First, I wanted to know where his small- and mid-cap fund-manager clients can make multiples on investment. "There is a broad umbrella that includes the topics of CNS, metabolic and infectious disease," he says. That's a lot of territory for sure, but I'm curious because CNS indications are very tough. How do you create a mouse model for Alzheimer's disease, depression or schizophrenia? Furthermore, even though infectious diseases kill more people than cancers worldwide, antibiotics are typically given only for short duration, and that means blockbuster status is probably not in the cards in most cases.
The value proposition for developing antibiotics is always a challenge. "I think it's been pretty well recognized that resistance is a continuing problem," says Carr, "And this represents an unmet need." But of course to move the needle on share price you have to be looking at stocks where market caps are low enough to give the investor a bump for his money. To that end, "Really it's the biotechs that have stepped up to address the problem," he says, "And there are a number of private and a few public biotech companies that are devoted to R&D in antibiotics. Some of them are planning to bring these drugs all the way through development and launch them with their own sales force."
Carr is bullish on antibiotic developer Optimer Pharmaceuticals Inc. (OPTR:NASDAQ), which received FDA approval for Dificid (fidaxomicin) in May 2011 for the treatment of Clostridium difficile infection (CDI), which decimates the lining of the colon, causes diarrhea and can be deadly or debilitating in large groups of patients. The product shows clear superiority over former standard-of-care antibiotic vancomycin for which resistance is now a major issue. In April 2011 Optimer struck a two-year deal with Cubist Pharmaceuticals Inc. (CBST:NASDAQ) for its antibiotic sales force to market Optimer's Dificid along with its own product Cubicin (daptomycin), and on March 29 of this year the company announced that a marketing deal had been struck with global Japanese drug developer Cubist Pharmaceuticals Inc. (CBST:NASDAQ). Astellas has a door open to physicians, hospitals and institutions the world over for a variety of indications and products, and Cubist has already shown that a small biotech company can launch a product successfully and keep the momentum up even with an elfin sales team. Carr also likes Cubist which is up 86% over the past 24 months and now has a $2.6 billion ($2.6B) market cap. Cubicin targets methicillin resistant Staphylococcus aureus (MRSA) and other Gram-positive bacteria. MRSA presents special problems because it occurs as a primordial biofilm rather than as a planktonic (microbes floating or suspended in serum or interstitial bodily fluids) infection and some MRSA-related skin infections cause death or persist for years in patients.
He refers to Cempra Inc. (CEMP:NASDAQ) as "an exciting antibiotic company," with two products in development: solithromycin (CEM-101) and Taksta (fusidic acid). Both are moving into phase 3 trials later this year. "Fusidic acid is unique because the company plans to develop it for a chronic indication, which you don't see with antibiotics very often," he says. "It targets prosthetic joint infection, which is very tough and takes a long time to treat. The antibiotic needs to be administered for years in some cases. The commercial opportunity is different than for your typical antibiotic." This kind of chronic indication sounds interesting considering Cempra has a relatively small market cap of $150 million compared to the market opportunity.
What's the next growth area in the antibiotic realm? "It has been in MRSA and other Gram-positive infections over the last 10–15 years because that's where a lot of the need was," says Carr. "But, there hasn't been as much work done in the area of Gram-negative infections where I think it is being increasingly recognized that this will be the next area of focus." These problems include pneumonias, bloodstream infections, wound and surgery-related infections as well as meningitis, and they tend to be resistant to multiple antibiotics already on the market. Next time I'll ask him if he's building a list of biotechs that might be focusing on Gram-negative problems.
His weight loss/metabolic theme currently favors Vivus Inc. (VVUS:NASDAQ), with its Qnexa (phentermine and topiramate) candidate performing quite well in pivotal trials. When the Endocrinologic and Metabolic Drugs Advisory Committee met back on Feb. 22 it voted 20–2 in favor of the drug, and Carr expects Qnexa to be approved when the FDA meets on July 17, 2012 to review all the data.
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