The Broken Antibiotics Business Model Part I
Antimicrobial resistance and its resulting dire consequences have finally become well recognized. Still, the problem continues to proliferate, killing thousands each year. Bacteria are amazingly resilient and will over time develop resistance to whatever we throw their way trying to kill them. But this is only half of the underlying reason for the problem and the half that we can’t do anything about. The other half of the reason is that the economic model for anti-infective drug development is broken. Potential anti-infective drug developers find it very difficult making a living and consequently we do not have a sustainable necessary continuous pipeline of novel antibiotics. This problem is not well publicized or understood by the general public, but is something that we can do something about. In this and following articles, I will try to address this issue.
The antibiotics approved since 2010 have generated or are projected to generate on average USD 120m in global sales in their 5th year on the market, which is when they should hit full stride. Given sales and marketing costs, such a product may generate operating profits of USD 30-40m per year, which is far from adequate to reimburse the hundreds of millions of development costs or billions of dollars if also counting the costs of all the failed programs that never made it to market. The business case is severely challenged and many pharmaceutical firms and biotech investors have chosen to focus their energy elsewhere. The share prices of public companies have fallen by 35% in the last 12 months alone while the broader biotech index (which includes these companies) is up slightly.