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CORRECTED - UPDATE 2-Intercell sees H2 sales growth after Q2 picks up

(Corrects to make clear Intercell working with Merck & Co MRK.N, not Germany's Merck KGaA MRCG.DE on the S.aureus vaccine)

* Intercell posts Q2 loss of 8.346 million euros

* Beats poll for loss of 10.7 million euros

* Sees continued growth of net product sales in H2

* Expects FY loss of between 20 and 40 million euros

* Shares largely unchanged

(Adds analyst comment, share price)

By Katie Reid

ZURICH, Aug 17 (Reuters) - Austrian biotech company Intercell AG ICEL.VI expects product sales to grow in the second half of the year after sales for its Ixiaro vaccine against Japanese Encephalitis picked up in the second quarter.

The group posted a second-quarter net loss of 8.346 million euros ($10.69 million), narrower than the average estimate in a Reuters poll. [ID:nLDE67C17G]

“Intercell expects enhanced vaccination recommendations and increasing global marketing and sales efforts by its partners Novartis and CSL Ltd., fostering disease and product awareness,” the group said in a statement on Tuesday.

“Besides the traveller’s market the focus remains on the U.S. military,” the group said.

At 0701 GMT, shares in the group, which have come under pressure so far this year, were trading near flat at 14.975 euros.

“Intercell’s 2Q JE vaccine Ixiaro sales are in-line and the late-stage pipeline is on-track, which should provide some relief for the stock given recent underperformance,” analysts at Jefferies said in a note, adding its stock remained very attractive in the longer term.

“We believe Intercell is in a transformational period with the launch of its first vaccine, significant late-stage clinical news, a broad pipeline, and potential alliance(s) to crystallise value. Furthermore, it is well-funded with a validated vaccines platform technology,” the analysts said.

Intercell started to sell the vaccine, its first product on the market, last year and it is distributed by Novartis AG NOVN.VX.

Revenues from product sales rose to 5.2 million euros in the second quarter, up from the 2.4 million euros in the year-ago period and recovering from a weak first quarter.

Japanese Encephalitis can be a serious illness causing inflammation of the brain. It is caused by a virus and passed to humans by the bite of infected mosquitoes.

Intercell, which is the only major independent vaccine maker left in Europe beside Dutch company Crucell NV CRCL.AS, is due to disclose study results for its S.aureus vaccine, which it is developing with Merck & Co MRK.N, in 2011.

Investors are also looking out for study results on its vaccine patch against Traveller's Diarrhea (TD), in development with GlaxoSmithKline GSK.L, which are due at the end of 2010 or early 2011. ($1=.7804 Euro) (Editing by David Cowell)

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