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TheStreet Open House

Is antibiotic-resistant bacteria a curse or a blessing for Big Pharma?

Stocks in this article: GSK AKAO CEMP TTPH MDCO SNY AZN JNJ

By Ben Levine for Kapitall.

At the end of April, the World Health Organization (WHO) for the first time ever released a report on the cresting global crisis of antibiotic resistance

Unsurprisingly, decades of willy-nilly antibiotic use for everything from organ transplants and breast implants to runny noses and splinters has given rise to antibiotic-resistant “superbugs.” And the problem isn't specific to hostpitals or humans:  80 percent of annual antibiotic use in the United States is on animals.

Naturally, the tone of the WHO’s report was particularly dire. As WHO Assistant Director-General for Health Security Dr. Keiji Fukuda put it, “Without urgent, coordinated action by many stakeholders, the world is headed for a post-antibiotic era, in which common infections and minor injuries which have been treatable for decades can once again kill.” The report mainly focuses on a few problem strains, ones responsible for bloodstream infections, diarrhea, pneumonia, urinary tract infections and gonorrhea. It also breaks down the most pressing antibiotic-resistance concerns geographically, listing E. coli and the bacteria responsible for pneumonia and Staph infections as the primary concerns in the Americas and Europe.

Unfortunately, most of the power and resources for the development of next-generation antibiotics is in the hands of major pharmaceutical companies, and, compared with long-term treatments, antibiotic development isn’t very profitable. Antibiotics are expensive and hard to develop, difficult to get approved by the FDA, and are generally only prescribed for relatively short periods of time. What’s more, the FDA has only approved four new antibiotics in the past 16 years. When earning potential is the only driver of biomedical innovation, new antibiotics don’t get developed.

Yet, gloom and doom aside, there may be a silver lining here. In 2010, the United States’ Biomedical Advanced Research and Development Authority (BARDA) created a program called Broad Spectrum Antimicrobials (BSA). The program engages in public-private partnerships, effectively funding big pharmaceutical companies to develop new antibiotics (because they wouldn’t do it otherwise), giving these companies marketing rights should they develop a product that gains FDA approval. The upshot is that if any of these companies are successful, they stand to make a substantial amount of money. So far, BARDA has created six of these partnerships, with GlaxoSmithKline ( GSK), Achaogen ( AKAO), Cempra ( CEMP), Basilea (OTC:BPMUF), Tetraphase ( TTPH) and Rempex, a subsidiary of The Medicines Company ( MDCO).

The EU followed suit in 2012, creating a program called the Innovative Medicines Initiative that operates in a similar way. The initiative has five pharmaceutical partners so far, two of which are our BSA friends Basilea and GlaxoSmithKline, and the others are Sanofi ( SNY), AstraZeneca ( AZN) and Janssen, a subsidiary of Johnson & Johnson ( JNJ). 

As of yet, there hasn’t been much news that an antibacterial superhero is around the corner, but that’s not to say there isn’t—with the lucrative possibilities of government-funded development, Big Pharma is likely keeping mum.

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