The $50m will be paid under the RFP-3 contract, the $500m five-year contract the biopharmaceutical company was awarded in June. Under the contract, Bavarian Nordic is to manufacture and deliver 20 million doses of its smallpox vaccine, Imvamune, to the US Strategic National Stockpile for individuals to be considered "at risk", such as those who are immuno-compromised. "We are very satisfied that we have now already fulfilled several significant milestones as agreed with the US Department of Health and Human Services (HHS). With the advance payment and the future milestone payments, we have created a solid financial base for our further development," Bavarian Nordic president and chief executive Anders Hedegaard said in a statement. The contract for Imvamune is the first next-generation product procured by the HHS under the government's BioShield program, which was put in place following the terrorist attacks of 9/11 to guard against bioterrorism. Despite the World Health Organization (WHO) declaring the disease eradicated worldwide in 1980, with the last case of smallpox occurring in the US in 1949, there are concerns that should the virus get into the hands of terrorists, it could be used as a biological weapon with potentially devastating consequences. Smallpox is a highly contagious disease and kills about one-third of the people it infects. There is no treatment and the only prevention is vaccination. Imvamune is expected to be a much safer smallpox vaccine than those already stockpiled, which use live replicating vaccinia viruses and can cause side effects and complications in up to 25 per cent of the population. Imvamune, on the other hand, is based on the Modified Vaccinia Ankara (MVA) virus, which is in a weakened form that does not replicate in the body and cannot be accidentally transferred to other people. The company expects to receive two additional milestone payments each of $25m this year for fulfilling other significant milestones. Delivery is expected to start once an Emergency Use Authorisation for Imvamune is granted. Last week, the company's RFP-2, 2004 contract with the US Government was extended to 2010. The $15m extension will see the initiation of Phase II studies with Imvamune in people diagnosed with atopic dermatitis, a form of eczema. The company is expecting the additional revenue at the end of 2008 and 2009. In 2006, the Denmark Government approved the large-scale commercial production of Imvamune at the facilities there, which has the capacity to produce a minimum of 40 million doses of Imvamune per year, and the capacity to be expanded to 180 million doses per year. A spokesman from Bavarian Nordic was unavailable for comment.