Acambis' Springboard: Smallpox


By Amy Tsao A few years ago, Acambis (ACAM) was just another biotech outfit, plodding along with a few projects in its pipeline and burning through wads of money. The prospect of marketed products was distant. But it did make a fortuitous decision in late 2000 to buy a vaccine manufacturing plant. In the months after September 11, 2001, on fresh fears of bioterrorism, Acambis won a coveted contract worth $500 million to be the main supplier of smallpox vaccine for the U.S.

"People say we stumbled across a gold bar on the sidewalk," says Gordon Cameron, Acambis' recently appointed CEO. "That may be true, but we picked it up and made the most of it."

Indeed, three years later Acambis, which has operations in Cambridge, Mass., and Cambridge, Britain, is in an enviable position. The stockpile of smallpox vaccine it was asked to make is nearly complete. And now, with the leftover cash -- about $200 million as of the end of 2003 -- Acambis is working on several prospects in its pipeline. Among them are a modified smallpox vaccine, which AIDS suffers and other immune-compromised people can take, and vaccines against West Nile virus, yellow fever, Japanese encephalitis (similar to West Nile), and typhoid fever. It's also planning to use its cash toward product acquisitions, if appropriate.

With new infectious diseases emerging all the time and old diseases making a comeback, Acambis has plenty of vaccines to tackle. Its share price is up from $5 in late 2001 to $13.50 lately, but analysts still want it to prove it isn't a one-trick pony that will fritter away its cash. So Cameron's long-term goal is to show that Acambis can remain profitable -- "controlling our own destiny," as he puts it. Cameron has been with the drugmaker since 1996 and was most recently serving as chief financial officer.

BusinessWeek Online reporter Amy Tsao spoke to Cameron on Feb. 24 at BIO CEO, a biotech conference in New York City. Edited excerpts of their conversation follow.

Q: What's driving the demand for vaccines?

A: There are a lot of emerging diseases like West Nile virus, which no one had ever heard of until recently but suddenly appeared. That creates opportunity to come up with a cure or, even better, a preventative. Technologically, we can now develop vaccines against infections we couldn't before. The opportunities for what we can do with a vaccine have grown. We can make better and safer versions of existing vaccines.

A good example is what we're doing with our Japanese encephalitis vaccine. Existing ones require three to five doses. Through new technology we can develop a safer single-dose vaccine.

Q: What's the U.S. smallpox-vaccine situation now?

A: I think the U.S. is in pretty good shape. It's relying on an old stockpile of 15 million doses of the old dry vaccine, which they believe can be diluted down to make 80 million doses. The 210 million doses we're making, plus that stockpile of 80 million, covers the U.S. population. By the end of year, we will have supplied our doses of the vaccine.

Q: Is the plan to go ahead and vaccinate people?

A: No, because there are still safety issues. It's still an investigational product at the moment. The U.S. took a big gamble. It was an interesting situation. Because of the urgency of the need, they bought the vaccine, but they don't know if it works. It will, we believe. For us, the contract includes both making the vaccine and doing the clinical trials. We'll know the results toward the end of this year.

Q: So now that you've nearly fulfilled the contract, is that history for the company?

A: No. There's also a shelf-life issue. One of our revenue streams is to replace expired vaccine as it's sitting there. That's a steady revenue stream. At the same time, the government also wants from us a 'warm' manufacturing capacity so that we have surge capacity to make a large quantity quickly if it's needed.

To keep a facility warm, the best thing to do is to keep making vaccine. We're gunning for the government to place a minimum purchase order each year to replace vaccine that's lost its shelf life and to keep the facility warm.

Q: Are other countries making preparations for a possible smallpox attack?

A: Yes. We have contracts with 12 other governments. Half are in Europe, and half elsewhere. You can probably correlate who is interested with those who were part of the U.S. coalition in Iraq. They feel a threat. We haven't disclosed the names of any of them, but they're much smaller contracts. There's no other country that's adopted an approach of having one dose for every man, woman, and child.

Q: What about the status of a vaccine for West Nile?

A: [The] West Nile [virus] is in the U.S. countrywide but will go [more into the] South, for sure. We have the most advanced vaccine in development. We're first into [clinical trials], which we started at the end of 2003. Other companies are competing, but they're not in [clinical trials] yet. The dynamics are similar to flu, where the most at risk are older people and infants. The profile of the target market would be similar to flu. We'll just have to see how widespread the virus travels.

Is it going to be sold directly to consumers or bought by state health authorities? It depends. This is our highest R&D priority. But it's clearly not going to go away. You can't get rid of mosquitoes.

Q: How much demand do you see for a West Nile vaccine, and how would you price it?

A: FluMist [an inhalable flu vaccine being marketed by drugmakers Medimmune (MEDI) and Wyeth (WYE)] was clearly overpriced. We just started some market research to establish what kind of price we could command for a West Nile vaccine. We think there's no reason we can't get $40 or $50 for it. There's a bigger fear factor with it than with influenza. We did some models that this could be $400 million product, depending on pricing and demand, and assuming the virus' spread continues.

Q: So what should we expect from Acambis next?

A: Arilvax, our yellow fever vaccine, is probably next, in 2005, and then the West Nile vaccine and Japanese encephalitis in 2007. What I'd like to do is acquire products that can generate revenue, ideally now. We can in-license or acquire products that are already marketed by Big Pharma. They may have a $25 million or $50 million drug that isn't worth their resources to market. There are deals to be done. Tsao covers biotechnology issues for BusinessWeek Online. Follow her Biotech Beat column only on BusinessWeek Online


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