A new mode of bird-flu fighting

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http://www.philly.com/mld/inquirer/business/14351170.htm A new mode of bird-flu fightingA small Malvern drugmaker has devised a way that may make vaccine faster, cheaper and more potent.By LoydInquirer Staff Writer Rick Bright and his former colleagues at the Centers for Disease Control and Prevention have seen many companies jump on the avian-flu bandwagon, with a slew of potential treatments if a pandemic breaks out. "I've heard so many things, so many wild ideas. I've seen it all," said Bright, a virologist and immunologist at the CDC's influenza branch for nine years. But it is a small Malvern company, called Novavax Inc., that Bright says may have a viable solution to bird flu. The researcher recently left the CDC to take the helm of Novavax's vaccine research. Drugmakers are racing to come up with new approaches to bird flu, as the lethal H5N1 strain has killed millions of birds and spread from Asia to Europe, Africa and the Middle East, killing more than 100 people. The virus is not yet transmissible among people. Just eight months ago, Novavax had a money-losing estrogen lotion and shares trading at less than $1. But the drugmaker has had a remarkable change of fortune. For that it can thank avian-flu fears and a technology that may hold the promise of making an avian-flu vaccine faster, cheaper and more potent than conventional influenza

vaccines. "We are very excited about Novavax's approach," said Terry Tumpey, senior microbiologist at the CDC, which is working with more than a dozen smaller companies on new technologies to narrow the time it takes to make an avian-influenza vaccine. Novavax has a different way of making flu vaccine, using virus-like-particle technology (VLP) that extracts protein genes from influenza virus and turns them into particles that mimic the virus and trick the immune system into creating antibodies. The recombinant particles can be customized into a vaccine in about two to three months, instead of the six to nine months it takes to create a conventional flu vaccine in chicken eggs. Other companies are developing VLP vaccines for AIDS, severe acute respiratory syndrome (SARS), and human papilloma virus. But no other company is using the technology for flu, and Novavax has pending patents, said president and chief executive officer

Rahul Singhvi. Since 2001, Novavax scientists have been working on an avian-flu vaccine with the CDC, using a grant of about $1 million from the National Institutes of Health. In August, when preclinical results were published in the online edition of the journal Vaccine, Wall Street investors noticed. The stock rose from 87 cents Aug. 15 to $7.98 March 31, hitting a 52-week high of $8.31 March 20. The study reported strong immune protection in mice at low doses against the H9N2 strain, which first appeared in Hong Kong in 1998, without adding immune-boosting chemicals. Novavax plans to test the vaccine this fall in human clinical trials. The company is in the process of making a vaccine against H5N1, the strain that worries health experts the most. The CDC is preparing to test the H5N1 vaccine in animals. Novavax's VLP vaccine has "a lot of potential" because it can be made quickly and will be "cost-effective"

since the company intends to use a portable manufacturing process, said the CDC's Tumpey. Flu manufacturers now make vaccines in stainless-steel tanks in multimillion-dollar plants. Novavax plans to use disposable equipment, which can be "scaled up" to make large quantities in case of a pandemic. The company is collaborating with Wave Biotech L.L.C., of Somerset, N.J., to develop a commercial-scale production process. Manufacturing will be in sterile medical-grade plastic bags, using disposable cartridges and filters that can be thrown away and incinerated after each batch. The portable manufacturing could go into any "clean room" in the world where there is electricity. "We did an experiment and found it worked beautifully," said Singhvi, a chemical engineer from the Massachusetts Institute of Technology who spent 10 years in vaccine development and manufacturing at Merck & Co. Inc. "No other vaccine manufacturer in flu

is using this approach yet," said Bright, who worked with avian influenza at the CDC from 1997 until February. Novavax's product probably will not be approved for mass distribution until 2008, but potentially could be ready in winter 2007 if there were a pandemic, Singhvi said. • Only eight months ago, the company's prospects looked dim. The stock hit a year low Aug. 10 of 74 cents. When Singhvi became CEO on Aug. 9, Novavax had about $5 million in cash and was carrying $35 million in debt. Sales of its Estrasorb estrogen lotion were tepid, and the company was losing $2 million to $2.5 million a month. In his first act as CEO, Singhvi fired the sales and marketing staff of 40 to 45, shrinking the company by half. Today, Novavax employs 52 full-time and five part-time employees. A turning point came in October, when Novavax licensed rights to Estrasorb to Esprit Pharma

Inc. for $12.5 million up-front, plus double-digit royalties on sales and milestone payments. In addition, Novavax continued to manufacture the product at its Northeast Philadelphia plant. Capitalizing on investor enthusiasm and its rising stock price, Novavax raised $18 million in November through a public stock offering. In February, the company received an additional $20 million from two Silicon Valley venture firms: Kleiner Perkins Caufield & Byers, which has backed Google Inc., AOL and Genentech Inc., and Prospect Venture Partners. Not everyone thinks the company's avian-flu vaccine program is a panacea. Shares, which had become a trader's favorite in recent months, lost ground recently after RBC Capital Markets cut its rating on the company's stock to "underperform," saying bird-flu-vaccine expectations were overblown. Shares have fallen 19 percent since their Nasdaq close at $6.68 on April 5. Shares closed Thursday at

$5.38. "The expectations for Novavax are way ahead of the company's ability to deliver a safe, functioning vaccine that has been tested in humans with validated, commercial-scale manufacturing," RBC analyst Ken Trbovich wrote in a research note. "We believe the valuation is running so far in front of so many other small companies with a focus on flu and other vaccines that the stock has the potential for a significant sell-off when the bird-flu-scare cools." Trbovich said in an interview that the technology was "intriguing" and "a novel approach," but that "until they have real data from their vaccine, it's almost impossible to draw conclusions." "In the end," he said, "the new management team has done a good job in repositioning this company. But it's a long way away from ringing the cash registers." In February, Kleiner Perkins announced a $200 million fund to invest in innovative companies working on vaccines and drugs for

emerging infectious diseases, including pandemic flu. "Time and again people said, 'You've got to go see this company Novavax,' " said Kleiner Perkins managing partner Brook Byers, who said his firm invested $12.5 million in Novavax based on the management team, which came from Merck and other companies with expertise in vaccines and in scientific technology. "VLPs are the hot thing in vaccines now," Byers said. "Using viruslike particles, you can make a vaccine for five or 10 targets, all in the same vaccine. So the coverage of protection from the vaccine could be broad. Novavax, we believe, is one of the leaders in VLP technology." In September 2004, Novavax moved its headquarters to Malvern from Columbia, Md., but kept its vaccines division and about 20 scientists in Rockville, Md. With the company's recent focus on bird flu, Novavax is in talks with land economic-development officials about securing incentives to

expand vaccine operations in land - and possibly move the headquarters back there. "The corporate headquarters move is still up in the air," Singhvi said, "but what is definite is, we are going to a bigger facility in land for our vaccine operations." Even if the company does relocate, the Philadelphia-area operations will remain. Only "two or three" of Malvern's 15 employees will move, Singhvi said. And a 24,000-square-foot manufacturing facility that employs 20 in Northeast Philadelphia will stay open "and may expand," he said. What happens if the dreaded global epidemic never pans out? The company is not putting all its efforts into avian flu. "The second program we are going after is a seasonal-flu vaccine," Singhvi said. "Beyond that, we have another program in HIV vaccine that is currently being supported by NIH grants. We are planning to add more to our pipeline as we get more people." Novavax Changes Direction June 30: Shares of Malvern-based Novavax Inc. close at $1.32. It has $4.4 million in cash and cash equivalents and a money-losing estrogen cream, Estrasorb. Aug. 9: Former chief executive officer Sims retires and is replaced by Rahul Singhvi, whose first move is to lay off the sales and marketing staff, cutting the workforce in half to reduce costs. Aug. 25: Novavax reports positive preclinical results of its H9N2 avian-flu vaccine, as detailed in the journal Vaccine. Shares begin a steady move upward. Sept. 13: Novavax announces collaboration with Wave Biotech L.L.C. to develop a process for commercial-scale production for pandemic-flu vaccine, using disposable manufacturing equipment. Oct. 18: The company announces a licensing agreement for Estrasorb with Esprit Pharma, of East Brunswick, N.J., for $12.5 million, plus

double-digit sales royalties and milestone payments. Nov. 2: Novavax raises $18 million in a secondary stock offering, selling 4.2 million shares at $4.30 a share. Feb. 2: Rick Bright, immunologist and virologist at the Centers for Disease Control and Prevention, joins the company as vice president of vaccine research. Feb. 15: Novavax begins collaboration with the University of Pittsburgh School of Medicine to test its flu vaccines and a proprietary vaccine adjuvant. Feb. 27: The company receives $20 million from two California venture-capital firms - Kleiner Perkins Caufield & Byers and Prospect Venture Partners - by selling 4.6 million shares at $4.35 per share. Feb. 28: Novavax forms alliance with PacificGMP, of San Diego, to manufacture large quantities of avian-flu vaccine. March 6: Novavax and Bharat Biotech International Ltd. announce alliance to

develop pandemic-influenza vaccine for India and other south Asian countries. March 20: Shares reach a 52-week high of $8.31. March 21: Company sells 5.2 million shares of common stock at $7.30 a share, raising $36.1 million. March 31: Holders of Novavax convertible notes choose to convert $7 million in notes to 1.3 million shares of common stock at a price of $5.46 a share. April 13: Shares close at $5.38. Fighting Flu on Many Fronts Amid fear of an avian-flu outbreak in humans, many firms are developing therapeutics, antivirals and vaccines. Here are what several in the Philadelphia area are doing: Sanofi Pasteur of Swiftwater, Pa., has a $100 million contract to supply experimental H5N1 avian-flu vaccine to a U.S. government stockpile. In 2004, Sanofi began supplying the U.S. government with two million vaccine doses.

In addition, the French-based drugmaker is under contract to provide a year-round supply of chicken eggs for U.S. vaccine production, and is working on a new cell-culture influenza vaccine. GlaxoKline P.L.C. has begun human testing of two vaccines against the H5N1 strain, with the aim of having a vaccine in production before the end of the year. With a U.S. headquarters in Philadelphia, GlaxoKline has committed $2 billion to expand manufacturing capacity for seasonal-flu vaccine and its antiviral drug, Relenza. The company has submitted an application to European regulators for a pandemic vaccine for strains H2N2 and H9N2. GlaxoKline also acquired Canadian vaccine-maker ID Biomedical Corp. for $1.4 billion. Hemispherx Biopharma Inc. of Philadelphia said lab tests showed that its immune-system drugs Ampligen and Alferon might strengthen the power of current treatments against avian influenza. The company said its

experimental Ampligen drug boosted effectiveness of Roche Holding AG's Tamiflu and GlaxoKline's Relenza antivirals in lab testing and in mice. An oral form of Alferon, tested in healthy humans, may stimulate genes that play a role in building the body's defense system. Alferon is approved as an injectable treatment for genital warts. Quigley Pharma of Doylestown announced plans to test its antiviral compound QR-441A against the H5N1 virus in poultry. Elsewhere, companies working on avian-flu treatments include: Chiron Corp., Emeryville, Calif.; BioCryst Pharmaceuticals, Birmingham, Ala.; Alnylam Pharmaceuticals, Cambridge, Mass.; Generex Biotechnology Corp., Toronto; AVI Biopharma Inc., Portland, Ore.; Peregrine Pharmaceuticals Inc., Tustin, Calif.; and MultiCell Technologies Inc., Lincoln, R.I. Contact staff writer Loyd at 215-854-2831 or lloyd@....

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