BioSyntech Announces Completion of $1.4 Million Private Placement and Launch of $3.1 Million Rights Offering



    
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    DISSEMINATION IN THE UNITED STATES/
    

    LAVAL, QC, Aug. 24 /CNW/ - BioSyntech, Inc. ("BioSyntech") (TSX: BSY), a
biotechnology company developing biotherapeutic thermogels for regenerative
medicine, today announced that it has completed its previously announced
private placement of an aggregate of 140,000 units of BioSyntech, each
comprised of $10 principal amount of subordinated secured convertible
debentures and 91 common share purchase warrants, to Highland Crusader
Offshore Partners, L.P. ("Highland"), ProQuest Investments III, L.P.
("ProQuest"), Fonds de Solidarité des travailleurs du Québec (F.T.Q.)
("FSTQ"), A. M. Pappas Life Science Ventures III, LP and PV III CEO Fund, LP,
at a price of $10 per unit, representing gross aggregate proceeds of
$1,400,000 to BioSyntech.
    Concurrently with 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 were extended to March
31, 2010. Such term extension was approved by written resolution signed by
more than 66 2/3% of the holders of debentures.
    The board of directors of BioSyntech has also approved the distribution
to its existing shareholders of rights exercisable to purchase an additional
310,000 units at a price of $10 per unit, representing gross aggregate
proceeds of up to $3,100,000 to BioSyntech, subject to receipt of all
regulatory and stock exchange approvals. To that effect, BioSyntech will file
today a preliminary short form prospectus with the securities regulatory
authorities in the provinces of British Columbia, Alberta, Manitoba, Ontario
and Québec and with the Toronto Stock Exchange.
    Laurentian Bank Securities Inc. is acting as sole financial advisor to
BioSyntech with regards to this financing transaction and as sole dealer
manager under the rights offering.
    The terms of the debentures and warrants comprising the units offered
under the rights offering will be identical to the terms of the debentures and
warrants issued under the private placement. The 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 March 31, 2010. Each
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
debentures, subject to customary anti-dilution provisions. The debentures will
rank pari passu with the currently outstanding debentures. Each warrant will
entitle the holder thereof to purchase one common share for a purchase price
of $0.14 until August 19, 2016. In addition, the 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 has entered into stand-by purchase agreements with ProQuest,
FSTQ and Highland pursuant to which, subject to certain terms and conditions,
such shareholders have agreed to exercise in full their respective basic
subscription rights under the rights offering and to purchase, at a price of
$10 per unit, all of the units not otherwise purchased pursuant to the
exercise of rights under the rights offering at the expiry time, so as to
ensure a minimum subscription of $3,100,000, in accordance with the
proportions set forth in their respective stand-by purchase agreements.
    BioSyntech intends to use the net proceeds from the private placement and
the rights offering to complete the formal review of the strategic
alternatives of BioSyntech, including a commercial partnership in respect of
BST-CarGel(R) and/or a corporate sale of BioSyntech, pursue the pivotal trial
for its cartilage repair device BST-CarGel(R), and for general corporate
purposes, including working capital. The rights offering is expected to close
in mid-October 2009.
    "This is a great vote of confidence from the current investors of
BioSyntech; their continued support as we progress towards a strategic
relationship is greatly appreciated", said Ms. Jeanne M. Bertonis, Chief
Executive Officer of BioSyntech.
    BioSyntech also wishes to update investors on certain other recent
developments. With the events that have taken place since the beginning of the
summer of 2009, the Corporation's efforts have been focused on stabilizing its
management and replenishing its cash reserves. As a result, the advancement of
its BST-CarGel(R) program has been disrupted, leading the Corporation to
revise its estimated timing to reach certain milestones. More specifically,
the results for the interim analysis of the available clinical data from 40
subjects enrolled in its Canadian-European pivotal trial are now expected to
be available towards the end of calendar year 2009, and the final clinical
results of the 80-patient study are now anticipated in the summer of calendar
year 2010.
    Considering the time before reaching the foregoing milestones, and
considering that the debentures will mature on March 31, 2010, BioSyntech
would require additional financing to continue its operations, complete its
pivotal trial for the BST-CarGel(R) and repay maturing debentures (in the
event they are not converted before maturity) if it were to proceed without a
strategic relationship. Depending on the advancement of its review of
strategic alternatives and its pivotal trial for the BST-CarGel(R), BioSyntech
may need additional financing as soon as the beginning of calendar year 2010.
There can be no assurance that any such financing will be available. Any
additional financing may be dilutive to holders of shares, debentures and
other holders of convertible securities.
    Moreover, in light of the BioSyntech's reorientation around its lead
BST-CarGel(R) program and the termination of most of its other R&D programs,
BioSyntech recently entered into an agreement with Polyvalor Limited
Partnership ("Polyvalor") to, inter alia, assign back to Polyvalor certain
technologies abandoned by BioSyntech and initially licensed from Polyvalor and
change the payment schedule for the maximum amount of royalties payable to
Polyvalor such that the royalties are now potentially divided into milestones,
including a portion thereof which becomes payable upon reaching a transaction
where BioSyntech would sell or license its BST-CarGel(R) technology. The
maximum amount of royalties of $3,000,000 payable to Polyvalor under its
existing technology assignment agreement is not changed and remains capped at
$3,000,000.
    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, debentures,
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 our intellectual property, the success of our
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 rights
offering is subject to receipt of all regulatory and stock exchange approvals.
In addition, the stand-by commitments of ProQuest, FSTQ and Highland are
subject to certain terms and conditions. Failure to obtain the contemplated
financing could have a material adverse effect on BioSyntech and the trading
price of its common shares.

    %SEDAR: 00020217EF




For further information:

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

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