Biotech Values

[DewDiligence]

OXGN to Acquire VXGN

[VXGN has nothing to offer but cash and the remote possibility that its partner (EBS) will receive an order from the US government for anthrax vaccine; hence the OXGN-VXGN merger is effectively a financing transaction for OXGN. There is no premium in this deal; to the contrary, the exchange rate (which is subject to change as explained below) implies a slight discount to VXGN’s closing price on Wednesday. (OXGN’s share price fell on Thursday, so the deal is even worse for VXGN based on Thursday’s close.)]

http://finance.yahoo.com/news/OXiGENE-to-Acquire-VaxGen-in-pz-2627430582.html?x=0&.v=1

›6:00 am EDT, Thursday October 15, 2009

Acquisition to Add Approximately $33 Million in Cash to OXiGENE's Balance Sheet

Conference Call Today at 9:00 AM Eastern

SOUTH SAN FRANCISCO, Calif., Oct. 15, 2009 (GLOBE NEWSWIRE) -- OXiGENE, Inc. (Nasdaq: OXGN) (Stockholm:OXGN), a clinical-stage, biopharmaceutical company developing novel therapeutics to treat cancer and eye diseases, and VaxGen, Inc. (OTCBB: VXGN), a biopharmaceutical company, announced today that they have entered into a definitive merger agreement pursuant to which OXiGENE will acquire VaxGen in exchange for common stock of OXiGENE. Upon closing of the transaction, VaxGen will become a wholly-owned subsidiary of OXiGENE, and VaxGen stockholders will become stockholders of OXiGENE.

At the closing of the transaction, OXiGENE will issue approximately 15.6 million shares of common stock in exchange for all outstanding shares of VaxGen's common stock. The number of shares issued at closing will be subject to adjustment if VaxGen's net cash, as of a date shortly before the closing, as agreed by both parties, less certain expenses and liabilities, is greater or less than approximately $33.2 million. Based upon the shares of common stock of OXiGENE and VaxGen currently outstanding and assuming net cash at closing equals the target net cash, the stockholders of VaxGen would receive approximately 0.4719 shares of common stock of OXiGENE for each share of VaxGen common stock. VaxGen currently estimates that its net cash at closing may be below the target amount of net cash, depending on the timing of the closing and the amount of VaxGen expenses.

In addition to the initial shares issued to VaxGen stockholders, OXiGENE will also place approximately 8.5 million shares of its common stock in escrow to be released to VaxGen stockholders contingent upon the occurrence of certain events over the two-year period following the closing. These events relate primarily to settlement of VaxGen's obligations under its lease of facilities in South San Francisco, and to the potential award of a procurement contract to Emergent BioSolutions (NYSE:EBS) by the U.S. Government for which VaxGen is eligible to receive milestone and royalty payments in connection with Emergent BioSolutions' May 2008 acquisition of VaxGen's recombinant protective antigen (rPA) anthrax vaccine product candidate and related technology.

Immediately after the closing, VaxGen stockholders prior to the merger are expected to own approximately 20% of the outstanding shares of the combined company and OXiGENE stockholders are expected to own approximately 80%. If all of the contingent shares are released, OXiGENE anticipates having approximately 87 million shares outstanding. Under these circumstances, VaxGen stockholders prior to the merger would be expected to own approximately 28% percent of the outstanding shares of the combined company and the current OXiGENE stockholders would be expected to own approximately 72% percent, assuming no further issuances of stock by OXiGENE.

"OXiGENE's mission is to develop new and improved therapeutics based on our vascular disrupting agent (VDA) technology that has the potential to deliver significant medical benefits to patients with cancer and sight-threatening eye diseases and conditions. We believe these programs will be significantly strengthened by the addition of approximately $33 million of cash," said Peter Langecker, M.D., Ph.D., OXiGENE's interim Chief Executive Officer. "This transaction represents a timely and efficient strategy to strengthen our cash position and fund operations into 2011. In addition to the benefit of an immediate infusion of significant cash which strengthens our ability to fund our clinical development programs, we believe that there is potential upside in this transaction in the form of milestones and royalties should the rPA anthrax vaccine be selected for government stockpiling. We want to welcome our prospective new stockholders and board members and look forward to their support and sharing our progress with them."

"We believe that this merger transaction with OXiGENE represents an excellent strategy to maximize the value of VaxGen's remaining tangible and intangible assets and to provide our stockholders with the opportunity to participate in OXiGENE's potential success as a leader in the development of promising new agents for cancer and eye diseases," said James Panek, President of VaxGen.

The merger agreement has been approved unanimously by the boards of directors of both OXiGENE and VaxGen. The merger is subject to customary closing conditions, including approval by both OXiGENE's and VaxGen's stockholders. As of June 30, 2009, VaxGen's unaudited cash, cash equivalents and marketable securities balance was approximately $36 million and its liabilities and contractual obligations consisted primarily of costs and expenses of its outstanding leases related to its former biopharmaceutical manufacturing operations located in South San Francisco, CA.

Upon the closing, two members of VaxGen's board of directors will be appointed to OXiGENE's board of directors: Lori F. Rafield, Ph.D., a consultant to the biotechnology industry, and Franklin M. Berger, a former biotechnology analyst.

The transaction is expected to be completed in the first quarter of 2010. OXiGENE is receiving a fairness opinion in this transaction from Houlihan Lokey, and VaxGen is receiving a fairness opinion from Aquilo Partners.

Details of the Proposed Stock-for Stock Transaction

Upon closing of the transaction, based upon the anticipated net cash balance of VaxGen at closing and the current number of OXiGENE's common shares outstanding, OXiGENE will issue approximately 15.6 million shares of newly issued common stock, subject to adjustment as set forth in the merger agreement, in exchange for all of VaxGen's outstanding common stock. All of VaxGen's outstanding stock options will be canceled immediately prior to the closing and all of VaxGen's outstanding warrants, to the extent not terminated prior to the closing, will be assumed by OXiGENE. OXiGENE will also place an additional approximately 8.5 million shares of newly issued common stock in escrow to be issued contingent upon certain occurrences over the two-year period following the closing.

Of the 8.5 million shares placed in escrow, approximately 2.7 million shares relate primarily to the potential settlement of VaxGen's lease facility obligation. If the outstanding lease obligation and related costs are reduced either before the closing or during the two-year period following the closing, OXiGENE will release additional shares from escrow to the VaxGen stockholders depending on the amount of the lease settlement arrangements.

The remaining 5.8 million shares to be held in escrow will be released to VaxGen's stockholders in the event that VaxGen (as a subsidiary of OXiGENE), within two years following the closing of the transaction, becomes entitled to receive a $3 million milestone payment from Emergent BioSolutions in connection with the award of a procurement contract to Emergent by the United States government for supply of rPA anthrax vaccine. In the event this milestone is achieved, OXiGENE will release from escrow approximately 1.9 million shares, plus additional shares based on the size of the contract awarded to Emergent. OXiGENE will be entitled to receive additional milestone payments based on net sales as well as royalties from sales of rPA anthrax vaccine for a period of 12 years from commercial sale, with no obligation to issue additional shares to VaxGen stockholders. If the award of the procurement contract is announced prior to the closing, VaxGen will receive credit for the $3 million milestone payment in calculating net cash at closing, and OXiGENE will issue to VaxGen stockholders at the closing additional shares based on the size of the contract awarded to Emergent.

In connection with the Merger Agreement, VaxGen entered into voting agreements with OXiGENE and certain executive officers, directors and stockholders of OXiGENE, and OXiGENE entered into voting agreements with VaxGen and certain executive officers and directors of VaxGen pursuant to which these parties agreed to vote in favor of the adoption of the merger agreement and against approval of any proposal opposing or in competition with the consummation of the Merger.

Conference Call Today

Members of OXiGENE's and VaxGen's management teams will discuss the VaxGen merger transaction and provide a corporate update via a webcast and conference call today at 9:00 a.m. EDT (6:00 a.m. PDT). To listen to a live or an archived version of the audio webcast, please log on to the OXiGENE's website, www.oxigene.com. Under the "Investors" tab, select the link to "Events and Presentations." You may also listen to an archived version of the audio webcast by logging onto VaxGen's website at www.vaxgen.com. The conference call can also be heard live by dialing 800-946-0719 in the United States and Canada, and 719-325-2258 for international callers, five minutes prior to the beginning of the call.

A replay will be available starting at 11:00 a.m. EDT, (8:00 a.m. PDT) on October 15, 2009 and ending at midnight EDT (9:00 p.m. PDT) on October 29. To access the replay, please dial 888-203-1112 if calling form the United States or Canada, or 719-457-0820 from international locations. Please refer to replay passcode 7768134.

About OXiGENE

OXiGENE is a clinical-stage biopharmaceutical company developing novel therapeutics to treat cancer and eye diseases. The company's major focus is developing vascular disrupting agents (VDAs) that selectively disrupt abnormal blood vessels associated with solid tumor progression and visual impairment. OXiGENE is dedicated to leveraging its intellectual property and therapeutic development expertise to bring life-extending and life-enhancing medicines to patients.

About VaxGen

VaxGen is a biopharmaceutical company based in South San Francisco, California. The company owns a state-of-the-art biopharmaceutical manufacturing facility with a 1,000-liter bioreactor that can be used to make cell culture or microbial biologic products. The facility is contained within leased premises. For more information, please visit the company's web site at http://www.vaxgen.com.‹