However, history shows antibiotic development is anything but a waste of money.
Cubist Pharmaceuticals (CBST) is demonstrating that the demand for antibiotics is huge and, perhaps more importantly, profitable. Their flagship drug, Cubicin, grossed over $1 billion in 2013, a number on par with some of the best-selling drugs in the pharmaceutical industry. In its heyday, Pfizer made over $1 billion per year on sales of its breakthrough macrolide antibiotic, Zithromax.
Furthermore, the U.S. government is enticing companies into the field of antibiotic development. In 2012, Congress passed the Generating Antibiotic Incentives Now Act -- legislation which requires the FDA to prioritize approval for drugs against resistant bacteria. This bill allows pharmaceutical companies to circumvent the standard approval process in favor of a faster track for FDA review. The GAIN Act also permits an extra five years of market exclusivity before the developed antibiotic is made generic, affording additional time for companies to land a handsome return on their investment.
New drug-resistant organisms are emerging in droves and creating a healthcare burden which is at this point largely unaddressed. As this problem grows and gains momentum, companies specializing in antibiotic treatments will be poised to fill this need and stand to profit immensely from the development of new compounds to fight resistant bacteria.The new incentives in place through the GAIN Act only make these investments that much more palatable. Large caps such as GlaxoSmithKline (GSK), AstraZeneca (AZN), and Merck (MRK) and small caps such as Cempra (CEMP), Tetraphase (TTPH), and Durata (DRTX) are just a few of the companies currently researching novel antibiotics to capitalize on this mounting healthcare need. They see this growing market and you should too. At the time of publication, the author held no positions in any of the stocks mentioned. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
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