HUNTINGDON VALLEY, Pa., Dec. 2 /PRNewswire-FirstCall/ -- Cellegy Pharmaceuticals, Inc. today announced that PDI, Inc. filed a breach of contract action against Cellegy in the United States District Court for the Southern District of New York. The suit alleges that Cellegy failed to notify PDI of certain payments received and failed to make certain payments to PDI, which PDI believes it is entitled to under the terms of a Secured Promissory Note which was executed by Cellegy and PDI as part of a settlement agreement entered into on April 11, 2005. PDI also notified Cellegy that PDI believes that the outstanding principal amount of $2,900,000, plus default interest, of the Secured Promissory Note and outstanding principal amount of $3,500,000, plus default interest, of the Nonnegotiable Convertible Senior Note are immediately due and payable in cash pursuant to the “Event of Default” provisions of those notes.
Cellegy renegotiated its Exclusive License and Distribution Agreement with its licensee, ProStrakan Group plc relating to Cellegy’s Rectogesic(R) product in November 2005. Under the renegotiated agreement, ProStrakan assumed all responsibility for manufacturing and product support functions and will purchase the product directly from the manufacturer rather than purchasing from Cellegy under the terms of the original agreement. In return, ProStrakan paid Cellegy $2 million. PDI claims that it is entitled to $1 million of the upfront payment to Cellegy by ProStrakan under the renegotiated agreement. Cellegy does not agree that the payments made by ProStrakan under the renegotiated agreement fall within the definition of “Pledged Collateral” in the settlement documents and does not believe that any amount is owed to PDI as a result of such payments.
Under the Secured Promissory Note, 50% of licensing fees, royalties or milestone payments, or other payments in the nature thereof, received by Cellegy under certain of Cellegy’s agreements with respect to Cellegy’s Tostrex(R) (testosterone gel) and Rectogesic(R) (nitroglycerin ointment) products in territories outside of North America and certain of Cellegy’s agreements with respect to Fortigel(TM) licensees in North American markets are payable to PDI. Amounts owed under the notes may be accelerated upon certain Events of Default.
PDI’s suit requests that the court declare that Cellegy has breached its obligations under the Secured Promissory Note and the Nonnegotiable Convertible Senior Note, order Cellegy to specifically perform its obligations under the settlement agreements, award PDI damages in the amount of $6,400,000 plus default interest, and other remedies.
Cellegy believes that it has not breached any of the provisions of the notes or the other settlement documents and that PDI’s claims are without merit. The Company plans to vigorously defend itself against the claims.
About Cellegy
Cellegy Pharmaceuticals is a specialty biopharmaceutical company that develops and commercializes prescription drugs for the treatment of women’s health care conditions, including sexual dysfunction, HIV prevention and gastrointestinal disorders. In October 2004, Cellegy acquired Biosyn, Inc., a privately held biopharmaceutical company in Huntingdon Valley, Pennsylvania. The addition of Biosyn, a leader in the development of novel microbicide gel products for contraception and the reduction in transmission of HIV in women, expands Cellegy’s near term product pipeline and complements Cellegy’s women’s health care focus. Cellegy believes that Savvy(R) (C31G vaginal gel), currently undergoing Phase 3 clinical studies in the United States and Africa, is one of the most clinically advanced products in development for the reduction in transmission of HIV.
Fortigel(TM) (testosterone gel), branded Tostrex(R) outside the United States, is marketed in Sweden for the treatment of male hypogonadism also by ProStrakan. Approvals of Rectogesic and Tostrex by the other member states of the European Union are being sought through the Mutual Recognition Procedure. Cellegesic, for the treatment of anal fissures, was the subject of an FDA Not Approvable letter in December 2004, was resubmitted to the FDA in April 2005 and is currently under review at the FDA.
Forward Looking Statements
This press release contains forward-looking statements. Investors are cautioned that these forward-looking statements are subject to numerous risks and uncertainties, known and unknown, which could cause actual results and developments to differ materially from those expressed or implied in such statements. Such risks and uncertainties relate to, among other factors: completion, timing and outcome of clinical trials, including primarily the Savvy prevention and contraceptive Phase 3 studies; and the need and ability to complete corporate partnerships and additional financings. For more information regarding risk factors, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 and other filings with the Securities and Exchange Commission.
Cellegy Pharmaceuticals, Inc.
CONTACT: Richard C. Williams, Chairman and Interim CEO, +1-650-616-2200,or, Robert J. Caso, Vice President, Finance & CFO, +1-215-914-0900, ext.603, both of Cellegy Pharmaceuticals, Inc.
Web site: http://www.cellegy.com//
