‘Superbug’ Among Woes Eating at Small Cap Biotech Firms

It’s often been noted that bacteria live on an “evolutionary fast track” and that antibiotics should be used judiciously to treat them or they will quickly become ineffective.  Still, the announcement this week that Japanese researchers had found a new strain of gonorrhea–a “superbug”– that is resistant to the current crop of antibiotics made headlines worldwide. The new strain, called H104, has the potential to transform gonorrhea (known commonly as “clap”) from a relatively easy-to-treat bacterium into a global health epidemic, according to experts.

The news brings to mind other high-profile bacteria that have also developed strains resistant to antibiotics through overuse. There is MRSA (Methicillin-resistant Staphylococcus aureus), an infection caused by a strain of staph that has developed resistance to commonly used antibiotics. Syphillis, a STD that most often can be treated by penicillin or azithromycin, has now developed an antibiotic-resistant strain that may in some way be related to the AIDS virus.

The resilience of bacteria and other related issues has hurt biotech companies and drastically limited investments in antiobiotics. A recent fact sheet published by the Infectious Diseases Society of America (http://www.idsociety.org/Content.aspx?id=5652) notes that R& D on antibiotic drugs is “expensive, risky and time consuming,” adding that:

  • An aggressive R&D program started today would likely require 10 or more years and an investment of $800 million to $1.7 billion to bring a new drug to market.
  • Out of more than 506 drugs in development, only five were antibiotics
  • Since 1998 only 10 new antibiotics have been approved by the FDA, two of which are truly novel.
  • In 2002, among 89 new medicines emerging on the market, none was an antibiotic.

According to the IDSA, many large companies that have been involved in antibiotic development “appear to be withdrawing from the market” including Aventis, Abbott Laboratories, Bristol-Myers Squibb, Eli Lilly, Proctor & Gamble, Roche and Wyeth. FierceBiotech reports that only two drug companies currently have an antibiotic R&D pipeline: AstraZeneca and GlaxoSmithKline (http://www.fiercebiotechresearch.com/special-reports/superbug-antibiotics-new-drugs-advance-amid-rd-investment-shortfall).

Another article in eWeek offers more hope in antibiotic development, noting that IBM is teaming with technology and university partners to “turn to the cloud in the battle against super bacteria.” IBM and its partners can employ cloud computing technology to accumulate and analyze massive amounts of data and make it available at any time, thereby freeing researchers from the need to set up and maintain the data, which allows them to concentrate on research (http://www.eweek.com/c/a/IT-Infrastructure/IBM-ETH-Zurich-Turn-to-the-Cloud-in-Battle-Against-SuperBacteria-512521/?kc=EWKNLHCR07132011STR2

For small cap biotech companies, these issues and such things as FDA regulators and large competitors make a difficult road to profitability even tougher. In recent years many of the most successful of the small biotechs have been those creating drugs for cancer. But there are still some  pushing forward, involved in the development of antibiotics, or things such as vaccines or drugs to treat STDs. Here are a randomly selected few small biotechs out there struggling to navigate these issues:

Smyrna, GA-based Geovax Labs, Inc. (OTCBB: GOVX.OB, http://www.geovax.com/) is developing vaccines that treat HIV/AIDS. It’s tiny ($15.2 million market cap). The effectiveness of prototypes of its HIV/AIDS vaccine has been demonstrated in pre-clinical studies and it is currently enrolling patients for a clinical study in humans. The stock is trading for about $0.97.

Seattle-based Cell Therapeutics (Nasdaq: CTIC, http://www.celltherapeutics.com/) develops drugs for the treatment of cancer and typifies the fate of some small biotechs. This former high-flyer traded for more than $400 back in 2006, but difficulties with the FDA and other issues caused the stock price to plunge to only 48 cents in March of 2009. Today it still trades actively, about 2.5 million shares a day and closed July 12 at $1. CEO James Bianco told the Puget Sound Business Journal last week that after a recent financing and an escape from a Nasdaq delisting he is predicting a “turnaround” (http://www.bizjournals.com/seattle/news/2011/07/08/cell-therapeutics-ceo-bianco-optimistic.html?ana=yfcpc).

Berkeley-based XOMA Ltd. (Nasdaq: XOMA, http://www.xoma.com/) develops and manufactures therapeutic antibodies to treat autoimmune, infectious and oncological diseases. It receives license fees for its products and has several under development including XOMA 052, a monoclonal antibody for the treatment of type 2 diabetes, rheumatoid arthritis, gout and other diseases. It was trading for $2.33 July 13, on the low end of its 52-week range of $2.17-7.71. About four years ago this was a $54 stock.

Cambridge, MA-based Zalicus Inc. (Nasdaq: ZLCS, http://www.combinatorx.com/) develops drugs for treating inflammation and until last September was known as CombinatoRx. Back in November 2008 this was a 46-cent stock but shares have been on the upswing ever since and have doubled in the past 12 months. The stock was trading at $2.80 on July 13 but Oppenheimer has a $4 target based largely on its Exalgo pain medication.

Other small cap biotechs include Vical Inc. (VICL), AEterna Zentaris (AEZS), Geron Corporation (GERN), Keryx Biopharmceuticals (KERX), Biosante Pharmaceuticals (BPAX) and ADVENTRX Pharmaceuticals (ANX).

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3 thoughts on “‘Superbug’ Among Woes Eating at Small Cap Biotech Firms

  1. In researching my recent book, “The History and Evolution of Health Care in America: The Untold Backstory of Where We’ve Been, Where We Are and Why Health Care Needs More Reform,” I came to conclusion that one of the many issues we have in our current health care system are the myths we carry about the current system, which is in reality not a system at all. One of the main myths is our perception of the concept of our “cures.

    Most people believe that we have cures for most disease. They believe these cures are immutable once discovered and eradicate the effect of disease for all time. Many still believe that Penicillin is a wonder drug that is as effective today as it was when it was invented in 1928. The truth is, that we are in a constant war – a war with our environment (causing accidents, and injury), a war with other species (bacteria, viruses, other micro-organisms), and a war with ourselves (our own behaviors).

    In the battle with the other species, they do not sit quietly and wait to become eradicated and made extinct. They evolve, they adapt, and they have continued to find effective ways to defeat out continued chemical attack. It is no anomaly that we are seeing a rise in super resistant strains of bacteria. We are often only a single mutation away for viruses to change infection methods and patterns. Can you imagine if the AIDS virus, one of the more adaptable viruses, was to change the mechanics of it method of infection to direct fluid contact to aerosol or airborne infection?

    Pharma is running out of magic bullets, as they have picked most, if not all, of the low hanging fruit. It is no coincidence that the new drugs we hear about on TV seem to have an ever increasing list of harmful side effects. Soon in order to get a prescription for treatment, the pharmacist will need to know our genotype and phenotype (individual body chemistry) in order to provide the variant of the drug that won’t harm or kill us, vs. the other one that will.

    This is a great article, but this message needs to be amplified. This factor like many others is one of the reasons we are continuing to see rising health care costs. While it is convenient and self-gratifying to vilify drug companies, insurers and others for making profits on the backs of patients as the cause of the rising cost of care, the reality of is quite a bit different.
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