Tetraphase sold for $14m … and $600m goes up in smoke!

Dear All (and with thanks to Kevin Outterson for co-authoring this newsletter):
Wonkish and long note alert … top-up your coffee and settle in…
We learned about a week ago that Tetraphase, despite having brought an antibacterial (eravacycline) to approval, has been sold for stock worth $14.4m (plus a potential $12.5m more if aggressive sales targets are achieved). The buyer is AcelRx (link), a public company with one FDA-approved sublingual pain drug on the market. Make no mistake about it, this is functionally a wipeout for Tetraphase investors. This is yet another lesson in antibacterial economics that needs to be reviewed and understood by the entire community. Let’s take it in steps.
Start with the numbers that are available from the 31 Dec 2019 10-K filed by Tetraphase with the SEC (link):

  • The company appears to have raised and spent more than $604m since inception (Accumulated Deficit, page 74)
  • The company had $21m in cash on 31 Dec 2019 (Cash Equivalents, page 74)
  • The company was spending ~$70m/year in R&D and SG&A (Selling, General, and Administrative, page 75) – let’s round that to $6m/month
  • The company had income of $3m in 2019 from sales of Xerava (eravacycline), which was approved by the FDA on 27 August 2018
  • The company raised an additional $17.5m during Jan 2020 (link) (note how dramatically the valuation dropped even since the January raise)
  • Unlike Melinta, Tetraphase had no long-term debt other than leases.

So, if we assume Tetraphase spent $15m (2.5 months x $6m/month) since 1 Jan 2020, this consumes most of the $17.5m raised in January – and the sale for $14.4m is pretty close to cash on hand at 31 Dec 2019. Put another way, the net value of eravacycline was close to zero in March 2020, down from a peak market capitalization of ~$1.8 billion in mid-2015.

Above: Tetraphase share price over time from Google Finance. At the peak, the share price was > $1000 (adjusted for stock splits) and the market capitalization was ~$1.8b. 

Well, that is quite a loss for all investors …  $600m of R&D work gone up in smoke. This also includes 3 other development candidates (two antibiotics – including one in Phase 1 that had been supported by CARB-X — and one possible cancer drug) that were shutdown in June 2019 (10-K, page 9) — it would appear that these are being given no value in the deal.

Clearly this is not good, especially when you recall that the last year has brought us the bankruptcy of Achaogen (one approved NCE antibiotic, link) and Melinta (three recently approved NCE antibiotics and one approved improvement to an older drug, link). Let’s look at this from several perspectives.

First, is $600m an appropriate amount to have spent to bring a product to registration? Here, the answer would appear to be a resounding YES. The amount spent (~$600m) is actually on the low end, not accounting for failures along the way to get to FDA registration. The $ spent by Tetraphase is also similar to the $700m spent by Achaogen (link). (Go here for a general discussion of development costs and here for the excellent discussion of costs at last year’s ASM-ESCMID meeting). And, investors reasonably expect a return above and beyond what they put in.

Second, why were eravacycline sales so poor? At $3.3m for the past year, eravacycline was definitely trailing other drugs – Alan Carr’s Jan 2020 review shows that of the 16 systemic antibacterial NME drugs approved since 2009(*), only 3 (eravacycline, plazomicin, and omadacycline) had sales of < $10m for the last 12 months (link). This is not to say the other others were doing all that well as the entire group sold only $524m in the last 12 months and only 2 products sold > $100m (ceftazidime-avibactam, ceftaroline), but $3.3m is definitely at the low end.

*For reference, the entire list of 16 antibiotics in alphabetical order is: Cefiderocol, Ceftaroline, Ceftazidime-avibactam, Ceftolozane-tazobactam, Dalbavancin, Delafloxacin, Eravacycline, Imipenem-cilastatin-relebactam, Lefamulin, Meropenem-vaborbactam, Minocycline, Omadacycline, Oritavancin, Plazomicin, Tedizolid, and Telavancin. Note that (i) lefamulin/Xenleta is not shown in Alan’s table, (ii) IV minocycline is included in both his table and our math here; although its first approval in oral form was in 1971 (link), its approval as an IV formulation in 2009 extended its use for difficult bacteria, and (iii) we have excluded the antifungal and C. difficile products from our tabulation.

Was the potential utility of eravacycline overlooked by prescribers? Tetracyclines have long been popular drugs for good reason: they tend to have a broad Gram-negative and Gram-positive spectrum as well as coverage of atypical pathogens. And looking specifically at eravacycline, it has activity vs. CRE and A. baumannii (see both the 10-K and Theuretzbacher 2019, link) that are intriguing. That said, it is very, very hard to show these values in initial clinical trials – it can take many years for a compound’s full utility to become apparent. Further, eravacycline failed twice in cUTI (tetracyclines do not generally have high concentrations in the urine) which limited the label to cIAI. Post-newsletter addendum: For further context, please see David Shlaes’ instructive blog exploring these themes.

Finally, and has been recently reviewed, even compounds with clean data in multiple indications have limited uptake. Here we refer to a 2020 paper in CID by Strich et al. (link) and its accompanying editorial by Satlin (link). The message of these two papers is well summarized by the title of Satlin’s editorial: “Languid uptake of ceftazidime-avibactam for carbapenem-resistant Gram-negative infections and continued reliance on polymyxins.” It really is time for use of colistin/polymyxin to come to an end … and guidelines need to be updated to reinforce this message! For more details, see this newsletter on colistin and this newsletter on the need to update guidelines.

Putting it all together, what needs to be done next? Well, that’s the billion-dollar question, of course. One way to summarize our state of play is that 6 of 16 antibiotics approved since 2009 have fallen to zero value: Baxdela/delafloxacin, Minocycline/Minocin, Orbactiv/oritavancin, Vabomore/meropenem-vaborbactam, Xerava/eravacycline, and Zemdri/plazomicin. You could also call it 5 of 15 if you want to exclude minocycline, but either either way it is about a third of the output from an entire decade in the context of the IDSA campaign calling for 10 new antibiotics by 2020 (link). Industry over-achieved that goal, but with economics this disappointing, why would anyone be crazy enough to try again? As has been reviewed extensively by DRIVE-AB and others (see list of prior newsletters just below the signature block), the only real solution to the conundrum of low sales is to recognize the value-in-existence of new agents – like fire extinguishers, their very presence enables all of medical care to be delivered safely.

And, it is increasingly clear that the global value needed to deliver and sustain any given new antibacterial drug is a number that starts with “b” as in “billion.” Somehow, you have to stump up ~$600-700m to invent the drug and bring it to initial approval (plus failures along the way), provide another $300-$500 during the first 10 years post-approval to just do basic work, and then (inhale, exhale!) an additional amount ($100-$300m would be a good guess) to do supplemental indications and other work to enhance knowledge. Then the investors must be repaid, with a reasonable return for their risk. We know that we can’t do this for every antibiotic, but currently we aren’t doing it for any antibiotics.

We need to see substantial pull incentives from governments, with haste.

All best wishes in these uncertain times, John & Kevin

PS:  If you want to read more about cost and incentives, start with these 3 prior newsletters in this order:

  • Incentives For Antibiotics: Summary Of DRIVE-AB / Slides From The 6-8 Sep 2017 ASM-ESCMID Meeting (link, dated 11 Sep 2017, this note provides a good survey of DRIVE-AB)
  • Push! Pull! Push! Pull! / Highlights From Davos 2018 (link, dated 23 Jan 2018, this explores further some of the DRIVE-AB messages and connects them both to the idea of antibiotics as fire extinguishers as well as to Dr. Doolittle’s mythical Pushmi-Pullyu)
  • What Does An Antibiotic Cost To Develop? What Is It Worth? How To Afford It? (link, dated 6 Mar 2020, this note uses a recent paper to dive deeply into the cost of developing new drugs)

John H. Rex, MD | Chief Medical Officer, F2G Ltd. | Operating Partner, Advent Life Sciences. Follow me on Twitter: @JohnRex_NewAbx. See past newsletters and subscribe for the future: https://amr.solutions/blog/. All opinions are my own.

Kevin Outterson, JD, Professor of Law, Boston University & Executive Director, CARB-X (these views are personal and do not necessarily reflect the views of CARB-X or any of its funders) @koutterson

Current funding opportunities:

  • Open now through 9 Apr 2020: NIAID Broad Agency Announcement (BAA) soliciting contract proposals for preclinical and clinical development of vaccines, therapeutic, and diagnostics for microbial pathogens. Go here for more.
  • Dates for the 2020 funding rounds for Novo REPAIR Impact Fund will be announced May 2020. Go here for current details.
  • 2020 funding rounds for CARB-X have not been announced.

Upcoming meetings of interest to the AMR community:

  • 25 Mar 2020 (online): NHS England is holding two webinars on its pilot procurement project. The webinars have the same content, the first is for suppliers (10a-noon UK) and the second is for interested stakeholders (1-3p UK). Go here for a prior newsletter on the project. Details on how to attend the webinars are not yet posted — for now, just mark your calendar.
  • 26 Mar 2020 (online, 17:00-18:30 CET): GARDP REVIVE webinar. Title: “Probability of target attainment analyses for dose selection in antimicrobial drug development,” Speaker: Shampa Das. Go here to register.
  • 30 Mar 2020 (everywhere): Deadline for applications for the Molecular Mycology pathogenesis course at Marine Biological Laboratory, Woods Hole. Now in its 24th year, the hands-on residential course runs 17 July to 2 Aug and gets rave reviews. Go here for more.
  • 28 Apr 2020 (online, 17:00-18:30 CEST): GARDP REVIVE webinar. Title: “Inhaled antimicrobials: Do we get the drug to the bug?” Speaker: Harm A. W. M. Tiddens. Go here to register.
  • 5 May 2020 (online, 09:00-10:30 CEST): GARDP REVIVE webinar. Title: “The challenges and opportunities for antimicrobial R&D in low- and middle-income countries – India case study.” Speaker: Anand Anandkumar. Go here to register.
  • 7 May 2020 (Silver Spring): FDA workshop entitled “Development Considerations of Antifungal Drugs to Address Unmet Medical Need.” Go here to register.
  • 8 May 2020 (Silver Spring): FDA workshop entitled “Developing Antifungal Drugs for the Treatment of Coccidioidomycosis (Valley Fever) Infection.” Go here to register.
  • 25-30 May 2020 (Rotterdam), Annual ESPID meeting (European Society for Pediatric ID, #38)
  • 18-22 Jun 2020 (Chicago), ASM Microbe 2020. Go here for details.
  • 17 Jul-2 Aug 2020 (Marine Biology Laboratory, Woods Hole, MA): Residential course entitled “Molecular Mycology: Current Approaches to Fungal Pathogenesis.” This 2-week intensive training program has run annually for many years and gets outstanding reviews. Go here for details.
  • 29 Jul-2 Aug 2020 (Philadelphia, PA): Small World Initiative Instructor Training Workshop – training for undergraduate professors and high school teachers in wet lab techniques, parallel curricula, pedagogical instruction to engage students in the hunt to find new antibiotics in soil. Go here to register.
  • 24-25 Aug 2020 (Basel): BEAM-, Novo REPAIR-, CARB-X-, DZIF-, ND4BB-, ENABLE-supported (among a long list!) Conference on Novel Antimicrobials and AMR Diagnostics. Details are here.
  • September 2020. University of Sheffield (UK). Applications are being taken for a new 1-year (full-time) or 2-year (part-time) Masters of Science course in Antimicrobial Resistance. The program runs annually from September and covers microbiology, clinical practice and policy. The course webpage is here.
  • 1-4 Sep 2020 (Dublin): Annual ASM-ESCMID Conference on Antibiotic Development #5! Mark your calendar now and go here for details.
  • 9-10 Sep 2020 (Washington, DC): US PACCARB public meeting. Go here for details.
  • 22-25 Sep 2020 (Albuquerque, New Mexico): Biannual meeting of the MSGERC (Mycoses Study Group Education and Research Consortium). Save-the-date announcement is here, details to follow.
  • [REGISTRATION NOW OPEN] 17-25 Oct 2020 (Annecy, France): Interdisciplinary Course on Antibiotics and Resistance (ICARe). This is a soup-to-nuts residential course on antibiotics, antibiotic resistance, and antibiotic R&D. The course is very intense, very detailed, and gets rave reviews. Registration is here and is limited to 40 students.
  • 10-13 Apr 2021 (Vienna): Annual ECCMID meeting (#31)
  • [NEW] 20-24 June 2021 (Toronto): International Symposium on Pneumococci and Pneumococcal Diseases (ISPPD-12). Go here for details.
  • 3-7 Jun 2021 (Anaheim), ASM Microbe 2021. Go here for details.


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