VaxGen and Raven biotechnologies Announce Signing of Definitive Merger Agreement

- Conference Call Scheduled for Tuesday, November 13, 8:00 EST -

    SOUTH SAN FRANCISCO, Calif., Nov. 12 /PRNewswire-FirstCall/ -- VaxGen
 Inc. (Pink Sheets: VXGN), a biopharmaceutical company, and Raven
 biotechnologies, inc., a privately held company focused on the development
 of monoclonal antibody therapeutics (MAbs) for treating cancer, announced
 today that their respective boards of directors have unanimously approved a
 definitive merger agreement. The merger is expected to create a drug
 development company with a robust pipeline of monoclonal antibody
 candidates in oncology, proprietary antibody discovery platforms,
 biopharmaceutical manufacturing capabilities and sufficient cash to fund
 operations at least through the end of 2009.
     (Logo: http://www.newscom.com/cgi-bin/prnh/19991112/VAXGENLOGO)
     Details of the Proposed Transaction
     Under the terms of the agreement, VaxGen shall issue, and the holders
 of Raven Series D preferred stock shall receive, in a tax-free transaction,
 approximately 32 million shares of VaxGen common stock. Following the
 closing of the transaction, VaxGen stockholders will own approximately 51
 percent of the combined company, on a pro forma basis, and Raven Series D
 preferred stockholders will own approximately 49 percent. This ratio is
 subject to adjustment under certain circumstances described more fully in
 the merger agreement, but in no event will VaxGen stockholders own less
 than 50.1 percent of the combined company on a pro forma basis. In
 addition, VaxGen will assume Raven's debt and equipment lease obligations
 of approximately $1.8 million as of December 1, 2007. Raven Series D
 preferred stock warrants will be converted into approximately 332,000
 VaxGen common stock warrants. All other Raven options and warrants will be
 cancelled.
     Completion of the transaction is conditioned upon the approval of the
 stockholders of both companies, as well as other customary closing
 conditions. Major Raven stockholders already have executed voting
 agreements in favor of the transaction. Further conditions to close include
 a requirement that VaxGen relist its common stock on a national stock
 exchange, preparations for which are underway. VaxGen expects to file a
 Form S-4 and related proxy statement/prospectus with the U.S. Securities
 and Exchange Commission in the coming weeks. The merger is expected to
 close in the first half of 2008.
     Between signing and closing, Raven will receive a bridge loan of $3.8
 million from the holders of Raven Series D preferred stock to fund
 operating and transaction-related expenses. VaxGen will provide a bridge
 loan of up to $6 million to fund ongoing operations and to support
 advancement of Raven's pipeline prior to the transaction's closing. All
 principal and accrued interest due under the VaxGen loan is repayable in
 full in the event the transaction does not close. All principal and accrued
 interest due under the loan from the holders of Raven Series D preferred
 stock will automatically convert into shares of Series D preferred stock
 immediately prior to the closing of the transaction. This conversion is
 reflected in the current exchange ratio agreed to between the two
 companies.
     Rationale and Pipeline
     "We believe that the proposed merger of Raven and VaxGen will create a
 new company that can deliver value through its promising pipeline and
 technology platforms in one of the most scientifically and commercially
 promising areas of drug development," said George F. Schreiner, M.D.,
 Ph.D., chief executive officer of Raven biotechnologies. "We expect that
 the transaction will allow the new company to accomplish three objectives:
 first, to initiate Phase 2 clinical trails for RAV12, our lead oncology
 product; second, to move our lead antibodies targeting cancer stem cells
 into the clinic; and third, to advance our discovery platforms in cancer
 stem cell biology. We further expect that the new company will be well
 positioned to pursue collaborations with pharmaceutical companies and other
 strategic alliances."
     James P. Panek, VaxGen's president and chief executive officer, said:
 "During the past 10 months, VaxGen evaluated a wide range of strategic
 alternatives and determined that Raven's strong pipeline, technology and
 complementary capabilities distinguished it from the alternatives. We are
 confident that this proposed transaction with Raven will achieve our goal
 to build value for our stockholders through the creation of a broadly based
 biotechnology company with a promising future."
     The combined company's product pipeline will have one compound for
 major cancer indications in clinical development, four oncology product
 candidates in preclinical development, and a substantial library of
 antibodies to novel cancer antigens. This library includes antibodies to
 tumor stem cells and conditioned cell immunogens, which are undergoing
 pre-clinical screening. The new company would expect to file at least one
 additional IND in 2009.
     Organization, Management and Board of Directors
     Both companies separately expect to undertake restructuring efforts in
 the fourth quarter to conserve cash resources. The combined company will be
 based in Raven's offices in South San Francisco.
     Upon closing, Dr. Schreiner will serve as CEO and a director of the
 combined company. Mr. Panek will assume the title of president and chief
 operating officer and will serve as a director. Other executive officers of
 the combined company will be Matthew J. Pfeffer, chief financial officer;
 Jennie P. Mather, Ph.D., chief scientific officer; Stanford J. Stewart,
 M.D., vice president, clinical research; Gordon A. Vehar, Ph.D., vice
 president, research and development; and Piers Whitehead, vice president,
 corporate and business development.
     At the closing, the combined company's board of directors will include
 four members from VaxGen's current board of directors and three from
 Raven's. VaxGen directors who will serve on the new board are Randall L-W.
 Caudill, D.Phil., who will continue as chairman of the board; Franklin M.
 Berger, CFA; Myron M. Levine, M.D.; and Mr. Panek. The Raven directors who
 will serve on the board are William D. Young, Dr. Schreiner, and Michael
 Kranda, who will serve as vice-chairman.
     VaxGen was advised by Lazard and Cooley Godward Kronish LLP. Raven was
 advised by Montgomery & Co., LLC and Latham & Watkins LLP.
     Conference Call
     A joint conference call will be held at 8:00 a.m. EST on Tuesday,
 November 13, 2007 to discuss the proposed merger and the business and
 strategy of the combined company. The call may be accessed through the
 following means.
     Domestic callers: 800-366-7640.
     Domestic replay: 800-405-2236 or 303-590-3000; pass-code 11102242#
     International callers: 303-262-2051
     International replay: 303-590-3000; pass-code 11102242#
     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. For more information,
 please visit the company's web site at http://www.vaxgen.com.
     About Raven
     Raven biotechnologies, inc. is a privately held biotechnology company
 focused on the development of monoclonal antibody therapeutics for treating
 cancer. Raven's lead product candidate, RAV12, targets adenocarcinomas and
 is in clinical development for the treatment of gastrointestinal and other
 cancers. Raven, which is based in South San Francisco, California, has
 identified multiple candidate therapeutic MAbs for many cancer indications
 including lung, colon, pancreatic, prostate, breast, brain, and ovarian
 cancer. Please visit http://www.ravenbio.com for more information about
 Raven biotechnologies inc.
     Note: This press release contains "forward-looking statements" within
 the meaning of the federal securities laws. These forward-looking
 statements include, without limitation, statements regarding each company's
 ability to meet the conditions necessary to close this transaction, its
 ability to list its common stock on an national stock exchange, failure of
 VaxGen's shareholders to approve the merger, the ability to complete the
 transaction contemplated by this communication in a timely fashion, the
 risk that VaxGen's and Raven's business operations will not be integrated
 successfully; the combined company's inability to further identify, develop
 and achieve commercial success for products and technologies; the combined
 company's ability to meet milestones as planned; and the risk that the
 combined company's financial resources will be insufficient to meet the
 combined company's business objectives. These statements are subject to
 risks and uncertainties that could cause actual results and events to
 differ materially from those anticipated. Additional information concerning
 these and other risk factors is contained in VaxGen Form 10-K for the year
 ended December 31, 2006 and most recently filed Form 10-Q. Readers are
 cautioned not to place undue reliance on these forward-looking statements
 that speak only as of the date of this release. VaxGen and Raven undertake
 no obligation to update publicly any forward-looking statements to reflect
 new information, events, or circumstances after the date of this release
 except as required by law.
     Additional Information and Where to Find It
     VaxGen intends to file a registration statement on Form S-4, and a
 related proxy statement/prospectus, in connection with the merger.
 Investors and security holders are urged to read the registration statement
 on Form S-4 and the related proxy/prospectus when they become available
 because they will contain important information about the merger
 transaction. Investors and security holders may obtain free copies of these
 documents (when they are available) and other documents filed with the SEC
 at the SEC's web site at http://www.sec.gov. In addition, investors and
 security holders may obtain free copies of the documents filed with the SEC
 by contacting VaxGen Investor Relations at the email address:
 ir@vaxgen.com.
     This communication shall not constitute an offer to sell or the
 solicitation of an offer to sell or the solicitation of an offer to buy any
 securities, nor shall there be any sale of securities in any jurisdiction
 in which such offer, solicitation or sale would be unlawful prior to
 registration or qualification under the securities laws of any such
 jurisdiction. No offering of securities shall be made except by means of a
 prospectus meeting the requirements of Section 10 of the Securities Act of
 1933, as amended.
     VaxGen, Raven and their respective directors and executive officers may
 be deemed to be participants in the solicitation of proxies from the
 stockholders of VaxGen in connection with the merger transaction.
 Information regarding the special interests of these directors and
 executive officers in the merger transaction will be included in the proxy
 statement/prospectus of described above. Additional information regarding
 the directors and executive officers of VaxGen is also included in VaxGen's
 preliminary proxy statement for its 2007 Annual Meeting of Stockholders
 which was filed with the SEC on November 9, 2007 and its Annual Report on
 Form 10-K for the year ended December 31, 2006, which was filed with the
 SEC on August 30, 2007. These documents are available free of charge at the
 SEC's web site at http://www.sec.gov and from Investor Relations at VaxGen
 as described above.
 
 

SOURCE VaxGen Inc.