Acusphere Announces Signing of a Definitive Agreement with Cephalon

Business Wire, Oct 25, 2008

WATERTOWN, Mass. -- Acusphere, Inc. (NASDAQ:ACUS) today announced the signing of a definitive agreement with Cephalon, Inc. to provide $20 million in upfront financing by purchasing a $15 million senior secured convertible note and by paying a $5 million upfront fee for an exclusive worldwide license to AI-525, a preclinical-stage injectable formulation of celecoxib using Acusphere's proprietary Hydrophobic Drug Delivery System (HDDS[TM]) technology. The transaction is expected to close in approximately 10 days.

The $15 million senior secured convertible note has a three year term and an interest rate of 8%, payable annually, at the option of Acusphere, in cash or shares of common stock. At Cephalon's option, the note is also convertible any time prior to the first anniversary of the closing date into one of the following: (1) a license for Imagify[TM] (Perflubutane Polymer Microspheres) for Injectable Suspension, a cardiovascular drug for the detection of coronary artery disease, in all territories other than those previously licensed by Acusphere to Nycomed; (2) a number of shares of Acusphere common stock equal to the outstanding principal and accrued and unpaid interest on the note at the time of conversion, divided by 90% of the average closing price of Acusphere's common stock for the ten day period prior to the signing date (provided that Cephalon shall receive upon conversion shares of common stock constituting no less than 51% of the fully diluted number of shares of common stock outstanding after giving effect to the conversion); or (3) a $15 million credit against a future milestone payment for approval by the U.S. Food & Drug Administration (FDA) of the initial indication for AI-525.

Sherri C. Oberg, President and CEO of Acusphere, said, "Our transaction with Cephalon accomplishes three important objectives for Acusphere. First, we secure necessary financing to advance Imagify through the FDA review process. Second, it provides us the potential to partner Imagify with Cephalon, whose success has been built on a strategy of marketing high growth, innovative products, building marketing and distribution channels and investing in unique compounds that may change the course of disease. We are pleased that Cephalon considers Imagify as a potential new product that fits this profile. Finally, it represents a significant strategic step for Acusphere as we build on our technology platform and become a multi-product company with Cephalon as a seasoned partner in the pain space pushing forward the development of AI-525 and providing an important choice in post-operative pain relief. We look forward to closing this transaction shortly."

Under the AI-525 injectable celecoxib license, in addition to the $5 million upfront fee, Cephalon will pay Acusphere an additional $15 million upon FDA approval of the initial indication and a royalty on global net sales.

AI-525 is an injectable formulation of the hydrophobic drug, celecoxib, the active ingredient in Pfizer Inc.'s CELEBREX([R]), which had revenues of more than $2.3 billion in 2007. CELEBREX([R]) is a non-steroidal anti-inflammatory drug offering both anti-inflammation and pain relief for osteoarthritis and rheumatoid arthritis as well as acute pain, but it is currently available only in oral form. Acusphere believes that a significant unmet need exists for an injectable, non-opioid analgesic in a postoperative setting that not only provides acute pain relief and imparts anti-inflammatory effect, but also has an improved side effect and safety profile versus the currently utilized Toradol([R]) or opioids. Given the large market for postoperative pain relief, Acusphere believes AI-525 is well-positioned to fill this unmet need, especially in partnership with an experienced drug developer and marketer like Cephalon.

The Imagify license would include a $40 million payment to Acusphere upon FDA approval of Imagify and a royalty on net sales. Acusphere submitted the New Drug Application (NDA) for Imagify in April 2008, and FDA accepted the filing in June 2008. An FDA Advisory Committee meeting has been scheduled for December 10, 2008 to review Imagify. Under the Prescription Drug User Fee Act (PDUFA), the anticipated action date for Imagify is February 28, 2009. Acusphere believes that Imagify, if approved, represents a cost-effective, convenient and radiation-free alternative to nuclear stress testing, the current standard for imaging coronary artery disease, the leading cause of death in the U.S.

Prior to the closing of the transaction with Cephalon, and pursuant to the stockholder approval received at Acusphere's annual meeting of stockholders on June 5, 2008, the Company expects to file an amendment to its certificate of incorporation with the Secretary of State of the State of Delaware increasing the authorized number of shares of its common stock from 98.5 million to 250 million shares. The filing of the amendment was approved by the Finance Committee of the Company's Board of Directors on October 22, 2008.