June 2, 2010 (FinancialWire) (Go to http://www.financialwire.net/?s=ftrdnwswnd for all of today’s featured news.) — VaxGen, Inc. (OTCBB: VXGN), a biopharmaceutical company, has entered into entered into a definitive agreement to acquire diaDexus, Inc., a privately held diagnostics company in a stock-for-stock merger. VaxGen said that the terms of the deal changed after DiaDexus voluntarily suspended the commercialization of its automated PLAC TIA product.

In connection with the transaction, VaxGen will issue, as merger consideration, common stock equal to around 38% of the outstanding shares of the combined company immediately following the merger and VaxGen stockholders will continue to own around 62% of the combined company immediately following the merger.

Due to the impact of the suspension, the parties renegotiated the relative ownership of the combined company, as well as certain other terms, from those set forth in a Summary of Terms reported in April 2010.

If the merger is consummated, upon the closing of the transaction, diaDexus will become a wholly-owned subsidiary of VaxGen, and diaDexus stockholders receiving merger consideration will become stockholders of VaxGen.

The officers of the combined company will be the current officers of diaDexus, and the combined company will be renamed diaDexus.

VaxGen has also agreed to provide a loan to diaDexus in an amount not to exceed $6 million. If the amount of the loan advanced exceeds $4 million, the ownership percentage of diaDexus will be reduced. Certain significant stockholders of diaDexus have also agreed to provide a loan to diaDexus in the amount of $1.5 million. Both loans are secured by the assets of diaDexus, including intellectual property.

The companies said they anticipate that the merger will close in the 3rd quarter of 2010. Upon the closing of the merger, the board of directors of the combined company would consist of five members, with two members being nominated by VaxGen and three members being nominated by diaDexus.

As of March 31, 2010, VaxGen's reviewed cash, cash equivalents and marketable securities balance was around $31.3 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, California.

VaxGen's South San Francisco facility lease expires in December 2016 and diaDexus' South San Francisco facility lease expires in June 2011. According to VaxGen, the combined company will make a decision as to which facility best suits its needs.

The combined company will retain ownership of the milestone and royalty rights associated with VaxGen's rPA anthrax vaccine candidate asset sale agreement with Emergent BioSolutions, Inc. Under that agreement, VaxGen is eligible to receive potential milestone payments, as well as royalties from sales of rPA for a period of 12.5 years from first commercial sale.

The combined company will also retain certain commercialization rights associated with VaxGen's HIV/AIDS vaccine candidates licensed to Global Solutions for infectious disease, should those candidates ultimately prove to be commercially viable.

California-based VaxGen has a 1,000-liter bioreactor that can be used to make cell culture or microbial biologic products. The facility is contained within leased premises.

California-based diaDexus is a privately held diagnostics company focused on the development and commercialization of patent-protected in vitro diagnostic products addressing unmet needs in cardiovascular disease.

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