Cephalon and Mesoblast form strategic alliance

Cephalon, Inc., a biopharmaceutical company, and Mesoblast Limited have entered into a strategic alliance to develop and commercialize novel adult Mesenchymal Precursor Stem Cell, or MPC, therapeutics for degenerative conditions of the cardiovascular and central nervous systems.

\These conditions include Congestive Heart Failure, Acute Myocardial Infarction, Parkinson's Disease, and Alzheimer's disease. The alliance also extends to products for augmenting hematopoietic stem cell transplantation in cancer patients.

Under the terms of the Development and Commercialization Agreement between the companies, in exchange for exclusive world-wide rights to commercialize specific products based on Mesoblast's proprietary adult stem cell technology platform, Cephalon will make an upfront payment to Mesoblast totaling $130 million ($30 million upon Mesoblast shareholder approval) and regulatory milestone payments of up to $1.7 billion.

Mesoblast will be responsible for the conduct and expenses of certain Phase IIa clinical trials and commercial supply of the products. Cephalon will be responsible for the conduct and expenses of all Phase IIb and III clinical trials and subsequent commercialization of the products. Mesoblast will retain all manufacturing rights and will share significantly in the net product sales.

In addition, under the terms of a Stock Purchase Agreement and a Subscription Deed, Cephalon will make an equity investment to purchase a 19.99% stake in Mesoblast at A$4.35 per share, totaling approximately $220 million. This price represents a 45% premium to the last 30 days' volume weighted average price for Mesoblast shares. Cephalon has entered into a standstill agreement to limit its investment to 19.99% of Mesoblast common stock for the next 12 months, with a right to maintain its equity stake on a top up basis, subject to the Australian Securities Exchange rules. Cephalon COO J. Kevin Buchi will join the Mesoblast Board of Directors, effective immediately.

"This global licensing agreement positions Cephalon as a leader in regenerative medicine while further strengthening our late stage pipeline with another innovative biologic platform," said Mr Buchi. "Mesoblast has done an outstanding job of developing Phase II clinical data in congestive heart failure and hematopoietic stem cell transplants, plus preclinical data in acute myocardial infarction. We are excited to have the opportunity to develop potentially the world's first stem cell therapy for indications that could serve millions of patients globally."

Mesoblast will separately and with its own resources continue to develop, manufacture and commercialize the rest of its suite of adult stem cell products for bone and cartilage applications, diabetes, eye diseases, and inflammatory and immunological conditions. Deutsche Bank Securities Inc. served as exclusive financial advisor to Cephalon.

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