Antibacterial Drug Development in European SMEs: Roles, Challenges, Solutions June 10, 2015 Author: Cornelia Körber Master’s Thesis in Public Health Science with Health Economics, 30 hec Supervisor: Professor Enrico Baraldi Examiner: Dr. Monica Hunsberger ©  by  Cornelia  Körber,  University  of  Gothenburg  June  2015 Citation:  Cornelia  Koerber:  Antibacterial  Drug  Development  in  European  SMEs:  Roles,  Challenges,  Solutions.   Master’s  Thesis  in  Public  Health  Science  with  Health  Economics,  University  of  Gothenburg  June  2015.   Submitted  for  publication. Part I COVER  STORY     Antibacterial Drug Development in European SMEs – in a public health perspective The development of new antibacterial drugs is one of many important steps to combat antibiotic resistance, one of today’s most urgent public health challenges addressed by WHO, the European Commission and numerous governments, among them Sweden, UK and the US (Butler et al. 2013; Spellberg 2014). Societies and public health systems world-wide are in the need of effective antibiotics in order to protect people from suffering or dying from severe infections due to diseases or as side-effect from modern medical treatments like surgical procedures (Högberg et al. 2010). As it has been shown that antibacterial drug R&D has 1) not been able to deliver new classes of antibiotics for gram negatives in the last 20 years (Butler et al. 2013) and 2) has entirely shifted from the big pharmaceutical corporations (Big Pharma) to small and medium sized enterprises (SMEs) in the Biotech setting (So & Shah 2014), studying this new business area of antibacterial developing SMEs builds basis for guiding policymaking. From a public health point of view antibiotic resistance related topics like conservation mechanisms to reduce usage, adequate antibiotic use or global access to antibiotics appear to be more closely related, whereas the economic aspect behind drug R&D is also relevant but may not appear so. As experts call that antibiotic resistance can only be addressed in a multidisciplinary approach including ecological, environmental, medical and economical perspectives, the economic perspective is equally important in addressing the problem of antibiotic resistance. Moreover, due to opposing interests between the public health and the economic perspectives, research of economic- related aspects gains even more in relevance for public health, one example being the conflict between public health requirement for low quantity of sales and sales stimulating economic incentives. The results of this study show that many of the challenges from the SMEs are mainly originated in the antibiotic market, especially with respect to investors and possible buyers (exit partners). Many of the suggested solutions proposed by the SMEs and the current literature try to influence this setting by stimulating the market with economic incentives. From the SMEs’ experiences those incentives are usually not linked to the medical need or characteristics of the product such as the target pathogen or respectively clinical indication. This is a big shortcoming from a public health point of view. Society is in need for effective antibiotics represented by new classes and priorities regarding target pathogens. Even though it is hard to predict which drugs will be most needed in the future, it is vital to link product specifications to economic incentives. Possible solutions are a common global approach pursuing the same stewardship mechanisms and price levels. Then the proposed delinkage mechanisms can create a favourable business environment that allows R&D that is driven by the medical need instead of economic factors. Further, the concept of antibiotics as a non-renewable source needs to be accepted by society in order to stimulate a shift in public perception upon the issue of antibiotic resistance and all the actions needed to combat it, including research and development. The demand and the awareness about antibiotic resistance and for new antibiotics have to be large enough to spur research and development in that area. Further, society has a claim that quality in research and development is ensured to achieve best possible results. If the quest to develop new antibiotics does not succeed, this would cause severe restriction for healthcare services and patients. Going back to a pre- antibiotic area would lead to many deaths and high society costs. Ethics Many ethical implications are related to antibiotic resistance. From a socio-economic perspective finding solutions gains even more importance as lack of antibiotics strikes hardest on the poor. This relates to socio-economic differences within industrial nations as well as to differences between high income and low-income countries (Cars et al. 2015). With reference to “the right to the health” approach from United Nation General Comment No.14, antibiotics should be available, accessible, and acceptable and of good quality (WHO 2007). Three out of the four areas are issues within antibacterial drug R&D, which policymaking should consider. Availability of new antibiotics is not given why we need innovation and efforts to improve R&D. Accessibility is a problem in low income countries and the discussion about an increase in prices as part of the economic incentives would deter accessibility even further. Good quality of the antibiotic drugs links to standards of R&D where no short cuts should be taken on costs of quality or safety. Further within the topic about antibacterial developing SMEs ethics concern the R&D process, where clinical trials are conducted and how regulatory approval can be altered in a way that help SMEs in their R&D process without endangering either the trial participants nor society with too early approvals. Conclusions Policymaking that stimulates antibacterial R&D and thereby address the challenges of SMEs should not exclusively be market oriented and more related to the medical need, hence product driven. From a public health point of view it is necessary to call for an integrated, multidisciplinary approach including conservation mechanisms and equal global access. Patients and patient groups can raise their voice and call for policy that ensures integration of the medical need in policy making. Delinkage from sales numbers and prices regarding the return on investment from SMEs as in a guaranteed, public buy out could ensure those demands. Part II THE SCIENTIFIC ARTICLE / MANUSCRIPT Antibacterial  Drug  Development  in  European  SMEs:   Roles,  Challenges  and  Solutions   Author: Cornelia Körber “We are in danger of going back to the dark ages of medicine” David Cameron (Walsh 2014) Acknowledgements: to my supervisor Enrico Baraldi, Ursula Theuretzbacher, all participants of the study, the DRIVE-AB team and the Department of Industrial Engineering and Management at Uppsala University ABSTRACT / SUMMARY BACKGROUND: Antibacterial research and development (R&D) is an important part of the worldwide fight against antibiotic resistance. Innovation challenges mainly result from low net present value (NPV) characteristics of antibacterial drugs that caused a dry pipeline and a shift from resourceful big pharmaceutical companies to small and-medium sized enterprises (SMEs). AIM: Understanding the role of antibacterial developing SMEs in Europe, their challenges and their required solutions in order to guide policy making for incentivizing antibacterial R&D. Method: A qualitative study including 27 out of 56 identified antibacterial developing SMEs in Europe that relies on empirical data from group interviews, case studies and additional expert interviews. The study follows an adductive method, in which a theoretical and analytical framework was developed during the study. Results: The core challenge for antibacterial developing SMEs lies in their dependency on investors and possible buyers (exit partners) due to needed funding and their role as “seller”. The relationship to both partners is negatively influenced by adverse economic factors, which are NPV related and further discouraged by the SME’s roles as “innovators” and “risk takers”. The SME’s role as “medical need responders” is not valued in the current model. In their role as “opportunist” solutions sought by the SMEs are less strategic and more action based. The lack of exit partners leads to operations in later stage R&D allowing for new business models to appear. Conclusion: Policy can stimulate antibacterial R&D on different levels, indirectly by providing incentives that address economic factors or directly in offering alternatives to the current investors and exit partners. Multilevel incentive packages, which include public health goals as well as a focus to societies’ medical need, are desirable for sustainable antibacterial R&D that benefits SMEs and combats antibiotic resistance. Key words: antibiotic resistance, SMEs, antibacterial drug development TABLE OF CONTENTS 1   INTRODUCTION / BACKGROUND ...................................................................................... 1   1.1   Aim ......................................................................................................................................... 2   1.2   Organisation of the paper ....................................................................................................... 3   2   METHOD ..................................................................................................................................... 3   2.1   Population and Data Collection .............................................................................................. 4   2.1.1   Group Interviews ............................................................................................................. 5   2.1.2   Case Studies .................................................................................................................... 6   2.2   Method of Analysis ................................................................................................................ 8   2.2.1   Group Interviews ............................................................................................................. 8   2.2.2   Case Studies .................................................................................................................... 9   3   THEORETICAL AND ANALYTICALFRAMEWORK OF THE PAPER ....................... 10   3.1   Theoretical Framework ........................................................................................................ 10   3.1.1   Research and Development in the Biotech Sector ........................................................ 10   3.1.2   Business Models & the concept of “Role” .................................................................... 11   3.1.3   The Problem of Antibiotic Resistance & Challenges in Antibacterial R&D ................ 13   3.1.4   Solutions to the Problems behind Antibiotic Resistance ............................................... 14   3.2   Analytical Framework .......................................................................................................... 16   4   PRESENTATION OF RESULTS ............................................................................................ 19   4.1   Results – Role ....................................................................................................................... 19   4.2   Results – Challenges ............................................................................................................ 24   4.3   Results – Solutions ............................................................................................................... 26   4.4   Results – Summary ............................................................................................................... 28   5   DISCUSSION ............................................................................................................................ 29   5.1   Discussion – Role ................................................................................................................. 30   5.2   Discussion – Challenges ....................................................................................................... 31   5.3   Discussion – Solutions ......................................................................................................... 33   5.4   Strengths and Limitations ..................................................................................................... 35   6   CONCLUSION .......................................................................................................................... 36   6.1   Implications for policy ......................................................................................................... 37   7   REFERENCES .......................................................................................................................... 38   8   In Text: Tables & Figures ......................................................................................................... 44 1 INTRODUCTION  /  BACKGROUND   Antibiotic resistance is a global threat to public health and causes a large economic burden to health care systems (ECDC & EMEA 2009; TATFAR 2014; Secretariat WHO 2014a). In the European Union alone, drug resistant bacteria cause 25.000 deaths annually with costs exceeding EUR 1,5 billion (ECDC & EMEA 2009). Even though existing antibiotics are loosing their efficacy, the research and development (R&D) pipeline for novel antibiotics is empty (Cooper & Shlaes 2011). Public Health Systems worldwide depend on effective antibiotics (AB) to fight infectious diseases, not only the current ones but also to protect from diseases that we have long overcome during the last decades. Further, modern medicine depends on the protection against infections during and after invasive treatments (Nathan & Cars 2014). Therefore, new classes, not only modifications, of ABs are urgently needed (Thomson et al. 2004). In contrast to the medical need, many pharmaceutical companies prioritise other therapeutic areas of research today and in some cases exit antibacterial research completely (Thomson et al. 2004; O’ Neill 2015a). Therefore the landscape around antibacterial R&D has transformed radically, being entirely shifted from resourceful, global pharmaceutical enterprises to small and medium-sized enterprises (SMEs) (Kanavos et al. 2011; Projan 2003; Butler et al. 2013). But only a very low number of truly novel antibiotic lead compounds have been discovered (Thomson et al. 2004; O’ Neill 2015a). Next to scientific hurdles, an adverse economic environment deters antibacterial R&D. The low volume and low price characteristics of antibiotics, in comparison to other therapy areas, cause a relatively low - in some cases negative return on investment. While stewardship and conservation 1 mechanisms are fundamental public health instruments to slow down resistance, especially regarding novel antibiotics, will further limit sales. This interrupts the historic price/volume model about generating revenues and strongly averts investments in the area (Mossialos 2010). As reaction to these changes several initiatives examine ways to incentivise antibacterial research and development and to ensure a healthy pipeline of compounds (O’ Neill 2015a; Sertkaya et al. 2014; DRIVE-AB 2014). One of those initiatives is the Innovative Medicine Initiative (IMI) project DRIVE-AB, a joint undertaking between the European Union and EFPIA (DRIVE-AB 2014) of which the author is part of. DRIVE-AB’s major goal is to find answers of how the current business model/economic model around antibiotics can be changed in order to stimulate antibacterial R&D while including the public health demand for responsible antibiotics use. As major pharmaceutical firms abandoned the antibacterial field, SMEs are entering it. Therefore, knowing the role of SMEs in the antibacterial drug R&D process will assist in generating policies that support innovation and will further support the overall assessment of the likely impact of policy suggestions targeting antibiotic resistance. Which business models do those SMEs incorporate? How is innovation developed by SMEs? What challenges and barriers are they exposed to and which solutions do they prefer? 1.1 Aim   The aim of the study is to answer the three questions: 1) How do European SMEs involved in antibacterial research and development define their role? 2) What challenges do they experience? and 3) Which solutions to their challenges would they prefer in terms of policy measures in the antibacterial field. 2