Project BioShield - Challenging and Strengthening the Biodefense Arena

Project BioShield - Challenging and Strengthening the Biodefense Arena Threat of Avian Flu Pandemic Escalates Need for Biological Countermeasures By: Ann-Marie Fleming November 2005 Since the attacks of 9-11 the U.S. Government has injected considerable funds into the biodefense arena for the development and production of countermeasures against potential biological threats. With current fears of a possible avian flu pandemic, in addition to bioterrorist concerns, the issue of biosecurity has been readdressed. One of the main government initiatives is Project BioShield, which was signed into law in July 2004 to help spark participation in biodefense from the private sector, and in particular from biotechnology and pharmaceutical companies. Project BioShield has opened the door for many industry participants as it has helped to establish a market for biodefense. By providing companies an arena to develop countermeasures and receive funding, this legislation has created a viable market. A major advantage of the biodefense environment is that you have products purchased prior to FDA approval, with products that are earmarked for contribution added to the strategic national stockpile. "The goal of Project BioShield is to converge the government's intent to purchase with the ability of the capital markets to fund. Those companies, who effectively advance their treatment countermeasure from a regulatory standpoint, should expect the government to acquire that treatment for the national stockpile. This reality provides significant incentive for the capital markets to infuse the equity resources that will drive the countermeasures into the marketplace. It should be noted that the pathogens of greatest concern do not allow for human efficacy studies for obvious humanitarian reasons. So in essence, you have an abbreviated regulatory path with a back-end guarantee to purchase," stated James A. Joyce, CEO of Aethlon Medical, Inc, a developer of the first medical devices to treat infectious diseases, including several Class "A" biological weapon threats. A company that has been able to benefit on a significant level from BioShield is VaxGen. In November 2004, VaxGen was awarded a contract valued at approximately $877.5 million for the purchase of 75 million doses of the Company's anthrax vaccine. Paul Laland, Vice President, Public Affairs for VaxGen explains BioShield's advantages, "In our case we have a large well-defined government market, anthrax. Our first commercial milestone would be when we deliver 25 million doses of a new-generation vaccine to the national stockpile and later an additional 50 million doses. Beyond the initial delivery to the national stockpile, we also expect downstream revenue from product replacements. Our product is anticipated to have shelf life from 3 to 5 years so at some point it has to be replaced. Additionally, you also have the U.S. military, foreign governments as well as state and local governments." Acambis plc, a leading developer of vaccines to prevent and treat infectious diseases, identifies tremendous benefits within BioShield and the biodefense industry as a whole in light of their smallpox vaccines. As Clement Lewin - Vice President, US Government Affairs and Strategy describes, "BioShield provides significant opportunities for revenue generation, enhancing organizational capabilities and skill sets. It is a great opportunity to collaborate with the FDA and the Health and Human Services (HHS). Finally, it puts a company in the forefront of public health and bioterror issues." Challenging the Industry: The advantages that accompany Project BioShield, however are not without its challenges. The process of distribution of advanced contracts remains an area of controversy as the timing and somewhat unclear parameters do not always provide the opportunity that the program initially suggested. As Lewin explains, "The procurement process can be unclear at times, for example RFP timing, is taking a bit longer to come out and the order volumes can vary from early estimates. This is significant as there are large fixed costs in both clinical development and manufacturing of the products, which has a considerable impact on pricing and profitability for companies. The warm-base concept, which is to provide a surge capacity, has also proven challenging. I think everybody recognizes that it needs to be done, but actually getting all the details in place can take quite a while. Companies who have invested in the manufacturing run the risk of these facilities sitting idle unless they have an alternative use." Hollis Eden Pharmaceuticals, a developer of a treatment for Acute Radiation Syndrome (ARS), has been heavily involved in the biodefense arena with their Neumune