AMR Action Fund plans to invest $1 billion in startups fighting antibiotic-resistant bugs. Its first bets are on Venatorx and Adaptive Phage

A fund that plans to invest $1 billion in antibiotics companies has made its first two deals, backing startups aiming to tackle antimicrobial resistance in different ways.

Boston-based AMR Action Fund, backed by drugmakers and groups such as Wellcome Trust, launched in 2020 to finance smaller biotechnology companies with antimicrobial drugs in clinical trials, bridging what it says is a funding gap between early research and regulatory approval.

AMR Action—the “AMR” stands for antimicrobial resistance—is backing Venatorx Pharmaceuticals Inc., whose lead drug targets conditions such as complicated urinary-tract infections, and Adaptive Phage Therapeutics Inc., a developer of viral therapies for various infections, including those occurring in prosthetic joints.

More than 2.8 million antibiotic-resistant infections occur in the U.S. annually, and more than 35,000 people die as a result, said a 2019 Centers for Disease Control and Prevention report.

“If we don’t get out in front of this soon, just doing routine surgery could be problematic,” said Kenneth Thorpe, the Robert W. Woodruff professor of health policy at Emory University.

Despite the need, the incentive to invest in antibiotics is low, Dr. Thorpe and others say. Hospitals typically use new antibiotics sparingly to slow development of resistance.

New antibiotics also compete with cheaper generics. Under bundled payment systems, hospitals can lose money when using novel antibiotics, discouraging their use even when they are the best option, according to a new report from the Biotechnology Innovation Organization, a trade group.

Small biotechs—which develop most antibiotics, now that top drugmakers have largely left the market—often struggle to sell new antibiotics. Companies including Achaogen Inc. have filed for bankruptcy in recent years because they didn’t profit from antibacterials they developed.

Instead of antibiotics, venture capitalists have been targeting cancer and other markets that pose fewer reimbursement obstacles. From 2011 through 2020, antibiotics U.S. startups raised $1.6 billion in venture capital; oncology companies in contrast collected $26.5 billion, according to the BIO report.

AMR Action, whose investors include drugmakers Eli Lilly & Co., Novartis AG and Roche Holding AG, said it plans to invest more than $100 million this year in antimicrobials companies.

The fund’s investments will buy time for the industry, but policy changes are needed to reinvigorate broader investment in it, said Henry Skinner, AMR’s chief executive, adding that the fund expects to make about 20 to 25 investments.

“The market’s broken,” he said.

Congress is considering fixes, including the bipartisan Pasteur Act, which would decouple profits from the volume of drugs sold, creating a Netflix-like subscription model for biotechs that provides upfront payments in exchange for access to novel antibiotics.

Pasteur has been gaining support from lawmakers, said Emily Wheeler, BIO’s director of infectious disease policy.

“There’s great acknowledgment that a combination of things needs to be done to address the antimicrobial ecosystem,” she said.

Read the full Wall Street Journal article here.