Shares in

VaxGen

(VXGN)

jumped more than 26% Tuesday after the biotech firm said its experimental HIV/AIDS vaccine may produce a broader immunity than previously thought.

But while VaxGen has pushed its vaccine, known as Aidsvax, further down the development pipeline than any of its rivals, approval of any HIV/AIDS vaccine is still a long shot, observers say.

Tuesday, the Brisbane, Calif., company said it presented data at a scientific conference last week indicating that Aidsvax induced immune responses capable of preventing infection from a broad array of HIV strains, including HIV strains found in nature, or "wild type" strains of the disease.

"These are preliminary laboratory results that need additional confirmation, but they are encouraging because they indicate that Aidsvax induces the type of antibodies necessary to prevent HIV infection in real-life settings," said Donald Francis, VaxGen's president, in a statement.

Investors jumped all over the news, pushing shares in VaxGen up $5, or 26.4%, to $23.89 in Tuesday trading.

VaxGen is in the middle of two pivotal, late-stage tests of its vaccine. Interim results from the tests will be unveiled in November, and if positive, they could form the basis for a marketing application to the

Food and Drug Administration

.

The discovery of an effective HIV/AIDS vaccine is one of modern medicine's great quests. More than 36 million people are infected with the HIV virus worldwide, according to the

World Health Organization

. Last year, 2.5 million adults and 500,000 children died from diseases related to AIDS, while 4.7 million adults and 600,000 children became infected with HIV.

But searching for a HIV/AIDS vaccine -- and actually finding one that works -- are two different issues, making this a risky area for investors, says John McCamant, editor of the

Medical Technology Stock Letter

.

"I've covered HIV since the late 1980s so I understand the tremendous need for a safe and effective vaccine, but this is one area where I think investors should stay away. There's too much roulette involved here," he says. McCamant doesn't have a position in VaxGen.

The problem, he says, is developing a vaccine that is truly effective. In VaxGen's case, the FDA says it will consider approval if the vaccine is effective in at least 30% of patients. While VaxGen's development efforts are furthest along, McCamant believes that rival treatments may prove to be more effective.

"You need pioneers like VaxGen to open the door, but I just don't think it's a place where investors should be putting their money," he says, adding that the best way for investors to place a safer bet on VaxGen would be to invest in

Genentech

(DNA)

, which spun out the company in 1995 and now owns 11%.

Other companies pursuing an HIV/AIDS vaccine include

GlaxoSmithKline

(GSK) - Get Report

,

Chiron

(CHIR) - Get Report

,

Immune Response

(IMNR)

and

Merck

(MRK) - Get Report

. Last week, GlaxoSmithKline announced positive results from its efforts, although the experimental vaccines are still being tested in the laboratory and have not yet been tried on patients.

Lance Ignon, a VaxGen spokesman, says the company is pushing for an Aidsvax efficacy rate higher than the minimum 30% standard set by the FDA. But even at those levels, a first-generation vaccine would be a success.

"It's a common misperception that vaccines are 100% effective. In reality, very few new vaccines are 100% effective," he says. "Vaccines routinely go through improvements and changes that boost their effectiveness, and Aidsvax, if approved, will be no different."

For instance, a HIV/AIDS vaccine, even one that is partially effective, could play a huge role in reducing the number of new infections in areas like Africa, where HIV and AIDS run rampant.

VaxGen's decision to release positive findings Tuesday paid off nicely for at least one group of institutional investors. On May 24, the

Halifax Fund

, managed by the

Palladin Group

, led a group of investors who sunk $20 million into VaxGen through a private placement of convertible stock. The 20,000 shares of preferred stock are convertible into an undisclosed amount of VaxGen common stock at $23.22 a share.

Ignon says investors in the private placement had no inside knowledge of when the scientific findings were going to be released.

"We presented our findings at the scientific conference last Thursday," he says. "We wanted to get the news out because it was material information, but we wanted to do it in a very conservative way. These investors had absolutely no idea that we were going to release this information."