Two South San Francisco biotech firms, the struggling VaxGen and Raven biotechnologies, inc., have agreed to merge in an all-shares transaction.

Shareholders in VaxGen, which has suffered a series of well-publicised setbacks including the failure of an AIDS vaccine in 2003, delisting from Nasdaq in 2004 and the loss of a U.S. government anthrax vaccine contract in 2006, will retain a majority of shares in the new company, the company said in a statement released Monday. Vaxgen will also assume the privately-held Raven’s debt and equipment lease obligations of approximately $1.8 million, and move its headquarters to Raven’s offices.

Vaxgen is required as part of the merger to relist with a national stock exchange, a step that company officials said is underway.

The merged company’s board will include four Vaxgen board members and three Raven board members. Raven CEO George F. Schreiner will serve as CEO and director of the new company, with Vaxgen President and CEO James P. Panek to serve as president and chief operating officer.

The combined company will have one compound for major cancer indications in clinical development, four oncology product candidates in preclinical development, and a library of antibodies to novel cancer antigens, the companies said in a statement.

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