Forge Therapeutics CEO Zak Zimmerman stands in the company’s lab. Forge and other San Diego biotechs are taking on life-threatening infections called superbugs.

Forge Therapeutics CEO Zak Zimmerman stands in the company’s lab. Forge and other San Diego biotechs are taking on life-threatening infections called superbugs. Photo by Jamie Scott Lytle.

In a race to combat antibiotic resistance, big pharma bailed. Investors are skeptical. But Forge Therapeutics isn’t deterred.

Forge and other San Diego biotechs are developing antibiotics for life-threatening infections called “superbugs.” Besides challenges in the lab, there’s the matter of tough-to-pencil-out economics.

This summer Switzerland-based Novartis AG joined a trend of drug giants leaving this kind of research. Novartis was scared away by the prospect of limited sales and steep costs to stay ahead of resistant strains.

Running counter to that narrative, San Diego superbug biotechs are armed with fresh funding, courtesy of talent with a track record in the space. In addition, regional research institutions have won bacteria research grants, feeding biotech with talent and potentially breakthroughs.

Difficult Funding Landscape

Leaders of these companies acknowledged a difficult funding landscape, while simultaneously encouraged by potential reforms to speed up antibiotic development. And they’re confident the growing need for new antibiotics will put a premium on their work.

“There are thousands of people who are getting sick and actually dying from infections that a couple of years ago we were able to treat. This problem isn’t getting better. It’s getting worse,” said Forge CEO Zak Zimmerman.

Forge last year raised a $15 million Series A round. Around that time, Forge also took in $8.8 million from Carb-X, a public-private partnership funding new antibiotic development.

The $8.8 million was the largest grant last year from Carb-X, which awarded 11 grants out of 168 applications.

Another San Diego firm, Cidara Therapeutics, came in second with a $6.9 million grant for technology for bacterial infections, part of Cidara’s diverse drug pipeline.

New Classes of Antibiotics

Forge is developing new classes of antibiotics, critical because most classes were developed decades ago, and resistance emerged. The company emphasized the point among investors waking up to the business potential.

“Some new antibiotics, because they’re not innovative, because they’re just modifications of existing classes, they’re not being used by physicians since they’re no different than the cheaper versions being prescribed,” Zimmerman said.

The company’s lead program, LpxC, killed gram-negative superbugs in animal models. Forge estimates the drug candidate could hit the market in five years. By then the company expects a sea change.

“In two, three, four, five years — are generics going to work anymore? The answer is they’re not going to work as well. They may not work at all,” Zimmerman said. “The market will respond to a drug that saves people’s lives.”

Infection Rate

The Centers for Disease Control and Prevention estimates that at least two million people in the U.S. annually develop serious infections caused by antimicrobial-resistant pathogens. And, at least 23,000 people die as a direct result of these infections. The number could mushroom without action, experts say.

Besides Forge and Cidara, Qpex Biopharma looks to be another major player locally. Last month, Qpex surfaced with a $33 million Series A round and a federal contract worth up to $132 million to combat superbugs.

Worth mentioning as well: AmpliPhi Biosciences, taking on antibiotic-resistant bacterial infections. As a reminder of the difficulty of developing antibiotics, the company’s stock declined further last month after a public offering.

Talent on Scene

Why does San Diego have a cluster of companies in a decidedly unpopular space? Company executives cited advances in recent years — and talent that stuck around from earlier antibiotic companies based here.

Forge, for instance, has ties to Trius Therapeutics, acquired by Massachusetts-based Cubist in 2013 for $707 million. Cubist four years earlier purchased San Diego antibiotic-maker Calixa Therapeutics for $402.5 million.

Merck, which in 2014 bought Cubist for $8.4 billion, is one of the few pharmaceuticals still in antimicrobial research.

Only five of 16 brand-name antimicrobials approved between 2000 and last year earned more than $100 million in annual sales, according to a study from Duke University’s Margolis Center for Health Policy.

At least for now, generic antibiotics are inexpensive and widely effective, making them the first line treatments.

Difficult Revenue Model

Biotechs took a more prominent role when big pharma left a different area: neuroscience programs like Alzheimer’s. Unlike neuroscience, pharmaceuticals made significant scientific gains in antibiotics, but ultimately didn’t see a way to profit.

Some aren’t convinced biotechs can take up the antibiotic mantle. Erik Gordon, a clinical assistant professor at the University of Michigan’s Ross School of Business, called the idea “somewhat of a head-scratcher.”

“Biotechs have shown over and over they can do the science that the big pharmaceuticals companies can’t do. But here that’s not what we’re talking about. You’re talking about a difficult revenue model,” Gordon said.

Such biotechs, he added, could encounter cash-flow problems. Typically biotechs recoup years of losses with windfall sales on new drugs for chronic conditions, less likely with antibiotics used sparingly.

Subscription Fee?

In September U.S. Food and Drug Administration Commissioner Scott Gottlieb talked of reimbursement reforms to incentivize new antibiotics. One possibility: hospitals paying a subscription fee for antibiotic doses, rather than a per-use basis.

“These subscription fees could be priced at a level to create a sufficient return on the investment to develop drugs with a certain profile,” Gottlieb said. “This is similar to the way that software often gets reimbursed, where institutions pay a licensing fee for a fixed number of installations.”

The FDA is discussing changes with Centers for Medicare & Medicaid Services, which sets reimbursement policies.

Qpex Pharmaceuticals CEO Mike Dudley said with big pharma leaving, biotechs battling superbugs will need to take drugs further into the pipeline and rebuild commercial channels. For this to make business sense, he added, a biotech must advance several drug candidates, not just one.

“We’re not sitting around yearning for big pharma to get back in the game,” Dudley said.

Qpex’s aforementioned $33 million round is going toward a portfolio of antibiotics to fight drug-resistant infections. Instead of developing new antibiotics, the company’s approach is to combine what are called beta lactamase-blocking drugs with existing antibiotics.

As testament to the federal government’s increased attention on superbugs, Biomedical Advanced Research and Development Authority, or BARDA, awarded Qpex $32 million in 2016. An additional $100 million is possible.

The management team is made up of former executives of The Medicines Co., which won regulatory approval of three antibiotics in the last five years. Qpex also has roots in Rempex, a local antibiotics developer acquired by The Medicines Co.

San Diego research institutions are winning grants for groundbreaking superbug research. That includes UC San Diego receiving a $9.5 million National Institutes of Health grant for an interdisciplinary center exploring the biology of antibiotic resistance.

Bacteriophage Therapy Center

UC San Diego this summer also launched a bacteriophage therapy center, embracing a 100-year-old method dropped in the 1930s with the advent of modern antibiotics. But bacteriophages — viruses that specifically target and consume bacteria — are getting a fresh look with the rise of superbugs.

Andrei Osterman, a professor of bioinformatics who has studied bacterial resistance at Sanford Burnham Prebys Medical Discovery Institute, said academic grants seem to be minimal in the space. That includes both experimental early-stage research and translational research, the latter of which is key for attracting biotech interest or for spinning out companies.

“I think there’s a disconnect there,” Osterman said. He added researchers have made notable strides in recent years, like sequencing the genomes of resistant microbes to gauge their evolution.