U.S. cancels VaxGen's $877.5 million contract to make anthrax vaccine
http://www.mercurynews.com/mld/mercurynews/news/16277396.htm
By Steve Johnson, Mercury News
In a major setback for the nation's efforts to counter bioterrorism, federal officials Tuesday canceled their $877.5 million contract with Brisbane-based VaxGen for an improved anthrax vaccine, because the company was behind schedule developing it.
The U.S. Department of Health and Human Services sent VaxGen a letter terminating the contract, awarded in March 2004, citing the company's failure to meet a deadline Monday for beginning a key test of the vaccine in people.
The contract had been the largest issued under President Bush's Project BioShield, a $5.6 billion program to counter bioterrorism over 10 years. Under the contract, VaxGen was to have provided 75 million doses of the vaccine, which were to be stockpiled for civilian use in case of an anthrax attack on the country.
VaxGen had conducted several tests of the vaccine earlier. But the U.S. Food and Drug Administration had refused to let the one scheduled for Monday begin. The FDA feared the vaccine was proving unstable and might lose its potency, rendering the study results unreliable.
``VaxGen's failure to perform is not excusable,'' said the letter from the Department of Health and Human Services. ``The government is terminating the contract for default.''
VaxGen spokesman Lance Ignon expressed dismay over the federal agency's action and said the company was considering appealing the decision.
``We certainly knew that this was a strong possibility, but we are still obviously very disappointed,'' he said. ``VaxGen made an enormous investment in this vaccine,'' he added, noting that it spent more than $175 million of its own money developing the vaccine. Under the contract, the company would only receive the $877.5 million after the vaccine was delivered to the government.
``It's regrettable that HHS chose not to engage with us to explore options'' about how to continue developing the vaccine, Ignon said. ``We asked them repeatedly through as many channels as we could possibly pursue to have an open and productive dialogue with us, and they refused.''
Having its biggest contract terminated could be a serious blow to the company. VaxGen also is working on a smallpox vaccine, which it hopes to persuade the federal government to buy. But the agency likely to be involved in purchasing it would be the same agency that canceled the anthrax vaccine contract.
Moreover, the federal government's termination letter to VaxGen warned that the company may be ``held liable for any excess costs.'' The letter didn't explain what those costs might be. But if the government has to buy another anthrax vaccine at a higher per-dose cost than what VaxGen's contract called for, the government could order VaxGen to pay the difference, Ignon said.
The government had been getting antsy about the vaccine contract for some time. VaxGen was at least a year behind schedule, and it has been in a nasty spat in recent months with the Department of Health and Human Service over the terms of the contract.
VaxGen has acknowledged that the vaccine has had stability problems, but it has said in the past that it thought the problem had been fixed.
Health and Human Services spokesman Bill Hall said he couldn't comment on the agency's options for developing an improved anthrax vaccine.
``It's impossible for me to speculate on what our next steps will be,'' he said. But he added, ``we are still fully committed to the development of a next generation anthrax vaccine. That remains unchanged.''
Since Sept. 11, federal officials have been especially worried about terrorists launching an anthrax attack. The bacteria is relatively easy to obtain, can be dispersed over a wide area and secretes proteins that become highly toxic when they come in contact with human cells.
Although federal officials had considered VaxGen's vaccine promising, critics in Congress and elsewhere questioned why the small company won the contract in the first place. VaxGen has no commercial products, failed at making an AIDS vaccine and has been delisted from the Nasdaq Stock Market since 2004 because of its fouled-up financial records.
Yet because most other vaccine companies declined to bid on the contract, the government had few other options.
The United States already has an anthrax vaccine, AVA. Developed in the 1950s, it has been used to inoculate more than 1 million military personnel. But AVA has been linked to six deaths and unpleasant side effects, from fever to body aches. Hundreds of soldiers have refused to take it.
AVA also must be given in a series of six shots over an 18-month period, which health officials consider complicated. The amount of its protective antigen also varies from one production lot to another. Federal officials had hoped VaxGen's genetically engineered vaccine would provide a more consistent amount of protection and require only three doses.
Since VaxGen began having problems with its vaccine, the federal government ordered 10 million doses of AVA to bolster the civilian stockpiles. Hall said he couldn't comment on whether his agency might purchase additional doses of AVA.
Kim Brennen Root, spokeswoman for Emergent BioSolutions of Maryland, which makes AVA, said her company would provide the government more doses of its vaccine if needed. ``We are prepared to act, should HHS call on us,'' she said.
By Steve Johnson, Mercury News
In a major setback for the nation's efforts to counter bioterrorism, federal officials Tuesday canceled their $877.5 million contract with Brisbane-based VaxGen for an improved anthrax vaccine, because the company was behind schedule developing it.
The U.S. Department of Health and Human Services sent VaxGen a letter terminating the contract, awarded in March 2004, citing the company's failure to meet a deadline Monday for beginning a key test of the vaccine in people.
The contract had been the largest issued under President Bush's Project BioShield, a $5.6 billion program to counter bioterrorism over 10 years. Under the contract, VaxGen was to have provided 75 million doses of the vaccine, which were to be stockpiled for civilian use in case of an anthrax attack on the country.
VaxGen had conducted several tests of the vaccine earlier. But the U.S. Food and Drug Administration had refused to let the one scheduled for Monday begin. The FDA feared the vaccine was proving unstable and might lose its potency, rendering the study results unreliable.
``VaxGen's failure to perform is not excusable,'' said the letter from the Department of Health and Human Services. ``The government is terminating the contract for default.''
VaxGen spokesman Lance Ignon expressed dismay over the federal agency's action and said the company was considering appealing the decision.
``We certainly knew that this was a strong possibility, but we are still obviously very disappointed,'' he said. ``VaxGen made an enormous investment in this vaccine,'' he added, noting that it spent more than $175 million of its own money developing the vaccine. Under the contract, the company would only receive the $877.5 million after the vaccine was delivered to the government.
``It's regrettable that HHS chose not to engage with us to explore options'' about how to continue developing the vaccine, Ignon said. ``We asked them repeatedly through as many channels as we could possibly pursue to have an open and productive dialogue with us, and they refused.''
Having its biggest contract terminated could be a serious blow to the company. VaxGen also is working on a smallpox vaccine, which it hopes to persuade the federal government to buy. But the agency likely to be involved in purchasing it would be the same agency that canceled the anthrax vaccine contract.
Moreover, the federal government's termination letter to VaxGen warned that the company may be ``held liable for any excess costs.'' The letter didn't explain what those costs might be. But if the government has to buy another anthrax vaccine at a higher per-dose cost than what VaxGen's contract called for, the government could order VaxGen to pay the difference, Ignon said.
The government had been getting antsy about the vaccine contract for some time. VaxGen was at least a year behind schedule, and it has been in a nasty spat in recent months with the Department of Health and Human Service over the terms of the contract.
VaxGen has acknowledged that the vaccine has had stability problems, but it has said in the past that it thought the problem had been fixed.
Health and Human Services spokesman Bill Hall said he couldn't comment on the agency's options for developing an improved anthrax vaccine.
``It's impossible for me to speculate on what our next steps will be,'' he said. But he added, ``we are still fully committed to the development of a next generation anthrax vaccine. That remains unchanged.''
Since Sept. 11, federal officials have been especially worried about terrorists launching an anthrax attack. The bacteria is relatively easy to obtain, can be dispersed over a wide area and secretes proteins that become highly toxic when they come in contact with human cells.
Although federal officials had considered VaxGen's vaccine promising, critics in Congress and elsewhere questioned why the small company won the contract in the first place. VaxGen has no commercial products, failed at making an AIDS vaccine and has been delisted from the Nasdaq Stock Market since 2004 because of its fouled-up financial records.
Yet because most other vaccine companies declined to bid on the contract, the government had few other options.
The United States already has an anthrax vaccine, AVA. Developed in the 1950s, it has been used to inoculate more than 1 million military personnel. But AVA has been linked to six deaths and unpleasant side effects, from fever to body aches. Hundreds of soldiers have refused to take it.
AVA also must be given in a series of six shots over an 18-month period, which health officials consider complicated. The amount of its protective antigen also varies from one production lot to another. Federal officials had hoped VaxGen's genetically engineered vaccine would provide a more consistent amount of protection and require only three doses.
Since VaxGen began having problems with its vaccine, the federal government ordered 10 million doses of AVA to bolster the civilian stockpiles. Hall said he couldn't comment on whether his agency might purchase additional doses of AVA.
Kim Brennen Root, spokeswoman for Emergent BioSolutions of Maryland, which makes AVA, said her company would provide the government more doses of its vaccine if needed. ``We are prepared to act, should HHS call on us,'' she said.
