VaxGen, Inc. announced a merger agreement with diaDexus, Inc., a private company involved in the diagnostics business. The deal is expected to close in the third quarter of 2010. Post merger the two companies will operate under the name diaDexus.

James Panek, the President of VaxGen, Inc., said, “We believe that this potential transaction with diaDexus represents an excellent strategy to maximize the value of VaxGen’s remaining tangible and intangible assets and to provide our stockholders with the opportunity to participate in diaDexus’ potential success as a leader in the development and commercialization of novel diagnostic products.”

VaxGen, Inc. will issue 51.6 million shares of its common stock in exchange for all the outstanding stock of diaDexus. Post merger, VaxGen, Inc. stockholders will own 39.1% of the new company, and diaDexus stockholders will hold 60.9%.

After the merger closes, the new company will have a seven member Board of Directors, with VaxGen, Inc. nominating two members and diaDexus nominating five members.

VaxGen, Inc. is a biopharmaceutical company that owns a 1,000-liter bioreactor used to cultivate cell culture or microbial biologic substances. The company currently has no product or drug development activities. DiaDexus is a privately held diagnostics company focused on tests used in vitro to detect cardiovascular problems.