceuticalpartners, most of which had long-running new target pro-grammes, none of which had produced a clinical developmentcandidate. This is the reason why the few remaining BigPharma antibacterial discovery efforts are largely directedtowards modifying existing drugs instead of de novo designagainst new targets. Hence, the bar is set high and there isclose scrutiny of any innovative development candidateoffered up by a biotech company.

The shear improbability of discovering a novel antibacterialcompound is also appreciated by potential venture investors.Although biotech companies can overcome any scepticism

with compelling test results, they cannot control the currentventure-funding paradigm and the fact that delivery of adevelopment candidate can create a significant strategic chal-lenge and a potential conflict between existing investors withdepleted reserves in extant funds and potential new investorswilling to invest the huge sums needed to underwrite clinicaltrials. Most current (and recently liquidated) privately heldantibacterial companies with late discovery or preclinical stagecompounds were started between 1998 and 2001 when team,transforming technology and market were the key featuresventure investors looked for. It is not a coincidence that thecompanies that have recently foundered were those supportedfrom venture funds that had passed or are approaching theirtypical 5-year lifespan. Closure of these funds requires a dis-position of the portfolio companies in order to distribute pro-ceeds to limited partners. The optimal disposition, of course,is via an initial public offering (IPO) or acquisition thatwould provide a positive return on investment and financialliquidity. However, faced with the prospect of a dilutivefinancing round, a closed IPO window and limited mergersand acquisitions (M&A) opportunities under acceptableterms, existing investors have virtually no options for a finan-cial exit. Moreover, because the venture industry has maturedsince these biotech companies were founded, the criteria forinvestment has evolved to traction towards liquidity andpotential new investors have a strong bias towards companieswith clinical stage compounds with more clearly defined riskprofiles and market horizons. In this new paradigm a com-pany with a novel compound can be viewed as a high-riskinvestment and there is little appetite to support the burn rateof a discovery-stage antibacterial company given the signifi-cant challenges highlighted above. Should a company’s discov-ery programme be sufficiently advanced (i.e., in preclinicaldevelopment) to attract new investors it is likely that theterms will dictate that further discovery activities be severelycurtailed in order to maximise the runway into the clinic forthe development candidate.

3. Future prospects

Having seen the writing on the wall, a few antibacterial com-panies have all but eliminated their discovery operations andadopted the specialty pharma model of in-licensing clinicalcompounds that have been abandoned by pharmaceuticalcompanies. These compounds are largely those that have beenabandoned for good reasons: they either had an unacceptablerisk profile or their market expectations were below thethreshold that warranted further development. Withoutexception these compounds come from existing drug classes.However, from the biotech company’s perspective a relativelysmall market can be sufficient to attract further investment asthe company would be in the clinic. The standard rationale isthat the company will revisit the discovery of novel drugs aftertheir future IPO provides access to additional fundingoptions. To date, this has not occurred.

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Stein

Expert Opin. Investig. Drugs (2005) 14(2) 109

The abandonment of new antibacterial R&D has raisedalarms among infectious disease clinicians and officials at theFDA, National Institute of Health (NIH) and the Centres ofDisease Control (CDC). Although there are proposals to pro-vide legislative solutions to fuel innovation within pharma-ceutical companies [8] the prospects of these appear poor inthe current political climate and public attitude toward BigPharma. Moreover, true innovation has always come fromsmall companies that would not directly benefit from theproposed solutions.

4. Expert opinion and conclusion

Given the improbable scenario of the venture cycle revertingin the near future to favour early-stage discovery, continuedinnovation in antibacterial research will require a fundamen-tal shift away from venture-backed enterprises. One optionwould be to increase the activity of drug discovery research atuniversities or private research institutes that can exploit therecent emphasis at the NIH and other funding agencies forgrant proposals to contain a drug discovery component inorder to increase the relevancy of funded research. Largeresearch universities, especially those with affiliated medical

schools, have all of the elements necessary to perform discov-ery research as well as to conduct clinical trials. For this to beeffective, however, a migration away from single-investigatorscience and towards tight interdisciplinary collaboration isrequired. This is already a trend at many larger universities.An additional requirement would be a minimisation of uni-versity bureaucracy and the introduction of a mechanism thatwould make individuals involved in the research stakeholdersin the output of their efforts. In short, it would require thecreation of a nimble, entrepreneurial enterprise within theuniversity environment. The advantage to the universitywould be an enhanced ability to both translate innovationinto value and to benefit society by doing so; the latter ofwhich is, after all, part of the charge of a university. Valuecould be captured by the spin-out of a company once a pro-gramme is in the clinic or by out-licensure to a pharmaceuti-cal company. Alternatively, such an intrapreneurial approachcould also take place within a large pharmaceutical company.In fact, several pharmaceutical companies are attempting toimplement a form of this in order to increase productivity.Whether either of these approaches can, in the end,resuscitate antibacterial R&D in time to provide effectivenew drugs when they are needed remains to be seen.

Bibliography1. WALSH C: Where will new antibiotics

come from? Nat. Rev. Microbiol. (2003) 1(1):65-70.

2. SPELLBERG B, POWERS JH, BRASS EP, MILLER LG, EDWARDS JE Jr: Trends in antimicrobial drug development: implications for the future. Clin. Infect. Dis. (2004) 38(9):1279-1286.

3. PROJAN SJ: Why is big Pharma getting out of antibacterial drug discovery? Curr. Opin. Microbiol. (2003) 6(5): 427-430.

4. SHLAES DM: The abandonment of antibacterials: why and wherefore? Curr. Opin. Pharmacol. (2003) 3(5):470-473.

5. SELLERS LJ: Big Pharma bails on anti-infectives research. Pharmaceutical Executive (2003) 22.

6. PROJAN SJ, SHLAES DM: Antibacterial drug discovery: is it all downhill from here? Clin. Microbiol. Infect. (2004) 10(Suppl. 4):18-22.

7. DIMASI JA, HANSEN RW, GRABOWSKI HG: The price of innovation: new estimates of drug development costs. J. Health Econ. (2003) 22(2):151-185.

Website101. http://www.idsociety.org

IDSA White Paper. Bad Bugs, No Drugs…A Public Health Crises Brews (2004).

AffiliationJeffrey Stein PhDQuorex Pharmaceuticals, Inc., 1890 Rutherford Road, Suite 200 Carlsbad, CA 92008-7326, USATel: +1 760 840 0472;E-mail: jstein@quorex.com

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