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, 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.
‘Valley of Death’
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.
"There should be a sense of expediency and urgency to get these products developed and stockpiled," said Richard B. Hollis, head of Hollis-Eden Pharmaceuticals Inc., a San Diego company that has spent more than $70 million developing a treatment that would be used after a nuclear or radiological explosion. His company has been hammered in the stock market by perceived delays in the government's plans to purchase the drug.
William Hall, an HHS spokesman, said that the government is aware of companies' complaints and is trying to move rapidly but that it also has to take great care in analyzing potential terrorist threats and deciding which treatments and antidotes are worth the taxpayers' money. BioShield's funding "is not a bottomless pit," he said.
Supported by government contracts totaling close to $1 billion, the VaxGen program is a showcase of how BioShield is supposed to work. VaxGen is assigned to produce 75 million doses of vaccine, enough to treat 25 million people after an attack -- roughly equivalent to the entire populations of the Washington and New York metropolitan areas.
That stockpile was originally supposed to be in place by next year. But at the current rate it will be completed no sooner than 2008 or 2009, long after the anthrax attacks of late 2001 prompted the government to promise a better defense.
VaxGen, despite a troubled financial history, has managed to raise $148 million based on its anthrax contracts. It has built a $20 million production facility in South San Francisco, Calif., has hired a staff of 300 and is producing test lots of anthrax vaccine. Money shortages don't appear to have played any role in the recent problems with the vaccine.
But the company's finances are still wobbly, and with at least a year's delay looming before the vaccine is ready, VaxGen's ability to survive long enough to fulfill its contract with the government remains in doubt.
"The so-called Valley of Death is long and hot," said Lance Ignon, VaxGen's vice president for corporate affairs. "How we emerge will be very important -- it will send a strong signal to the rest of the industry."
Efforts are afoot on Capitol Hill to solve the financing problem by creating a biodefense agency with greater contracting powers than HHS. But the proposal has been criticized across the political spectrum because the agency would be exempt from open-government requirements.
VaxGen has been signaling problems in its vaccine program to Wall Street for many months and disclosed in early November that a year's delay was likely, sending its stock plunging 33 percent. But the scientific details of its problems were unclear before now.
In interviews recently in South San Francisco, VaxGen officers laid out the trouble in detail. They refused to release copies of data from the key human trial that their vaccine flunked, saying the material has not been fully reviewed by the government, but they showed the data to a reporter.
The test, completed last year, revealed an unexpected problem with the strength of the vaccine. Analysis eventually revealed that the vaccine was unstable -- any given batch was losing potency within months. That is a potentially disastrous problem, since the whole point of the vaccine is to sit on a shelf for years, ready for use the moment anthrax is unleashed.
Once they understood it, the VaxGen scientists said, the problem was easy to solve by adding an ingredient. But they can't be certain that fix has worked until they run additional tests, including a human test scheduled to begin later this year. HHS declined to comment on the problem but said VaxGen was required to deliver a product of acceptable stability to the government.
Hall, the HHS spokesman, noted that the government also encountered delays several years ago when it sought to stockpile smallpox vaccine but eventually solved them and acquired enough for every American.
An unknown quantity
Even when the shelf-life problem is solved, the anthrax vaccine will still be something of an unknown quantity. VaxGen licensed the vaccine from the U.S. Army, which invented it at a laboratory in Frederick, and Army tests show it should work. But naturally occurring anthrax infection is rare, so a new vaccine can't be tested for effectiveness in people. The Food and Drug Administration will have to approve it based on a combination of safety tests in people and effectiveness tests in animals.
With the new vaccine delayed, HHS is stockpiling an older vaccine made by a subsidiary of Emergent Biosolutions Inc., a Gaithersburg company. That vaccine has a checkered history, including lot-to-lot variability and a tendency to cause sore arms and perhaps more serious reactions. Some U.S. soldiers have risked court martial rather than take the vaccine.
If a large anthrax attack happened tomorrow, that vaccine plus antibiotics would be the defenses the government would have to offer people who had been exposed but weren't yet ill. When the same vaccine was offered in 2001 to people potentially exposed to letters containing anthrax spares, many Capitol Hill aides took it, but most postal workers refused, preferring to take their chances using antibiotics alone.