Which way to jump?
Post 9/11, governments have become acutely aware of the terrorist threat, and especially that from bioterrorists, who could release deadly pathogens. In the US especially this has given rise to new funding opportunities to the biotechnology industry. But is this really the silver lining it appears to be? The question is, what is the business model? Are US biotech companies to become defence contractors? This is a binary market. The US government, admittedly, has limitless funds, and if it is going to buy a smallpox vaccine from Company A, then that company will make money.However, an understanding is needed of how the US government works. There is the Code of Federal Regulations (CFR), which lays down strict pricing rules, and usually ensures that profits remain in single digit or low double digits, which compares to what the markets and margins would be in the private sector.
To borrow a phrase from US defence secretary Donald Rumsfeld, the 'known unknown' in this business is the US government. Despite the CFRs, until the rules for counteracting bioterrorism are clearly defined - which may include 'bending' the regulations for expediency in times of threats to national security - the investment community, which is the backbone of the most biotech companies, is unlikely to look favourably on such government contracts. It's just too risky. For instance, at the moment San Diego-based Vical has a very clearly defined private marketplace, with lots of history in developing vaccines for conditions such as cytomegalovirus (cmv). On the other side it has a potentially huge publicly funded sector, but with no history and lots of grey areas.
So from the investment view, the risk is obvious. As David Kaslow,Vical's cso, said:'We know that cmv will continue to be a problem in the transplant population for years to come unless a vaccine is found. With bioterrorism, through the likes of anthrax, the future is less clear.'
Many believe, therefore, that the jury is still out with respect to the business model for biodefence.