VaxGen Manages a Noticeable Makeover

It's been pretty easy to dump all over VaxGen (VXGN - commentary - Cramer's Take). After all, this is the company that led investors on a wild-goose chase for an AIDS vaccine that turned out to be a zero. But every ugly biotech deserves a chance at a makeover, and these days VaxGen is looking a lot prettier.

VaxGen Climbs Shares have a solid September

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I've been an outspoken critic of VaxGen in the past year, but I have to admit that the VaxGen I heard present Tuesday at the UBS Global Life Sciences Conference in New York is a biotech firm transformed. The reason: The U.S. government is getting ready to spend big money to stockpile bioterrorism vaccines, and VaxGen appears to be well prepared to grab an oversized share of the pot.

Investors apparently agree. VaxGen shares have taken off like a rocket, jumping threefold since the beginning of September. The stock closed Tuesday at $12.55; on Sept. 2, this was a $4 stock.

VaxGen is developing vaccines against anthrax and smallpox. Normally, this wouldn't deserve much notice, but we don't live in normal times anymore -- not when Congress and President Bush are planning to pass and sign legislation to spend almost $6 billion over the next 10 years to buy vaccines to protect Americans from five categories of bioterrorism attacks. Allocations for anthrax and smallpox make up the largest chunk of that amount at $3 billion.

The so-called Project BioShield is a huge bonanza for any company that can convince the government it can produce reliable bioterrorism vaccines, and VaxGen, it seems, is doing just that.

Work Under Way

VaxGen is already working on a small, stage-one contract from the National Institutes of Health to develop a new anthrax vaccine. By the end of the month, the NIH is expected to award contracts for a larger, second phase of this program. Given the work already completed by VaxGen on its anthrax vaccine, the company looks likely to get a piece of this second NIH contract. VaxGen wouldn't talk about the potential size of this government business, but VaxGen CEO Lance Gordon says the NIH has budgeted $140 million for anthrax vaccine development under this program.

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Adam Feuerstein writes regularly for RealMoney.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback.