POWDERJECT pharmaceuticals the Oxford based company at the centre of a controversial £32 million contract to supply smallpox vaccine said it had moved into the black for the first time.

The Government contract hit the headlines earlier this month after it emerged chairman and chief executive Paul Drayson was a Labour Party donor.

Attention was focused on two £50,000 payments from Dr Drayson, the most recent of which was made in December.

But yesterday, as the vaccine specialist announced it had moved into profit ahead of targets, Dr Drayson insisted Powderject had won the bid fairly after fighting off four rivals.

He said: "The department was aware that I was Labour Party donor, that was disclosed a year ago. We won the contract because we provided the best bid, it is as simple as that. We were the only company that could provide the vaccine when it was needed."

Group net profits for the year to March 31 were £1.2 million against losses of £18.8 million in the previous year, while revenues soared from £40 million to £113 million.

Most analysts had expected Powderject to report its first profit in a year's time, and shares in the group jumped 7 per cent at 491p.

Powderject decided to tackle the bio-defence market last year and the smallpox deal is its first major win.

"After September 11, it became clear the bio-terrorist threat was going to be increased and was not going away and we decided this was an important area," Dr Drayson said.

He conceded it had not been a fully competitive tendering process but stressed this had been for security reasons only.

Powderject put its move into the black down to strong performances from core products. The Fluvirin flu vaccine , for example, saw record sales, up 64 per cent at £66.7 million.