West Coast Editor

Still casting around for a "strategic transaction," VaxGen Inc. restructured for the third time since losing its anthrax vaccine contract with the feds, reducing the work force from 61 to 27 employees to lower the monthly cash burn for operating activities to about $1 million.

VaxGen's stock (Pink Sheets:VXGN) closed Friday at $1.43, down 3 cents. Company officials could not be reached for comment.

In December, the $877.5 million contract granted two years earlier by the Department of Health and Human Services was cancelled after Brisbane, Calif.-based VaxGen said it could not start a second Phase II trial of the anthrax vaccine rPA102 on time.

The FDA's Center for Biologics Evaluation and Research had informed the company a few days earlier that it would maintain the clinical hold on the second Phase II trial, due to stability concerns with the vaccine. (See BioWorld Today, Dec. 21, 2006.)

In January, VaxGen reduced its staff by half, dropping the head count to 90, and sold its stock in the overseas contract-manufacturing firm Celltrion Inc., to raise $51.3 million.

April brought an $11 million payment from the government for nixing the anthrax contract, and VaxGen said at the time it was considering the sale of some or all assets, a merger, a reverse merger, an acquisition or some combination of those, and had screened more than 130 other companies. More than 80 had been contacted. (See BioWorld Today, Jan. 4, 2007.)

Spun out of South San Francisco-based Genentech Inc., VaxGen once drew much investor hope with its AIDSVax vaccine to prevent HIV, the first ever to reach Phase III trials, in 1998. By 2003, two Phase III trials had fizzled, and hopes turned to anthrax and smallpox vaccines. (See BioWorld Today, June 4, 1998; Feb. 25, 2003; and Nov. 13, 2003.)

Earlier this year, VaxGen and the Chemo-Sero-Therapeutic Research Institute of Japan, or Kaketsuken, terminated their deal for an attenuated smallpox vaccine, called LC16m8, for use in the U.S. and elsewhere.

Deals lately have been few and far between, though VaxGen in August finalized a material transfer agreement with ImmuneRegen BioSciences Inc., of Scottsdale, Ariz., under which VaxGen will provide recombinant protective antigen - the active ingredient in its anthrax vaccine - for testing with ImmuneRegen's adjuvant Viprovex, still at the preclinical stage for anthrax.

Among those sent packing in the most recent layoff is Lance Ignon, vice president of corporate affairs, who had been with VaxGen for seven years.

Other firms are busy in the anthrax space. Late last month, Cangene Corp., of Toronto, completed delivery of the initial order for anthrax immune globulin, and the drug has been received formally into the U.S. strategic national stockpile. The company invoiced for about one-third of the $18 million to $22 million total, under the government contract.

Also in August, Chicago-based Advanced Life Sciences Holdings Inc. began its collaboration with the National Institute of Allergy and Infectious Diseases on studies to evaluate cethromycin, the company's late-stage antibiotic, as a treatment for anthrax. Earlier this year, the firm reported positive data showing that cethromycin was effective in preventing inhalation anthrax infection in primates, and the drug has been granted orphan status by the FDA.