WEX Pharmaceuticals Inc.

WEX Pharmaceuticals Inc.

October 17, 2007 13:54 ET

WEX Pharmaceuticals Inc.: Private Placement Closes

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 17, 2007) - WEX Pharmaceuticals Inc. ("WEX" or the "Company") (TSX:WXI) announces today that it has closed its previously announced private placement of equity and debt (the "Private Placement") with Pharmagesic (Holdings) Inc. ("Pharmagesic"), the designee of CK Life Sciences Int'l., Inc. ("CKLS") of Hong Kong pursuant to the terms of the subscription agreement with CKLS dated as of July 15, 2007 as amended pursuant to amending agreements with CKLS dated as of August 14, 2007 and October 15, 2007 (collectively the "Agreement"). For a full description of the Private Placement see our information circular (the "Information Circular") dated August 16, 2007 prepared for the annual and special shareholders meeting held on September 17, 2007, which is available on SEDAR under our company name.

Pursuant to the terms of the Agreement, WEX has issued Pharmagesic:

- 16,327,272 restricted voting shares of the Company (the "Restricted Shares") of WEX, representing approximately 37% of the current issued and outstanding Restricted Shares (or approximately 27% of the issued and outstanding Restricted Shares after the issuance of such shares), at a price of $0.275 per share for a total consideration of approximately $4,490,000;

- one class A special share of the Company (the "Class A Share") for nominal consideration; and

- a convertible debenture (the "Debenture") in the principal sum of $15,600,000, of which $2,000,000 was advanced today.

The proceeds raised under the Private Placement are to be applied to fund the cost of WEX's planned phase III clinical trials of Tectin™ and for working capital purposes as permitted under the Agreement.

The Debenture will mature two years from date of issue ("Maturity Date"). If at maturity WEX is unable to make payment the maturity date may be extended for two years at WEX's option.

Subject to certain conditions precedent, the remaining funds under the Debenture will be advanced to WEX in installments on the seventh day following the end of each financial quarter commencing December 31, 2007 pursuant to a quarterly installment schedule. The Debenture imposes significant restrictions on the activities of WEX throughout its term.

The Debenture bears interest at the rate of LIBOR plus 4% per annum, calculated and payable, initially on March 31, 2008 and thereafter payable semi-annually, in Restricted Shares. The Restricted Shares to be issued in payment of the interest will be issued at an issue price equal to the volume weighted average market price ("VWAP") of such shares on the Toronto Stock Exchange ("TSX") for each trading day over the six month period prior to the date that interest payment is due, less a discount of 30% (the "Discounted Market Price").

Regardless of whether the Maturity Date may be extended for two years or not, the principal amount of the Debenture is convertible into Restricted Shares at the holder's option at any time (1) on or after the Maturity Day, or (2) after the occurrence of any of the events of default defined in the Debenture, or (3) in the event that an offer for effective control of WEX is received. The Restricted Shares to be issued upon conversion on the maturity date are to be issued at an issue price equal to the Discounted Market Price of such shares on the date of conversion and in all other cases at an issue price equal to VWAP of such shares on the TSX over the last five trading days prior to the conversion date, less a discount of 30%.

The issue price of the Restricted Shares to be issued pursuant to the interest payment provisions or the conversion provisions in the Debenture may not be higher than $1.75 per Restricted Share or less than $0.05 per Restricted Share.

The Agreement also provides CKLS or its designee with the right to:

- elect one or more members of the Board, in the same proportion, as nearly as may be, as its shareholdings are to the total outstanding Restricted Shares of WEX to a maximum of one half of the Board;

- have one of CKLS' designees to the Board fill the position of Chairman of the Board;

- approve any change in the Chairman of the Board, Vice-Chairman if applicable, and Chairman of the Audit Committee;

- designate the Chief Executive Officer, Chief Financial Officer and the Chief Scientific Officer; and

- designate the Chairman of WEX's 97% subsidiary Nanning Maple Leaf Pharmaceutical Company ("NMLP");

so long as CKLS holds at least 10% of WEX's outstanding Restricted Shares or any portion of the Debenture is outstanding.

Pursuant to the rights above, Alan Yu has been appointed Chairman of the Company and Alan Yu and Victor Tong are CKLS's designees on the Board.

These rights are evidenced by the Class A Share. The Articles have been amended to create the Class A Share, attach rights and restrictions to the Class A Share, redesignate the Common Shares as "restricted voting shares" and make consequential amendments to the rights and restrictions attached to the Restricted Shares, all as described in the Information Circular. These amendments have been implemented as set out in the Information Circular.

WEX has also executed a registration rights agreement providing Pharmagesic with the right to require WEX to qualify Pharmagesic's Restricted Shares for sale by prospectus.

The Board of Directors has waived the application of the shareholder rights plan (the "Plan") to the Private Placement. Further, at the annual and special shareholders meeting held on September 17, 2007, the shareholders of WEX approved the waiver and an amendment to the Plan, which on close of the Private Placement effected the termination of the Plan.

The short term bridge loan made by an affiliate of CKLS to WEX of $430,192 and all accrued interest and fees relating to the same was repaid on closing of the Private Placement. Further, on close of the Private Placement, pursuant to termination agreements reached with the holders of WEX's existing convertible debentures, WEX paid out these debentures for a discounted lump sum amount of approximately $2.1 million (USD). As noted in our press release of October 16, 2007, upon closing the Company has also settled litigation with its former employees and a significant shareholder.

Early Warning

Under applicable securities legislation, CK Life Sciences Int'l., (Holdings) Inc. ("Holdings"), a public company based in Hong Kong and the parent of CKLS and Pharmagesic, is deemed to be the indirect beneficial owner of the securities acquired under the private placement (the "Securities"). The Securities have been acquired as a strategic investment. Holdings may in the future increase (through conversion of the Debenture or otherwise) or decrease its ownership in securities of WEX depending on the business and prospects of WEX and/or Holdings as well as market conditions.

About CKLS

Pharmagesic is an indirect wholly owned subsidiary of CK Life Sciences Int'l., (Holdings) Inc. CK Life Sciences Int'l., (Holdings) Inc. has been listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited (stock code: 8222) since July 2002. The CK Life Sciences Group is engaged in the business of research and development, manufacturing, commercialization, marketing and sale of biotechnology products.

About WEX Pharmaceuticals Inc.

WEX Pharmaceuticals Inc. is dedicated to the discovery, development, manufacture and commercialization of innovative drug products to treat pain. The Company's principal business strategy is to derive drugs from naturally occurring toxins and develop proprietary products for the global market. The Company's Chinese subsidiary sells generic products manufactured at its facility in China.

Forward Looking Statements and Information

Certain statements herein may contain forward-looking statements and forward-looking information within the meaning of applicable securities laws. Such forward-looking statements and information include but are not limited to statements or information about the Private Placement. Forward-looking statements or information appear in a number of places and can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate" or "believes" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. With respect to forward-looking statements and information contained herein, we have made certain assumptions. Forward-looking statements and information are by their nature based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or information. See our annual information form, our management information circular and our quarterly and annual management's discussion and analysis for additional information on risks and uncertainties relating to the forward-looking statement and information. There can be no assurance that forward-looking statements or information referenced herein will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements or information. Also, many of the factors are beyond the control of the Company. Accordingly, readers should not place undue reliance on forward-looking statements or information. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments. All forward-looking statements and information made herein are qualified by this cautionary statement.

Contact Information

  • WEX Pharmaceuticals Inc.
    Dr. Edge Wang
    President & CEO
    (604) 683-8880 or Toll Free: 1-800-722-7549
    (604) 683-8868 (FAX)
    Email: wex@wexpharma.com
    Website: www.wexpharma.com
    CK Life Sciences Int'l., (Holdings) Inc.
    Wendy Tong Barnes
    Chief Corporate Affairs Officers
    (852) 2122-2062