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?

- By Leah Rosen­baum

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?”


 ?? Sci­en­tific Scien­tol­o­gist ?? Sum­mit Ther­a­peu­tics CEO Bob Dug­gan has given more than $500 mil­lion to Scien­tol­ogy over the years but says he doesn’t “in­tro­duce re­li­gion into busi­ness.”
Sci­en­tific Scien­tol­o­gist Sum­mit Ther­a­peu­tics CEO Bob Dug­gan has given more than $500 mil­lion to Scien­tol­ogy over the years but says he doesn’t “in­tro­duce re­li­gion into busi­ness.”

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