Developers are reluctantly shelving promising drugs due to market failure.
Scientists trying to bring new antibiotics out of the lab and see them administered to patients are being forced to shelve their promising therapies due to a chronic market failure.
Small companies attempting to help solve a global crisis in drug-resistant infections with novel treatments are facing a wall of disinterest from investors and a lack of help from governments. That’s pushing firms out of business and decimating the pipeline of new antibiotic candidates.
For those involved, it’s a heart-wrenching situation. “For me, the question is not how can I make the biggest profit,” said Remko van Leeuwen, whose biotech went bust. “There is still an intrinsic motivation …. to do something about [antimicrobial resistance].”
The world is in desperate need of new antibiotics. Microbes are increasingly resistant to existing drugs, every year taking away 1 million years of life in the European Union and European Economic Area alone and costing health systems some €1.1 billion.
Van Leeuwen, a medical doctor by training, started working in HIV research in the early 1990s, and saw that antivirals could mean the difference between life and death, he told POLITICO while sipping coffee in the buzzing Brussels’ Schuman area.
Inspired, van Leeuwen founded Madam Therapeutics in 2011, a biotech company developing a new class of antibiotics active against drug-resistant pseudomonas bacteria. The goal was to create an antimicrobial targeting lung infections caused by this bacteria.
Pseudomonas that are resistant to carbapenems — a commonly-used class of effective antibiotics — are listed among seven pathogens in high need of novel drugs by the World Health Organization. Back in 2011, they were on the critical list.
The research was going well: “We had fairly nice data, we also published that in scientific papers,” van Leeuwen recalled. However, there was one issue: funding.
“The first years when I constantly heard ‘no’ (from investors), I thought: ‘Oh, this is probably my own lack of skills,’” he said. But it wasn’t. “It is the business proposition that is actually difficult.”
Low financial returns and the sparing use of antibiotics to avoid resistance make this field particularly challenging for investors. At the same time, new products are urgently needed. As resistance to existing treatments grows worldwide, medical advances such as cancer treatments risk being undermined.
“Antimicrobial resistance is only getting worse yet we’re not developing new trailblazing products fast enough to combat the most dangerous and deadly bacteria,” said Yukiko Nakatani, the WHO’s acting assistant director-general for antimicrobial resistance.
The good news is that the preclinical pipeline of antibiotics is “innovative and includes a large number of non-traditional approaches,” according to the WHO. The bad news is that innovation struggles to reach the next clinical stage.
Funding gap is nail in the coffin
Preclinical product developers like Madam Therapeutics experience difficulties in securing funding for early drug development when the risk of failure is particularly high compared to advanced clinical studies, according to the European Observatory on Health Systems and Policies policy brief.
Yet these small companies now drive antibiotic research and development (R&D) because most deep-pocketed pharmaceutical companies — that could previously absorb the development costs — have left antibiotics research.
In 2023, after reaching the final pre-clinical stage, Madam Therapeutics went bankrupt; the company could not secure the necessary funding to enter first clinical trials. They are not an exception.
The BEAM Alliance represents SMEs developing novel antimicrobial drugs. “We lose two to three members, sometimes more, every year,” BEAM Alliance board member van Leeuwen said.
In 2024 BEAM Alliance lost another member — Nosopharm, a company that was working on novel antibiotics for treating infections caused by drug-resistant pathogens. The story is painfully similar.
“We have done all the pre-clinical development work,” said Philippe Villain-Guillot, former CEO of Nosopharm.The company was ready to enter its first-in-human study, but due of lack of funding or a pharma sponsor the trial never took off.
They contacted around 250 investors but none responded. “You are working in a desert,” Villain-Guillot recalled. He described letting go of the program as “really painful” — yet another company that was too small to survive.
“Unfortunately, the market is broken for antibiotics,” Villain-Guillot said.
Making antimicrobial R&D attractive for investors
The return on investment — also known as the net present value — for new antibiotics is estimated to be negative $50 million, meaning that companies lose money on average. By contrast, developing a neurological drug has an estimated return of $720 million, while a musculoskeletal drug has $1.15 billion.
“Ultimately, if you don’t have profits — if you don’t recoup your innovation investments — that innovation will come to a halt. And that is what we see in our family,” van Leeuwen said.
On top of that, spending on antibiotics decreased between 2011 and 2020 in developed countries — as their use becomes more sparing — making it an even less attractive field.
“Investors will always have the choice between antimicrobial resistance and oncology,” said Frédéric Peyrane, BEAM Alliance’s managing director and founder of Mandanova, a company that helps innovators access funding. “It will always be more attractive to go to oncology.”
But as the world needs new antimicrobials, there needs to be a greater financial motivation to attract investors, he said. R&D incentives, classified into push and pull, are aimed at reinvigorating antibiotic pipelines. And while there are plenty of push incentives — to help fund early R&D — there is a dire lack of pull incentives, to solve the market failure.
“Imagine you are in a hole,” Peyrane said. Someone can push you half-way up, but without a rope to pull you from the top, “you will not get out.”
This is where many biotechs, including Villain-Guillot’s, got stuck — half-way up the drug development journey before they were forced to quit. “If we had the possibility to obtain pull incentive within Europe it would have been helpful for companies like us,” he said.
Possible solutions
To address the market failure, the European Commission proposed a market monopoly incentive — known as a transferable data exclusivity voucher — as part of its overhaul of the pharmaceutical legislation.
Developers of “game-changing” novel antimicrobials would be awarded an additional year of monopoly rights for any drug in their portfolio, or the voucher could be sold.
While the European Parliament supported the voucher, national health ministers in the Council are more cautious and countries are currently split over it.
“If the vouchers [were] accepted, there will be a lot of extra guard rails to give member states the confidence that the system is not misused,” van Leeuwen said. “We need something that is workable and predictable.” He added that vouchers are a start but not the only solution.
An alternative subscription model — deployed successfully in the U.K. — that pays antibiotics developers a fixed amount every month irrespective of demand, was not proposed in European legislation.
But EU countries have supported a third model: a revenue guarantee scheme that would see developers’ coffers topped up from an EU fund if sales of a new antibiotic don’t hit a threshold.
The European Commission awarded its first contract to Italian company Menarini in December. However, the company did not sign the deal, which was valued at €40 million to supply 21 EU countries with the antibiotic Vaborem over 49 months. POLITICO contacted Menarini and the Commission for comment.
But with every day that goes by without a wider market solution, more small companies risk going bust. While vouchers are not a “silver bullet,” van Leeuwen hopes to see them come to fruition. Otherwise, “we’re back to square one, and it will take time to get those investors back.”
“This is actually our cry for help.”
This article has been updated with the status of the EU-Menarini revenue guarantee deal.
