Overcoming AMR market failure: Three start-up stories

Slowly but surely, the world’s antibiotics are becoming less effective as disease-causing bacteria evolve into drug-resistant “superbugs”. The crisis is inevitable, but there’s little short-term financial incentive to develop new antibiotics: Drug companies would have to spend significant money to develop the drugs, and they might never recoup it, since the price point for antibiotics is so low and the existing drugs still work – until they don’t.

This isn’t a hypothetical problem. The last five years have seen a number of small biotechs try to make it in this space only to declare bankruptcy, their novel drugs fading into obscurity. Big pharma, meanwhile, mostly avoids the space for similar reasons.

Where the free market fails, governments and non-profits step in, and this is where the bulk of AMR work is being done. The pharma-supported billion-dollar AMR Action Fund and the CARB-X accelerator dominate non-profit investment.

In the US, government investment is coming from the National Institute of Allergy and Infectious Diseases (NIAID, a division of the National Institutes of Health), while the Biomedical Advanced Research and Development Authority (BARDA) and the Department of Defense are interested in new antibiotics for battlefield medicine. Elsewhere in the world, the governments of Germany and the UK are some of those taking the threat most seriously, with the UK putting into action a plan to change the way the NHS pays for antibiotics.

But entrepreneurs are a tenacious bunch. Tell them something will never pay, and at least a few of them will try to prove you wrong. Deep Dive talked with the leaders of three start-ups tackling antimicrobial resistance in their own ways.

Revagenix: The resurgent phoenix

One of the cautionary tales of biotechs trying to develop new antibiotics is Acheogen. In 2019, it got an antibiotic approved by the FDA to treat carbapenem-resistant Enterobacteriaceae, a lethal superbug that can emerge in intensive care units and kill around half the people it infects. Less than a year later, it was declaring bankruptcy, having made less than a million dollars in six months on the market.

But that’s not necessarily the end of the story for Acheogen, or its pipeline. Founder Ryan Cirz was able to buy some of the company’s assets and hire a chunk of the team. Under the name Revagenix, they’re trying to take up the company’s mantle.

“We grabbed the pipeline, but we don’t work on a lot of it because a lot of it we can’t make sense of what to do from a non-scientific standpoint,” he said. “Some things we think we know maybe what to do.”

Of the three companies Deep Dive spoke to for this piece, only Revagenix is actually working on novel antibiotics. And though Cirz didn’t want to go into too much detail about their strategy, he laid out the broad strokes.

“We’re really focused on broad-spectrum antibiotics that include coverage for multiple gram-negative priority pathogens, as many as we can get, although sometimes there are limits with chemistry,” he said. “Sometimes gram-positive pathogens come along for the ride, depending on the chemistry. We’re trying hard just to be committed to working on molecules that can meaningfully affect things like mortality. But we’re also realistic that you can’t necessarily study or develop the drug for that because some of those highest on the need settings are the least economically viable.”

For the moment, the company relies on government and non-profit funding sources to pursue its mission of creating new antibiotics for unmet needs. They’re supported by NAIAD and the Department of Defense, among others, along with the occasional private investor.

“We meet investors really one at a time and eventually find somebody that listens to what we’re thinking, and then honestly watches us for a little while and sees, ‘Hey, they’re actually doing the things they said.’ With our government partnerships, we have that time to not always be desperately fundraising. We effectively have to go one by one meeting people, and that’s how we raise money.”

Cirz says he hopes governments will find a way to solve the investment problems, but he’s not hopeful. Even approaches like the UK’s subscription model are fundamentally flawed, he believes, because they create new adverse incentives.

“The company is going to want to sell zero products because every $1 drug I sell, I take a dollar of straight cash away,” he said. “But that dollar did not make me a dollar. That dollar made me 50 cents. Now I have someone using drugs. Now I’ve got to make more. I’ve got to report pharmacovigilance for the first five years to the FDA. I got to do all this work. They’re creating an incentive where people are going to beg for no one to use the thing, even the company, and just take the check.”

He hopes stories like Acheogen’s will wake the world up to the scope of the problem.

“It’s so much like climate change, unfortunately. When it’s too late, you’ll know,” he said.

LimmaTech: The stalwart partner

Making novel antibiotics isn’t the only way to combat antimicrobial resistance. With many of the superbugs on the WHO and CDC watch lists, it’s possible to identify at-risk populations who could then be vaccinated against the bug. No infection in the first place means no antibiotics, and no opportunity for the superbugs to adapt any further.

“The less antibiotics you are giving, the less you increase the antibiotic resistencies because people are not taking them,” said Franz-Werner Haas, the CEO of LimmaTech. “So it’s not mutually exclusive to have an antibiotic or a vaccine. Vaccine protects and keeps you away from the disease, certainly, but also the antibiotics. So it’s symbiotic somehow, additive. And that’s where we are at LimmaTech. We are working in this field of vaccines in order to protect from microbial infections.”

LimmaTech is looking at several high-risk infections that crop up in predictable populations: gonorrhoea, which tends to surface in sex workers, the gay population, and healthcare workers who serve these communities; shigella, which targets whole communities in the developing world; and staph aureus, a hospital-acquired infection, where people can be vaccinated before high-risk procedures.

Today, most vaccines are designed to fight viruses, not bacteria. But biologic drugs provide a platform that can be used for bacterial vaccines. LimmaTech uses an e. coli-based bioconjugate platform licensed from GSK to develop its vaccines.

LimmaTech, which was built from the unacquired assets of GlycoVaxyn when that company was purchased by GSK, relies heavily on its partnerships with GSK and another company, AppVac, to sustain itself as it develops its pipeline. But Haas thinks there’s enough opportunity here to support the company in the long run.

“How many companies are working in this very, I think, still underestimated field of antimicrobial resistance, and then to tackle it via vaccines?” he said. “There is a huge interest, and it is a niche. The hard news is it is a niche. The positive news is it is a niche. There are not that many companies working in this field, but there is a very high unmet medical need.”

But more than the potential for a payout, Haas believes the industry needs to be mobilising to meet the threat of AMR head-on, in whatever ways it can.

“If no antibiotics are working because of this resistance, we are back in a Stone Age where just before Fleming discovered penicillin,” Haas said. “That is really why the people call it a silent pandemic.”

Lumen: The novel innovator

The heart of the problem with making a profit in the antibiotic business is the disconnect between the cost of the drugs and the revenue they can be expected to bring in. Much of the effort by government and non-profit actors is aimed at increasing that revenue potential. But what if you could dramatically reduce the cost of manufacturing?

Seattle, Washington-based Lumen Bioscience has an innovative approach to drugs that the company hopes will hit that sweet spot. Like LimmaTech, they’re focusing on prevention rather than treatment, but they also have a unique approach to the drugs themselves.

“We can price the product. That’s our trick,” Brian Finrow, Lumen’s CEO, told Deep Dive. “That’s our hack, the prevention versus treatment distinction. We make a product that is safe enough and cheap enough to use preventatively. Antibiotics are cheap enough, but not safe enough. Conventional biologics are safe enough, but not cheap enough. We got the good box in that two by two grid, and that means we can sell it at a price that saves the system money on net and still makes us a reasonable return. Neat trick, right?”

At the heart of the “trick” is a little organism called spirulina. You might have seen it in the grocery store where it’s sold as a dietary supplement. A single-cell photosynthetic microbe, spirulina, can be easily cultivated as a crop. Less easily, Lumen has found a way to engineer strains of spirulina to deliver therapeutic proteins, vastly reducing the price of creating biological drugs. In addition, because the pill is essentially a foodstuff, it has a very favourable safety profile, even at high doses.

On the AMR threat list, Lumen Bioscience is targeting Clostridioides difficile (C. diff), which the CDC puts on a short list of urgent threats when it comes to AMR. They are trialling it to prevent recurrence of C. diff in patients being treated with antibiotics.

“Antibiotics are a very broad spectrum, and so they kill off your microbiome,” Finrow explained. “That’s actually what opens up the opportunity for C. diff to recolonise. But the biologics have this attribute scientists call specificity, which means you can make them like a scalpel. They only go after the bad bugs and none of the others. Because they’re absorbed, in addition, you don’t have to worry about all the liver toxicity and other issues of antibiotics. They’re safer and much more specific. That’s why we can give them to you during the preventative phase, allowing your normal bacteria to regrow without risking another case of C diff.”

Not all of Lumen’s products are AMR-related. In fact, Finrow says, the company doesn’t brand itself as being in the AMR space precisely because of the stigma around profitability.

“Even if, as in our case, there’s a really compelling business case, it doesn’t matter because you can’t do research without funding,” he said. “The fact that everyone disagrees with us in the investor world that there’s a business case, it’s just it’s too bad. We get painted with a broad brush.”

Instead, they seek VC funding for other programmes, work with the US Department of Defense, CARB-X, and the Gates Foundation on their various AMR programmes, and hope that their strategy proves itself out in the long run.

“Preventive drugs, we think, are where we can operate,” he said. “We can’t solve all of the AMR crisis single-handedly. We’re not trying to. There are plenty of them that are systemic, and we don’t have a way to go after those. But for areas where we can operate, that’s our shot at proving all of the VCs wrong.”

About the author

Jonah Comstock 

Jonah Comstock is a veteran health tech and digital health reporter. In addition to covering the industry for nearly a decade through articles and podcasts, he is also an oft-seen face at digital health events and on digital health Twitter.

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