Next week the Senate is expected to revamp Project Bioshield, a $5.6 billion spending plan meant to shore up the nation's defenses against a bioterror attack.The original law, enacted in June 2002, was supposed to provide inducements for biotech companies to work on vaccines and antidotes for threats such as anthrax and Ebola. However, the structure of the bill actually served as a disincentive. That's because companies weren't going to get paid until the products they developed were approved for use. Large biotechs such as Amgen ( AMGN) and Genentech ( DNA) had little interest in the government's program. After all, they had businesses to run. At the same time, several smaller firms were salivating over the possibility of large contracts and eagerly signed up. The problem has been that participating companies have had a difficult time successfully developing products and getting through the period before a treatment is successfully launched, when cash is going out but none is coming in. The newest bill, sponsored by Sen. Richard Burr (R., N.C.) will, among other things, add $1 billion to the program to fund companies prior to product approval. That should ease the financial strain for firms developing products that the government deems essential to protecting our nation's health. Below are some of the publicly traded companies that are researching ways to protect the American public from bioterror threats. Just keep in mind that many of these companies have very low market caps, are thinly traded, have little or no revenue or track records and should be considered very speculative.
Nevertheless, it's not difficult to imagine a threat sending these stocks soaring, so you should be aware of which ones could participate in a rally caused by fears of bioterror.
If you plan on investing here, know that you'll be one of only a handful of stockholders. The Gaithersburg, Md.-based company is tightly controlled by CEO Fuad El-Hibri, who controls 81% of the outstanding stock. Aside from its anthrax fighter, Emergent is also working on a vaccine against botulism. Meanwhile, Human Genome Sciences ( HGSI) has received a $165 million contract from the Department of Health and Human Services for 20,000 doses of ABthrax. Roughly 90% of the total funds are expected in 2008 upon delivery of the drug. As for smallpox, Acambis ( ACAM) has two offerings for treating the virus. One is a vaccine called ACAM2000, and the company expects to sell 10 million doses for $30 million to the U.S. government this year. The other product recently was dealt a setback after the U.S. said it wouldn't be considered for a potential $1 billion contract. Acambis plunged 40% in one day. The company was working on the second product with Baxter International ( BAX), the distributor of ACAM2000. Bavarian Nordic, whose stock trades in Copenhagen, is now believed to be the favorite for the contract. A company still doing research is Siga Technologies ( SIGA), whose SIGA-246 smallpox antiviral is in preclinical studies. The company claims SIGA-246 is the first drug ever to demonstrate 100% protection against human smallpox in a primate trial. Understand that smallpox is considered by health authorities to have been eradicated, but samples of the virus remain held in labs. Were a case to appear today, it would be "the result of an intentional act," the Centers for Disease Control and Prevention says on its Web site. "A single confirmed case of smallpox would be considered an emergency."
Also high on the list of the government's worries are hemorrhagic fever viruses such as Ebola. An Ebola vaccine, being developed by Dutch biotech company Crucell ( CRXL), recently entered phase I trials with 48 healthy volunteers. Currently, no cure or vaccine for Ebola is on the market.