LONDON ¿ Shares in Acambis plc rose by almost 40 percent to #3.15 last week after the company announced it had beaten off competition from Merck & Co. Inc. and GlaxoSmithKline plc to win a US$428 million contract from the U.S. government to manufacture and deliver 155 million doses of smallpox vaccine within the next 12 months.

This is in addition to a September 2000 deal, worth $343 million, to develop and manufacture 40 million doses of smallpox vaccine over 20 years. The contract was subsequently increased to 54 million doses, and in October, Acambis, based in Cambridge, UK, said it was accelerating the production program.

The latest contract includes funding for an accelerated clinical development program, with clinical trials due to start early in 2001 and the application for approval expected to be filed in mid-2003.

Acambis will subcontract the manufacture to Baxter BioScience, the biotechnology arm of Baxter Healthcare Corp. Baxter is a strategic partner and invested #27.8 million (US$39.6 million) in Acambis last year.

The September 2000 deal requires the company to maintain the stockpile over the 20-year life of the contract, through the continued replacement of out-of-date doses. With the second contract Acambis will now be supplying the U.S. government with a total of 209 million doses of smallpox vaccine during 2002. The company will be paid, whether or not the vaccine is approved.

CEO John Brown said, ¿Being the only recipient of a new contract under this latest award is testament both to our world-leading expertise in the development of antiviral vaccines and to the considerable experience we have gained through developing our smallpox vaccine during the past year.¿

The new vaccine will be based on the same vaccinia virus strain that was used before smallpox was eradicated.

Analysts at Goldman, Sachs and Co. said the contracts should produce revenues for Acambis of at least $350 million in 2002, resulting in the company moving into profit within the next 12 months.

Smallpox was eradicated 20 years ago, but in the early 1990s it became evident that the former Soviet Union had developed smallpox as a biological warfare agent. Although there is no evidence of any security breaches, the U.S. government is concerned that weaponized smallpox from this source could have fallen into the hands of terrorists.