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Biothreat Detection Firms Aim for Homeland Security’s $3 Billion BioWatch Gen-3 Prize

Much of the American public along with investors have probably forgotten about the 2001 anthrax attacks but a handful of stocks, including PositiveID Corporation, Northrop Grumman Corporation and Cepheid, have developed biothreat detection technologies that will hopefully prevent further bioterrorism or biowarfare attacks. Its also worth noting that two of these companies, PositiveID Corporation (PSID) and Northrop Grumman Corporation (NOC), are hoping to be suppliers for the Department of Homeland Security’s (DHS) BioWatch Gen-3 program which is worth $3 billion over five years.

Starting with PositiveID Corporation, it’s a medical device company involved in the development of medical devices and molecular diagnostic systems for diabetes management plus rapid medical testing and airborne biothreat detection. On the biothreat detection side of the business, PositiveID Corporation’s MicroFluidic Systems (MFS) subsidiary is considered to be a leader in biothreat detection technologies and molecular diagnostic systems. In fact, it has already received $45 million in government and commercial contracts over the past ten years plus it has a strong IP portfolio of 29 patents or patents pending.

Moreover and under contract from the Department of Homeland Security (DHS) over the past eight years, MicroFluidic Systems (MFS) has developed M-BAND technology – a so-called a Microfluidics-based Bioagent Autonomous Networked Detector that will scan the air for bio-warfare agents (e.g. anthrax) and operate on its own for as long as 30 days. More importantly and should PositiveID Corporation secure supplier status for its M-BAND technology (decisions will likely be made in 3Q2012), investors have a good reason to be excited given how much the program is worth and that the margins are expected to be in the 15% to 20% plus other government agencies like the Army will no doubt also want to acquire the devices.

In addition to the M-BAND technology, PositiveID Corporation’s Dragonfly™ Rapid MDx Cartridge-based diagnostic system is designed to be a miniaturized point-of-care or field based system that has the ability to perform molecular diagnostic results from a sample in less than 30 minutes. Specifically, Dragonfly is effective at detecting a whole range of pathogens, including influenza, E. coli and methicillin-resistant staphylococcus aureus (MRSA), along with detecting radiation-induced cell damage.

Meanwhile, defense industry behemoth Northrop Grumman Corporation reported about a year ago that it was field testing its own biodetector technology for the BioWatch Gen-3 program plus it has already delivered important assay technology to the DHS. However, I am not seeing any further updates from the company regarding field testing or deliveries.

Finally, its also worth briefly mentioning Cepheid, a molecular diagnostics company that develops, manufactures and markets integrated systems for testing in the clinical market plus for applications in non-clinical biothreat, industrial and partner markets. On the biothreat front, Cepheid has developed tests that are designed for the surveillance of anthrax agents in environmental samples. However, Cepheid’s main focus is still products for the healthcare market rather than the biodetection market.

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