Struggling VaxGen cuts costs, seeks alternatives

VaxGen Inc. said Friday that it had laid off half its workers, lost its chief executive and hired a firm to explore “strategic alternatives” less than three weeks after losing an $878-million U.S. government contract to make anthrax vaccine.

Lance Gordon resigned as CEO and president and was succeeded by James Panek, who had been executive vice president, said Brisbane, Calif.-based VaxGen. The biotechnology company also dismissed 112 employees and halved its spending to less than $3 million a month.

VaxGen has scaled back production of anthrax vaccine since the Department of Health and Human Services revoked an order for 75 million doses on Dec. 19 because the company didn’t meet a deadline for a clinical trial. VaxGen has been in talks with potential partners about a possible sale or merger.

“They’re obviously getting down to business, in terms of figuring out what to do next,” said Sharon Seiler, an analyst at Punk, Ziegel & Co. in New York. “Almost any biopharmaceutical company could be interested” in VaxGen’s assets, which include a South San Francisco factory that makes vaccines.

VaxGen hired Lazard Ltd. to help explore strategic choices, and Gordon, the former CEO, will continue to advise VaxGen. Spokesman Lance Ignon said the company would “look at any opportunity that has the potential to increase shareholder value.”

VaxGen said it had $96.6 million in cash and short-term investments at year-end. If the company spends $3 million a month, VaxGen has enough money to maintain its operations for more than two years.

Shares of VaxGen rose 26 cents, or 12%, to $2.51. The stock has plunged 71% in the last 12 months.