Funding For Biopharmas Targeting Urgent Bacterial Threats

By Cathy Yarbrough, Contributing Editor
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A Nevada woman’s death in 2016 from an untreatable bacterial infection called attention to the possibility of an “antibiotic apocalypse,” when even the most deadly bacterial strains will prove resistant to all available antibiotics. “Antibiotic development is not keeping pace with the emergence of antibiotic-resistant bacterial strains,” said Kevin Outterson, executive director of the new global public-private partnership, Combatting Antibiotic Resistant Bacteria Biopharmaceutical Accelerator (CARB-X). Headquartered at Boston University (BU), CARB-X was launched in August 2016 to accelerate the preclinical development of innovative, high-quality antibacterial products at biotech startups.

New antibiotic classes are far too rare, said Outterson, BU professor of law and a global thought leader on the economics of antibiotic development. (Editor’s note: See sidebar on newly proposed economic models for antibiotic R&D.)

On March 30, CARB-X awarded its first round of grants to about a dozen biotech startups with highly promising therapeutic, preventative, and diagnostic products that target microbes on the CDC’s 2013 list of urgent and serious bacterial threats. The grants will be heavily weighted toward Gram-negative bacteria, which include CRE, the microbe that killed the Nevada woman. CARB-X’s funding portfolio is not limited to antibiotics, because vaccines and rapid point-of-care diagnostic tests also will help protect the public from resistant bacterial strains, said Outterson.

CARB-X was established in response to the U.S. government’s National Action Plan for Combating Antibiotic Resistant Bacteria. Funding CARB-X’s five-year budget of $350 million are the U.S. government’s Biomedical Advanced Research and Development Authority (BARDA) and the National Institute of Allergy and Infectious Disease (NIAID), as well as the U.K.’s Wellcome Trust and AMR (Antimicrobial Resistance) Center.

While CARB-X will not finance Phase 2 or 3 clinical trials, the products that emerge from the startups supported by the organization’s grants will be in a position to attract the public or private investment required to finance costly late-stage clinical evaluations.

"The science is definitely out there, but it has been starving for funding because private money is not being invested in the preclinical space for antibiotics."

Kevin Outterson
Executive Director, CARB-X

“A lot of interesting science is occurring at small biotech companies,” Outterson said. “The science is definitely out there, but it has been starving for funding because private money is not being invested in the pre-clinical space for antibiotics. CARB-X seeks innovation, not modest modifications of existing products.”

In addition to receiving funding, biotech startups awarded CARB-X grants will be given streamlined access to a suite of technical, research, regulatory, and business mentoring services. “Many of these startups are spinoffs of university labs,” said Outterson. “While the scientists at these companies are very clever, few of them likely have brought a drug to full FDA approval.”

The services will be provided at no cost by CARB-X’s partner organizations, ranging from the AMR Center, a private-public translational R&D initiative; to the California Life Sciences Institute (CLSI) and MassBio, two of the world’s best biotech accelerators. These and other partners will help shepherd CARB-X funded companies through the preclinical development process. The grantee companies will not be required to use any of the services. If the company enlists its own CRO or another service provider, CARB-X partners “will be happy to work with whomever the company is working with to advance the preclinical development of the product,” Outterson said.

For preclinical services and project management support, the grantee companies will be able to turn to the NIAID and AMR Center as well as the nonprofit RTI International, which specializes in project management, clinical trial design, and other services for both government and commercial clients. Outterson gave an example of a service that could be provided by NIAID. If a CARB-X grantee company needs to evaluate its potential product in additional animal models, NIAID will help not only with the model selection but also with the design and conduct of animal testing.

Mentoring and other business support services will be provided by the Wellcome Trust, AMR Center, MassBio (MB), and CLSI. MassBio and CLSI have extensive experience in mentoring biotech startups. “Mentors will help a company decide ‘yes’ or ‘no’ on whether a product candidate should progress to clinical trials,” Outterson explained. Mentors also will help with IND (investigational new drug) submissions, FDA meeting preparations, and fundraising.

STARTUPS RETAIN IP
To qualify for CARB-X support, a biotech startup must have advanced its product candidate to at least technology readiness level 3, at which proof-of-concept has been demonstrated. The startup also must be a legally established entity with a business structure and sufficient financing separate from the CARB-X grant to support basic operations for 12 months. To finance the development of its products, the startup must provide a cost share equal to at least 20 percent of the project costs. However, CARB-X encourages the companies to propose higher amounts. Because CARB-X grants will be nondilutive, the grantee companies will not be saddled with additional debt or equity dilution. Like NIH grant recipients, CARB-X funded startups will retain their IP.

If the company meets all milestones established by CARB-X, it will be continuously funded to the end of Phase 1 without having to take time to reapply for funding each year. If a milestone is not met, CARB-X will terminate the company’s grant.

CARB-X’s three-stage grant application process was up and running within 30 days after the organization established its offices at BU. A total of 350 biotech start-ups representing 23 countries contacted CARB-X in the first two funding cycles. Since antibiotic-resistant bacterial strains cross borders, CARB-X is not geographically limited in its support of biotech startups with highly promising preclinical antibacterial products.

In addition to Outterson, CARB-X’s staff leaders include John Rex, M.D., former senior VP and head of infection in global medicine development at AstraZeneca. Dr. Rex, chief strategy officer at CARB-X, also is a voting member of the Presidential Advisory Council on Combating Antibiotic Resistant Bacteria. Barry Eisenstein, M.D., who heads CARB-X’s science advisory board, was senior VP of scientific affairs at Cubist Pharmaceuticals, now part of Merck. CARB-X’s Global R&D Director Karen Gallant, Ph.D., was global head of business development for AstraZeneca’s infection, neuroscience, and gastrointestinal programs. In addition to these staff leaders, CARB-X’s executive team includes 23 representatives of partner organizations, none of whom receive salary support from CARB-X.

By 2021, if CARB-X’s plans prove effective, the currently sparse global clinical antibacterial pipeline will be enriched by several novel antibiotics, vaccines, and rapid diagnostic tests ready for clinical testing.

Update: CARB-X recently announced that it awarded grants to 11 biotech companies and research teams. The grants total $24 million up front and promise up to $24 million in milestones.

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SIDEBAR

NEWLY PROPOSED ECONOMIC MODELS FOR ANTIBIOTIC R&D

Efforts are underway in the U.S., the U.K., and Europe to create new economic models for antibiotics that will encourage more biopharmaceutical companies to invest in the preclinical and clinical development of these essential drugs. (The last new class of antibiotics was developed 40 years ago.) While primarily focused on antibiotics, the groups that have been leading these efforts also have emphasized that high-quality vaccines and rapid diagnostic tests are needed to protect the public from antibiotic-resistant bacterial infections.

“Right now, antibiotic resistance is a very slow-moving train wreck. It might take another decade for antibiotic resistance to become a true disaster, or it might be tomorrow,” said Boston University Professor of Law Kevin Outterson, a global expert on the economics of antibacterial R&D and commercialization and executive director of CARB-X. (See adjacent article.)

Without effective global action, untreatable infections could cause 10 million deaths globally each year by 2050, according to the U.K. Review on Antimicrobial Resistance, commissioned by the U.K. prime minister.

During 2016, the Pew Charitable Trusts determined that only 40 antibiotic candidates were in clinical trials. The antibiotic R&D pipeline is meager because the development and commercialization of these drugs have become unprofitable. Under the current price-multiplied-by-volume economic model, a new antibiotic must be prescribed to the highest possible number of patients for a biopharmaceutical company to recoup its R&D investment and earn a profit. However, the price-volume model has contributed to the inappropriate use of antibiotics, for example, to treat viral infections. Antibiotic misuse and overuse have accelerated the natural evolutionary process by which bacterial strains become resistant.

To slow the development of resistance, a new antibiotic is typically reserved for the relatively few patients whose bacterial infections have proven impenetrable to older antibiotics, many of which are low-cost generics. Public health and insurance company measures that restrict the prescription of new antibiotics obviously decrease their sales. Also limiting antibiotic sales is the acute nature of bacterial infections. Unlike drugs for chronic diseases such as hypertension, antibiotics are usually taken for just a brief time.

ECONOMIC INCENTIVES RECOMMENDED

During the past decade, several non-U.S. groups including the Review on Antimicrobial Resistance and the Chatham House think tank, both in the U.K., and the EU’s DRIVE-AB (Driving Reinvestment in R&D and Responsible Antibiotic Use) have examined various economic incentives to encourage more biopharmaceutical investment in antibiotic R&D. Both U.K. groups have issued reports with recommended incentives. In June 2017, DRIVE-AB will publish its recommendations.

In 2016, the Duke-Margolis Center for Health Policy of Duke University launched a program to create an economic model for antibiotic development that could be integrated into the U.S. healthcare system. “Much of the work of the groups in the U.K. and Europe has been more relevant to the single-payer healthcare system of those countries than to the U.S. healthcare system with its multiple public and private payers,” said Gregory Daniel, Ph.D., deputy director and head of the center’s pharmaceutical and medical device policy portfolio.

The Duke-Margolis Center brought together a wide range of stakeholders, from biopharmaceutical company leaders to payers, to identify the “push” and “pull” economic incentives that would be practical and effective in the complex U.S. market. “Push” incentives, such as government-funded research grants and public-private R&D partnerships, are designed to reduce a company’s financial risks when investing in preclinical and clinical antibiotic development. Examples of these incentives include the biopharmaceutical accelerator CARB-X’s research grants and support services for biotech startups with highly promising preclinical antibacterial products.

DE-LINKING SALES FROM REVENUE

One of the most promising “pull” incentives being proposed de-links the sales of a new antibiotic from the utilization of the drug. Instead of sales, the company’s revenue would come from financial rewards such as a substantial market entry payment, a transferable exclusivity award, a market exclusivity extension, and milestone payments. A company would earn a market entry award by obtaining regulatory approval of a new antibiotic that met specific innovation criteria such as a novel antibiotic class.

The market exclusivity extension could be used or sold by the company. The dollar value of the award could be large enough to partially provide the market-entry payment, said Outterson. Milestone payments could be a tiered structure of financial awards based on a company achieving specific stewardship benchmarks designed to prevent misuse and overuse of antibiotics as well as ensure availability of the drugs when they’re needed. Benchmarks also could include the FDA approval of new indications or different formulations of the antibiotic. Daniel explained that benchmark payments could encourage antibiotic manufacturers to remain engaged in the life cycle of their drugs.

“To be effective, economic incentives must be predictable and guaranteed,” said Daniel. “Before making an investment in antibiotic R&D, companies must be confident that the market entry awards and other financial incentives will be available when their new antibiotic products are submitted for FDA approval.”

Daniel and other members of his Duke-Margolis team are compiling a white paper proposing a value-based alternate payment model that will provide financial incentives to boost antibiotic development. Once the paper is published, the center will seek input from stakeholders and sponsor a pilot project to identify how the model should be implemented in the U.S.

THE PROPOSED VALUE-BASED PAYMENT MODEL

A value-based payment model for antibiotics aligns with current trends in the U.S. healthcare system. “We’re moving rapidly from fee-for-service to value-based reimbursements based on patient outcomes,” said Daniel. While the details have not yet been worked out, the center’s economic model likely will require a phased-in approach to value-based reimbursement, he said.

The Duke-Margolis model will propose a market-entry award paired with value-based payments from contracts that the biopharmaceutical company would negotiate with private payers. The base market-entry payment could total $200 million during the first year after regulatory approval. In subsequent years, the market-entry payment would lessen and be based on a company demonstrating an increasing percentage of revenue coming from its value-based contracts with private payers.

“This would limit the size of the market-entry reward needed, incentivize movement toward more payments based on value, and ensure that payers aren’t paying any more than they usually do for antibiotics,” said Daniel. In this model, payers will structure their payments based on their membership size rather than the volume of the drug used. Payments also would be based on the availability of the drug and the biopharmaceutical company’s support of stewardship.

Whether the U.S. government will totally or partially fund the market-entry award has not been determined, and the Centers for Medicare & Medicaid Services’ role in this proposed model also has not been defined.

To delay the development of bacterial resistance to its antibiotic, a company must be “thoughtful about stewardship from the word go,” said Outterson. “From society’s standpoint, we want a new antibiotic to remain effective for 50 to 100 years — well beyond its patent life.”

Daniel said that “ideally a company will put its new antibiotic on a shelf and distribute it only when it is really needed.” Stewardship and de-linkage of an antibiotic’s revenue from its utilization are major components of the economic models drafted by U.S., U.K., and E.U. groups. The models are similar in recommending a comprehensive strategy of “push” and “pull” incentives, global coordination, and access to antibacterial drugs at a reasonable price in developing countries. “While there is widespread inappropriate or excessive use of antibiotics in the U.S., there are many countries where people cannot afford antibiotics when they need them,” said Outterson.

Biopharmaceutical companies have expressed support for new economic models for antibiotic development and commercialization. In early 2016, more than 80 companies signed the Davos Declaration, which called on governments to help develop new and alternative market structures providing incentives for investing in antibiotic R&D. Prior to the United Nations General Assembly’s high-level meeting on antimicrobial resistance in September 2016, 13 companies presented a new road map with four key commitments to reduce antimicrobial resistance. Among their commitments is “establishing new business models that balance access needs, appropriate antibiotic use, expanded vaccine coverage, and adequate return to companies.”