Losses at the Austrian company Intercell increased 145.1% to 8.5 million euros in the second quarter but that has not dented confidence at the vaccine maker which still expects to post its first full-year profit for 2007.

Revenues fell 31.5% to 3.7 million euros, but Intercell is predicting a reversal of fortune in that area too. It expects revenues to zoom up to 50 million euros this year, thanks to its “technology-based strategic product alliances” with major players in the pharmaceutical industry.

This level of optimism is principally based on the partnership it entered into with Novartis last month. That deal will see the Swiss drugs giant make an upfront payment of 270 million euros to Intercell for exclusive opt-in rights for any unpartnered or any future projects following the completion of Phase II clinical trials. This sum includes the purchase of 4.8 million new Intercell shares, which will increase Novartis’ stake in the Austrian firm to 16.1% from the current 6.1%.

The previous stake was acquired at the time of a marketing and distribution agreement signed in 2006 for IC51, a vaccine which has recently completed Phase III trials as a treatment for Japanese encephalitis, which is caused by a flavivirus transmitted by mosquitoes and is most common in Asia. It is expected to be launched next year in the USA, Europe and Australia, targeting travellers and the armed forces initially and the market potential is estimated to be 250-350 million euros.

Intercell noted that it would start a Phase II study for a vaccine against Staphylococcus aureus infections that is partnered with Merck & Co in the second half of 2007 and also said that Phase II/III studies of its vaccine against intensive care hospital-acquired pseudomonas infections are planned for the first half of 2008.

The Vienna-based group’s chief financial officer, Werner Lanthaler, said that the reported net loss was expected given its higher R&D and manufacturing spending. The dramatic revenue rise scheduled for the second half “would make 2007 the first profitable year in the young history of our company,” he added, and after completion of the agreement with Novartis, “we expect to end the year with a cash balance of approximately 300 million euros”.