Some might think of big pharmaceutical companies as cutthroat corporations only interested in their own profits and self-preservation. But what if told you that several big pharma companies are together investing close to $1 billion to help smaller biotechs?
Believe it or not, that's exactly what's happening. Last week, over 20 top drugmakers announced the launch of the AMR Action Fund. Key investors in the AMR Action Fund include Pfizer (PFE -3.85%), Roche (RHHBY -1.70%), Eli Lilly (LLY -1.00%), Merck (MRK 2.93%), and Johnson & Johnson (JNJ -1.15%). These and other leading companies in the biopharmaceutical industry have already raised nearly $1 billion and hope to increase the total to more than $1 billion.
Here's why these big pharma companies are ponying up so much money to help small biotechs -- and why it matters for you.
Image source: Getty Images.
Behind the big bet
There's one simple goal for big pharma's partnership with the AMR Action Fund: Develop between two and four new antibiotics by the end of the decade. We have plenty of antibiotics available now, so what's the big deal?
The "AMR" in AMR Action Fund stands for antimicrobial resistance. Bacteria and other microbes continually mutate and develop resistance to current antibiotics. This escalating antimicrobial resistance means that new antibiotics are needed.
However, there are few new antibiotic candidates in development pipelines. Pfizer has a late-stage antibiotic candidate targeting bacteria that have developed resistance to current treatments. Roche's pipeline includes an antibody-antibiotic conjugate in phase 1 testing for treating staph infection. They're exceptions among large drugmakers, though.
The problem is that there's simply not a viable market for antibiotics right now. Several biotechs that focused on developing antibiotics have gone bankrupt or shifted their focus because of the lack of commercial potential for new antibiotics.
But scientists and industry experts know that the need for new antibiotics will intensify. That's why so many big pharma companies are stepping up to the plate. The AMR Action Fund will provide funding to the most promising new antibiotic candidates to help them advance through clinical testing. This financial assistance will hopefully give governments across the world enough time to change policies to avoid a global health crisis. In addition, the big drugmakers will lend their technical expertise to smaller companies with leading new antibiotics in development.
Why it matters for you
The main reason why big pharma's $1 billion bet matters for you is that a world with rampant bacteria that can't be treated would be more terrifying than COVID-19. The AMR Action Fund stated that antimicrobial resistance "is a looming global crisis that has the potential to dwarf COVID-19 in terms of deaths and economic costs."
Currently, around 700,000 people worldwide die due to antimicrobial resistance. That total could potentially escalate to as many as 10 million deaths per year by 2050.
This isn't a future problem, by the way. The Centers for Disease Control and Prevention's (CDC) 2019 Antibiotic Resistance Threats Report identified five microbes as urgent threats plus 11 others that are serious threats right now. Scientists think that up to 70% of bacteria have already developed some level of resistance to at least one antibiotic.
Without new antibiotics, even routine infections could become deadly. That could impact you or your loved ones in the not-too-distant future.
Investing with a superbug focus
It might seem strange that small antibiotic-focused biotech stocks wouldn't already attract investors. However, the convoluted market dynamics are such that investors' money is going elsewhere. The pharmaceutical industry's partnership with the AMR Action Fund could help these small companies.
In the meantime, are there any stocks that investors could buy that would likely benefit from efforts to fight potential superbugs? Two stocks stand out, in my view.
As mentioned earlier, Pfizer has a late-stage antibiotic candidate. The company's clinical study should wrap up late next year. The more important reasons to buy Pfizer stock, though, are its increased growth prospects after the merger of its Upjohn business with Mylan and the potential for the COVID-19 vaccine candidate that it's developing with BioNTech.
Another stock that I like is Abbott Labs (ABT -0.03%). The company is currently enjoying a sales boost for its diagnostics systems from the COVID-19 pandemic. If antimicrobial resistance becomes an even more worrisome threat in the future, Abbott would likely rank among the top players in diagnostics systems for detecting bacterial infection. And if the dire predictions don't pan out, Abbott has other products such as its Freestyle Libre continuous glucose monitoring system that will drive growth.
