U.S. Wants More Tests of VaxGen’s Anthrax Vaccine

Financially struggling VaxGen Inc. said Wednesday that the federal government was demanding that the biotechnology company conduct more human tests before delivering a new anthrax vaccine.

The government made the costly requirements unilaterally and doesn’t intend to cover the added cost, the Brisbane, Calif.-based company said.

The government will not pay VaxGen until it begins delivering the 75 million dosages ordered, which are now expected in 2008. It is the second delay since the company won the $877.5 million contract in 2004.

The government is VaxGen’s only customer and its stock plummeted $2.96, or 37%, to $4.99.

“Financing an increased scope of work and delays imposed without compensation is the greatest challenge we have faced,” said Lance Gordon, VaxGen’s chief executive.

The contract was the first awarded under Project BioShield, a law President Bush signed in 2004 that promises $5.6 billion to develop remedies against bioweapons. The small biotechnology company has been trying to refashion itself as a biodefense specialist since its experimental AIDS vaccine flopped in 2003.

Gordon said the company had asked the Health and Human Services Department to reconsider its new demands and was “pursuing legal remedies” to recoup costs to test more people with the experimental vaccine.

A department spokesman didn’t immediately return a telephone call.