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June 17, 2019 at 03:13 PM
Four years ago, antibiotics developer Tetraphase Pharmaceuticals Inc. had a market value of almost $2 billion. Now its shares trade for about 70 cents as investors flee the market for new drugs that kill bacterial infections.
To survive, the company said last week it would cut research, reduce staff and try to divest three drugs it has in development. It plans to focus all of its efforts on marketing Xerava, a recently approved hospital drug that fights particularly tough abdominal infections.
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Even as deadly strains of bacteria proliferate around the world, big drugmakers are getting out of the antibiotics market, leaving many new products in the hands of tiny startups. But most new antibiotics for dangerous strains are selling poorly because doctors hold them in reserve until they’re absolutely necessary, concerned about creating drug resistance. And price-sensitive hospitals have been slow to switch to the drugs from cheaper generics.
“In my 20 years, I have never seen it any worse than this,” said Tetraphase Chief Operating Officer Larry Edwards, who is being promoted to chief executive officer as part of the Watertown, Massachusetts-based company’s restructuring. “Investors have shied away.”
Always Challenging
Edwards, a veteran antibiotics marketer, said it had become apparent that Tetraphase simply didn’t have the money to continue testing its other drugs while investing in the launch of Xerava. The reorganization and other cost-saving efforts will save about $8.2 million annually, the drugmaker said last week.
“It has always been a challenging industry to be in,” he said. But now, “everybody wants an immediate return.”
Unlike many new expensive cancer drugs, which can generate big sales quickly, it takes time to get antibiotics on a hospital’s covered-drug list and to get doctors comfortable with prescribing them, Edwards said. Sometimes the process can take years.
Crashed Model
Another small firm specializing in antibiotics, Achaogen Inc., filed for bankruptcy protection in April, less than a year after getting approval for a drug for urinary tract infections that killed resistant strains in the test tube. In June, the company, which once had a market value of about $1 billion, reached an agreement to sell most of its assets, including the drug Zemdri, for just $16 million as part of a bankruptcy auction.
“The business model, the way we reimburse and pay for antibiotics, has just fundamentally crashed,” said Kevin Outterson, a Boston University law professor who has studied market failures in the antibiotics area. The government needs to act in three to six months to improve the reimbursement for hospital antibiotics or the U.S. may lose even more capacity to develop new bacteria-fighting drugs, he said.
A bill introduced in the Senate this month would allow the government’s Medicare program for seniors to offer additional reimbursements to hospitals that use certain antibiotics to treat a serious or life-threatening infection. The measure is backed by the Infectious Diseases Society of America, which calls it “urgently needed.”
