Continuing the theme of this blog, doctors and healthcare professionals have a unique edge in biotech investing, but you need to integrate that insight into a robust investing framework. This newsletter serves to help you with that integration. So, if you haven’t read my prior article on this topic, I encourage you to check it out.
Here’s a case where your clinical expertise gives you foresight that regular investors lack. From your experience, you know doctors rarely prescribe newly approved antibiotics to curb resistance. For infections, first-line antibiotics are the go-to; the “big guns” are reserved for severe cases where those fail.
This reality spells trouble for antibiotic innovators. Developing a new antibiotic costs roughly $1 billion over 7–10 years, from bench research to launch. Even with excellent efficacy and safety, these drugs often see minimal prescriptions due to cautious clinical practices. Sales rarely justify the massive investment, leaving investors disappointed and triggering steep stock crashes for young, small-cap antibiotic companies. As their equity value tanks, these firms—now microcaps—struggle to raise capital through public offerings. Without a strong balance sheet, many end up filing for Chapter 11 bankruptcy.
Take Melinta Therapeutics (formerly MLNT) as a prime example. In 2018, the company boasted a $1.5 billion market cap, with shares trading between $15–$20. Despite its promising antibiotic portfolio, lackluster sales led to liquidity issues. By December 2019, Melinta filed for Chapter 11. It emerged in 2020, reorganized but relegated to the OTC market under MLNTQ, with a market cap of just $1.5 million—a near-total loss of value despite its strong drugs.
As a physician, you’d see the writing on the wall and avoid such investments. That’s exactly what my clients at my prior consulting business, Integrated BioSci Investing, do—we steer clear of antibiotic innovators for these reasons.
Yet, this creates a dilemma: without investment in new antibiotics, we face a future with dwindling options against multidrug-resistant (MDR) bacteria. Antibiotic resistance, fueled by non-compliance and widespread livestock use, is a growing threat. Without novel drugs, treatable infections could become deadly.
Fortunately, initiatives like the Bill and Melinda Gates Foundation and the PASTEUR Act are stepping up. The Pioneering Antimicrobial Subscriptions to End Upsurging Resistance (PASTEUR) Act, a bipartisan U.S. bill introduced in 2021 and reintroduced since, proposes a subscription-style model to incentivize antibiotic development. It offers developers guaranteed payments—$750 million to $3 billion over 10 years—for new antimicrobials targeting resistant infections.
This approach decouples revenue from sales volume, encouraging innovation despite low prescription rates. The Act also ensures hospital access and establishes a committee to identify priority pathogens. Though it enjoys bipartisan support, it remains stalled in Congress as of 2024. Critics argue it’s a step forward but may need complementary financing to fully revive the antibiotic market. Let me know in the comment section below what do you think is a good way to incentivize the antimicrobial innovators?
At Evergrowth BioHealthcare Capital, we leverage insights from physicians like you to spot opportunities early. Our hedge fund, guided by physician investors and Medical Advisors, stays ahead of Wall Street, delivering outsized returns through deep life-science expertise.
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Disclaimer: This blog is for educational and informational purposes only. It is not a recommendation to buy, sell, or hold any stock. Always consult your investment advisor and conduct thorough due diligence before making investment decisions.
Disclosure: Neither I nor Evergrowth BioHealthcare Capital hold shares of MLNTQ at the time of this publication. I have no plans to purchase MLNTQ within the next three days.