Acambis, the vaccines manufacturer, has been dumped by the US government from a contract to supply smallpox vaccine that could have been worth up to $1bn (£555m).
The UK company was told that its proposal for a new, weakened vaccine was "no longer highly rated" on technical grounds. The unexpected announcement wiped almost 40 per cent from the share price.
Investors fear that without revenue from the contract, which would have part-subsidised Acambis's research and development work until the end of the decade and beyond, the loss-making company is more reliant than ever on signing licensing deals for its other products.
Gordon Cameron, chief executive, said he was seeking an urgent meeting with the US health department to find out why Acambis had been shut out of the smallpox contract. He was told the news late on Monday night."We are surprised that the US government would eliminate Acambis," he said. "We believe that our proposal would have met the requirements of the government, especially given our track record in the biodefence field."
Acambis shares crashed 59.75p to 94.75p, falling back for the first time below their level on 11 September 2001, when the terrorist attacks on the US transformed the company's fortunes. Fears of a bioterrorist attack led the US government to ask Acambis to make a stockpile of smallpox vaccine from what had previously been a little used plant inside the company.
Acambis has since supplied almost 200 million doses of traditional smallpox vaccine and funnelled the cash into new projects, such as experimental vaccines against Japanese encephalitis and the West Nile virus. The US has been funding a race between Acambis and its Dutch rival, Bavarian Nordic, to develop a second, weakened smallpox vaccine for the elderly and people with weak immune systems, and it had previously been expected that the contract would be split between the two companies.
Acambis announced the outcome of a strategic review last week which promised its two smallpox vaccines would "provide significant revenues and cashflow to underpin the business while supporting the core non-biodefence pipeline".
The health department's decision to withdraw support for Acambis is a "significant slap in the face", according to Chris Redhead, analyst at Nomura Code.