Annapolis biodefense firm PharmAthene has called off plans to merge with a Seattle life sciences company, a deal that executives said would allow PharmAthene to diversify beyond government customers and improve its prospects for future business.

Executives did not provide an explanation for the decision. PharmAthene will now pay Seattle-based Theraclone Sciences a $1 million termination fee.

The all-stock transaction was announced in August and PharmAthene chief executive Eric Richman said at the time that it was part of a corporate strategy to expand its product pipeline.

PharmAthene manufactures a vaccine and treatment for Anthrax that it then sells to the federal government. As a wholly owned subsidiary, Theraclone would have added a pipeline of drugs to treat infectious diseases, such as the seasonal flu.

Biotechnology companies that sell commercial products often receive higher valuations on Wall Street because investors judge them by how much money they might make in the future. Biotechnology companies that sell to the government, on the other hand, are often judged by the value of contracts they hold.

“We at PharmAthene will continue to seek to identify opportunities to maximize value for our stockholders,” Richman said in a statement.