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Last Updated

16 Apr 2003

Source: Boston Globe, April 16, 2003

Transformation of Acambis

Smallpox pact frees firm from cash concerns

By Naomi Aoki, Globe Staff

CAMBRIDGE -- Acambis PLC is a rarity in the biotech industry: It became profitable before its product hit the market, and it's funneling its own money back into the company to fuel growth. The reason: the threat of smallpox.

In the weeks following the Sept. 11, 2001, terrorist attacks, the US government decided to drastically speed the development of a new smallpox vaccine and create a stockpile for every man, woman, and child in the United States.

To win the contract, Acambis, a British biotech firm with just 120 employees that was losing money would have to go up against some of the world's largest vaccine makers, giants like Merck & Co. and GlaxoSmithKline PLC that employ tens of thousands and log billions of dollars in annual revenues.

Acambis had a key advantage. Researchers at its US headquarters were already working on a smallpox vaccine for the government, making it the only company to have worked on a vaccine for the extinct disease in two decades. It was on track to supply 54 million doses of vaccine. The new contract called for as many as 250 million more doses.

On the afternoon of Nov. 27, 2001, Gordon Cameron, the head of the company's US division, was told by public health officials to expect a call. He waited in his fifth-floor office on Sydney Street. The news arrived at 5:30 p.m.: Acambis won a $428 million contract to be the sole supplier of the smallpox vaccine for the US stockpile.

''That contract completely transformed the company,'' Cameron said. ''By the end of this year, we will have more than $160 million in cash, and cash is king in biotech.''

Most biotech firms depend on investors to survive the decade or more it takes to get a product to market and make a profit. But Acambis's contract is enabling the company to fund the increase of its US staff to 225 people from 50 and the buildup of a manufacturing plant in Canton, resources that also advance Acambis's aims to market vaccines for yellow fever, West Nile, and typhoid.

Even as President Bush earmarks $6 billion over 10 years to expand the nation's medical arsenal against bioterrorism, analysts and biotech executives don't expect any single contract to be as large as Acambis's smallpox contract.

On the health front, Acambis's experience working closely with regulators to speed its vaccine through clinical testing and to market serves as a model for responding to other emerging threats, not only from bioterrorists but from viruses such as West Nile and SARS, or severe acute respiratory syndrome, whose sudden and mysterious arrivals have stoked anxiety worldwide. Since SARS emerged late last year, it has killed at least 154 people worldwide and infected more than 3,200, according to the World Health Organization.

''These diseases and outbreaks will continue to be a problem,'' said Ken Trobvich, an analyst with CE Unterberg, Towbin in Denver. ''SARS is just the latest example. Responding to these outbreaks will require far more collaboration with regulators and public health officials.''

Acambis was formed by a merger in 1999 of two ailing vaccine firms, London's Peptide Therapeutics Group PLC and Cambridge's OraVax Inc. The companies had toiled for nearly a decade, developing vaccines against diseases such as yellow fever, Japanese encephalitis, and typhoid. Its first brush with national defense came in 2000 when it answered an ad in a trade magazine to supply smallpox vaccine for a US stockpile and won a 20-year contract worth $343 million.

Because it was spread out over two decades, the contract wasn't going to make the company profitable. In 2000, Acambis logged $9 million of revenue and $16 million of losses. But the work that followed would prove crucial in positioning the company to win the second, much larger contract, most of which will be paid to Acambis by late next year. Led by Acambis's chief scientific officer Tom Monath, a group of researchers in Cambridge set out to make a new version of the DryVax vaccine that was used to help eradicate smallpox.

The old vaccine was grown on live cows. Workers would dip a sharp-edged instrument in the smallpox virus and scrape the cows' hides. Several days later, they would harvest the cow pox virus, known as vaccinia, from blisters that had formed on the cows. With the disease eradicated, it would be difficult to prove an entirely new vaccine safe and effective. So the government wanted to find a better way to produce essentially the same vaccine.

Monath's group began by testing various samples of the old vaccine. Over four months, they isolated a single virus particle that seemed to have the right properties -- it wasn't too weak or too potent, it was free of any diseases cows might carry. They would clone it, and use it to grow up mass quantities of vaccine in mammalian cells, a process commonly used to make vaccines and other protein-based drugs. Late in the summer of 2001, Acambis was gearing up to begin clinical trials.

But Sept. 11, 2001, brought with it a new sense of urgency. Smallpox was considered the top bioterrorism threat. The government wanted a stockpile seven times the size of the one it had initially proposed, and it wanted it in place as quickly as possible. Acambis agreed to step up the timetable and increase the proposed supply of 40 million doses to 54 million. But it needed a partner to meet the demands of the new contract, and it found one in Baxter Healthcare Corp., which owns 20 percent of Acambis.

''The fact that we won the entire contract came as somewhat of a surprise,'' Cameron said. ''We thought we might get a share of it. We didn't have time for a formal celebration. Everyone just got to work.''

The government had 15 million doses of DryVax vaccine it could dilute to vaccinate 75 million people, leaving Acambis and Baxter to produce a total of 209 million doses by the middle of 2003. The companies began work on Acambis's manufacturing plant in Canton, which had been mothballed for years. Baxter sent in 20 regulatory, legal, and manufacturing folks until Acambis could hire its own staff. They consulted with the Food and Drug Administration almost daily as they began clinical trials that could quickly test the new vaccine's safety and effectiveness and got manufacturing sites up to regulatory standards.

Early clinical trials suggest Acambis's vaccine may prove safer than the old vaccine being used to vaccinate 500,000 US healthcare workers. Some hospitals have refused to cooperate with the effort, citing the vaccine's risks: About 49 in every million people vaccinated will develop serious illness and up to two will die.

Acambis is now on track to complete delivery of those 209 million doses and begin the final phase of clinical testing by summer's end. It expects to file for regulatory approval early next year, putting it on track to have an approved vaccine just four years after beginning work on the drug. In an industry where it typically takes a decade to get a drug from the lab to patients, Acambis and regulators have worked together to cut the time by more than half.

''There are so many instances where this kind of response will be important,'' Monath said. ''Not only for bioterrorism. Look at West Nile. Look at SARS.''

Acambis finished last year with $15 million in profits. The revenues from the contract alone will make it profitable again this year and next, giving the company the time and resources it needs to push other products to market. It expects to apply for US regulatory approval for a yellow fever vaccine this year, and is funneling resources to push a West Nile vaccine, the only one due to enter human testing, to market.

The company is building labs and office space, expanding to two floors and 55,000 square feet at its Sydney Street office. And at a time when many other biotech firms are shedding staff, Acambis plans to hire 30 people this year.

''People look at us in a different way,'' Cameron said. ''Dare I say, we've become more of a real company, and we leapfrogged the normal path to get there.''