Novo Growth Equity invests in Orexo

“HealthCap is a committed long-term investor in Orexo and welcomes Novo Growth Equity as another strategic long term investor. Further, we believe by adding Novo Growth Equity, the strategic process to fully transform Orexo into a successful commercial pharmaceutical company will be accelerated.”

Orexo AB (STO:ORX) and Novo A/S today announced combined transactions encompassing a directed new issue by Orexo of a SEK 111 million convertible bond to Denmark-based Novo A/S and the acquisition of significant blocks of existing shares by Novo A/S from two existing venture capital shareholders, subject to approval at an Extraordinary General Meeting (EGM). The conversion price of the convertible bonds is set at 25 per cent premium to the closing share price on 12 March, 2010.

The investment is managed by Novo Growth Equity, the growth equity unit of Novo A/S and brings Orexo a committed new long-term shareholder with significant experience and expertise in the life-sciences sector. The amount raised through the convertible bond issue will strengthen Orexo’s financial and strategic position and provide a platform for continued growth.

Ulrik Spork, Managing Partner of Novo Growth Equity, said: “Orexo has accomplished significant results over its history. The Company has proven its value by having developed and secured regulatory approval of three products contributing to the treatment of patients in need. Orexo’s documented track record in drug development combined with a number of exciting formulation technologies and a pipeline of compounds in development represents a very attractive risk profile for us as shareholders. We look forward to contributing actively to the further development of Orexo into a leading international specialty pharma company, and this investment supports our strategy to take major stakes in promising late stage life sciences companies with near-term commercial potential.”

Håkan Åström, Chairman of the Board of Orexo, commented: “In Novo Growth Equity we are gaining a long-term and engaged investor with vast life-sciences industry experience, endorsing our products and our business strategy. Today’s announcement provides Orexo with a strong platform for further growth in our commercial operations, and is a significant step towards becoming a leading specialty pharma company.”

Novo A/S will, subject to the EGM approval of the issue, subscribe for the entire issued amount of convertible bonds offered by the company and simultaneously acquires, in a separate transaction, a combined 10.7% of the outstanding share capital of Orexo, from Apax Partners and SLS Invest. The acquisition of these shares is conditional upon a positive decision from the EGM to issue the convertible bonds. Upon closing of the transaction, Novo A/S’ combined shareholding corresponds to approximately 19% on an as converted basis.

The convertible bonds have a conversion price of SEK 47.50 which implies a premium of approximately 25% to the closing price of Orexo’s shares on 12 March, 2010 of SEK 37.90, and is structured with an option, providing Orexo with the right to convert the convertible bond once the company’s share price exceeds the conversion price by 50% during a certain period. The convertible bond issue has a fixed rate coupon of 8% per annum. If not converted, the bond will be repayable in full on 31 March, 2015.

The board of directors of Orexo believes that, in light of the above, diverting from the shareholders’ pre-emptive rights in the issue of convertible bonds to Novo A/S, on the terms described herein, will create significant value for Orexo and its shareholders.

In connection with the transaction, Novo A/S and HealthCap have entered into an agreement to restrict the sale of their holdings in Orexo over the next 12 months.

Staffan Lindstrand, partner with HealthCap and board member, commented “HealthCap is a committed long-term investor in Orexo and welcomes Novo Growth Equity as another strategic long term investor. Further, we believe by adding Novo Growth Equity, the strategic process to fully transform Orexo into a successful commercial pharmaceutical company will be accelerated.”

The convertible bond issue is subject to the necessary resolutions being passed at an EGM, to be held on 31 March 2010. The notice convening the EGM is issued today in a separate stock exchange announcement. The notice contains a more detailed summary of the terms of the convertible bonds. The EGM is proposed to approve the issuance of the convertible bonds. At the upcoming EGM the Nomination Committee will propose to the shareholders to resolve to add a new board member, Michael Shalmi, M.D., MBA, senior partner with Novo Growth Equity. At the same time Johan Christenson, M.D., Ph.D. will retire from the Board of Directors of Orexo.

Shareholders representing more than 40% of the total number of shares outstanding in Orexo have stated that they are supportive of the proposal to issue convertible bonds to Novo A/S. Novo and Healthcap have agreed to support the election of one Director each to the Board of Orexo at the upcoming EGM and the AGM in April, 2010.

Advisors Related to the transaction, ABG Sundal Collier is acting as financial advisor and Vinge as legal advisor to Orexo while Latham & Watkins and Roschier are acting as legal advisors to Novo A/S.