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Last Updated

05 Nov 2002

Source: Washington Post, November 5, 2002.

Of Terrorists and Mosquitoes

U.S. Turns to Tiny British Firm on Smallpox -- and Now West Nile

By Justin Gillis, Washington Post Staff Writer


Twice in recent years, when federal health experts needed to build up vaccine supplies to safeguard the nation against the deadliest scourge in history, they turned to a little-known company called Acambis. Weeks ago, called to Congress to account for the government's efforts against another nasty virus, West Nile, the nation's top infectious-disease doctor once again cited the efforts of that company.

Some of the country's most pressing health priorities are being entrusted not to the giants of the pharmaceutical industry but to a tiny British biotechnology company that few have ever heard of -- with no products on the market, one notable failure in its background and no proven ability to deliver anything.

Acambis PLC has kept a tight lid on information over the past year as it worked to execute its biggest project, two contracts to supply the U.S. government with 209 million doses of smallpox vaccine that would be urgently needed if terrorists got their hands on the virus that causes that deadly plague. It's not yet possible to say for sure how well Acambis will perform, but some heartening signals are beginning to emerge.

The company, it is clear, is already shipping millions of doses to the government, less than a year after launching a crash program to do so. That is a striking achievement, given that scaling up to produce any pharmaceutical in quantity almost always takes years.

In a warren of laboratories and offices nestled amid this city's booming biotechnology district, company executives recently granted their first extended interviews since last year's terrorist attacks. They made clear that they intend to deliver on their promises to the government, and to earn a profit doing so. In fact, smallpox vaccine appears likely to become a cash cow for Acambis, fueling the development of a string of additional, potentially more lucrative products. With many other biotechnology companies strapped for cash, the situation has drawn considerable interest from investors.

"I think the financial base of the company has been underpinned by the two smallpox contracts we've received," Gordon Cameron, the company's chief financial officer and head of its U.S. operations, said in an interview.

A year ago -- when the Department of Health and Human Services rejected huge drug companies like Merck & Co. and GlaxoSmithKline PLC as smallpox contractors in favor of Acambis -- the reaction of many Americans worried about smallpox was: Who are they? It turns out that some of the key people involved in Acambis have long track records in public service, strong scientific reputations and extensive ties in Washington.

Two of the company's key scientists, Thomas P. Monath and Dennis W. Trent, spent many years as researchers with the Centers for Disease Control and Prevention, tracking insect-borne ailments. Monath, the company's chief scientific officer, is an American held in high regard by public-health scientists around the world for his background in chasing deadly plagues, and particularly for work in Africa that nailed down the transmission route of dread Lassa fever. He served in a key Army laboratory in Frederick devising bioterrorism defenses, he has testified before Congress, and he has chaired a committee offering scientific advice to the Central Intelligence Agency.

"This is somebody we all regarded as being extremely good, somebody that's very intelligent," said D.A. Henderson, the Baltimore scientist who led the World Health Organization campaign that eradicated smallpox. "I've always had the feeling whenever I've discussed things with him that his knowledge was very precise. There was nothing that was a sham or a front."

The company's scientific strength may begin to explain why the government has put such faith in it. A related question is whether investors should do so. The company's shares jumped to record levels early this year, not long after it received the federal nod on smallpox, but they have fallen back recently amid concerns about how quickly Acambis can translate the government's confidence into cash to fuel additional product development.

Though Acambis is technically a British company, it is really a half-British, half-American hybrid born of failure. The American half used to be called OraVax Inc., a start-up biotech company in Massachusetts that ran into trouble in 1997 when its main drug candidate, designed to treat a respiratory disease in premature babies, failed in clinical trials. Low on cash, the company sold itself to a British concern called Peptide Therapeutics Group PLC that wanted to build a business developing new vaccines.

The merged company happened to have headquarters in Cambridge, Mass., and Cambridge, England, and so decided to name itself Acambis ("bis" is an adverb meaning "twice"). Despite its problems, the company still had considerable scientific strengths -- and it had a drug factory in Canton, Mass., that had been mothballed when the OraVax product failed.

Monath had joined the company in 1992 as vice president of research. Though his day job involved commercial products, by the late 1990s he was one of a handful of scientists in the country who had begun to take the threat of biological terrorism seriously. He perked up in 1999 when the Clinton administration decided to rebuild the nation's stocks of smallpox vaccine.

"We understood the biowarfare field," Monath said in an interview. "And we had this facility sitting there mothballed, waiting to make something happen."

All of this was before the attacks of Sept. 11, 2001, and the subsequent anthrax crisis, at a time when few Americans and few companies understood the impending threats. With little interest from competitors, Acambis snagged a contract to produce 40 million doses of smallpox vaccine, the first civilian production in decades.

The project was advancing at a stately pace when the terrorist attacks propelled homeland defense to the top of the government's agenda. Smallpox was seen as the biggest bioterror threat, by far. The disease -- eradicated as a naturally occurring illness in the 1970s -- is highly contagious, it spreads rapidly, and it can kill more than a third of the people it infects, disfiguring the rest. Vaccination stopped in this country decades ago.

In theory all remaining stocks of smallpox virus have been secured in the United States and Russia, but given the audacity of last year's attacks, nobody is disposed to bank on this. Tommy G. Thompson, the Bush administration's secretary of health and human services, promised to acquire a dose of smallpox vaccine for every American. As Congress rushed to supply funds, he bumped the original Acambis contract to 54 million doses, then took bids on an even larger contract.

With its head start and a critical alliance with Baxter Healthcare Inc. of Deerfield, Ill., a well-known medical products company that had production capacity in Austria, Acambis offered favorable prices and won the second contract. As reconfigured, the two contracts, worth about $771 million, called for Acambis, with Baxter's assistance, to deliver 209 million doses. Thompson said last year it would happen by this Dec. 31.

The company and the government have steadfastly refused to say whether Acambis will meet that deadline, but graphs in a company presentation made in Toronto in June and in government briefing documents several weeks ago suggested it will not.

These graphs also suggested, however, that the delays are not serious. The graphs showed that Acambis was to have delivered 16 million doses by the end of October, with 60 million doses due by year-end and 160 million due by the end of April. The schedule for the remainder of deliveries was unclear from the graphs, and William Pierce, a spokesman for the government, said it was still being developed.

"I think the fact they have come up with a vaccine as fast as they have -- most of us look on this as some sort of a miracle," said Henderson, the smallpox warrior, who has become a government bioterrorism adviser. "There have been glitches in the whole thing, all sorts of them. But they're really pretty close on the mark of where they said they would be."

The vaccine is being made in bulk in Austria, then purified and packaged at the Acambis plant in Canton, a bucolic suburban town south of Boston. Two Washington area companies are also involved: The refined vaccine goes to Chesapeake Biological Laboratories Inc. of Baltimore for final packaging, and BioReliance Corp. of Rockville provides testing services.

Some of the urgency of late last year has dissipated, for two reasons. Government studies showed an existing vaccine stockpile of 15 million old doses could be diluted, if necessary, to produce 70 million doses. And Aventis SA of Strasbourg, France, found another 85 million old doses at a facility in Pennsylvania that could probably be diluted, as well. Tests are expected to show that the new Acambis vaccine can be diluted, so that by the time the company is done, the federal government in a global emergency might be able to create as many as 1.5 billion doses of smallpox vaccine -- enough for every American and a big chunk of the world.

That is a stunning turnaround from two years ago, when there appeared to be insufficient vaccine to stop a smallpox attack on the mainland United States. Now the White House and policy experts are vigorously debating whether to offer the vaccine to the public in advance -- it is a relatively dangerous vaccine that would kill one or two people for every million who received it.

Acambis will earn profits on both contracts, and a healthy 40 percent gross margin on the larger one, the company has told investors. The company is in an unusual position for a small biotech concern: It should be able to fuel future research and development out of its smallpox profits without continually raising fresh money from investors. The company expects to reach profitability this year and to remain profitable thereafter.

For that reason Acambis has been a favored stock all year for analysts in London who follow the biotechnology industry. One note of dissent cropped up recently, after the company said it would employ conservative accounting policies, not booking some of the smallpox receipts as revenue until well after it has actually received the cash. That is likely to push some profits into next year.

The London branch of one investment house, UBS Warburg, downgraded the stock. "We continue to believe that Acambis will successfully honour its contracts with the U.S. gov't., installing a strong financial platform for drive forward its R&D projects," analyst Martin Wales wrote. "However, until this contract-related cash is received, we see little to drive the stock in the near term."

Longer-term, the biggest risk for Acambis appears to be whether the smallpox vaccine can pass muster at the Food and Drug Administration. Much of the vaccine is being made in a type of cell that has caused some safety concerns, so the lots Acambis is producing are expected to receive close scrutiny.

Acambis today has 270 employees, and with the exception of smallpox, it is focused entirely on commercial vaccines. Furthest along is a vaccine against yellow fever that might be sold to travelers and the military, but the most discussed product is a potential vaccine against West Nile virus.

That emerging virus, originally from Africa, appeared in New York in 1999 and has since spread across the country, killing 204 people this year. The Acambis vaccine has been tested only in animals so far, but it has protected monkeys against direct injection of West Nile virus into their brains, a stringent test. The work was recently cited in congressional testimony by Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, as a potential breakthrough against West Nile.

Characteristically, Acambis has said relatively little, and years of work are ahead before a vaccine might reach the market, but the company has made clear that it expects to enter human tests shortly.

"We want to underpromise and overdeliver," said Cameron, the company's chief financial officer. "That's our approach. Too many companies have been guilty of the opposite."