Exhibit 99.1
VaxGen Announces Preliminary Financial Results
for the Fourth Quarter and Year
Results Indicate Sharply Higher Revenues
BRISBANE, Calif. - February 17, 2004 - VaxGen, Inc. (Nasdaq: VXGN) today
announced preliminary financial results for the fourth quarter and year ended
December 31, 2003. The company expects to report a sharp increase in earned
revenues as a result of its first anthrax vaccine development contract and other
U.S. government sources. Final and comprehensive financial results, including
net losses and results on a consolidated basis that incorporate the company's
manufacturing subsidiary, will be presented in VaxGen's forthcoming Form 10-K
for the year ended December 31, 2003.
Preliminary Revenues
Earned revenues for the fourth quarter ended December 31, 2003 are
expected to total approximately $4.6 million, compared to $1.2 million in the
same period a year ago. For the fourth quarter, VaxGen billed the National
Institute of Allergy and Infectious Diseases (NIAID), a division of the National
Institutes of Health, approximately $7.9 million and received approximately $8.4
million in cash from its two anthrax contracts. (See "Revenue Recognition
Policy" below for an explanation of earned revenues and cash from contracts.)
Earned revenues for the 12 months ended December 31, 2003 are expected to
total approximately $14.3 million, compared to $1.6 million for the previous
year. For the year, VaxGen billed $20.8 million and collected $18.8 million in
cash before the year-end from its two anthrax contracts.
Net losses for the quarter and year are expected to be lower than year-ago
periods.
"VaxGen booked more revenues in 2003 than it had in all of the previous
years combined since the company was founded in late 1995," said Lance K.
Gordon, Ph.D., VaxGen's chief executive officer. "We are pleased that revenues
have grown so quickly and are now reducing our losses and cash burn."
Revenue Recognition Policy
The NIAID has awarded VaxGen two contracts with a combined value of $101.2
million for the development of a new anthrax vaccine. Both contracts - the first
of which was awarded in September 2002 and the second of which was awarded in
September 2003 - include various milestones. VaxGen bills the NIAID monthly for
work associated with each milestone and customarily receives payment within 30
days of issuing the invoice. However, VaxGen does not recognize these billed
invoices as earned revenues until the NIAID concurs that each milestone has been
completed.
As a result of this accounting policy, expected earned revenues are
currently less than the dollar value of the invoices billed by VaxGen and the
amount of cash it has received. (See results presented above under the heading
Preliminary Revenues.)
VaxGen believes that these non-GAAP measurements provide useful
information to investors because they illustrate the level of activity and
progress the company makes in its programs each quarter. The non-GAAP
information is provided as a complement to our preliminary results and should
not be considered better than, or a substitute for, GAAP measurements.
Cash Position
VaxGen ended the year with $28.3 million in cash and investment securities
and approximately $5.0 million in accounts receivable, which consist primarily
of outstanding invoices associated with its various contracts with the NIAID.
VaxGen's year-end cash and investment securities balance includes the equity
financing that the company completed in December 2003.
Based upon the contract-defined budget plans with the NIAID and from other
revenue sources, VaxGen expects to invoice approximately $51 million in billings
in 2004. These billings are expected to generate approximately $45 million in
cash receipts in 2004. Based on current 2004 operating plans, including capital
expenditures, VaxGen's expected net cash burn will range between $20 million and
$25 million.
Highlights and Key Events in 2003
VaxGen began building a biodefense vaccine portfolio in late 2002, when it
won the first of its two anthrax vaccine contracts. It was during that same year
that the company also announced its intention to develop an attenuated smallpox
vaccine for use in the United States and potentially elsewhere. VaxGen made
substantial progress in 2003 on the development of both vaccines.
More recently, on January 22, 2004, the company announced that it had
formed a cross-license and research collaboration with Avanir Pharmaceuticals to
co-develop an anthrax monoclonal antibody.
"We are proud of the progress we've made in developing critically needed
biodefense vaccines, and we deeply appreciate the contributions of our partners
in government and in private industry," Gordon said. "We have taken our anthrax
vaccine candidate from pre-clinical research through several animal efficacy
studies and our first clinical study to full manufacturing scale-up in just over
a year. We're also well along in our program to qualify our attenuated smallpox
vaccine candidate for use in the U.S. and internationally. We believe our
smallpox vaccine candidate will address the need for a single-dose vaccine while
meeting the established benchmarks for effectiveness and an enhanced safety
profile. Meanwhile, our recent agreement
with Avanir further broadens our biodefense franchise and takes advantage of our
expertise in monoclonal antibody production."
The following is a list of other highlights for 2003.
o VaxGen launched a Phase I clinical trial of its anthrax vaccine in
May. Preliminary results from the trial, which measured the vaccine
candidate's ability to induce an immune response in humans, were
provided to the NIAID in October. VaxGen expects to present the
final data from the trial at the International Conference on
Emerging Infectious Diseases (ICEID) in Atlanta, which is scheduled
to run from February 29 to March 3, 2004.
o The NIAID awarded VaxGen an $80.3 million contract on September 30
to advance the development of the company's anthrax vaccine
candidate. The contract, among other things, will fund the
completion of two Phase II clinical trials and production of 3
million doses of the vaccine candidate.
o VaxGen announced in June that it had completed the mechanical
construction of its new biopharmaceutical manufacturing facility in
South San Francisco, Calif. The 49,000-square-foot facility includes
17,000 square feet of cGMP space for the production of complex
proteins made through recombinant bacterial fermentation and
mammalian cell culture. The new facility is currently being used to
manufacture VaxGen's anthrax vaccine candidate and is expected to be
used to make Avanir's anthrax monoclonal antibody.
o VaxGen announced in October that it had completed a license
agreement with the U.S. Army Medical Research Institute of
Infectious Diseases (USAMRIID) that gives VaxGen exclusive worldwide
rights to develop and commercialize a recombinant anthrax vaccine
candidate based on technology developed by USAMRIID. The agreement
is subject to certain rights retained by the government. The
technology provides the basis of VaxGen's recombinant anthrax
vaccine candidate.
o VaxGen and the Chemo-Sero-Therapeutic Research Institute
(Kaketsuken) of Kumamoto, Japan, announced in December that they had
finalized the commercial terms of their collaboration to develop an
attenuated smallpox vaccine for use in the United States and
potentially elsewhere. The immediate goal of the collaboration is to
be able to respond, beginning this year, to potential U.S.
government contracts for the purchase of attenuated smallpox
vaccine. The vaccine is being developed for use in the general
population, either in preparedness programs or in response to a
terrorist attack.
VaxGen will hold a conference call and web cast today at noon, EST,
to review this press release. 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) 645-9291
Passcode: 5068627
The webcast can be found by clicking on "Fourth-Quarter Conference Call
and Webcast" under "Webcasts" 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.
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 plague and an
anthrax monoclonal antibody through a collaboration with Avanir Pharmaceuticals.
VaxGen is also the largest stockholder in Celltrion, Inc., a joint venture
formed to build manufacturing operations for the production of biopharmaceutical
products. For more information, please visit the company's web site at:
www.vaxgen.com
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 revenues and
statements regarding the company's future capital resources, the timing and
progress of completion of development efforts for VaxGen's anthrax or smallpox
vaccine candidates; future uses of its manufacturing subsidiary; the Company's
ability to obtain future government contracts; and the timing and progress of
U.S. government spending on biodefense vaccines. 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 Item 5 of the
first Current Report on Form 8-K filed by VaxGen on December 2, 2003, under the
headings "Risk Factors" and "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