VaxGen Provides Financial Update Following the Filing of Its 10-Q for Second Quarter With SEC; Results Include $8.5 Million Charge in Respect of Manufacturing Plant Asset Impairment
VaxGen had approximately $59 million in cash and equivalents andinvestment securities as of June 30th, 2008, or $29 million net of theCompany's $30 million of outstanding convertible debt. VaxGen reported a netloss for the second quarter of $10.4 million, reflecting a non-cash assetimpairment charge of $8.5 million associated with the carrying value of theCompany's manufacturing and laboratory assets. VaxGen's management and boarddetermined to take this charge in light of an aborted transaction to sell thefacility and associated equipment, and reflecting the length of time that thefacility has been marketed without success.
James P. Panek, VaxGen's President and CEO, commented "While we have takenseveral important steps to preserve capital, we are obviously disappointedthat the anticipated sale of the manufacturing plant and equipment fellthrough, having completed diligence and agreed to terms, for reasons entirelyunrelated to VaxGen or the plant. In light of this, however, our expectationsgoing forward need to reflect the difficulty we have experienced selling thisasset. The encumbrance of the facility lease represents our single largestremaining financial liability."
Since the end of the second quarter, the Company has spent $18.3 millionrepurchasing $22 million in face value of its convertible debt, and receivedrepayment of $6.3 million from Raven biotechnologies in respect of the bridgeloan and accrued interest. As a result, VaxGen had approximately $46.5million in cash and equivalents and investment securities as of July 31st,2008, or $38.5 million net of the Company's $8 million of outstandingconvertible debt.
On August 25, 2008, VaxGen received a $1 million milestone payment fromEmergent BioSolutions, Inc., the purchaser of the Company's recombinantanthrax vaccine development program and associated assets, related to thegeneration of non-clinical data demonstrating the immunopotency and improvedstability of the vaccine candidate.
During the second and third quarters, VaxGen further reduced its staff andoperating expenses to preserve capital as it seeks to identify a strategictransaction which can deliver shareholder value. As a result of these costcutting efforts, VaxGen will terminate Piers Whitehead, Vice President ofCorporate and Business Development as of August 31 2008.
"With our new Strategic Transaction Committee of the Board fully engaged,and given the status of the transaction process, and our business, the Companyand Piers can now part ways," said James P. Panek. "Piers has madeinnumerable contributions to VaxGen since joining VaxGen in 2002. Hisstrategic thinking, negotiating skills and breadth of experience have been oftremendous value to the Company. He will be missed."
VaxGen expects its average monthly cash burn to be approximately $750,000,excluding unusual items. Management considers "cash burn" to be a non-GAAPfinancial measure. A reconciliation to GAAP is not provided since we areunable to predict the occurrence of unusual items which could be material tothe company's results of operations.
VaxGen is a biopharmaceutical company based in South San Francisco,California. The company owns a state-of-the-art biopharmaceuticalmanufacturing facility with a 1,000-liter bioreactor that can be used to makecell culture or microbial biologic products. The facility is contained withinleased premises. For more information, please visit the company's web site athttp://www.vaxgen.com.
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