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Published on 1/19/2006 in the Prospect News Biotech Daily and Prospect News PIPE Daily.

Procyon Biopharma, Cellpep merge to form Ambrilia; Procyon sells C$18.1 million warrants, units

By Angela McDaniels

Seattle, Jan. 19 - Procyon Biopharma Inc. and Cellpep SA said they have entered into a definitive acquisition agreement under which the companies will become Ambrilia Biopharma Inc., a biopharmaceutical company focused on developing therapeutics for the treatment of oncology and infectious diseases.

Procyon will acquire all of the outstanding securities of Cellpep in exchange for 119,885,894 common shares, worth C$39.1 million, to be issued to Cellpep shareholders.

A C$18.1 million concurrent private placement of special warrants and units has also been completed, according to a company news release, and Procyon has made a secured loan of C$1.9 million to fund the operations of Opep Pharma Inc., the Canadian manufacturing subsidiary of Cellpep SA.

"We are very excited about this major strategic move to bring both companies together," Procyon president and chief executive officer Hans J. Mader said in a company news release.

"Combining an early-stage with a late-stage oncology and infectious diseases products company will, we believe, create value for all of our stakeholders. The expected revenues from Cellpep's high-value generics should enable Ambrilia to reach profitability within the next 24 months."

Mader will remain president and chief executive officer, Max Link will remain chairman of the board and Bonabes de Rouge, Cellpep's co-founder, president and chief executive officer, will become chief scientific officer of Ambrilia Biopharma. Procyon's co-founder, Chandra Panchal, will assume the responsibilities of business development, licensing and intellectual property.

Private placement details

The C$18.1 million concurrent financing consists in part of the issuance of 61,690,785 special warrants of Procyon priced at C$0.23 each for a total of C$14.2 million.

Each special warrant entitles holders to receive a unit made of one common share and one warrant to purchase one common share at a price of C$0.35 at any time within five years from its issue date, the companies said.

The remaining C$3.9 million of the financing consists of 16,987,056 similar units to be issued to European investors.

If the acquisition is not closed as planned by March 22, Procyon said it will repurchase the special warrants for C$0.23 each plus interest.

Proceeds of the private placement have been placed in escrow pending completion of all closing conditions. In the event the Cellpep acquisition is not completed, the escrowed funds will be returned to the subscribers.

As of Thursday, more than 95% of all Cellpep shareholders have accepted Procyon's offer, according to the release. The acquisition and concurrent private placement have been approved by the board of directors of both companies and remain subject to the approval of Procyon shareholders.

The private placement was completed through a syndicate of agents including Dundee Securities Corp., Desjardins Securities Inc. and Loewen, Ondaatje, McCutcheon Ltd.. Dundee Securities acted as lead placement agent and advisor to Procyon for the acquisition.

Following completion of the transaction, Ambrilia Biopharma's common shares will continue to be traded on the Toronto Stock Exchange, under the new ticker symbol "AMB." The companies said a reverse split of shares is also planned at a later date during the year.

Cellpep is a private biotechnology company with headquarters in Paris and a subsidiary in Montreal. The company identifies and develops technologies in the fields of oncology and infectious diseases.

Procyon Biopharma is a biotechnology company based in Montreal that discovers and develops therapeutics in the fields of cancer and HIV/AIDS.

Issuer:Procyon Biopharma Inc.
Issue:Units of one share and one warrants
Amount:C$18.1 million
Units:78,677,841
Price:C$0.23
Warrants:One warrant per unit
Warrant expiration:Five years
Warrant strike price:C$0.35
Placement agent:Dundee Securities Corp. (lead), Desjardins Securities Inc., Loewen, Ondaatje, McCutcheon Ltd.
Announcement date: Jan. 19
Stock Symbol:TSX: PBP
Stock price:C$0.325 at close Jan. 19

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