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Last Updated

23 Mar 2003

Source: New York Times, March 23, 2003

Untested Companies Enlist in U.S. Biodefense


AFTER anthrax spread through the mail in October 2001, the government began a crash program to develop drugs, vaccines and diagnostic tests to protect the nation from biological terrorism. The pharmaceutical industry pledged support. It seemed to be the dawn of a new defense industry, based on genes instead of jets.

But with the nation now at war in Iraq, which is presumed to have biological weapons, the efforts to create a vibrant biodefense sector have had only partial success.

The United States is certainly better prepared now than it was when the anthrax attacks traumatized the nation. And about 100 biotechnology companies are trying to develop technology for detecting or fighting pathogens that may be used by terrorists or rogue nations.

But the companies that have enlisted tend to be small, lured not only by the call of duty but also by government research money at a time when raising money from investors is extremely difficult. While small companies are often innovative, most have never brought a product to market successfully. The effect has been to leave national security against bioterrorism largely in the hands of untested companies.

For the most part, the big pharmaceutical and biotechnology companies have stayed on the sidelines, turned off by the perceived small sales of products that people hope never have to be used and by the bureaucracy and low profit margins that come with government contracts.

"Government is not going to get new miracle drugs for cost plus 10 percent," Sidney Taurel, the chairman and chief executive of Eli Lilly, said in a speech on Capitol Hill last spring.

Many drugs on the market for diseases like cancer or AIDS stem from basic research sponsored by the government. But in trying to spur development of drugs for bioterrorism, the government is finding that just financing basic research is not enough..

"We need to have a little more pull toward getting the product made," said Dr. Anthony S. Fauci, the director of the National Institute of Allergy and Infectious Diseases.

So the Bush administration is proposing to go a step further by spending an estimated $6 billion over 10 years to buy and stockpile medicines to counter biological, chemical and radiological weapons, creating a guaranteed market for some of these drugs. "There's been a lot of uncertainty about what the market is here," said Dr. Mark B. McClellan, the commissioner of the Food and Drug Administration. With the new system, he said, "We will be able to offer a contract for payment on delivery."

But some biotechnology executives, while welcoming the program known as Project BioShield, say it may be too limited, with much of the spending going to vaccines and drugs that are already fairly close to production. Gillian R. Woollett, the vice president for scientific and regulatory affairs at the Biotechnology Industry Organization, said BioShield does not deal with some important issues like protecting companies from liability if products developed under government contract have side effects.

GOVERNMENT officials cite many areas of progress. "Where we are right now, in March 2003, is enormously ahead of where we were just a year and a half ago," said Dr. Fauci at the infectious-diseases institute. Back then, he said, the government had only 15 million doses of smallpox vaccine. But it found through testing that the vaccine would remain effective if diluted to provide 75 million or even 150 million doses.

Millions of doses of a new version of the vaccine are now being produced each month by Acambis, a British company, and Baxter International. Contracts to develop yet another smallpox vaccine, expected to cause fewer side effects than the existing one, were given to two companies Acambis and Bavarian Nordic of Denmark. The first doses will be available next year, Dr. Fauci said.

An anthrax vaccine is back in production at the Lansing, Mich., factory of BioPort. The factory had shut down for failure to satisfy F.D.A. manufacturing regulations. Contracts to develop an improved vaccine have gone to two companies, VaxGen of Brisbane, Calif., and the Avecia Group of Britain.

The Defense Department is separately developing several vaccines through a contract given to the DynPort Vaccine Company of Frederick, Md.; DynPort's majority owner is the Computer Sciences Corporation of El Segundo, Calif.

Even government officials concede that the situation is not ideal. Col. Erik A. Henchal, head of the Army's biological defense laboratory, said in January that there were serious holes in defenses against biowarfare because of inadequate government money and a lack of interest on the part of the drug companies before the Sept. 11 attacks. The existing smallpox vaccine has enough side effects including one or two deaths per million people vaccinated that health care workers are balking at it. The anthrax vaccine requires six shots over 18 months.

Moreover, much of what is available consists of vaccines. But it is impractical to vaccinate all civilians for every conceivable threat, so there is a need for drugs that can treat people after they are infected.

For now, no such drug is available for smallpox, though the vaccine can work if given soon after exposure. Some antibiotics, like Cipro, from Bayer, work against anthrax, but only if given promptly. Existing antibiotics also can work for tularemia and plague, Dr. Fauci said. For botulinum toxin there is an antitoxin, but it is made from horse blood and is in short supply. No drugs exist for the Ebola virus.

Moreover, some experts say, many pathogens can be used in an attack, some genetically engineered to be resistant to antibiotics. So there is a need, they say, for medicines that can work against a broad array of germs, as well as for techniques for quickly devising countermeasures when a new threat arises.

Since 2001, the government budget for biological countermeasures has soared. At the National Institutes for Health, for instance, the biodefense research budget rose to $1.5 billion in 2003 from about $274 million in 2002.

The Food and Drug Administration has hired 100 people to review drug applications related to bioterrorism and to provide guidance to companies developing them. A rule was put into effect last year to expedite approval of drugs aimed at countering biological, chemical or radioactive weapons. The rule allows approval based largely on tests in animals.

So far, the agency has approved one drug under this rule pyridostigmine bromide, a protection against soman, a nerve gas. Dr. McClellan, the food and drug commissioner, said that "more than a few" other drugs are in line to be approved using animal tests.

Pyridostigmine bromide has long been approved for myasthenia gravis, a neuromuscular disease. "A lot of the work up till now has been on finding new uses for existing drugs with respect to agents of bioterror," Dr. McClellan said. But he added that more novel drugs were also in the works.

ANTIBODIES, one area of interest, can be made to neutralize particular pathogens and toxins. They would provide protection in advance of exposure, effective for about a month, and could also be useful after exposure.

Human Genome Sciences, a biotechnology company in Rockville, Md., and Avanir Pharmaceuticals of San Diego separately announced recently that they had developed antibodies against anthrax. Abgenix, of Fremont, Calif., is working on antibodies to treat smallpox, plague and Ebola and Marburg viruses. EluSys Therapeutics of Pine Brook, N.J., is developing antibodies that stick not only to a pathogen but also to red blood cells, to quickly remove the pathogen or toxin from the body.

Antibodies must be injected or given intravenously, which could be time-consuming in an emergency or on the battlefield. So some companies are working on pills.

Chimerix, a San Diego company with five employees, is developing one to treat smallpox or the side effects from the vaccine, although the company is still at least 18 months away from testing the pill's safety in people, an executive said.

For some small biotechnology companies, the research financing from the National Institutes of Health or the Defense Department has been a godsend at a time when investors are shunning biotechnology and the companies are running out of cash. VaxGen, whose main product, an AIDS vaccine, failed in a large clinical trial recently, remains afloat largely on revenue from its government anthrax vaccine contract.

For many of the companies, the biodefense work is just another application of their main technology, allowing them to improve it at government expense. Getting a contract from the government is also regarded as a validation of a company's approach, helping it attract other investors and sometimes leading to higher stock price.

"Anything you do in biotech that moves products forward builds credibility, builds perception of the quality of the science," said Edward O. Lanphier II, the chief executive of Sangamo BioSciences of Richmond, Calif., which is seeking a $5 million government grant to apply its gene regulating technology to pathogens.

Still, the fact that some companies are going into biodefense at least in part for the government contract money raises questions about how dedicated they will be once the investor climate improves. These companies also face the risk that their products, even if developed, may not be procured by the government because of competitive bidding. "It may be an all-or-nothing for these companies," said John T. McCamant, the editor of the Medical Technology Stock Letter in Berkeley, Calif.

A rare example of a company that has clearly built a profitable business from bioterror countermeasures is Acambis of Britain. It was awarded contracts for smallpox vaccines worth more than $770 million, very meaningful for a small start-up. Because of the contracts, it reported its first profit last year.

For most companies, biodefense work is a small part of their business, compared with work on drugs for infectious diseases or other ailments. But there are exceptions. Anacor Pharmaceuticals of Palo Alto, Calif., has received $22.6 million from the Pentagon and only $7 million from venture capitalists. The company was formed two years ago largely because the Pentagon wanted to commercialize research by two university scientists.

Many executives say that because of the small size of the market, they would not be involved in biodefense work if they had to spend their own money on it. Even if drugs are stockpiled, that is a one-time sale, not a continuing revenue stream.

"This is not something investors are after," said Kevin P. Anderson, vice president for business development at Chimerix. "They are looking at commercial targets like AIDS or cancer."

Government grants also come slowly and in small increments. Human Genome Sciences was able to leapfrog several competitors in developing its anthrax treatment because it did not need to rely on government grants. And the grants also come with a lot of paperwork.

"The rules were designed for whoever it is that builds the stealth bomber at a couple of billion dollars a clip," said David B. Singer, the chairman and chief executive of GeneSoft Pharmaceuticals, a company in South San Francisco, Calif., that is trying to develop smallpox and anthrax drugs with Pentagon financing. "These rules were not designed for companies like ours that have two and a half people in our accounting department."

These factors help explain why the big drug companies have largely stayed on the sidelines. They do not need small research grants, and their profit margins are typically much higher than those of military contractors like Boeing or Raytheon. Moreover, two types of drugs of most interest in biodefense vaccines and antibiotics have been of declining interest to many drug companies even for natural infectious diseases. The companies are focusing more on drugs for chronic diseases.

Merck, GlaxoSmithKline, Aventis and Wyeth bid on the smallpox vaccine contract, worth more than $400 million, that was won by Acambis and Baxter. And Aventis did bid jointly with DynPort Vaccine, though unsuccessfully, for a contract to develop a next-generation anthrax vaccine. Other than that, many of the big companies have confined themselves to working with the government to see whether their existing antibiotics could be used against anthrax or other threats.

ELI LILLY is now working with government officials to test whether Xigris, its drug for sepsis, can fight Ebola hemorrhagic fever.

"These studies do take time," said Dr. Gail H. Cassell, the vice president for scientific affairs at Lilly. "The public needs to appreciate the difficulty of working with these highly dangerous pathogens."

Senators Joseph I. Lieberman, Democrat of Connecticut, and Orrin G. Hatch, Republican of Utah, have introduced a bill that they say would go beyond Project BioShield's incentives by providing tax breaks, patent extensions and liability protection to companies for work on countermeasures to biological, chemical and radiological weapons.

Instead of forcing drug companies into the system of military contractors, the bill would encourage companies to develop such countermeasures "at their own risk, at their own expense and for their own good business reasons" but with the prospect of the profit levels to which they are accustomed.

The bill is expected to face tough resistance, because giving subsidies to pharmaceutical companies may be unpopular amid the public outcry over rising drug prices. The Bush administration has not announced support of it, emphasizing Project BioShield. The BioShield legislation should pass easily. A Senate committee on Wednesday approved it unanimously.