BioSyntech Announces $4.5 Million Financing



    /NOT FOR DISTRIBUTION TO THE UNITED STATES NEWS WIRE SERVICES OR
    DISSEMINATION IN THE UNITED STATES/

    LAVAL, QC, Aug. 14 /CNW/ - BioSyntech, Inc. ("BioSyntech") (TSX: BSY), a
biotechnology company developing biotherapeutic thermogels for regenerative
medicine, today announced that it has entered into an agreement with ProQuest
Investments III, L.P. ("ProQuest"), Fonds de Solidarité des travailleurs du
Québec (F.T.Q.) ("FSTQ"), Highland Crusader Offshore Partners, L.P.
("Highland") and A.M. Pappas Life Science Ventures III, LP and PV III CEO
Fund, LP (collectively, "Pappas" and, together with ProQuest, FSTQ and
Highland, the "Investors") pursuant to which:

    
    -   The Investors will subscribe, on a private placement basis, to an
        aggregate of 140,000 units of BioSyntech (the "Units"), each
        comprised of $10 principal amount of subordinated secured convertible
        debentures (the "New Debentures") and 91 common share purchase
        warrants (the "New Warrants"), at a price of $10 per Unit,
        representing gross aggregate proceeds of $1,400,000 to BioSyntech
        (the "Private Placement");

    -   The term of the currently outstanding subordinated secured
        convertible debentures of BioSyntech that were issued pursuant to the
        July 2008 public offering (the "Existing Debentures") will be
        extended to March 31, 2010 (the "Term Extension"); and

    -   BioSyntech will also launch a rights offering to its shareholders for
        an additional 310,000 Units at a price of $10 per Unit, representing
        gross aggregate proceeds of up to $3,100,000 to BioSyntech (the
        "Rights Offering").
    

    The New Debentures will mature on March 31, 2010 and will bear interest
at an annual rate of 12% payable in cash or common shares, at the option of
BioSyntech, on December 31, 2009 and March 31, 2010. Each New Debenture will
be convertible into common shares at the option of the holder at any time
prior to maturity at a conversion price of $0.11 per share, being a ratio of
approximately 91 common shares per $10 principal amount of New Debentures,
subject to customary anti-dilution provisions. The New Debentures will rank
pari passu with the Existing Debentures. Each New Warrant will entitle the
holder thereof to purchase one common share for a purchase price of $0.14
until the date that it is seven years from the date of closing of the Private
Placement. In addition, the New Warrants may be exercised on a cashless basis
with BioSyntech paying the in the money amount through the issuance of common
shares based on the market price at the time of exercise. BioSyntech will also
apply to the Toronto Stock Exchange ("TSX") to amend the currently outstanding
common share purchase warrants of BioSyntech (the "Existing Warrants") to
provide for their exercise on the cashless basis described above.
    The Private Placement and the Term Extension are expected to close on or
about August 21, 2009 and are subject to certain conditions, including the
conditional approval by the TSX of the listing of all common shares which may
be issued as a result of the transaction, certain third-party consents and the
execution of definitive agreements.
    Following completion of the Private Placement and the Term Extension,
subject to certain conditions, BioSyntech will launch the $3,100,000 Rights
Offering. Two of the Investors have agreed, subject to certain conditions, to
exercise the basic subscription rights that they will receive as shareholders
of BioSyntech in the Rights Offering and purchase Units not otherwise
subscribed by BioSyntech's shareholders at the expiry time of the Rights
Offering so as to ensure a minimum subscription of $1,958,900 (the "Stand-by
Commitment"). A third Investor would commit an additional $1,141,100 to the
Stand-by Commitment subject to the approval of its board of directors. There
will be no stand-by fees payable in connection with the Stand-by Commitment.
The Rights Offering is expected to close in mid-October 2009.
    Laurentian Bank Securities Inc. is acting as sole financial advisor to
BioSyntech with regards this financing transaction.
    The contemplated financing will improve the cash position of BioSyntech.
The Rights Offering will allow all shareholders to participate in the
financing. BioSyntech intends to use the net proceeds from the financing to
pursue the pivotal trial for the BST-CarGel(R), to complete the formal review
of the strategic alternatives of BioSyntech, including a commercial
partnership in respect of its cartilage repair device, BST-CarGel(R) and/or a
corporate sale of BioSyntech, and for general corporate purposes, including
working capital.
    An aggregate of 86,432,477 common shares could be issued upon conversion
of the New Debentures or exercise of New Warrants to be issued by BioSyntech
under the Private Placement and the Rights Offering or in payment of interest
on the Existing Debentures for the extended term and on the New Debentures
(assuming the payment of interest is made in common shares and the market
price of the common shares remains at the current level), resulting in a
potential dilution of 42.41% when taking into account the issued and
outstanding common shares and the common shares issuable upon conversion of
the Existing Debentures or exercise of the Existing Warrants or in payment of
interest on the Existing Debentures (based on the above-mentioned assumptions)
and 81.97% when taking into account only the issued and outstanding common
shares.
    The Units to be issued under the Private Placement will be allocated
among the Investors as follows: 60,330 Units to Highland, 28,000 Units to
ProQuest, 28,000 Units to FSTQ and 23,670 Units to Pappas. Given the current
holdings of common shares, Existing Debentures and Existing Warrants by the
Investors, the transaction is not expected to materially affect the control of
BioSyntech.
    ProQuest and FSTQ are "insiders" and "related parties" of BioSyntech
pursuant to applicable securities legislation in that they each hold more than
10% of the issued and outstanding common shares. ProQuest currently holds
16,418,999 common shares, $3,000,000 principal amount of Existing Debentures
and 7,500,000 Existing Warrants, representing a non-diluted position of 15.6%
and a fully-diluted position of 19.7% in the common shares of BioSyntech, and
will acquire pursuant to the Private Placement $280,000 principal amount of
New Debentures and 2,548,000 New Warrants which would increase its
fully-diluted position in the common shares to 19.8%. FSTQ currently holds
12,081,705 common shares, $3,000,000 principal amount of Existing Debentures
and 7,500,000 Existing Warrants, representing a non-diluted position of 11.5%
and a fully-diluted position of 17.6% in the common shares of BioSyntech, and
will also acquire pursuant to the Private Placement $280,000 principal amount
of New Debentures and 2,548,000 New Warrants which would increase its
fully-diluted position in the common shares to 17.9%. The Private Placement
constitutes a "related party transaction" pursuant to Multilateral Instrument
61-101 - Protection of Minority Shareholders in Special Transactions ("MI
61-101"). BioSyntech relies on an exemption included in MI 61-101 to be
exempted from the requirement to obtain a formal valuation and minority
shareholder approval of the Private Placement based on the fair market value
of the Private Placement to related parties not exceeding 25% of BioSyntech's
market capitalization.
    A Finance Committee comprised of independent directors, free from any
interest in the transaction and unrelated to the Investors, was formed in July
2009 by the Board of Directors of BioSyntech to review the financing
alternatives available to BioSyntech. The Finance Committee, after having
conducted a detailed review and analysis of the transaction with the
assistance of counsel and having received advice from its financial advisors,
recommended that the Board of Directors approve the transaction. The Board of
Directors of BioSyntech endorsed such conclusions and approved the
transaction.
    The filing of a material change report less than 21 days before the
closing date of the Private Placement and the Term Extension is reasonable and
necessary in the circumstances as BioSyntech wishes to complete the Private
Placement in a timely manner.
    This news release does not constitute an offer to sell or the
solicitation of an offer to buy these securities nor shall there be any sale
of the securities in any jurisdiction in which such offer, solicitation or
sale would be unlawful. Securities may not be offered or sold in the United
States absent registration or an exemption from registration under the United
States Securities Act of 1933, as amended, and any applicable State laws.
BioSyntech has not and does not intend to register any Units, New Debentures,
New Warrants or underlying common shares in the United States.

    About BioSyntech

    BioSyntech is a medical device Company specialized in the development,
manufacturing and commercialization of advanced biotherapeutic thermogels for
regenerative medicine (tissue repair) and therapeutic delivery. BioSyntech's
platform technology is a family of hydrogels called BST-Gel(R), some of which
are liquid at low temperature and solid at human body temperature. These gels
can be injected or applied to a specific local site and offer beneficial
properties for the local repair of damaged tissue such as cartilage, bone and
chronic wounds and provide the benefit of avoiding invasive surgery. The
Company's lead, late-stage product, BST-CarGel(R) is currently undergoing an
international pivotal trial. For additional information, visit
www.biosyntech.com

    Forward-Looking Statements

    This press release contains forward-looking statements and information
which are subject to material risks and uncertainties. Such statements are not
historical facts and are based on the current expectations of management. You
are cautioned that such statements are subject to a multitude of risks and
uncertainties that could cause actual results, future circumstances, or events
to differ materially from those projected in the forward-looking information.
These risks include, but are not limited to, those associated with our
capacity to finance our activities, the adequacy, timing, and results of our
clinical trials, the regulatory approval process, competition, securing and
maintaining corporate alliances, market acceptance of BioSyntech's products,
the availability of government and insurance reimbursements for BioSyntech's
products, the strength of intellectual property, the success of research and
development programs, reliance on subcontractors and key personnel, and other
risks and uncertainties detailed from time-to time in our filings with the
Canadian securities commissions. Readers should not place undue reliance on
the forward-looking information, given that (i) our actual results could
differ materially from a conclusion, forecast or projection in the
forward-looking information, and (ii) certain material factors or assumptions
which were applied in drawing a conclusion or making a forecast or projection
as reflected in the forward-looking information, could prove to be inaccurate.
Additional information about (i) the material factors that could cause actual
results to differ materially from the conclusion, forecast or projection in
the forward-looking information, and (ii) the material factors or assumptions
that were applied in drawing a conclusion or making a forecast or projection
as reflected in the forward-looking information, is contained in BioSyntech's
annual report and other documents filed from time to time with the Canadian
securities commissions which are available at www.sedar.com. These statements
speak only as of the date they are made, and we assume no obligation to revise
such statements as a result of any event, circumstance or otherwise, except in
accordance with law. The completion of the transaction is subject to certain
conditions, including the conditional approval by the TSX of the listing of
all common shares which may be issued as a result of the transaction, certain
third-party consents and the execution of definitive agreements. Failure to
complete the transaction could have a material adverse effect on BioSyntech
and the trading price of its common shares.
    %SEDAR: 00020217EF C5177




For further information:

For further information: James Smith, The Equicom Group, (416) 815-0700
x229, Jsmith@equicomgroup.com

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