LPX Lipoxen

TIDMLPX

RNS Number : 7316L

Lipoxen PLC

04 August 2011

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION (DIRECTLY OR INDIRECTLY) IN WHOLE OR IN PART IN, INTO, WITHIN OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, NEW ZEALAND AND THE REPUBLIC OF SOUTH AFRICA OR ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

ALL TERMS ARE DEFINED AT THE BACK OF THIS ANNOUNCEMENT, UNLESS OTHERWISE DEFINED HEREIN.

4 August 2011

LIPOXEN PLC ('Lipoxen' or the 'Company')

SUBSCRIPTION FOR 110,800,000 NEW ORDINARY SHARES BY SYNBIO LLC AT A PLACING PRICE OF 11 PENCE PER SHARE

ACQUISITION OF SYMBIOTEC GmbH

APPROVAL OF WAIVER OF THE OBLIGATION TO MAKE AN OFFER UNDER RULE 9 OF THE CITY CODE

AGREEMENT WITH THE SERUM INSTITUTE OF INDIA LTD

PROPOSED CHANGE OF NAME AND ARTICLES OF ASSOCIATION

AND

GENERAL MEETING

Lipoxen (AIM: LPX.L), the bio-pharmaceutical company specialising in the development of high-value differentiated biologic drugs and vaccines, is pleased to announce a series of transformational transactions that include a significant financing, the acquisition of patent-protected orphan drug candidates and accelerate the launch of EMA/FDA clinical trials of a number of its proprietary drug candidates.

Highlights:-

-- Strategic Investment - Placing with SynBio LLC ("SynBio") of 110.8 million ordinary shares in the capital of the Company at an issue price of 11 pence per share, to raise GBP12.19m (before expenses). SynBio will also be granted five-year warrants over the shares in the capital of the Company representing up to 11,080,000 ordinary shares at a price of 33 pence per share, representing a premium of 256 per cent., to the closing mid-market price on 3 August 2011.

-- Placing at a substantial premium - The Placing is being carried out at a premium of 18.9 per cent. to the closing mid-market price of an ordinary share on 3 August 2011.

-- Sovereign fund major investment partner - SynBio is a newly-formed Russian company whose majority shareholder will be the multi-billion dollar Russian state-owned nanotechnology investment company, Russian Corporation of Nanotechnologies (www.Rusnano.com).

-- Co-Development Agreement - Lipoxen will enter into a comprehensive Co-Development Agreement with SynBio. Through this agreement Lipoxen will license into Russia six product candidates to efficiently exploit its technologies and establish human proof of concept in advance of initiating EMA/FDA clinical trials. The Directors believe that this strategy will mitigate the technical and commercial risks of future drug development.

-- Acquisition - The Company intends to acquire the entire issued share capital of SymbioTec GmbH ("SymbioTec") for a total consideration of GBP8.8 million, which is to be satisfied by the issue of 80 million new ordinary shares in the capital of the Company.

-- Orphan drug candidates and new technology platform - SymbioTec is a company registered in Germany and has a portfolio of patents around a naturally occurring platform technology, histone, which has potential application across a broad spectrum of cancers. SymbioTec is in clinical development for its patent-protected lead drug candidate, OncoHist(TM), a treatment of acute lymphocytic leukaemia ("ALL") and acute myeloid leukaemia ("AML"), which has been granted orphan drug status by both the FDA and the EMA. SymbioTec's license partner is currently conducting a Phase IIb clinical trial in Russia involving up to 120 patients in late stage relapsed or resistant AML. The Company hopes that Phase IIb clinical trials will be completed by the end of 2013. Upon completion of Phase IIb clinical trials, Lipoxen's license partner plans to file for market launch.

-- Agreement with Serum Institute of India Ltd ("SIIL") - Lipoxen has entered into a Master Agreement to consolidate and refine the Company's commercial arrangements with SIIL. This will include the surrender back to the Company of the development rights of up to 14 drug candidates, and uplift the Company's economic interests in ErepoXen(R).

-- New share subscription by SIIL - SIIL is subscribing for 2.5 million new ordinary shares in the capital of the Company at an issue price of 11 pence per share and will be granted two-year warrants over the shares in the capital of the Company representing up to 7.5 million shares at an average exercise price of 20 pence per share.

-- Open offer - Following completion of the Placing and Acquisition, the Company is proposing to raise up to approximately GBP1.95 million (before expenses) through a proposed Open Offer to existing shareholders. Further details of the Open Offer, detailed timetable and an Application Form will be posted to Qualifying Shareholders in due course.

-- Substantial funding for future clinical and operational development- Funds from the Placing, Serum Subscription and Open Offer are expected to raise up to GBP14.4m (before expenses) and are expected to be sufficient to fund the Company's drug development initiatives and operational requirements for two years following implementation of the Proposals.

-- Change of Name - The Directors believe that the Proposals represent a transformational step forward for Lipoxen and, as such, the Company proposes to change its name to "Xenetic Biosciences plc".

-- Notice of General Meeting - Lipoxen will hold a General Meeting at the offices of Pinsent Masons LLP, 30 Crown Place, London, EC2A 4ES at 11:00 a.m. on Thursday 1 September 2011.

Commenting on the Proposals, M. Scott Maguire, CEO of Lipoxen, said:

"As previously communicated, Management has actively explored a number of opportunities that, with the overall objective of reducing its dependence on third parties, would allow the Company to control its destiny through proprietary drug development, the acquisition of complementary natural platform technologies, and the acquisition of new product candidates with near-term commercialisation potential.

We are therefore delighted to announce these proposals to shareholders and believe this series of transformational transactions will afford the Company independence as a specialty drug developer with high-value orphan drug product candidates which have shorter term market launch potential."

Enquiries:

 
 Lipoxen plc                                             +44 (0)20 7389 5015 
 M. Scott Maguire, Chief Executive 
  Officer 
 Singer Capital Markets (NOMAD 
  & Broker)                                              +44 (0)20 3205 7500 
 Jeff Keating / Claes Spang 
 Walbrook PR                                             +44 (0)20 7933 8780 
 Paul McManus / Bob Huxford (Media Enquiries) 
 Dr Paul Cornelius (Investor Enquiries) 
 
 

Important Notice

Singer Capital Markets Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for the Company in relation to the Proposals and will not be responsible to any person other than the Company under the Financial Services and Markets Act 2000, the rules of the Financial Services Authority or otherwise for providing the protections afforded to its clients or for advising any other person in relation to the contents of this Announcement, the Proposals or any matter, transaction or arrangement referred to in this Announcement. Singer Capital Markets Limited is not making any representation or warranty, express or implied, as to the contents of this Announcement.

City Capital Corporation Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for the Company in relation to the Proposals and will not be responsible to any person other than the Company under the Financial Services and Markets Act 2000, the rules of the Financial Services Authority or otherwise for providing the protections afforded to its clients or for advising any other person in relation to the contents of this Announcement, the Proposals or any matter, transaction or arrangement referred to in this Announcement. City Capital Corporation Limited is not making any representation or warranty, express or implied, as to the contents of this Announcement.

The Directors accept responsibility for the information contained in this Announcement other than the information for which responsibility is taken by the directors of SynBio as referred to below. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) the information contained in this Announcement is in accordance with the facts and there is no omission likely to affect the import of such information.

The directors of SynBio accept responsibility for the information contained in this Announcement relating to each member of the Concert Party and their related interests and the statements attributed to them in respect of their intentions and conduct. To the best of their knowledge and belief (having taken all reasonable care to ensure that such is the case) such information contained in this Announcement is in accordance with the facts and there is no omission likely to affect the import of such information.

Shareholders of the Company are advised to read carefully the Circular in relation to the Proposals once it has been despatched. Copies of the Circular will, from the date of posting to the Shareholders of the Company, be available for inspection at the offices of Pinsent Masons LLP, 30 Crown Place, London, EC2A 4ES during normal business hours on any weekday (Saturdays, Sundays and public holidays excepted).

Capitalised terms in this announcement are defined in Part 4 hereof.

PART 1

Introduction

The Company proposes to raise GBP12.19 million before expenses via the Placing with SynBio at an Issue Price of 11 pence per Ordinary Share, representing a premium of 18.9 per cent to the mid market price of an Ordinary Share on 3 August 2011, being the last practicable date prior to release of this Announcement.

The Company also proposes to undertake a series of associated transactions alongside the Placing that will, if completed, result in significant changes to the Group's business and provide the financial stability to initiate a number of material clinical developments in the Group's product pipeline.

As part of the Proposals, in addition to the Placing, the Company:

-- intends to acquire the entire issued share capital of SymbioTec; and

-- has entered into a Master Agreement with SIIL in order to consolidate and refine the Company's commercial arrangements with SIIL.

Given the transformational nature of the Proposals, the Company also proposes to change its name to "Xenetic Biosciences plc" and to adopt new articles of association at the General Meeting which, amongst other things, reflect changes to the UK company law regime as a result of the final implementation of the Companies Act 2006. Immediately following completion of the Placing the Company intends to make an Open Offer which will enable Qualifying Shareholders to participate at the Issue Price alongside the new incoming investor to raise up to GBP1.95 million(before expenses). Further information, the terms and conditions, an Application Form and a detailed timetable in relation to the Open Offer will be sent to Qualifying Shareholders in due course.

The Placing and the Acquisition are each conditional, amongst other things, on the approval by Shareholders of the relevant Resolutions, and Independent Shareholders only in the case of the Independent Shareholder Resolution, proposed at the General Meeting. The purpose of this Announcement is to provide details of the Proposals. A circular in relation to the Proposals will be dispatched to Shareholders today providing details of the Proposals and convening a General Meeting at which the Resolutions required to effect the Proposals will be proposed.

Background to and Reasons for the Proposals

As stated in the last Chairman's letter, the Company undertook in 2010 to actively explore a number of opportunities, including the acquisition of complementary natural platform technologies, the acquisition of new product candidates with near term commercialisation potential, and obtain a level of funding that would allow proprietary drug development to reduce dependence on third parties.

The Proposals represent the result of the Directors' endeavours to meet these objectives and provide the platform for a series of transformational changes to enable the Company to propel into the clinic a number of potentially blockbuster and high-value orphan drug product candidates.

As a consequence of the Proposals, the Company will be positioned to take direct control of its own destiny as a specialty drug developer as opposed to remaining a pure outlicensing company which relies on delivery by external partners and as a result the Company expects significantly to reduce its dependence on third party collaborators. The Directors will however still seek outlicensing deals along the lines of the Company's collaboration with Baxter Healthcare and where appropriate, will entertain offers for pipeline candidates.

The Directors believe the Proposals are the core catalyst required to transform the Company's business, and the funds being raised now are greater than the aggregate of all of the equity capital raises completed by the Company since its admission to AIM in January 2006.

The Company expects to mitigate the technical and commercial risks of drug development by working in close collaboration with an important new Russian-based collaboration partner, SynBio, which is entering into the Co-Development Agreement with the Company under which SynBio will be responsible for driving six new product candidates through human proof of concept trials in Russia as primary validation for the initiation of EMA/FDA clinical trials by the Company. The Co-Development Agreement will operate alongside the current arrangements which the Company has entered into with Pharmsynthez where a further six product candidates are undergoing clinical development in Russia with the same overall commercial objectives.

The nature of the Company's business is that, as a platform technology enterprise with an established base of pre-clinical and clinical validation of its technologies, particularly in the case of PolyXen, the Company's technologies are expected to have wide application in the fields of biologic drugs and vaccines.

As such, the product potential for these technologies means that it is commercially unlikely that the Company will seek to pursue all development opportunities on its own account. Accordingly, outlicensing remains an important part of the Company's strategy for building shareholder value, albeit that, operating from a position of much-increased financial stability, the Company will seek demanding fiscal and operational deliverables from any future licensees.

Sources and Uses of Funds

As a result of the Proposals and the proposed Open Offer, the Company expects to raise up to GBP14.42 million before expenses (assuming the proposed Open Offer is taken up in full but before the exercise of any warrants or options over Ordinary Shares).

The Directors believe the aggregate net proceeds of the Proposals and the proposed Open Offer will be sufficient to fund the Group's development for the foreseeable future, that is, for the two years following implementation of the Proposals and the proposed Open Offer.

The principal application of funds is expected to be as follows:

-- Initiate development, and clinical efforts in Europe and/or an FDA-regulated territory on three proprietary Lipoxen product candidates: Polysialyiated EPO ("ErepoXen"), Polysialyiated G-CSF ("StimuXen") and Histone H1.3 ("OncoHist").

-- Develop the Company's in-house product development and commercialisation capabilities by contracting with manufacturing organisations to conduct the concomitant drug development processes.

-- Expand laboratory operations to enhance the Company's capabilities to better support the design and execution of all steps necessary for the range of clinical trials about to be undertaken, as well as preparing new product candidates from the Company's pipeline to be brought forward for clinical and commercial development.

-- Fund the working capital requirements of the Group as enlarged by the Proposals.

The Company will also continue to actively seek grant funding in both Europe and the US (primarily in relation to orphan drug candidates).

Information on the Placing and SynBio

The Placing relates to the 110,800,000 SynBio Shares, which will represent approximately 30.09 per cent. of the issued share capital as enlarged by the Placing and the Acquisition. The Placing will raise GBP12.19 million before expenses (GBP11.29 million after expenses).

The SynBio Shares will be placed with SynBio pursuant to the provisions of the Subscription Agreement and will be held by SynBio subject to lock in arrangements for 24 months following completion of the Placing and orderly marketing arrangements for a further 24 months thereafter.

SynBio is a newly formed Russian limited liability company which will, immediately following completion of the Placing and the Acquisition, be owned by Rusnano, a Russian state owned and sponsored biotechnology and nanotechnology investment company, HSCI (a company quoted on MICEX which is engaged principally in stem cell research) and Dmitry Genkin (a Director of the Company) and entities associated with him. Together these parties are part of the Concert Party that has been formed to establish SynBio and to effect the Placing.

Conditional on completion of the Placing, SynBio and the Company have agreed to enter into the Co-Development Agreement (described above in "Background to and Reasons for the Proposals") and the Relationship Agreement (described in the section headed "Relationship Agreement" below).

Immediately following completion of the Placing and the Acquisition, SynBio is expected to hold 184,831,461 Ordinary Shares, representing 50.19 per cent. of the issued share capital of the Company as enlarged by the Placing and the Acquisition. Following completion of the proposed Open Offer, the issue of the SIIL Consideration Shares and the issue of the SIIL Subscription Shares, and assuming the Open Offer is taken up in full in due course, SynBio would hold 46.50 per cent. of the issued share capital of the Company as enlarged by the Proposals and the proposed Open Offer.

As part of the Placing arrangements, the Company has granted the SynBio Warrants, under which SynBio may, in the period commencing two years from the date of completion of the Placing and for three years thereafter, require the Company to issue up to 11,080,000 New Ordinary Shares at an exercise price of 33 pence per Ordinary Share. The SynBio Warrant Instrument provides that SynBio may exercise the SynBio Warrants only to the extent the total number of Ordinary Shares held by it and the Concert Party as a result of the exercise of the SynBio Warrants do not exceed 50 per cent. of the then issued ordinary share capital of the Company.

In the event that the SynBio Warrants are exercised in full on 30 September 2013 (being the second anniversary of Completion), the total number of Ordinary Shares held by SynBio would be 195,911,461, representing approximately 47.95 per cent. of the issued share capital of the Company after Third Closing as enlarged by the Ordinary Shares issued pursuant to the SynBio Warrants.

Accordingly, SynBio will become, and remain for the foreseeable future, a significant strategic shareholder in the Company, and will for so long as it holds 40 per cent. or more of the voting rights of the Company have the right to appoint two directors to the Board (one of whom shall be Dmitry Genkin). It is intended that Roman Knyazev, a director of SynBio, will join the Board at Completion.

Beyond its contractual relationships under the terms of the Co-Development Agreement and the Relationship Agreement, its rights as a Shareholder, and its minority presence on the Board, SynBio will have no control or influence over the future business of the Company, its strategic plans, the deployment of its assets or the terms of employment of the management or employees of the Company.

SynBio has no intention of changing the continued employment of the employees and management of the Company or its subsidiaries, including any material change in the conditions of their employment.

The Placing is conditional, inter alia, on the Resolutions, in particular the Independent Shareholder Resolution, being duly passed and completion of the Acquisition Agreement. Shareholders' attention is drawn to the paragraphs below, which set out details of the City Code and its impact on the Proposals.

Further details on SynBio and the Concert Party, the Subscription Agreement, the SynBio Warrants and the Co-Development Agreement will be set out in the Circular.

Information on SymbioTec and the Acquisition

SymbioTec is a company registered in Germany with operations in Saarbrucken which is principally involved with early stage clinical trials for its patent-protected lead drug candidate, OncoHist. OncoHist is a candidate for treatment of AML and ALL, and it has been granted orphan drug status by both the FDA and the EMA.

SymbioTec's licensee, Cryonix,is currently conducting a Phase IIb clinical trial in Russia involving up to 120 patients in late stage relapsed or resistant AML. Subject to satisfactory patient recruitment, Cryonix hopes to complete these Phase IIb clinical trials by the end of 2013.

The Company has agreed, conditional, inter alia, on passing of the Resolutions and completion of the Placing, to acquire by way of issuance of new shares the entire issued share capital of SymbioTec in consideration for the issue of the Acquisition Shares, valuing SymbioTec at GBP8.80 million (based on the Issue Price).

Professor Michael Zeppezauer, the sole director of SymbioTec and principal scientist behind the development of OncoHist, will join the Scientific Sub-Committee of the Company following completion of the Acquisition.

Further details regarding SymbioTec and the Acquisition Agreement are set out in Part 2 of this announcement and in the Circular.

Impact of the Acquisition Agreement and the Placing

It is intended that the Placing and the Acquisition will complete on or before 30 September 2011 and appropriate announcements as to the completion of the Placing and the Acquisition will be made, and a letter with formal terms and condition of the proposed Open Offer will be posted to Qualifying Shareholders with Application Forms, immediately following completion of the Placing and Acquisition. The Open Offer will remain open for acceptances for eleven Business Days following the date on which the Open Offer is made.

City Code and Concert Parties

Immediately following completion of the Acquisition and the Placing, SynBio will hold approximately 50.19 per cent. of the issued share capital of the Company as enlarged by the issue of the Acquisition Shares and the SynBio Shares.

Whilst completion of the Acquisition and the Placing would normally give rise to an obligation under Rule 9 of the City Code for SynBio to make a compulsory offer for the remaining Ordinary Shares, the Panel has agreed that, subject to the Independent Shareholder Resolution being passed by the Independent Shareholders, it will waive the obligation. Further details of the implications of this are set out in the Circular.

Relationship Agreement

With a view to preserving the independence of the Company from its largest single shareholder, SynBio (with whom the Directors anticipate having commercial dealings in the future, as described above), and the Company's suitability as an AIM company following completion of the Proposals, the Company and SynBio will (conditional on completion of the Placing and Acquisition) enter into the Relationship Agreement pursuant to which SynBio will ensure that the Company is capable of carrying on its business independently of it and its associates.

Under the terms of the Relationship Agreement SynBio shall be entitled to nominate two non-executive Directors, save that the Directors nominated by SynBio shall not be entitled to request information, participate in discussions and shall abstain from voting in relation to any transaction or matter where an actual or potential conflict of interest exists between SynBio or any associate and the Company.

The Relationship Agreement shall be immediately terminated if SynBio and/or any of its associates cease (for a period of more than six months) to be a Shareholder holding directly or indirectly over 25 per cent. of the issued ordinary voting capital of the Company.

Further details of the Relationship Agreement will be set out in the Circular.

SIIL Master Agreement

The SIIL Master Agreement is both a housekeeping exercise, consolidating, inter alia, the three existing principal agreements between the parties into a single over-arching agreement, and the formalisation of certain commercial terms renegotiated between the parties in line with achievements made to date and agreed plans for the future.

The key commercial features of the SIIL Master Agreement are as follows:

-- The surrender back to the Company of up to 14 product candidates, the development rights for which were vested in SIIL under the terms of the existing agreements. The parties have agreed that the interests of Shareholders will be best served by the Company regaining full control of such future development activities both as it expands its internal ability to initiate such developments and in light of the increasing validation of the Company's core technologies which is expected to facilitate partnering opportunities.

-- The issue of the SIIL Consideration Shares to SIIL in consideration for the beneficial changes in the current arrangements as outlined above.

-- The uplift in the Company's favour to 75:25 (currently 50:50) of the economic interest receivable by the Company from sub-licensing revenue received by the Company in the Lipoxen Territory (broadly the developed world) in relation to any PSA EPO product candidate which utilises the Serum EPO cell line.

-- The uplift from 5 per cent. to 8 per cent. of the Company's share of revenues for, inter alia, non-tender income arising from sales of SIIL's PSA EPO in all of the SIIL Territories (broadly the developing world) save for those made in the sovereign territory of India.

-- Changes to the nature and cost of supply of cGMP PSA (clinical grade polysialic acid manufactured under conditions of Good Manufacturing Practice).

-- An additional subscription by SIIL for 2.5 million new Ordinary Shares at the Issue Price (raising GBP275,000) together with SIIL Warrants to subscribe for up to 7.5 million Ordinary Shares over a period of twelve to twenty four months from completion of the SIIL Master Agreement at an average exercise price of 20 pence. This represents a potential for up to GBP1.775 million of additional cash proceeds, to further enhance the Company's ability to accelerate development of its proprietary pipeline.

-- The issue of the SIIL Consideration Shares is expected to take place within seven Business Days of completion of the Placing or by 30 December 2011 at the latest.

The Proposed Open Offer

In order to give Shareholders the opportunity to participate in this capital raising round at the Issue Price, the Company is proposing to raise up to approximately GBP1.95 million (before expenses) through the proposed Open Offer pursuant to which the Company proposes to offer up to 17,743,225 new Ordinary Shares to Qualifying Shareholders, such offer to be made immediately upon completion of the Placing and the Acquisition. Further details of the Open Offer, proposed timetable and the Application Forms will be posted to Qualifying Shareholders in due course.

Open Offer

If, and when, an Open Offer is made, it is proposed that Qualifying Shareholders will be given the opportunity to apply for the Offer Shares at the Issue Price, pro rata to their holdings of Existing Shares on the Record Date, on the basis of:

1 Offer Share for every 10 Existing Shares

No member of the Concert Party who is also a Qualifying Shareholder (namely FDS Pharma and Igor Nikolaev) will participate in the Open Offer. The Record Date for the Open Offer is 3 August 2011 and the Company's shares have been marked "ex" rights today.

Effect of the Placing, the Acquisition, the issue of the SIIL Shares and the proposed Open Offer

Following completion of the Acquisition, the Placing, the issue of the SIIL Shares and the proposed Open Offer, the New Ordinary Shares will represent approximately 55.36 per cent. of the Company's Enlarged Issued Share Capital. The Resolutions must be passed at the General Meeting in order for the Proposals to proceed.

The New Ordinary Shares will rank pari passu with the Existing Shares in all respects including the right to receive all dividends or other distributions declared, made or paid by the Company after their respective dates of allotment.

Related Party Transactions

Given that SIIL is a significant shareholder in the Company, and the significance of the SIIL Master Agreement to the Company, entry into the SIIL Master Agreement by the Company is a related party agreement for the purposes of the AIM Rules.

Dmitry Genkin's involvement in the ownership of SymbioTec (where a company controlled by him is a shareholder), means that the Acquisition Agreement is a related party agreement for the purposes of the AIM Rules.

Equally, Dmitry Genkin is also closely involved in the establishment and ownership of SynBio, the Placing (which includes the entry into the Subscription Agreement, the Co-Development Agreement and the Relationship Agreement) therefore falls to be treated as a related party transaction for the purposes of the AIM Rules.

Accordingly, in compliance with the AIM Rules, the Independent Directors have consulted with the Company's nominated adviser, Singer Capital Markets, in respect of each of the Related Party Agreements and the Independent Directors consider, having consulted with Singer Capital Markets, that the terms of the Related Party Agreements are fair and reasonable insofar as Shareholders are concerned.

General Meeting

A Circular (to be posted to shareholders today) will contain a notice convening the General Meeting to be held on 1 September 2011 at 11.00 a.m. at the offices of Pinsent Masons LLP, 30 Crown Place, London EC2A 4ES, at which the Resolutions will be proposed.

Irrevocable Undertakings

The Directors, Baxter Healthcare SA, Path Property Ltd, FDS Pharma, SIIL, Poonawalla Investments Limited, the Trustee of the Lipoxen Joint Share Ownership Plan and Eastern Infotech have provided irrevocable undertakings in respect of in aggregate 102,890,000 Ordinary Shares representing approximately 57.70 per cent. of the issued share capital of the Company in which they are beneficially interested, to vote in favour of all of the Resolutions (save for FDS Pharma and Igor Nikolaev who will abstain from voting on the Independent Shareholder Resolution), provided that the Placing is (i) announced at the Issue Price and (ii) announced to raise at least GBP12.19 million (before fees and expenses). The undertakings will lapse upon the passing of the Resolutions or, if earlier, defeated by a validly conducted poll. In addition, the undertaking given by Baxter Healthcare SA shall lapse on (i) the date falling six weeks after the posting of the Circular to Shareholders; and (ii) in the event that the Circular has not been posted to Shareholders within five Business Days of the date of the undertaking, the date falling five business days after the date of the undertaking.

Recommendation

The Independent Directors, who have been so advised by Singer Capital Markets, consider the Placing, the Acquisition and the Panel Waiver to be fair and reasonable and in the best interests of Independent Shareholders and the Company as a whole. In providing its advice Singer Capital Markets has relied upon the Directors' commercial assessments.

The Directors, who have been so advised by Singer Capital Markets, consider the SIIL Issue, the change of name of the Company to "Xenetic Biosciences plc" and the adoption of new articles of association to be fair and reasonable and in the best interests of the Company's Shareholders.

Accordingly, the Independent Directors unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting, as they have irrevocably undertaken to do in respect of their own beneficial and connected shareholdings, which amount in total to 11,264,595 Ordinary Shares representing approximately 6.35 per cent. of the current issued share capital of the Company.

Due to the interests of the Concert Party in the matters dealt with by the Independent Shareholder Resolution, those members of the Concert Party who are currently Shareholders have undertaken not to vote on such Independent Shareholder Resolution, though they have irrevocably undertaken to vote in favour of the remaining Resolutions in respect of their shareholdings which amount to 41,440,050 Ordinary Shares in aggregate representing approximately 23.36 per cent. of the current issued share capital of the Company.

Accordingly, the Company has received irrevocable undertakings to vote in favour of the Independent Shareholder Resolution in respect of 59,648,181 existing Ordinary Shares in aggregate representing 43.86 per cent. of the existing enfranchised issued share capital of the Company and has received irrevocable undertakings to vote in favour of the remaining Resolutions in respect of 101,088,231 existing Ordinary Shares, in aggregate representing 56.97 per cent. of the existing issued share capital of the Company.

PART 2 - INFORMATION ON SYMBIOTEC

1. Directors

The sole director of SymbioTec is Michael Zeppezauer.

2. Registered Office

The registered office of SymbioTec is Science Park 1, D-66123 Saarbrucken, Germany.

3. Activities

SymbioTec is a small biotechnology company located in Saarbrucken in southern Germany that has received approximately EUR14 million of investment to date (a sum similar to that invested in the Company to date). Its core technology is based around a set of patents for recombinant human histone H1.3 and recombinant human N-bis-met-histone H1.3 (active ingredients of OncoHist) for a broad platform application as a therapeutic to solid and non-solid cancer tumours. The first two therapeutic treatments being pursued are for the treatment of acute myeloid leukaemia (AML) and acute lymphoblastic leukaemia (ALL).

4. Financial Information on SymbioTec

For the financial year ended 31 December 2010, SymbioTec's annual accounts (unaudited) reported total assets of EUR120,000 (2009: EUR135,000) and net income after tax of EUR(565,000) (2009: EUR1,190,000).

5. Effect on the Company

The Board considers that the Acquisition of SymbioTec is not expected to have a material effect on the Company in the context of the Proposals taken as a whole.

PART 3 - EXPECTED TIMETABLE OF PRINCIPAL EVENTS

 
 Event                                                  Time / date (2011) 
 Record Date for entitlement under the               5.00 p.m. on 3 August 
  proposed Open Offer 
 Announcement and publication of the                              4 August 
  Proposals, Circular and Form of Proxy 
 Ex-entitlement date for the Open Offer              8.00 a.m. on 4 August 
 Latest time and date for receipt of               11.00 a.m. on 30 August 
  Forms of Proxy for use at the General 
  Meeting 
 General Meeting                                 11.00 a.m. on 1 September 
 Completion of the Acquisition and the                     by 30 September 
  Placing 
 Admission of the Acquisition Shares          by 8.00 a.m. on 30 September 
  and the SynBio Shares (commencement 
  of dealings in the Acquisition Shares 
  and the SynBio Shares, subject to lock-in 
  and orderly marketing arrangements) 
 
 
 Notes: 
              1. All references to time in this Announcement are to London 
              time (unless otherwise stated). 
              2. The times and dates set out in the expected timetable of 
              principal events above and mentioned throughout this 
              Announcement are indicative only and may be adjusted by the 
              Company. 
              3. Different deadlines and procedures for return of Forms of 
              Proxy may apply in certain cases. 
              4. Completion of the Acquisition and the Placing are conditional 
               upon certain events which are to be fulfilled by no later than 
               30 September 2011 unless otherwise extended with the agreement 
               of the relevant parties in which event details of the new dates 
               will, if appropriate, be notified to Shareholders. 
 

PART 4 - DEFINITIONS

The following definitions apply throughout this Announcement unless the context otherwise requires:

 
 "Announcement"                 this announcement 
 "Acquisition"                  the acquisition by the Company of the entire 
                                issued share capital of SymbioTec 
 "Acquisition Agreement"        the conditional agreement dated 4 August 2011 
                                made between (1) the Company and (2) the 
                                Sellers relating to the Acquisition, further 
                                details of which are set out in the Circular 
 "Acquisition Shares"           the 80,000,000 new Ordinary Shares to be 
                                issued by the Company to the Sellers (or as 
                                they direct) pursuant to the Acquisition 
                                Agreement 
 "Admission"                    the admission of the relevant New Ordinary 
                                Shares to trading on AIM becoming effective in 
                                accordance with Rule 6 of the AIM Rules 
 "AIM"                          AIM, a market operated by the London Stock 
                                Exchange 
 "AIM Rules"                    the AIM Rules for Companies as published by 
                                the London Stock Exchange from time to time 
 "ALL"                          acute lymphoblastic leukaemia 
 "AML"                          acute myeloid leukaemia 
 "Application Form"             the form of application to be posted to 
                                Shareholders in due course by which 
                                applications are to be made under the proposed 
                                Open Offer 
 "Board" or "Directors"         the directors of the Company 
 "Business Day"                 any day (except Saturdays and Sundays) on 
                                which banks are open in London for the 
                                transaction of normal banking business 
 "City Code"                    The City Code on Takeovers and Mergers 
 "Co-Development                the agreement between (1) the Company and (2) 
  Agreement"                    SynBio, further details of which are set out 
                                in the Circular 
 "Company"                      Lipoxen plc, a company registered in England 
                                and Wales with registered number 03213174 
 "Completion"                   the Placing being effected immediately 
                                following completion of the Acquisition in 
                                accordance with the Acquisition Agreement 
 "Concert Party"                each of SynBio, Dmitry Dmitrievich Genkin, 
                                Artur Aleksandrovich Isaev, OJSC Institute of 
                                Human Stem Cells ("HSCI"), OJSC Rusnano 
                                ("Rusnano"), FDS Pharma, Pharmsynthez, JSC 
                                Cryonix, Angport Limited, OOO Baltic Finance 
                                and Igor Nikolaev, as more particularly 
                                described in the Circular 
 "Circular                      the document to be despatched to Shareholders 
                                containing details of the Proposals and 
                                convening the General Meeting 
 "EMA"                          the European Medicines Agency 
 "Enlarged Issued               the Ordinary Shares in issue immediately 
  Share Capital"                following Admission of the Acquisition Shares, 
                                the SynBio Shares, the SIIL Shares and the 
                                Offer Shares, assuming that the Open Offer is 
                                taken up in full 
 "Existing Shares"              the 177,432,255 Ordinary Shares currently in 
                                issue at the date of this Announcement which 
                                are admitted to trading on AIM 
 "FDA"                          The Food and Drug Administration of the USA 
 "FDS Pharma"                   FDS Pharma Associates LP, an English 
                                registered limited partnership 
 "First Closing"                completion of the Acquisition and the Placing 
 "Form of Proxy"                the form of proxy for use in connection with 
                                the General Meeting which accompanies the 
                                Circular 
 "FSMA"                         the Financial Services and Markets Act 2000, 
                                as amended from time to time 
 "General Meeting"              the general meeting of the Company, to be 
                                convened at 11.00 a.m. on 1 September 2011, 
                                and any adjournment thereof, notice of which 
                                is set out at the end of the Circular 
 "Group"                        the Company, its subsidiaries and its 
                                subsidiary undertakings 
 "Independent Directors"        Sir Brian Richards, M. Scott Maguire, Colin 
                                Hill and Professor Gregory Gregoriadis (and 
                                "Independent Director" shall mean any one of 
                                them) 
 "Independent Shareholders"     Shareholders other than the Concert Party 
 "Independent Shareholder       resolution 1 set out in the Notice of General 
  Resolution"                   Meeting being an ordinary resolution, to be 
                                taken on a poll of Independent Shareholders, 
                                to approve the Panel Waiver 
 "Issue Price"                  11 pence per new Ordinary Share 
 "London Stock                  London Stock Exchange plc 
  Exchange" 
 "New Ordinary                  the Acquisition Shares, the SynBio Shares, the 
  Shares"                        SIIL Shares and the Offer Shares 
 "Notice of General             the notice convening the General Meeting 
  Meeting"                      contained in the Circular 
 "Offer Shares"                 up to 17,743,225 new Ordinary Shares to be 
                                offered pursuant to the Open Offer 
 "Open Offer"                   the open offer intended to be made to 
                                Qualifying Shareholders which, if made, shall 
                                constitute an invitation to apply for Offer 
                                Shares on the terms and subject to the 
                                conditions that will be communicated 
                                separately to Shareholders in due course 
 "Ordinary Shares"              ordinary shares of 0.5 pence each in the 
                                capital of the Company 
 "Overseas Shareholders"        Shareholders with registered addresses outside 
                                the UK or who are citizens or residents of, or 
                                located in, countries outside the UK 
 "Panel" or "Takeover           the Panel on Takeovers and Mergers 
  Panel" 
 "Panel Waiver"                 the waiver (further details of which are set 
                                out in the Circular) granted by the Panel, 
                                subject to the passing of the Independent 
                                Shareholder Resolution on a poll of 
                                Independent Shareholders at the General 
                                Meeting, of the obligation of SynBio which 
                                would otherwise arise under Rule 9 of the City 
                                Code to make a mandatory offer for the 
                                Ordinary Shares not already owned by the 
                                Concert Party as a result of the Placing and 
                                the Acquisition 
 "Placing"                      the issue of the SynBio Shares pursuant to the 
                                 Subscription Agreement 
 "Proposals"                    together the Acquisition, the Placing, the 
                                SIIL Issue, the proposed change of the name of 
                                the Company to "Xenetic Biosciences plc" and 
                                the proposed adoption of new articles of 
                                association by the Company 
 "Qualifying Shareholders"      Shareholders on the register of members of the 
                                Company at the Record Date as holders of 
                                Existing Shares with the exclusion (subject to 
                                certain exceptions) of persons with a 
                                registered address or located or resident in 
                                the United States, Australia, Canada, Japan, 
                                New Zealand and the Republic of South Africa 
 "Record Date"                  5.00 p.m. on 3 August 2011 
 "Registrar"                    Share Registrars Limited of Suite E, First 
                                Floor, 9 Lion and Lamb Yard, Farnham, Surrey 
                                GU9 7LL 
 "Related Party                 the Acquisition Agreement, the Subscription 
  Agreements"                   Agreement, the Co-Development Agreement and 
                                the Relationship Agreement 
 "Relationship                  the agreement to be entered into between (1) 
  Agreement"                    the Company and (2) SynBio, further details of 
                                which are set out in the Circular 
 "Resolutions"                  the resolutions set out in the Notice of 
                                General Meeting contained in the Circular 
 "Shareholders"                 holders of Ordinary Shares from time to time 
 "Second Closing"               the issue of the SIIL Shares pursuant to the 
                                SIIL Master Agreement 
 "Sellers"                      HSCI; Angport Limited; Professor Michael 
                                Zeppezauer; Dr Volker Rusch and Klaus Faber 
                                AG 
 "Serum Institute               The Serum Institute of India Limited, a 
  of India" or "SIIL"           company incorporated under the laws of India 
                                having its principal place of business at 
                                S.No. 212/2, Off Sol; Poonawalla Road, 
                                Hadapsar, Pune-411 028, Maharashtra, India 
 "SIIL Consideration            the 9,000,000 Ordinary Shares to be issued to 
  Shares"                       the Serum Institute of India in consideration 
                                for, inter alia, the surrender of certain 
                                development rights back to the Company 
                                pursuant to the SIIL Master Agreement 
 "SIIL Issue"                   the issue of the SIIL Shares pursuant to the 
                                SIIL Master Agreement 
 "SIIL Master Agreement"        the master agreement made on 4 August 2011 
                                between (1) the Company and (2) the Serum 
                                Institute of India, further details of which 
                                are set out in the Circular 
 "SIIL Shares"                the SIIL Consideration Shares and the SIIL 
                              Subscription Shares 
 "SIIL Subscription           the 2,500,000 Ordinary Shares to be allotted and 
  Shares"                     issued to SIIL for cash pursuant to the SIIL 
                              Master Agreement 
 "SIIL Warrant                the warrant instrument made on 4 August 2011 by 
  Instrument"                  the Company pursuant to which the SIIL Warrants 
                               are constituted 
 "SIIL Warrants"                the warrants to be issued to SIIL pursuant to 
                                the terms of the SIIL Warrant Instrument, 
                                further details of which are set out in the 
                                Circular 
 "SynBio"                       SynBio LLC, a limited liability company 
                                incorporated under the laws of the Russian 
                                Federation, Main State Registration Number 
                                1117746126321, having its registered office at 
                                building 2, 55/1, Leninsky Prospekt, Moscow, 
                                Russian Federation 
 "SynBio Shares"                the 110,800,000 Ordinary Shares to be issued 
                                to SynBio pursuant to the Subscription 
                                Agreement subject to the passing of the 
                                Resolutions 
 "SynBio Warrant                the warrant instrument made on 4 August 2011 
  Instrument"                   by the Company pursuant to which, subject to 
                                the passing of the Resolutions, the SynBio 
                                Warrants are constituted 
 "SynBio Warrants"              the warrants issued to SynBio pursuant to the 
                                terms of the SynBio Warrant Instrument, 
                                further details of which are set out in the 
                                Circular 
 "Singer Capital                Singer Capital Markets Limited, the Company's 
  Markets" or "SCM"             nominated adviser and broker 
 "Subscription                  the conditional agreement made on 4 August 
  Agreement"                    2011 between (1) the Company and (2) SynBio, 
                                further details of which are set out in the 
                                Circular 
 "SymbioTec"                    SymbioTec GmbH, a company incorporated under 
                                the laws of Germany further details of which 
                                are set out in Part 2 of this Announcement and 
                                in the Circular 
 "Third Closing"                Completion of the proposed Open Offer, 
                                assuming that it is taken up in full 
 "UK" or "United                the United Kingdom of Great Britain and 
  Kingdom"                      Northern Ireland 
 "US" or "United                the United States of America, its territories 
  States"                       and possessions, any state of the United 
                                States of America and the District of 
                                Columbia 
 
 

References in this Announcement to "$"" are US dollars being the legal tender of the United States, references to "EUR" are to Euros and references to "Rubles" are to the legal tender of Russia.

Unless otherwise stated the Sterling exchange rates applied throughout this Announcement are as follows:

GBP1.00 = EUR1.20

GBP1.00 = $1.60

GBP1.00 = Ruble 49.50

All references in this Announcement to times are, unless otherwise expressly provided, references to the time in London, UK.

Notes to Editors

About Lipoxen

Lipoxen plc is a biopharmaceutical company focused on the development of new and improved biologic drugs and vaccines. Lipoxen has three proprietary patented technology platforms:

1) PolyXen - for extending the efficacy and half life of biologic drugs

2) ImuXen - for creating new vaccines and improving existing vaccines

3) SiRNAblate - for the delivery of siRNA

Lipoxen's technology is designed to improve the efficacy, safety, stability, biological half-life and immunologic characteristics of its products.

Lipoxen has multiple drug and vaccine programmes in development. Two products are in clinical development, SuliXen, a long acting insulin and ErepoXen, a long-acting erythropoietin (EPO). Lipoxen's preclinical pipeline includes vaccines against HIV, multiple sclerosis and influenza and an exclusive license deal with Baxter Healthcare for blood coagulation drugs.

The Company has a low-risk business model and out-licenses its proprietary technologies to biopharmaceutical companies that have strong manufacturing and marketing capabilities. Lipoxen currently has commercial agreements with some of the world's leading biotechnology and pharmaceutical companies including Baxter, Schering-Plough, the Serum Institute of India Limited, Genentech, and Genzyme. Furthermore, Baxter, the Company's third largest shareholder, and management led the GBP2.9 million fundraising that the Company announced in May 2009. This fundraising was followed up by a GBP1.2 million placing in April 2010 which was led by the Company's management team.

Lipoxen, which was founded in 1997, trades on the AIM Market of the London Stock Exchange under the ticker symbol LPX. More information can be found at the Company's website: www.lipoxen.com.

This information is provided by RNS

The company news service from the London Stock Exchange

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