Role of small biotechnology companies in the fledgling biodefense vaccine industry

KEYWORDS:

• Biodefense
• vaccine
• small biotechnology
• government funding
• product development

Since Edward Jenner introduced immunization with cowpox in the late eighteenth century for smallpox prevention, vaccines have saved countless lives and trillions of dollars in public health and related expenditures. At the same time, a 40-billion-dollar-worldwide vaccine market has been created that is dominated by a few large pharmaceutical companies [1]. While the Food and Drug Administration (FDA) lists 80 licensed vaccine products [2], the number of diseases (22 pathogens or their toxic products) targeted is much smaller due to multiple competing products for high-value markets. This is a sobering reminder that successful vaccine development is a colossal undertaking plagued with risks and requires companies with a strong financial backbone as well as extensive experience and infrastructure.

In 2001, letters laced with anthrax spores were mailed to media outlets and prominent politicians in the United States infecting 22 people and killing 5 [3], underscoring the grave consequences and exhibiting lack of preparedness associated with a biological attack. The anthrax scare single handedly created a new biodefense industry charged with development, licensure, and stockpiling of medical countermeasures (MCM) to protect civilians and first responders against biowarfare threats. In the wake of this unprecedented urgency, National Institute of Allergy and Infectious Diseases (NIAID) significantly increased efforts to fund research for MCM development for pathogens designated as bioweapons by the Center for Disease Control and Prevention (CDC). Since NIAID mandate traditionally covered early R&D [4], Project Bioshield legislation (2004) and creation of Biomedical Advanced Research and Development Authority (BARDA) in 2006 were designed to fund advanced development, FDA licensure, and stockpiling of MCM. The FDA created a regulatory path, the ‘Animal Rule,’ for biodefense product approval in absence of human efficacy data [5].

The infusion of money into the biodefense industry, more than $78B from 2001 to 2014, created a unique opportunity for biotechnology and pharmaceutical industry. While Project Bioshield and BARDA attracted several small- and mid-sized biotechnology companies, large pharmaceutical companies largely shied away from this endeavor beyond influenza vaccines and antibiotics with substantial commercial interest. Fourteen years after the anthrax attacks, the Strategic National Stockpile (SNS) has stockpiled vaccines only for three major indications: influenza including pandemic H1N1 and H5N1 subtypes [6,7], anthrax [8], and smallpox [9–11].

In 2004, due to concerns of potential adverse effects and the requirement for multiple injections of the anthrax vaccine known as Biothrax®, the government awarded a $877M contract for development and delivery of 75 million doses of a recombinant-protective antigen (rPA) anthrax vaccine to Vaxgen, a small biotechnology company with limited advanced development experience. This contract was terminated two years later due to formulation and stability problems leading to multiple product development delays. While lower levels of funding currently support rPA development [12], BARDA’s strategy has largely shifted toward supporting Emergent Biosolutions (a mid-size Pharma) to enhance BioThrax® through dose-sparing studies, expanding application to post exposure prophylaxis, increasing manufacturing capacity, and expanding availability to at-risk populations [13].

To date, only seven products have been licensed under the Animal Rule (Cyanokit®, Mestinon®, Levaquin®, ABThrax®, Heptavalent Botulism AntiToxin (BAT®), Avelox®, Anthrasil®, as well as Biothrax® for post exposure prophylaxis), all by mid-size and large pharmaceutical companies [14]. Of these products, only three represent novel product entities (Anthrax Immune Globulin Intravenous, Botulism Antitoxin, and anti-PA monoclonal antibody Raxibacumab). The fact that the only vaccine among them was previously approved via traditional licensure methods for a separate indication, underscores the difficulty of the government to attract and partner with pharmaceutical companies for development of complex products such as vaccines. Challenges to licensure under the Animal Rule include lack of well-characterized and appropriate animal models, limited natural history clinical data, heightened biocontainment requirements, inability to conduct human efficacy trials, the need rapid onset of immunity ideally after a single dose, inclusion of novel, potent adjuvants, and extended shelf-life requirements [15,16].

The absence of small biotechnology from the roster of companies with late clinical stage countermeasures or stockpiled products is partially related to the high risks of working under government contracts. Hurdles for small companies taking on large government contracts include complicated federal acquisition regulations, requirement for specific financial systems including earned value management for most large contracts, exposure to potential liability and risk of litigation, payment systems that require major upfront investment by the company, dependence on shifting government policies, and a complex approval pathway for licensure of new biodefense-related products. Smaller companies may be unable to recruit, pay, and retain highly experienced personnel especially since the pay scale for employees paid under government contracts is limited, even for executives, with anything above the cap coming out of the company’s own funds. The above, combined with weak infrastructure of small biotechnology companies, makes it difficult for them to successfully take on late-stage vaccine development. Most venture-funded small biotechnology companies are reluctant to take risks like Vaxgen did by accepting an $877M contract only to be paid nothing in the end. Although the VaxGen technology was eventually acquired by Emergent BioSolutions and is now back on development track, this story still sends shivers down the spine of investors in companies in the biodefense space. Since then, the government has implemented additional incentives such as milestone payments, simplified acquisition procedures, and market guarantees. Despite these incentives, the risks remain fairly high for small biotechnology companies with limited resources.

On the other end of the spectrum, the small biotechnology community has been very active conducting cutting-edge discovery and preclinical R&D for biodefense targets. NIAID and the Department of Defense (DoD) have been the engine of these efforts. Small business grants and early-stage funding from DoD support discovery research through proof-of-concept with promising candidates often having a chance for transition through the so called valley of death under NIAID various cooperative agreements and development contracts or DoD grants and contracts ranging from $1 to 20M. Over 200 awards were made under National Institute of Health (NIH) cooperative partnerships for biodefense and emerging infectious diseases (EID) with a significant portion of that being for development of vaccines and adjuvants. Using NIH RePorter system, we performed an analysis of 60 small biotechnology companies winning the highest amount of biodefense-related Small Business Innovative Research (SBIR) funding between 2003 and 2015. Most of these companies were also awarded one or more partnership grants (U01 or partnership R01). These 60 companies collectively won over $400M of SBIR and NIH Partnership funding with the top 10 companies winning an average of $25M. Remarkably, over 85% of these companies are still in business, a much higher survival rate than typically seen in the industry. However, only 12 of these companies (20%) are primarily focused on vaccines or adjuvants, which is not surprising given the long and complex development path for vaccines.

Several promising vaccine candidates have been developed by small biotechnology companies under NIH and Army/DoD grants. For example, NIAID and DoD supported several companies with vaccine platforms for filoviruses (Bioprotection Systems/NewLink Genetic, Profectus, Integrated Biotherapeutics, Paragon, Inovio, and Vaxart). These efforts came to fruition during the 2014 Ebola virus disease (EVD) outbreak where four vaccine platforms [17] were transitioned into clinical trials under an exemplary coalescence of support from governments and international organizations such as Wellcome Trust and the Bill and Melinda Gates Foundation [18]. Interestingly, this global health emergency enticed larger companies such as Merck, GSK, and Johnson & Johnson to enter the field partly in partnership with smaller companies who developed the underlying technology. Alliances formed to develop, manufacture, and deliver vaccines during the EVD outbreak can be a blue print for cooperation between small biotechnology, large pharmaceuticals, and governmental and nongovernmental organizations in managing response to future outbreaks.

A number of small biotechnology companies (Vaxin, AlphaVax, Nanotherapeutics, GeneSegues, and Soligenix) have also been supported with small grants from NIAID and DoD for development of vaccines for tularemia, ricin, equine encephalitis viruses, and botulinum neutrotoxin. Often, these grants enable technologies such as expression platforms, formulations, delivery, and adjuvants that can be broadly applicable across multiple pathogens. Funding for products with individual indications can be difficult to obtain given recent priorities of government agencies for broad spectrum or platform technologies. Thus, the small biotechnology companies have been more inclined to seek government funding for platform technologies with broader application. However, the use of federal funding for discovery can have downsides of which investors may not approve, like intellectual property sharing with the government.

Another important facet of government support that enables small biotechnology companies is the preclinical, manufacturing, and clinical services offered by NIAID. Preclinical testing of novel vaccine candidates can be sought through ‘in kind’ testing services through NIAID and, more recently, also by BARDA and DoD. These services can provide proof-of-concept data to enable additional future funding through competitive grant and contract vehicles. In 2012, BARDA funded three new manufacturing sites (Emergent Manufacturing Operations Baltimore LLC, Novartis, Texas A&M University System) to develop and manufacture MCM. In 2014, the DoD awarded a similar contract to Nanotherapeutics to establish a MCM advanced development and manufacturing capability for both small molecule and biologic products of DoD interest. These centers are expected to manufacture products and provide small biotechnology companies with regulatory, quality, and technology expertise. Through the Vaccine and Treatment Evaluation Units (VTEU), the NIAID conducts clinical trials for biodefense and EID vaccines. Examples of VTEU support for small biotechnology vaccine programs include baculovirus-produced influenza vaccines (for example, Novavax and Protein Sciences Corp.), DNA-based anthrax vaccine (Vical), and attenuated staphylococcal enterotoxin B (STEBVax) vaccine (Integrated Biotherapeutics). VTEU and the preclinical support provided by NIAID are invaluable tools for small biotechnology companies with limited financial resources. However, as a result of government bureaucracy and competing priorities, these studies often proceed at a slow pace and public health emergencies such as pandemic influenza or EVD can derail testing timelines.

Overall, investors do not seem very interested in funding biotechnology companies, much less funding biodefense initiatives in small companies that have questionable to no return [19]. Return on investment in the biodefense arena is based on stockpile requirements determined by the government threat assessments, or biological attacks and EID outbreaks that cannot be anticipated. Biotechnology companies consume capital quickly and decisions to continue with products have to be made early due to risk. In addition, while the nondilutive nature of funding is very attractive, the government is considered a highly volatile and unreliable funding partner. Swings in funding are driven by political winds and unexpected public health emergencies and program monies can be rapidly changed with little notice to funded companies. Funding cycles for both grants and contracts (~12–18 months from submission to award) can have devastating effects for continuous operating costs of small, private biotechnology companies. Furthermore, lack of commitment to funding the full development cycle puts the viability of small companies that enter this field at a greater risk.

Conclusions

The financial support of government and nongovernment organizations is critical to drive innovation for biodefense products. However, biodefense funding is only a very small portion of total research and development set asides within both health and human services and the DoD [19], although steady and significant funding is critical for discovery and development of MCM for biodefense indications. Clear and consistent funding priorities and plans across government agencies would assist small biotechnology companies with determining areas of interest. In addition, hurdles associated with government funding include bureaucracy, funding gaps, and timelines associated with grant/contract review and award. Further financial incentives for small biotechnology companies could be special tax breaks for out of pocket research and development monies spent on biodefense-related projects.

Innovation within biotechnology companies sets the stage for partnerships between biotechnology and larger pharmaceutical companies (or acquisitions of companies or product) to move toward successful MCM licensure. This appears to be the most common path, and only a few small biotechnology companies make the leap into mid-size or publically traded companies (for example, Novavax, Emergent Biosolutions, and Inovio Pharmaceuticals). The path to commercial product licensure takes an average of 10 years and $200–900M from ‘bug to drug’ if continuous funding is provided [20]. Gaps in funding will stall or completely halt development of ‘government interest only’ MCM, thus requiring commitment on the part of these well-funded pharmaceutical companies for successful delivery of MCM. Since the global biodefense market is expected to reach >13B$ per annum by 2020 [21], there may be financial incentive for larger players to enter this market.

Declaration of interests

KL Warfield is an employee of Emergent BioSolutions. MJ Aman is an employee of Integrated Biotherapeutics Inc. The authors have no other relevant affiliations or financial involvement with any organization or entity with a financial interest in or financial conflict with the subject matter or materials discussed in the manuscript. This includes employment, consultancies, honoraria, stock ownership or options, expert testimony, grants or patents received or pending, or royalties.