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Bavarian's Smallpox Vaccine Pact Worth Up To $1.6 Billion

Bavarian's Smallpox Vaccine Pact Worth Up To $1.6 Billion
By Cormac Sheridan
BioWorld International Correspondent

Bavarian Nordic A/S could earn a total of $1.6 billion from its contract with the U.S. Department of Health and Human Services to supply a stockpile of next-generation safe smallpox vaccines.

The base contract, which calls for the delivery of a stockpile of 20 million doses of Bavarian's Imvamune vaccine, is worth $500 million. It was administered under the so-called Request for Proposals 3 (RFP-3) process, which has been under way for five years. It also will support the company's efforts to fulfill requirements for the use of Imvamune in an emergency and to obtain registration for its use in healthy people.

The Bavarian vaccine is based on a modified Vaccinia ankara (MVA) vector and, unlike existing smallpox vaccines, is intended to be administered to people with skin disorders and immune deficiencies. The standard vaccine can result in life-threatening complications in those categories of recipients, and potential recipients therefore have to be screened in order to ensure that they can be vaccinated safely.

The optional elements of the contract include a provision for the delivery of a further 60 million doses, as well as support for clinical studies to extend product approval to children, elderly and immunocompromised people.

"We have spent far more resources negotiating that part," Rolf Sass Sorensen, vice president of communications and investor relations at Bavarian Nordic, told BioWorld International. Some of those studies already are under way.

Moreover, the HHS was anxious that the Kvistgaard, Denmark-based firm communicated the optional elements of the contract when disclosing the award. It is realistic to expect the company will secure some or all of the optional elements of the contract, he said. However, he added: "We have no guarantee - that is important to state."

Nevertheless, there is considerable scope for supply of additional doses of Imvamune. As the vaccine requires two doses, the initial supply only will cover 10 million people. Although U.S. authorities already have secured a large stockpile of standard smallpox vaccine from Cambridge, UK-based Acambis plc - an unsuccessful bidder for the RFP-3 contract - the Imvamune vaccine would be cheaper to administer, Sorenson said, because of the screening requirement attached to the older vaccine.

Bavarian will receive $150 million of the contract in the form of milestone payments, $125 million of which will be paid during 2007 and 2008. It is the first time that a Bioshield program contract has been structured in that fashion, Sorenson said. He attributes it to the establishment last year of the Biomedical Advanced Research and Development Authority (BARDA), which has led to a recognition on the part of the authorities that many of the companies involved in biodefense work are small entities with limited resources.

The failure of Brisbane, Calif.-based VaxGen Inc. to deliver on a $877.5 million anthrax vaccine supply contract has been another significant factor in determining the structure of the deal. "They have really looked into how to make this contract a success," Sorenson said. "VaxGen didn't meet the milestones. With that in mind, we were asked to suggest milestones that could be met."

Because of the earlier than expected flow of cash, Bavarian Nordic altered its financial guidance for 2007. It now expects to post a loss before tax of DKK50 million (US$9.1 million) this year, having previously guided a loss of DKK350 million. It raised its revenue forecast from DKK130 million to DKK380 million.

The company also will be able to devote more attention to the rest of its development pipeline. It is starting new Phase I clinical trials of vaccines for breast cancer, prostate cancer and HIV, and it is commencing new vaccine development programs in respiratory syncitial virus and measles. The latter will enter the clinic shortly.