Struggling US vaccine maker VaxGen, which recently announced major job cuts and was thought to be putting itself up for sale, has announced plans to merge with Raven Biotechnologies.
Under the terms of the all-stock deal, VaxGen will issue 32 million shares to holders of Raven’s series D preferred stock, a move which will give the former firm a 51% stake in the combined company. However, one of the conditions for closing is that VaxGen must get listed on “a national stock exchange”, having been dropped by the Nasdaq in 2004, and both companies said that they “separately expect to undertake restructuring efforts in the fourth quarter to conserve cash resources”.
Raven’s series D stockholders will give the firm a bridge loan of $3.8 million between now and the closing of the deal. VaxGen will loan Raven up to $6 million for drug development until the merger is complete. The latter specialises in monoclonal antibody therapeutics for treating cancer.
The deal represents a major boost for VaxGen which has been in the doldrums since December 2006 when the US Department of Health and Human Services decided to cancel its ‘strategic national stockpile’ contract for 75 million doses of its recombinant anthrax vaccine. This would have been enough to inoculate 25 million Americans in the case of a biological attack and the deal would have been worth $877.5 million to the firm, but the HHS refused to approve new studies of the experimental vaccine.
Since then, VaxGen has had to restructure three times and on the last occasion, in September, it reduced its workforce from 61 to just 27 employees. Last year, some 200 people were working at the firm. However a report last month from the US Government Accountability Office concluded that VaxGen was not solely responsible for the anthrax contract termination and criticised the HHS for setting unrealistic standards and timelines that would have been difficult for even a large drugmaker to meet.
Things seem to be looking up, however, and James Panek, VaxGen’s chief executive, said that during the past 10 months, the firm has “evaluated a wide range of strategic alternatives and determined that Raven’s strong pipeline, technology and complementary capabilities distinguished it from the alternatives”. He added that the deal “will achieve our goal to build value for our stockholders through the creation of a broadly based biotechnology company with a promising future”.
Raven’s lead product candidate, RAV12, targets adenocarcinomas and is in clinical development for the treatment of gastrointestinal and other cancers. It has also identified multiple therapeutic MAbs for lung, colon, pancreatic, prostate, breast, brain and ovarian cancer.
VaxGen also reported a third-quarter loss of $9.9 million, a decrease of 34.4%, while revenues were $416,000, down from $2.4 million in the like, year-earlier period. The new entity expects to have sufficient cash to fund operations at least until the end of 2009.
