(Adds new Fauci quotes, paragraphs 13-14, 17-18, background)
By Andrew Quinn
BETHESDA, Md., March 25 (Reuters) - The U.S. government began a major overhaul of its effort to produce an AIDS vaccine on Tuesday, stressing a return to basic scientific research after the failure of a key clinical trial last year.
Government officials at a summit with AIDS scientists pledged to prioritize spending on lab work and animal tests rather than expensive, and thus far disappointing, large-scale vaccine trials on humans.
"We need to turn the knob in the direction of discovery. That is unambiguous," said Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, who convened the meeting outside of Washington.
"We really do need new and novel ideas."
The vaccine summit follows the failure last year of an experimental HIV vaccine developed by Merck & Co (MRK.N) which had been widely touted as one of the best hopes in the field.
Clinical trials, however, indicated the vaccine candidate did not protect against infection with the AIDS virus and might even have made recipients more susceptible, although how is not exactly clear.
Scientists said the surprising outcome of the Merck trials demonstrated how little HIV is understood after more than two decades of intensive research.
"Despite hundreds and hundreds of millions of dollars, the reality is that in 2008 an effective HIV/AIDS vaccine is beyond our grasp," said Warner Greene, a co-chair of the summit and professor of medicine at the University of California-San Francisco.
"There is no question in my mind that the HIV vaccine effort is in need of a major mid-course correction."
Fauci suggested the overall AIDS research budget at his institute, now about $1.5 billion, could tilt more in favor of basic laboratory work rather than vaccine product development, which currently accounts for about a third of spending.
"We really need to seriously look at torquing that balance more to answering some of the fundamental questions that we don't have answers to," he said.
The new funding initiative is expected to begin within months and will focus on both broader, more imaginative research and on encouraging younger scientists to begin cracking HIV's mysteries, Fauci said, adding that all projects were being examined.
"Everything is on the table," he said.
Nearly 30 potential AIDS vaccines are being tested on people around the world, and advocates argue that ultimately an effective vaccine would be the best way to stop a virus that still infects some 12,000 people every day. Globally, AIDS has killed about 25 million people.
Some AIDS advocacy groups have criticized U.S. spending on the vaccine effort. The AIDS Healthcare Foundation this week said suspending U.S. funding for a vaccine and investing in strategies that save lives and stop new infections would be the wisest and most effective use of limited public resources.
Fauci said any suggestion that the overall AIDS vaccine project would stop was off the mark.
"Under no circumstances will we stop AIDS vaccine research. Not only will we not cut it, wherever possible we will increase it," he said. (Editing by Will Dunham and Cynthia Osterman)