November 1, 2007 (Vol. 27, No. 19)
While Financial Incentives Are Uncertain, Some Companies Are Making It Work
Seven years ago, biodefense elicited yawns in all but a few circles. Now, there are conferences devoted to it. That doesn’t mean the industry is vibrant, though. There’s a long way to go before the U.S. government is able to work effectively with the biotech industry, and the unsustainable nature of the work leaves many in the finance community nonplussed. Under the right conditions though, companies are finding biodefense work just the boost their budgets need to further related commercial projects.
Acambis (www.acambis.com) has the first biodefense vaccine licensed since 9/11. The small contract it was awarded before 9/11 was expanded shortly afterward, and 195 million doses of a cell culture-based small pox vaccine, ACAM2000, have already been delivered to the Strategic National Stockpile.
The project went from award to licensure in 60 months because “the trials ran in parallel with manufacturing,” Clem Lewin, Ph.D., vp of market policy and strategy, says. “We were able to do this because we worked in close collaboration with the CDC, and the FDA monitored the project on an ongoing basis.
“We had a great experience, but this was a peculiar situation,” Dr. Lewin adds. “The original contract took 42 days from request for proposal (RFP) to the award. Now, timeframes of two years aren’t uncommon. Therefore, we’re not pursuing other biodefense projects beyond ACAM2000.”
Although the smallpox vaccine itself has no commercial market, Acambis is working with the U.S. Department of Health and Human Services (HHS) to create a domestic surge manufacturing production capability for ACAM2000.
“The goal of that surge program is to strengthen domestic preparedness by ensuring that the production system does not fall into disuse. If that occurred, it could be several years before the vaccine would again be available,” Dr. Lewin cautions.
Acambis plans to leverage the manufacturing infrastructure to produce other vaccines in its pipeline—Clostridium difficile, West Nile virus, and Japanese encephalitis (now in Phase III).
PharmAthene (www.pharmathene.com), founded in 2001 before 9/11, focused on biodefense from day one, recalls David Wright, president and CEO. At the moment, the company is working to commercialize some of its defense projects. “The idea of dual use emerged when we tried to build a business. It’s not a new model,” Wright says. “There are hundreds of examples of commercial technologies that began as defense projects.”
Protexia®, developed for the U.S. Department of Defense to prevent morbidity and mortality from chemical weapons, also shows promise in protecting against heroin, cocaine, and pesticide exposure and may be useful in the ICU when patients are brought out of sedation. There’s even a potential use in Alzheimer’s treatment, Wright notes.
Likewise, GenPhar (www.genphar.com) is working with the U.S. Army to develop countermeasures against two subtypes of Ebola and three subtypes of Marburg virus. “In tests at 1,000 times the lethal dose, prototypes showed 100 percent protection,” John Dong, M.D., Ph.D., president and CEO, says. The compounds provide broad-spectrum protection by targeting up to eight subtypes of virus simultaneously. Importantly, “the Army tested these compounds at their cost,” he adds.
Flexibility is the key to biodefense work, Dr. Dong explains. Although these compounds have only one potential limited market, the platform is being leveraged to treat hepatitis C, HIV, and pandemic influenza.
Most companies involved in biodefense work, however, focused initially on commercial applications. Chimerix (www.chimerix-inc.com) touts its ProLipTag technology, which was used to develop a broad-spectrum cidofovir mimetic without kidney toxicity to treat smallpox, according to George Painter, Ph.D., president and CEO. The technology was developed to allow known drugs to be modified to improve dosing parameters, broaden therapeutic applications, and decrease the risk of adverse reactions.
ProLipTag can be used for commercial spin-offs to treat viral infections in organ transplants and as a topical application for genital warts. The approach appears to work for herpes, pox, adeno, papilloma, and polynoma viruses, Dr. Painter says, although the mechanism of action isn’t fully elucidated.
Chimerix received a $37.1 million grant from the NIAID, before Bioshield was passed in 2004, that financed the high-risk development period, which allowed the company to raise venture capital later. “It would have been difficult otherwise to raise money for a drug with no commercial market,” Dr. Painter says.
Advanced Life Sciences (ALS; www.advancedlifesciences.com) is another firm banking on dual use. It is developing cethromycin as a treatment for anthrax and other bioagents, but it also effectively treats community-acquired pneumonia and other respiratory tract infections. Animal studies of the drug show 100% protection against lethal doses of inhaled anthrax, according to ALS. The company began working with NIAID this summer to continue evaluating cethromycin against high-priority biodefense agents. Because cethromycin has a dual binding site, it can overcome resistance from many pathogens, explains Patrick Flavin, chief legal counsel.
“We’re not a biodefense company,” Flavin emphasizes. “We’re developing cathromycin for respiratory tract infections, and we’re working with the government to leverage safety and efficacy data to develop other applications.” The benefit, he says, is in the development funds provided by the government, which let the company conserve money for commercial development programs.
U.S. government work isn’t confined to U.S. companies. British firm deltaDOT (www.deltadot.com) is working with a U.S. consortium in a DARPA-funded project to accelerate vaccine production. The benefit for deltaDOT is twofold. It gains funds to advance its Peregrine HPCE and Osprey protein stability-technology platforms and also gains visibility, according to Richard Lingard, vp of sales.
The Peregrine HPCE analysis system is used for on-site bioreactor monitoring, product purification, and final product optimization, replacing a process that typically took two days with one that delivers accurate results in about 20 minutes, according to the company. Importantly, Peregrine uses label-free intrinsic imaging, so unlabeled proteins can be monitored directly, in real time, and cost effectively, Lingard notes.
Headquartered in Brisbane, Australia, with a second office in Seattle, Implicit Bioscience (www.implicitbioscience.com) is tapping into biodefense money as a virtual company. It’s in late-stage development work with a broad-spectrum immunologic that regulates the host response factor.
“Biodefense isn’t a field for a fully integrated company,” according to Garry Redlich, Implicit’s CEO, explaining the reason for this virtual business model. “Only a handful of labs have the capability to work with high-level threat agents,” so Implicit works with those labs around the world using project-based management methodology. “All of us work on various projects, depending upon expertise,” he explains.
“The government is coming with eyes wide open to see the benefit of working with agents with dual uses,” Redlich says, “and we get work done that otherwise would be paid for by shareholders.” The benefits at the company are seen in toxicology, method of action, delivery options, and pharmacokinetics.
These companies are making their biodefense work succeed, but it’s not without its challenges. The problem with biodefense work is that products that have no commercial application are plagued by high development costs, the lack of a definitive plan by government to actually buy the drugs, and no time frame in which to do so. “That makes biodefense work risky,” Wright says.
Elusys Therapeutics (www.elusys.com) has worked on biodefense projects since 2000, an effort that complements its infectious disease development programs. In September it was awarded a $12 million contract for the advanced development of Anthim™, an anthrax antitoxin. “Anthim has been shown to significantly increase survival in anthrax-infected test animals both before and after exposure to the pathogen,” explains Elizabeth Posillico, Ph.D., president and CEO.
“We used to think that we would have several biodefense products in our pipeline,” Dr. Posillico recalls, but the government has moved slowly, making the long-term market for biodefense products very uncertain. “Consequently, our perspective has changed from the early days.”
“The government is not succeeding in developing a sustainable biodefense program,” states Wright. “It needs to get RFPs out and contracts to buy products.” Additionally, agencies need to be more focused on what they think they need and the necessary quantities. “Originally, there were many targets,” Dr. Posillico says, “but they pulled back when they saw how much it costs.”
Funding is certainly an issue. The government invested $5.6 billion in Project Bioshield to purchase products, and the NIH funds much of the early research, but Biomedical Advanced Research and Development Authority (BARDA) funds for development seem lacking.
“We have a potential for disaster on our shoreline greater than any war has ever provided,” Wright emphasizes, “with hundreds of thousands of deaths and a major economic impact, yet the government is spending less than the cost of a couple of B-1 bombers.” (Note: Actually, Bioshield funds would buy about 16 bombers, given inflation and a 1998 cost of $283.1 million for the B-1B Lancer.) The point is taken, though. The funds invested are insufficient to protect the country.
Liability and indemnification also remain big hurdles in this industry, according to Robert V. House, Ph.D., president and CSO of DynPort Vaccine (www.dynport.com). Liability is high for products approved by animal models, yet that is the only viable option for many biodefense counteragents. Therefore, the risk is too great for profitable companies to invest in vaccines or other biodefense work given its limited market potential and currently unsustainable manufacturing and purchasing model.
“We are seeing some progress,” in that liability and indemnification are being discussed by federal representatives at biodefense meetings, Dr. House says.
There’s another hurdle too. “You want products with a stable shelf life,” Dr. House notes, but it puts manufacturers in the untenable position of developing products and ramping up production only to suspend production for several years before needing to start again.
All these issues point to a need to reinvent government to align more closely with the needs of modern businesses. BARDA is one example. Established to oversee Project Bioshield, it is still without a director. Not just any experienced director will do though. The new BARDA director needs commercial experience, Dr. Painter insists. “BARDA needs to integrate the government and biotech ways of operating.” That includes developing realistic time lines and understanding opportunity costs as well as changing the way contracts are awarded and the speed at which RFPs are issued. BARDA posted its first RFP September 14 for a final-stage development plan for a drug to treat pandemic influenza.
FAR and Other Regulations
Working with the government is rarely as straightforward as working with other commercial partners. “There have been some bugs and hiccups,” Dr. Painter says, “but the goal of helping the biopharma industry develop drugs against bioattacks is clear.”
Unlike in business, the government product acquisition process is driven by Congressional politics and budgets, not by market needs. Biotech CEOs generally say that the DoD is the easiest of the agencies to work with because of its prior experience with biotech. The HHS and agencies like the NIAID are scientifically astute but have little experience with commercialization. The agencies are beginning to communicate better but still need to be more focused.
Responding to an RFP is a lengthy process and requires a lot of data. For deltaDOT, “working with the U.S. government was protracted,” Lingard says. Winning the contract took about six months and multiple steps.
Particularly for small firms, responding to an RFP represents significant effort, sometimes involving suspending work on other projects to generate needed data, with the risk that the proposal may not meet the government requirements because of predispositions to a technology or other requirements that weren’t mentioned in the RFP.
Additionally, federal acquisition regulations (FARs) and the defense acquisition regulations are extensive, acknowledges Dr. House. “The involvement of the government really varies according to specific customers,” he says. The DoD looks to DynPort as a prime contractor, expecting FDA approval and deliverables, Dr. House adds. “NIAID is based on a research model and, therefore, is more academic, with more free-flowing communication between it and the company.”
Despite any immediate benefit to the bottom line, there’s no consensus whether gaining government biodefense grants also helps attract other funding. The potential market is the issue. In biodefense work, there tends to be one customer and oftentimes no market with which to sustain production. To attract venture capital, there must be other attractants.