Emergent BioSolutions To Buy Maker Of Flu Vaccine

By Kendra Marr
Washington Post Staff Writer
Tuesday, May 27, 2008

Emergent BioSolutions, in a push to diversify beyond its biodefense business, plans to announce today that it is buying Protein Sciences, a maker of a next-generation flu vaccine that federal regulators have put on a fast track to approval.

Under the deal, which includes assumption of debt and future payments, Rockville-based Emergent could pay $75 million or more for Protein Sciences, which is based in Meriden, Conn.

At the start of the year, Emergent chief executive Fuad El-Hibri said the firm's key growth strategy would be to acquire products in late-stage testing. The company has felt pressure to move beyond biodefense, which mostly relies on government contracts. Protein Sciences' vaccine, which is in late-stage testing, fits into Emergent's plans.

"Looking at our vaccine pipeline, this is our most advanced one," El-Hibri said.

Each year, 5 to 20 percent of the U.S. population gets the flu, according to the Centers for Disease Control and Prevention. Vaccines are reformulated every year to combat the three most common strains of the circulating flu virus. To manufacture the flu vaccine, drug companies for decades have been injecting flu strains into chicken eggs. The eggs incubate the virus, which is later killed and bottled into the vaccine.

The system is too time-consuming and inflexible to respond to pandemics or flu-shot shortages, such as the one in 2004.

"One step relies on the previous step, which relies on a previous step," said Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases at the National Institutes of Health. "If something goes wrong, you're in trouble."

Also, a bird flu pandemic could wipe out the egg supply.

Protein Sciences' vaccine, called FluBlok, would not rely on eggs. Instead, the vaccine would be grown in insect cells. The result: a more easily manufactured vaccine that can quickly react to evolving flu strains and vaccine demand. Such vaccines are more controlled, flexible and predictable, Fauci said.

"It will allow us to manufacture the vaccine sooner and get it to the customer before the start of the flu season and faster than our competitors," said Jim Jackson, Emergent's chief scientific officer.

Approval from the Food and Drug Administration will take time. The next steps include an inspection of FluBlok's production facility in Meriden. Emergent plans on keeping Protein's 50 employees, as well as production, in Meriden.

"There are still risks getting it through the finish line," El-Hibri said.

Emergent's move into flu vaccine production may prove to be well-timed.

In February, a CDC panel voted to expand annual flu vaccination to nearly all children, excluding infants younger than 6 months and those with egg allergies. About 30 million more children could be vaccinated.

Emergent's primary business has been anthrax vaccines. Since 1998, Emergent has delivered 20 million doses, mostly to the Defense Department. Last year, it won a three-year, $448 million contract to provide 18.75 million doses for the national stockpile.

However, some soldiers have reported serious side effects, and Emergent's anthrax vaccine can take 18 months and six shots to produce immunity.

This month, the company paid its rival VaxGen $2 million for a new anthrax vaccine that promises to produce immunity faster.

In buying Protein Sciences, Emergent will also acquire the technology behind FluBlok, which the company has also been using for a SARS vaccine in early development.

Because FluBlok is in late stages of testing, Emergent hopes it won't be much of a gamble.

Emergent is not changing its revenue projection for 2008, keeping it at $180 million to $195 million.

"A lot of biopharmaceuticals have growth through acquisitions," said Eric Schmidt, a biotechnology analyst with Cowen in New York. "It's not an unproven strategy, but it's not risk-free, of course. You have to select the right candidates and products to acquire."

If the flu vaccine is approved, it would put Emergent on a short list of diversified biotechs.

"In biotech, for better or for worse, it's not too uncommon for companies to have their fortunes tied to a single product," Schmidt said. "It's rare for a biotech company to have more than one product on the market."

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