Isotechnika announces a strategic collaboration and financing with Paladin Labs



    EDMONTON, May 7 /CNW/ - Isotechnika Inc. (TSX: ISA) today announced a
strategic investment and collaboration with Paladin Labs Inc. (TSX: PLB), a
leading Canadian specialty pharmaceutical company. Pursuant to this agreement,
Isotechnika has entered into a plan of arrangement with Paladin Labs, which
will provide Isotechnika with $7.0 million of cash immediately and $4.35
million in supported Research and Development funding over the next 12 months.
    Under the proposed plan of arrangement, current shareholders of
Isotechnika will own 81% of a new company, Isotechnika Pharma Inc., with the
remaining 19% owned by Paladin Labs. Isotechnika Pharma will maintain a
listing on the Toronto Stock Exchange and senior management of Isotechnika
will continue with Isotechnika Pharma.
    "The combination of this financing and share reorganization provides
Isotechnika shareholders with a solid balance sheet to deliver on key
milestones and business objectives," said Dr. Robert Foster, President & CEO
of Isotechnika. "We are pleased to be able to secure capital on favorable
terms in such a difficult market, while retaining the rights to market
voclosporin in the largest, most strategic markets, including the U.S.,
Europe, Japan and Asia. In the process we gain a strategic partner in Paladin
Labs for key pharmaceutical markets, including Canada. With this improved
capital position, we are better positioned to secure a global
commercialization deal for voclosporin. We continue to look forward to
milestone and royalty payments from our partners, Lux Biosciences and Atrium
Medical."
    "We are pleased to partner with Isotechnika for the development &
commercialization of voclosporin. With positive results from a recently
completed Phase III trial in psoriasis, we intend to submit voclosporin for
Canadian regulatory approval. We believe voclosporin will find a profitable
niche in the Canadian market while providing benefit to psoriasis patients. We
are also excited by the much larger market opportunity for voclosporin in the
transplant indication. We look forward to participating with current
Isotechnika shareholders in a new, well-funded company that will continue to
develop voclosporin for the benefit of its shareholders," stated Mr. Jonathan
Ross Goodman, President & CEO of Paladin Labs Inc.
    Management of Isotechnika Pharma will focus its efforts on finding
partnerships for the clinical development of voclosporin in the transplant
indication, and expects it will have the necessary capital to fund operations
until the anticipated milestones from Lux Biosciences.
    "Given these challenging markets, Isotechnika's Board of Directors has
evaluated a number of options for the company. Based on our assessment, a
fairness opinion from our financial advisors for the transaction, and other
considerations, the Board of Directors unanimously recommends that Isotechnika
security holders approve the transaction," stated Mr. Donald Schurman,
Chairman of the Board of Directors.
    The strategic relationship with Paladin is expected to build on the
strengths of each organization. Paladin is recognized for its business
development acumen and pharmaceutical commercialization expertise, which
perfectly complements Isotechnika's significant expertise in drug discovery
and development. Combining the strengths of these two companies, it is
expected that additional late-stage clinical assets will be brought into
Isotechnika Pharma to strengthen the product pipeline, while Paladin will be
granted the rights to these products in its territories of interest.
    The restructuring will be completed by way of a plan of arrangement to be
approved by the Court of Queen's Bench of Alberta, the TSX and Isotechnika
security holders (by a majority of at least 66.6% of the security holders
voting). Completion of the transaction is expected to occur in June 2009.
    Deloitte & Touche Corporate Finance Canada Inc. provided advice to
Isotechnika with respect to the transaction.
    Complete details of the transaction will be provided to shareholders in
an Information Circular which is expected to be mailed to Isotechnika
shareholders before the end of May 2009. To summarize the key elements of the
proposed arrangement and collaboration agreement:

    
    -   In consideration for the acquisition of all of the assets of
        Isotechnika Inc., Paladin will invest $7 million dollars in
        Isotechnika Pharma and provide Isotechnika Pharma with an R&D
        contract of $4.35 million to further the development of voclosporin.
    -   Current Isotechnika shareholders will own 81% of Isotechnika Pharma,
        with the balance owned by Paladin Labs. Holders of Isotechnika stock
        options, deferred share units, and warrants will exchange their
        holdings for options, deferred share units, and warrants in
        Isotechnika Pharma.
    -   Paladin will retain the rights to market, sell, and distribute
        voclosporin in Canada, Israel, Central & South America, South Africa,
        and Mexico, and will make payments equal to 30% of net sales, less
        manufacturing costs, to Isotechnika Pharma in those jurisdictions,
        for a period of seven years. Isotechnika Pharma will own the
        commercialization rights to voclosporin in the rest of the world,
        including the key markets - the U.S., Europe, Japan and Asia - and
        will pay Paladin royalties of 12% on its revenues in these
        territories.
    -   Isotechnika Pharma will receive payments equal to 88% of the net
        profit from the sale of any Helikit(R) product.
    -   Isotechnika Pharma will retain the lion's share of economic benefit
        related to its Lux and Atrium licensing agreements, and will receive
        88% of any revenues derived from these licensing agreements. With
        major milestone payments due in the second half of 2010 and early
        2011, these revenues could fund Isotechnika Pharma's future
        operations.
    -   Senior management of Isotechnika will continue with Isotechnika
        Pharma.

    About Isotechnika
    -----------------
    

    Edmonton-based Isotechnika Inc. is a biopharmaceutical company focused on
the discovery and development of novel immunosuppressive therapeutics that are
designed to offer advantages over other currently available treatments. There
is a significant unmet medical need in the treatment of both solid organ
transplantation and autoimmune disease. It is estimated that the market
potential will exceed $4 billion annually in sales for calcineurin inhibitors
such as voclosporin by 2010.
    Voclosporin is a next generation calcineurin inhibitor, which recently
completed a Phase 2b North American trial for the prevention of kidney
rejection following transplantation. Extensions to the Phase 2b trial and a
combined Phase 3 European/Canadian trial for the treatment of moderate to
severe psoriasis have been completed and data is being analyzed. Our partner,
Lux BioSciences, Inc., has recently completed three separate Phase 2/3 pivotal
trials investigating voclosporin (referred to as LUVENIQ(TM) by Lux) for the
treatment of uveitis. In addition to the uveitis trials, Lux BioSciences Inc.
has also commenced a Phase 1 trial using their proprietary voclosporin
ophthalmic solution (LX214) as a candidate for dry eye syndrome. Voclosporin
has also entered First-in-Man trials as the drug utilized in the CINATRA(TM)
Drug Coated Coronary Stent system developed by the Company's partner, Atrium
Medical Corporation.
    Isotechnika Inc. is a publicly traded company on the Toronto Stock
Exchange under the symbol "ISA". More information on Isotechnika can be found
at www.isotechnika.com or www.SEDAR.com.

    Forward-Looking Statements

    This press release may contain forward-looking statements. Forward
looking statements, including the Company's belief as to the potential of its
products, the Company's expectations regarding the issuance of additional
patents and the Company's ability to protect its intellectual property,
involve known and unknown risks and uncertainties, which could cause the
Company's actual results to differ materially from those in the forward
looking statements. Such risks and uncertainties include, among others, the
availability of funds and resources to pursue research and development
projects, the ability to economically manufacture its products, the potential
of its products, the success and timely completion of clinical studies and
trials, the Company's ability to successfully commercialize its products, the
ability of the Company to defend its patents from infringement by third
parties, and the risk that the Company's patents may be subsequently shown to
be invalid or infringe the patents of others. Investors should consult the
Company's quarterly and annual filings with the Canadian commissions for
additional information on risks and uncertainties relating to the forward-
looking statements. Investors are cautioned against placing undue reliance on
forward-looking statements.

    %SEDAR: 00010508E




For further information:

For further information: Dr. Robert Foster, President & CEO, Isotechnika
Inc., (780) 487-1600 (247), (780) 484-4105 (fax), rfoster@isotechnika.com; Mr.
Dennis Bourgeault, Chief Financial Officer, Isotechnika Inc., (780) 487-1600
(226), (780) 484-4105 (fax), dbourgeault@isotechnika.com

Organization Profile

ISOTECHNIKA PHARMA INC.

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