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How one company lost out on protecting the nation from terrorists

WASHINGTON—At first, Richard Hollis thought his firm would be a "poster child" for the government's BioShield program to stockpile medical antidotes in case terrorists attack with nuclear, biological or chemical weapons.

Hollis-Eden Pharmaceuticals had a breakthrough drug that promised to keep some people alive after strong doses of radiation and the government said it would provide the market.

But after nearly six years of research and an investment of more than $85 million, Hollis, the drug maker's chairman and CEO, now calls the San Diego company a "poster child" for everything that's wrong with BioShield.

Last week, the Department of Health and Human Services rejected its drug for failing to meet "technical requirements." The agency said it would start a fresh search for another treatment of radiation poisoning. HHS declined to elaborate further.

In just two days, the company's stock plunged from over $5.70 a share to $2.83. Since Hollis-Eden's radiation treatment first stirred excitement with private investors in 2003, its market value plummeted by $700 million, to under $70 million. Now, company executives are trying to assure Wall Street that they have enough cash to stay afloat.

The experiences of the drug maker, corporate officials say, were an "unfair" bait-and-switch and call into question the government's massive effort to protect the public from the health effects of a nuclear attack.

Congressional committees, disturbed by the development, are expected to conduct hearings soon examining the procurement and the entire BioShield program, which also recently halted an $877.5 million contract for a second-generation anthrax vaccine and another pending award for a third-generation anthrax vaccine.

The latest decision left HHS, the nation's lead agency for emergency preparedness, with no immediate prospect of a drug that might limit fatalities in a radiological or nuclear attack. It also sheds light on the starts and stops that have plagued the BioShield program and threatens to shrink participation from the biotech industry.

Researchers at the Armed Forces Radiobiology Research Institute first approached Hollis-Eden in the summer of 2001 about joining in development of the drug for revitalizing bone marrow, the body tissue most vulnerable to radiation. Hollis said the Sept. 11 terror attacks soon persuaded him there might be a market.

"The Department of Defense asked us to develop it because it was the most promising drug against the No. 1 threat," he said.

In animal tests, the drug not only had boosted production of white blood cells that fight infection, but also increased platelets that protect against unchecked bleeding. After the United States dropped atomic bombs on Hiroshima and Nagasaki, Japan, in 1945, many people died of infections or bled to death because of depleted platelet levels.

In a series of recent interviews, Hollis recounted his company's odyssey.

In early 2003, Hollis attended a conference of top officers of biotech firms where President Bush and then-Commissioner Mark McClellan of the Food and Drug Administration described the government's plan to create BioShield to woo private investors into footing the heavy costs of developing medicines for victims of weapons of mass destruction.

"The cornerstone of the bill was to guarantee there would be a market for drugs for WMDs"—the government, Hollis said. "We were a poster child for the bill."

Seeing the Pentagon's interest, Hollis-Eden began the rigorous and expensive testing needed to bring it to market. In early 2004, Hollis said, "HHS told us that when BioShield was approved by Congress, they would give us a contract."

He said Stewart Simonson, the HHS assistant secretary for emergency preparedness at the time, was so excited about the drug that he said "he would write up the contract himself."

It wouldn't be that simple.

After Congress created BioShield in June 2004, Hollis said, HHS officials told the company it must file an Investigational New Drug application with the FDA.

And agency officials declined to divulge how many doses they ultimately would buy, saying the Department of Homeland Security first must complete a threat assessment on the risk of a radiological "dirty bomb" or nuclear attack, he said.

Hollis said he asked whether the company should hold off its research until that was done, but was encouraged to proceed. He was comforted that the agency was buying millions of doses of drugs for anthrax and smallpox.

Then in late 2004, the agency issued a request for interest from all companies that have anti-radiation drugs that boosted white blood cell and platelet counts. Hollis said he was sure his firm had the only one.

HHS issued a solicitation for bids in late 2005, but it sought only enough medicine to treat 100,000 people, too little for the company to recover its development costs. Hollis said HHS assured him this was an "initial" purchase.

The agency also dropped the requirement that the drug boost platelets, a change that opened the door to competitors. Hollis said the revision seemed inconsistent with the FDA's position that a new radiation drug had to boost people's survival prospects because people need platelets to stay alive.

On Tuesday, HHS officials told the company that a major issue was that tests showed the drug to be effective only if it is administered within four hours of radiation exposure, a company spokesman said. That would leave emergency personnel little time to give the drug. The government, in its formal procurement request, however, set a minimum time frame.

The company argues the drug could be deployed in advance, would be an aid against a radioactive "dirty bomb" and could be given to people fleeing the blast or a plume of radioactive fallout who wouldn't know for sure whether they were exposed to radiation. Hollis-Eden says the agency has bought other anti-radiation drugs, such as potassium iodide to protect the thyroid gland, that also must be taken within a few hours. Bone marrow experts stress that early treatment for acute radiation syndrome is critical.

Over the last year, Hollis said, HHS officials on multiple occasions told the firm it was "within the competitive range." But the agency kept delaying a contract decision until last week's communique.

Hollis also said the National Institute for Allergies and Infectious Diseases has set up a program that has distributed $94 million in grants for anti-radiation research over the last two years.

Now, Hollis said Congress is moving to fund research on new BioShield drugs.

"The only companies that are going to be willing to participate in this today," he said, "are going to be companies interested in getting grants from the government. They're not going to use investor money."

David Grdina, a professor of radiation and cellular oncology at the University of Chicago who is developing another drug for radiation victims, also worries that the private market will lose interest in developing new drugs.

The abrupt ending and apparent communication breakdown, he said, "is a very serious concern for any other commercial entity that wants to develop a product under project BioShield."

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(c) 2007, McClatchy-Tribune Information Services.

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