Novel insights from financial analysis of the failure to commercialise plazomicin: Implications for the antibiotic investment ecosystem

Antimicrobial resistance threatens global health and has led to calls for new antibiotics, yet economic hurdles have driven large pharmaceutical firms out of the space, leaving small and medium-sized enterprises (SMEs) to carry most development. SMEs dominate early and late clinical stages, but many have gone bankrupt after FDA approval due to insufficient profitability and reliance on capital markets. Financial flows for a single drug are typically opaque, limiting empirical understanding of SME vulnerabilities. This study addresses that gap using financial analysis of Achaogen’s development and failed commercialisation of plazomicin (2004–2019), enabled by SEC-mandated disclosures after Achaogen’s 2014 IPO. The objectives were to quantify and time public, philanthropic, and private investments; estimate development and commercialisation costs; and assess how capital market dependency affected commercialisation and pipeline fragility. Given the ripple effects of Achaogen’s bankruptcy on investor confidence and access to novel antibiotics, the study aims to inform the design of new pull incentives now under consideration in the US, EU, Japan, and Canada.

Prior work highlights inadequate innovation and economic challenges in antibiotic R&D, with large pharmaceutical firms exiting due to poor profitability (Carlet et al. 2012; Projan 2003; WHO 2017). SMEs now dominate the pipeline but face untenable investor return expectations and fragile business models (Årdal et al. 2018, 2020; Harbarth et al. 2015). Market failures include stewardship-driven limits on volume, short treatment durations, and competition from inexpensive generics (Outterson 2009, 2014; Spellberg et al. 2012). Recent analyses document poor uptake and access to newly approved antibacterials across high-income countries (Outterson et al. 2021) and frequent SME bankruptcies (Taylor 2020; Terry 2020; Mullard 2019). Policy proposals include subscription-style pull incentives (e.g., UK pilot; Outterson and Rex 2023), the US PASTEUR Act, and the EU transferable exclusivity extension, though critiques argue some may be flawed or inequitable (Årdal et al. 2023; Glover et al. 2021; Klug et al. 2021). This study builds on that literature by providing a granular, empirically grounded financial case analysis of one SME and product to illuminate funding dependencies and commercialisation risks.

The study applied financial analysis methods to Achaogen’s publicly available, independently audited disclosures and related documents. Data sources included SEC filings (S-1; 10-Ks for 2016–2018; bankruptcy-related 8-K), the 2014 IPO prospectus, audited financial statements (2014–2018), investor presentations, and the Q4 2018 earnings call transcript. Clinical development milestones and trials were cross-checked against ClinicalTrials.gov (search term: “plazomicin”). Financial statement line items were used to construct a cashflow-based dataset of funding sources, categorised as public, private (capital market investors, equity, and debt), and philanthropic, and mapped against the regulatory and clinical trial timeline to quantify amounts and timing by funder type. Commercialisation economics were assessed by comparing pre-approval investor expectations (e.g., IPO targets, analyst models) to realised outcomes (revenues, costs, pricing, and post-approval obligations). Post-bankruptcy asset sale outcomes and subsequent rights transfers were traced via SEC documents and public announcements. Semi-structured expert interviews (n=7) with stakeholders across academic, clinical, biotech, financial, and non-profit sectors, conducted March–July 2022 (two UK, two Europe, two US, one Asia), provided context on market dynamics, clinical practice, and reimbursement. Analyses focused on funding dependency, commercialisation cashflows, bank debt covenants, and investor sentiment impacts on SME viability.

- Total funding and split: Over ~15 years, Achaogen raised approximately $770 million to develop plazomicin. Funding comprised 26% public (primarily US biosecurity grants), 3% philanthropic (Wellcome; Bill & Melinda Gates Foundation), and 71% private capital market financing (equity and debt). - Pre-IPO and grants: Series A in 2004 raised $15.7m; additional venture rounds (2006–2013) raised ~$101m. Non-dilutive US government grants totaled ~$106m (2006–2013). BARDA’s Phase 3 award delivered $96m in cash inflows (2014–2018). Philanthropy included $13.6m from Wellcome (2009–2010) and a $10m BMGF commitment in 2017 (with $5.7m repaid and $7.1m cancelled in 2018). CARB-X awarded $2.4m (initial $1.3m in 2018). - Capital markets: The 2014 IPO raised $74m; additional equity raises totaled ~$287m (2015–2018). By 2018, Achaogen held a $49.8m loan with Silicon Valley Bank (SVB). In Dec 2018, amid deteriorating cashflows, SVB restructured and collateralised the loan, leaving only ~$26.4m available and blocking ~$25m cash. - Regulatory outcome: Plazomicin received FDA approval (June 2018) for cUTI, including pyelonephritis, but failed to secure CRE indications due to insufficient enrolment in CARE. Approval carried 10 costly post-marketing requirements (e.g., pediatric studies, 5-year surveillance, hemodialysis PK study, and a therapeutic drug monitoring diagnostic). - Commercialisation costs and commitments: 2018 general and administrative expenses rose to ~$71m; R&D peaked at ~$103m (late-stage trials, pre-approval manufacturing, medical affairs, pharmacovigilance). Additional obligations included $7.5m to Ionis (milestone), $1m success fee to Solar Capital, and manufacturing commitments with Hovione totaling ~$43m (2020–2024). Post-approval fixed costs were estimated at ~$27m (regulatory), $3m (surveillance), and $5m (automated AST development). - Revenues and pricing: 2018 total revenue was ~$8.7m, largely grant/contract revenue; plazomicin product sales were ~$0.8m. Entry price per course (~2018) was ~$4,955; WAC per day (~2019) ~$945 (vs. ceftazidime-avibactam ~$1,076/day; meropenem–vaborbactam ~$990/day; vs. cheaper alternatives like colistin ~$56/day, polymyxin B ~$21.78–$45/day). Earlier analyst forecasts had anticipated ~$63m US revenue plus ~$3m EU royalties post-approval—far above realised sales. - Cashflow crisis and bankruptcy: Cash fell from ~$145m (end-2017) to ~$31m (end-2018). Loan covenants and collateralisation constrained liquidity; as investor sentiment deteriorated and new funding dried up, Achaogen could not meet targets and filed for bankruptcy on April 15, 2019. Assets sold for ~$16m; Cipla acquired worldwide rights (ex-China) for ~$4.65m and later withdrew the EU application. Greater China rights sold to Sihuan for ~$4.5m; Sihuan did not commercialise and transferred rights to New Asia (2022). - Market constraints: US reimbursement via DRGs disincentivised uptake of higher-priced novel antibiotics; narrow cUTI label limited volume; clinical practice concerns (aminoglycoside toxicity/monitoring; lack of automated AST) and formulary delays impeded adoption. CRE epidemiology implied small US target populations; estimates suggested the entire US market for new CRE-active agents was ~$289m/year, whereas developers might need ~$350m over 10 years merely to break even (excluding full investor repayment and further studies). - Broader impact: The bankruptcy reinforced investor skepticism toward the SME antibiotic model, contributing to capital flight and subsequent SME failures. Contrastingly, Paratek’s omadacycline later benefited from a large BARDA Project BioShield award (~$304m by 2023), covering post-approval costs and purchases, and the company was acquired in 2023 (~$462m), illustrating how post-approval public funding and purchase guarantees can improve sustainability.

Applying financial analysis to Achaogen’s disclosures revealed the centrality of private capital to later-stage development and, crucially, to commercialisation—but also its fragility when revenues are uncertain and post-approval costs are front-loaded. The findings address the research questions by quantifying public versus private contributions over time, documenting commercialisation economics, and showing how capital market dependency, loan covenants, and investor sentiment precipitated failure despite regulatory approval. In the US context, narrow labeling (cUTI only), clinical practice hesitancy with aminoglycosides (toxicity concerns, therapeutic drug monitoring needs), lack of automated AST, formulary delays, and DRG-based reimbursement collectively constrained price and volume. The epidemiology of resistance further limited the addressable market, such that even competitive pricing could not generate sufficient early revenues to cover high fixed post-approval expenses. These results underscore the mismatch between stewardship-driven low volumes and volume-linked revenue models—an archetypal market failure in antibiotics—rendering SME-led commercialisation especially vulnerable. The plazomicin case suggests that the “wrong drug, place, and time” can compound these systemic challenges: a narrow label for an aminoglycoside introduced first in the US market with low CRE prevalence and cost-sensitive reimbursement proved commercially untenable. Bank financing with strict covenants amplified liquidity risk, empowering lenders to trigger bankruptcy when targets became unreachable. Investor confidence deteriorated rapidly, not only for Achaogen but across the antibiotic SME ecosystem, reinforcing a vicious cycle of reduced funding and further exits. In contrast, models that provide predictable, delinked revenues—such as subscription contracts with guaranteed payments—appear more compatible with stewardship and with the extended timelines needed to build markets for novel antibiotics. The Paratek example shows how large, multi-year post-approval support and purchase agreements can stabilize cashflows, facilitate compliance with post-marketing commitments, and sustain investor confidence. The broader significance is clear: without long-term, access-oriented pull incentives that extend beyond approval, SME dependency on speculative capital and bank debt will continue to threaten reliable access to new antibiotics.

This case study contributes an empirical, finance-based analysis of an SME antibiotic developer’s trajectory from R&D to approval and failed commercialisation. It quantifies the mix and timing of public, philanthropic, and private investments; details post-approval fixed costs and revenue constraints; and shows how capital market dependence and loan covenants can force bankruptcy despite regulatory success. Three key implications emerge for the antibiotic investment ecosystem: (1) narrow-label antibiotics for small patient populations are unlikely to be commercially viable in the current US market; (2) SMEs require incentive structures that bridge multi-year commercialisation cashflow droughts; and (3) restoring industry and investor confidence in SME-led development will require durable, access-oriented pull mechanisms. Policy directions include subscription-style payments that delink revenue from volume and provide long-term cashflow visibility; purchase guarantees and multi-year commitments that can enable bank financing or ‘antibiotic bonds’; and conditionality to ensure global access and stewardship. Future research should extend financial analysis to other SME antibiotic cases to identify success factors and inflection points, including cases like omadacycline, to refine incentive designs that promote both innovation and sustainable access.