WP: Anthrax Vaccine Supplier Moves Closer to IPO -- Nov 11, 2006

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http://www.washingtonpost.com/wp-dyn/content/article/2006/11/10/AR2006111001680.\

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Anthrax Vaccine Supplier Moves Closer to Initial Public Offering

S. Rosenwald, Washington Post Staff Writer

Saturday, November 11, 2006; D01

A Gaithersburg drug company that makes most of its money selling the only

federally approved vaccine against anthrax is in the final stages of preparing

an initial public offering to raise up to $92 million.

Late last month, Emergent Biosolutions Inc. set the range of its offering at

$14 to $16 a share. The company said it intends to use the money on its

manufacturing facilities in Frederick and Michigan and to fund development of

several products, according to documents filed with the Securities and Exchange

Commission.

The company is tightly controlled by Fuad El-Hibri, its chairman and chief

executive. El-Hibri, who lives in Potomac, has an extensive background in the

telecommunications industry. He and his father have also had significant

involvement with a British provider of anthrax vaccines. El-Hibri, who became a

U.S. citizen in 1999, was born in Germany and grew up around Europe and the

Middle East before attending Stanford and Yale universities.

El-Hibri controls 99.5 percent of the Emergent's outstanding stock. After

going public, he will control 81.4 percent. In SEC documents, the company said

El-Hibri " will continue to have substantial control over us after this offering,

including through his ability to control the election of the members of our

board of directors, and could delay or prevent a change of control. "

Biotech analysts said Emergent could have a tough time with its initial public

offering. Just two biotech companies -- Osiris Therapeutics, a Baltimore

biotechnology firm working on stem-cell therapies, is one -- went public in the

third quarter, and the market for IPOs in general has been spotty.

According to Thomson Financial, more companies have withdrawn IPOs this year

than in any of the previous five years, indicating investors are skeptical of

new company stock offerings despite the generally strong market for stocks. And

venture capital-backed IPOs, traditionally the most prolific source of new

company issues, fell significantly in the third quarter.

Companies that have managed to go public are in a broad range of industries,

and those that have had the most success are in tried-and-true money-making or

technologically hot industries. For example, locally, government contracting

giant SAIC Inc. is up 33 percent since its Oct. 12 IPO. And Osiris Therapeutics

is up 89 percent since its August IPO.

Emergent Biosolutions' effort to finish its IPO comes as federal health

officials deal with a troubled $877.5 million contract for another anthrax

vaccine, made by VaxGen Inc. VaxGen is supposed to provide 75 million doses for

the national stockpile, but the Food and Drug Administration recently halted

human testing of the California company's vaccine because of concerns about its

potency, throwing the entire contract into doubt.

VaxGen's contract was awarded under the Project Bioshield initiative, which

seeks to develop modern vaccines and drugs for chemical, biological,

radiological or nuclear attacks. VaxGen's proposed anthrax vaccine, if

successful, would require fewer doses over a shorter period of time to produce

immunity than the older version made by Emergent.

Emergent has been urging Congress and federal health officials to buy more of

its anthrax vaccine, called BioThrax, for the stockpile. The efforts are being

aided by Louis W. Sullivan, who was health and human services secretary from

1989 to 1993, and Jerome M. Hauer, a former senior HHS official who oversaw

public health emergency preparedness. Both men are on Emergent's board.

So far, the government has purchased 10 million doses.

In its SEC filings, Emergent said the government's efforts to stockpile a

newer version " would limit, possibly significantly, the market for BioThrax. "

The company said it is in the early stages of developing a next-generation

anthrax vaccine and products for other diseases and bioterrorism agents.

Emergent officials could not comment because the company is in a quiet period

before its offering.

While the $5.6 billion Project Bioshield program is potentially the most

lucrative outlet for BioThrax, Emergent also sells the vaccine to the Defense

Department. Since 1998, the Defense Department has vaccinated 1.5 million people

with more than 5.7 million doses, according to SEC documents. It is providing

1.5 million doses to the military through September 2007.

BioThrax has been controversial in the military. Some soldiers have complained

of significant side effects and have refused to use the vaccine, leading to a

court battle that temporarily stopped mandatory vaccinations. The government

recently resumed mandatory vaccinations with BioThrax after the FDA said the

vaccine was safe and effective.

T. McCamant, editor of the Medical Technology Stock Letter, said

Emergent's IPO could be particularly difficult because the only customer for

bioterrorism products is the government.

" That's a tall trick because the money will come in lumps at best, " he said.

Staff writer Terence O'Hara contributed to this report

Randi J. Airola, © 517-819-5926

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