Acambis, Crucell poised to strengthen, Merrill vaccine biodefense report says

By Jennifer Chiou

New York, July 21 - The vaccine biodefense market could grow exponentially in the near future and Acambis, Crucell and VaxGen among others could be positioned to benefit, Merrill Lynch biotechnology analysts Peter Welford and Erica Whittaker said in a global vaccine biodefense report.

In the European biotech sector, the analysts said they believe Acambis, which has a $428 million market cap, may have the most compelling potential upside with its approved VIG smallpox vaccine.

Acambis licensed the rights for countries outside North America and Israel from Cangene, a Canadian company, Merrill noted. The analysts' sum-of-parts valuation for the company is nearly 220 pence per share.

Welford and Whittaker also highlighted the biodefense exposure of Bavarian Nordic, Crucell and to a lesser extent Intercell, noting that Merrill's biodefense sector has produced a positive return of 22% since early 2004.

Denmark's Bavarian Nordic has two smallpox vaccines, Imvamune MVA-BN in Phase II trials and Elstree-BN in Phase I trials. The company has a $407 million market cap.

Crucell, of the Netherlands, is in the preclinical phase with its pandemic flu, ebola, malaria and West Nile virus vaccines. Its market cap is $788 million.

Crucell is also entitled to a share of the revenues from the U.S. government contracts Sanofi Aventis won.

American company VaxGen was awarded an $877.5 million U.S. government supply contract for 75 million doses of rPA102, its anthrax vaccine, which is in Phase II trials.

Based on conversations with government and industry representatives, the analysts expect the United States to continue to lead the way in funding biodefense countermeasures.

Merrill noted Project BioShield set aside $5.6 billion with less than $1 billion awarded to date, thus substantial potential funding opportunities remain, they added.

Merrill said the market for biodefense vaccines is unique within the pharma-biotech industry as the majority of customers are governments; however, contracts have binary outcomes, producing significant financial uncertainty for biotechs.

The U.S. government's Project BioShield II could provide billions of dollars in incremental biodefense funding and Merrill said this helps validate the biodefense business model and could potentially increase the number of licensing deals between big pharma and biotech.

Analysts said growing concerns about the potential devastating impact of a lethal influenza strain, or a repeat of the 2004 U.S. vaccine supply shortfall, are likely to drive substantial future spending on the development of flu vaccines and technologies.

Welford and Whittaker said the U.S. government has already awarded contracts both for bird and pandemic flu vaccines.

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