SAN DIEGO, CA, Jan. 30 /PRNewswire-FirstCall/ - Stressgen Biotechnologies Corporation ("Stressgen" or the "Company") announced today that it has entered into an agreement with 0747036 B.C. Ltd. ("Investor"), an affiliate of Madison Group, a diversified investment firm, to recapitalize and reorganize Stressgen's business, resulting in non-dilutive funding totaling up to $9.25 million.
Immediately prior to the effective date of the transaction, Investor will invest $9.25 million in Stressgen by way of a convertible loan, $3 million of which will be held in escrow pending satisfaction of certain conditions. Stressgen will then transfer all of its assets, including the investment amount, to a new company ("Newco"), all of the shares of which will be owned by the existing shareholders of Stressgen who will exchange their existing shares of Stressgen for shares of Newco on a one for one basis under a plan of arrangement. New voting and non-voting shares of Stressgen, representing a minority equity interest, will also be distributed to the existing shareholders of Stressgen. Current optionholders of Stressgen will exchange their existing options for options in Newco and current warrantholders of Stressgen will exchange their existing warrants for warrants in Newco and new warrants in Stressgen. As part of the reorganization, Newco will apply to retain Stressgen's current listing on the Toronto Stock Exchange (TSX).
The restructuring will be completed by way of a plan of arrangement, to be approved by the Yukon Supreme Court and the Stressgen security holders. The transaction is also subject to regulatory approval and the receipt by the Board of Directors of Stressgen of a favorable fairness opinion from an independent third party financial advisor. Subject to these conditions, the Board of Stressgen has unanimously approved the transaction.
Following the transaction, Newco will change its name to "Stressgen Biotechnologies Corporation", carry on the business conducted by the Company, and have the benefit of up to $9.25 million non-dilutive capital. The current management of Stressgen will continue in the same capacity with Newco. Upon completion of the transaction, the Investor will rename Stressgen, elect a new board of directors and seek fresh capital and new business opportunities.
The Investor will, upon conversion of the convertible loan, hold a minority voting interest and a majority equity interest in the original entity. Following completion of the transaction, Investor will hold a 40 percent voting and a 94.9 percent equity interest in the original entity and current Stressgen shareholders will hold a 60 percent voting and a 5.1 percent equity interest in the original entity.
"This transaction is a win situation for our shareholders and represents a significant milestone that substantially increases our financial resources without dilution," said Gregory M. McKee, President and Chief Executive Officer at Stressgen. "Our shareholders will maintain their current interest in Stressgen and, at the same time, receive an equity interest in a second venture."
Further details of the transaction will be provided to shareholders in an information circular describing the transaction, which is expected to be mailed in late February. Closing is currently expected to occur in March 2006.
About Stressgen Biotechnologies Corporation
-------------------------------------------
Stressgen, a biopharmaceutical company, focuses on the discovery, development and commercialization of innovative therapeutic vaccines for the treatment of infectious diseases and cancer. The corporation is publicly traded on the Toronto Stock Exchange under the symbol SSB.
About HspE7, Lead Product Candidate
-----------------------------------
HspE7 is a novel CoVal(TM) fusion therapeutic vaccine designed for the treatment of diseases caused by the human papillomavirus (HPV), one of the most common causes of sexually transmitted diseases in the world. An estimated 80% of sexually active men and women are infected by genital HPV at some point in their lives. Approximately 5.5 million new sexually transmitted HPV infections are reported in the U.S. each year. At least 20 million people in the U.S. are already infected. HPV infection can result in diseases including internal and external genital warts and precancerous conditions, such as cervical and anal dysplasia. Precancerous HPV-related conditions can progress into life-threatening diseases, including cervical, anal, and head and neck cancers.
About CoVal(TM) Fusion Proteins
-------------------------------
Stressgen capitalizes upon the immunostimulatory powers of heat shock proteins utilizing recombinant technology to fuse, or covalently link, a stress protein with a protein antigen to create a single hybrid protein designed to trigger the immune system to recognize that antigen. For more information about CoVal(TM) fusion technology, or Stressgen, please visit the website located at www.stressgen.com.
This press release contains forward-looking statements regarding a corporate reorganization, by way of a plan of arrangement, and development of our HspE7 program. Actual results could be materially different from those implied by these forward-looking statements due to factors over which we have limited control, including but not limited to the risk that the reorganization may not be consummated, for any number of reasons, including the failure to obtain necessary court approvals, board approvals, shareholder approvals or the failure to satisfy all of the closing conditions, our ability to continue as a going concern, our ability to enter into corporate partnering relationships (and the effects and terms of those relationships), difficulties inherent in the manufacture of commercial-grade clinical supplies, our ability to meet regulatory approval requirements, the development of our potential products, including HspE7, not proceeding as planned, clinical trial uncertainties, the risk that, if successfully developed, HspE7 may not be commercially successful and the effect of our limited cash resources. Please refer to our filings with Canadian securities regulators for more information on these and other applicable risks. We assume no obligation and expressly disclaim any duty to update any forward-looking statement to reflect events or circumstances after the date of this news release or to reflect the occurrence of subsequent events.
Stressgen Contact: ------------------ Donna Slade Director, Investor Relations 6055 Lusk Boulevard San Diego, CA USA 92121 Tel: 858/202-4900 Dir: 858/202-4945 Fax: 858/450-9263 dslade@stressgen.com
Stressgen Biotechnologies Corp.CONTACT: Stressgen: Donna Slade, Director, Investor Relations, 6055 LuskBoulevard, San Diego, CA USA 92121, Tel: (858) 202-4900, Dir: (858)202-4945, Fax: (858) 450-9263, dslade@stressgen.com