Actavis wins FDA approval for a new 'superbug' antibiotic

Actavis ($ACT) won the FDA's blessing for a new combination antibiotic treatment targeting drug-resistant infections, setting the stage for a showdown with Merck ($MRK) and its $9.5 billion splash into the field.

The drug, Avycaz, is a combination of the approved cephalosporin agent ceftazidime and avibactam, a new beta-lactamase inhibitor designed to help the former ingredient escape the defenses of dangerous pathogens. Avycaz, picked up in Actavis' $28 billion acquisition of Forest Laboratories, is now approved to treat complicated urinary tract and intra-abdominal infections caused by Gram-negative bacteria, which have few treatment options.

With an eye on the worsening scourge of treatment-resistant bugs, the FDA cleared Avycaz on Phase II data alone, giving Actavis a priority review and indicating the drug only for patients with limited or no other alternatives.

Actavis holds the American rights to Avycaz while AstraZeneca ($AZN) controls the drug in the rest of the world, and the pair are working through Phase III trials set to wrap up this year. Once they have late-stage data, Actavis will hand it into the FDA in hopes of expanding the drug's label, and AstraZeneca will use it to support global approvals.

Now Avycaz will contend with Merck's recently approved Zerbaxa, which also combines a cephalosporin with a beta-lactamase inhibitor. That drug, picked up in the company's acquisition of Cubist Pharmaceuticals, is approved for complicated urinary tract and intra-abdominal infections with no caveats, and analysts expect it to bring in peak sales above $1 billion a year.

Actavis sees similar promise for itself in the antibiotic space, last year trading $675 million for Durata Therapeutics to help build out its stable of treatments for infectious disease. The company is following a trend among the world's largest drugmakers, whose history of inattention to antibiotic R&D is in part responsible for the current increase in demand--and market opportunity--for anti-infectives. Now, buoyed by government incentives, Big Pharma is creeping back into the space.

"The FDA approval of Avycaz is an important step forward in enhancing our ability to respond to serious infections caused by difficult to treat Gram-negative pathogens," Actavis Executive Vice President David Nicholson said in a statement. "... We were very pleased to be working with the FDA to advance the approval of Avycaz as quickly as possible to make this important new treatment option available to physicians and patients at the earliest possible time."

- read the FDA's announcement
- here's Actavis' release