'Aiea-based Hawaii Biotech yesterday announced plans to split into two companies — a California-based vaccine business and a Hawai'i-based anti-inflammatory drug developer.

The breakup will occur in conjunction with a merger of the vaccine businesses of Hawaii Biotech Inc. and Sydney, Australia-based Avantogen Ltd.

After that deal, which is expected to close in late April, Hawaii Biotech will be renamed. That as-yet-unnamed company will be headquartered in San Diego.

Hawaii Biotech's non-vaccine businesses will be spun out into a new Hawai'i company called Cardax Pharmaceuticals Inc.

Strategically, the move will allow Hawaii Biotech and Avantogen to combine resources, which should accelerate the development of vaccines for avian flu, West Nile virus and dengue fever, and result in an additional number of unspecified local jobs, said Hawaii Biotech Chief Executive David Watumull. After the transaction, Watumull will become chief executive for Cardax, which will employ 15 people.

Avantogen's current Chief Executive Leonard Firestone will become chief executive of the newly formed company, which will keep its research-and-development operations and 40 jobs in 'Aiea. However, the company's headquarters will move to California, which will make it easier for executives to attract investors, Watumull said.

In September, Hawaii Biotech eliminated 14 jobs, or 20 percent of its workforce, as it sought investment capital needed for drug trials. In January, Hawaii Biotech raised $7.8 million from local and Mainland investors to help with clinical trials of vaccine and anti-inflammatory drugs.

Hawaii Biotech isn't the first high-tech Hawai'i company to shift its head offices to California. In 2004 Firetide Inc. moved its headquarters from Honolulu to Los Gatos in search of more investment capital.

The privately held Hawaii Biotech was founded in 1982 by nine University of Hawai'i professors.

Watumull said the change of addresses isn't significant. It's unlikely Hawaii Biotech's current Hawai'i operations would be moved outside the state for a variety of reasons, he said. Among those reasons is that the company would no longer be eligible for Hawai'i technology tax credits if research functions were shifted to another state.

"There is a CEO and a CFO that will be in La Jolla (California), but to me the real work is going to be done in Hawai'i," Watumull said.

"In reality we'll see an expansion of biotech companies in Hawai'i, so I see the industry growing as a result of this transaction."

Under terms of the deal Avantogen, a public company, will contribute $3.5 million along with its vaccine development work and senior management team to Hawaii Biotech. Hawaii Biotech will contribute $1 million and its vaccine programs, facilities and grant funding.

Avantogen and Hawaii Biotech investors will each own half of the new, unnamed company, though ownership could be shifted in favor of one or the other group in the future.

"This is a global marketplace and these types of strategic partnerships will happen," said Lisa Gibson, president for trade group the Hawaii Science & Technology Council. "It's not a bad thing. The new entity is actually going to result in more employees for Hawai'i. The spinoff that David will be leading will stay here."

Reach Sean Hao at shao@honoluluadvertiser.com.