03.24.10

Bioterror defense cozy sole-source deal backfires

Posted in Bioterrorism at 9:24 am by George Smith

Updated

Bioterror defense in the US is a good way to make big money.

As such, it’s done the American way, creating the impression of cozy dealing and business doublecross.

There is continual growth opportunity in vaccine and nostrum-making. Bruce Ivins saw to it.

But the anthrax vaccine biz is also very tangled. Its history shows bitter struggle between a small club of rivals, routine retaliatory and delaying government contract protests and regular efforts to drive each other to financial ruin.

The latest news is on PharmAthene, one of the major players in the Alliance for Biosecurity and what has become known more vulgarly as the “Murtha/O’Toole favor factory.”

Michael Goldfarb coined the name at the Weekly Standard and described it thusly back in January:

Several months ago we warned that Tara O’Toole who recently became Under Secretary for the Science and Technology Directorate at the Department of Homeland Security would reward her friends resulting in millions of dollars in gifts to John Murtha cronies who supported her nomination.

And it now appears the Murtha/O’Toole favor factory has begun production. In February 2008, the Department of Health and Human Services (HHS) issued a request for proposal (RFP) for a second-generation anthrax vaccine. This RFP was issued to be a re-procurement for a contract that had been canceled in 2006 for the same vaccine. And on December 7, HHS canceled the RFP.

After further review, it is becoming all too clear why this happened. Just as the year was closing and no one was paying attention, O’Toole’s friends at PharmAthene were awarded a sole-source contract, which has resulted in their stock nearly doubling

However, just this week a potential monkeywrench was thrown into the works.

From a Pharmathene press release on the 19th, one which caused its stock to sag:

PharmAthene, Inc. (NYSE Amex: PIP), a biodefense company specializing in the development and commercialization of medical countermeasures against chemical and biological threats, announced today that pursuant to the Federal Acquisition Regulations and pending a ruling in a protest recently filed by a competitor the Department of Health and Human Services (HHS), through the Biomedical Advanced Research and Development Authority (BARDA), has suspended work under the modification the Company announced on February 23, 2010 to its existing contract with BARDA for the research and development of SparVax(TM). June 11, 2010 is the deadline to rule on the protest.

David P. Wright, President & Chief Executive Officer, commented “We are confident that BARDA has complied with all applicable legal and contractual requirements in entering into the modifications with PharmaAthene and that the contract modification for SparVax(TM) will be upheld once a ruling on the protest is issued. In the meantime, funding under the original NIH contract transferred to BARDA in April 2009 will continue to support ongoing advanced development activities for SparVax(TM) until a decision is reached. We are disappointed that a competitor – whose primary motivation should be protecting our citizens from bioterrorist threats – has chosen to pursue a path intended to delay development of a key medical countermeasure for our nation’s biodefense arsenal.”

“PharmAthene Loses More Than 7.5%, Halts Work on Contract With BARDA Due to Protest,” reads one headline from a newswire broadcast.

But who is this competitor? PharmAthene’s press releases on the matter decline to say.

DD is betting it is Panacea Biotec, a Mumbai-based company and big vaccine maker which used to be a generous investor in PharmAthene.

WRONG!

Much crap deleted in update.

All credit to commenter for correction. My bad.

See here:

“Dick – you are way off on this story. Emergent Biosolutions filed the protest. You can check your facts by calling either Emergent or Pharmathene investor relations. the protest documents are public record. They filed on an obscure technicality.

“You might also ask why Emergent filed? They had nothing to gain as it was a contract renewal – not a competitive award. Did anyone file protests on Emergent’s contract extensions for their drug Vaxgen?

“If you are patriot Dick, you’ll understand that our country needs more companies in bioterror defense space. Emergent ran one company out of town – thus Vaxgen. Tried with others… and is now messing with Pharmathene. Open your eyes and check your facts.”

From a story in The Annapolis Capital:

PharmAthene, a biodefense firm whose headquarters are located downtown at One Park Place, is one of possibly just three companies in the world working on a more advanced vaccine, said David P. Wright, the company’s president and chief executive officer.

Two of those companies are based in Maryland. Emergent Biosolutions, a biodefense company based in Rockville, is in early development stages of a second-generation vaccine.

Emergent’s history with anthrax vaccine making was written up by David Willman at the Los Angeles Times in 2007.

Emergent, another Alliance for Biosecurity firm, engaged in battle with VaxGen, still another rival — based in San Francisco, which threatened its business as supplier of the anthrax vaccine now used by the US government.

“America’s sole supplier faced oblivion if its rival’s product was adopted,” reads the subhed at the Los Angeles Times. “It was time to call on its connections.”

The vaccine — BioThrax, and Emergent’s prime money-maker, has a long history of being criticized for the length of the innoculation regime and adverse effects, a potency requiring booster shots, and shelf-life limitations which it has fought to extend.

“The manufacturer, Emergent BioSolutions Inc. of Rockville, Md., prevailed in a bitter struggle with a rival company [Vaxgen] that was preparing what federal health officials expected to be a superior vaccine,” wrote Willman in 2007. “The episode illustrates the clout wielded by well-connected lobbyists over billions in spending for the Bush administration’s anti-terrorism program.”

A whispering campaign, fueled by lobbyists for Emergent, explained the Times, resulted in the competence of Vaxgen’s efforts being undermined. And a subsequent government revision in standards for its vaccine development delivery run and scientific problems within it crippled the firm’s ability to deliver on time.

This eventually resulted in the cancellation of Vaxgen’s second generation anthrax vaccine contract.

By 2008, Emergent had acquired that VaxGen anthrax vaccine in a fire sale brought about by the latter company’s financial collapse.

According to the San Francisco Business news:

VaxGen Inc. finished selling the assets of its anthrax vaccine program for $2 million.

The buyer was Emergent BioSolutions Inc., based in Rockville, Md … Emergent sells the only FDA-approved anthrax vaccine … Emergent aims to develop the vaccine to meet a request for proposals from the U.S. Department of Health and Human Services, which seeks to stockpile 25 million doses of anthrax vaccine for bioterrorism defense.

Paradoxically, in early 2009 a biodefense industry competitor protest was filed against Emergent’s second generation anthrax vaccine bid to the US government, stalling the business.

“Emergent is awaiting an HHS decision on its bid last year to sell 25 million doses of a separate anthrax vaccine to the agency — a negotiation process that has been delayed by a protest … ” reported the Washington Business Journal from that time here. This contributed to a significant earnings drop report for Emergent during a quarter.

US government requests for proposals on a second generation anthrax vaccine have, up until now at least, been an on-and-off again process, confusing to follow.

In late 2009, the US government cancelled its original second RFP for such a vaccine, after issuing a re-procurement RFP in 2008 for a bid cancelled in 2006.

PharmAthene was then awarded the sole-source contract for the 25 million dose second gen anthrax vaccine contract at the end of last year. Which brings the story full circle, it seems.

For now.

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Protest filings in the conducting of business re vaccine development against bioterrorism

2006: Emergent/DOR (both Alliance for Biosecurity firms) denied protest against DynPort Vaccine here. Complaint: Improper sole source contracting award.

2009: Panacea Biotech — see crossed-out cite above — protest that its second generation anthrax vaccine proposal was unreasonably excluded from US competitive range here. Judgment: Denied.

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