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Tally, 63, has been an antibiotics researcher for a quarter of a century. For nine years, beginning in 1986, he headed antibiotic research at Lederle Laboratories, a division of what is now Wyeth (nyse: WYE - news - people ), where he launched the drug Zosyn in 1993. Before that, he was conducting antibacterial research at the Tufts School of Medicine. But even toward the end of his tenure at Lederle, big pharmaceutical companies were starting to pare back on antibiotics, opting for more lucrative cancer and heart drugs. In 1995, he joined Cubist (nasdaq: CBST - news - people ), saying he hoped to design a new generation of antibiotics to combat "super bugs"--deadly pathogens that are resistant to just about every drug in the antibiotic arsenal.

Bacterial resistance is a serious problem. Tens of thousands of people die each year as a result of resistant infections. Of particular concern is a bacteria called Staphylococcus aureus. Like other bacteria, S. aureus mutates at random, and through trial-and-error it will eventually find a way to outsmart any drug. But when it comes to resisting antibiotics, it is at the head of its class. Over 70% of the bacteria that cause hospital-acquired infections are resistant to at least one of the drugs used to fight them.

Cubist's injectible antibiotic Cidecin targets S. aureus and similarly resistant bugs in hospitals. Right now, Thomas Dietz at Pacific Growth Equities predicts 2006 Cidecin sales of at least $275 million to treat skin and soft-tissue infections in hospitals. But Dietz, who owns Cubist shares, sees sales of at least $600 million if clinical trials testing the drug against endocarditis, a bacterial infection of the heart, pan out. When caused by S. aureus, the endocarditis is fatal at least one-third of the time. "Physicians feel if you can treat endocarditis," says Tally, "then you can treat any infection. And there's a tremendous halo effect around that."

 

Staphylococcus aureus

But Cidecin itself is evidence of how difficult it is to develop a new antibiotic. Tally didn't find it using the drug technology Cubist was working on when he came aboard. Cubist licensed the drug, generically known as daptomycin, from Eli Lilly (nyse: LLY - news - people ). Lilly will receive a complex royalty on the drug that analysts estimate at about 14%. "Daptomycin looks to me like a very nice drug," says Peter Appelbaum, a pathologist at Penn State University who spends a lot of time testing drugs against resistant strains of bacteria.

Cidecin is absolutely unique, but there have been development snags. It failed to work well enough against community-acquired pneumonia to be approved, apparently because the drug it was being compared with performed much better than it normally does. And Cidecin hit a snag at the FDA that was apparently a result of a clerical issue. A regulatory decision was originally expected last month, but some empty fields in the new drug application--one of the first filed electronically--confused the FDA's computers. A final regulatory decision will come during the next three months, but approval is expected.

 

	Francis P. Tally

Even at $600 million, the potential market for Cidecin is small by the standards of many drug companies, which rely on drugs with sales of well over $1 billion. And new antibiotics have had trouble gaining a foothold, or getting onto the market at all. Aventis' (nyse: AVE - news - people ) Ketek has been held up by more than two years of regulatory delays in the U.S. Eli Lilly and Roche seem to be doing little if any research in the area. In the past five years, new antibiotics from Pfizer (nyse: PFE - news - people ) and Bristol-Myers (nyse: BMY - news - people ) turned into major disappointments. Pfizer research chief Peter Corr says his company is committed to inventing new antibiotics, pointing to a recently licensed an experimental pill from Tokyo-based Daiichi, still in the early stages of human tests. Other candidates are in even earlier stages of testing.

"This is an ongoing issue; this is not a phase," says Michael Bonney, Cubist's CEO. "In another ten or 15 years, we're going to have the same problems. If you lose the ability to do basic discovery research on resistant organisms, you're going to have a major public health problem."

New incentives to help drive both small biotechs and big pharmaceutical companies into developing bug killers would help, but they won't come easily. "That could take an act of Congress," Tally says. He expresses optimism that regulators may be wising up to the fact that they've made it too difficult to approve new antibiotics that fight dangerous infections. One antibiotic, Factive, has already made it through the FDA this year under the sponsorship of GeneSoft, a small company run by former Affymetrix (nasdaq: AFFX - news - people ) chief executive David Singer. Regulatory sensitivity alone may be enough to spur the development of more antibiotics. One way or another there will be more resistant bugs ahead.