Warburg Commits to Invest CDN$35 Million in Protox

Warburg Pincus has committed to invest CDN$35 million in Protox, which develops receptor targeted fusion proteins for the treatment of diseases of the prostate and cancer. Warburg is a global PE firm.


Protox Therapeutics Inc. (the “Company” or “Protox”) (TSX: PRX), a leader in the development of receptor targeted fusion proteins for the treatment of diseases of the prostate and cancer, and Warburg Pincus, a leading global private equity firm, today jointly announced that they have entered into an Investment Agreement.

Under the Investment Agreement, Warburg Pincus Private Equity X, L.P. and Warburg Pincus X Partners, L.P. (together “Warburg Pincus”) have committed to invest up to CDN $35 million in Protox, comprised of an initial tranche of $10 million, and an additional tranche of $25 million subject to the FDA granting a Special Protocol Assessment (“SPA”), for the treatment of benign prostatic hyperplasia (“BPH”) prior to September 30, 2011. An SPA is a binding written agreement with the FDA that the proposed trial protocol design, clinical endpoints and statistical analyses are acceptable to support regulatory approval.

“We are delighted to be working with Warburg Pincus, a firm with extensive experience in the sector, and a team that clearly recognizes the immense commercial potential of PRX302,” said Dr. Fahar Merchant, President & CEO of Protox Therapeutics. “Warburg Pincus’ impressive track record of building substantial shareholder value, providing access to growth capital, and offering unparalleled sector specific expertise, will provide Protox with the full means to complete the BPH clinical activities required for marketing authorization.”

“We are very pleased to be able to provide the financing necessary to advance Protox’s lead product candidate into late-stage trials in BPH,” said Jonathan Leff, a Managing Director of Warburg Pincus. “We look forward to working closely with the company’s board and partnering with the management team.”

Frank Holler, Chairman of Protox and CEO of Protox’s largest existing investor, Lions Capital, commented, “To have one of the world’s top private equity firms commit to this size of investment in the Company is a strong endorsement of our technology, our people and their accomplishments to date. We look forward to working with Warburg Pincus to build Protox into a leading life science company serving the urology and oncology markets.”

Financial Terms

Warburg Pincus will invest up to $35 million through a unit offering at $0.40 per unit, where each unit is comprised of one common share of Protox and 0.6 common share purchase warrants. Each whole warrant entitles the holder to purchase one common share of Protox at a price of $0.50, exercisable for a period of five years from the date of issue, subject to the acceleration of the expiry date in certain circumstances.

The investment of the initial tranche of $10 million will close upon the satisfaction of certain closing conditions, including the approval by Protox’s shareholders and the Toronto Stock Exchange of the investment. Warburg Pincus will invest the second tranche of $25 million if the Company receives an SPA for the treatment of BPH prior to September 30, 2011. If the Company does not receive the SPA within that time frame, Warburg Pincus will have the right, but not the obligation, to invest up to the additional $25 million, subject to certain conditions. Upon the closing of the initial tranche, Warburg Pincus will hold 25,000,000 common shares (approximately 21% of the Company’s outstanding shares) and 15,000,000 share purchase warrants, and will be the Company’s largest shareholder. Warburg Pincus could become the majority shareholder of the Company with the additional investment of $25 million, and would hold an aggregate of 87,500,000 common shares and 52,500,000 share purchase warrants. Upon the closing of the $25 million second tranche and the exercise of all of the warrants on a cash basis Warburg Pincus would hold up to 59% of the Company’s outstanding shares.

In connection with the financing, Warburg Pincus has agreed to a customary 12-month standstill subject to certain customary exceptions. Warburg Pincus has also been granted certain registration rights with respect to future sales of common shares of the Company held by Warburg Pincus.

Upon closing the first tranche, Drs. Jim Miller, Alex Giaquinto and Avtar Dhillon have agreed to step down from the Board and will be replaced by Mr. Jonathan Leff, a Managing Director of Warburg Pincus, and Dr. Nishan de Silva, a Principal of Warburg Pincus, along with a leading independent biotech industry executive to be designated by Warburg Pincus, who will assume the Chairmanship of the Protox Board. Mr. Frank Holler, the chair since 2003 will remain on the Board as will Mr. Jim Heppell and Dr. Jack Geltosky. An additional independent designate acceptable to the Company and Warburg Pincus as well as an additional Warburg Pincus designee will also be appointed to the Board within 90 days of the first closing.

The special meeting of shareholders of Protox to approve the investment will be held on or before November 24, 2010. The initial $10 million investment is scheduled to close shortly thereafter.

Lions Capital Corp. and certain directors of the Company have entered into voting agreements under which they agree to vote the common shares under their control or direction (in aggregate, approximately 21.0% of the outstanding common shares of the Company) in favour of the Warburg Pincus investment.

Warburg Pincus advises that the investment in Protox is being made as a strategic investment and that Warburg Pincus may increase or decrease its investment, directly or indirectly, in Protox from time to time, depending on market conditions or any other relevant factors.

Conference Call and Webcast

Protox will host a conference call and live webcast on Wednesday, September 29th 2010, at 4:30 pm E.T. to discuss the Investment Agreement and its impact on the BPH program. To access the conference call by telephone, dial (888) 231-8191 or (647) 427-7450. Please connect approximately ten minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until Tuesday, October 5 at midnight. To access the archived conference call, dial (800) 642-1687 or (416) 849-0833 and enter the reservation number 14619539 followed by the number sign.

A live audio webcast of the conference call will be available at www.protoxtherapeutics.com. Please connect at least ten minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. The webcast will be archived on the Company’s website for 60 days.

About Warburg Pincus

Warburg Pincus is a leading global private equity firm. The firm has more than $30 billion in assets under management. Its active portfolio of more than 110 companies is highly diversified by stage, sector and geography. Warburg Pincus is a growth investor and an experienced partner to management teams seeking to build durable companies with sustainable value. Founded in 1966, Warburg Pincus has raised 13 private equity funds which have invested more than $35 billion in approximately 600 companies in more than 30 countries. The firm has offices in Beijing, Frankfurt, Hong Kong, London, Mumbai, New York, San Francisco, São Paulo, and Shanghai. For more information, please visit www.warburgpincus.com

About Protox

Protox Therapeutics is a leader in advancing novel, receptor targeted therapeutic fusion proteins. Two drug candidates derived from the company’s INxin(TM) and PORxin(TM) platforms are in clinical development. Protox’s lead program, PRX302 (PORxin), achieved positive results from its Phase 2b placebo controlled trial called TRIUMPH, to treat benign prostatic hyperplasia (BPH or enlarged prostate). Protox has partnered with Kissei Pharmaceuticals for the development and commercialization of PRX302 in Japan. PRX321 (INxin) is being developed for the treatment of various cancers and has received Fast Track Designation and Orphan Drug Status from the US FDA and EMEA for the treatment of primary brain cancer. For more information, please visit www.protoxtherapuetics.com