News & Events

ChemGenex Pharmaceuticals Limited (ASX: CXS) (ChemGenex) today welcomes leading global biopharmaceutical company Cephalon, Inc. (Cephalon) (Nasdaq: CEPH) as a significant investor.

ChemGenex has finalised a convertible note subscription agreement with Cephalon (through its wholly-owned subsidiary Cephalon International Holdings, Inc.) under which Cephalon has agreed to subscribe for up to A$15 million of convertible notes. The notes are onvertible at A$0.50 per share, representing a premium of 13% to the volume weighted average price of ChemGenex shares for the one month period to 15 October 2010.

ChemGenex will use funding provided under the convertible notes to fund the operations of the company into the next financial year, including its collection and analysis of patient data which is necessary to progress the planned NDA submission to the U.S. FDA for  omacetaxine for the treatment of chronic myelogenous leukemia (CML) patients who have failed two or more tyrosine kinase inhibitor (TKIs).

Cephalon has also today entered into option agreements with two of ChemGenex’s major shareholders, Stragen International N.V. (Stragen) and Merck Santé S.A.S (Merck). Under the option agreements, Cephalon has the right to acquire up to 19.9% of the outstanding ChemGenex shares. The options are exercisable by Cephalon at any time before the later of 31 March 2011 and one (1) week after the completion of the abovementioned data collection and analysis. The option exercise price is $0.70 per share, however, shareholders should note that Cephalon has indicated no present intention to exercise the options as its decision will depend on the progress of the patient data collection and analysis process referred to above and Cephalon’s assessment of the prospects of ChemGenex following completion of that process. Stragen and Merck have received no fee or other consideration from Cephalon for the grant of these options apart from an undertaking to pay an option fee of $10.00.

The options have the effect of giving Cephalon an immediate “relevant interest” under the Corporations Act in 19.9% of ChemGenex shares, notwithstanding that they may not be exercised. Accordingly, ChemGenex will seek shareholder approval in accordance with the Corporations Act to allow Cephalon to increase its relevant interest in ChemGenex beyond 20% by conversion of the convertible notes as soon as practicable and in any event prior to 31 December 2010.

Each of Alta Partners, Stragen, Merck and GBS Venture Partners (which as of 22 October 2010 hold in aggregate a total of 44.4% of ChemGenex shares) has indicated to ChemGenex’s Board that it supports the issue of convertible notes to Cephalon and that it intends to vote in favour of a resolution that would allow the immediate conversion of the notes. Provided that shareholder approval is obtained, ChemGenex expects that the notes will be converted to ordinary shares during the first quarter of 2011.

Greg Collier Ph.D., Managing Director and Chief Executive Officer of ChemGenex said: “We are delighted that Cephalon has indicated its interest in ChemGenex and omacetaxine by becoming a substantial investor. The company is at a pivotal stage in its development, pending the collection of data to allow it to proceed with its new NDA to the U.S. FDA for omacetaxine for the treatment of CML patients who have failed two or more TKIs.”