U.S. anthrax vaccine project faces difficulties

Following 9/11 the United States launched a $1 billion project to develop a new anthrax vaccine. It now appears that the project is in trouble, as Brisbane, California-based VaxGen reported failure in a major human test and falling at least a year behind schedule. The company says, however, that the problem with the vaccine has been isolated and that it was on its way to fixing it. They agreed that there was no hope the company would meet the November 2006 deadline to deliver twenty-five million doses of the vaccine to a national stockpile. Unless the government agrees to extend the deadline, the company will be in default of its contract.

In November 2004 the U.S. government awarded VaxGen an $877.5 million contract for the purchase of 75 million doses of the company’s anthrax vaccine, rPA102. Legislators and security experts were puzzled with the administration’s choice from the start, pointing out that a small company like VaxGen would not be able to meet an aggressive schedule for stockpiling millions of doses of a new anthrax vaccine. Until 75 million doses are ready, the United States must depend on antibiotics to treat a large-scale anthrax attack, but terrorists could overcome this strategy by creating antibiotic-resistant anthrax.

Officials at the Department of Health and Human Services (HHS) did not specifically address the case of VaxGen, but they point out four things:

Some inevitable setbacks notwithstanding, a national defense against anthrax spores is being built, and HHS has already stockpiled enough antibiotics to treat forty million people

Because of the VaxGen delays, the government has recently bought five million doses of an older, controversial anthrax vaccine — enough to treat fewer than 2 million people — and will order more when funds are available

There is currently no alternative to relying on small companies such as VaxGen: The $5.6 billion or so which will be invested in bioterror vaccines have caught the interest of biotechnology companies, but most of the biggest U.S. drug companies have decided not to go into the program because of uncertain profits and the risk involved in botching high-profile government contracts; the result is that the government must depend on small, financially shaky, and more risk-accepting biotechnology companies

The Pentagon has the authority to use public funds to help shore up companies doing defense R&D work for it. HHS, on the other hand can pay such companies no more than 10 percent of the value of a contract in advance, which is pittance in developing a new drug. The result is that biotech companies receive little money in advance, and very large amounts of money when they fulfill the contract, but must finance the expensive middle stages on their own (biotech executives call this gap the Valley of death).

We should note that VaxGen has not done badly when it comes to financing the middle stages. It has raised $148 million based on its anthrax contracts, built a $20 million production facility in South San Francisco, hired a staff of about 300 employees, and is producing test lots of anthrax vaccine. Money shortages don’t appear to have played any role in the recent problems with the vaccine. Lance Ignon, VaxGen’s vice president for corporate affairs, does not mince words: “The so-called Valley of Death is long and hot ….How we emerge will be very important — it will send a strong signal to the rest of the industry.”

-read more in Justin Gillis’s detailed Washington Post report