Thallion's Annual and Special Meeting to Be Held August 6, 2013

MONTRÉAL, QUÉBEC--(Marketwired - July 2, 2013) - Thallion Pharmaceuticals Inc. (TSX VENTURE:TLN) ("Thallion") announced today that the Superior Court of Québec has issued an interim order authorizing Thallion to hold an annual and special meeting of the shareholders of Thallion, at which shareholders will be asked to approve the proposed plan of arrangement (the "Arrangement") involving the acquisition of Thallion by BELLUS Health Inc. ("BELLUS Health") (TSX:BLU), which was announced previously on June 18, 2013.

The meeting of shareholders will be held at the offices of McCarthy Tétrault LLP, Suite 2500, 1000, De La Gauchetière Street West, Montréal, Québec, H3B 0A2 at 10:00 a.m. (ET) on August 6, 2013. The Court has fixed July 4, 2013 as the record date for determining the shareholders entitled to receive notice of and to vote at the meeting.

The acquisition agreement between BELLUS Health and Thallion (which can be found at www.sedar.com) provides for a cash consideration of approximately $6.332 million ($0.1765 per common share (on a fully-diluted basis)), subject to adjustments, and (ii) the issuance of one contingent value right ("CVR") per common share, entitling the holder thereof to: (A) its pro rata share of 80% of any additional purchase price consideration to be received from Premium Brands Holding Corp. ("Premium Brands") in 2016 (expected to be up to approximately $1.45 million) (or $0.0323 per CVR), and (B) its pro rata share of 5% of the Shigamabs® revenue generated or received by BELLUS Health, capped at $6.5 million (or $0.1812 per CVR), payable in installments upon the achievement by BELLUS Health of each whole $10 million tranche of revenue on Shigamabs®.

Completion of the Arrangement is subject to receipt of court and regulatory approvals and other third party consents. The acquisition agreement also contains closing conditions, including that Thallion have net cash on hand, as determined pursuant to the terms of the acquisition agreement ("Net Cash"), of at least $7,500,000, on the effective date (including deemed proceeds for the exercise or cancellation as per the Arrangement of "in-the-money" options of approximately $500,000), that no more than 5% of Thallion shareholders dissent to the Arrangement and other customary closing conditions. The acquisition agreement also provides that if the Net Cash condition is not met, BELLUS Health will have the option of either terminating the acquisition agreement or reducing the cash portion of the consideration payable under the Arrangement in proportion to any shortfall on a dollar-for-dollar basis, pro rata to each Thallion share, rounded to the nearest hundredth of a cent. If Thallion's Net Cash at the effective date is estimated to be in excess of $7,500,000, the cash portion of the consideration payable under the Arrangement will instead be increased in proportion to such excess amount on a dollar-for-dollar basis, pro rata to each Thallion share, rounded to the nearest hundredth of a cent.

Response to Jaguar

Thallion is concerned that Jaguar continues to issue press releases that appear to contain misstatements of fact, misrepresentations and/or false assumptions which may mislead investors and Thallion's shareholders regarding the merits of the Arrangement versus other available alternatives including a liquidation. The management information circular of Thallion (the "Circular") which will contain all relevant information relating to the Arrangement, including additional information regarding a liquidation scenario, as well as the related proxy form and letter of transmittal, are expected to be mailed to the shareholders of Thallion on or about July 10, 2013. Furthermore, Jaguar statements and actions, including in connection with the Court proceedings, also increase Thallion's legal and other advisory costs that impact the available Net Cash to the detriment of shareholders.

The following are relevant extracts of the Circular which are disclosed by Thallion in response to Jaguar's statements and actions, subject to the assumptions and qualifications to be contained in the Circular.

• Assuming the Net Cash at the effective date is $8,000,000 (including deemed proceeds for the exercise or cancellation as per the Arrangement of "in-the-money" options of approximately $500,000), the cash consideration payable to shareholders on the effective date would amount to approximately $0.1904 per share.
  
  
• The Net Cash calculated as of May 31, 2013 estimated by Management of Thallion for illustration purposes only is approximately $8,200,000 to $8,400,000 (including deemed proceeds for the exercise or cancellation as per the Arrangement of "in-the-money" options of approximately $500,000 and net of severance costs referred to below and other costs included in the Net Cash definition, including lease termination costs and transaction expenses). Although Management believes that the estimate of the Net Cash as of May 31, 2013 is reasonable based on information currently available to Thallion, the actual amount of the estimated Net Cash may differ materially from Management's estimates for a variety of reasons, including (i) to the extent there are material unforeseen costs or liabilities to be reflected in the Net Cash calculation, (ii) estimated transaction expenses which remain subject to variations, including as a result of Jaguar's actions, and (iii) to the extent that there are any unforeseen movements in Thallion's cash balances pursuant to its ongoing operations from May 31, 2013 until the effective date. Thallion and BELLUS intend to issue a further press release on or about July 30, 2013 announcing any adjustments to the purchase price relating to estimated Net Cash.
  
  
• Liquidation Scenario Summary
  
  
  • It is expected that a liquidation would take a minimum of three years to complete.
    
    
  • The amount by which it is estimated that assets would exceed liabilities would be reduced after three years to between $6,600,000 and $7,000,000 in aggregate, or between $0.1840 and $0.1951 per share (on a fully-diluted basis). It is possible that the liquidation could take longer than three years to complete, in which event the amount available for distribution would be further reduced.
    
    
  • In addition, subject to the terms and conditions of an indemnity agreement with Premium Brands Holding Corp. ("Premium Brands"), up to approximately $1,450,000 (or $0.04 per share (on a fully-diluted basis)), may be received by Thallion as additional purchase price consideration payable by Premium Brands to Thallion on or about July 2016. There is no certainty that any such additional purchase price may be payable under the indemnity agreement which remains subject to the satisfaction of certain conditions.
    
    
  • A substantial portion of available cash may not be distributed to shareholders before the expiry of certain indemnification obligations of Thallion, including of up to $4,425,000 towards Premium Brands under the indemnity agreement until July 2016. Based on the foregoing and the assumptions and qualifications to be detailed in the Circular, it is estimated that the initial distribution to shareholders would likely be between $0.0613 and $0.1233 per share and that such distribution would occur on or about four to six months after the initiation of a liquidation process (subject to obtaining customary tax clearance certificates).
    
    
  • The distributions by Thallion to the shareholders after the initiation of a liquidation process would be made to the shareholders as a reduction of stated capital of the common shares to the extent thereof, and thereafter, if necessary, as dividends, with the shareholders sharing rateably, share for share, in the distribution proceeds. Thallion currently reasonably estimates that the stated capital of the common shares is equal to approximately $3.5 million as of May 31, 2013 which is much lower than what Jaguar's statements seem to suggest.
    
    
  • The amount of all distributions exceeding the paid-up capital for tax purposes (which is generally equal to the stated capital, subject to certain adjustments where applicable) of the common shares immediately prior to the winding up would be treated as a taxable dividend under the Income Tax Act (Canada). Thallion currently reasonably estimates that the paid-up capital of the common shares is equal to approximately $3.5 million as of May 31, 2013. The steps of the Arrangement maximize the use of the available paid-up capital for the benefit of shareholders.
    
    
  • There is no guarantee that a third-party may wish to purchase Shigamabs® in the context of a liquidation at terms better than those provided by BELLUS. As part of the strategic review process of Thallion, no other party presented expressions of interest for the development, investment in, ownership of or monetization of Shigamabs® at terms better than those provided by BELLUS. The Phase II clinical trial of TLN-4601 was terminated early in December 2009 due to lack of efficacy and Thallion announced in June 2010 that the rights to TLN-232 were returned to its licensor.

For the Arrangement to be implemented, the Arrangement must be approved at the Thallion annual and special meeting by a resolution passed by at least (i) 66 2/3 percent of the votes cast by the shareholders of Thallion and (ii) a simple majority of the votes cast by the shareholders, other than interested shareholders, and their related parties and joint actors, if any, present in person or by proxy at the meeting. In relation to the Arrangement, the interested shareholders of Thallion are all shareholders other than Allan Mandelzys and Michael Singer and their related parties and joint actors, if any (collectively, the "Interested Shareholders"). To the knowledge of the directors and executive officers of Thallion, after reasonable inquiry, 156,000 votes attached to the common shares (being the aggregate number of votes attached to the common shares held by the Interested Shareholders) will be excluded in determining whether minority approval for the Arrangement is obtained.

Assuming that all required shareholder approvals are obtained, Thallion is expected to apply to the Court on August 9, 2013 for a final order in respect of the Arrangement. Assuming that the final order is obtained and all other conditions precedent to the Arrangement are satisfied or waived, the Arrangement is expected to close in August, 2013.

Thallion also announces that effective June 30, 2013, Allan Mandelzys and Michael Singer were terminated without cause. Termination payments will be made in accordance with their employment agreements. As previously disclosed by Thallion, these payments would have been required to be made in the event of a termination in connection with a liquidation process. Under the terms of consulting agreements, Mr. Mandelzys and Mr. Singer have agreed to continue to perform functions similar to those performed by a Chief Executive Officer and Chief Financial Officer, respectively, and, as requested by BELLUS, to assist with the implementation of the Arrangement.

About Thallion (www.thallion.com)

Thallion is a biotechnology company developing pharmaceutical products in the areas of infectious disease and oncology. Thallion's lead clinical program Shigamabs® is a dual antibody product for the treatment of Shiga toxin-producing E. coli bacterial infections and has recently completed a Phase II clinical trial. Additional information about Thallion can be obtained at www.thallion.com.

Forward Looking Statements

Certain statements contained in this news release, other than statements of fact that are independently verifiable at the date hereof, may constitute forward‐looking statements. Such statements, based as they are on the current expectations of management, inherently involve numerous risks and uncertainties, known and unknown, many of which are beyond the control of BELLUS Health Inc. or Thallion Pharmaceuticals Inc. Examples of such forward looking information in this news release include, but are not limited to, information with respect to (i) the Arrangement and the results expected to be achieved from the successful completion of the Arrangement; (ii) the ability to obtain all required approvals and consents and otherwise satisfy all other conditions to complete the Arrangement; (iii) the payments to be derived from the Arrangement which may be subject to adjustment provisions; (iv) the ability to receive payments pursuant to the terms of the CVRs and the timing of such payments; (v) potential distributions under a potential liquidation; and (vi) estimated Net Cash. Such risks include but are not limited to: the ability to obtain Court and regulatory approvals, third party consents and to satisfy other closing conditions, adjustments may be made to the cash consideration depending on the Net Cash, risks relating to the satisfaction of payment conditions under the CVRs, the ability to obtain financing, the impact of general economic conditions, general conditions in the pharmaceutical and/or nutraceutical industry, changes in the regulatory environment in the jurisdictions in which the BELLUS Health Inc. and Thallion Pharmaceuticals Inc. do business, stock market volatility, fluctuations in costs, changes to the competitive environment due to consolidation, achievement of forecasted burn rate, achievement of forecasted clinical trial milestones, and that actual results may vary once the final and quality‐controlled verification of data and analyses has been completed. Consequently, actual future results may differ materially from the anticipated results expressed in the forward‐looking statements, and there can be no assurance that any amounts will become payable under the CVRs. The reader should not place undue reliance, if any, on any forward‐looking statements included in this news release. These statements speak only as of the date made and neither BELLUS Health Inc. nor Thallion Pharmaceuticals Inc. is under any obligation to update or revise such statements as a result of any event, circumstances or otherwise, and BELLUS Health Inc. and Thallion Pharmaceuticals Inc. disavow any intention to do so, unless required by applicable legislation or regulation. Please see the public fillings of BELLUS Health Inc. and Thallion Pharmaceuticals Inc., including the Annual Information Form of BELLUS Health Inc. for further risk factors that might affect both companies and their respective businesses.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.