Med BioGene Inc.
TSX VENTURE : MBI

Med BioGene Inc.

August 15, 2014 08:30 ET

Med BioGene Provides Update and Announces Proposed Financing

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Aug. 15, 2014) - Med BioGene Inc. (TSX VENTURE:MBI) today provided an update to its shareholders and announced a proposed financing.

Erinn Broshko, MBI's Executive Chairman commented: "Shareholders of MBI have an important decision to make at the upcoming annual and special meeting scheduled for September 5, 2014. The dissident shareholders who are attempting to replace the entire board of MBI do not appear to have the required experience, nor have they provided any plans to maximize shareholder value, manage the partnership with Precision Therapeutics, or fund MBI given its limited cash position. If the dissident shareholders are elected and do not raise funds for the company, we believe that MBI will likely not be able to continue for an extended period of time as a going concern."

Mr. Broshko added: "To address the company's limited cash position, management of MBI has arranged for a $200,000 private placement. As required by the key subscribers to the private placement, the financing is subject to the re-election of a majority of board members of MBI (including the re-election of the current Executive Chairman) for continuity in the leadership of the company. MBI believes that the first milestone payment of $500,000 relating to Precision's commercialization obligations of GeneFx Lung is owing by Precision and management intends to use the proceeds from the financing to enforce its rights under the agreement including, if necessary, initiating binding arbitration proceedings. MBI encourages shareholders to vote in person or by proxy at the upcoming meeting and to consider seriously the consequences of their vote. The board of directors of MBI strongly recommends the re-election of the current directors."

MBI Strongly Recommends Shareholders Re-Elect Board of Directors

MBI previously announced on August 6, 2014 that certain dissident shareholders have noted their intention to replace the current board of directors of MBI with a new slate of nominees at the upcoming annual and special meeting of shareholders to be held on September 5, 2014 (the "Meeting").

To date, the dissident shareholders have not filed a dissident proxy circular, nor have they provided any information to the shareholders of MBI regarding their plan to maximize shareholder value or to fund MBI given its limited cash position. This is basic information that the shareholders require in order to make an informed decision regarding the election of directors.

In the exercise of good corporate governance, the Executive Chairman of MBI, Erinn Broshko, contacted Iain Weir-Jones, the dissident shareholder who is leading the efforts to replace the current MBI board. Mr. Broshko repeatedly, and in good faith, asked Mr. Weir-Jones for his and his nominees' plans to enhance MBI shareholder value. Mr. Broshko also referred to MBI's limited cash position and made clear to Mr. Weir-Jones that, if the dissidents are elected as directors at the Meeting they would need to complete a financing to sustain operations of the company. When asked, Mr. Weir-Jones did not provide any plans or suggestions.

The board of directors of MBI recommends that shareholders VOTE IN FAVOUR OF MANAGEMENT'S NOMINEES and not for the dissident shareholders' nominees.

Partnership with Precision Therapeutics

Current Status

As previously announced, MBI's commercial partner, Precision Therapeutics, Inc. has received regulatory approval of GeneFx Lung under CLIA (Clinical Laboratory Improvement Amendments of 1988), the United States federal regulations applicable to clinical laboratory testing. With this approval, Precision may undertake commercial testing of GeneFx Lung in its CLIA-certified clinical laboratory in Pittsburgh, Pennsylvania.

The long-term commercial success of GeneFx Lung will depend largely upon the extent to which government payors, specifically Medicare, and other third-party payors reimburse the test. Precision has advised MBI that, in advance of the commercial launch of GeneFx Lung, it is engaging in further dialogue with payors, specifically Medicare, to better understand the current landscape and the specific needs of relevant payors as they apply to GeneFx Lung. As such, Precision further advised MBI that the timing of the commercial launch of GeneFx Lung will be established by Precision in light of these considerations. Certain other information regarding Precision's commercialization and reimbursement strategy is strategically sensitive and, as a result, MBI is not in a position at this time to disclose further information.

Agreement with Precision - MBI Considering Options to Enforce Payment of First Milestone

Under the commercialization agreement between MBI and Precision, MBI is eligible to receive from Precision up to $1.0 million in milestone payments upon the happening of certain events, all of which are credited against future royalties that may be owed to MBI by Precision.

MBI believes that the first milestone payment of $500,000 (i.e. $300,000 due now and $200,000 due at the end of the year) relating to Precision's commercialization obligations of GeneFx Lung is owing by Precision. Management of MBI recently met with management of Precision at its offices in Pittsburgh to articulate this position and is currently considering its options to enforce MBI's contractual rights under the commercialization agreement, including, if necessary, initiating binding arbitration proceedings.

Financial Position of MBI

As at June 30, 2014, MBI had cash and equivalents of approximately $83,000.

Since March 2014, as a result of MBI's cash position, management and directors of MBI have voluntarily elected to defer their cash compensation (not including reimbursement of expenses in the ordinary course) to provide an extended runway for the company pending the anticipated payment by Precision of the first milestone payment under the commercialization agreement. The cash compensation owing but not paid to management and directors is being accrued and is due and payable upon demand. The debt amount owing to management and directors as of June 30, 2014 was $50,500 and continues to accrue.

Management and directors of MBI have advised the company that in the event that the replacement of the MBI board by the dissident shareholders appears likely, they will demand payment of the debt owing to them. Under such circumstances, MBI would make such payment and, as of the date of the Meeting, MBI would have minimal remaining available cash.

Proposed Financing -- Conditional upon Re-Election of Majority of Directors

To address the financial position of MBI and to provide funding for MBI to enforce its contractual rights under the commercialization agreement with Precision, MBI today announced that it has received signed subscription agreements and funds for a non-brokered private placement of $200,000 of units.

Each unit will be issued at a price of $0.05 and will consist of one common share and one common share purchase warrant. Each whole common share purchase warrant will entitle the holder to purchase one common share at a price of $0.10 for a period of 24 months. The securities issued pursuant to the private placement will be subject to a four-month hold period from the date of closing.

As a finder's fee, MBI may issue compensation options to acquire MBI common shares equal to 10% of the units sold pursuant to the private placement.

The closing of the private placement is conditional upon, among other things: (a) receipt of all necessary regulatory approvals, including the approval of the TSX Venture Exchange, and (b) at least three of the four persons, including the Executive Chairman of MBI, nominated by management for re-election to the board of directors of MBI at the Meeting, being elected as directors of MBI at the Meeting (this condition being required by the key subscribers to the proposed financing).

It is important to note that there can be no assurances that the financing will close. The subscription funds are being held by MBI in trust and if the conditions to closing of the private placement, including re-election of a majority of the board of directors, are not met the subscription proceeds will be returned to the subscribers pursuant to the terms of the subscription agreements.

About Med BioGene Inc.

MBI is a life science company based in Vancouver, British Columbia that is currently focused on managing the license and rights to GeneFx Lung. MBI's common shares are listed for trading on the TSX Venture Exchange. For more information, please visit www.medbiogene.com.

About GeneFx Lung

GeneFx Lung is a proprietary gene expression-based test to improve upon staging for identifying those patients with early-stage non-small-cell lung cancer (NSCLC) who, following surgical removal of their tumor, are at higher and lower risks of mortality. In an initial study of patient specimens from the National Cancer Institute of Canada Clinical Trials Group JBR.10 trial, published in the Journal of Clinical Oncology, patients classified by GeneFx Lung as high risk benefited from adjuvant chemotherapy, and those classified as low risk did not benefit and may have experienced a detrimental effect from adjuvant chemotherapy. In the same study, GeneFx Lung was validated in predicting patient mortality in four independent studies involving data from tumor specimens totaling 375 untreated early-stage NSCLC patients. As published in the Journal of Thoracic Oncology, GeneFx Lung was also independently validated in a prospective and blinded manner in predicting patient mortality in a study of 181 specimens from untreated NSCLC patients. GeneFx Lung is expected to provide better-informed and personalized treatment decisions to assist in the selection of patients for adjuvant chemotherapy.

On April 15, 2011, Precision and MBI closed their commercialization, license and research reimbursement agreement. The commercialization agreement provides to Precision exclusive global rights to develop and commercialize GeneFx Lung.

About Precision Therapeutics

Precision Therapeutics, a leading life science company based in Pittsburgh, Pennsylvania, is dedicated to improving the outcomes of cancer patients by providing personalized medicine solutions that aim to increase quality of life and cancer survival rates. Precision offers a portfolio of products developed to help guide physicians and patients with difficult clinical decisions throughout the continuum of cancer care.

Precision currently markets a number of tests through its CLIA-certified laboratory, including ChemoFx®, BioSpeciFx® and GeneFx® Colon.

For more information on Precision, please visit www.precisiontherapeutics.com.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Certain information in this press release contains forward-looking information and statements ("forward-looking information") of MBI under applicable Canadian and United States legislation. Words such as "anticipates," "believes," "estimates," "expects," "intends," "may," "plans," "projects," "will," "would" and similar expressions are intended to identify forward-looking information, although not all forward-looking information contains these identifying words. Forward looking information includes, but is not limited to, that with respect to the timing, completion and/or results of clinical trials or studies, the timing for commercialization of any products, future profits, future product revenues, future shareholder value, future operations and plans, the completion and use of proceeds from transactions or financings and the prospects for negotiating partnerships or collaborations and their timing. This forward-looking information is only a prediction based upon MBI's current expectations, and actual events or results may differ materially. MBI may not actually achieve the plans, intentions or expectations disclosed in its forward-looking information. Forward-looking information is subject to known and unknown risks and uncertainties and is based upon uncertain assumptions that could cause MBI's actual results and the timing of events to differ materially from those anticipated in such forward-looking information. You are cautioned not to place undue reliance on this forward-looking information, which speak only as of the date of this press release. MBI's forward-looking information does not reflect the potential impact of any future partnerships, collaborations, acquisitions, mergers, dispositions, joint ventures or investments that MBI may make. All forward-looking information herein is qualified in its entirety by this cautionary statement and MBI undertakes no obligation to revise or update any such forward-looking information as a result of new information, future events or otherwise after the date of this press release, other than as required by applicable law. Certain information included in this press release in respect of Precision and its scientific, clinical and/ or commercialization efforts and expectations have been provided to MBI by Precision. MBI may not have been able to confirm the accuracy of such information and you should not place undue reliance on any such information, including any information regarding Precision that may constitute forward-looking information. A redacted copy of the commercialization agreement between MBI and Precision may be found at www.sedar.com. Each trademark, trade name or service mark of any entity appearing in this press release belongs to its holder.

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