Bacterial infections, and particularly the increasing spread of antibiotic resistance, are among the greatest health threats of our time. Despite this, antibiotics have a relatively small share of the global pharmaceutical market. But could this be about to change?
The discovery and development of antibiotics was one of medicine's most significant milestones, making possible our modern way of life. However, the large pharmaceutical companies that manufacture prescription medicines, often referred to as "Big Pharma", have been reluctant to invest significantly in this area. Why is this?
Stable cash flows, attractive dividends, and margins that remain comparatively high despite price pressures have always been among the defining characteristics of "Big Pharma" manufacturers of prescription medicines. Together with the inherently stable demand - reflecting the fact that "we will always get ill" - these factors form the basis for the sector's defensive nature.
In addition to financial results, it is above all news of product developments that captures investors' imaginations and, if successful, can trigger significant share price movements.
For years, news flow in the sector has been shaped primarily by developments combatting the major health threats of our time: cancer, diabetes, and cardiovascular diseases. Innovative therapies in these areas often have blockbuster potential, so it's no surprise that they attract so much attention (think Ozempic and Keytruda).
Dr Tilman Dumrese is a Senior Equity Specialist at LGT, focusing on sustainability topics and the healthcare, consumer discretionary, and chemicals sectors. He holds a doctorate in immunology and worked internationally at renowned research institutes during and after his academic training in Germany and the US.
Vaccines (which prevent or treat viral or bacterial infections) and antibiotics (which treat bacterial infections) gain significantly less attention. Even when viral pathogens like Hanta or Ebola come briefly into the spotlight during local outbreaks, as long as they are regionally confined interest quickly wanes. It's only when local epidemics escalate into a pandemic, as in the case of Covid-19, that broad public and investor interest rises, logically given the sharp increase in medical demand that follows.
Unfortunately, global medical need alone isn't always enough to generate sustained attention. In a report published in 2019, the World Health Organisation (WHO) lists antibiotic resistance among today's ten most significant global health risks. The list also includes air pollution and climate change, demonstrating the huge importance of sustainability, as well as non-communicable diseases like diabetes, cancer, and cardiovascular disease, and inadequate living conditions.
In 2019, bacterial infections were the second leading cause of death worldwide after coronary heart disease. Some 33 bacterial pathogens were linked to just under 7.7 million deaths, with around half attributable to just five pathogens. And there is a clear disparity between low- and high-income regions. In sub-Saharan Africa, 230 people per 100,000 died annually from bacterial infections. In the West, this figure stood at 52 per 100,000.
Frequently cited projections suggest that unless effective countermeasures are taken, up to ten million people globally could die each year from infections caused by multi-drug-resistant pathogens by 2050. The supply of important, often older antibiotics is in some cases critically insecure. Supply bottlenecks, low stock levels, and production by only a small number of suppliers further increase the vulnerability of healthcare systems.
The development of antibiotic resistance is a natural evolutionary process. As a result, the need for new antibiotics is likely to remain high over the long term, and could be further increased by incorrect practices like stopping antibiotic treatments too early.
Despite this, the development of new antibiotics remains significantly under-represented compared with vaccine research into viral infections. According to a report by the Access to Medicine Foundation, the number of antimicrobial drugs developed by major pharmaceutical companies has fallen by 35 % in the five years since 2021: from 92 to 60 projects.
Antibiotics are used for acute infections, usually taken for just a few days, and prescribed as sparingly as possible to prevent resistance developing. But it is precisely this approach that limits their commercial potential and makes it difficult for companies to recoup their high research and development costs.
So antibiotics face a tension between medical need and economic incentive. In addition, antibiotics often consist of small-molecule ingredients. This means that once patent protection expires, generic versions can come onto the market relatively quickly, which leads to a rapid fall in prices. Vaccines, by contrast, are often complex biotechnological products that are significantly more difficult for competitors to replicate.
The key question is: how can the antibiotics market be made more attractive to "Big Pharma" again? Government bodies, in particular, have a role to play. They can create economic incentives to make the development of new antibiotics more profitable once more.
Various models are being discussed and are already being implemented worldwide. Broadly speaking, they can be divided into two categories: "push" models are designed to reduce the financial risk in the early stages of research and development, prior to marketing authorisation. "Pull" models come into play after authorisation and create financial incentives for successful developments. A combination of both approaches is considered particularly effective.
One promising "pull" approach is the subscription model. Under this model, a government or healthcare system pays the manufacturer a fixed annual fee for access to a new antibiotic - regardless of how frequently it is actually prescribed. This decouples revenue from the volume sold. At the same time, the model encourages prudent and medically appropriate use.
The UK is already trialling this approach. In the European Union, market-based incentives such as transferable exclusivity vouchers are also under discussion. If a company develops a much-needed antibiotic, it could use this to extend the market exclusivity of another, higher-turnover medicine. This would delay the market entry of cheaper generic medicines - and increase the economic incentive to develop new anti-infectives.
These initiatives address a key demand from the pharmaceutical industry: the shift from volume-based reimbursement to reimbursement for the reliable availability of new antibiotics. If such models become widely adopted, they could help to counteract the growing threat posed by bacterial infections and antibiotic resistance.
