The anthrax vaccine program is by far the largest component of the Bush administration's Project BioShield, a 5.6-billion-U.S.-dollar effort to counter bioterrorism threats. It is already years behind schedule.

    The military has used an anthrax vaccine produced by another firm for years, but the U.S. government sought to produce a different version with California-based VaxGen Inc. The firm has run into several technical problems, including a failed test on humans.

    FDA officials declined to comment, but VaxGen said the agency's questions centered on the vaccine's "stability," or the rate at which it would deteriorate while stockpiled.

    Company officials said that some deterioration in the potency of the vaccine is be to expected when it is stockpiled.

    "The fundamental scientific question that we need to address with FDA is whether the changes in the potency that we're observing... are significant and potentially clinically meaningful," said James P. Panek, VaxGen's executive vice president.

    VaxGen said it was unclear how long it would take to address FDA's concerns. The company may be required to generate new data on the current vaccine formula or make more improvements to it, President and Chief Executive Lance K. Gordon said Friday in a conference call with analysts.

    The delay prompted the Department of Health and Human Services (HHS) to warn the company that it might terminate work potentially worth nearly 1 billion dollars.

    VaxGen was picked for the project in 2004. The contract calls for the company to produce enough of the vaccine for 25 million people, roughly the equivalent of the population in the New York and Washington metropolitan areas combined.

    The HHS sent VaxGen a "cure" notice Friday, which is often a precursor to a contract termination. The FDA's action "is endangering performance of the contract," Brian K. Goodger, an HHS contracting officer, said in a letter to VaxGen. Unless the issue is addressed within 10 days, "the government may terminate for default," he wrote. HHS spokesman Bill Hall said no decisions have been made on the program's future.

    Panek declined to comment on the notice or the status of the contract, which called for VaxGen to begin human testing by Nov. 13.

    VaxGen officials said they hoped to hold a teleconference with the FDA next week and an in-person meeting within 30 days, but acknowledged that the FDA controls the timetable.

    The delay also raises questions about VaxGen's ability to stay in business long enough to finish the project. Company officials said there was enough cash to fund operations through 2007. But VaxGen is not scheduled to begin delivering the vaccine until 2008 or 2009, which is when the company would receive most of the funding under the HHS contract.

    (Agencies)