Almost overnight, bioterrorism prevention has become a multibillion-dollar business. And some biotechnology companies looking for a steady source of revenue and a deep-pocketed customer are paying heed — in some cases, tailoring drug trials and structuring business-development efforts to government plans to create a biotech armory.
In the last four years, the government has opened the spigot for bioterror research, allocating $14 billion to counter a potentially lethal attack. The money — most of it spilling from government coffers since 9/11 — has been earmarked for everything from tackling letter-borne anthrax to inoculating hospital workers against a smallpox assault. Congress set aside $5.6 billion for Project BioShield, a massive effort to stockpile vaccines, antidotes, and tests in a frontline pharma defense against a bioterror attack.
The Biosecurity Center of the University of Pittsburgh Medical Center checked the books of government agencies and concluded that civilian bioterror programs consumed $414 million of the federal budget in 2001. Next year, that figure will hit $7.6 billion. The military’s budget for biodefense would add billions more.
That money is helping to fund several biotech start-ups and is encouraging ambitious research and development plans among established drug companies. For them, there are plenty of strings — and no small fears — attached. But this is one opportunity that some biotechs see as simply too good to pass up.
They are, no doubt, buoyed by Congress’s seemingly unbridled enthusiasm. Before being signed by President Bush on July 21, Project BioShield won Senate passage, 99 to 0 (John Kerry was the lone abstention). The House adopted the Senate bill without any changes — something almost unheard of in modern-day Washington — to speed the bill to the president’s desk.
ENCOURAGING R&D
The government already has opened its coffers to companies that can fill contracts today for tens of millions of vaccinations. But there’s an R&D component at work here as well, and officials have signaled their intent to help to push new and better drugs through the pipeline.
At this year’s Biotechnology Industry Organization conference in San Francisco, Charles Gallaway, PhD, director of the chemical-biological defense directorate of the Defense Threat Reduction Agency, summed up the government’s attitude: “We want to encourage and reward innovation. In the process, we are willing to accept more risk.”
“We want to work with industry,” echoed Klaus Schaefer, acting deputy assistant to the secretary of defense for chemical, biological, radiological and nuclear defense. He has a budget of $1.2 billion to prove it, including $25 million earmarked for the development of drugs that can counter the effects of toxins.
Vaccine production will ramp up under Project Bioshield. The 10-year program encourages biotechs to develop products that would protect the public health in the event of a bioterrorist attack.
MAXIMILIAN STOCK LTD. / PHOTO RESEARCHERS, INC.
Most of what the government wants to buy are FDA-approved drugs and products. But much of what it has to choose from now is problematic at best and, often, woefully short of what’s needed. Smallpox vaccines have been shunned by legions of healthcare workers leery of potential side effects. Workers responding to the anthrax attack had only imperfect vaccines and antibiotics to rely on. Some antidotes work on select populations and have a short shelf life — adding to the long-term cost of the program.
“I hope we get up to six years,” Philip Russell, MD, of the Department of Health and Human Services told BIO 2004.
Biotech companies have responded, such as U.S. Genomics, the beneficiary of a $7.5 million contract to develop systems to detect and identify airborne pathogens. A little more than a year after September 11, Anacor Pharmaceuticals inked a $21.6 million contract with the Defense Advanced Research Projects Agency (DARPA) and the U.S. Army Medical Research and Materials Command to develop new therapeutics against biowarfare agents such as anthrax. That same day, the company also pocketed $7 million in new venture capital — and the juxtaposition of public and private money has been a key part of its business development plan.
Winning a government contract is a “good way to kick-start a business,” Anacor CEO David Perry told BIO. Yes, and it is also much less expensive than relying entirely on the venture capital money that is available today.
But Perry, like many biotech executives, says that the stream of government cash has some big hooks attached: “Project BioShield has to develop into a market” with “predictable” funding patterns.
“It may seem like a lot of money, but it probably isn’t enough.”
— LUCIANA BORIO, MD, UPMC CENTER FOR BIOSECURITY
And Congress — with a history of hot and cold reactions to science projects — can be anything but predictable. Some consultants caution biotechs to make sure the government pots they dip into are geared to accept the kinds of risks involved in some drug development projects.
“Everybody’s thinking about Project BioShield,” Cori Gorman, a principal at DNA Bridges, a consultancy group, told BIO. “But there needs to be a little reality check.”
The venture capital and pharmaceutical worlds caution that defense companies traditionally operate on much smaller margins than those for which biotech typically aims.
One alternative Gorman suggests is going to DARPA, which has a hefty appetite for funding blue-sky research — the riskier the better. Even better, she says, “DARPA has lots of money.”
PRIORITIES, PRIORITIES
But add it all up, and some bioterror experts still see a big hole right where the money is needed most.
“It may seem like a lot of money, but it probably isn’t enough,” says Luciana Borio, MD, a senior fellow at UPMC’s Center for Biosecurity. About $1 billion of Project BioShield’s budget will go to the purchase of a second generation vaccine of anthrax — just one piece of many that need to be assembled. Plus, she reminds us, that money is spread out over 10 years. Many new drugs are needed to combat a potential bioterrorist attack, she adds, and they won’t be cheap or easy to push through the pipeline.
Of particular concern, she says, is that while Congress has been allocating more money to biodefense, it hasn’t earmarked large amounts specifically for new drug development. The National Institutes of Health is reluctant to fund drug development, preferring to stick with its mission of backing scientific research. DARPA has a big appetite for high-risk research but doesn’t offer money for clinical trials. Many biotech companies are unwilling to undertake the risk themselves without some government guarantees.
“Clearly, the government won’t be able to fund everybody,” says Borio, “but there must be a mechanism to at least prioritize the more promising drugs. We need a system in which drugs that meet certain milestones receive support — especially for smaller companies.” Large companies, she suggests, could be offered tax credits and other incentives to spur development.
Or, maybe everyone would benefit by recalibrating their strategic business sights.
For biotechs that adopt the government-funding strategy, there may be a bigger market in the future in meeting the kind of global health needs created by an unsuspected virus attack rather than terrorists, Stephe Sammut, a venture partner with a special focus on biodefense projects at Burrill & Co., told BIO.
In terms of payback, he says, “that’s where it fits together.”