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Opinion: Biotech companies are trying to solve stubborn illnesses using ‘drugs from bugs’

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Poor germs. They just can’t catch a break.

Many people, not only germaphobes, spend lots of energy trying to avoid germs like, well, the plague.

I get it, but there’s a grand irony here, too. Because inside the body, trillions of various kinds of bacteria, yeast, fungi and viruses team up to form a germ squad that helps us fight everything from cancer, diabetes and heart disease to weight gain. The squad also improves our moods and brain power.

You gotta love germs.

Gut network

I list and describe, below, key publicly traded companies in this niche.

Without this “microbiome” in our intestines and on our skin, we’d be far worse off. Sorry, Naomi Campbell.

To understand what’s going on here, the key is to know that the small intestine is actually the biggest part of the immune system. Your gut plays a major role in helping your body fight diseases.

“Immune cells from the gut migrate to lymph nodes where they condition other important immune cells including T-cells,” explains Peter Attia, a medical doctor who does a regular podcast on the science of longevity. “These conditioned T-cells then travel throughout the body via the lymphatic system to impact disease.”

This network literally connects the gut to all organs and tissues.

You don’t need kombucha to make this happen. A varied diet provides the necessary probiotics (live microorganisms) and prebiotics (nondigestible foods that stimulate the microorganisms).

The problem is, antibiotics and infections can upset the balance or introduce malicious bacteria, creating health problems. This is called “dysbiosis.” Researchers are looking for ways to tweak the germ squad back into a healthy state to treat these diseases. Several companies are already proving they can do this, and they’re poised to deliver more evidence this year. The news will attract interest to the space, and probably move their stocks higher.

Key players

Welcome to the brave new world of microbiome companies developing bugs as drugs.

“We believe microbiome-based therapies are on the precipice of mainstream acceptance,” says Chris Howerton, the Jefferies analyst who covers this space.

This is a relatively new field. Until last year, the space had no major wins in clinical trials, and it still has no drug approvals. Now it could be on the cusp of a major turning point, which makes it a potentially interesting place for investors.

The big picture is that drugs from bugs may be developed to:

* Treat inflammation, including inflammatory bowel disease and ulcerative colitis in particular. Advances in therapies here could be the breakthrough that draws more big pharma interest and funding into the space.

* Treat neurological disorders including autism and Parkinson’s disease. “Gastro intestinal issues are a common but overlooked aspect of these diseases,” says Howerton.

* Fight the development of antibiotic-resistant bacteria. These nasty bugs could become a leading cause of death globally and even drag down gross domestic product (GDP) by 3% annually, says Howerton.

“The basic concept is that the more the bacteria are exposed to antibiotics, the higher the chances are that antibiotic resistant bacteria will multiply and go on to show very high levels of resistance,” he says.

Using the microbiome to treat infection reduces this likelihood.

Catalysts are on the way

In one of the first major breakthroughs in drugs from bugs space, Seres Therapeutics
MCRB,
+0.66%

has recently made major strides toward marketing the first ever microbiome-based therapy. It’s for the superbug Clostridium difficile (C. diff), a life-threatening, antibiotic-resistant bacterial infection. Almost 10% of people over 65 with C. diff infection die within one month.

In Phase III trial results last year, Seres demonstrated that its SER-109 for C. diff works, and it updated results earlier this year. The funding should lead to approval by the Food and Drug Administration, says Howerton, possibly in two years. He predicts we may eventually see two or three microbiome-based therapeutics to treat C. diff on the market over the next few years, including possible therapies from Finch Therapeutics
FNCH,
+1.14%

and Rebiotix, a private company.

After that, microbiome companies may advance therapies for ulcerative colitis and psoriasis. Seres and Evelo Biosciences 
EVLO,
+1.31%

could post Phase II readouts on these two ailments, respectively, in mid-2021 and the third quarter.

Many other companies have late-stage Phase II and III studies on microbiome therapies, and several promising early-stage candidates. Before we get to a quick roundup, here are some of the challenges facing this space.

Here are some key obstacles:

* Big pharma is not all in. Pfizer
PFE,
+0.01%

has taken a stake in the privately held microbiome company Vedanta, but drugs from bugs still aren’t seeing much support from big pharma. Running successful trials is all well and good, but turning a therapy into a final product is another matter altogether. “This is a box yet to be checked,” says Howerton. “The true commercial opportunity for microbiome therapies is still unknown.” This is one reason why many large pharma players see the field as risky.

* There is so much more to learn. Researchers know relatively little about what strains of microbes are linked to which diseases, or how different strains interact in the body once they’re shown to be effective in combination in the petri dish. “Our understanding of the microbiome is in its early days, particularly as it relates to more complex diseases,” says Howerton.

* Microbiome therapies need to show they work better than traditional meds. The jury is still out on this. Without superior performance, doctors may favor existing therapies that come in the form of a pill. It would also help if drugs from bugs treat diseases with no available therapies, the holy grail of “unmet medical needs,” in biotech. So far, that’s not the case.

Microbiome stocks

Challenges aside, I expect several key data readouts from this group over the next 12 months could attract investor attention to the microbiome theme and these names.

Here’s a roundup of the key pure plays on drugs from bugs.

Seres Therapeutics has demonstrated an effective microbiome-based therapy against C. diff, in Phase III trials. It may be approved in 2023. The company also has Phase II trials testing a therapy for ulcerative colitis, and a possible metastatic melanoma cancer therapy in preclinical research.

Finch is a busted IPO that has completed a Phase II trial testing the use of a microbiome therapy code named CP101 against C. diff. It has ongoing preclinical studies on therapies for ulcerative colitis, Crohn’s disease, autism, hepatitis B and oncology. The company has a partnership with Takeda Pharmaceutical
TKPHF,
+0.26%
.

Evelo Biosciences has possible Covid-19 therapies in Phase II and III trials. It has a therapy for psoriasis in Phase II trials, possible treatments for atopic dermatitis (eczema) in Phase I trials, and therapies for cancer, inflammation and metabolic disorders in preclinical studies.

BiomX
PHGE,
-3.35%

thinks it can deploy viruses in the body to target and remove bad bacteria. The viruses,, called phages, are safe and can be effective. The company has possible therapies for acne in Phase II trials. It is testing treatments for inflammatory bowel disease in Phase I trials. It’s doing preclinical research on treatments for eczema, cystic fibrosis and colorectal cancer. BiomX has a partnership with Johnson & Johnson
JNJ,
-0.26%
,
and it may partner with cosmetic companies.

Synlogic
SYBX,
+0.56%

uses genetically engineered bacteria to develop microbiome therapies that work by doing things like degrading harmful proteins. It has possible therapies for cancer and the metabolic disorders phenylketonuria and enteric hyperoxaluria in Phase I and II trials. It’s doing preclinical research on cures for inflammation and metabolic disorders.

Kaleido Biosciences
KLDO,
-0.50%

thinks it can improve the microbiome by tweaking how various bacteria behave, rather than introducing new bacteria into the gut. It has possible therapies for Covid-19, inflammatory bowel disease, urea cycle disorders that affect how the body removes waste, and hepatic encephalopathy, a decline in brain function caused by liver disease.

Michael Brush is a columnist for MarketWatch. At the time of publication, he had no positions in any stocks mentioned in this column. Brush has suggested PFE and JNJ in his stock newsletter, Brush Up on Stocks. Follow him on Twitter @mbrushstocks.

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