VaxGen starts negotiations with HHS on modifications to anthrax vaccine contract

By Jennifer Lanning Drey

Eugene, Ore., June 19 - VaxGen, Inc. began formal negotiations with the Department of Health and Human Services last week regarding modifications the agency made to its contract with VaxGen for a national stockpile of anthrax vaccine, according to Lance Gordon, president and chief executive officer of the company.

"What the outcome of that may be, I can't tell you, but it certainly is a constructive approach to protecting what has been one of the most successful public-private partnerships," Gordon said Monday at the Rodman & Renshaw 3rd Annual Security, Biodefense & Connectivity Investor Conference.

HHS signed a contract in November 2004 to purchase 75 million doses of VaxGen's recombinant anthrax vaccine candidate for more than $877.5 million.

Last month, HHS told VaxGen it would be required to conduct an additional clinical trial and repeat one of its animal efficacy studies after meeting the original terms of the contract, Gordon said.

"Those [requirements] do have the effect of delaying performance and causing the acceleration of cost to the company," said Gordon on Monday.

VaxGen had made many attempts to negotiate compensation with HHS in the past; however, the company said until recently it had not received a response and was considering taking legal action.

"We are preserving our legal rights, certainly, but it is not in the company's intention to use litigation to satisfy this," Gordon said Monday.

VaxGen's anthrax vaccine is being developed under special rules that will allow the company to deliver the product to the U.S. government for the national stockpile before it has received Food and Drug Administration approval. Its efficacy will be demonstrated in relevant animal models.

"We and HHS share the objective of a reliable supply of vaccine at the earliest sign to protect the American population. No one wants to have another attack happen and an unprotected country," Gordon said.

In clinical trials, about 600 participants developed significant immune responses from the vaccine, according to Gordon.

The company plans to begin a second phase 2 trial this summer to finalize the formulation of the product for the national stockpile, he added.

Commercialization opportunities

VaxGen also said Monday that it will work to commercialize the anthrax vaccine after deliveries to HHS have started or when they are complete.

The company plans to submit an application to the FDA to study the use of the vaccine both before and after an anthrax attack, he said.

If the vaccine eventually obtains FDA approval, VaxGen believes the U.S. military, foreign governments and state and local governments could be among additional new markets for it.

"We do anticipate commercializing this product globally," said Gordon.

However, he also cautioned on Monday that the new regulations and procurement pathways under which the company is working could lead to changes in procedure in the future.

"Much of what we're doing is new. These new pathways are subject to political pressure and changing priorities," Gordon said.

VaxGen is a biopharmaceutical company that develops, manufactures and commercializes biologic products for the prevention and treatment of human infectious diseases, including anthrax, smallpox and meningitis B. The company is located in Brisbane, Calif.

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