Novo Holdings is repositioning the strategic focus of its REPAIR Fund in order to provide later-stage support to its portfolio companies, as the struggling antibiotics industry faces a dearth of investment.
The Danish investor launched its REPAIR Impact Fund in 2018. An acronym for “Replenishing and Enabling the Pipeline for Anti-Infective Resistance,” the fund has invested a total of $48 million across eight companies based in the US and Europe to date—including $12 million this week.
The first of these investments was $3.9 million to Integrated Biotherapeutics’ subsidiary, IBT Vaccines, which is developing a vaccine for staph infections. The fund also injected €7 million ($7.81 million) in Mutabilis, a French company developing novel antibacterials against Gram-negative infections.
Novo Holdings partner and REPAIR Impact Fund director Aleks Engel says that over the past two years, the fund has validated “a large amount of innovation” within its early pipeline, which includes four small molecules, two vaccines, one peptide, and one oligonucleotide-based therapy, all performing as expected.
The big challenge is that the marketplace has “deteriorated significantly” over the last two years, while unmet need increases, Engel explains.
“Where we two years ago saw a funding gap at the early stage—which we thought was the valley of death for antibiotics—at that time, if you developed a positive Phase 1 dataset there was money to take such programs into late phase and into the market. And that has changed significantly,” he tells Xconomy.
Funding has “dried up to the point that at the valley of death is a desert of death,” with very little investment across the board, Engel says. This is attributed to the poor performance of the last 10 antibiotics launched, which he notes have not returned any investment to their developers and investors—leaving Phase 1 programs stranded.
“So, we will now reserve some money for potentially funding Phase 2 trials,” explains Engel, speaking to the fund’s scope adjustment for 2020. Additionally, where it has been conducting two calls for proposals per year, one for North America and one for Europe, the fund will now reduce this to one global call for investment.
Moving into 2020, Engel hopes to hear more positive news in the second half of the year, including, potentially, some policy changes. “I’m hoping that some of these bankruptcies have not gone completely to waste,” he says, “and that policy makers around the world will make good on some of their commitments that they made in the past to the space in terms of declaring this space a strategic and important one.”
Big pharma has been exiting antibiotics research for several years, with Novartis (NYSE: [[ticker:NVS]]) last year announcing its decision to cut its antibacterial and antiviral research programs, joining other firms—including AstraZeneca (NYSE: [[ticker:AZN]]), Sanofi (NYSE: [[ticker:SNY]]), and Allergan (NYSE: [[ticker:AGN]])—in its departure. A handful of startups aimed to take on the challenge, but also have recently found themselves without enough money. Most recently, antibiotics developer Melinta Therapeutics (NASDAQ: MLNT) filed for bankruptcy in late December. Additionally, Achaogen last April filed for Chapter 11 less than a year after gaining FDA approval for plazomicin, a treatment for complicated urinary tract infection.
Novo is urging policy makers to make changes, and Engel poses both short- and long-term solutions, including market entry rewards and other incentives. He also cites the subscription model being piloted in the UK. In this model, pharmaceutical companies will receive payment for antibiotics up front instead of by volume sold.
“Longer term, we hope for value-based pricing to the point that drugs that save lives will be able to command higher prices,” Engel says. While these changes will admittedly take some time to implement, he hopes in the interim, other changes will help pick up the slack, such as adjustments to add-on payments to hospitals using newer antibiotics: CMS boosted these payments from 50 percent to 75 percent last year in the US. The New Technology Add-On Payment (NTAP) system was created by Congress in 2000 with the intent to “smooth market entry for new innovations,” explained CMS Administrator Seema Verna in a blog post.
Additionally, because new antibiotics are not often prescribed—Engel says it takes about 10 years before real adoption—-he also is calling for more frequent updates to standard of care protocols.
“When antibiotics are approved they are typically approved through a non-inferiority design and as a consequence, when new products hit the market [doctors] believe that they are no worse than what was there before, when in fact these more modern medicines are typically better in terms of both efficacy and safety,” he explains.
Engel also notes that the Developing an Innovative Strategy for Antimicrobial Resistant Microorganisms— DISARM—Act is currently sitting in front of Congress. The act aims to improve Medicare reimbursement for antibiotics and would require hospitals to establish antibiotic stewardship programs.
In the US, the most recent Centers for Disease Control and Prevention estimates attribute more than 2.8 million infections and 35,000 deaths annually to antibiotic-resistant bacteria and fungi.
(Image: iStock/Pornpak Khunatorn)