VaxGen Inc. raised $15 million by selling a portion of its shares in Celltrion Inc. while still maintaining a significant stake in the joint venture.

The proceeds will go toward general corporate purposes, including VaxGen's anthrax vaccine and other programs. The company's stake in Celltrion, which operates a large-scale biopharmaceutical manufacturing operation in South Korea, is reduced to 22.2 percent from 26.9 percent. A group of South Korean investors purchased the shares.

"We had looked at a wide variety of financing vehicles, and this was clearly at the top of our list because it is non-dilutive," said Lance Ignon, VaxGen's vice president of corporate affairs. "Yet we raised a meaningful amount of money, and we also retained a significant stake in Celltrion, which is a very important joint venture to us."

The company expects to receive about $10 million in gross proceeds this month, and the remaining amount of $5 million by the end of November. The gross proceeds are subject to a 0.5 percent transfer tax, and net proceeds are subject to exchange rate fluctuations.

Brisbane, Calif.-based VaxGen established Celltrion in 2002, along with three South Korean partners, Nexol Corp., KT&G Corp. and J. Stephen & Co. Ventures Ltd. Ignon said one of those three partners participated in the financing, although he would not disclose which one.

Celltrion manufactures therapeutic monoclonal antibodies and recombinant proteins and employs about 150 people worldwide.

In June, the company entered an agreement to manufacture biologic products being developed by New York-based Bristol-Myers Squibb Co., representing the largest biologics manufacturing contract ever for an Asian biopharmaceutical contract manufacturer, VaxGen said.

VaxGen raised $40 million last November in a direct offering of common stock, just a few weeks after winning an $878 million government contract for its anthrax vaccine. The contract calls for the company to deliver 25 million doses of the vaccine next year and 50 million doses in 2007. (See BioWorld Today, Nov. 8, 2004, and Nov. 23, 2004.)

"We get paid on that when we deliver, not before," Ignon said.

The company also is developing a smallpox vaccine, LC16m8, in partnership with the Chemo-Sero-Therapeutic Research Institute (Kaketsuken), a government-backed business in Kumamoto, Japan.

That vaccine has completed a Phase I/II program, and "we're expecting to launch a Phase III safety trial roughly toward the end of this year, beginning of next year," Ignon told BioWorld Today.

And VaxGen is developing a meningitis B vaccine in partnership with EndoBiologics International, of Missoula, Mont. The vaccine is in early stage, proof-of-concept testing.

"If that works out, we'll start a clinical commercial development program next year," Ignon said.

As of Sept. 19, VaxGen had $30.2 million in cash, cash equivalents and U.S. government receivables. The company has not filed financial statements since Dec. 31, 2003, because it discovered that it was underestimating revenue from its government contracts and needed to restate its finances for 2001, 2002 and 2003, and apply the same model to its 2004 finances.

VaxGen expects to file those statements in the fourth quarter. In the meantime, its stock is trading on the Pink Sheets. Shares (Pink Sheets:VXGN) rose 73 cents Wednesday to close at $14.90.

In other financing news:

GenVec Inc., of Gaithersburg, Md., watched its shares (NASDAQ:GNVC) sink almost 15 percent on news that the company agreed to offer 7.25 million shares of its common stock at $2 each, a significant discount to the company's closing price on Tuesday of $2.45. Shares closed Wednesday at $2.09, down 36 cents. The offering, expected to close Sept. 26, will bring GenVec $14.5 million in gross proceeds, or $13.4 million in net proceeds. The money will fund ongoing product development, including the company's clinical trials and the expansion of manufacturing capabilities and general corporate purposes. SG Cowen & Co. LLC is acting as exclusive placement agent for the transaction.

CoTherix Inc., of South San Francisco, filed a registration statement to offer 4.5 million shares of common stock. About 500,000 of the shares will be sold by stockholders of CoTherix, who, along with the company, plan to grant underwriters an overallotment option for an additional 675,000 shares. CIBC World Markets Corp. and UBS Investment Bank will act as joint book-running managers, and Piper Jaffray & Co. and Needham & Co. LLC will act as co-managers of the offering. CoTherix is developing products to treat cardiopulmonary and other chronic diseases, such as Ventavis inhalation solution, which was FDA-approved in December for pulmonary arterial hypertension. The company's stock (NASDAQ:CTRX) fell 43 cents Wednesday to close at $13.61.

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