Billionaire Insider Lightening Up on VaxGen Stake

Paul Allen is a co-founder of Microsoft, a high-profile multibillionaire and someone with a reputation as an active technology investor. So investors might want to take notice of his latest move: Selling a huge stake of his ownership in VaxGen(VXGN) right before the small biotech firm takes the wraps off test results for its controversial HIV/AIDS vaccine, AIDSVAX.

Allen is not the only VaxGen shareholder poised to sell before anyone knows whether AIDSVAX works or not. Last month, the company filed a registration statement with the Securities and Exchange Commission allowing other preferred shareholders to also sell their considerable stakes in the company.

With the sting of Enron and ImClone Systems still fresh, investors need not be reminded that the stock-selling activities of company executives and other insiders has become a closely watched measure of corporate health. Allen and the other stakeholders who could be unloading their VaxGen stakes might just be locking in profits -- the value of VaxGen stock has more than tripled since this summer -- but their apparent eagerness to get out now could also be a red-flag warning about the upcoming AIDSVAX study.

Results from the randomized, controlled, phase III study of AIDSVAX -- which enrolled 5,000 gay men and 400 women with HIV-positive partners in the U.S. -- should be released in the first quarter of 2003.

VaxGen shares have been on quite the roll, quadrupling in price since sinking to a recent low of $5.10 on July 12. The stock hit $20.80 on Dec. 2 and was trading at $17.10 recently.

Brisbane, Calif.-based VaxGen is sitting on a potential commercial gold mine if AIDSVAX proves effective in helping prevent infection from HIV (more on what that means later). Drug companies have been successful in developing medicines to manage the disease but not cure it. A vaccine to actually prevent transmission has similarly proven to be an incredibly difficult scientific challenge. VaxGen is not alone in searching for such a holy grail, but its approach has not been entirely embraced by other AIDS researchers. In the mid-1990s, government researchers, for instance, took a look at AIDSVAX but declined to fund studies.