After a tough few years, VaxGen is to be acquired by fellow US firm Oxigene, which is offering stock worth about $22.5 million to complete the deal.

Oxigene is issuing about 15.6 million common shares in exchange for all outstanding VaxGen common shares and in return will get access to the latter’s cash pile of $33 million. Once the deal is closed, Vaxgen stockholders would own about 20% of the new entity. That could rise to 28% as another 8.5 million shares will be put into escrow to be issued “contingent upon certain occurrences over the two-year period following the closing”, due in the first quarter of next year.

Oxigene, which is developing therapeutics based on its vascular disrupting agent technology for cancer and eye diseases, and VaxGen’s cash will significantly strengthen those programmes. Chief executive Peter Langecker said the transaction “represents a timely and efficient strategy” that will help fund operations into 2011.

In addition to “the benefit of an immediate infusion of significant cash”, he added that there is potential upside in the form of milestones and royalties should the recombinant protective antigen (rPA) anthrax vaccine, which was sold by VaxGen to Emergent BioSolutions in May 2008, be selected for government stockpiling.

If the deal goes through, it will end a turbulent period for VaxGen, which has undergone several rounds of restructuring since December 2006 when the US Department of Health and Human Services decided to cancel a potentially lucrative stockpile contract for 75 million doses of the rPA anthrax vaccine. VaxGen then tried to merge with Raven Biotechnologies but that deal collapsed in March last year.

The company has no operations but is the owner of a state-of-the-art biopharmaceutical manufacturing facility that can be used to make cell culture or microbial biologic products.