Germ warfare: agencies scramble to create vaccine market.

When anthrax was delivered to Capitol Hill and media outlets in envelopes in 2001, the prospect of a widespread biological attack became real to the U.S. government.

For Jay Cohen, undersecretary of the Department of Homeland Security's science and technology division, it's the possibility of a biological attack that keeps him up at night.

While nuclear or radiological weapons require a significant capital and physical investment to develop, "in today's genomic world, students with microscopes have the potential to develop biological weapons," he said in an interview with National Defense.

The relative simplicity of deploying a deadly biological agent has prompted the government to seek technological solutions from the private sector. In the aftermath of the anthrax attacks, contractors predicted that a robust biodefense industrial complex would emerge. But so far the market has lagged, experts say.

Eleven government agencies now work on biodefense. Several offices within these agencies award contracts and grants to universities and public health organizations to prepare for biological attack.

"Currently, the U.S. biodefense market consists of a hodgepodge of small niche players blended with very few large biopharmaceuticals and select defense contractors," said Tim Garnett and Andrew Michaels, previous partners at DFI International, a consulting firm now known as Avascent. They noted that the federal market for biodefense technologies is highly fragmented.

Defense and Homeland Security are pursuing disparate vaccination programs to combat different needs for military and civilian populations.

The Department of Homeland Security was given control of Project Bioshield, a program signed into law by President Bush in 2004. The Bioshield Act allocated $5.6 billion in funding through 2013 in an attempt to attract large biopharmaceuticals to develop vaccines, a White House document said. DHS was directed to work with the Department of Health and Human Services and "the heads of other agencies as appropriate" to assess current and emerging threats and subsequently award contracts to companies with the proper countermeasures.

VaxGen, a small firm based in San Francisco, was awarded an $877.5 million contract in November 2004 for 75 million doses of an anthrax vaccine, said Frank Rapoport, a government contracts and public health law partner with McKenna, Long and Aldridge, a Washington D.C.-based law firm. The award was the largest under Bioshield and was a big coup for a small biopharma. But the contract was terminated in December 2006 because the company failed to "meet a milestone imposed by Health and Human Services," said a VaxGen press release. VaxGen appealed the cancellation and settled with the government in April for $11 million.

The contract failure was a blow to the Bioshield effort, but also highlighted some of the larger obstacles biopharmas face for such work.

"The current biodefense market is attractive only to small players whose willingness to chase low-margin contracts goes hand-in-hand with their desire to stay afloat in a highly competitive marketplace," Garnett and Williams wrote.

Major pharmaceutical companies have stayed out of the Bioshield program, partially because vaccine profits are low and because there is a high level of uncertainty in biodefense, as demonstrated by the failed VaxGen award.

"Countermeasure development is unattractive to private investors because there are no markets outside of governments for most of these products," said Tara O'Toole, director and CEO of the Center for Biosecurity of the University of Pittsburgh Medical Center. "Even in the most profitable scenarios, biodefense countermeasures ... cannot generate profits comparable to successful medicines for chronic disease that are taken for years by large populations," she told the House Committee on Energy and Commerce.

Also, drug and vaccine development is expensive and uncertain. Of 5,000 drugs identified by scientists, only five make it to clinical trials and only one of these, on average, will become a product, O'Toole noted.

For small biopharmaceuticals such as VaxGen, the lack of financial stability in biodefense spells trouble for the future. The anthrax vaccine cancellation put a huge strain on the company; its cash flow was expected to drop by half a million dollars in the second financial quarter of 2007, the VaxGen web site said.

A radiological/nuclear treatments program under Bioshield was also canceled in March, nearly two years after the request for proposals was released.

Other vaccine contracts include a botulinum antitoxin (to treat botulism), anthrax therapeutics, a smallpox vaccine and pediatric potassium iodine.

Meanwhile, the Defense Department has procured vaccines for military personnel, but not without its share of controversy. Among required immunizations for deployed troops are an anthrax countermeasure and a smallpox vaccine. The anthrax inoculation program has faced many hurdles, including a court order to stop the mandatory program for soldiers in 2004. A district court judge ruled that the Food and Drug Administration had not found that the vaccine--made by Bioport Corp.--was effective against anthrax.

After the mandatory shots were halted, only about half of military members voluntarily received the vaccines. In October, following a second drug administration approval, the immunizations were reinstated for military personnel in high-risk jobs or high-risk areas such as Iraq, Afghanistan and Korea, William Winkenwerder, assistant secretary of defense for health affairs told reporters.

Currently, the Defense Department is developing a vaccine against equine encephalitis. Ichor Medical Systems, a small biotech company in San Diego, secured a $900,000 contract to help develop a DNA countermeasure for the encephalitis pathogen. The Army Medical Institute of Infectious Diseases in Ft. Detrick, Md., found a need for this capability and came to Ichor for its vaccine delivery system, not for an actual vaccine, said Drew Hannaman, vice president of Ichor research and development, during an interview.

Ichor uses a device that employs electrical fields to deliver the countermeasure directly to a cell, which creates a better immune response, Hannaman explained. This method enhances the effectiveness of the Army developed vaccine because the medicine by itself was "insufficiently potent" for the Defense Department, he added. This is because the conventional delivery technique administers the vaccine to the tissue surrounding the cell, not to the actual cell that can better communicate with the immune system, Hannaman said. So far, the Food and Drug Administration has not approved an equine encephalitis inoculation, the Joint Program Executive Office for Chemical and Biological Defense web site said.

Hannaman said his company had received grants from the National Institutes of Health prior to this contract. Ichor also conducted preclinical studies of anthrax on animals to initially secure biodefense work, but the company agrees that this type of vaccine work carries with it several challenges.

The problem with biodefense relevant projects is how to work out commercialization, Hannaman said. When the government is the only customer, it makes it difficult and creates a lot of uncertainty, he added. "There is funding available, but also questions about product roll out and having the government committed to purchasing," Hannaman said.

The Ichor contract also points to a question about why agencies pursue vaccines for some pathogens over others.

The Centers for Disease Control has a long list of biological threats, separated into categories. The most dangerous microbes--including anthrax, smallpox and plague, are listed under category A. Yet Bioshield has only awarded contracts for three category A threats. Equine encephalitis is considered to be a category B pathogen, the Centers for Disease Control said.

Experts believe the government has sent vaccine biodefense work down the wrong path.

"We need a rational risk assessment of the likelihood of an attack with certain microbes," said Barbara Billauer, president of the Foundation for Law and Science Centers and a public health expert.

Billauer doubts that terrorists are so predictable that they would target specific pathogens that are difficult and expensive to make.

"If I were a terrorist, why would I use a designer microbe if I could use something like salmonella?" she asked.

Osama Bin Laden's deputy is a pediatrician, Billauer said, and he knows that salmonella can kill babies and elderly people.

Even if a terrorist wanted to spread diseases such as anthrax or smallpox, Billauer explained that anthrax for example, has to float between three and five feet off the ground to be ingested by humans, otherwise it falls to the ground and dies. "You add 'clay' to it [anthrax] to keep it airborne," but it's difficult to get the formula exactly right, she said. Microbes also need to live in specific habitats and must be the right size to infect humans. The Japanese terrorist group, Aum Shinrikyo, known for releasing sarin nerve gas in a Japanese subway, tried seven times to release anthrax from the top of a building and failed because the conditions were wrong, Billauer said.

"We still need to develop sophisticated vaccines, but we need to address the mechanics of a microbe release, not the lethality of it in lab tests," Billauer said.

Right now, the government is focusing on known threats. But to combat new biological diseases, scientists have to wait for them to emerge before they can develop vaccines, she said.

O'Toole agreed that the threat environment is too large to narrowly focus on a few diseases. "There are dozens of naturally occurring pathogens which could serve as bioweapons agents today ... the current approach of developing countermeasures against each potential bioweapon agent will prove futile," she said.

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