No Hope for Stockpile of New Anthrax Vaccine by November

Developer Seeks Extension After Setback on Crucial Test

The government's $1 billion effort to develop a new anthrax vaccine has run into difficulty, with the company in charge of the project reporting failure in a major human test and falling at least a year behind schedule.

Officers at VaxGen Inc. of Brisbane, Calif., said in interviews that they believe they have isolated the problem with their vaccine and are well on their way to fixing it. But they acknowledged that they have no hope of meeting a deadline to deliver 25 million doses of the vaccine into a national stockpile by November and will default on their contract with the government unless it grants an extension they have requested.

The difficulties appear to confirm predictions on Capitol Hill two years ago that a small company like VaxGen wouldn't be able to meet an aggressive schedule for stockpiling millions of doses of a new anthrax vaccine. Until the full stockpile of 75 million doses is ready, the United States would depend on antibiotics to treat a large-scale anthrax attack, a strategy that terrorists could overcome by creating antibiotic-resistant anthrax.

Administrators at the Health and Human Services Department declined to discuss specifics of the VaxGen contract. But they said that, despite some setbacks, they are building a national defense against anthrax spores, among the most fearsome of bioterror weapons. In particular, they noted, they have already stockpiled enough antibiotics to treat 40 million people after a large-scale attack.

"I think overall we are certainly making progress in our anthrax preparedness program," said Gerald Parker, the chief deputy in an HHS office that manages emergency preparations.

With the VaxGen product delayed, the government recently bought 5 million doses of an older, controversial anthrax vaccine, enough to treat fewer than 2 million people, and hopes to order more when funds are identified.

The anthrax program is emblematic of larger problems in Project BioShield, President Bush's ambitious biowarfare defense program. It's becoming clear that many of the robust national safeguards against biological and radiological terrorism that Bush promised when he got Congress to create BioShield simply won't be ready any time soon. HHS Secretary Michael Leavitt told Congress yesterday that "more can and must be done to aggressively and efficiently implement Project BioShield," and he pledged to reorganize the responsible office.

An injection of federal money into the program, $5.6 billion over a decade plus additional research funds, has piqued the interest of biotechnology companies. But many analysts say the research and development needed to create new products is moving at a glacial pace.

Moreover, most of the nation's biggest drug companies have eschewed the program, seeing little profit but big risk to their reputations if they mess up a high-profile government contract.

The government has thus had to depend on small, financially shaky biotechnology companies. Yet in contrast to the way the Pentagon buys goods, HHS lacks the legal authority to use public funds extensively to shore up companies. It can pay them up to 10 percent of the value of a contract in advance, but that isn't much -- the seemingly mundane tasks of building production lines and perfecting large-scale manufacturing techniques are riddled with pitfalls and can eat up tens or even hundreds of millions in capital.

The companies can get research subsidies early in a project, and they stand to receive hefty government payments at the end, after they deliver a product. But they must finance the expensive middle stages largely on their own. Biotech companies have dubbed that financing gap the "Valley of Death," and it remains to be seen if any of them can get to the other side of it on a major BioShield contract.

Companies have complained bitterly on Capitol Hill that the government has worsened that problem by doing a poor job of laying out its requirements and of issuing contracts expeditiously.