Paratek Zeroes in on New Antibiotic While Big Pharma Carefully Watches From the Sidelines

Of all subsectors of biotechnology, companies developing new antibiotics enjoy a particularly unique advantage over almost any other biotech. It’s an advantage you won’t hear about often, or perhaps even at all, in your typical biotech analysis feed because it strikes at the heart of human emotion rather than bureaucratic technicalities that often receive hyper-focus.

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Not to sound overly melodramatic of course, but the facts stripped down to the bare core are these: What makes biotech so exciting, even addicting for investors of all stripes from institutional down to retail is that gains can be made very quickly if and when technical bureaucratic hurdles are overcome. Special FDA status grants, data readouts, positive board reviews, approval, they all induce either huge jumps or falls because government law, ultimately, causes all of this.

But here’s what every biotech investor knows but rarely admits consciously. Behind every bureaucratic FDA rule is a human being with a very impressive scientific background. And human beings of all stripes, especially highly educated scientists, are acutely aware of the ever- worsening problem of antibiotic resistance.

We recently covered the impressive Phase III results for Paratek Pharmaceuticals, Inc. (NASDAQ:PRTK) and its lead antibiotic omadacycline. What needs to be emphasized is the position that Paratek now finds itself in, due not only to the objective and solid data reported, but also to the subjective position it is now in as a company with a new and promising antibiotic.

Antibiotic Resistance as the Bogey Man

From grade school, most of us are familiar with the concepts of natural selection and Darwinian evolution. From layman to leading scientist we all know it extends to the realm of bacteria. As we continue to attack bacteria with antibiotics, those bacteria will inevitably develop resistance.

Leniencies in bureaucratic procedure are few and far between, especially in today’s era of hyper-regulation, but with new antibiotics these leniencies are nearly across the board. In our previous coverage of Paratek, we mentioned that companies do not need to show the FDA that their version of an antibiotic is actually better than those currently approved in terms of efficacy. In fact, in most cases, they don’t even need to show that they are equivalent. Usually, the FDA will accept evidence that a new antibiotic is almost as good as one already approved, assuming an acceptable safety profile.

You won’t find bureaucratic leniencies like these in almost any other biotech subsector.

Omadacycline, Paratek’s most recent Phase III success, is a broad-spectrum antibiotic, belonging to the aminomethylcycline subclass of tetracycline antibiotics. This is an entirely new class resulting from a minor chemical alteration in the molecular structure of the antibiotic. It is therefore expected to carry a similar safety profile to the drugs that it mimics.

The results speak for themselves. Omadacycline versus approved antibiotic moxifloxacin against community-acquired bacterial pneumonia showed that omadacrycline was just about as effective at inducing a response in patients within three to five days of their first dose. No serious safety issues, and tolerability was acceptable.

Why then, on an intuitive level, is “just about the same” a success for new antibiotics? Because FDA doctors know full well that resistance will only increase over time, and soon that “just about the same” will become “significantly better” over a relatively short period of time as resistance builds to the older antibiotic.

Switching subjects to the market, one of the bestselling antibiotics of all time is levofloxacin. What makes an antibiotic bestselling or not is oral availability, and omadacycline is thankfully, able to be taken orally as well as intravenously. Like omadacycline, levofloxacin is designed to treat community acquired bacterial pneumonia (CABP). Eventually, levofloxacin will become ineffective as time passes and the newer antibiotic takes its place.

And this leads us to another hidden advantage of new antibiotics like omadacycline. That is, companies in general prefer to be listed as first line therapies over second or third, for marketing purposes. For antibiotics, it can often be the other way around though. Since pursuing a second or third-line treatment is often cheaper from a trial perspective, it is often advantageous for companies to pursue these second or third-line opportunities at lower cost, anticipating that first-line antibiotics will soon become obsolete anyway through natural selection.

Paratek sees potential launch of the new antibiotic possible as early as the end of next year, 2018. Investors though should keep the following in mind: New antibiotics will only become more and more valuable as antibiotic resistance builds up and the supply of antibiotics shrinks and the demand for new ones grows. For purposes of keeping potential in perspective here, Trius Pharmaceuticals, the creator of tedizolid as an MRSA antibacterial, was ultimately acquired by Cubist Pharmaceuticals, which was ultimately acquired by Merck & Co. Inc. (NYSE:MRK), the Big Pharma linchpin.

Big Pharma knows the value of a new working antibiotic, and we may soon see how serious they are about acquiring it. Whether or not Paratek is ultimately acquired, if approval is ultimately granted, which looks likely, then omadacycline will be worth multiples of what is worth today.


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