Background of PharmAthene, Inc.
PharmAthene, Inc. was incorporated on April 25, 2005 under the laws of the State of Delaware as Healthcare Acquisition Corp. (“HAQ”), a special purchase acquisition corporation formed solely to acquire a then unidentified business. HAQ became a public company on August 3, 2005. On August 3, 2007, HAQ acquired a Delaware corporation which at the time was known as “PharmAthene, Inc.” (the “Merger”); effective upon the consummation of the Merger, HAQ changed its name from “Healthcare Acquisition Corp.” to “PharmAthene, Inc.” and former PharmAthene changed its name to “PharmAthene US Corporation.” Through February 27, 2009, our operations were conducted by PharmAthene US Corporation. Effective February 27, 2009, PharmAthene US Corporation was merged with and into PharmAthene, Inc., with PharmAthene, Inc. being the surviving corporation.
In March 2008, PharmAthene Inc., through its wholly-owned subsidiary PharmAthene UK Limited, acquired substantially all the assets and liabilities related to the biodefense vaccines business (the “Avecia Acquisition”) of Avecia Biologics Limited (along with its affiliates, “Avecia”).
Our executive offices are located at One Park Place, Suite 450, Annapolis, Maryland 21401 and our telephone number is 410-269-2600. Our stock trades on the NYSE Amex under the symbol “PIP.”
Unless the context otherwise requires, all references in this report to the “Company”, “PharmAthene”, “we”, “us” or “our” refers to the business of the combined company after the Merger and to the business of former PharmAthene prior to the Merger, and “HAQ” refers to the business of Healthcare Acquisition Corp. and its subsidiaries, as a combined entity, prior to the Merger. Unless the context otherwise requires, the information contained in this report gives effect to the consummation of the Merger on August 3, 2007 and the change of our name from “Healthcare Acquisition Corp.” to “PharmAthene, Inc.”
Overview
We are a biodefense company engaged in the development and commercialization of next generation medical countermeasures against biological and chemical threats. Our current biodefense portfolio includes the following product candidates:
In addition, we were awarded by the Delaware Court of Chancery in September 2011 the right to receive 50% of all net profits related to the sale of SIGA Technologies, Inc. ST-246 and related products for 10 years following initial commercial sale of the drug once SIGA earns $40 million in net profits from sales of ST-246 and related products. SIGA has stated it intends to appeal this decision to the Delaware Supreme Court.
Business Concept and Strategy
Our goal is to become the premier company worldwide specializing in the development and commercialization of best-in-class prophylactic and therapeutic drugs for defense against biological and chemical threats and emerging infectious diseases. In assembling our product candidate portfolio we have adhered to a strategy emphasizing specific selection criteria to enhance the likelihood of U.S. government procurement. These selection criteria include:
We seek to acquire and develop leading compounds and technologies targeting the highest priority U.S. Government biodefense requirements. We also look to bring products into our portfolio with dual-use potential that may serve both biodefense and commercial markets.
We have developed and will continue to develop unique biodefense product development and contracting capabilities. Development of these capabilities has required a substantial investment, which we may leverage further through possible acquisitions of additional biodefense product candidates, whether under licensing deals, mergers and acquisitions, or otherwise. We believe that product opportunities will come primarily from companies focused on commercial markets that wish to see their products or technologies exploited in biodefense.
Biodefense Industry
Market Overview
The worldwide biodefense market can generally be divided into three segments: U.S. civilian, U.S. military, and non-U.S. markets. U.S. government funding represents the vast majority of the worldwide market. According to the University of Pittsburgh Medical Center - Center for Biosecurity, U.S. government biodefense military and civilian spending peaked in fiscal year 2009 at over $8 billion and has averaged around $6.2 billion since fiscal year 2007.
U.S. Civilian: The U.S. civilian market includes funds to protect the U.S. population from biowarfare agents and is largely funded by the Project BioShield Act of 2004. Project BioShield, the U.S. government’s largest biodefense initiative, seeks to accelerate the research, development and purchase of medical countermeasures (“MCMs”). $5.6 billion was allotted under Project BioShield to procure MCMs for the Strategic National Stockpile (“SNS”) for the period from July 2004 through 2013. Of the $5.6 billion, $3.4 billion was made available through fiscal year 2008, and the remaining $2.2 billion became available in fiscal year 2009. At the end of calendar year 2011, of the total $5.6 billion, over $2 billion in procurement contracts had been awarded and approximately $1.8 billion had been transferred out of the Project BioShield Special Reserve fund (“SRF”) for non-procurement related activities. Remaining funds in the SRF are now approximately $1.5 billion. Biomedical Advanced Research and Development Authority’s (“BARDA”) budget for advanced development funding for government fiscal year 2012 is $415 million. This amount is the same as it was for fiscal year 2011 and $110 million more than the $305 million BARDA budget for fiscal year 2010.
Congress is also considering legislation to reauthorize key biodefense legislation as part of the Pandemic and All Hazards Preparedness Act (“PAHPA”) reauthorization. PAHPA was originally passed in 2006 and created and established funding for BARDA. Among other things, this legislation authorizes Project BioShield SRF funding for procurement activities at $2.8 billion over five years from 2014 through 2018. The U.S. House of Representatives passed this bill in November 2011. A Senate companion bill including similar provisions remains pending.
Military: The Department of Defense (“DoD”) is responsible for the development and procurement of countermeasures for the military segment, which focuses on providing biowarfare protection for military personnel and civilians who are on active duty. The DoD biological defense research and development budget for fiscal year 2011 was approximately $400 million. Fiscal year 2012 funding is approximately $500 million. The overall DoD budget for fiscal year 2013 and future years is heavily dependent on congressional action on a debt reduction plan.
Non-U.S. Markets: Non-U.S. markets address protection against biowarfare agents for both civilians and military personnel in foreign countries. We anticipate that foreign countries will procure biodefense products as they are developed and validated by procurement by the U.S. government.
Project BioShield, established under the Project BioShield Act of 2004 and the U.S. government’s largest biodefense initiative, is focused on acquiring products with low technology risk that will be available for purchase in the near term. The U.S. government has identified the following threats as critical biodefense priorities: anthrax, smallpox, botulinum toxin, radiation, and nerve agent exposure. To evaluate and select the best products for these threats, the Department of Health and Human Services (“DHHS”) typically issues Requests for Information followed by Requests for Proposals (“RFP”). RFPs detail product and procurement requirements including treatment types, numbers of doses and delivery timeframes. To qualify for Project BioShield funding, products must demonstrate product efficacy in an animal model and complete advanced development activities, and companies must show that they can provide sufficient manufacturing capability. As of December 31, 2011, nine awards have been made under Project BioShield, including those for the treatment or prevention of anthrax, smallpox, radiation and botulinum toxin.
Anthrax
The three general modes of infection by Bacillus anthracis (“B. anthracis”), the bacterium which causes anthrax infection, are by inhalation, ingestion or skin contact with anthrax spores. Inhalation is the form of infection most likely to be lethal. Inhalational anthrax occurs when anthrax spores become airborne and enter a person’s body through the lungs. Inhalational anthrax is usually fatal if left untreated, and has approximately a 50% mortality rate or less in patients treated aggressively with antibiotics and supportive care. Persons infected by B. anthracis that is ingested will suffer from gastrointestinal anthrax; those whose skin comes into contact with anthrax will suffer from cutaneous anthrax. Gastrointestinal anthrax has a mortality rate of more than 40% if left untreated. Cutaneous anthrax generally causes skin infections within a week or two after exposure. Cutaneous anthrax is the least fatal. Without treatment, approximately 20% of all skin infection cases are fatal. Treated cutaneous anthrax is rarely fatal.
The DoD estimates that up to ten countries may possess anthrax weapons and an undetermined number of individuals and terrorist groups could have access to anthrax. Anthrax is an effective bioterrorism agent because the spores are stable, can be milled to a fine powder and may be dispersed widely with readily available instruments and machinery. The U.S. Congressional Office of Technology Assessment in 1993 analyzed the potential scope of an anthrax attack, calculating that there would be between 130,000 and 3 million deaths following the release of 100 kilograms of anthrax.
In light of the limited effectiveness of antibiotics and supportive care, we believe that currently available treatments for inhalational anthrax – antibiotics and vaccines - are suboptimal. Following exposure, but prior to the onset of symptoms, antibiotics like ciprofloxacin, doxycycline or penicillin can be used as post-exposure prophylaxis with the goal of preventing progression of the disease with a recommended antibiotic course of treatment of 60 days, sometimes in combination with the administration of anthrax vaccine. We believe that both compliance and side effects are problematic for anyone asked to take antibiotics for such an extended period of time. Furthermore, antibiotic resistance, whether naturally occurring or genetically engineered, is a concern. Products like our rPA-based anthrax vaccine candidate and our monoclonal human antibody treatment, Valortim® might allow for a shorter duration of antibiotic dosing to achieve adequate post-exposure prophylaxis.
Smallpox
Smallpox virus is classified as a Category ‘A’ agent by the U.S. Centers for Disease Control and Prevention and is considered one of the most significant threats for use as a biowarfare agent. Although declared eradicated in 1979 by the World Health Organization (“WHO”), there is a threat that a rogue nation or a terrorist group may already possess or have the capability to produce an illegal inventory of the virus that causes smallpox. Inventories of the virus are known to be contained under extremely tight security at the CDC in Atlanta, Georgia and at the Vector laboratory in Russia.
Many scientists agree that with the scientific tools available today smallpox can be created by modifying another orthopox virus available naturally worldwide by a Ph.D. scientist with access to a modern laboratory. Studies conducted prior to the eradication of natural reservoirs of smallpox virus show that the disease has a mortality rate of 30% or higher, and survivors are scarred and suffer other permanent detriments.
Chemical Weapons and Nerve Agents
Chemical weapons use the toxic properties of chemical substances to produce physiological effects on an enemy. Classic chemical weapons, such as chlorine and phosgene, were employed during World War I and consisted primarily of commercial chemicals used as choking and blood agents, to cause respiratory damage and asphyxiation. Organophosphorous agents (nerve agents), one of the most lethal forms of chemical weapons, were developed in the 1930s in the years leading up to World War II.
Nerve agents function by binding to acetylcholinesterase, an enzyme that normally causes termination of the activity of the neurotransmitter acetylcholine. Nerve agents block the activity of acetylcholinesterase, allowing the activity of acetylcholine to continue unchecked. As a result, nerve impulses are continually transmitted, causing muscle contractions that do not stop. This effect is referred to as a “cholinergic crisis” and results in a loss of muscle control, respiratory failure, paralysis and convulsions. Nerve agent exposure that does not cause death after a short period can lead to permanent brain damage.
There is currently only one FDA-approved pre-treatment for nerve agents, pyridostigmine bromide (“PB”). PB is only approved for the pre-treatment of exposure to the nerve agent soman. It confers no protection on its own but enhances the protection conferred by post-exposure treatment. The standard of care for post-exposure treatment involves repeated doses of a cocktail of drugs including atropine, reactivators including the oxime 2-PAM, and anti-convulsants. However, this type of treatment acts primarily on the symptoms of nerve agents, not their underlying cause. We believe available pre-and post-treatment options are inadequate and that there is a need for more efficacious countermeasures, especially as evidence mounts that modified, more toxic forms of nerve agents may be used in future attacks.
PharmAthene’s Product Candidates
SparVax™: Recombinant Protective Antigen (PA)-based Anthrax Vaccine
SparVax™ is a second generation, rPA anthrax vaccine designed to protect against inhalational anthrax, the most lethal form of B. anthracis infection in humans. The vaccine has been shown to induce anti-Protective Antigen (“PA”) antibodies in clinical trials in healthy human volunteers and in animal models of inhalational anthrax. These antibodies are believed to function by targeting PA, a protein component necessary for the transportation of bacterial toxins into the cell and the subsequent toxic cascade that leads to morbidity and mortality. SparVax™ has been shown to generate a high level of protective efficacy in rabbits and non-human primates when vaccinated and subsequently exposed to lethal inhalation doses of anthrax spores. One Phase I and two Phase II clinical trials have been completed involving approximately 770 individuals. Data from these trials demonstrated that SparVax™ is generally well tolerated and immunogenic.
SparVax™ is being developed for two indications: post-exposure prophylaxis (“PEP”) in conjunction with antibiotics and general use prophylaxis (“GUP”). In a PEP setting, the vaccine would be used following a suspected exposure to augment the natural immune response and provide protection once antibiotics are discontinued. In the GUP setting, the vaccine is administered in advance of any exposure and is intended to induce an immune response that will be protective should there be an exposure.
Pre-clinical Studies
Prior to an IND being filed with the FDA, SparVax™ underwent safety testing in rodents and non-human primates. SparVax™ was well tolerated with no deaths and no behavioral or clinical signs observed in any species. All of the toxicology studies were compliant with Good Laboratory Practices (“GLP”) and the data were used to support the Investigational New Drug (“IND”) and allowed for the initiation of clinical trials of SparVax™.
Non-clinical Studies
SparVax™ is being developed utilizing the Animal Rule (21 CFR 601.90) which allows for efficacy testing in appropriate animal models in lieu of clinical efficacy trials. To date, our animal model development and efficacy studies in both rabbits and non-human primates for both GUP and PEP indications using SparVax™ have been sponsored by the National Institute of Allergy and Infectious Diseases (“NIAID”) and conducted by a contract research organization. Data from the studies conducted to date have shown that SparVax™ is immunogenic in both rabbits and non-human primates; protection has been demonstrated in vaccinated animals subjected to aerosol challenge with Ames strain anthrax spores.
Clinical Studies
The Phase I trial was a dose escalation study designed to evaluate a range of dosage levels administered with either of two different dosing schedules. There were no vaccine-related serious adverse events or changes in blood chemistries, vital signs or electrocardiograms (“ECGs”) reported. The results demonstrated that the vaccine was generally well tolerated and immunogenic and that the immunogenic response was dependent on vaccine dosage.
The Phase II program was designed to evaluate the safety and immunogenicity of the two highest dosages tested in Phase I using a three dose regimen in a larger number of subjects. Two Phase II trials were conducted, both of which studied the effect of different vaccine dosage levels and schedules.
In the Phase IIa trial, SparVax™ was highly immunogenic and generally well tolerated with no vaccine-related serious adverse events or changes in blood chemistries, vital signs or ECGs reported.
The Phase IIb trial compared a longer dosing regimen at two different vaccine dosages with a smaller control group who received the currently licensed anthrax vaccine, BioThrax®. As in the Phase IIa trial, SparVax™ was highly immunogenic and generally well tolerated with no vaccine-related serious adverse events or changes in blood chemistries, vital signs or ECGs reported. The immunogenicity data showed that SparVax™ elicited a robust immune response after the primary immunization series as well as induced an anamnestic response after a booster dose given at 6 or 12 months after the primary dosing schedule. While both vaccines were immunogenic following the 3-dose series with seroconversion rates of approximately 90%, an increased proportion of individuals experienced injection site pain in the BioThrax® group (where the vaccine was administered subcutaneously) as compared to the SparVax™ groups.
Future studies will seek to confirm the dose and schedule of SparVax™ that induces antibody levels in humans which are comparable to those shown to be protective in the animal models, demonstrate the acceptability of using SparVax™ in conjunction with antibiotics, and confirm the safety of SparVax™ in a sufficient number of human subjects (as required by FDA).
Product Stability
In 2011, we announced that SparVax™ product produced from bulk drug substance manufactured at Avecia Biologics Laboratories in the United Kingdom had demonstrated 52 month stability. Moreover we have demonstrated over 36 month stability on our final drug product vaccine formulation. The stability data were prepared utilizing a variety of analytical methods and a well characterized mouse challenge potency release assay.
Funding
To date, funding for the development of SparVax™ has occurred under two contracts from the National Institutes of Health (NIH) originally entered into in 2002 and 2003 which, not including the modification discussed below, provided for aggregate funding of up to approximately $128 million.
In April 2009, the United States Government transferred the Sparvax™ contract to the Biomedical Advanced Research and Development Authority (BARDA). In February 2010, PharmAthene and BARDA entered into negotiations to modify our existing advanced development contract for SparVax™. During the base period of performance under the contract modification, i.e., through September 1, 2013, we have been funded up to approximately $62 million on a cost-reimbursement-plus-fixed-fee basis, assuming that all milestones are achieved. The government, at its sole discretion, may also exercise three contract options during the base period of performance, under which we could receive up to an additional $17 million in funding. The government has indicated it is unlikely these options will be exercised. As of December 31, 2011, approximately $71 million in funding and options remained under the contract, of which $54 million is funded. It is unclear when BARDA will consider a new funding request. We are currently in discussions with BARDA about modifying the activities under our current contract to include a Phase II human clinical trial.
Valortim®: Anthrax Monoclonal Antibody
Valortim® is a fully human monoclonal antibody designed to protect against and treat human inhalational anthrax, as both post-exposure prophylaxis (i.e., before symptoms manifest) and post-exposure therapy (i.e., once symptoms are evident).
Valortim® functions by targeting PA, a protein component of the bacterium that attaches to and facilitates the entry of the destructive toxins Lethal Factor (LF) and Edema Factor (EF) into healthy cells in the infected person. Valortim® is designed to bind to PA and protect the cells from damage by the anthrax toxins. In non-clinical studies, animals were protected against this fatal disease when Valortim® was administered following a lethal aerosol challenge of anthrax spores, demonstrating that Valortim® induces recovery and survival in animals exposed to inhalational anthrax.
Anthrax spore challenge studies in animals have demonstrated protection by Valortim® both when given early following challenge (post-exposure prophylaxis) as well as when given at the point when animals demonstrate signs of infection after challenge (therapeutic intervention). We believe Valortim® may bind to a novel site of PA, permitting protection after toxins have already attached to the cell. In addition, other data suggest that Valortim® may augment the immune system’s ability to kill anthrax spores. We believe Valortim® has unique potency and a potentially unique mechanism of action.
BMS Collaboration and Development Timeline
We are developing Valortim® in collaboration with Bristol Myers Squibb, Inc. (“BMS”) pursuant to a collaboration agreement entered into in November 2004. Under the terms of the collaboration agreement, we and BMS will share operating profits according to a formula that establishes our share of the profits at between 20% and 60%, with the final split largely dependent on the amount of funding provided by us prior to sale of product to the U.S. government. Prior to distribution of operating profits, each party is entitled to reimbursement of research and development expenses incurred that were not otherwise covered by government funding.
Valortim® has received Fast Track designation from the FDA as well as orphan drug status.
Clinical and Non-clinical Studies
Valortim® is being developed for two indications: (i) post-exposure prophylaxis; and (ii) as a therapeutic.
Clinical Phase I Studies
In 2006 PharmAthene and BMS completed an initial Phase I open-label, dose-escalation clinical trial to evaluate the safety, tolerability, immunogenicity, and pharmacokinetics (the study of absorption, metabolism and action of drugs) of a single dose of Valortim® administered intravenously or intramuscularly in healthy volunteers. No drug-related serious adverse effects were reported.
In August 2009 we began a second Phase I clinical trial of Valortim® in combination with the antibiotic ciprofloxacin. During the course of the study, there were two adverse reactions in the four subjects dosed, one of which was characterized by the clinical investigators as a serious adverse event. We halted the trial and the FDA placed the study on partial clinical hold pending the outcome of an investigation. Following completion of our investigation, the FDA lifted the partial clinical hold in December 2010, and we then commenced and completed an intravenous (IV) dose-escalation study of Valortim®. We submitted the final study report for the trial in January 2012.
In December 2011 we published the results from the initial Phase I clinical trial in the journal Clinical and Vaccine Immunology. Forty-six healthy volunteers received either a single intravenous (IV) dose of Valortim® ranging from 0.3 to 20.0 mg/kg (10 subjects in cohorts receiving 1.0, 3.0 or 10.0 mg/kg and 3 subjects in cohorts receiving 0.3 and 20 mg/kg) or a single 100 mg intramuscular (IM) dose of Valortim® (10 subjects). The Phase I data showed that Valortim® was generally safe and well-tolerated and non-immunogenic when administered as single 0.3 mg/kg to 20 mg/kg IV infusions or as a single IM dose injection at 100 mg. No drug-related serious adverse events were reported. These results demonstrate that a single dose of Valortim® can provide levels of antibodies in humans that correspond to protective levels in animal models and is well tolerated.
Non-clinical Studies: Post-exposure Prophylaxis Indication