BELLUS Health to acquire Thallion Pharmaceuticals

LAVAL, QC, June 18, 2013 /CNW Telbec/ - BELLUS Health Inc. (TSX: BLU) ("BELLUS Health") and Thallion Pharmaceuticals Inc. ("Thallion") (TSXV: TLN) announced today that BELLUS Health has agreed to acquire Thallion for approximately $6.332 million in cash, or $0.1765 per share (on a fully-diluted basis), subject to certain adjustments as described below, and the issuance of contingent value rights ("CVRs"), which will entitle the holders thereof to additional payments of up to approximately $7.66 million, or $0.2135 per CVR, if certain product revenue milestones are achieved and a future receivable is collected.

"This non-dilutive transaction will strengthen our pipeline through the addition of a Phase II drug candidate," said Roberto Bellini, CEO of BELLUS Health. "We are excited about the opportunity to continue developing Shigamabs® while leveraging our expertise in the kidney and rare disease areas."

Thallion is developing Shigamabs®, a monoclonal antibody therapy being evaluated for the treatment of Shiga toxin-producing E. coli ("STEC") bacterial infections. STEC infections can lead to hemolytic uremic syndrome (HUS), a condition principally affecting the kidneys and that often leads to dialysis and in certain cases death.

BELLUS Health's lead program is KIACTA™, a drug candidate currently in a Phase III Confirmatory Study for the treatment of AA amyloidosis, a rare disease resulting in kidney dysfunction that often rapidly leads to dialysis and death.

"The proposed transaction is the result of the strategic review process of all available alternatives for Thallion and its shareholders previously announced in February 2013.  We believe that the proposed transaction provides a favourable outcome for our shareholders with a significant premium over our current share price and an additional opportunity to participate in future revenues that may be generated from Shigamabs® under the terms of the CVRs." said Dr. Allan Mandelzys, CEO of Thallion.

Approval of Transaction at Thallion Annual and Special Meeting of Shareholders

The acquisition will proceed by way of a court-supervised arrangement pursuant to the Canada Business Corporations Act (the "Arrangement"). A special meeting of Thallion shareholders to consider the Arrangement is currently expected to occur on or about August 6, 2013, concurrent with Thallion's annual meeting. A proxy circular relating to the annual and special meeting and containing further details regarding the Arrangement is expected to be mailed to Thallion shareholders no later than July 16, 2013. Approval of at least 66 2/3% of Thallion shareholders present in person or by proxy at the meeting will be required to proceed with the Arrangement.

Unanimous Approval of Thallion Special Committee and Board of Directors

The independent committee of Thallion's Board of Directors that was established to consider all strategic alternatives (the "Special Committee") has received a fairness opinion (the "Opinion") dated June 17, 2013 from Bloom Burton & Co. Inc., Thallion's financial advisor. The Opinion states that as of such date, the consideration to be paid pursuant to the Arrangement is fair from a financial point of view for the Thallion shareholders. After having taken into consideration the Opinion and other factors, the Special Committee recommended that the Board of Directors of Thallion approve the Arrangement. The Board of Directors of Thallion, excluding one director who was required to abstain from voting, after receiving the recommendation of the Special Committee, has unanimously approved the Arrangement, and in doing so has determined that the consideration offered under the Arrangement is fair to the Thallion shareholders and that the Arrangement is in the best interest of Thallion. The Board of Directors recommends that Thallion shareholders vote in favour of the Arrangement at the annual and special meeting of shareholders. All directors and officers of Thallion holding common shares of Thallion, as well as Victoria Square Ventures Inc. and 1324286 Alberta Ltd. have entered into voting support agreements supporting the transaction, representing 5.79% of the shares outstanding of Thallion. The voting support agreements will terminate upon any termination of the acquisition agreement between BELLUS Health and Thallion relating to the Arrangement.

The Acquisition Agreement

The acquisition agreement between BELLUS Health and Thallion provides for a cash consideration of approximately $6.332 million ($0.1765 per common share (on a fully-diluted basis)), subject to adjustments, and (ii) the issuance of one CVR per common share, entitling the holder thereof to: (A) its pro rata share of 80% of any additional purchase price consideration to be received from Premium Brands Holding Corp. ("Premium Brands") in 2016 (expected to be up to approximately $1.45 million) (or $0.0323 per CVR), and (B) its pro rata share of 5% of the Shigamabs® revenue generated or received by BELLUS Health, capped at $6.5 million (or $0.1812 per CVR), payable in installments upon the achievement by BELLUS Health of each whole $10 million tranche of revenue on Shigamabs®.

The estimated cash portion of the consideration payable under the acquisition agreement and the combined cash and CVR consideration (assuming that the maximum amount payable under the CVRs is achieved) represent premiums of 35.8% and 200.0%, respectively, to Thallion's closing trading price of $0.13 on the TSX Venture Exchange on June 17, 2013, premiums of 39.4% and 208.1%, respectively, based on the volume weighted average trading price for the 20 prior trading days and premiums of 52.4% and 263.9%, respectively, based on the volume weighted average trading price for the 90 prior trading days.

The amount to which the holders of CVRs may be entitled can be reduced for potential contingent liabilities owing by Thallion (including, but not limited to, in respect of the indemnity agreement with Premium Brands, accounts payable or litigation). The CVRs will not be assignable or transferable and will not be listed on an exchange. Under the terms of the CVRs, BELLUS Health will covenant and agree to use commercially reasonable efforts within a reasonable time period from closing to continue the development of Shigamabs® upon terms and conditions detailed in the definitive transaction documents.

The acquisition agreement also contains customary provisions prohibiting Thallion from soliciting any other acquisition proposal, but allows for termination under certain circumstances, including receipt of an unsolicited bona fide acquisition proposal from a third party that the Thallion Board of Directors, in the exercise of its fiduciary duties, and in accordance with the terms and conditions of the acquisition agreement, finds to be superior to the proposed transaction, subject to the reimbursement by Thallion of BELLUS Health's transaction-related expenses, up to an amount of $150,000. Completion of the Arrangement, which is expected to occur in August 2013, is subject to receipt of court and regulatory approvals and other third party consents. The acquisition agreement also contains closing conditions, including that Thallion have net cash on hand, as determined pursuant to the terms of the acquisition agreement ("Net Cash"), of at least $7,500,000 on the Effective Date, that no more than 5% of Thallion shareholders dissent to the Arrangement and other customary closing conditions. The acquisition agreement also provides that if the Net Cash condition is not met, BELLUS Health will have the option of either terminating the acquisition agreement or reducing the cash portion of the consideration payable under the Arrangement in proportion to any shortfall on a dollar-for-dollar basis, pro rata to each Thallion share, rounded to the nearest hundredth of a cent. If Thallion's Net Cash at the effective date is estimated to be in excess of $7,500,000, the cash portion of the consideration payable under the Arrangement will instead be increased in proportion to such excess amount on a dollar-for-dollar basis, pro rata to each Thallion share, rounded to the nearest hundredth of a cent. The parties intend to issue a further press release on or about five business days before the annual and special meeting, announcing any adjustments to the purchase price relating to estimated Net Cash.

Copies of the acquisition agreement, voting support agreements and certain related documents will be filed with Canadian securities regulators and will be available on SEDAR at www.sedar.com as part of Thallion's public filings.

About BELLUS Health (www.bellushealth.com)

BELLUS Health is a development-focused healthcare company concentrating on products that provide innovative health solutions and address critical unmet medical needs. The Company's lead program is KIACTA™, a novel drug candidate currently in a Phase III Confirmatory Study for the treatment of AA amyloidosis, an orphan indication resulting in renal dysfunction that often rapidly leads to dialysis and death. KIACTA™ is partnered with global private equity firm Auven Therapeutics. AA amyloidosis affects approximately 35,000 to 50,000 individuals in the United States, Europe and Japan.

About Thallion (www.thallion.com)

Thallion is a biotechnology company developing pharmaceutical products in the areas of infectious disease and oncology. Thallion's lead clinical program Shigamabs® is a dual antibody product for the treatment of Shiga toxin-producing E. coli bacterial infections and has recently completed a Phase II clinical trial. Additional information about Thallion can be obtained at www.thallion.com.

Forward Looking Statements

Certain statements contained in this news release, other than statements of fact that are independently verifiable at the date hereof, may constitute forward‐looking statements. Such statements, based as they are on the current expectations of management, inherently involve numerous risks and uncertainties, known and unknown, many of which are beyond the control of BELLUS Health Inc. or Thallion Pharmaceuticals Inc. Such risks include but are not limited to: the ability to obtain Court and regulatory approvals, third party consents and to satisfy other closing conditions, adjustments may be made to the cash consideration depending on the Net Cash, risks relating to the satisfaction of payment conditions under the CVRs, the ability to obtain financing, the impact of general economic conditions, general conditions in the pharmaceutical and/or nutraceutical industry, changes in the regulatory environment in the jurisdictions in which the BELLUS Health Inc. and Thallion Pharmaceuticals Inc. do business, stock market volatility, fluctuations in costs, changes to the competitive environment due to consolidation, achievement of forecasted burn rate, achievement of forecasted clinical trial milestones, and that actual results may vary once the final and quality‐controlled verification of data and analyses has been completed. Consequently, actual future results may differ materially from the anticipated results expressed in the forward‐looking statements, and there can be no assurance that any amounts will become payable under the CVRs. The reader should not place undue reliance, if any, on any forward‐looking statements included in this news release. These statements speak only as of the date made and neither BELLUS Health Inc. nor Thallion Pharmaceuticals Inc.  is under any obligation to update or revise such statements as a result of any event, circumstances or otherwise, and BELLUS Health Inc. and Thallion Pharmaceuticals Inc. disavow any intention to do so, unless required by applicable legislation or regulation. Please see the public fillings of BELLUS Health Inc. and Thallion Pharmaceuticals Inc., including the Annual Information Form of BELLUS Health Inc. for further risk factors that might affect both companies and their respective businesses.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE: BELLUS Health Inc.

For further information:

BELLUS Health Contact:
Adam Peeler
TMX Equicom
Phone: 416-815-0700 ext. 225
Email: apeeler@tmxequicom.com 

Thallion Contact:
Michael Singer
Chief Financial Officer
Phone: (514) 940-3600
Fax: (514) 336-2343
E-mail: info@thallion.com
Internet: www.thallion.com