Superdrugs for superbugs

NEW YORK (CNNMoney.com) -- Smaller biotechnology companies are ready to take the lead away from big pharma in developing antibiotics that can take on a new generation of deadly "superbugs."

The most common bug is methicillin-resistant Staphylococcus aureus, or MRSA, which is transferred through skin contact. Most infections occur in hospitals among patients with weakened immune systems. But staph is appearing in more public spaces, including schools.

Big pharmaceutical companies already dominate the skin-infection antibiotic market with drugs like Pfizer's (PFE, Fortune 500) blockbuster Zyvox and Wyeth's (WYE, Fortune 500) Tygacil. But their payoff doesn't appear to be big enough.

"Antibiotics were considered an area that you couldn't make a lot of money in," said Rachel McMinn, an analyst for Cowen and Co., "so Big Pharma made the decision to get out, and biotechs filled that gap," with a pipeline of new treatments. If their products get government approval, she said, they could lead to a multibillion-dollar market.

Oritavancin, an antibiotic for skin infections including MRSA, is awaiting decision from the Food and Drug Administration. Its maker, the biotech Targanta Therapeutics (TARG), submitted its approval application on Feb. 11, and the review could be completed this year.

Cethromycin from Advanced Life Sciences (ADLS) finished late-stage studies and is on track for FDA submission. The antibiotic has been studied as a guard against pneumonia, but Chief executive Michael Flavin said it could possibly be used for staph infections.

Faropenem, from Replidyne (RDYN), is in early-stage tests for MRSA. An antibiotic from privately held Paratek Pharmaceuticals is in early-stage tests for community and hospital infections. And Cubist's (CBST) fast-growing antibiotic Cubicin, which is already on the market, is being tested for a variety of other infections.

McMinn said the next action from the FDA will probably happen on Feb. 27, when an advisory panel votes on whether to support the approval of telavancin, an experimental MRSA antibiotic from Theravance (THRX).

Nearly 19,000 Americans died from MRSA infections in 2005, according to the Journal of the American Medical Association, surpassing the death rate from AIDS. This is just a fraction of the total number of infections, which are mostly minor.

Some of the most high-profile deaths occurred last year, when the drug-resistant strain killed a 17-year-old high school student in Virginia and a 12-year-old student in New York. This year, two members of a high school wrestling team in Nebraska became infected with the staph strain, exasperating concerns about in-school infections and contact sports.

"Drug resistance is on the rise and old drugs are working less well," said Jason Kantor, analyst for RBC Capital Markets. "MRSA is the big driver currently."