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Special Report on Infectious Disease: The fungus within us
September 2017
by Randall C Willis  |  Email the author
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Special Report: Infectious Disease
 
The fungus within us
 
Is our arsenal evolving quickly enough to match its protean foe?
 
By Randall C Willis
 
Taking a semester off from college to help his father get a small business off the ground, Rolando was like many other young adults living in Southern California—a second-generation American of divorced parents. Most of his weekends were spent balancing study and hanging out with friends, but this autumn was about work.
 
Typically quite healthy, he initially ignored his cough, but after seven days, a slight fever set in. His doctor prescribed an antibiotic.
 
Three days later, the cough deepened, causing discomfort in his chest, and Rolando was sore all over. He was weak and couldn’t eat.
 
Admission to a nearby emergency department led to a diagnosis of Valley fever, also known as coccidioidomycosis, and six months of antimicrobial treatment.
 
Why didn’t the antibiotic work? Because, like thousands of others in the American Southwest that year, Rolando’s life was toppled by a fungus.
 
Less respect, more risk?
 
Every week, newspapers across the country describe large and small outbreaks of viral and bacterial diseases. Likewise, the pages of the CDC’s Morbidity & Mortality Weekly Report recount pockets of Salmonella-tainted food or norovirus. And very recently, reports surfaced of cases of the bubonic plague in the United States.
 
What is less present are mentions of debilitating and life-threatening fungal infections. If fungi are discussed, it is typically in ads decrying jock itch.
 
“A lot of people, when they think about fungal infections, think about relatively mild infections—say, toenail infection, athlete’s foot, vulvovaginal candidiasis (VVC), thrush,” suggests Marco Taglietti, president and CEO of Scynexis.
 
And even in cases of life-threatening infections, he continues, the infection often occurs within the context of another condition such as cancer or bone marrow transplant, where the patient is immunocompromised.
 
Thus, he says, “when someone dies from a fungal infection under one of these conditions, people say they died of complications of cancer.”
 
However, Oren Cohen, chief medical officer for Viamet Pharmaceuticals, is quick to caution against considering the non-life-threatening infections as little more than aesthetic problems.
 
“Recurrent VVC carries very significant morbidity for people who suffer with it, which is a very substantial number of women in their reproductive years especially,” he explains, citing tremendous issues in lost productivity, personal relationships and morbidity.
 
As well, he highlights the challenges of Valley fever, a respiratory illness highly endemic to the southwestern United States as well as parts of Central and South America.
 
Taglietti adds that even though fungal infections are less common than their bacterial and viral counterparts, the outcomes can be significantly worse.
 
Aspergillus has a mortality of 40 to 50 percent,” he says. “Candida has a mortality of 20 to 40 percent; some rare molds, mortality can be as high as 80 to 90 percent.”
 
And according to recent European studies, the incidence of invasive fungal infection (IFI) is on the rise.
 
Examining hospital records across France, Françoise Dromer and colleagues noted that over a 10-year period from 2001 to 2010, almost 36,000 cases of IFI were recorded, with the incidence increasing 1.5 percent annually. Of these cases, more than a quarter resulted in death, increasing 2.9 percent annually.
 
The authors were quick to caution, however, the limitations of their population-based study.
 
“The increase in IFIs observed parallels a better awareness of clinicians and microbiologists of the threat of IFIs in at-risk populations, improving the sensitivity of the hospital-based dataset,” they wrote. As well, “the advent of new diagnostic tools for the detection of many invasive mycoses may have affected our ability to diagnose these diseases over the study period, which may have had a substantial impact on the temporal trends observed.”
 
Perversely, suggests Jeff Stein, president and CEO of Cidara Therapeutics, the rise in fungal infections may be partly due to success in other therapeutic areas such as immunotherapy.
 
Echoing Taglietti, Stein says, “Unlike in bacterial and viral infections, most fungal infections occur in patients who are already hospitalized for something else.”
 
“These are patients whose immune systems may be intentionally dialed down through the use of immunotherapies, and when their immune system is attenuated, they become at-risk for fungal infections,” he concludes. “That’s where the vast majority of invasive fungal infections are contracted—in the hospital.”
 
And these complications are not helped by the limited armamentarium of antifungals to date (see table below).
 
Limited weapons, greater resistance
 
“To find antifungals is much more difficult than to find antibacterials because the biological machinery of the fungi is more similar to the biological machinery of the human cells,” offers Taglietti. In short, fungi are eukaryotes, just like humans.
 
“You can find a lot of targets in bacteria that don’t have a counterpart in human cells,” he continues. “For fungi, it is a much more difficult challenge to find good targets.”
 
“This explains why for bacteria, you have probably a dozen different classes and hundreds of antibacterials, whereas for serious fungal infections, you have only three classes—polyenes, azoles and echinocandins—and basically seven or eight products.”
 
With so many potential fungal targets having human homologs, the risk for unintended effects increases.
 
“The biggest class of drugs, the azoles, target fungal cytochrome P450s, which is why there are a lot of drug-drug interactions,” offers Stein. “And that’s a major issue with that class of drugs because these are complicated patients on many different drugs.”
 
“The biological difference doesn’t entirely explain the phenomenon you observe,” cautions Cohen. “Part of it has to do with the way drugs are developed.
 
“Frankly, it’s a lot easier to put your finger on a bunch of cases of community-acquired pneumonia to do a clinical trial than it is to do invasive fungi, so part of it is a feasibility issue.”
 
Unfortunately, one way in which fungi are more microbial than human is in their ability to rapidly respond to environmental stresses, and this includes pharmaceutical assault. Just as with the advent of superbugs expressing multidrug resistance (MDR), superfungi are becoming increasingly prevalent.
 
Cohen highlights their molecular versatility.
 
“In fungi, there are a number of different [resistance] mechanisms,” he says. “There are pumps in the cell membrane that result in drug efflux, so they pump drugs out.”
 
“There are the typical genetic changes, so if you’re targeting the cytochrome p51 gene product, the gene will change to create a functional enzyme that is not susceptible to your drug,” he continues. “And that’s particularly prevalent in things like Candida glabrata.”
 
There may even be gene amplification or up-regulation of the target enzyme or complete bypass pathways.
 
And the source of that resistance, Cohen continues, can appear completely innocuous at first blush.
 
He gives the example of resistance in Aspergillus, arising from The Netherlands, where widespread use of agricultural azoles has given rise to changes in environmental Aspergillus, changes that have found their way into humans.
 
Whatever the resistance mechanism, the loss of sensitivity to one category of drugs becomes problematic when the arsenal is relatively limited.
 
“If you have a pathogen that is resistant to azoles, then suddenly, instead of three classes, you only have two and no oral options,” explains Taglietti. “Now the issue is that you start to have pathogens that are multidrug-resistant; resistant to both azoles and echinocandins, at which point, you only have one product left: amphotericin B, which is a very toxic product.
 
“With such a small armamentarium to start with, when resistance starts to develop, this becomes a bigger problem.”
 
According to Antonio Felici, director and head of microbiology, drug design and discovery at Aptuit, part of the MDR issue may have arisen from the use of broad-spectrum antimicrobials.
 
“The use of broad-spectrum antibiotics produced a selective pressure which prompted pathogens to exchange their resistant determinants intra- and interspecies, thus giving rise to the spread and increase of antimicrobial resistance,” he suggests, speaking more to antibacterials than antifungals.
 
“One of the approaches is now to develop a specific therapy for a specific pathogen and, if possible, for a single indication in order to minimize or, better, delay the emergence of new pattern of resistance,” he continues. “There is the idea to have a sort of ‘antibiotic suitcase’ consisting of specific drug for a specific infection.”
 
He quickly acknowledges, however, that for this to work optimally would necessitate the parallel development of diagnostic methods to increase the speed at which pathogens and their resistance genotypes are identified.
 
As Patrick Horn, chief medical officer of antibacterial specialist Tetraphase Pharmaceuticals, explains, this identification is critical to the decision between specific and broad-spectrum treatment.
 
“If you have a patient who has been in the hospital and you have your culture results back, and you know that exactly that they have a carbapenem-resistant E. coli and that’s what’s causing it, then, the ideal is to have an antibiotic that really targets that pathogen and leaves everything else alone,” he says.
 
But as is more often the case now, patients may enter the hospital with symptoms that could signal any of a variety of pathogens.
 
“You need to cover that for the 48 to 72 hours it takes to really identify the pathogen,” Horn explains. “And then, depending on what the pathogen is, you may or may not be able to step down.”
 
“There is a lot of literature out there that shows for every hour- or two-hour-delay in appropriate antibiotic therapy, you’re going to have negative outcomes,” he warns. “So you need to treat those up front.”
 
Leveraging its medical chemistry expertise to develop a pipeline of fully synthetic tetracycline derivatives, Tetraphase clearly sees the value in a broad-spectrum approach.
 
“By being able to have this fully synthetic chemistry, we were able to target compounds that really hit the toughest bacteria,” Macdonald explains. “With eravacycline, we have really good coverage against the MDR gram-negative, but it also covers the gram-positive and the anaerobes.”
 
“When you look a little deeper into our pipeline, a compound like TP6076 right now probably has the best MIC90 anyone’s had against MDR Acinetobacter, whether it’s an existing class, a rejuvenated class or a novel class.”
 
In July, the company presented top-line results of its IGNITE4 Phase 3 study of eravacycline in complicated intra-abdominal infections (cIAI).
 
“Collectively, the data from the IGNITE program in cIAI versus two widely used comparators, ertapenem and meropenem, provides compelling evidence for IV eravacycline monotherapy and its potential to be a valuable new addition to the limited toolkit currently available to treat serious, and often life-threatening, MDR infections,” offered University of Cincinnati’s Joseph Solomkin, an advisor to Tetraphase.
 
But tackling known, even if constantly evolving, opponents is one thing. What do you do when a new opponent arrives on the scene? The recently identified Candida auris turns that speculation into a concerning reality.
 
New threats
 
Otherwise unremarkable when it was first isolated from the ear canal of a Japanese patient, C. auris is quickly changing the landscape of fungal disease. So much so that it has become a focal point of organizations like the U.S. Centers for Disease Control and Prevention (CDC).
 
“The way that C. auris has emerged and continues to emerge is a bit of a mystery, because it was not prevalent,” explains Viamet’s Cohen. “They’ve gone back and looked at stored isolates historically, and there are only a tiny handful of cases where misidentified Candida whatever has turned out to be C. auris. It really does seem to have been a recent emergence of this species in patients on different continents.”
 
Like many such fungal infections, he explains, C. auris preys on immunocompromised patients, but it behaves more like a Staph infection.
 
“It sticks to everything,” Cohen continues. “When people get this in the hospital, you can’t get rid of it in the environment.”
 
Last year, for example, London’s Royal Brompton Hospital had to shutter its intensive care unit for a few weeks because of an outbreak involving about 50 people, he says.
 
“The normal decontamination stuff doesn’t work. It is very difficult to eliminate from the environment.”
 
What makes this strain particularly worrisome, adds Scynexis’ Taglietti, is that it is the first Candida that can transfer from patient to patient.
 
Candida infections are considered endogenous infections,” he explains. “In other words, patients who get Candida infections have Candida in their bodies already, either in the GI tract or, in many women, it is a colonizer of the vagina.”
 
Thus, the fungi can remain completely innocuous until given an opportunity to flourish, such as when a person becomes immunocompromised during treatment for another condition.
 
“These patients, while in the hospital, are not considered infectious patients that need to be isolated,” he presses. “Candida auris is different.”
 
Adding to the concern is that the mortality rate in immunocompromised patients is about 70 percent, and the microbe is highly drug-resistant.
 
Although C. auris is not yet particularly prevalent in the United States—the CDC recently suggested there are about 100 cases, mostly in New York and New Jersey—the fungus is spreading rapidly throughout the developing world and is a growing threat.
 
In early studies, Taglietti reports, his company’s lead product SCY-078 has demonstrated efficacy against C. auris, which he suggests will help ensure the drug is viewed as an important new entry to the armamentarium.
 
In April, at the ECCMID meeting in Vienna, Case Western Reserve University’s Mahmoud Ghannoum demonstrated that Scynexis’ lead candidate SCY-078 also had activity in vitro against C. auris.
 
To address this shifting landscape, many companies are evolving new forms of existing drug classes or approaching the problem from completely new perspectives.
 
Tradition meets innovation
 
Viamet focused its efforts on re-engineering azole-based antifungals, starting with the metal-binding group (MBG) that serves as the core of these compounds’ abilities to inhibit the cytochrome p51 target.
 
“The problem is that all of those drugs essentially use the same MBG within their structures,” Cohen explains. “And not surprisingly, if you incentivize chemists to come up with a good metalloenzyme inhibitor that binds to a metal, they’re going to create a very potent one.”
 
The problem, he continues, is that MBGs are too strong in their metal-binding capacity, and although that helps with the drug’s potency, it means those drugs bind to human enzymes almost as well as to the fungal enzymes. This reduced specificity results in a lot of toxicities and drug-drug interactions.
 
“Essentially, what Viamet did was to create a better version of those molecules that are unbelievably specific for fungi and not humans,” Cohen says. “And then in a second stage of that process, because you do lose potency when you make that MBG less avid, re-engineer other parts of the molecule to gain back potency.”
 
In June, the company presented posters at the ASM Microbe 2017 meeting highlighting the in-vitro activity of VT-1598 against C. auris (with collaborators at the CDC) and a broad spectrum of fungi (with collaborators from Arizona), including species of Aspergillus, Candida, Cryptococcus and others.
 
A month later, at the American Podiatric Medical Association meeting, the company presented results from its Phase 2b study of VT-1161 in onychomycosis (nail fungus).
 
Focusing its efforts on Aspergillus and lung disease, Pulmocide is also developing a next-generation azole, but to avoid many of the side effects associated with systemic delivery, PC945 is formulated for intranasal dosing.
 
Only entering Phase 1 trials this year, the triazole compound has demonstrated superior activity compared with intranasally dosed voriconazole and posaconazole against A. fumigatus infection in immunocompromised mice.
 
As Kazuhiro Ito and colleagues at Pulmocide and Nihon University noted in a recent study, PC945 demonstrated strong impact on fungal burden in the lung and on biomarkers in the serum and bronchoalveolar lavage fluid (BALF) when given therapeutically. These impacts were magnified, however, when the compound was given prophylactically at 25-fold lower doses.
 
“Prophylaxis with PC945 was found to inhibit fungal load in the lung, the [galactomannan] concentrations in both BALF and serum and cytokines, and the inhibitory effects of prophylaxis (-7/+3) were more than 10-fold more potent than either early or late intervention,” the authors noted. “The persistence of PC945 action in the lung, which could contribute to an accumulation of effect, was suggested by the observation that prophylaxis treatment (-7/0) generated superior antifungal effects than resulted from -1/0 days treatment, as the antifungal effects were evaluated on Day 3 after stopping treatment.”
 
For its part, Cidara is approaching the challenge of developing new anti-infectives from two directions, in one case, taking a nod from the world of immuno-oncology.
 
As Stein explains, the company’s Cloudbreak platform essentially takes the concept of immunotherapy and turns it 180 degrees.
 
“In immuno-oncology, you develop a bispecific molecule that uses an antibody directed against an epitope that is over-expressed on the surface of a fungal cell,” he describes. “That epitope also exists on healthy cells, so you can get cross-toxicity issues with some of these drugs.
 
“On the back end of these molecules, you can have a drug—so, an antibody-drug conjugate, for example—and you can pull that drug into the site of infection.”
 
The Cloudbreak platform effectively turns that around, putting a modified version of an existing drug on one end of the bispecific molecule to act as the targeting agent.
 
“Then, on the back end of the molecule, we can either conjugate a molecule that attracts specific elements of the immune system or a part of the immune system—like the Fc domain, for example—to help concentrate an immune response,” Stein continues. “So basically you have a bispecific molecule that targets the pathogen and draws in the immune system.”
 
Because of funding considerations, Cidara focused the initial application of Cloudbreak in the development of an antibacterial candidate.
 
Recognizing the Cloudbreak platform as a “high-risk/high-reward, very early-stage conceptual program,” Stein says the company had also built some expertise in the fungal infection arena and so acquired a preclinical candidate molecule—CD101—that they have taken into Phase 2 studies.
 
“It’s a member of an existing class—the echinocandin class—but it has several important areas of differentiation,” he says. “It has a very long half-life and can be administered safely at very high concentrations. So it is once-a-week effective and very safe dosing.
 
“And it can treat infections caused by Candida fungi far more effectively and safer than existing options.”
 
This difference in performance between CD101 and other echinocandins was highlighted recently in a study by Rutgers’ Yanan Zhao and colleagues of the ability of CD101 and micafungin to penetrate sites of infection in a model of intra-abdominal abscess, as monitored by histopathology, MALDI-MS imaging and laser-capture microdissection/LC-MS-MS.
 
“Current understanding of tissue distribution of antifungal agents has been primarily based on drug concentration measurement in whole-tissue homogenates,” the authors explained their rationale. “Drug concentration in tissue homogenates is a useful measure of exposure. Yet, it can be misleading due to the loss of key information on the spatial distribution of drugs in distinct subcompartments, particularly when abscesses or other forms of lesions are formed.”
 
They noted that after a single humanized dose, both micafungin and CD101 quickly distributed to the liver and kidney, but the compounds quickly diverged when it came to pharmacokinetics of tissue exposure and patterns of lesion penetration.
 
In stark contrast to micafungin, CD101 “was observed to quickly penetrate into abscesses as early as 3h and rapidly reach the necrotic core, interacting with the main fungal population at 6h,” the authors noted. “Even at 72h following a single dose, drug levels inside lesions were still close to 30 μg/g, about 6-fold higher than that for micafungin at steady-state.”
 
At the American College of Clinical Pharmacy meeting last October, Cidara presented its progress on both intravenous and topical formulations of CD101, the latter in a rat model of VVC.
 
Other companies, however, are looking to break out of the box created by the two largest antifungal classes.
 
Amplyx Pharmaceuticals, for example, recently completed Phase 1 studies of its IV and oral formulations of APX001, a first-in-class molecule that targets an enzyme critical to fungal cell wall integrity.
 
Last November, the FDA granted orphan drug designation to APX001 for the treatment of invasive candidiasis, invasive aspergillosis, coccidioidomycosis and rare mold infections caused by Scedosporium, Fusarium and Mucorales fungi.
 
The company continues its Phase 1 studies of the drug and looks to initiate Phase 2 in late 2017/early 2018.
 
At the ASM Microbe 2017 conference in June, meanwhile, Vical presented findings of Phase 1 studies of its VL-2397, a metallohexapeptide molecule that has demonstrated potent activity against a variety of fungi in vitro as well as in mouse models of invasive pulmonary aspergillosis (IPA), including azole-resistant IPA. In these mouse studies, VL-2397 demonstrated superiority to posaconazole.
 
“Current therapies [for IPA] can have toxicities and cause drug interactions, and response rates are often suboptimal,” explained University of Alabama in Birmingham’s Peter G. Pappas in the Phase 1 study announcement. “New treatment options are urgently needed for these patients. The profile of VL-2397 emerging from Phase 1 is encouraging, so if safety and efficacy can be demonstrated in patients with invasive aspergillosis in Phase 2, it could be very promising.”
 
Scynexis, meanwhile, is looking to identify a therapeutic sweet spot, combining features of the azoles and echinocandins in SCY-078, a novel triterpenoid, semi-synthetic derivative of enfumafungin. Like the echinocandins, SCY-078 targets fungal glucan synthase.
 
“We see this product as one with a unique set of attributes,” Taglietti explains. “It is broad-spectrum, can be used both oral and IV. It is a product that works against resistant strains, including fluconazole- and echinocandin-resistant strains. And last but not least, it is a product with a good safety profile and very little propensity for drug-drug interactions.”
 
The product has already completed Phase 2 studies against standard of care in echinocandin-treated invasive candididasis and against fluconazole in VVC, and is currently undergoing Phase 2 analysis in fungal diseases refractory or intolerant to standard antifungal treatment, as well as against fluconazole in acute VVC.
 
Battle without end
 
Despite the multiple approaches to antifungal development and diverse thinking about the triggers and challenges of fungal diseases, everyone is united in the belief that this is a battle that will continue long after any of these next-generation drugs hit the market.
 
“This will be endless warfare,” Taglietti states bluntly.
 
“As a doctor, I truly believe we will one day find a treatment for Alzheimer’s, for Parkinsons, for cancer,” he says. “But anti-infectives is an area where we will never finish our fight with these pathogens. These pathogens have been around for billions of years before us and will be around for billions of years after us.”
 

Team effort
 
Given the current high medical need and the possible future healthcare crisis precipitated by multidrug-resistant microbes and emerging microbial threats, there is a clear need to rebuild the anti-infectives discovery infrastructure.
 
Antonio Felici, director and head of microbiology, drug design and discovery at Aptuit, offers the following insights.
 
Support basic research. Including the social sciences, as well as biosciences and allied disciplines, to understand antimicrobial resistance and provide the resource to underpin diverse scientific approaches to combatting pathogens.
 
Improve lead compound identification, optimization and characterization. These platforms include transcriptomics to define modes of action; new natural product sources; novel medicinal chemistry methods; culturing hitherto unculturable microbes.
 
Resolve pre- and early clinical bottlenecks. This requires clarification of the science and technology competencies that are limiting current efforts to reach proof-of-principle. It is also necessary to sustain clinical skills and infrastructure for infectious disease research and to facilitate faster recruitment of patients into clinical trials.
 
Optimize current EU/US partnerships. Building on strategies to ensure sufficient EU funding, concentration on the best research, tools and therapeutic assets and flexibility to pursue new research directions.
 
Rethink regulatory frameworks. Introduce simpler data requirements, where appropriate, to increase the use of conditional licensing followed by comprehensive monitoring of patients, and to take account of the expected availability of new diagnostic tests.
 
Raise public/political awareness of the threats. This necessitates better appreciation of the importance of animals in research, the improbability of generating medicines with zero side effects and the need to reduce bureaucracy while providing greater public resources to accelerate innovation.
 

Inventive incentives
 
Historically, one of the major challenges to companies participating in anti-infectives development has been the belief that a company cannot make back its investment, that the nature of therapy for infectious disease is too short-lived to provide a strong revenue stream.
 
“The way that drug development works and the capital needed to develop new medicines has worked against antimicrobial development,” explains Oren Cohen, chief medical officer for Viamet Pharmaceuticals. “The problem is that if you develop a fantastic antimicrobial agent, it is generally going to be used for a limited period of time.”
 
And because of concerns about emerging resistance, he continues, hospital formularies and professional societies will produce guidance saying that a given product should only be used under very specific circumstances, unintentionally discouraging pharmaceutical companies from entering the market.
 
That said, at least within the antifungals space, many marketed products approach the traditional blockbuster status of $1 billion.
 
“None of the azoles has been less than a $600- to $700-million product at peak,” says Marco Taglietti, CEO of Scynexis. “Actually, fluconazole has been over $1.2 billion.”
 
The same is true with the echinocandins, he adds, suggesting peak sales for caspofungin of $650 million to $700 million and micafungin at more than $1 billion.
 
“In other words, when you look in general at antifungals for serious fungal infections, none of these products has been less than, say, $700 million in peak sales.”
 
Even the dreaded amphotericin B, Taglietti suggests, has a significant market.
 
“A product that is widely disliked because it is only IV, it’s toxic and has been around forever, still sells $500 million a year because sometimes there just are no other options left,” he says.
 
His enthusiasm is borne out by a recent report from BCC Research, which suggests that the global antifungal market will reach $16.1 billion by 2021, up from the 2016 market of $13.1 billion, and that the Asia-Pacific region will experience the greatest growth at 9.9 percent compound annual growth rate.
 
In the announcement of the report, BCC Research Editorial Director Kevin Fitzgerald cautioned that there were still significant needs to be addressed.
 
“A lack of funding and development of new and innovative antifungal drug classes has restrained the market,” he noted. “In the last 30 years, only one new class of antifungal drugs, echinocandins, has been developed. Whatever the reason for this paucity, the need for new, improved and affordable antifungal treatments with greater safety and efficacy is clear.”
 
To satisfy these market development challenges, Cidara Therapeutics’ president and CEO Jeff Stein takes hope from recent and pending U.S. legislation that he suggests offers both push and pull incentives.
 
“On the push incentives side, these are things such as CARB-X and BARDA that provide funding to do discovery and development,” he offers. “That’s been extremely helpful.”
 
He also quickly points to the GAIN Act, which he describes as push-pull.
 
“Probably most meaningful on the pull side is that it provided an additional five years of data exclusivity,” he explains, meaning that once a drug is approved, companies have about 10 years to get as much out of the intellectual property as they can.
 
“There are companies today that would not otherwise be in existence if not for the GAIN Act,” he says.
 
Supporting the R&D side of things, Stein points to the READI Act that provides a tax credit to any company introducing a new drug.
 
“Basically, as currently written, it will reimburse 50 percent of all your Phase 2 and Phase 3 development costs at NDA in the form of a tax credit,” he says.
 
What makes this program particularly attractive to biotechnology companies, which he says don’t pay taxes on revenues, is that these tax credits are transferable and are therefore attractive to large pharmaceutical firms.
 
“Current estimates are that these should go for between 80 and 90 percent of their face-value,” Stein continues. “So that is a meaningful incentive to a smaller biotech company.”
 
Another opportunity, he suggests, is coming in changes to reimbursement, which for hospital-based drugs fall under a diagnosis-related group (DRG) code. This is essentially a fixed payment to treat a given patient for a specific condition.
 
“The challenge is that the hospital pharmacy director doesn’t want to use that limited payment on a branded agent,” Stein states. “He or she has the biggest incentive to use the cheapest drug and to keep the bulk of that payment in their budget.”
 
“This is what exacerbates resistance, because there’s very strong incentive to administer the very cheapest antibiotic or antifungal available.”
 
The ARM Act, he says, should address this problem by introducing new technology add-on payments that will ideally offset some of the expense of using the newer brands versus the generics.
 
And finally, Stein points to Market Entry Awards, currently being evaluated, which will provide four years of annual financial support of approximately $80 million to $150 million when a drug achieves NDA and meets certain novelty criteria.
 
“What that does is disconnect the use of the drug from the revenues,” he explains. “So it provides built-in revenue for a set period of time that gets the company through the so-called Valley of Death.”
 
Looking at the industry from the perspective of antibacterials, Tetraphase Pharmaceuticals’ CEO Guy Macdonald says there has been a lot of talk about vouchers and other pull-through mechanisms on the reimbursement end, but ultimately it’s about cost-effective, life-changing treatment.
 
“I think we still need to work on the back end part, so that what gets developed then gets used properly,” he says.
 
 
Code: E091731

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