Discovering, developing and commercialising novel antibacterials is hard. The science is tough, finding funding is challenging and if successful, the commercial rewards are insignificant. We have seen companies that should have been rewarded for delivering new treatments collapse.
Some of our best scientific and medical communicators have been effective, convincing Governments that antibacterial R&D is special and needs extra-ordinary levels of support. We have seen remarkable amounts of early stage R&D “push” funding to aid attractive projects and we are starting to see novel approaches to reward product developers that reach the market with subscription models.
But we should not be surprised that the consistent message that the antibacterial market is broken should eventually put off investors and lead to low valuations for companies in the space.
Looking at the likely life cycle for an antibacterial R&D project – it starts in academia or biotech, where grant funding and or investors supported by non-dilutive grants can get the project to early clinical trials. To complete the clinical development and to get to market with global distribution the project probably has to transition into a larger organisation. The valuation of an antibiotic asset is currently so low that the early-stage investors are unlikely to see a return at this stage. They must wait for milestones and royalties. The larger company, if successful, may get a market entry reward, but once they take out their costs, how much will be shared with the early investors? How long will the angel and series A-D investors have to wait for their reward?
Furthermore, we have increased project risk, not reduced it. One of the major advantages of antibacterial R&D is the predictive animal models which means that projects can be derisked early, by Phase II you have a good idea of whether the antibiotic works. Now nobody knows how market-entry rewards will work or what projects will be rewarded. We have added a layer of uncertainty and time onto an already unattractive investment.
Unless each stakeholder can make an adequate return on investment in a reasonable time frame I don’t see how we are fixing the model. It feels like we are delaying the fix because it is hard.
To build a sustainable antibacterial R&D environment for the long-term, 30-, 100- and 300-years, we need to reassess antibacterial pricing and encourage a commercial model that rewards risk and investment. The alternative is that tax-payers will have to fund antibacterial R&D forever, and that feels fragile and unsustainable. But it may be the only option for the short term.