Staff Writer

ViRexx Medical Corp. said results from laboratory studies on its Chimigen hepatitis B vaccine candidate produced the desired immune response in patients infected with the virus.

In the studies, the responses were seen in peripheral blood mononuclear cells isolated from patients who are chronically infected by the hepatitis B virus as well as in normal healthy individuals. The results were presented Monday at the 2008 HBV International meeting in La Jolla, Calif.

Edmonton, Alberta-based ViRexx hopes to initiate a clinical trial for its Chimigen hepatitis B therapeutic vaccine potentially with a partner in the second half of 2009 or early 2010.

Shares in ViRexx (AMEX:REX) soared more than 20 percent early Tuesday on the hepatitis B lab study results, but it ended the day at 4 cents, unchanged.

But ViRexx hopes its share price will get a boost as it continues to report good news stemming from the science on which its vaccines are based, Chief Financial Officer Brent Johnston said.

The company is using its Chimigen technology to develop several potential products, including a hepatitis C therapeutic vaccine, an avian flu vaccine and vaccines for use in biodefense, all of them in the preclinical stage. "The platform has multiple uses, and it's flexible enough to find ways to use it in different areas, and that's its real strength," Johnston told BioWorld Today.

After its Phase III antibody for ovarian cancer failed last year, ViRexx changed its focus to an early stage company, he said. Two Phase III trials of its pipeline antibody, OvaRex MAb, for advanced ovarian cancer, failed to reach statistical significance. Neither study showed a difference between the active arm (standard care followed by OvaRex MAb) and control arm (standard care followed by placebo).

In the near-term, ViRexx is seeking to raise additional funds through a rights offering, in which existing common shareholders will be granted the rights to subscribe for additional common shares in ViRexx at the price of C45 cents per share. The offering, which would be available until Friday, is expected to raise net proceeds of about C$2.99 million to be used for general working capital and to advance its clinical development programs.

The company also is undergoing a reorganization that is expected to continue through the third quarter.

ViRexx recently reported a net loss of C$1.52 million (or C2 cents per common share), for the three months ended June 30. That compares to C$3.18 million or C4 cents per common share for the same period in 2007, according to the company's most recent quarterly earnings.

ViRexx's cash and cash equivalents and short-term investments were about $300,000 at the end of July.

In addition to its hepatitis B vaccine candidate, ViRexx also has two preclinical tested vaccine candidates in its hepatitis C program. Several potential Chimigen avian influenza vaccine candidates also have been produced and are being evaluated for their efficacy.

In collaboration with the Defence Research and Development Canada Suffield, ViRexx has focused on two biodefense candidate vaccines for Western equine encephalitis virus. Based on the results from these studies, the company was encouraged to apply for a biodefense development contract, which was submitted to U.S. National Institutes of Health in January.

The application is under review, and the result is expected this fall.