A building contractor has pulled out of work on a controversial animal research centre for Oxford University.
The university says 98% of animals housed at the centre will be rodents
Executives at the Montpellier Group announced on Monday that the company's subsidiary, Walter Lilly and Co, would be withdrawing from the project.
Oxford University officials say they remain committed to building the facility on South Parks Road.
Home Secretary David Blunkett promised tough action against any animal rights activists who resort to intimidation.
Mr Blunkett told Channel 4 News: "I have spoken personally to the managing director of this particular company.
"I am deeply sorry that because of the dangers of profitability and the structure of the company being damaged that they have had to pull out.
Joan Court staged a 48-hour hunger strike outside the site
"I think that reinforces the need to clamp down heavily on those who are not using legitimate means of persuasion but completely illegitimate means of intimidation."
Oxford University says the £18m centre will replace existing sites and would not mean an increase in animal tests.
About 98% of its animals would be rodents, although the centre could also house ferrets, amphibians, fish and primates.
A university spokeswoman told BBC News Online: "The board of Montpellier have not given reasons for their decision and that is a matter for them.
"But we remain committed to the project and we are putting alternative plans in place."
The spokeswoman said she could not name the alternative building contractor.
She said: "We do not discuss contractual matters as this can attract attention that makes it difficult for people to get on with the work."
Some members of the scientific community reacted with dismay to the news.
A spokesperson for the Royal Society said: "The development of medical treatments that could save or improve the lives of millions of people could be delayed or even prevented if vital research does not take place."
Robin Lovell Badge, of the Association of Medical Research Charities, said: "It is likely that the animals will have superior conditions, and therefore better lives, in a new building than dispersed among several older buildings."
He added: "Moreover, there will be efficiencies of scale that are likely to lead to an overall reduction in numbers of animals required.
"On both counts it seems illogical to oppose the construction of the new facility in Oxford."
Last week, 85-year-old animal rights campaigner Joan Court held a 48-hour hunger strike outside the site.
Ms Court, a retired midwife from Cambridge, said she was delighted at the latest development.
She told BBC News Online: "It is a miracle, I am absolutely delighted - anything that will stop continuation of the project gives me immense happiness.
"Not only are experiments cruel and immoral, they are also misleading as animals are not good models for human beings.
"I am astonished that educated scientists are not reading the literature about alternatives to animal testing."
Science Minister Lord Sainsbury said: "The government will give its fullest support to the alternative arrangements which are being put in place to ensure that the project is completed on time."