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Cubist Pharma on the front lines of superbug war

Monday, 16 Dec 2013 | 12:49 PM ET
Cubist Pharma CEO: Open to Acquisitions & Being Acquired
Monday, 16 Dec 2013 | 10:00 AM ET
Cubist Pharmaceutical CEO Michael Bonney talks to CNBC's Bertha Coombs about his company's big bet on antibiotics to treat superbugs, which recently drove the firm to acquire two smaller rivals. He leaves the door open to future deals.

At Cubist Pharmaceuticals' labs in Lexington, Mass., researchers feel like they are in a race against time. They are trying to develop antibiotics to fight infections that are becoming increasingly untreatable and deadly. And they feel they are playing catch up with these superbugs.

"You're going after a pathogen that evolves and changes its ability to respond to your drug. So, it's not just that you're going after a target, you're going after a moving target," said Dr. Obi Umeh, Cubist's senior director of clinical research.

According to the Centers for Disease Control, 2 million Americans were sickened by drug-resistant bacteria, and about 23,000 died because the infections proved untreatable.

The agency issued a report in September warning that superbugs are becoming a serious threat to public health. Among the strains the agency deemed the most acute threats, was the hospital-acquired infection Clostridium difficile, a bacteria that affects patients' bowels and can result in diarrhea.

"We are rapidly approaching the point where the antibiotics we've relied on for generations will no longer be available to treat infections that can actually be lethal," said Dr. Michael Bell, deputy director of the Division of Healthcare Quality Promotion at the Centers for Disease Control.

(Read more: Supberbugs are a 'costly war we can't win': Doctors)

Over time, antibiotics lose their impact over bacteria because the pathogens evolve and develop resistance to the drugs, Bell said. The problem, he said, has become more acute in recent years because of the easy availability of antibiotics and their overuse.

"Very recently we looked at how good antibiotic prescriptions are in this country, and about half are unnecessary or the wrong antibiotic," he said. "That's a lot of room for improvement."

A researcher works in a microbiology laboratory at the Cubist Pharmaceuticals research facility in Lexington, Mass.
John Guillemin | Bloomberg | Getty Images
A researcher works in a microbiology laboratory at the Cubist Pharmaceuticals research facility in Lexington, Mass.

In an effort to curb the use of antibiotics in food production, this month the Food and Drug Administration issued new guidelines urging livestock producers to phase out their use over the next three years, except in cases to treat illnesses in animals raised for meat.

"Because antimicrobial drug use in both humans and animals can contribute to the development of antimicrobial resistance, it is important to use these drugs only when medically necessary," the FDA said in a release.

While more infections have become resistant and the need for new drugs is growing, it has been nearly a generation since a new antibiotic has been developed. As many of the most widely used drugs have gone off patent, some large drug makers have left the field of antibiotic development. Pfizer, once a leader, closed its antibiotic research and development center in Connecticut in 2011. Bristol-Myers Squibb, Eli Lilly and other major firms also cut back.

(Read more: Pressure grows to create drugs for 'superbugs')

Health-care consultant Barbara Ryan, of FTI Consulting, said antibiotic production has not been lucrative for the major pharmaceutical companies. One big financial challenge is that new treatments are usually held in reserve and not widely used, so that they can remain viable as a drug of last resort.

"The challenges are the reasons you don't see the hordes of companies going after these opportunities that you see, let's say, in oncology where there is a lot of green field," she said.

Federal officials have taken actions to help encourage new development. Last year Congress passed the Generating Antibiotic Incentives Now Act, known as GAIN. The law gives developers five years of additional market-based exclusivity incentives if they develop products for a "qualified infectious disease," such as c. difficile. The FDA has also committed to streamline approval of the much-needed drugs.

The new antibiotic regulations could prove positive for Cubist. The company already has five products in the portfolio aimed at treating acute infections, including its flagship drug Cubicin to treat the superbug MRSA, (Methicillin-resistant Staphylococcus aureus) which generates close to $1 billion a year in revenue.

(Read more: Tired of Obamacare? More of the same in 2014 )

"We're built for the acute care environment. We don't do any direct-to-consumer advertising, as a result," said Cubist CEO Michael Bonney. "That allows us to invest more in R&D and still be competitive for capital. So this year we'll spend something like 40 percent of revenue on R&D."

While it already has two superbug treatments in late-stage development, Cubist also invested in acquiring two smaller antibiotic developers this fall to boost its drug pipeline even further—Optimer and Trius Therapeutics. The deals were announced in the summer, and were valued at more than $800 million for each firm.

"We think we have figured out a model fundamentally different from this historic large pharmaceutical company model that allows us to be a serial developer, if you will, of antibiotics for these resistant bacterial infections and deliver a fair return for our shareholders," Bonney said.

Bonney is not ruling out further acquisitions, but some analysts say if the current crop of drugs in development come to market, Cubist itself may make an attractive takeover target for one of the major pharmaceutical players. When asked about that possibility, he didn't rule it out.

(Read more: Obamacare: An uneven playing field for hospitals )

"We can't control how the boards of other companies are thinking of us," he said. "Once we invest we go hard at it and develop the data that the clinical, the physicians of the world need, and we're able to do that with enough margin so that we can continue to attract the capital we need, so maybe it happens, maybe it doesn't, but I can't control that."

Right now, the one thing that is clear—there is a pressing need for new drugs.

"If you move to the post-antibiotic era, that means all of the advances of modern medicine could be reversed," said Cubist's Umeh. "Patients who had that infection in which there was no treatment option, they were in the post-antibiotic era."

—By CNBC's Bertha Coombs. Follow her on Twitter: @berthacoombs.

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