Health vs. Wealth
The world is awash in cheap antibiotics. So why is biotech billionaire BOB DUGGAN trying to make a new one—and how can he possibly make money from it?
Why is biotech billionaire Bob Duggan trying to make a new antibiotic—and how can he possibly make money from it?
BBob Duggan could easily have called it a career in 2015, after he sold Pharmacyclics, his cancer-drug biotech, to AbbVie. He was 71 years old and worth some $3 billion. He might well have retreated to his house in Costa Rica, with its giant mural of a green-eyed jaguar cub, and lived out the rest of his life on the beach, surfing and reading books about Scientology. But Duggan, now 76, rejects the idea of retirement. “It’s indigenous in every human to want to make a difference, to exercise their ability and capability,” he says. “It has nothing to do with age.”
In April, Duggan became the CEO of Summit Therapeutics by buying more than 60% of
the Nasdaq-traded company for about $63 million. Summit, which was founded in 2003 but has yet to post any meaningful revenue, is developing a new antibiotic for the common but deadly infection Clostridioides difficile (C. diff),
which is spread by fecal matter and is often acquired in hospitals and nursing homes. C. diff
itself causes extreme diarrhea and, in severe cases, organ failure and death. Every year almost a quarter-million Americans are infected with C. diff, and 13,000 die.
It’s a noble place for Duggan to try to make a difference, but it’s also a difficult one. Nobody disputes that antibiotics are one of the great success stories of the 20th century. Before penicillin was discovered in 1928, infectious diseases were the leading cause of death in America, and life expectancy at birth was just 58 years. Antibiotics changed everything. With cheap treatments widely available for everything from tuberculosis to pneumonia, a child born in Cleveland yesterday can expect to live to be nearly 80.
But there are two main problems with antibiotics today. First, the economics: There are a lot of different antibiotics already on the market, almost all inexpensive generics. Amoxicillin, for instance, was introduced in 1973 and is one of the most commonly prescribed antibiotics in the world. Off-patent for decades, it now costs less than a dollar per pill and is highly effective. Given that it takes about $1.3 billion to develop a new drug, hardly anyone is even trying to make novel antibiotics anymore. There’s no easy way to recoup the expense.
Compounding the difficulty is a scientific problem. Bacteria mutate and evolve quickly. That means the bacterial strains that are resistant to being killed by a specific antibiotic survive and spread. To treat patients infected with bacteria resistant to a certain antibiotic, a different one needs to be administered. Therefore, when a new antibiotic is finally developed, “doctors reserve it for very severe cases because of resistance,” says Samir Devani, the founder of Rx Securities, a life sciences–oriented investment bank based in London. “What that means commercially is that these new antibiotics get put in the cupboard, and they’re not used.”
The result: Antibiotic development is usually not worth it for big pharma companies, and the small firms that still develop them are struggling. Two of Summit’s peers, Achaogen (of which Duggan owned a 15% stake) and Melinta Therapeutics, filed for bankruptcy in the past 18 months. Only 25 new antibiotics have been approved over the last 20 years, most of which are derivatives of existing drugs.
None of this deters Duggan, a committed Scientologist with a history of investing in underdogs and coming out on top. He started investing in his early 20s while studying business administration at UCLA. “I started my investment career with about $5,000,” he says, “and within a year and a half I had half a million dollars.” One of the first companies he invested in was Sunset Designs, the maker of Jiffy Stitchery needlepoint kits, which was sold to British consumer-goods giant Reckitt Benckiser Group for $15 million in the mid-1980s. Next came investments in a bakery chain, an ethernet firm and a business that designed robotic surgical instruments. In 2008, Duggan became the CEO at Pharmacyclics, a penny-stock biotech.
Then, finally, the billion-dollar break. A drug in Pharmacyclics’ pipeline, Imbruvica, turned out to be a blockbuster treatment for B-cell cancers, including chronic lymphocytic leukemia (CLL), one of the most common forms of leukemia in adults. That led directly to the $21 billion acquisition by AbbVie.
As at Pharmacyclics, the fate of Summit lies in one drug: ridinilazole, a new antibiotic for treating C. diff which is being tested head-to-head against the generic gold standard, vancomycin. In a recent Phase 2 clinical trial, ridinilazole was found to be not only superior to vancomycin in treating C. diff, but also possibly able to prevent recurrence of disease. If Summit can prove that ridinilazole not only treats but also prevents illness better than the best current option, hospitals could charge a premium for the drug.
Alan Carr, a biotech analyst at Needham, thinks that if any new antibiotic has a shot at success, ridinilazole may be it. “There is a fairly attractive market opportunity for C. diff,” Carr says, noting that the price for ridinilazole will likely be higher because it is a pill, not an intravenous drug, which means it can also be prescribed to patients outside a hospital. But “I don’t think it’s a billion-dollar drug. I think it can be a few hundred million, but I don’t think it’s a blockbuster.”
For Duggan, it all boils down to the simplest wisdom: “How can you not make money if you deliver what patients need?”
“DISEASES DESPERATE GROWN BY DESPERATE APPLIANCE ARE RELIEV’D, OR NOT AT ALL.” —William Shakespeare