Daniel Abdun-Nabi, chief executive of Rockville-based biodefense company Emergent Biosolutions, wants to grow his firm’s commercial business. (Evy Mages/FOR THE WASHINGTON POST)

Biotechnology companies that have historically sold defense-related drugs and vaccines to the federal government are expanding their portfolios to include commercial products in an effort to diversify their business and improve valuations on Wall Street.

The value of biodefense firms often lags that of their commercially focused counterparts because it is typically judged based on past revenue received from federal contracts and the like, said Gregory Wade, managing director at Wedbush Securities.

As a result, the firms don’t always receive the same lift to their stock price that happens when investors consider a company’s future market potential based on products in development.

“That’s not optimal, but it’s the way the world is,” Wade said.

That reality motivated Annapolis-based PharmAthene to combine with Seattle-based Theraclone Sciences, a firm whose drug to treat pandemic and seasonal flu is advancing into late-stage clinical trials.

Chief executive Eric Richman said the deal is the culmination of a years-long search for an acquisition that would complement his company, whose success has come from developing a vaccine and treatment for Anthrax.

The pairing gives PharmAthene the ability to enter into the commercial market, selling a drug that doctors might prescribe rather than develop for one the government stockpiles in the event of a bioterrorism attack.

A diversified pipeline has become even more important, Richman said, as the government changes the way it issues contracts for biodefense products. Agencies used to award large contracts that fund both the development and eventual purchase of products, he said. Thus, the company and its investors could feel confident they had a buyer.

Increasingly, the government is separating contracts to develop a new product from contracts to buy the product. This helps to reduce risk for the government and minimize upfront costs, but in turn passes that risk onto the company.

“The government has been pretty smart in some of its work in this area, and they’ve tried to invest in products that might have a commercial use,” Wade said. “And what they would do is instead of stockpiling it, they would expand the distribution.”

“Unfortunately for the public market investor, it does create a bit of a gap between understanding how big the product opportunity might be, what the real economic value could turn out to be,” Wade said.

The degree to which the slowdown in government spending is driving the companies’ strategy remains unclear.

But Wade at Wedbush Securities said the government still has reason to spend on new responses to bioterrorism attacks. “I don’t think there’s a significant concern on the part of these companies that the government is going to shy away from its goals and commitments to new products for threats they’ve identified,” he said.

Others aren’t as bullish. Judy Britz is executive director of the Maryland Biotechnology Center. The state is home to a number of biodefense firms and others who rely heavily on the federal dollar to buoy their bottom line.

“We all recognize that with sequestration that really the marketplace has to be broadened, and we have to look for new applications for existing technologies,” Britz said.

“The companies that have relied on biodefense funding are being realistic about the fact that their products do have practical uses in the private sector, and the federal funding for these private products may not be quite the open faucet that it has been for many years,” she said.

Rockville-based Emergent Biosolutions debuted a strategic plan last year aimed at growing both its government and commercial lines of business.

“Both [markets] offer tremendous growth opportunities for the organization, and as we look at the capabilities of the company, biologics manufacturing stands out. That is not limited simply to biodefense,” chief executive Daniel Abdun-Nabi said.

That strategy will be driven by acquisitions, Abdun-Nabi said at the time, including the purchase of the health care protective products division of Bracco Diagnostics earlier this year.