By Jim Shrine

VaxGen Inc. completed one of the few initial public offerings in the biotech industry of late in an IPO that raised $40.3 million.

The Brisbane, Calif., company, which spun off from Genentech Inc. in 1995, sold 3.1 million shares of common stock at $13 per share. The company in its filing proposed selling 3.1 million shares at $13 to $15 each.

The stock (NASDAQ:VXGN) ended its first day of trading Wednesday at $16.375.

Prudential Securities Inc., of New York, was the lead underwriter. Punk, Ziegel & Co., of New York, co-managed the offering. They have an overallotment option on another 465,000 shares, which, if exercised, would add $6 million to the total.

VaxGen was formed to complete development and commercialize, in collaboration with South San Francisco-based Genentech, the AIDSVAX vaccine, which is designed to prevent HIV infection. Genentech's 19.8 ownership position in VaxGen was reduced to about 14 percent with the offering.

VaxGen officials, citing an SEC-imposed "quiet period," declined to comment.

The vaccine is being tested in a large Phase III study in North America that started a year ago and is designed to enroll 5,400 volunteers. Most will be gay males or people with HIV-positive partners. About 60 sites will participate, including one clinic each in Canada, Puerto Rico and the Netherlands.

A second Phase III trial is under way in Thailand. It is designed to enroll 2,500 volunteers at 17 sites in Bangkok.

The vaccines used in each trial will target strains of HIV predominant in each region. It uses recombinant versions of glycoprotein 120, which is the major envelope protein from HIV.

The company has said the endpoint needed for regulatory approval is a 30 percent reduction in HIV infections. Interim analyses will be done for each study, and if the target is met at that time the trial will be stopped and VaxGen will seek approval. If the 30 percent threshold has not been reached at that time the trial will run its full course.