Hunan Influenza Vaccine Joint Venture on Hold Pending Resolution of Contract Renegotiation

Microbix suspends project activity and returns Phase I funds to private investors.

TORONTO, June 27, 2011 /CNW/ - Microbix Biosystems Inc. (TSX: MBX), a biotechnology company commercializing novel technologies for influenza vaccine manufacturing and biological products announced today that it is renegotiating key terms of the original joint venture agreement with their Joint Venture partner Hunan Biopharmaceutical Co. Ltd. (a Hunan Province state-owned enterprise). The original agreement was signed in 2008 to build and operate Asia's largest influenza vaccine production facility.

William J. Gastle, Chief Executive Officer said, "In January we closed Phase I financing for Crucible,  a Microbix subsidiary, and began working diligently to implement the new legal structure for the Joint Venture Company, requiring both parties to sign certain amendments to the original agreement.  During this process Hunan raised some material issues they wanted to discuss and revise.  At the same time we have our own issues we wish to discuss and revise based on feedback from interested private equity investors.  We have involved different levels of government to facilitate these discussions, but at this time we are at an impasse with Hunan and anticipate these negotiations could take considerably more time to resolve.  Under these circumstances, we have decided to suspend all project activity and return the funds to Phase I investors, placed in Crucible in January, until contract renegotiations are concluded with Hunan."

Gastle continued, "We remain committed to this venture to upgrade China's influenza vaccine capacity and to raise the immunization rates to the WHO recommended levels of 20% in Hunan Province. We have assembled an outstanding internationally recognized management team and are close to securing the remaining financing from large institutional investors to build one of the most advanced vaccine facilities in the world.  We continue to work through this situation with the best interests of our Microbix shareholders in mind, and as such we are also exploring other options in China to extract the value from our investment in this project if we are unable to reach satisfactory terms with Hunan."

Last December, Microbix announced the joint venture had raised the necessary Phase I start-up capital to begin the three-phase development of the planned 120 million-dose influenza vaccine facility. The joint venture would initially require approximately $50 million to build a 20 million dose capacity to serve Hunan Province.

About Hunan Joint Venture

In 2008, Microbix and the Hunan Biopharmaceutical Co. Ltd (Hunan), a Hunan Province state-owned enterprise, entered into a 50:50 joint venture to build and operate a new influenza vaccine facility in Changsha National Biomedical Park near Changsha City, the capital of Hunan Province. As part of this prior agreement, Hunan had agreed to purchase 75% of the initial 20 million dose vaccine output from the facility in its first seven years of operation, representing estimated revenue of $500 million. Going forward, Hunan had additionally committed to Microbix that it will assist in facilitating additional supply agreements with other provinces. And, as part of its broader outreach to China, Microbix expects to enter into a delivery partnership with one of the largest Chinese pharmaceutical distributors.

About Microbix Biosystems

Microbix Biosystems Inc. specializes in the development of biological technologies and commercializing them through global partners. The Company has intellectual property in large market biotherapeutic drugs, vaccine technologies and animal reproduction technologies. Established in 1988, Microbix is headquartered in Toronto.

Disclaimer

This press release contains forward-looking statements which are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements including the risks associated with operations in Foreign jurisdictions and foreign governments, risks associated with construction generally and with specialized construction requirements of a influenza vaccine facility, risks associated with production including control over costs, quality, quantity and timeliness of delivery of products, foreign currency and exchange rate risk, and risks of raising capital on acceptable terms or at all.  These forward-looking statements represent the Companies' judgment as of the date of this press release. The Company disclaims any intent or obligation to update these forward-looking statements.

SOURCE Microbix Biosystems Inc.

For further information:

Visit www.microbix.com or contact:
William J. Gastle, CEO, (416) 234-1624 x 230;
James Long, CFO, (416) 234-1624

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Microbix Biosystems Inc.

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