BioWorld International Correspondent

Shares in Acambis plc plunged 38 percent on the London Stock Exchange Tuesday on news that the U.S. Department of Health and Human Services is no longer considering its bid for a government contract to supply a stockpile of next-generation smallpox vaccines, based on the modified vaccinia ankara (MVA) vector.

Shares in Kvistgard, Denmark-based Bavarian Nordic A/S, Acambis' sole rival for the award, gained about 20 percent on the Copenhagen Stock Exchange.

Late on Monday, Cambridge, UK-based Acambis was informed by HHS that, following a re-evaluation, its proposal for the award was no longer in the "competitive range."

"They have yet to specify what that essentially means," Lyndsay Wright, vice president of communications and investor relations at Acambis, told BioWorld International. "As far as we're aware, it's not a price question." Company CEO Gordon Cameron has requested a meeting to clarify the issues.

The news caught Acambis unaware. Last week, in reporting its third-quarter results, the company gave an upbeat assessment of the tender process. It said: "We remain confident that our strong track record with the U.S. government, our partnership with Baxter [Healthcare Corp., of Deerfield, Ill.] and our demonstrated ability to manufacture and deliver large quantities of vaccine put us in a very strong competitive position."

Acambis and Bavarian Nordic were competing in the courtroom as well as in the commercial and technical spheres. Bavarian Nordic has filed suit against Acambis at the International Trade Commission (ITC) in Washington, the U.S. Federal District Court of Delaware and the Commercial Court of Vienna, alleging patent infringement and misappropriation of trade secrets. Acambis and Baxter have, in turn, opposed a patent Bavarian Nordic received from the European Patent Office in Munich. Wright said Acambis has not yet decided on its course of action in those cases, following the news.

"It was a bit of a shock, I think, to most people," analyst Robin Campbell at Jefferies International in London, told BioWorld International. "The company sounded rather despondent. They had been riding a bit of a wave with the outcome of the ITC case in the U.S." Although a final determination has not been completed in that case, an initial ruling narrowed the scope of Bavarian Nordic's claim.

Bavarian Nordic has yet to make any official statement on the issue. "They haven't received a similar letter," said a spokeswoman for the company.

The elimination of Acambis from the contest would appear to leave Bavarian Nordic the winner of a contract to supply 20 million doses of vaccine, which Campbell estimated would be worth $300 million. The U.S. government also retained an option to acquire a further 60 million doses, which would be worth an estimated $900 million.

"The provisional assumption is that Bavarian Nordic scoops the lot," Campbell wrote in a research note, although HHS has yet to update its intention on the award process, which has experienced several delays. "Have the goalposts been shifted? I don't know - I can't answer that one," Campbell said.

"I don't think it's at risk," said Michael Novod, analyst at Handelsbanken Capital Markets in Denmark. "There should be no change."