The Antibiotic crisis: why the resistance from investors?

It wasn’t so long ago that cutting your finger could be a life-threatening event. Then the discovery of antibiotics made the world a much, much safer place. But microbes have fought back: with each new generation replicating – and mutating – up to three times an hour, they’ve adapted to render many antibiotics useless. We’re now left with a choice of just two ‘last resort’ drugs. Today, antimicrobial resistance (AMR) infections are estimated to cause 700,000 deaths each year. That figure is predicted to rise to 10 million, with a cumulative cost of $100 trillion, by 2050. By this time, it’s possible that death by infectious disease could regain its historical place as a bigger killer than cancer. 

Getting worse, not better

Despite this epic threat, the pharmacological industry has slowed down its development of new drugs. In fact, not a single new class of antibiotics has been developed since the 1980s and in 2018 alone, three large legacy pharma firms closed their antibiotic research programs. Achaogen, founded in 2002, was an antibiotics company that filed for bankruptcy late last year. On the day the FDA finally approved the company’s new antibiotic, Zemdri, its stock price actually dropped by 20 percent. It’s a case of economics: drug development is laborious, risky and costly. Even when successfully launched, antibiotics are taken for only seven or 14 days, rather than the life-long dose of diabetes or blood pressure medication, so profits are elusive. In an explicit market failure, antibiotics have become toxic to the Pharmaceutical industry.

So what does this mean for investors?

Not surprisingly, investors share the Pharmas’ concerns. Antibiotic development is a dead-end road. Governments, the obvious whip-cracker in this scenario, are largely shunning the challenge. The UK’s NHS is stirring, with plans to test a ‘subscription-style’ payment model that will help incentivise companies to develop new drugs needed to tackle resistant infections. But in the meantime, is it left to entrepreneurs to change the rules of engagement? 

A new approach

Enter CRISPR-Cas. This new technology, ‘CRISPR-Cas9‘ to be precise, is a unique method of editing parts of the genome by removing, adding or altering sections of the DNA sequence. The technique has wide-ranging implications, but for antibiotics it allows for ‘software’ level intervention. Traditional antimicrobials simply (and ingeniously) kill the problem bacteria dead, at the ‘hardware’ level. But gene editing doesn’t attack, it cuts. This makes it a different class of treatment altogether. Targeting and removing the pieces of a bacteria’s DNA responsible for its resistance effectively reverses evolution. A bacteria is taken back to its pre-resistance form, making it once again susceptible to ‘old’ antibiotics. This not only undermines the microbes’ key weapon – its ability to develop new resistance quickly – it rearms defunct antibiotics, bringing them out of retirement. 

Nemesis Bioscience is one company on the frontline of this technology. They’re calling it ‘Antibiotic Resurrection’ and we believe they’re not over-stating that claim. Animal model studies are already suggesting real promise for the clinical setting. Their patented ‘Nemesis Symbiotics’ will not only make existing antibiotics work again, but will also prevent the spread of resistance genes  and so protect the efficacy of new antibiotics, helping reboot their development by traditional Pharma. Other applications include reduction of chemotherapeutic toxicity and the synthesis of biofuels and therapeutics. 

Other startups in this space, such as Eligo, SNIPR Biome and Folium are working in similar ways to tackle the issue. The IP values of these companies are potentially enormous, but lead investors have yet to pile in. 

Uncertainty

I recently attended a conference concerned with this issue in Berlin. The mood was punchy but not overly optimistic. IPOs and exits, it was generally agreed, in the AMR space have been looking quite ugly. One example given was that of a successful company which only managed $800 million market cap after $25 billion in total investment. By contrast, billion dollar valuations in the oncology space – just for hypothesis, before even entering animal studies – are not uncommon.

The problem of remuneration was also discussed in Berlin. Gene editing fixes a patient’s problem permanently, so how do you charge for a one-off – albeit life-saving – treatment? A new model of payment, along the lines of the Netflix model, de-coupled from the industry-standard diagnosis-related group (DRG) system, could take the form of a ‘subscription for life’ commitment. A patient pays an incremental, affordable amount, for the rest of their life. A fair exchange, investors might agree. 

A new precedent

There is thankfully, a recent exception which could herald the dramatic change we’ve been looking for. Last year’s $800 million deal between Locus Biosciences and Janssen Pharmaceuticals (a division of Johnson & Johnson) opens a new path for CRISPR gene editing technologies and the whole field of microbiome-targeted therapies. 

Once this level of investment reaches Europe’s shores, the likes of Nemesis will be able to move to the forefront of the most critical medical battle we’ve faced in modern history.