How we can avoid the antibiotics apocalypse

Research scientist © Getty images

As bacteria become resistant to current antibiotics, the race is on to create new compounds. Investors who back winning providers stand to make big gains, says Andrew Lockley.

Most technology stories are good news stories, about miraculous inventions that will make the world a better place and improve the quality of our lives. This isn’t one of those stories. Instead, it’s a tale of how collective human selfishness and stupidity have brought us to the brink of a disaster that could unravel many of the advantages of 21st-century life that we take for granted. The only good news is that there is hope – and some potentially exciting profit opportunities.

So what’s the problem? In a word: antibiotics. There’s a good chance you wouldn’t be here without them – I probably wouldn’t be. My grandfather had chronic ear infections that almost killed him as a child. He had to have a large piece of bone chopped out of his skull when the infection spread. I suffered from them too. But I didn’t require major surgery – I just popped some pills and got better.

If you have children, you’d still expect these pills to work on them – but increasingly, this can’t be assumed. And that’s the problem. Antiobiotics are failing, which means we could be heading back to the pre-World War II era of medicine.

Needless to say, that would be horrific. In 18th-century Sweden, nearly a third of all children died before their fifth birthday. Even by the early 20th century, despite hospital care, industrialised agriculture and improved sanitation, more than 10% of children in developed societies died in early childhood.

Bacterial infections (such as those that cause pneumonia) were among the biggest killers. Without antibiotics, any infection is potentially lethal, rather than a nuisance. I don’t know about you, but when I think back to the number of times I’ve been prescribed antibiotics, that’s a significant number of brushes with death. That, unfortunately, is the world we’re heading back to now.

When the drugs don’t work

Before we look at how this has happened, we need to know how antibiotics work. An antibiotic simply kills bacteria. Some stop the bacterium from making or maintaining its cell wall, so that it just falls to bits. The antibiotic can do this by blocking the bacterial synthesis of folic acid, or the assembly of proteins. Alternatively, an antibiotic can gum up the bacterium’s reproduction mechanism, so that it is eventually overwhelmed by the body’s defences.

You’re probably familiar with the story of Alexander Fleming’s discovery of penicillin. The mould that produces the drug was found on a bacterial culture in his laboratory, and it killed the bacteria growing nearby. It’s certainly still possible to manufacture antibiotics this way – but the process is often modified. Modern antibiotics may still be fermented, but often genetically modified organisms are used. The naturally produced antibiotic compounds can then be tweaked to make semi-synthetic drugs. Others are entirely synthetic – but perhaps with a chemical structure similar to a natural substance.

Antibiotics don’t always work. You have to get the right one – many are specific to certain types of bacteria. Bacteria are usually split into two types (based on a common staining test that distinguishes between two different types of cell walls: gram negative and gram positive. Typically, gram-positive bacteria are more vulnerable to antibiotics, due to their simpler cell walls. Also, different doses of antibiotics are needed to kill different species; and even within a single species, there’s a bit of variation – some are naturally more susceptible, others less so.

These variations can take a number of forms, such as how rapidly the antibiotic is taken up, and whether it damages the cell as intended. Too low a dose will only kill the bacteria with the least resistance, leaving the most resistant to proliferate.

In theory, this shouldn’t be a problem, because a typical course of antibiotics is prescribed in a sufficiently high dose to wipe out all of the bacteria. The trouble is that people often fail to see a course through. They take the medicine, start to feel better, and throw the rest away. But this only serves to select for bacteria with antibiotic resistance.

The weaker bugs are wiped out and the resistant bacteria are left standing. The survivors immediately multiply and dominate, turning the host into a dispersal mechanism for drug-resistant bacteria.

Worse still, these survivors can spread their resistance to others. Normally, bacteria reproduce by dividing in two. Sometimes this results in new genes for resistance – a mistake during reproduction gives some lucky bacterium a crucial genetic boost – but it’s a slow process. However, bacteria can also share these winning genes through a process called gene transfer – roughly the bacterial equivalent of sex. This enables resistance to spread far more quickly. These new bacterial strains are then ready to dominate as soon as they come into contact with a dose of the antibiotic that they are resistant to.

And they have many opportunities to encounter such doses in the modern world. One particularly stupid mistake on humanity’s behalf has been to add antibiotics to animal feed as a growth promoter.

The quest for cheaper chicken nuggets and the like has led to farms around the world becoming a source for all kinds of terrifying new nasties, as vulnerable strains are replaced by antibiotic-resistant ones. As these strains encounter new antibiotics, they gradually build up resistance to these too, becoming multi-drug-resistant superbugs. Eventually even our “last resort” antibiotics fail.

Staving off the antibiotic apocalypse

How can we avoid this antibiotic apocalypse? Killing a superbug is actually easy – you just need bleach or heat. The hard thing is doing it without killing the patient you’re trying to cure. There are some promising technologies and unconventional therapies that might work. Bacteria have their own sworn enemies – viruses. Viruses that infect bacteria are known as bacteriophages. These infect bacterial cells in the same way a cold virus infects a human’s cells. Once inside, they capture the cell’s “machinery”, using it to reproduce in large numbers. These viruses eventually burst from their hosts and the life cycle starts all over.

Bacteriophages, meanwhile, are harmless to us. They don’t reproduce in our cells, leaving our natural “good bacteria” unharmed. That’s great news, as anyone who’s had an upset stomach from antibiotics will agree. But there are some major difficulties in getting the approach past regulators. Bacteriophages aren’t simple chemicals – they’re living viruses, which do their work through reproduction. So while they are a promising therapy, it’s an investment minefield.

The obscure Phage Therapy Center is one leader in the field – with desperate patients travelling to Georgia from the West to get treatment for otherwise incurable infections. A more conventional biotech play is the institutionally backed Pherecydes Pharma. It has a portfolio of treatments for skin, bone, and respiratory infections – but all have many years of expensive trials ahead before they become marketable. An alternative firm at a similar stage of product development is AmpliPhi Biosciences.

How about developing new antibiotics? One problem is that drug companies make far more money from tablets you have to take indefinitely – those used for treating chronic conditions, such as high blood pressure. And the main need is for last-line-of-defence antibiotics – these are used sparingly, which means they probably won’t sell well. In short, developing a five-day course of antibiotics for a few patients who are hard to treat isn’t an appealing investment route for most shareholders.

A way out?

However, there is one very promising source of new antibiotics – bacteria themselves. You see, if you’re a bacterium, then the best way to do away with a rival species is to kill it with your own antibiotics. The problem for researchers is that, while we can easily find species of bacteria from which antibiotics may conceivably be obtained, bacteria are feral things. They don’t like to be grown in the laboratory – only around 1% of bacteria can be cultured. That’s a quite astounding state of affairs – but it’s also a huge investment opportunity.

One firm has a “secret sauce” technology that is capable of getting bacteria to produce antibiotics, even when they can’t be conventionally cultured. Privately held NovoBiotic Pharmaceuticals produces a novel product for culturing bugs – the iChip (which they licensed from the university that the firm was spun out from). It’s essentially a very particular kind of tissue paper – a thin membrane that traps bacteria.

It’s pretty easy to isolate the bacteria you want, but very hard to give it the right environment to grow in – so the firm doesn’t even try. Instead, it places the bacteria in the soil it naturally lives in – allowing the natural chemicals it’s familiar with to wash through the membrane. This way the bug gets exactly what it needs, but it can’t escape.

It’s a long way off being a working method to produce antibiotics, but it’s a great help for identifying promising compounds and the bacteria that produce them. The firm has already isolated one of a completely new class of antibiotic (the first such discovery since 1987): Teixobactin. Obviously, these new compounds must be checked for safety as well as effectiveness, so there’s a long process of development ahead. And these technologies by themselves are still very far from being able to stop the antibiotic apocalypse in its tracks.

But the new class of compound is certainly interesting, and there could be many more to come, making this a very attractive investment area. And right now, they’re about all we’ve got. I look at some of the most promising stocks below.

The five stocks to buy now

Finding pure-play stocks in this area is difficult. The commercial model is unattractive: last-line antibiotics are intended to be used sparingly and for short periods, so they’re not very profitable. Hence few firms have a strong antibiotic pipeline. But as concerns over superbugs have grown, the authorities are looking at how to change this.

In May, the British government’s Review on Antimicrobial Resistance, headed by ex-Goldman Sachs economist Jim O’Neill, published several recommendations, including ideas for a new funding model. The US government’s Biomedical Advanced Research and Development Authority is already investing millions to help both AstraZeneca and GlaxoSmithKline develop new drugs, while Britain and China have established a joint fund to tackle the problem, says Bloomberg.

A recent survey by the newswire suggests big drug firms plan to boost antibiotic research spending by an average of 36% this year. In short, the potential disaster is focusing minds on the way forward – and some stocks are well placed to benefit.

AmpliPhi Biosciences (NYSE: APHB) focuses on bacteriophage treatments – one of the only pure plays on this alternative therapy. Its stock has had a torrid time over the last few years. Having been as high as $32.50, shares are now trading around the $1.50 mark. None of its listed pipeline therapies are beyond Phase 1 clinical trials (early stage), so it’s not a firm I’d expect to see paying dividends soon, and while the company has sufficient cash to last the rest of the year, chief executive Scott Salka has plans to raise more.

AmpliPhi Biosciences share price chart

Its most advanced trial – which targets staphylococcus aureus in chronic rhinosinusitis patients – is due to report this year. The stock should get a decent boost if the news is good, but it’s a high-risk play.

Theravance Biopharma (Nasdaq: TBPH) already has one commercial antibiotic (Vibativ) on the market, so the firm has proved its ability to deliver in the past, and it has another in Phase 1 trials. After a post-initial public offering honeymoon, the share price struggled to break out of its debut price range. But it’s been in a year-long uptrend, after losing two-thirds of its value from the highs. The firm also owns a modest portfolio of non-antibiotic drugs, providing some diversification.

Tetraphase (Nasdaq: TTPH) has a pipeline of three different molecules at various stages of development. Over the last year the stock has lost more than 90% of its value due to investors’ disappointment over a failed Phase 3 (the final stage of drug development) clinical trial. It’s a salutary reminder of how risky investing in these smaller pharmaceutical firms can be, but the stock could see strong gains if current and future trials end well.

Cempra (Nasdaq: CEMP) benefits from an antibiotic-focused pipeline that includes two products (for treating MRSA and gonorrhoea) in Phase 3 clinical trials. In common with other stocks on this list, it’s suffered a brutal rout, trading down at just over $17 a share from more than $45 around a year ago. However, a successful outcome from these trials would, of course, help to turn that around.

Pharmaceuticals giant AstraZeneca (LSE: AZN) is the only firm on this list not to have taken a battering in recent times (partly because of post-Brexit demand for UK-listed stocks with high dollar earnings). Astra has a specific business unit focused on antibiotic discovery. It’s currently listing half a dozen candidate drugs at various stages of trials – the largest pipeline of all the firms listed here.

Andrew Lockley is an experienced consultant to tech start-ups, who has written academic papers on economics and law. He writes regularly for Exponential Investor.

Category: Genetics and Biotechnology

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