WASHINGTON - Privately held Protein Sciences Corp. Inc. won a $35 million Health and Human Services (HHS) contract, which could be extended to $147 million over five years, to support the Meriden, Conn.-based firm's recombinant baculovirus influenza vaccine technology.
However, Protein Sciences' creditors, led by Rockville, Md.-based Emergent Biosolutions Inc., which had attempted last year to acquire the company, filed a petition in federal bankruptcy court seeking to force Protein Sciences into bankruptcy and liquidation.
Protein Sciences and the government have maintained that the company has the financial stability necessary to follow through on the contract.
The contract requires Protein Sciences to establish domestic manufacturing capability to provide a finished vaccine within 12 weeks of onset of an influenza pandemic and to produce at least 50 million doses of the vaccine within six months of pandemic onset.
The award was in response to a 2007 solicitation from the government for advanced development of recombinant influenza vaccines for seasonal and pandemic purposes, said Robin Robinson, director of the Biomedical Advanced Research and Development Authority (BARDA), the office that is administering the contract.
Recombinant baculovirus technology, Robinson said, "has the promise of being able to deliver vaccines sooner than the traditional egg-based and maybe even cell-based" influenza vaccines.
Robinson noted that he was one of the inventors of baculovirus technology when he worked in industry before joining BARDA.
Companies responding to the HHS solicitation had to have completed Phase I trials, or proof of concept, to apply for the contracts, Robinson said.
BARDA received the proposals from firms in early 2008 and notified companies that met the competitive range a few months later, he added.
Protein Sciences officials said they were notified in March 2008 that they had met the competitive range.
When the government and the company entered into negotiations, "we had numerous technical and business questions about their proposal," Robinson said.
He noted that Protein Sciences already was in advanced development of its seasonal influenza vaccine, known as FluBlok, and had submitted a biologics license application to the FDA at that point.
The product currently is under review, with the FDA expected to make a decision by late October, said Protein Sciences CEO Daniel Adams.
Protein Sciences also is developing a pandemic influenza vaccine, known as PanBlok using the same technology, in which flu virus genes are extracted and placed into an insect virus called baculovirus.
Robinson said that as part of BARDA's due-diligence process in reviewing potential contract offers, "we always look at the financial stability of a company."
During that process, Protein Sciences had entered into an asset purchase agreement with Emergent.
Under the terms of the proposed transaction, Emergent had extended $10 million to Protein Sciences in the form of a bridge loan. The loan, said Daniel Abdun-Nabi, president and chief operating officer at Emergent "was secured by all assets."
"We had a security agreement in place. They pledged as collateral for the loan all assets of the company," he said.
But, he charged, once Protein Sciences obtained the funds from Emergent, "senior management of the company solicited shareholders to oppose the transaction in violation of the contractual commitment."
Abdun-Nabi said Protein Sciences had initially issued a proxy statement to their stockholders, which "identified and described in detail the history of their efforts to raise money, that they had no alternatives but to secure some funding from Emergent and complete the transaction because there were no other viable transactions available to the company."
But Protein Sciences said it terminated the agreement because of "multiple breaches" by Emergent, including disclosure and mischaracterization of Protein Sciences' material confidential information obtained from the firm during due diligence and Emergent's failure to fulfill its obligation to provide adequate funding to the company.
Abdun-Nabi said his firm has twice extended its deadline for Protein Sciences to repay the loan, most recently to May 31. He said his firm filed the petition Monday to get its money back.
Protein Sciences' Adams charged that his firm has attempted over the past year to repay it. But Abdun-Nabi responded that the offer Emergent received was from a third-party that offered to buy the loan note for a "substantial discount," which he called "a low-ball" offer.
Adams said the petition to the bankruptcy court was a "desperate attempt to stop us" from getting the BARDA contract.
Because of the ongoing dispute between Protein Sciences and Emergent, the government conducted "two extra audits of the firm's business model and its financial stability, Robinson said.
"The results of those audits, which take a very long time to do, revealed that while there may be some minor problems, the company could perform the tasks that were asked in the contract," he insisted.
BARDA was able to resolve "most of the problems to the point that we felt it was worthwhile to award the contract," Robinson said.
The five-year contract is funded only for the first 18 months, with options for further development aspects, such as scale-up of the manufacturing facility, validation of the manufacturing process and development of the pandemic vaccine, he noted.
If Protein Sciences reaches its early milestones, the government would then consider exercising the options of the contract, which ultimately could provide the company access to $147 million, Robinson said.
He noted that the award is a "cost-reimbursement contract," where the firm must submit an invoice on the work it has done, which must undergo a review process. If BARDA deems that work acceptable, the firm is reimbursed.
One thing that makes Protein Sciences contract different from other advanced development awards is that the government added an option to buy the firm's H1N1 vaccine, Robinson said.