The global antibiotic market is estimated at over US$41 billion with competition from multinational pharmaceutical entities and small entrepreneurial companies focused in the space (BCC Research PHM025 2016). As with other therapeutic categories, many of the current standards of care are inexpensive multi-sourced generic products with many of the newer therapies commanding premium brand pricing. Three geographic regions account for the majority of sales and are the primary focus areas of the Appili team for both current and future antibiotic products: US (US$16 billion), Europe (US$10 billion), and Asia (US$9 billion) (BCC Research PHM025 2016). Large pharmaceutical companies such as Pfizer Inc., Johnson & Johnson Inc., and Merck & Co., Inc. are the largest players in the antibiotic market by sales, but no single company accounts for more than 5% of the total antibiotic market (BCC Research PHM025 2016).

Patients are the intended users of an antibiotic product, but rarely pay for the entire cost of a prescription. Typically, patients pay for a small portion of the antibiotic cost while the remainder is paid for by public or private insurers ("Payers") or within hospital and institutional budgets. Payers have gained significant authority to dictate terms to healthcare companies limiting access to new medicines through a number of administrative levers. Payers may elect to not reimburse an antibiotic if they believe the value proposition is not warranted or if the acquisition cost is too high compared to current standards of care. They may require patients to first try and fail on a lower cost medicine first (step therapy), add a specialist approval (prior authorization) or ask patients to pay for a portion of the antibiotic's cost (co-pay). Any of the above practices has the potential to limit market adoption. Drug pricing strategies must account for and address Payer behavior to ensure adoption. Although Payers are growing increasingly cost sensitive, short term acute conditions such as bacterial infections are less of a concern to Payers compared to higher cost biologics and chronic therapies that are more burdensome on the health care system and increasingly common. Therefore, there remains latitude in pricing of antibiotic for the foreseeable future.

Until recently, the antibiotic market received relatively little attention from pharmaceutical companies. This was largely due to the fact that novel antibiotics did not easily displace older, lower cost and generic antibiotics to generate profitability and volume necessary for continued investment. In addition, innovator antibiotics are increasingly held in reserve to limit the potential development of resistance, a process referred to as antibiotic stewardship (IDSA 2011 Clin Infect Dis 52: S397-S428). Limited pricing upside and utilization of novel antibiotics, compared with the high potential for profitability in other therapeutic areas led many pharmaceutical companies to redirect their focus. However, a rapidly aging population with an increased susceptibility of infection and the rising rates of antibiotic resistance is rapidly changing antibiotic market dynamics. In particular, high levels of antibiotic resistance are reducing the efficacy of generics such that the need for novel antibiotics is increasing (CDDEP 2015). Patient adherence has also emerged as a critical factor in reducing infection spread and resistance. Innovative branded products that overcome resistance, and improve adherence and patient quality of life, retain significant commercial potential despite incumbent generic competition.

Additional incentives may emerge to increase the attractiveness of the antibiotic marketplace. With antibiotic resistance rising, a growing number of government and public health organizations have issued statements, guidance, and recommendations to promote the development and commercialization of innovative new therapies (United Nations Draft Political Declaration of the High-Level Meeting of the General Assembly on Antimicrobial Resistance 2015, WHO Global Action Plan on Antimicrobial Resistance 2016, G20 Leaders' Declaration 2017). These include the World Health Organization's ("WHO") Global Action Plan on Antimicrobial Resistance which advocates for 'innovative ideas for financing research and development and for the adoption of new market models to encourage investment and ensure access to new antimicrobial products'.