Biotie to acquire CNS and inflammation specialist elbion GmbH

Biotie Therapies Corp (“Biotie” or the “Company”) has today entered into an agreement with privately held elbion NV to acquire its wholly-owned subsidiary elbion GmbH. In exchange Biotie will issue 46,802,967 new shares to elbion NV (the “Exchange Offer”). In connection with the Exchange Offer, certain shareholders of elbion NV have committed to invest an aggregate amount of EUR 3.3 million into the combined entity (the “Offering”, together with the Exchange Offer the “Transaction”). The Transaction is subject to the necessary resolutions passed by Biotie and elbion NV shareholders at the general meetings to be held on 14 November 2008 and 10 November 2008, respectively.

elbion GmbH is a pharmaceutical research and development company based in Radebeul, Germany, originally founded through a management buy-out from the German industrial group Degussa AG and subsequently financed by an international syndicate of venture capital investors in 2004. For further information on elbion GmbH please refer to Appendix 1.

Following the Exchange Offer, elbion GmbH will be a wholly-owned subsidiary of Biotie. The combined entity will focus on research and development of drugs for central nervous system disorders (addiction, psychotic illnesses) and inflammatory diseases (e.g. rheumatoid arthritis and psoriasis) with high unmet medical need. The combined entity will have a strong and balanced pipeline with first-in-class compounds at various stages of clinical development; many programmes have already been validated by top-tier pharma partners such as Roche, Wyeth and Lundbeck.

“Bringing together the outstanding pharmaceutical development capabilities and strong clinical pipelines of both companies will create a European leader in the CNS and inflammation market”, said the Chairman of Biotie, Mr Juha Jouhki. Mr Luc Philips, the Chairman of elbion NV stated that “this business combination is a unique opportunity to combine complementary programmes and capabilities with sufficient financial means to reach key value inflection points”.

The combined entity’s most advanced product, Nalmefene, is currently in phase III development for the treatment of alcohol addiction disorders and is already licensed to Lundbeck. Two compounds targeting inflammatory disorders are also in clinical development: (i) ELB353 is an orally available selective anti-inflammatory agent with potential application in several inflammatory indications and has completed phase I clinical development; (ii) BTT-1023, a fully human monoclonal antibody targeted against VAP-1, the combined entity’s proprietary inflammatory receptor, has recently completed a first in-man clinical study and is expected to proceed to clinical studies with repeated doses of the antibody. BTT-1023 has significant potential in treatment of inflammatory diseases such as rheumatoid arthritis and psoriasis. The combined entity is also developing Buprenorphine Depot, a next generation proprietary formulation of the leading drug for the treatment of opioid dependence; this drug is currently being prepared for clinical development. In addition, elbion GmbH’s world-class PDE-focused drug discovery platform is expected to provide a stream of further product candidates.

The combined entity’s clinical and pre-clinical pipeline has been endorsed by leading international pharmaceutical partners. elbion GmbH has entered into a licensing and collaboration agreement for the development of PDE10-inhibitors with Wyeth. This agreement contains potential milestones of up to USD 110 million as well as significant royalties on sales. Biotie has entered into a licensing agreement with Lundbeck for Nalmefene involving potential milestones of up to EUR 82 million as well as significant royalties on sales. Biotie also has option agreements with Roche for BTT-1023 and for a pre-clinical stage SSAO-inhibitor compound.

The management of the combined entity will be as follows:

Name - Position in the combined entity - Current position
Timo Veromaa - Chief Executive Officer - CEO of Biotie
Thomas Taapken - Chief Financial Officer - CFO of elbion NV
Thomas Kronbach - Chief Scientific Officer - CSO of elbion NV
Antero Kallio - Chief Medical Officer - VP of Drug Development of Biotie

Kai Lähdesmäki will serve as a senior business development advisor for the combined entity. Mr. Lähdesmäki has been an advisor to Biotie since 2007 after retiring from his position of VP, Business Development of Biotie.

It is proposed that Biotie’s Extraordinary General Meeting of Shareholders would appoint Bernd Kastler, currently Chief Executive Officer of elbion NV, together with Ann Hanham and Christoph Schroeder as additional new members of the Board of Directors of Biotie. The combined entity will have its operations in Turku, Finland, and Radebeul, Germany, with approximately 75 employees.

Biotie reported revenues of EUR 4.0 million for the first three quarters of 2008 and a net loss of EUR 3.8 million. On a pro-forma basis, the combined entity would have had revenues of EUR 6.6 million and would have incurred a loss of EUR 5.3 million in the first three quarters of 2008. After completion of the Transaction, Biotie will have approximately EUR 27 million in cash. The pro-forma financial information on the combined entity for the financial year 2007 and the first three quarters of 2008 will be available in the listing prospectus intended to be published by Biotie on or about 12 November 2008.

Extraordinary General Meeting of Shareholders to be convened

The Board of Directors gives notice today that it is convening an Extraordinary General Meeting of Shareholders on 14 November 2008 to authorise the issue of 46,802,967 new shares to elbion NV in connection with the Exchange Offer (“Consideration Shares”) and authorise the further issue of up to 7,305,733 new shares in connection with the Offering (“Institutional Offering Shares”, together with Consideration Shares the “New Shares”).

Subsequent to the subscription and registration of the New Shares, the aggregate number of shares in issue in Biotie will be 144,320,560. The number of the Consideration Shares offered to elbion NV represents 51.88 per cent of Biotie’s issued share capital and votes attaching thereto prior to the Transaction (32.43 per cent thereafter). The Institutional Offering Shares represent 8.10 per cent of the Company’s issued share capital and votes attaching thereto prior to the Transaction (5.06 per cent thereafter).

The Board of Directors proposes that the Extraordinary General Meeting of Shareholders would authorise the Board of Directors to resolve on one or more share issues. This authorisation would contain the right to issue new shares or dispose of the shares in the possession of the Company and to issue options or other specific rights to the shares pursuant to chapter 10 of the Companies Act. The authorisation would consist of up to 7,000,000 shares in the aggregate. A maximum of 819,000 own shares in the possession of the Company could be conveyed.
Biotie has been notified that the shareholders representing approximately 49 per cent of the Company’s shares and voting rights will propose to the Extraordinary General Meeting of Shareholders that, in addition to the current members of the Board of Directors, three new members would be elected in connection with the transaction implemented through the exchange of shares. The new members of the Board of Directors would be Ann Hanham, Bernd Kastler and Christoph Schroeder.

In connection with the proposed Transaction, existing Biotie’s shareholders representing approximately 49 per cent of the Company’s shares and voting rights, have agreed to vote in the general meeting in favour of i)the Transaction, ii) the authorisation to issue new shares for the purpose of option programmes and iii) the appointment of further Directors to the Board of Biotie.

Biotie will publish an invitation to the Extraordinary General Meeting of Shareholders separately.

Exemption from the obligation to make a public tender offer in relation to Biotie shares

Following the completion of the issue of New Shares, elbion NV’s voting rights in Biotie will amount to approximately 32.43 per cent of all voting rights attached to the issued shares of Biotie. Under Chapter 6 of the Finnish Securities Market Act, a shareholder whose holding in a listed entity exceeds 3/10 or one half of the total voting rights is under the obligation to launch a public tender offer in relation to all shares of such entity, unless exempted by the Finnish Financial Supervision Authority (the “Fin-FSA”). elbion NV is in discussion with the Fin-FSA to receive such an exemption. The receipt of such exemption is a prerequisite for closing of the Transaction.

Commitment to invest in Biotie

Biotie has obtained commitment from certain shareholders of elbion NV, namely Burrill & Company, TVM Capital and AGF Private Equity, to subscribe for an aggregate amount of 7,305,733 new shares in Biotie at a subscription price of EUR 0,4517 per share which equates to a total subscription value of EUR 3.3 million payable in cash. The subscription price per share corresponds to the trade-volume weighted average of the Company’s share price during the 20 trading days up to and including 22 October 2008.

The current shareholder of elbion GmbH, elbion NV, has undertaken to provide additional capital to elbion GmbH prior to the completion of the Exchange Offer for an aggregate amount of EUR 1.8 million.

Combination Agreement

Biotie, elbion NV and elbion GmbH have today entered into a Combination Agreement, which sets out the terms and conditions of the Exchange Offer and the Offering. The Combination Agreement includes conditions to the completion of the Exchange Offer and the Offering. Such conditions include i) the availability of additional financing by means of the Offering, ii) the availability of necessary authorisations, iii) the absence of breach of agreement or material adverse change in the respective businesses of Biotie and/or elbion and iv) certain other conditions. The Combination Agreement also contains stipulations governing the conduct of Biotie and elbion GmbH prior to the completion of the Exchange Offer, the cooperation of the parties for the purposes of preparing necessary filings and documents to complete the Exchange Offer and the Offering and the possible termination of the Combination Agreement for example on the basis of material adverse change in the respective businesses of Biotie or elbion and the absence of relevant authorisations.

In the Combination Agreement, elbion NV has agreed not to transfer the shares held in Biotie during a period of twelve months from the completion of the Exchange Offer except for transfers among or to the shareholders or affiliated entities of elbion NV and to certain directors of elbion GmbH provided that such entities or persons are subject to an applicable transfer restriction.

Completion of the Combination and Offering

Provided that the Extraordinary General Meeting of Biotie on 14 November 2008 approves the issue of the New Shares, the Exchange Offer and the Offering will be completed immediately. Once registered at the Finnish Trade Register the New Shares will rank pari passu in every respect with the existing shares in Biotie. Biotie will apply to list the New Shares on NASDAQ OMX Helsinki Oy. Trading of the New Shares is expected to commence on approximately on 18 November 2008.

Listing Prospectus

Biotie will publish a prospectus in relation to the listing of the new shares offered in connection with the Exchange Offer and Offering on or about 12 November 2008. The prospectus will be available in the Finnish language on Biotie’s web site, www.biotie.com, at the offices of Biotie, Tykistökatu 6, Turku and at OMX Way, Fabianinkatu 14, Helsinki.

Expected Timetable of Principal Events

24 October 2008 Combination Agreement signed, invitation to the Extraordinary General Meeting of Shareholders

10 November 2008 Extraordinary General Meeting of Shareholders of elbion NV

12 November 2008 Listing Prospectus will be available

14 November 2008 Extraordinary General Meeting of Shareholders of Biotie

(approx.) 14 November 2008 New Shares subscribed in the Exchange Offer and the Offering

(approx.) 17 November 2008 New Shares registered with the Finnish Trade Register

(approx.) 18 November 2008 Trading of the New Shares commences