VaxGen Inc and a group of South Korean investors announced the formation of a joint venture, which will invest approximately $120 million to build and operate a facility in Incheon, South Korea, to manufacture VaxGen's AIDS vaccine.

The joint venture, through the same $120 million investment, will also fund construction of a smaller facility in South San Francisco, California, to support licensure and commercial launch of the vaccine. Both facilities will be used for commercial manufacture of the vaccine, AIDSVAX, if it proves safe and effective and is licensed by the U.S. Food and Drug Administration.

The South Korean investors participating in the joint venture, known as Celltrion Inc are Nexol Corp, Korea Tobacco & Ginseng Corp., and J. Stephen & Co. Ventures Ltd.

VaxGen will provide mammalian cell culture technology and biologics production expertise to Celltrion, but no cash, in exchange for a 44 percent interest in the joint venture. VaxGen is Celltrion's single-largest shareholder. The South Korean partners will provide the funding necessary to design and construct both facilities and to validate and operate the Incheon facility. The Incheon facility will be built on approximately 26 acres of land sold to Celltrion by the city of Incheon at a discount to prevailing market rates.

In its first phase of development, the Incheon facility is expected to be capable of producing up to 200 million doses of AIDSVAX per year. The smaller facility in South San Francisco could produce up to 10 million doses of the AIDS vaccine per year and may also be used to develop other pharmaceutical products. Celltrion expects to complete construction of the smaller facility by the middle of 2003 and the Incheon facility by the end of 2003. Additional time will be required to validate and license each facility.

Both facilities will be designed to manufacture not only AIDSVAX but a variety of human therapeutic proteins using mammalian cell fermentation. In its first phase of development, the Incheon facility will include four commercial-scale bioreactors. Celltrion will have the option to expand the facility to a total of 12 bioreactors.

If VaxGen's AIDS vaccine proves to be safe and effective, VaxGen intends to use the South San Francisco facility to validate its manufacturing process, which would be a key component of its subsequent regulatory submission to the FDA. This facility, which will be located near VaxGen's R&D facility, is expected to be used for commercial manufacturing of AIDSVAX at least through commissioning of the Incheon facility.