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June 3, 2020

Covid-19 pandemic: overcoming big pharma’s infectious disease market failure

Infectious diseases have been largely pushed to the wayside by big pharma because they are unable to bring the same profits as other conditions, such as cancer and chronic diseases. Octopus Ventures’ Uzma Choudry explains the reasons behind the failure and why she is hopeful the current Covid-19 pandemic will change attitudes towards the serious public health threats infectious diseases cause.

By Allie Nawrat

The Covid-19 pandemic has taken the world completely by surprise. The pharmaceutical industry has stepped up to try and find solutions to the escalating global crisis, which has tragically killed more than 370,000 people.

However, the fact that most companies are having to start from scratch in tackling Covid-19 highlights how unprepared the industry was and big pharma’s weakness in the infectious disease space. A recent Guardian exclusive story revealed that major European pharma companies, including Johnson & Johnson, Pfizer, Eli Lilly and GlaxoSmithKline, refused to engage in preparatory work to accelerate vaccine development in advance of possible outbreaks.

A 2016 report by the Netherlands-based Access to Medicine Foundation concluded: “Over the years, the focus on the financial bottom line has led many pharmaceutical companies to cut research into diseases that predominantly affect the poor. Drug development has become heavily oriented towards commercially-viable targets: meeting the health needs of people in developed countries, while largely neglecting R&D for diseases of poverty.”

This situation is particularly concerning given that Covid-19 is far from the only public health challenge related to infectious disease that is threatening the world at the moment. According to a recent report by the World Health Organization, antimicrobial resistance could claim 10 million lives a year by 2050 and cause the same catastrophic economic damage as the 2008 global financial crisis.

The problem is that pharma companies have been reluctant to invest in infectious diseases, since it is so difficult to make their investment back in drug development, let alone make a profit. Looking to the future, how can the pharma industry be incentivised to tackle infectious diseases more proactively?

Deep tech and future of health-focused venture capital firm Octopus Ventures’ early-stage investor Uzma Choudry gives her perspective on this challenge and what role the Covid-19 pandemic could play in re-orienting pharma’s priorities towards infectious diseases.

Allie Nawrat: Why has there traditionally been less investment in the infectious disease space? 

Uzma Choudry: The current R&D system is not fit for purpose when it comes to vaccines and antibiotics; the market incentives are not there. When you look at the way pharma is set up, a lot of the incentivisation is around competition in the market against other big pharma and intellectual property rights on the drugs.

Antibiotic resistance is rife. We are on our last-resort antibiotics and no-one is ploughing money into antimicrobial research. [But] when you look at antibiotics, for example, historically the amount of investment has been quite low and it has gone down [over time]. Novartis, Sanofi and a few other players have shut down their R&D within this space.

When you think that these pharma companies have spent billions on developing those drugs, [with antibiotics] they’re not able to recoup the cost of having developed the drugs, let alone make a profit.  Whereas treatments that are for chronic illnesses, where the patient is taking the treatment every day for the rest of their life [is a better investment].

Compounding that, we’re starting to see resistance arise for drugs in clinical trials. So pharma companies have spent all that money, gotten the drug to Phase II and then you’re starting to see the resistance, and so having to shelve those antibiotics.

In the case of pandemics, which are hard to predict and hard to know how broad an effect they will have, pharma then starts throwing money into research for a solution. As soon as the crisis is over, that research and effort is put on hold until there is another crisis. If there had been basic R&D being done in a number of these viruses that have pandemic potential, then we wouldn’t suddenly be in a position where we are starting from scratch.

AN: What positive impact is the Covid-19 pandemic having on pharma’s standard way of working?

UC: In light of the current situation, we are seeing large pharma stepping up and initiating partnerships with each other and the governments on potential treatments.

Platform-based approaches are going to be very useful going forward. If we’re prepared to a 60% or 70% level, then you can hit the ground running, rather than starting from scratch.

 An interesting development on that front is CEPI [Coalition for Epidemic Preparedness Innovations], which is putting money into R&D efforts to build platform technologies, rather than creating drugs or vaccines for specific viral infections. This means you have spent the R&D effort into basic research for viruses with pandemic potential, and those platforms can be then be easily tweaked to multiple different viral variants. You’re not starting from scratch when you’re suddenly hit by a pandemic.

Moderna is one the projects being funded by CEPI. We saw the stocks of Moderna rise, while stocks worldwide were tumbling; we’re actually seeing a lot of appetite for investment.

Digital health has picked up strongly; the pandemic has created a big opportunity in accelerating the adoption of digital health platforms.

AN: Are you hopeful that Covid-19 will facilitate discussions and changes in the infectious disease market?

UC: There are still big questions about how pharma should be working. We need to look at the actual funding model. How can we…[ensure] pharma is able to at least recoup the costs of their investment into developing the drug? How do we incentivise that?

There needs to be a bit more movement than there has been, and understanding about who is going to address and take ownership of these problems.

Pharma is not prepared to invest a billion into the development of a drug that essentially isn’t going to recoup its costs or they could lose profits off the back of.

Governments need to understand how big a disruption pandemics like the one we are in can have on public health, but also the economy.

If you look at the exit landscape for antibiotics and antimicrobials, it is looking very dire; it is quite doom and gloom. So would investments touch that? Because when you’re looking at the motivation of the investors, they want financial return. It doesn’t make sense for them to go into an investment where the exit landscape looks quite gloomy.

I hope Covid-19 has been a wakeup call for governments about how bad things can get if you leave them unaddressed. You can’t put your hands over your eyes and say we will deal with it when the time comes. You’ve got to be more proactive.

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