Desperate for answers to the COVID-19 pandemic, the U.S. government has shelled out big money for a stable and reliable supply of key drugs made on U.S. soil. For drugmakers accustomed to offshore manufacturing in cheaper countries, does it make any sense to onshore production to meet U.S. demand?
One company has a compelling argument, and it's taking big risks—and government funding—to test its hypothesis.
Paratek Pharmaceuticals, maker of antibiotic Nuzyra, is kick-starting a three-year plan to build a government-funded, second supply chain in the U.S. in an effort to flesh out the nation's strategic supply of pandemic response drugs.
The U.S. government, through its Biomedical Advanced Research and Development Authority (BARDA), has dumped $285 million into helping Paratek build the U.S. supply line, which will stand apart from its current manufacturing network in Europe, CEO Evan Loh said.
It's a gamble for BARDA but even more so for Paratek, a 22-year-old company facing the rigorous prospect of building that supply chain from scratch. Even with more than a quarter-billion dollars of government money to work with, it's a risk; Paratek has a guaranteed order for just 10,000 treatment courses of Nuzyra—a "tiny investment," according to Loh—and no certainty the funding will keep coming.
For Loh, however, the government's big investment in his company is a sign that the U.S. Department of Health and Human Services (HHS) and BARDA are putting their money where their mouth is in creating a stable U.S. supply of key pandemic response drugs, with lessons learned from COVID-19.
"This is forward-thinking and pressing on the part of BARDA, and I think you’ll see more of this," Loh said. "This grant that came our way may be an experiment, but I think they’re experimenting with the right company."
Here's what Paratek has cut out for it in the next three years.
Starting from scratch
In December 2019, BARDA laid out a deal with Paratek that has become increasingly common during the COVID-19 pandemic.
The government agreed to dole out $285 million as part of BARDA's Project BioShield program to help the Boston-based drugmaker establish an onshore U.S. supply chain for Nuzyra and fund the drug's development to treat pulmonary anthrax––an infectious disease best known in the U.S for a series of 2001 attacks that left five Americans dead.
The five-year agreement, with could be extended to 10 years, required Paratek to direct to the Strategic National Stockpile (SNS) 10,000 treatment courses of Nuzrya, which notched its first FDA approvals in October 2018 to treat community-acquired bacterial pneumonia and acute bacterial skin and skin structure infections.
In return, BARDA agreed to fund Paratek's construction of the U.S. supply chain and back postmarketing studies of the drug to treat anthrax infection.
More could be in the offing, too, BTIG analyst Robert Hazlett figures. "We believe this comprehensive deal is step one of several that could transpire from BARDA, as additional purchases for additional indications are considered," he said.
The road to FDA approval was a long one for Nuzyra, first synthesized in 1996. Paratek launched two years later with the goal of producing antibiotics to aid public health response. It's a market marked by failures and meager profits despite desperate demand from federal regulators.
Loh, who made the switch to Paratek in 2014 after a stint as senior vice president in Pfizer's R&D group, said Paratek was burdened in its early years with a high barrier for regulatory approval and steep clinical and manufacturing startup costs. The company cycled through some 20-plus phase 1 clinical trials for Nuzrya and three phase 3 trials—each at a cost of about $40 million out of pocket—all in an attempt to enter a market that is "fragile and failing," Loh said.
Those years in the wilderness, however, gave Paratek the opportunity to develop a "stable and high-quality supply chain" in Europe that may have enticed BARDA to work with the company, Loh said. Despite the inherent risk in the government's contract, the deal comes with benefits for the drugmaker's aspirations.
According to Jason Burdette, Paratek's head of technical operations, the drugmaker will onshore production of Nuzyra's active pharmaceutical ingredient (API) from U.S.-sourced raw materials. That API will be used in intravenous and oral versions of the drugs at facilities operating under increased BARDA security requirements. Every facility involved will need FDA approval—and to meet its BARDA commitments, Paratek will need those approvals within three years.
With the U.S. and EU supply chains running in tandem, Paratek will have the necessary "speed and agility" to supply the BARDA stockpile in case of increased demand, Burdette said, and a dual supply point will also be a boon for the drugmaker.
"For us, we could not afford to have a fail anywhere along (our European) supply chain," Loh said, citing the high quality required and middling demand for the drug in the early stages of its launch. "Our supply chain is not the most cost-efficient today. I think it will get more cost-efficient, but the cost efficiency comes with more volume."
The move to build its U.S. supply will come with "incremental costs" of doing business, including higher wages and more stringent demands from BARDA, but Paratek is aiming to mitigate those new costs with a more streamlined production network.
"We probably would not have been able to go to the U.S. based on the incremental costs unless we had this public-private partnership with BARDA," Loh said. "That really enabled us to be able to do that, and I’m proud to be able to do that because I don’t think there’s been any other company that’s really made that commitment."
Paratek's gamble on government money might be a boon in the long term, but whether any other drugmakers follow its lead and develop their own U.S. supply lines is unknown, given the relatively high costs of manufacturing stateside.
However, Loh argued that HHS and BARDA have shown a willingness in recent years to make meaningful, big-dollar commitments to restock the SNS––and that could mean more opportunities for drugmakers producing pandemic response drugs, including those used to treat influenza and pneumonia.
"I think that movement is coming," Loh said. "As I talk to the leaders at HHS, they are very consistent in terms of what they have always said to us. They have two mantras: to protect the warfighter, and to save lives and protect Americans."
Examples of the government's renewed interest in pandemic response have been seen in a slew of major commitments BARDA has made in recent weeks to companies supplying strategic drugs.
Earlier this week, Emergent BioSolutions won a $628 million deal with the government to scale production of targeted COVID-19 vaccine candidates to make "tens to hundreds of millions" of doses available through 2021, the CDMO said.
As part of the agreement, the government will shell out $542.7 million to reserve bulk manufacturing capacity at Emergent's Baltimore Bayview facility, which was constructed as part of a BARDA pandemic preparedness contract signed in 2012. The remaining $85.5 million will be spent expanding fill/finish capacity at two Emergent plants at Camden in Baltimore and Rockville, Maryland.
In late May, BARDA also floated a four-year, $354 million contract with a fledgling company, Phlow Corporation, to build a generic medicine and API plant in Richmond, Virginia, and supply COVID-19 treatments produced there. That deal can be expanded up to 10 years and a total of $812 million, making it among the largest in BARDA's history.
Those deals could soon become a sign of the times as the U.S. realizes the need for a stable supply of homegrown drugs during a pandemic. For Paratek and Loh, a renewed and lasting commitment to that supply could be a boon in the coming years after three hard years of work are complete.
"This is going to be a very broad-based effort to look at the SNS, and I’m very optimistic that the current administration will continue to support that," Loh said.
Editor's Note: This story has been updated to correct an error. BARDA has invested $285 million total in Paratek's U.S.-based supply chain.