HHS shoots down bond plan for risky biotech bets

Don't count on Uncle Sam to fuel development of treatments against bioterror threats with government bonds. The Biomedical Advanced Research and Development Authority (BARDA), a unit of the U.S. Department of Health and Human Services (HHS), dismissed a biotech industry proposal for using government bonds rather than contracts to fund projects to advance vaccines and other meds for conditions resulting from bioterrorism, Bloomberg reported.

A crop of biotech companies has grown with the help of U.S. contracts to advance treatments that would provide countermeasures to bioterror attacks, as BARDA provides funding for programs that drugmakers would be unlikely to pursue on their own because of the uncertain market. Yet BARDA-backed drug developers such as the anthrax vaccine developer PharmAthene ($PIP) and others have pursued the plan to use bond funding rather than contracts in part to stem the costs and delays of contract approvals.

But the HHS unit scuttled the bond proposal based on an analysis that considered, among other things, "that there are high risks involved in a volatile bond market," Robin Robinson, BARDA's director, told Bloomberg in an email.

Biotech companies have an argument that the unpredictable timing of U.S. government contracts imperils those companies' operations. Take Bavarian Nordic, a Danish vaccine maker that relies on U.S. government contracts for a large portion of the company's revenue from a smallpox vaccine. As Bloomberg noted, the biotech said in August that it would shed hundreds of jobs and shutter a plant if the U.S. government didn't order more of the vaccine come January.

Still, even some people in the biotech industry see a mismatch between the inherent risks of drug development and bond funding.

"You think of bond projects for things like building a new bus stop,'' said Alan Shaw, CEO of the vaccine delivery specialist Vedantra Pharmaceuticals, as quoted by the news service. "They're not generally applicable to high-risk endeavors like vaccine development. The failure rate for biotechnology is huge.''

- check out Bloomberg's article