West Coast Editor

The government giveth and the government taketh away, but Novavax Inc. said losing its five-year contract with the National Institutes of Health for an HIV vaccine likely would have no material consequences for the company, and work under a second contract is forging ahead.

"They don't really tell us why they make program changes," said Gale Smith, vice president of vaccine development for Columbia, Md.-based Novavax. "Priorities and budgets are what you can assume are involved."

The company's stock (NASDAQ:NVAX) closed Friday at $5.30, down 9 cents.

Novavax had been the prime contractor - with Emory University, Tulane University and the University of Pittsburgh as subcontractors - for an HIV vaccine made by way of the company's virus-like particle (VLP) technology.

The VLP approach deploys proteins that the virus uses to construct its shell, but without nucleic acid that would make the bug infective. Detecting the virus-like particle, the body mounts an immune response.

Novavax was awarded the contract last fall when the government, approaching the end of its fiscal year, distributed almost $90 million in grant money to a handful of biotechnology firms. The deal would have been worth a total of $19 million to Novavax. (See BioWorld Today, Sept. 30, 2003.)

"They pay you back for what you've done," Smith noted, so Novavax lost no money in the pullback. "It's a risk you take when you get a government contract."

The second HIV vaccine program also is funded by the NIH through a consortium led by the University of Alabama at Birmingham that includes Emory University and Harvard University, and is not affected by the end of funding for the first program.

"They're fairly similar," Smith said, conceding that the government might have seen a difference. "We can still answer the fundamental question [of whether such a vaccine can be fully developed and approved], which both the government and us would like to know," he added.

The first candidate HIV vaccine will be delivered to the University of Alabama for animal testing within the next several months, Novavax said.

Candidate VLP vaccines have been tested in animals before, but "we're developing a commercial process for making them on a large scale" and the vaccines are being designed for use in human trials.

In the meantime, Novavax has launched Estrasorb (estradiol), its topical emulsion for estrogen therapy. Partnered with King Pharmaceuticals Inc., of Bristol, Tenn., Estrasorb was approved in October. The drug for hot flashes is the first to use Novavax's micellar nanoparticle technology, incorporating 17beta-estradiolin, a soy-based oil formulation.

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