Anthrax Vaccine Contract Voided, Thwarting Administration

By Renae Merle
Washington Post Staff Writer
Wednesday, December 20, 2006

Federal health officials yesterday scuttled the largest piece of the Bush administration's two-year program to counter bioterrorism, canceling an $877.5 million contract with VaxGen to develop an anthrax vaccine after the company missed a deadline to begin human testing.

The decision, delivered in a one-page letter, ends a troubled effort by the small California firm that has come to symbolize the failures of the government's ambitious $5.6 billion Project BioShield. The termination occurred on the same day President Bush signed legislation attempting to salvage the program by reorganizing its management and pumping more money into firms doing the work.

"It's very disappointing that they took such aggressive and dramatic action without engaging in a discussion with us about potential ways for salvaging all the work that has gone into this program," said Lance Ignon, VaxGen's vice president of corporate affairs. "We believe there is a high probability that this technology would lead to a modern anthrax vaccine."

The company has spent more than $175 million of its own money on the project, its only current contract, he said.

The cancellation means the government will continue to depend on a controversial anthrax vaccine, used by the military and made by Emergent BioSolutions of Gaithersburg, years longer than expected. A spokesman for the Department of Health and Human Services said the agency remains committed to developing a next-generation anthrax vaccine but has not decided whether to hold another competition.

"We are moving as aggressively and quickly as we can to reach that goal," said Bill Hall, a department spokesman.

VaxGen was picked for the project in 2004 despite having never successfully produced a drug. It was known for a failed attempt at an AIDS vaccine, and the company has had accounting and management problems, which caused it be delisted from the Nasdaq Stock Market.

In signing on to develop an anthrax vaccine, the company agreed to meet the government's aggressive timetable, producing a drug in five years, half the industry standard for such a product. VaxGen was to be paid as it began delivering the 75 million doses to the government, enough for 25 million people, roughly the equivalent of the population in the New York and Washington areas combined.

But VaxGen struggled from the beginning. The product's expected delivery was delayed two years as the company attempted to improve the vaccine's potency and reliability. In November, the company suffered another blow when the Food and Drug Administration refused to allow the firm to begin human testing because of those long-standing concerns.

The cancellation throws the company's survivability into doubt. VaxGen has said it has enough funds to work through 2007, but its only other product is a smallpox vaccine for which it doesn't have a contract. The anthrax contract was canceled for default, meaning the government does not plan to reimburse VaxGen for its costs and could even hold the company liable if there are extra costs from buying the product from another source.

VaxGen is exploring its legal and strategic options, Ignon said. The company could appeal the decision. "Fortunately, we are well capitalized," he said.

The government now hopes a reorganization of the program, signed into law yesterday, will address the delays and other complaints lobbed at Project BioShield by the private sector for the past two years. The legislation creates the Biomedical Advanced Research and Development Authority, within HHS, to manage the effort. It also allocates $1 billion over three years for research and attempts to pump more government money into the private sector sooner by making payments as companies meet milestones, instead of waiting until they begin delivering the product.

Yesterday's cancellation of the VaxGen effort "is a step back for an anthrax vaccine, but I think we have said this was a flaw in BioShield," said Sen. Richard Burr (R-N.C.), one of the chief architects of the legislation revamping the program. "I would like to think if that happened under the new system, we would have caught the problem at a much earlier point."

Until a new vaccine is developed, the government will rely on its stockpiles of antibiotics, including ciprofloxacin, for dealing with anthrax exposure and 10 million doses of an older vaccine made by Emergent. Some soldiers have complained of significant side effects from the Emergent vaccine and have refused to take it, though the FDA says it's safe. VaxGen had aimed to require fewer doses over a shorter period than Emergent's to produce immunity.

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