1036968--3/18/2008--VAXGEN

related topics

{stock, price, share}

{product, candidate, development}

{acquisition, growth, future}

{debt, indebtedness, cash}

{personnel, key, retain}

{cost, operation, labor}

{control, financial, internal}

{operation, natural, condition}

{property, intellectual, protect}

{product, liability, claim}

{cost, regulation, environmental}

{competitive, industry, competition}

We expect to incur significant costs integrating the companies into a single business. If we fail to retain key employees, the benefits of the merger could be diminished. If one or more of the product candidates in the merged company cannot be shown to be safe and effective in clinical trials, is not approvable or not commercially successful, then the benefits of the merger may not be realized. Failure to complete the merger could adversely affect VaxGen s stock price and VaxGen s future business and operations. Completion of the merger may result in dilution of future earnings per share to the stockholders of VaxGen. The costs associated with the merger are difficult to estimate, may be higher than expected and may harm the financial results of the combined company. We are not currently listed on a national exchange and cannot assure you we will ever be listed. Although we ceased active development of rPA102 and have reduced our workforce, we may be unable to successfully manage our remaining resources, including available cash, while we seek to complete a strategic transaction. If we fail to manage successfully any company or product acquisitions, joint ventures or in-licensed product candidates, we may be limited in our ability to develop our product candidates and to rebuild our product candidate pipeline. We may need to raise additional capital to support our operations and in order to continue as a going concern if we successfully complete the transaction with Raven, or an alternative strategic transaction. As a result of the reductions in our workforce that we announced in January, May and September 2007, we may not be successful in retaining key employees and in attracting qualified new employees as required in the future. If we are unable to retain our management, scientific staff and scientific advisors or to attract additional qualified personnel, our ability to rebuild our business will be seriously jeopardized. If we fail to meet our obligations under the 5 1/2% Convertible Senior Subordinated Notes due 2010, or Notes, our payment obligations may be accelerated. Our indebtedness could adversely affect our financial health, limit our cash flow available to invest in the ongoing requirements of our business and adversely affect the price of our common stock. We have only a limited operating history and we expect to continue to generate operating losses. Biopharmaceutical product development is a long, expensive and uncertain process and the approval requirements for many products are still evolving. If we are unable to successfully develop and test product candidates in accordance with such requirements, our business will suffer. Delays in successfully completing any clinical trials we may conduct could jeopardize our ability to obtain regulatory approval or market our potential product candidates on a timely basis. If we fail to comply with extensive regulations enforced by domestic and foreign regulatory authorities both before and after we obtain approval of our future product candidates, the commercialization of our future product candidates could be prevented, delayed or suspended. Our future product development efforts may not yield marketable products due to results of studies or trials, failure to achieve regulatory approvals or market acceptance, proprietary rights of others or manufacturing issues. We may fail to protect our intellectual property or may infringe on the intellectual property rights of others, either of which could harm our business. We face competition from several companies with greater financial, personnel and research and development resources than ours. Natural disasters, including earthquakes, may damage our facilities. Our use of hazardous materials and chemicals require us to comply with regulatory requirements and exposes us to potential liabilities. We may become subject to product liability claims, which could result in damages that exceed our insurance coverage. We may be subject to claims that our employees or we have wrongfully used or disclosed alleged trade secrets of their former employers. Risks Related to Our Common Stock Our stockholders could experience substantial dilution as a result of the issuance of additional shares of common or preferred stock. Shares of our common stock eligible for future sale may adversely affect the market for our common stock. Our stock price is likely to be volatile.

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1036968--3/18/2008--VAXGEN_INC