[LOGO VaxGen]
VaxGen Releases Second-Quarter Financial Results:
Revenue Increases as Operating Loss Declines
Brisbane, Calif. - August 5, 2003 - VaxGen, Inc. (Nasdaq: VXGN) today
announced financial results for the second quarter ended June 30, 2003.
Revenue for the most recent quarter totaled $2.8 million, compared to
$220,000 in the quarter ended June 30, 2002. The increase was due primarily to
revenue from VaxGen's contract with the National Institute of Allergy and
Infectious Diseases (NIAID) to fund development of an anthrax vaccine.
The company reported a consolidated net loss applicable to common
stockholders of $7.5 million, or 43 cents per share, for the most recent
quarter, compared to a net loss applicable to common stockholders of $7.4
million, or 52 cents per share, in the quarter ended June 30, 2002. The loss in
the second quarter of 2003 included non-cash charges of $1.0 million
attributable to VaxGen's convertible preferred stock.
VaxGen's second-quarter results now reflect assets, liabilities and
operating results associated with the company's majority-owned biopharmaceutical
manufacturing subsidiary in South San Francisco. This change in accounting
method, which is in accordance with GAAP, is the result of VaxGen's increased
level of ownership of the subsidiary in the quarter ended June 30, 2003
resulting from the company's ongoing investment in the subsidiary.
On a pro forma basis, which excludes charges related to VaxGen's
convertible preferred stock, the company reported a net loss of $6.5 million, or
37 cents per share, for the quarter
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ended June 30, 2003, compared to a net loss of $6.7 million, or 46 cents per
share, in the comparable quarter of 2002.
VaxGen believes that the non-GAAP results in this press release provide
useful information to investors because they exclude the effects of non-cash
charges that the company believes are not indicative of its on-going operations.
The non-GAAP information is provided as a complement to results provided in
accordance with GAAP and should not be considered better than, or a substitute
for, GAAP measures.
VaxGen had $14.6 million in cash and investment securities as of June 30,
2003, compared with $11.9 million at the end of the previous quarter ended March
31, 2003.
"We continue to believe that our existing cash, plus anticipated income
from existing government contracts and grants, will allow us to fund our
operations through approximately the first quarter of 2004," said Carter A. Lee,
VaxGen's senior vice president of Finance and Administration. "We expect to fund
our operations beyond that date through existing and new government contracts
and grants and/or equity financing."
Net cash expenditures for the second quarter totaled $9 million. This
figure reflects the company's net loss, as well as $2.2 million in final
payments to clinical sites associated with the company's Phase III HIV vaccine
trial in North America and Europe, which concluded earlier this year. Cash
expenditures also reflected $4.7 million in payments, principally for capital
equipment, associated with VaxGen's majority-owned biopharmaceutical
manufacturing subsidiary in South San Francisco. VaxGen is using its
manufacturing facility to support its current anthrax vaccine contract and is
proposing its use to meet the requirements of future anthrax vaccine development
and supply contracts.
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"With the investments we've made in our manufacturing capacity and our
track record of performance under our existing anthrax vaccine contract, we
believe VaxGen is well positioned to secure a second NIAID contract for advanced
development of an anthrax vaccine candidate," said Lance K. Gordon, Ph.D.,
VaxGen's CEO.
The U.S. government is expected to award at least two additional contracts
for anthrax vaccine. The NIAID is expected to award one or more contracts for
the advanced development of a recombinant anthrax vaccine before the end of the
third quarter of 2003. This contract or contracts are intended to fund
commercial scale-up and demonstration of manufacturing, as well as Phase II
trials and animal efficacy studies.
Separately, Project BioShield calls for the creation and maintenance of a
60-million-dose stockpile of anthrax vaccine. The U.S. House of Representatives
recently passed the measure by a vote of 421 to 2. The U.S. Senate is expected
to act shortly.
According to a recent Congressional Budget Office (CBO) estimate for the
House-passed bill, the U.S. government anticipates spending $1.4 billion between
2004 and 2013 on the procurement, maintenance and replacement of an anthrax
vaccine stockpile under Project BioShield, if Project BioShield is signed into
law. The CBO report states that the government expects to purchase an anthrax
vaccine made from recombinant anthrax Protective Antigen (rPA). VaxGen's
candidate anthrax vaccine was specifically developed under its existing NIAID
contract to meet this requirement.
"If Project BioShield is signed into law," Gordon said, "VaxGen expects to
aggressively pursue opportunities under this program."
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Second-Quarter Highlights
o VaxGen announced that the U.S. Food and Drug Administration
(FDA) had cleared an Investigation New Drug application (IND)
for the company's anthrax vaccine candidate, rPA102. The IND
allowed VaxGen to begin a Phase I clinical trial, which is now
fully enrolled and underway at four leading medical centers in
the United States.
o The field work on VaxGen's second Phase III HIV vaccine trial
was completed. The company expects to announce results from
the trial, which took place in Thailand, in the fourth quarter
of 2003.
o VaxGen announced that it had been awarded a phase 2 Small
Business Innovation Research (SBIR) grant from the NIAID to
identify novel antigens for potential use in future HIV
vaccine candidates. The SBIR grant provides up to $2 million
for the program and is in addition to the $210,000 that VaxGen
received late last year through phase 1 of the grant.
o VaxGen proceeded with preparations to introduce the LC16m8
smallpox vaccine into the United States. This vaccine was
developed in Japan and licensed there in 1980. Trials in
50,000 children showed the vaccine had a better safety profile
than other vaccines licensed for prevention of smallpox.
VaxGen has already received an initial supply of the vaccine
from its Japanese manufacturer, Kaketsuken, and anticipates
receiving 1 million doses of bulk vaccine for the purpose of
initiating clinical trials early next year.
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o VaxGen raised net proceeds of $11.7 million through two
separate equity financings. The proceeds are being used to
fund capital investments in VaxGen's majority-owned
manufacturing subsidiary and for general corporate purposes.
o VaxGen celebrated the opening of its biopharmaceutical
manufacturing facility in South San Francisco. Financed in
part by VaxGen's joint venture partner, Celltrion, Inc., the
facility includes cGMP suites occupying 17,000 square feet for
the production of vaccines, monoclonal antibodies and
therapeutic proteins. VaxGen also intends to use the facility
for training purposes leading to the transfer of technology to
a larger biopharmaceutical manufacturing facility in South
Korea that will be operated by Celltrion.
VaxGen will hold a conference call and web cast today to review this press
release. VaxGen will be discussing additional financial and statistical
information during the call. Participants are asked to dial in to the live call
five minutes before the start of the presentation. The following phone numbers
will provide access to the call or a taped version, which will be available
until the announcement of VaxGen's next quarterly financial call.
Live Call: Domestic: 800-404-1354
International: 706-643-0825
No passcode required.
Replay: Domestic: 800-642-1687
International: 706-643-5973
Passcode: 1740920
The webcast can be found by clicking on "Second-Quarter Conference Call
and Webcast" under "Company Presentations" in the Investor Relations section of
VaxGen's web site at www.vaxgen.com/invest. This will bring up a window from
CCBN. Then, click on the webcast link to view the accompanying slide
presentation.
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About VaxGen
VaxGen, Inc. is a biopharmaceutical company engaged in the development,
manufacture and commercialization of biologic products for the prevention and
treatment of human infectious disease. Based in Brisbane, Calif., the company is
developing preventive vaccines against anthrax, smallpox and HIV. The company is
also the largest shareholder in Celltrion, Inc., a joint venture formed to build
biopharmaceutical manufacturing operations for the manufacture of
biopharmaceutical products, including those from VaxGen, should they be
licensed. Celltrion is funded by a consortium of South Korean investors, with
VaxGen contributing manufacturing technology, know-how and training. For more
information, please visit the company's web site at: www.vaxgen.com
AIDSVAX(R) is a registered trademark of VaxGen.
Note: This press release contains "forward-looking statements" within the
meaning of the federal securities laws. These forward-looking statements include
without limitation, projections of future cash balances and revenue and
statements regarding the company's future capital resources, the timing and
progress of completion of development efforts for VaxGen's anthrax, smallpox or
HIV/AIDS vaccine candidates; future uses of its manufacturing subsidiary; the
Company's ability to obtain future government contracts; the timing and progress
of the passage of Project BioShield legislation and any future funding
commitments under Project BioShield; and the timing and progress of the
company's Phase III clinical trial of its HIV vaccine candidate in Thailand.
These statements are subject to risks and uncertainties that could cause actual
results and events to differ materially from those anticipated. Reference should
be made to VaxGen's Quarterly Report on Form 10-Q, filed with the Securities and
Exchange Commission on May 15, 2003, under the heading "Risk Factors", and the
company's Annual Report on Form 10-K, filed with the Securities and Exchange
Commission on March 31, 2003, under the heading "Business" for a more detailed
description of such factors. Readers are cautioned not to place undue reliance
on these forward-looking statements that speak only as of the date of this
release. VaxGen undertakes no obligation to update publicly any forward-looking
statements to reflect new information, events, or circumstances after the date
of this release except as required by law.
Contact: Lance Ignon
Vice President, Corporate Communications
(650) 624-1041
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VaxGen, Inc.
Condensed Consolidated Statements of Operations (unaudited)
(In thousands, except for per share data)
Quarter Quarter Six Months Six Months
Ended Ended Ended Ended
June 30, 2003 June 30, 2002 June 30, 2003 June 30, 2002
------------- ------------- ------------- -------------
Revenues:
Contract revenue $ 2,565 $ 220 $ 3,677 $ 238
Related party revenue 206 -- 307 --
------------- ------------- ------------- -------------
Total revenue 2,771 220 3,984 238
Operating Expenses:
Research and development (5,336) (4,299) (9,361) (8,956)
General and administrative (4,616) (3,141) (9,071) (6,069)
------------- ------------- ------------- -------------
Loss from operations (7,181) (7,220) (14,448) (14,787)
Other income, net 176 557 251 1,159
------------- ------------- ------------- -------------
Net loss before minority interest (7,005) (6,663) (14,197) (13,628)
Minority interest in subsidiary 500 -- 928 --
------------- ------------- ------------- -------------
Net loss (6,505) (6,663) (13,269) (13,628)
------------- ------------- ------------- -------------
Charges attributable to redeemable convertible
preferred stock (1,030) (736) (1,167) (1,470)
------------- ------------- ------------- -------------
Net loss applicable to common stockholders $ (7,535) $ (7,399) $ (14,436) $ (15,098)
============= ============= ============= =============
Net loss per share, basic and diluted (1) $ (0.37) $ (0.46) $ (0.80) $ (0.95)
============= ============= ============= =============
Net loss per share applicable to common stockholders,
basic and diluted $ (0.43) $ (0.52) $ (0.87) $ (1.05)
============= ============= ============= =============
Weighted average shares used in computing basic and
diluted loss per share 17,358 14,343 16,606 14,331
============= ============= ============= =============
(1) Non-GAAP "Net loss per share, basic and diluted" was calculated by
dividing "Net loss" by "Weighted average shares used in computing basic
and diluted loss per share."
VaxGen, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(In thousands)
June 30, December 31,
2003 2002
------------- -------------
Assets:
Cash and investment securities $ 14,599 $ 18,021
Accounts receivable (contracts and related party) 908 1,742
Deferred costs 946 1,379
Property and equipment, net 13,541 3,309
Other assets 2,083 3,586
------------- -------------
Total Assets $ 32,077 $ 28,037
============= =============
Liabilities and Stockholders' Equity:
Current liabilities $ 5,140 $ 8,670
Deferred revenues 3,348 917
Other liabilities 572 606
Minority interest in subsidiary 5,740 --
Redeemable convertible preferred stock 540 3,349
Stockholders' equity 16,737 14,495
------------- -------------
Total Liabilities and Stockholders' Equity $ 32,077 $ 28,037
============= =============