VaxGen Loses Anthrax Contract, CEO Resigns

Written by Staff Writer

Thursday, 25 January 2007

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In a massive restructuring program, American biopharmaceutical company, VaxGen Inc has said that it will be laying off more than half of its workforce following the decision by the government to terminate the $877.5 million anthrax vaccine contract awarded to it. The company's CEO, Lance Gordon too has resigned from his post, it added.

The contract, awarded in November 2004, was the first and biggest contract awarded to a company by the Bush government following fears of anthrax attacks by terrorists. It was a part of Bush's anti-terrorism program, Project BioShield.

The anthrax vaccine contract was terminated following the inability of VaxGen to meet a deadline to conduct a key test of the vaccine on humans. VaxGen, which had conducted a series of such tests earlier, had to stop as the U.S. Food and Drug Administration said that the vaccine might lose its potency as it was unstable.

The vaccine instability was first reported by VaxGen in March 2005. The company added that the federal authorities were arbitrarily changing the terms of the contract, demanding costly new requirements for testing the vaccine, an accusation later denied by Health and Human Services officials.

Commenting on the large scale layoffs, the company spokesman Lance Ignon said, "It's a sad day for us. We've lost a lot of great people". Meanwhile it has been reported that VaxGen will be replacing Gordon with its executive vice president James Panek as the new CEO of the company.

Panek joined the company in 2002 after serving as the senior vice president of Genentech's product operations. VaxGen said that Gordon will continue assisting the company as an advisor, though it has not been revealed whether it is a paid post.

VaxGen also reported the appointment of the investment bank Lazard as a part of the restructuring program with the specific task to explore the possibility of mergers or other business deals with other companies. In a prepared statement, Chairman Randall Caudill said, "We are already in early stage discussions with several potential strategic partners. The company has a number of significant assets of potential value to an acquirer or merger partner", though he refused to identify the companies.

Meanwhile Health and Human Services will be in the market looking for other companies interested in the contract. Spokesman Bill Hall revealed that HHS will be looking for new bids for the contract, though the supply of the first batch of vaccine will be delayed further.

Analysts believe that the English pharmaceutical company, Avecia is the frontrunner to bag the contract as it has already developed a genetically engineered vaccine which is similar to VaxGen. When asked whether the company will be able to provide the US government with 75 million doses, the company senior vice president for vaccines, Kevin Price said that they will have to agree to the terms, adding that such a vaccine will be ready "in the next couple of years."

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