VaxGen, Inc. Submits Draft 2003 10-K/A To Its Independent Auditors

BRISBANE, Calif., July 24 /PRNewswire-FirstCall/ -- VaxGen Inc. announced today that it has submitted its draft restated 2003 Annual Report on Form 10-K/A to its independent auditors. VaxGen expects to file the document with the Securities and Exchange Commission (SEC) once its independent auditors have completed their review and signed the audit opinion.

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"This submission marks a major milestone in VaxGen's plan to file its outstanding financial statements and become relisted on Nasdaq," said Matthew Pfeffer, VaxGen's Chief Financial Officer.

VaxGen has been in the process of restating its financial statements for the period ended December 31, 2003 since it concluded in July 2004 that it should recognize revenues and certain expenses related to its cost-plus-fixed-fee government contracts as services are performed. Previously, the company had deferred these contract revenues and expenses until predetermined milestones were completed. Because VaxGen concluded that the previous revenue recognition policy was inappropriate under accounting principles generally accepted in the United States of America (GAAP), the company determined that a restatement of previously issued consolidated financial statements was necessary.

VaxGen's restated financial statements will reflect adjustments relating to revenue recognition for government contracts, the company's investment in Celltrion, Inc. and other matters.

There has not been any misconduct associated with the restatement or the company's failure to file financial statements in a timely manner. VaxGen believes the actions of its management and directors in this regard were dictated solely by their desire to file financial statements in accordance with GAAP.

In order to become current with all of its financial statements, VaxGen will have to submit to its independent auditors and subsequently file with the SEC all Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K for 2004 and subsequent periods. VaxGen intends to apply for relisting on Nasdaq Global Market once it has filed all of its outstanding financial statements with the SEC.

About VaxGen

VaxGen, Inc. is a biopharmaceutical company engaged in the development, manufacture and commercialization of biologic products for the prevention and treatment of human infectious diseases, including anthrax and smallpox. VaxGen has been awarded an $877.5 million contract by the U.S. Department of Health and Human Services to provide 75 million doses of a modern anthrax vaccine for civilian biodefense. Based in Brisbane, Calif., VaxGen operates a wholly owned manufacturing facility in California and owns a minority interest in Celltrion, Inc., a company in the Republic of Korea established to provide contract manufacturing to the global pharmaceutical industry. For more information, please visit the company's web site at http://www.vaxgen.com.

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 the timing of submissions of VaxGen's financial statements to its independent auditors, the filing of its financial statements with the Securities and Exchange Commission and the company's expectation that it will relist on Nasdaq. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those anticipated. Reference should be made to Item 8.01 of the company's Current Report on Form 8-K filed by VaxGen on February 16, 2006 under the heading "Risk Factors" for a more detailed description of such risks. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date of this release. VaxGen undertakes 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.

CONTACT: Lance Ignon, Vice President, Corporate Affairs, +1-650-624-1016,or Kesinee Yip, Associate Director, Corporate Affairs, +1-650-624-2304,both of VaxGen Inc.

Web site: http://www.vaxgen.com/