Two years after an anthrax scare gripped the nation, VaxGen Inc. found itself on the receiving end of a lucrative contract from the U.S. government related to its development efforts for a vaccine to the pathogen.

The Brisbane, Calif.-based business was given an $80.3 million grant from the National Institute of Allergy and Infectious Diseases, an agency that parceled out nearly $200 million in contract funding this week. A unit of the National Institutes of Health, the NIAID earlier this week awarded a number of biotech companies similar grants to work on vaccines for HIV and other potential bioterrorism threats. (See BioWorld Today, Sept. 30, 2003.)

"I think our ability to win this contract reflects the performance of the vaccine so far, and our ability to have met the milestones associated with our original contract," Lance Ignon, VaxGen's vice president of corporate communications, told BioWorld Today, calling the award "a stabilizing event for the company."

Initial development of the product, called rPA102, stems from prior government collaboration. The vaccine, originally researched at the U.S. Army Medical Research Institute of Infectious Diseases in Fort Detrick, Md., cannot cause anthrax infection as it is made of an alum adjuvant and a purified protein designed to induce antibodies that neutralize anthrax toxins.

Last fall, VaxGen accelerated its development of rPA102 following a first contract from the NIAID. The early federal funding supported animal studies, a 100-patient Phase I trial and the production of 2,000 doses.

The clinical safety trial, which began in June, has since completed enrollment at four U.S. sites. VaxGen said it expects to conclude the study early next year. The Centers for Disease Control and Prevention in Atlanta has analyzed human immune responses to date, and forwards the data to the NIH in Bethesda, Md.

The company's latest award, by far the largest single contract from the government agency this week, is scheduled to be paid over a three-year period to fund animal studies, Phase II trials, the scale-up of the company's manufacturing process and the production of 3 million doses of rPA102. Because of the nature of anthrax, the recombinant protective antigen's efficacy will be determined through animal testing, as per the FDA's two-animal model, instead of in humans.

"Obviously, you want to test it for safety in humans and its immune response," Ignon said. "You correlate that immune response in humans with the immune response in animals that are challenged with the actual pathogen."

Therefore, a number of those steps will prove essential for eventual commercialization of the product, and also could pave the way for a larger government-funded manufacturing contract down the road.

Should the government approve Project BioShield, a multibillion-dollar initiative aimed at building up the nation's biodefense capabilities, VaxGen hopes to get a piece of the pie. The company said the Congressional Budget Office has earmarked $700 million to purchase a 60 million-dose stockpile of a recombinant protective antigen anthrax vaccine and another $700 million to maintain and replenish the stock.

The only approved anthrax vaccine, AVA, requires six injections over 18 months to confer immunity and is a filtrate that includes various materials that hamper its purity, VaxGen said. On the other hand, rPA102 is designed to elicit an immune response through no more than three doses. VaxGen, which plans to manufacture the protein antigen used in rPA102 at its facility in South San Francisco, said the plant could annually produce 100 million doses of rPA102.

"This is applying modern recombinant technology to the manufacture of a vaccine that previously had used much older technology," Ignon said, noting that the facility was created as part of a joint manufacturing venture called Celltrion Inc., backed financially by South Korean investors. The plant features 1,200 liters of expandable capacity, while construction continues in Inchon, South Korea, on another manufacturing building that will house 50,000 liters of expandable capacity.

Production needs under the original contract were fulfilled by the Battelle Memorial Institute in Columbus, Ohio, which also conducted the first animal challenge studies. The Health Protection Agency of England and Wales carried out assay work. Both subcontractors will fill similar roles under the latest contract work.

"We had to go from the contract's award to clinical trials, from October to June, in a remarkably fast timeline," Ignon said. "It was a whole lot of work to complete, but we did it."

Beyond the anthrax vaccine, VaxGen's pipeline includes vaccines for smallpox and HIV. Its smallpox product also could be in a position for funding under Project BioShield, which overwhelmingly passed through the U.S. House of Representatives and remains under consideration by the U.S. Senate.

In cooperation with Kaketsuken, a government-backed business in Kumumoto, Japan, VaxGen entered an agreement to begin U.S. studies of an attenuated smallpox vaccine called LC16M8. Ignon said the product was evaluated in more than 100,000 people overseas, showing no serious adverse events.

VaxGen aided Kaketsuken's efforts to achieve U.S. manufacturing standards, after which it produced 1 million doses and sent a small amount to VaxGen for animal studies it plans to conduct by the end of this year. Ignon said clinical studies are scheduled to begin early next year.

The company also plans to release findings from its second Phase III trial of AidsVax by the end of this year. The Thai trial follows an initial Phase III study that failed to reduce HIV infection within the study population as a whole, despite revealing a measure of efficacy among specific racial groups - blacks and Asians. Those findings sent VaxGen's stock into a 50 percent drop. (See BioWorld Today, Feb. 25, 2003.)

The program will proceed if the results point to a robust level of efficacy, Ignon said, but if the findings are ambiguous, the company will look for support from government or philanthropic agencies to continue its development.

The company's stock (NASDAQ:VXGN) rose 58 cents Wednesday to close at $12.65.