Acambis fights patent lawsuit over $1.9bn smallpox contract

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Cambridge biotechnology group Acambis goes to court tomorrow in Washington DC to fight a patent-infringement lawsuit that threatens to bar it from taking part in a $1.9bn (£1bn) contract to provide smallpox vaccines to the US government.

The charges before the International Trade Commission (ITC) in Washington DC are the first of a trio of legal proceedings brought by Danish vaccine maker Bavarian Nordic. The company alleges that Acambis's MVA vaccine infringes its treatment, which is based on the same smallpox strain. Bavarian Nordic could seek an exclusion order at the ITC trial, which would in effect stop any vaccines at the border. It has also filed suits in Delaware and in Austria, where Acambis's partner, Baxter Health- care, manufactures its vaccines.

The dust-up threatens to cut out a major source of sales for the loss-making Acambis, and also risks angering the US government, which is keen to have more than one supplier.

Acambis, which is also developing vaccines for ailments such as West Nile virus and Dengue fever, reports its first- quarter earnings on Tuesday.

Under Project BioShield, President George Bush earmarked up to $1.9bn in 2004 to stockpile smallpox vaccines in case of a biological attack. As a first step, the government has ordered 20 million doses of the MVA vaccine. At an estimated $15 per dose, this first tranche would be worth $300m. The programme includes an option for another 60 million doses, as well as funding for clinical testing of the treatment. That would make quite a difference for both companies; Bavarian is also losing money.

The MVA vaccine is intended for immuno-suppressed patients likely to experience severe side effects from the conventional smallpox vaccine. Acambis claims that Bavarian Nordic's European patent, awarded in December 2005, is "invalid and unenforceable", according to investor relations head Lindsay Wright. That's because information on the MVA smallpox strain is widely available, it claims, and the US government's National Institutes of Health in fact provided the strain to Acambis. The company also plans to file an objection with the European Patent Office against the Bavarian Nordic patent in the next few months.

Acambis won't begin producing the vaccines until the legal questions are resolved. Analysts expect that the companies will eventually arrive at a royalty agreement. "Like in any litigation, it benefits all parties to leave the door open," said Bavarian Nordic's lawyer, Li Westerland.