Bloomberg News

Drugmaker-Neglected Bacteria Gives Cubist $2 Billion Market

September 15, 2011

(Updates with closing shares in eighth paragraph.)

Sept. 15 (Bloomberg) -- Cubist Pharmaceuticals Inc. is working to combat a group of bacteria largely neglected by drugmakers with a medicine analysts say may have $2 billion in sales potential.

The drug, CXA-201, last month entered the final stage of tests generally required for U.S. approval and is about a year ahead of rivals under development. It aims at a difficult-to- treat family of bacteria, called gram-negatives, that are developing resistance to existing medicines and spreading among hospital patients, said Arjun Srinivasan, of the U.S. Centers for Disease Control and Prevention.

Gram-negatives may make up almost half of about 2 million hospital-acquired infections annually in the U.S., said Brad Spellberg of Harbor-UCLA Medical Center in Torrance, California. Drug companies have focused more on gram-positive bacteria such as methicillin-resistant Staphylococcus aureus, or MRSA, another cause of hospital infections. At least five new antibiotics against MRSA, including Cubist’s Cubicin, have been approved in the last 10 years, said David Livermore, of the U.K.’s Health Protection Agency.

“The issue is, very simply, we’re running out of antibiotics for gram-negatives,” Spellberg, an associate professor of medicine who works at the center’s Los Angeles Biomedical Research Institute, said in a telephone interview.

Conference Focus

This weekend, gram-negative bacteria such as pseudomonas and klebsiella will take center stage at the Interscience Conference on Antimicrobial Agents and Chemotherapy, or ICAAC, in Chicago. The bacteria can infect the lungs, causing damaging mucus buildup, and trigger urinary tract infections and blood poisoning that may be fatal if not treated properly, said Livermore, director of the U.K. agency’s Antibiotic Resistance Monitoring and Reference Laboratory, in a telephone interview. While antibiotics such as ceftazidime are currently used, gram- negative bacteria are becoming increasingly resistant to available options, Srinivasan said.

CXA-201, the drug candidate from Lexington, Massachusetts- based Cubist, combines a novel molecule active against Pseudomonas aeruginosa with an enzyme inhibitor that works against Klebsiella pneumoniae and E. coli, another member of the gram-negative family, said Steve Gilman, the biotechnology company’s chief scientific officer.

Drug Acquisition

Cubist gained CXA-201 in its 2009 purchase of Calixa Therapeutics Inc. It is 12 to 18 months ahead of products being developed by London-based GlaxoSmithKline Plc and Forest Laboratories Inc. of New York, and if approved stands to reap as much as $2 billion in annual revenue by 2020, said Ian Sanderson, an analyst with Cowen & Co. in Boston, in a telephone interview.

Cubist rose 62 cents, or 1.9 percent, to $33.16 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have gained 55 percent this year, outpacing a 4.7 percent gain for the Nasdaq Biotechnology Index of 125 companies.

Bacteria are grouped by the way they react to a staining method developed in the 1880s by Danish scientist Hans Christian Gram. Gram-negatives account for more infections among already sick patients than do gram-positives, though Staph aureus remains the most common hospital-associated U.S. infection, said Srinivasan, the Atlanta-based CDC’s associate director for Healthcare-Associated Infection Prevention Programs.

“We’ve been winning against bacteria for a very brief period in human history,” Livermore said. “Bacteria have been catching up with us, taking their revenge. Particularly with gram-negatives, we now face a time when we’re rather short of antibiotics, and treatment is becoming more difficult.”

First Product

Cubist’s first marketed product, Cubicin, targets MRSA, an organism that kills about 19,000 Americans annually, according to a February policy paper from the Infectious Diseases Society of America. That medicine, approved in 2003, generated $625 million for Cubist in 2010 sales -- 98 percent of the company’s revenue -- and Cubist forecasts peak annual sales of at least $1 billion in the U.S.

CXA-201, in a mid-stage trial reported in June, showed a 91 percent clinical cure rate versus 94 percent for a comparator antibiotic in complicated intra-abdominal infections, meeting the study’s non-inferiority goals. Cubist is also testing the medicine in complicated urinary tract infections, starting a final-stage trial last month.

The drug is designed to be particularly effective against pseudomonas, described by Spellberg as “the granddaddy of highly resistant gram-negatives.”

‘Big Scary Bugaboo’

“For decades, pseudomonas has been the big scary bugaboo,” Spellberg said in a telephone interview. Lurking on hospital bed rails, curtains and walls, it can live “in virtually any environment” and “can become resistant to everything.”

Pharmaceutical companies have shied away from developing medicines for gram-negative bacteria in part because nature gave those organisms more tools to battle antibiotics than their positive-reaction brethren, Spellberg said.

“Gram-negatives have an outer protective membrane, and a number of ways to remove any antibacterial that gets across those membranes,” Cubist’s Gilman said. “Gram-negatives seem to have stepped up a bit in the resistance mechanisms.”

Gram-positives don’t have the same additional protective layer, and have less of an ability to pump antibiotics back out beyond the cell’s walls, Livermore said.

Infection Spread

In the last decade or so, other gram-negative pathogens have spread. CXA-201 isn’t as effective against klebsiella or E. coli as an experimental drug from Forest, in collaboration with London-based AstraZeneca Plc, said Alan Carr, an analyst with Needham & Co.

“Both of them are good drugs, but neither of them is perfect,” the New York-based analyst said in a telephone interview. “They each leave gaps in coverage.”

Cubist’s lead in the gram-negative arena may make it an appealing acquisition for larger drugmakers, Sanderson said. He cited Basel, Switzerland-based Novartis AG, Cubist’s partner on Cubicin; AstraZeneca; Paris-based Sanofi and New York-based Pfizer Inc., the world’s largest drugmaker, as potential buyers.

“A handful of companies have made a big recent effort in the infectious disease space,” Sanderson said. Cubist “would be a turn-key infectious disease infrastructure in terms of sales and marketing and R&D.”

Cubist’s Gilman said the company is confident it can “recreate the Cubicin value proposition” with CXA-201, and said Cubist doesn’t comment on market rumors.

“What we can do is focus on developing CXA-201, doing the best we can as fast as we can,” Gilman said. “Our discovery organization is working hard to find new classes and extensions of other classes. CXA-201 will do a whole heck of a lot if it’s approved, but there’s always going to be more need.”

--Editors: Andrew Pollack, Reg Gale

To contact the reporter on this story: Meg Tirrell in New York at mtirrell@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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