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Crisis looms in antibiotics as drug makers go bankrupt

The former offices of Achaogen in South San Francisco. The company sold off the last of its lab equipment and fired its remaining scientists this past spring.
The former offices of Achaogen in South San Francisco. The company sold off the last of its lab equipment and fired its remaining scientists this past spring. Brian L. Frank/New York Times

NEW YORK — At a time when germs are growing more resistant to common antibiotics, many companies that are developing new versions of the drugs are hemorrhaging money and going out of business, gravely undermining efforts to contain the spread of deadly, drug-resistant bacteria.

Antibiotic startups Achaogen and Aradigm have gone belly up in recent months, pharmaceutical behemoths Novartis and Allergan have abandoned the sector, and many of the remaining American antibiotic companies are teetering toward insolvency. One of the biggest developers of antibiotics, Melinta Therapeutics, recently warned regulators it was running out of cash.

Experts say the grim financial outlook for the few companies still committed to antibiotic research is driving away investors and threatening to strangle the development of new lifesaving drugs at a time when they are urgently needed.

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“This is a crisis that should alarm everyone,” said Dr. Helen Boucher, an infectious disease specialist at Tufts Medical Center and a member of the Presidential Advisory Council on Combating Antibiotic-Resistant Bacteria.

The problem is straightforward: The companies that have invested billions to develop the drugs have not found a way to make money selling them. Most antibiotics are prescribed for just days or weeks — unlike medicines for chronic conditions like diabetes or rheumatoid arthritis that have been blockbusters — and many hospitals have been unwilling to pay high prices for the new therapies. Political gridlock in Congress has thwarted efforts to address the problem.

The challenges facing antibiotic-makers come at time when many of the drugs designed to vanquish infections are becoming ineffective against bacteria and fungi, as overuse of the decades-old drugs has spurred them to develop defenses against the medicines.

Drug-resistant infections now kill 35,000 people in the United States each year and sicken 2.8 million, according to a report from the Centers for Disease Control and Prevention released last month. Without new therapies, the United Nations says, the global death toll could soar to 10 million by 2050.

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The newest antibiotics have proved to be effective at tackling some of the most stubborn and deadly germs, including anthrax, bacterial pneumonia, E. coli, and multidrug-resistant skin infections.

The experience of the biotech company Achaogen is a case in point. It spent 15 years and $1 billion to win Food and Drug Administration approval for Zemdri, a drug for hard-to-treat urinary tract infections. In July, the World Health Organization added Zemdri to its list of essential new medicines.

But by then, there was no one at Achaogen to celebrate.

This past spring, with its stock price hovering near zero and executives unable to raise the hundreds of millions of dollars needed to market the drug and do additional clinical studies, the company sold off lab equipment and fired its remaining scientists. In April, the company declared bankruptcy.

Public health experts say the crisis calls for government intervention. Among the ideas that have wide backing are increased reimbursements for new antibiotics, federal funding to stockpile drugs effective against resistant germs, and financial incentives that would offer much needed aid to startups and lure back the pharmaceutical giants. Despite bipartisan support, legislation aimed at addressing the problem has languished in Congress.

“If this doesn’t get fixed in the next six to 12 months, the last of the Mohicans will go broke and investors won’t return to the market for another decade or two,” said Chen Yu, a health care venture capitalist who has invested in the field.

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The industry faces another challenge: After years of being bombarded with warnings against profligate use of antibiotics, doctors have become reluctant to prescribe the newest medications, limiting the ability of companies to recoup the investment spent to discover the compounds and win regulatory approval. And in their drive to save money, many hospital pharmacies will dispense cheaper generics even when a newer drug is far superior.

“You’d never tell a cancer patient, ‘Why don’t you try a 1950s drug first and if doesn’t work, we’ll move on to one from the 1980s,’ ” said Kevin Outterson, the executive director of CARB-X, a government-funded nonprofit that provides grants to companies working on antimicrobial resistance. “We do this with antibiotics, and it’s really having an adverse effect on patients and the marketplace.”

Many of the new drugs are not cheap, at least when compared to older generics that can cost a few dollars a pill. A typical course of Xerava, a newly approved antibiotic that targets multidrug-resistant infections, can cost as much as $2,000.

“Unlike expensive new cancer drugs that extend survival by three to six months, antibiotics like ours truly save a patient’s life,” said Larry Edwards, chief executive of the company that makes Xerava, Tetraphase Pharmaceuticals. “It’s frustrating.”

Tetraphase, based in Watertown, Mass., has struggled to get hospitals to embrace Xerava, which took more than a decade to discover and bring to market, even though the drug can vanquish resistant germs MRSA and CRE, a bacteria that kills 13,000 people a year.

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Tetraphase’s stock price has been hovering around $2, down from nearly $40 a year ago. To trim costs, Edwards recently shuttered the company’s labs, laid off some 40 scientists, and scuttled plans to move forward on three other antibiotics.

For Melinta Therapeutics based in Morristown, N.J., the future is even grimmer. Last month, the company’s stock price dropped 45 percent after executives issued a warning about the company’s long-term prospects. Melinta makes four antibiotics, including Baxdela, which recently received FDA approval to treat the kind of drug-resistant pneumonia that often kills hospitalized patients. Jennifer Sanfilippo, Melinta’s interim chief executive, said she was hoping a sale or merger would buy the company more time to raise awareness about the antibiotics’ value among hospital pharmacists and increase sales.

Coming up with new compounds is no easy feat. Only two new classes of antibiotics have been introduced in the last 20 years — most new drugs are variations on existing ones — and the diminishing financial returns have driven most companies from the market. In the 1980s, there were 18 major pharmaceutical companies developing antibiotics; today there are three.

“The science is hard, really hard,” said Dr. David Shlaes, a former vice president at Wyeth Pharmaceuticals and a board member of the Global Antibiotic Research and Development Partnership, a nonprofit advocacy organization. “And reducing the number of people who work on it by abandoning antibiotic R&D is not going to get us anywhere.”

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Some of the sector’s biggest players have coalesced around a raft of interventions and incentives that would treat antibiotics as a global good. They include extending the exclusivity for new antibiotics to give companies more time to earn back their investments and creating a program to buy and store critical antibiotics much the way the federal government stockpiles emergency medication for possible pandemics.

The DISARM Act, a bill introduced in Congress earlier this year, would direct Medicare to reimburse hospitals for new and critically important antibiotics. The bill has bipartisan support but has yet to advance.