VaxGen Gets No Boost From AIDS Study

According to the company's website, VaxGen owns a 35,000 square foot biologics manufacturing facility in South San Francisco.

Image: VaxGen

The company that grabbed headlines around the world for a promising HIV vaccine Thursday saw its stock rise a nickel to 74 cents.

That's the story of South San Francisco-based VaxGen Inc., a once-promising biotech company that crashed and burned years ago when its treatment failed to live up to expectations.

It may not be entirely too late for VaxGen to get some money from Aidsvax. After turning the vaccine over to a nonprofit to develop, the company can still collect future royalties if Aidsvax is approved. That could be many years from now, if ever.

In the meantime, investors are losing patience with VaxGen. After Aidsvax failed in a trial of 5,400 people back in February 2003, the company focused on an anthrax vaccine program that was later scrapped. Two days ago, disgruntled shareholders filed a motion to replace the company's board with their own slate. The investors' group is angry that the company, which is essentially a shell, hasn't sold its assets: basically a factory and potential royalty payments. The investors also want $10 million in cash paid out to the shareholders.

In a U.S. government study revealed Thursday, the treatment was effective in some patients when tested in combination with Sanofi-Aventis SA's Alvac. The study, which included 16,000 people, marked the first time ever that any vaccines were shown to effectively prevent HIV.

That's, of course, too late for the investors who bid up the stock prior to 2003, only to see the value of their shares halved right after the initial study failure. The stock once traded above $32 a share.

VaxGen, spun off from biotech firm Genentech Inc. in 1995, was once considered a company with a lot of potential that had a promising HIV vaccine. But that hope was crushed when a large North American human study failed in 2003.

"As an investor, you should be aware that particularly in the small-cap biotech space, that failure is a way of life," says Christopher Raymond, a biotechnology analyst at Robert W. Baird & Co. in Chicago. "More often than not, that's what happens. A lot of things can happen, and most of them aren't good."

Perhaps one former VaxGen executive is happy today.

Donald Francis, VaxGen's former president, left the company in 2004 to start Global Solutions for Infectious Diseases, a nonprofit also in South San Francisco. Two years later, VaxGen transferred rights for Aidsvax to Francis' group, which counts on donations from the Bill and Melissa Gates Foundation and other benefactors.