Commercial prospects dim as doctors prescribe new drugs sparingly; some companies run out of cash

The world desperately needs new antibiotics to tackle the rising threat of drug-resistant superbugs, but there is little reward for doing so.

Instead, the companies that have stepped up to the challenge are going bust.

Makers of newly approved antibiotic drugs are struggling to generate sales because doctors prescribe the treatments sparingly. The new drugs compete with older, cheaper products, and patients typically take them for only a week or two at a time.

One of America’s biggest antibiotics specialists, Melinta Therapeutics Inc., MLNT 6.06% filed for bankruptcy in late December, citing slow sales growth and high costs. Its collapse followed that of Achaogen Inc. AKAOQ 2.23% in April, less than a year after it launched a new antibiotic for difficult-to-treat urinary-tract infections. Other makers might soon face a similar fate, saying their cash will run out before the end of 2020. “We don’t know the fate of those drugs for our patients,” said Helen Boucher, chief of infectious diseases at Tufts Medical Center in Boston. “As a physician, that’s my biggest concern.”

Achaogen’s Zemdri drug was sold for about $16 million, a fraction of the roughly $300 million spent developing it. The lack of return is already causing some companies to rethink their antibiotics research—and prompting calls from investors, executives and doctors for an overhaul of how antibiotics are paid for. “We got everything right, and it still didn’t work,” said Ryan Cirz, who led research at Achaogen.

Investors warmed to antibiotics companies in recent years, partly thanks to a big push by the U.S. government to reinvigorate research after most large pharmaceutical companies abandoned the area. Since 2010, it has provided more than $1 billion to support drug development. A 2012 law made it easier to win regulatory approval and granted patent extensions for antibiotics that addressed the biggest public-health threats.

A spate of deals, including Merck & Co.’s $8 billion purchase of antibiotics developer Cubist, boosted investor interest. But most small companies weren’t acquired, and they are home to more than 90% of antibiotics under development, according to research by the Pew Charitable Trusts. Once their new drugs hit the market—a moment most companies would cheer—they are on their own to fund sales and marketing costs, with far less revenue than their peers.

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