WASHINGTON - If Project BioShield becomes law as expected in the next couple of months, insiders believe it will send a strong message to Wall Street and the industry that the government is committed to purchasing biomedical countermeasures for threats such as smallpox and anthrax.
But as with all new laws, there are a few quirks to flush out before federal money begins to flow.
Chief among the potentially troubling provisions is the condition making BioShield an investor-funded model as opposed to a defense-contractor model.
Project BioShield is the Bush administration's plan to speed development and availability of medical countermeasures in response to current threats. It is designed to streamline government research, create incentives for companies and give the government the ability to make products widely available in a public emergency.
The House version, which passed last summer in a 421-2 vote, allocates $5.6 billion over 10 years for the project. While the Senate version isn't expected to pass for 60 days or so, this year's budget has allocated $890 million for the project. (See BioWorld Today, July 23, 2003.)
But the question remains, will Bush sign a bill that pays for R&D and procurement under a defense-contractor model, or would he prefer private investors and companies to handle their own R&D with the commitment that the government will buy countermeasures proven to work?
"If the defense contractor is our model, the government will front all the money and take all the risk and find competent companies to bring all these products to market," explained Chuck Ludlam, counsel for Sen. Joseph Lieberman (D-Conn.). "[That] strategy will fail - maybe not in every case, but overall, it will fail. The only way to ever get this work done is to create a biodefense industry that is funded by investors."
Furthermore, he said, "Successful companies believe that if the government pays for the research, the government will set the price and own the patent, which is completely unacceptable to an entrepreneurial firm."
The larger question, he told BioWorld Today, is "how do you get companies involved that have brought a product to market? Getting the small companies involved that have never brought a product to market and whose capital markets are not open isn't difficult - they're happy to have the money."
Nevertheless, Ludlam believes that BioShield must attract all types of companies, otherwise "if we only attract small biotech companies, we will be pursuing a very risky strategy."
Growing Number Of Firms Taking The Risk
There are a number of small biotechnology firms already achieving success in the bioterrorism countermeasure arena.
For instance, Brisbane, Calif.-based VaxGen Inc. has received two National Institutes of Health grants totaling $100 million (one grant for $80.3 million, the other for $20 million) for an anthrax vaccine called rPA102. The vaccine, originally researched at the U.S. Army Medical Research Institute of Infectious Diseases in Fort Detrick, Md., cannot cause anthrax infection, as it is made of an alum adjuvant and a purified protein designed to induce antibodies that neutralize anthrax toxins. (See BioWorld Today, Oct. 2, 2003.)
Winning the contracts has had a positive impact on VaxGen's stock and is believed to have played a role in helping the firm raise $28.7 million through the sale of 4.1 million shares of common stock, Lance Ignon, VaxGen's vice president for corporate communications, told BioWorld Today. (See BioWorld Today, Dec. 8, 2003.)
Indeed, Ignon and others in the industry, such as Stephen Sudovar, president and CEO of EluSys Therapeutics Inc., of Pine Brook, N.J., agree that approval of BioShield is key to convincing investors that Uncle Sam is serious about buying products that essentially would have no other market.
"One of the big issues is whether the government is fickle," Sudovar told BioWorld Today. "Will the government cut the budget - that is big concern for us and venture capitalists."
Like VaxGen, EluSys has never brought a product to market, though the firm has been working with the government via a Cooperative Research and Development Agreement (CRADA) to develop the anthrax candidate ETI204, an affinity-enhanced monoclonal antibody. The company is completing rabbit studies for the product.
Sudovar and Linda Nardone, EluSys' vice president of clinical and regulatory affairs, believe small biotechnology firms can bring a lot to the table because of their success in research.
However, Nardone said there seems to be a "disconnect" in BioShield between R&D funding and procurement, adding that raising venture capital is not an easy task.
"But I think BioShield is a great first step and I would love to see it delivered on," Nardone said.
Regardless of the outcome of BioShield, Ignon said it appears that the government intends to move on with procurement.
In the last couple of weeks, the Department of Health and Human Services announced that it would award contracts for the purchase of up to 75 million doses of recombinant anthrax vaccine.
"We certainly think we are in a key position maybe to get all or part of that contract," Ignon said.
Beginning in September 2002 with its first contract for $20 million, VaxGen has gone from launching a Phase I program to being in a position to produce 3 million doses this fall, Ignon said.
"That's a timeline that a lot of people said could not be met - that is, producing 3 million doses three years after the anthrax attack," Ignon said. (Under the defense contract, the government may purchase the vaccine before it goes through Phase III trials and is licensed. VaxGen intends to get the vaccine licensed by the FDA.)
Others interviewed for this article agreed that it often is more difficult to accomplish goals in a large company as opposed to a smaller, more focused company.
Bob Marsella, vice president of business development at San Diego-based Hollis-Eden Pharmaceuticals Inc., said he believes smaller biotechnology firms can outperform large companies in niche markets because small firms can move fast.
Hollis-Eden, also working under a CRADA with the Army, is developing the immune-regulating hormone HE2100 (Neumune) as a candidate for radiation protection. Preliminary results in non-human primates have shown that administration of HE2100 two, four or 24 hours after radiation exposure resulted in a statistically significant reduction in the occurrence of severe neutropenia, compared to control animals.
Marsella said he's not quite sure why a large firm would be interested in BioShield when they can spend time and money working on the next blockbuster.
"If you are Genentech and you just developed a colorectal cancer drug that gives you another $40 billion in market capital, why would you be interested in BioShield - there's no incentive," he said.
But Frank Rapoport, a partner with McKenna, Long & Aldridge LP, of Philadelphia, told BioWorld Today a few big pharmaceuticals are interested in BioShield.
Rapoport, who Ludlam credits with helping to shape the legislation, represents Aventis Pasteur Inc., the vaccine business of Aventis SA, of Strasbourg, France.
Rapoport said Aventis has an interest in BioShield because the company works in the vaccines business.
While Rapoport and Ludlam support Project BioShield, they believe it will be necessary to write a subsequent bill, currently referred to as BioShield II, to correct and add certain provisions including tax incentives and indemnity protection left out of the first version. (See BioWorld Today, March 10, 2004.)