Creating Living Antibiotics: BiomX vs Armata (July 2024)

The Antibiotics Revolution

Antibiotics might have been one of the most important medical technology ever invented. Before antibiotics, even a small cut or small infection could turn deadly. So, from the 1930s onward, the medical world changed entirely.

“Before we had antibiotics, infections like scarlet fever could even lead to heart problems. Surgery often led to deadly infections in the blood like bacteremia or septicemia. 

Tuberculosis is a classic example of what happened before antibiotics. The treatment was fresh air and bed rest in a sanatorium, and if you were lucky, your immune system could resolve it and you're cured. If not, you get worse and you die. Then the antibiotic streptomycin came along and completely changed how TB is treated.” – A World Without Antibiotics

Simply put, it meant that plenty of now non-lethal diseases were actually massive killers. It was a world where tuberculosis or syphilis carried a death sentence and a painful and slow death at that.

The Trouble With Antibiotics

Because antibiotics silently save so many lives every day, we have started to take them for granted. But this is far from a safe assumption. Bacteria evolve very quickly, and not dying from antibiotics is a strong evolutionary pressure. So, it is common for a new antibiotic to lose its efficiency after 10-15 years.

The only thing that kept antibiotics ahead of bacteria resistance was the effort of researchers to keep finding new molecules decade after decade. This is a silent war between researchers and pathogens.

Recently, pathogens started to win.

Antibiotic resistance is a growing problem, especially concerning diseases contracted in hospitals. Antibiotic resistance is killing not less than 1.27 million people yearly worldwide.

Source: Aphage

Worse, the pipeline of new antibiotics is getting emptier over time. All the easy-to-discover molecules have been found, and too little money has been invested in the field.

Luckily, an alternative exists, one that is likely to manage better the problem of bacteria resistance.

From Chemical to Virus

There is a family of viruses that is deadly to bacteria but completely harmless to other types of living organisms, like plants or animals. They are called bacteriophages or phages. Literally “eater of bacteria”.

By Adenosine – Own work, CC BY-SA 3.0

Bacteriophages are everywhere, with an estimated 10³¹ bacteriophages on the planet. They also have something unique compared to chemical treatment. As they are living organisms, they are constantly evolving to keep up with the evolving bacterial defense.  Scientists think this co-evolution of bacteriophages and their prey has been happening for millions of years. So, it is very unlikely that we ever see a bacteria fully resistant to all bacteriophages.

So, the idea is to cultivate bacteriophages and use them as living antibiotics. This is something that was already done routinely in Georgia during the USSR. But easier to mass manufacture chemical antibiotics were preferred in the West. The current rise in antibiotic resistance has put into question this strategy.

Bacteriophage Safety

In addition, bacteriophages are active viruses. So, if just a few bacteriophages reach a pocket of infectious bacteria, they can self-replicate and multiply on-site to attack the pathogens. While still completely ignoring the patient's tissues. This makes it a good candidate for treating hard-to-reach tissue, such as the lungs.

According to the FDA guidance on bacteriophages, they are considered safe as they are inert to mammalian cells. So there is also no need for toxicology studies that would be required for antibiotics or healthy volunteer clinical studies. This can significantly cut drug development costs and the time required.

Companies Developing Bacteriophage Therapies

There are actually a lot of startups working on bacteriophages. The phage.org page is the best resource, listing most of them. Some of the most active places in bacteriophage research are Korea, France, and the USA. But when it comes to publicly listed companies, there are, to our knowledge, just 2 companies, Armata Pharmaceuticals and BiomX.

1. Armata Pharmaceutical

Armata is a company we actually covered briefly in the article about Innoviva. Innoviva is the largest shareholder of Armata. Besides Innoviva support, it also received money from the Cystic Fibrosis Foundation ($5M award; $3M equity investment) and the US Department of Defense ($16.3M award)

The company is focused on deadly respiratory infections (cystic fibrosis, pneumonia) caused by antibiotic-resistant Staphylococcus aureus and Pseudomonas aeruginosa. It is also working on bioengineering a bacteriophage specialized in attacking biofilms, a serious concern for keeping hospital and surgery rooms sterile. Biofilms are also notoriously unreactive to antibiotics.

It has 2 bacteriophage cocktails in phase 1b/2 clinical trials and one just out of the pre-clinical stage. The safety profile has been good so far. Some of the phase 2 results are expected by the end of 2024.

Armata is building a cGMP Manufacturing facility (the required standard for biomedical production) that will be functional by 2023. This will allow it to keep production in-house and accept contract manufacturing from other companies if needed, as there are, for now, very few cGMP bacteriophage manufacturing capabilities.

The company also owns 13 bacteriophage-related patents, with expiration dates through 2041.

2. BiomX

BiomX is similarly focused on treating antibiotic-resistant infections related to cystic fibrosis. The clinical study for this treatment has entered phase 2, with the first results expected in 2023. Initial clinical results have been promising, including penetration of biofilms and a good safety profile.

It is also looking at treatment for skin infections (atopic dermatitis), with research still in the pre-clinical stage.

BiomX considers its potential addressable market to be worth $1B in the USA alone.

3. BOLT

The company relies on its machine learning technology, “BOLT” (“BacteriOphage Lead to Treatment”), for designing new phage cocktails. BOLT was used for developing the cystic fibrosis treatment already in clinical trials. It can either be used for individual customized treatment, with a 6-8 weeks lead time, or for the general patient population with a 1-2 year for developing an optimized phage therapy.

XMarker

The company is also working on the biomarkers discovery XMarker technology. BiomX has entered into 2 partnership agreements to use Xmarker for discovering microbiome-based biomarkers for inflammatory bowel disease:

1. With Boehringer Ingelheim in 2020.
2. With Johnson & Johnson Innovation in 2018.

BiomX is also considering applying its phage therapy for prosthetic joint infection and M. avium complex, a rare and progressive condition caused by Mycobacterium avium lung infection.

Financial Profiles

1. Armata Pharmaceuticals

Armata is registering some revenues, thanks to $16.3 million in grant funding from MTEC administered by the U.S. Department of Defense and the Defense Health Agency and Joint Warfighter Medical Research Program. It received $1M of that money in 2021.

Armata had a cash position of only $14.9M on December 31, 2022. It has recently raised more money from Innoviva, with a $30 million convertible credit agreement. This came after a $45M private placement in March 2022. So, it is fair to say that Innoviva strongly supports Armata and considers its “real” value way above the recent market capitalization (Innoviva judges the fair value of this investment at $156M).

With the convertible credit, Innoviva's ownership of the company could rise to 80.7%

With the latest quarterly loss of $10.3M, Armata has some cash runaway but might still need to raise more money before reaching commercialization. There is little risk of actually running out of money thanks to Innoviva's support, but minority shareholders might still be somewhat diluted.

2. BiomX

BiomX is a fully pre-revenue company. In the last quarter, Q3 2022, it mostly spent money on R&D ($3.5M) and general expenses ($2.6M)

BiomX has $41.5 million in cash and cash equivalents as of September 30, 2022. This would give it an expected cash runway until at least the middle of 2024.

Some serious dilution of existing shareholders is nevertheless to be expected, as $6M worth of shares have been announced in a private placement and are still waiting to close in the second quarter of 2023. The $6M placement still to happen represents 24,632,245 shares, or almost as much as the current 29,748,000 share count. The placement was done at $0.245 per share, below the recent stock price.

Armata Vs. BiomX

Both companies have made impressive progress in bringing bacteriophages into approved treatment for cystic fibrosis. These successes are also likely to be applied later for other lung diseases and afflictions.

Considering phage therapies have been successfully used routinely in the Soviet bloc and Georgia before, we can assume therapeutic success is perfectly possible to achieve. So, this is a segment of biotech where the clinical trial failure rate is likely to be lower than for classical drug development. The addressable market is in the billions or even billions and will likely be split between less than a handful of companies.

Picking A Risk

The main limitation comes from phage therapy being so far an underfunded and “under-hyped” segment or research compared to more popular gene editing or synthetic biology. So investors in the segment should be wary of possible future dilution of their shares by future capital raise.

In that context, both companies carry some risks but differ.

Armata might start collecting some of the DoD money soon and, anyway, have Innoviva royalties cash flow backing. But the 80%+ ownership of Innoviva also carries the looming risk of a full takeover. If Innoviva took full control, there is very little minority shareholders could do.

BiomX has more cash on hand but faces massive dilution ahead. And it is unclear how much it will still need to raise to fund phase 3 clinical trials fully.

Overall, Armata is much more certain to find the cash to reach commercialization but carries its own risk for minority shareholders through Innoviva de facto control, while BiomX is more dependent on access to capital markets.

Taking Valuation Into Account

Without an insider view, it seems that both Armata and BiomX products are equally promising, with BIomX maybe 6-12 months behind in the clinical trial schedule. So, it might be that the persistent 1-to-5 ratio between Armata and BiomX market cap is somewhat excessive, as Armata's stronger backing can equally be seen as a safety and as a risk.

So, investors willing to face dilution and bet on capital markets staying open for innovative companies (something in question in case of a banking crisis) might prefer a high-risk/high-reward bet on BiomX.

More cautious investors are likely to prefer the safety of Armata and its backing by $760M+ and cash flow-positive royalty investment company Innoviva.