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VaxGen's anthrax vaccine hits snag

November 04, 2006|From the Associated Press

VaxGen Inc.'s $877.5-million federal contract to produce an anthrax vaccine hit another snag Friday that delayed delivery of the shots a third time and jeopardized the struggling company's future.

The Food and Drug Administration is concerned that the vaccine will lose its potency too fast to be effective and halted a pivotal human test of the experimental drug, the company said.

In a conference call with analysts, the company said its vaccine lost potency over time, but VaxGen scientists didn't believe that the loss was significant.

Chief Executive Lance Gordon said company representatives hoped to meet with FDA officials soon to discuss the agency's refusal to allow the human test to begin.

The Brisbane, Calif.-based company's stock fell $2.22, or 56%, to $1.77.

The FDA's demands will further delay delivery of 25 million genetically engineered doses that VaxGen was supposed to begin shipping this month under a contract it won two years ago from the Department of Health and Human Services.

Because the company won't begin the human test on time, the federal government can cancel the contract. The company won't receive any payments until it begins delivery. The department is VaxGen's only customer.

"That is the risk associated with the contract," VaxGen executive James Panek said.

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