Achaogen is not a company most people have heard of. It is not a household name, barely has an international presence and most of us have never used one of its products. The few who have probably don’t know the company either, even if its product saved their life. And yet its recently announced bankruptcy is one of the most significant – and worrying – corporate failures of this decade.
In the global struggle against superbugs, Achaogen is a biotech at the front line. Its failure is the latest symptom of an ailing antibiotics market. Decades of disinvestment have left perilously few companies active in antibiotic development. Those remaining are often dependent on support from philanthropic or public funders – such as the Wellcome Trust, the medical research charity, or the US government.
This support has catalysed an exciting crop of biotechs that are now driving antibiotic innovation. But to go beyond early-stage research and initial small-scale trials, they need private capital to step in. Without external investment, small biotechs cannot carry prospective drugs through the complex and expensive later-stage trials they must pass.
Against the odds, Achaogen appeared to have succeeded. Its antibiotic, plazomicin, was approved by the US Food and Drug Administration in 2018 for treating complex urinary tract infections caused by drug-resistant bacteria. It is a vitally needed drug and just one of the many new antibiotics we need to replace drugs that are rapidly losing their effectiveness against superbugs.
Achaogen was a leading example of what could be achieved by a smart start-up working in partnership with government and philanthropic funders. (Wellcome supported Achaogen with early research and development for the plazomicin programme, was later an investor in its IPO and still indirectly holds a small amount of stock). A handful of other companies followed, some making it all the way to market.
Private investors backing such companies counted on revenues being buoyed either by growing need for their products or by governments responding to the calls to fix the market. Instead, a disaster is unfolding. With limited resources behind it, and facing a tough marketplace, plazomicin has struggled to gain market share even as an alternative to colistin, a cheap, 50-year-old antibiotic with severe side-effects.
In the year before filing for bankruptcy protection last week, Achaogen’s stock lost more than 95 per cent of its value. It closed research and development programmes, laid off staff and even auctioned lab equipment online in desperate efforts to stay afloat. It is not alone. Ten of 12 antibiotics launched in the US in the past decade (not all of them breakthrough products) are achieving US sales of less than $100m a year. This barely covers the cost of keeping them on the market, let alone recouping investments.
The tragedy is not that investors have lost their money. Rather, it is the signal that there is no viable route to market for new antibiotics, however valuable they may be to society. Capital-starved smaller companies will fold. Innovation will die on the vine. Money already invested by governments and charities will be squandered.
Despite agreement about what is wrong, our political leaders have chosen not to address the problem. This is unacceptable. Governments must send an immediate signal to companies and investors that the future is not as bleak as the present. The UK government has announced a limited new pricing model pilot, paying developers upfront for antibiotics used by the National Health Service, based on the value of the drugs to the service rather than quantity. But there will be a two-year delay before it is implemented and possibly no fresh funding from the Treasury.
We need real change now. The amounts that need to be injected are high – about $1bn per drug. That’s a hard sell for politicians, but it reflects the value of antibiotics. The cost could be shared among countries: for the UK to contribute 5 per cent, for example, of an additional $1bn a year for antibiotic development would cost about 6p per person per month. This is a problem we can afford to solve.
If leaders are afraid to deliver these types of market incentives, we need to offer a plan B – finding creative new models to stabilise the antibiotics market and stimulate private sector innovation without exposing public funders to all the risk. If we do not act, the biggest losers will not be the investors, staff and shareholders of companies such as Achaogen, but patients and the public.
This article was first published in the Financial Times, 21 April 2019.