Global Security Newswire

The U.S. Health and Human Services Department yesterday canceled its $877.5 million contract with California biotechnology firm VaxGen Inc. for delivery of a new anthrax vaccine, the San Jose Mercury News reported (see GSN, Dec. 19).

The final straw for the long-delayed project was VaxGen's inability to meet a deadline this week to begin human safety testing on the vaccine.

The Food and Drug Administration had blocked testing due to concerns over the drug's stability.

"VaxGen's failure to perform is not excusable," Health and Human Services said in a letter to the company.  "The government is terminating the contract for default."

VaxGen might appeal, said vice president of corporate affairs Lance Ignon.

"We certainly knew that this was a strong possibility, but we are obviously very disappointed," he said.  "VaxGen made an enormous investment in this vaccine."

The company had spent $175 million on the project, but would only receive payment from the federal government upon delivery of the vaccine.

"It's regrettable that HHS chose not to engage with us to explore options" on continuing development of the treatment.  "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."

Delivery of the contracted 75 million doses of the anthrax vaccine was two years behind schedule as the company struggled with the drug's potency and stability, the Washington Post reported today (Renae Merle, Washington Post, Dec. 20).

The company also claimed the government added new requirements to the contract after it had been finalized (see GSN, Sept. 29).

There was no word from Health and Human Services on revised plans for the new anthrax vaccine, the Mercury News reported.

"It's impossible for me to speculate on what our next steps will be," said agency spokesman Bill Hall.  "We are still fully committed to the development of a next-generation anthrax vaccine.  That remains unchanged."

The federal government has purchased 10 million doses of the existing anthrax vaccine while trying to work through its problems with VaxGen.  Hall could not say if further orders were pending (see GSN, Dec. 15; Steve Johnson, San Jose Mercury News, Dec. 20).

The cancellation occurred on the same day that President George W. Bush signed legislation aimed at improving Project Bioshield (see related GSN story, today).  The program is intended to promote private development of countermeasures to WMD materials that could be used in terrorist attacks.  However, the biopharmaceutical industry has argued that the money available is not enough to attract large firms and that funds are not allocated during the drug development phase when they are most needed.

The vaccine contract cancellation "is a step back for an anthrax vaccine, but I think we have said this was a flaw in Bioshield," lead bill sponsor Senator Richard Burr (R-N.C.) told the Post.  "I would like to think if that happened under the new system, we would have caught the problem at a much earlier point."

VaxGen's future remains in question, the Post reported.  It does not have a contract for its sole remaining product, a smallpox vaccine.  Funding will allow operations to continue through 2007, the company said (Merle, Washington Post).