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12:00 AM
Mar 31, 2008
 |  BioCentury  |  Finance

Ebb & Flow

VaxGen and oncology company Raven caved under the weight of shareholder disapproval last week and terminated their merger plans.

The deal had been scheduled for a shareholder vote on Friday, but was pulled due to stronger than anticipated opposition. VaxGen said it believed the merger would have been defeated.

VaxGen's board will immediately assess strategic alternatives, including a possible liquidation. The company already has restructured three times since losing an HHS contract for its rPA102 anthrax vaccine in December 2006.

The week before the scheduled vote, investor MedCap issued a statement critical of the merger, specifically saying that Raven is too early stage, VaxGen's management had not adequately conserved cash and that given the falling share price there is a lack of momentum for the transaction. At March 19, the firm held about 4.8% of VaxGen (NASDAQ:VXGN).

MedCap had urged shareholders to vote against the merger because of "the possibility of receiving higher liquidation proceeds than the current stock price." It cited a $1.35 per share value for a liquidation, which it said was "low" but nonetheless a significant premium to the share price.

VaxGen responded with an SEC filing last Tuesday making the case for the merger and defending management. The company said it had reduced net cash used in operations by 65% to $25.2 million in 2007 from $70.5 million in 2006.

VaxGen shares have fallen by $0.73 (63%) to $0.42 since the deal was announced in November. On Friday, after the merger was canceled, the shares dipped a penny.

Raven stockholders would have received 32 million shares of VaxGen and held 49% of the combined company.

All the newco's development programs would have come from Raven. The lead product is RAV12, a mAb against an undisclosed cell-surface antigen that entered Phase II testing to treat pancreatic cancer in March. The company also has four mAbs in preclinical testing to treat various cancers.

Wyeth (WYE) has an option to exclusively license an undisclosed mAb to treat cancer.

Defensive move

Kleiner, Perkins, Caufield & Byers was looking for its first antibiotic company to add to the portfolio of its Pandemic Preparedness and Biodefense Fund. It found what it wanted in Trius, last week participating in a $30 million...

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