CNN / Mercury News: Bioshield Vaccine Contracts to mfg with "closest ties with the government"

CNN / Mercury News: Bioshield Vaccine Contracts to mfg with “closest ties with the government”

Sun, 18 Sep 2005

Questions are being raised (again) about the government vaccine purchasing program, ostensibly as a measure to protect the American public in the event of a bioterrorist attack. Mercury News (Twin City, Minnesota) reported (Sept 12): “Federal officials have assured Congress recently that they are making progress in protecting the country. Since the Sept. 11, 2001, terrorist attacks, they have spent $21 billion to counter bioterror, according to the University of Pittsburgh’s Center for Biosecurity. That’s $5 billion a year, more than 10 times what was spent annually on biosecurity before the Sept. 11 attacks. But critics contend the effort is flawed.”

Among other things, critics “say the government seems so fixated on producing vaccines for existing pathogens, it hasn’t adequately prepared for the possibility that terrorists or Mother Nature could create vaccine-resistant mutations of those toxins.” Critics note the lack of participation by experienced vaccine developers, which “could slow development of countermeasures for the wide range of biological substances terrorists could use. They liken the federal effort so far to trying to plug a leaky dike with too few fingers.”

In the wake of FEMA’s dismal performance and its failure to provide rescue and relief services to the survivors of Katrina, it would be irresponsible not to listen to critics and re-examine the rationale and viability of Bioshield spending appropriations – to ensure that the vaccine program will not prove to be as disastrous as FEMA.

We cannot afford another inept government spigot for misspending taxpayer dollars to reward cronies and favorite companies that have no track record. The government plans to spend $5.6 billion on vaccine stockpiles – primarily anthrax, smallpox and ebola vaccines. “I worry about the development of a vaccine to a virus that was well-known two years ago without knowing what its capacity for change is,” said Marvalee Wake, a University of California-Berkeley professor who is president of the American Institute of Biological Sciences. “It’s so scary to be behind the curve rather than ahead of it.”

Furthermore, VaxGen’s track record is not reassuring: its much touted AIDS vaccine failed, and the anthrax vaccine for which the government has contracted $877.5 million is an unlicensed experimental vaccine. The Food and Drug Administration has not approved the anthrax vaccine because it has not been proven safe or effective.

Why would government officials be eager to sign up billion dollar contracts BEFORE there is evidence that what they are committing to buy will have any protective value?

Mercury News reports: “few stand to see their revenue rise as much as VaxGen. The company was in trouble a few years ago. The AIDS vaccine it had been developing was going nowhere and it was losing money. Since the Sept. 11 terrorist attacks, however, federal money has been pouring in.” CNN reports that VaxGen has the “closest ties with the government.”

What guarantee or even assurance is there that the billions of dollars that will be spent for unlicensed, experimental anthrax and smallpox vaccines will be of any value to the American taxpayer in the event of a bioterrorist attack?

Jack Melling, former head of Britain’s biodefense vaccine program and now a consultant to the United States Government Accountability Office, warned: “When the day comes and we have to give this to 20 million people, in terms of this new vaccine, what will happen? The jury is still out; it is still an open question.” See: Doubts Are Raised on Push for Anthrax Vaccine By ERIC LIPTON, NY Times, December 11, 2004

http://www.nytimes.com/2004/12/11/national/11anthrax.html

But for Lance K. Gordon, VaxGen’s chief executive, one thing is certain – “there’s a lot of money in it.”

Contact: Vera Hassner Sharav
212-595-8974

http://money.cnn.com/2005/09/16/news/fortune500/stockpile/

U.S. gears up for anthrax, smallpox
VaxGen top bidder so far as the feds build up Strategic National Stockpile.
September 16, 2005: 3:38 PM EDT
By Aaron Smith, CNN/Money staff writer

NEW YORK (CNN/Money) – So you heard about the bubonic plague-infected mice missing from a bio-terror research plant in Newark and now you’re scared? Don’t be. Bubonic plague is not at the top of the government’s list of worries. But you should be worried about anthrax and smallpox, designated by the Department of Health and Human Services as top threats to our national security, along with the dreaded Ebola virus.

So what does this mean from an investment standpoint? Billions of tax dollars are being spent to build up stockpiles of vaccines for counterterrorism.

“If there was an anthrax attack today, we would be about as well prepared as we were in New Orleans [for Hurricane Katrina,]” said Robert Leboyer, analyst for EKN.

Through Project Bioshield, the government plans to spend $5.6 billion through 2013 building up the Strategic National Stockpile. This includes $1.9 billion on vaccines for smallpox and $1.4 billion for anthrax. Also, hundreds of millions of dollars could be allocated for the development of an Ebola vaccine.

“Until recently, the vaccine business was kind of out of favor,” said Sharon Seiler, analyst for Punk, Ziegel & Co. “I think it’s bounced back with the contracts. People have renewed concerns about global pandemics.”

Analysts expect the feds to award large contracts through 2007, followed by smaller contracts to maintain existing stock. The government is stockpiling vaccines without waiting for approval from the Food and Drug Administration, in order to get the latest advancements to the American population.

Glen Nowak, spokesman for the Centers for Disease Control and Prevention, said that vaccines expire within 18 months to two years, which is why the government has a “floating inventory” rather than a warehouse stuffed with a full supply.

So who’s getting the government money?

On Thursday, the French drug maker Sanofi-Aventis (up $0.34 to $40.66, Research) was awarded a $100 million government contract to produce influenza vaccines at its plant in Swiftwater, Penn. But that pales in comparison to what the government is spending on counter-terrorism.

VaxGen, Inc. (down $0.08 to $14.17, Research) of Brisbane, Calif., is the Bioshield winner so far, having secured an $877.5 million contract last year to produce 75 million doses of anthrax vaccine. The government is expected to allocate hundreds of millions of dollars more for the maintenance of this stockpile.

In addition, VaxGen is trying to secure a contract to produce the smallpox vaccine.

“Clearly, there is a medical need to have a safer product than what’s being used,” said VaxGen spokesman Paul Laland, who said that his company’s product is safer than Wyeth’s (up $0.65 to $45.65, Research) Dryvax, the smallpox vaccine currently in the national stockpile.

VaxGen is partnering with Japanese drug maker Kaketsuken, which has had a smallpox vaccine approved in its home country since 1980. Laland said his company is currently producing the anthrax vaccine at an undisclosed location in California, and is ready to produce smallpox vaccine at an FDA-approved facility in Japan at any time.

Bavarian Nordic Research Institute (down $0.81 to $78.90, Research), a Berlin biotech, and Acampis, a privately held biotech in Cambridge, Mass. and the UK, are also competing for the smallpox vaccine bid. Analysts believe that VaxGen is the top player.

“I don’t believe there’s any other competitor for a smallpox vaccine that would be applicable for the entire population,” said Leboyer, the EKN analyst.

In addition, Jeffrey Marshall, analyst for Fairview Capital Group, said the VaxGen has the “closest ties with the government.”

No vaccine currently exists for Ebola, a virus that causes massive hemorrhaging with a kill rate of 50 to 80 percent. Crucell (up $0.03 to $24.22, Research), a biotech based in the Netherlands, is considered a lead candidate for developing a vaccine and cashing in on government contracts. Jeffrey Marshall, analyst for Fairview Capital Group, said an Ebola vaccine contract could range from $400 million to $500 million.

“I believe that Crucell’s vaccine is superior,” said Marshall. “The U.S. government has tested it in primates at Walter Reed Hospital. They vaccinated the animals with one dose of vaccine, injected them with a lethal dose of Ebola, and they all survived.”

Seiler owns shares of VaxGen and her firm has done business with them. Marshall owns shares of Crucell.

http://www.twincities.com/mld/twincities/business/technology/12624749.htm

Mercury News
Bioterror challenge
By Steve Johnson
Mon, Sep. 12, 2005

The government has poured billions of dollars into programs to protect the nation from terrorists wielding biological weapons. That’s been a bonanza for several Bay Area biotech companies.

One of them, Vaxgen, has won nearly $1 billion in contracts to make an anthrax vaccine. The tiny Brisbane company hopes to land a smallpox-vaccine deal worth even more.

But some people question whether the federal program will be able to defend the country from bioterrorist attacks that could take many forms. Despite claims by federal officials that they are making progress in countering bioterrorism, serious doubts remain.

Most major drug companies have declined to get involved. Some dislike dealing with the government because it’s unpredictable or because there appears to be little commercial application for the products federal officials want developed.

Others complain that federal rules exclude firms mostly financed by venture capital, which includes many biotech start-ups. They also say any products developed under the program could leave the companies vulnerable to consumer lawsuits.

The dearth of business participation could slow development of countermeasures for the wide range of biological substances terrorists could use, some critics say. They liken the federal effort so far to trying to plug a leaky dike with too few fingers. “Given a modest amount of time, the big holes will be, if not plugged, then at least partially plugged,” said David Relman, a Stanford Medical School microbiologist and immunologist who’s on the National Science Advisory Board for Biosecurity. “But I’m not optimistic that we’re going to take biological agents off the table as a threat.”

The danger can take many forms. Anthrax is considered one of the most likely substances to be used by terrorists. When somebody mailed it to federal offices and the media in 2001, five people died. Anthrax can infect a person through a cut, contaminated food or the air. Once it enters the body, it releases two kinds of toxins that can kill infected cells and cause water to accumulate in the lungs.

Program flaws

VaxGen’s vaccine uses a form of protective antigen that prompts the body’s immune system to block the toxins from doing any damage. But 75 million doses will protect only 25 million people. It could take years to develop enough of the vaccine to shield most of the population.

Even if anthrax was eliminated as a serious threat, a number of other pathogens could cause widespread havoc. They include smallpox, botulism, plague, cholera, the Ebola virus, tularemia and shigella. Terrorists have plenty of options for using those substances on an unsuspecting populace.

In June, a study by two Stanford researchers concluded that contaminating a milk-processing facility with just one gram of botulism toxin could sicken 150,000 people and kill more than half of them. During a tour last month at the Pleasanton offices of Applied Biosystems, which makes kits for government agencies to test for terrorist toxins, U.S. Rep. Richard Pombo, R-Stockton, said large animal feed lots also represent a tempting target. At many such lots, he said, “there is no security.”

Federal officials have assured Congress recently that they are making progress in protecting the country. Since the Sept. 11, 2001, terrorist attacks, they have spent $21 billion to counter bioterror, according to the University of Pittsburgh’s Center for Biosecurity. That’s $5 billion a year, more than 10 times what was spent annually on biosecurity before the Sept. 11 attacks.

But critics contend the effort is flawed.

Among other things, some say the government seems so fixated on producing vaccines for existing pathogens, it hasn’t adequately prepared for the possibility that terrorists or Mother Nature could create vaccine-resistant mutations of those toxins. “I worry about the development of a vaccine to a virus that was well-known two years ago without knowing what its capacity for change is,” said Marvalee Wake, a University of California-Berkeley professor who is president of the American Institute of Biological Sciences. “It’s so scary to be behind the curve rather than ahead of it.”

But the most common gripe is that the federal effort has alienated the businesses it needs most to be effective. “It was ill-conceived,” said Lynn Klotz, a biotech consultant and a senior science fellow with the Center for Arms Control and Non-Proliferation. “It showed no understanding of how the pharmaceutical industry or even the biotechnology industry operates.”

Congress is considering legislative changes to entice more businesses to participate, including a provision that would ease the potential for consumer lawsuits against companies receiving government contracts to make biosecurity products.Liability is a problem because of the way vaccines and other drugs for combating bioterrorism are approved. For obvious reasons, their effectiveness is tested only in non-human animals. So if the drugs wind up failing to protect humans, lawsuits could result.

Reaping the rewards

For now, the nation’s biosecurity work is being done at a smattering of small biotech outfits in the Bay Area and elsewhere. Many are accustomed to skimpy revenue and rivers of red ink. But they are finding that the job of countering terrorists can be rewarding.

Take Dynavax Technologies of Berkeley, which makes treatments for allergies and infectious diseases. Between 2000 and 2003, its annual revenue averaged $1.7 million. Then, in 2003, it won $8.4 million in contracts to make vaccines for anthrax and other pathogens.

Xoma, another biotech company in Berkeley whose 2004 revenue was $3.7 million, was awarded $15 million in March to develop a treatment for people infected with botulism. The 18-month contract “is a welcome shot in the arm,” said the company’s spokeswoman, Ellen Martin.

But few stand to see their revenue rise as much as VaxGen. The company was in trouble a few years ago. The AIDS vaccine it had been developing was going nowhere and it was losing money. Since the Sept. 11 terrorist attacks, however, federal money has been pouring in.

VaxGen, whose annual revenue barely topped $14 million in 2003, already has received $101 million to develop the anthrax vaccine and expects nearly $300 million more next year when it is due to deliver the first 25 doses. As a result, the company is growing fast. It has 280 employees — nearly triple what it had three years ago — and expects to have 500 by late next year, he said. That could be just the beginning. Other countries also are expressing interest in buying the company’s vaccine, Gordon said, and the federal contract for a smallpox vaccine VaxGen is seeking could be worth $2 billion.

Working for the government hasn’t been easy. Initially, federal officials told VaxGen to produce the drug in vials. Then they changed their minds and wanted it in syringes. “That did cause us a little heartburn,” according to Gordon, who said the switch set the vaccine’s production back at least six months. The company also has had to change its accounting system to suit the government. And it must meet 14 times a month with federal officials to discuss matters related to the vaccine and produce monthly progress reports that run 700 pages or more, he said.

Nonetheless, Gordon figures it’s worth it.

Despite those who criticize the national effort to counter terrorism and the many companies that have declined to get involved, VaxGen takes pride in helping protect the public from biological threats, Gordon said. Besides, he added, “there’s a lot of money in it.”

Contact Steve Johnson at (408) 920-5043.

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