Corgentech and AlgoRx Announce Merger Agreement

/PRNewswire-FirstCall/ -- Corgentech Inc. (Nasdaq:   CGTK) and AlgoRx
 Pharmaceuticals, Inc. today announced that they have entered into a definitive
 merger agreement to create a late-stage company with a deep pipeline of
 clinical products that will be largely focused on developing and
 commercializing products for pain management and inflammation.
     The combined company will have four products in its pipeline.  AlgoRx's
 portfolio of pain management drug candidates includes ALGRX 3268, which is in
 Phase 3 clinical trials, ALGRX 4975, which is in Phase 2 clinical trials, and
 ALGRX 1207, which is soon to enter the clinic.  Corgentech continues to
 develop NF-kappaB Decoy, which is in two Phase 1/2 trials for the treatment of
 eczema.
     Under the terms of the agreement, Corgentech will issue, and AlgoRx
 stockholders will receive in a tax-free exchange, shares of Corgentech common
 stock such that AlgoRx stockholders will own approximately 62 percent of the
 combined company on a pro forma basis and Corgentech stockholders will own
 approximately 38 percent.  The agreement and plan of merger has been approved
 by both boards of directors and will need to be approved by the companies'
 stockholders.
     "We believe that the combination of Corgentech and AlgoRx will add
 significant value for our stockholders by dramatically bolstering our product
 pipeline with late-stage product candidates that bring us closer to
 commercialization," stated John P. McLaughlin, chief executive officer of
 Corgentech.  "We are also optimistic about the potential of our NF-kappaB
 Decoy product candidate for eczema and believe that the combination of the two
 companies offers diversification for stockholders of both companies."
     "By combining the financial resources of the two companies and the
 expertise of the two management teams, which include significant experience in
 regulatory affairs, clinical trials management and product marketing and
 commercialization, we believe that our late-stage products in pain management
 will be more expeditiously commercialized," stated Ronald M. Burch, M.D.,
 Ph.D., chief executive officer of AlgoRx.  "This merger may enable us to file
 a New Drug Application (NDA) for our lead product candidate, ALGRX 3268 for
 topical local anesthesia in 2006."
     With a seasoned management team and $124 million in cash, cash equivalents
 and short-term investments in the combined companies at the end of the second
 quarter, the company would also have a deep pipeline of four product
 candidates after the approval of the merger:
 
      --  ALGRX 3268 represents a near-term product opportunity, which is
          expected to complete Phase 3 trials in 2005 and file an NDA during
          2006.  The product is for topical local anesthesia and is aimed at
          reducing the pain associated with needlesticks for venipunctures
           (blood draws) and intravenous line placements.  ALGRX 3268 is based
          on a needleless injection system called Powderject(R), which
          accelerates lidocaine particles into the epidermis in order to
          anesthetize nerves.  The product, which may be especially useful in
          pediatric populations and emergency room settings, is easy to use and
          anesthetizes quickly -- generally in one minute -- offering an
          important advantage over currently available therapies.
 
      --  ALGRX 4975, a VR1 agonist, is being developed for site-specific,
          severe or intractable pain.  These types of pain are poorly treated
          by existing drugs such as opioids, and use of ALGRX 4975 could result
          in the reduction in opioid side effects as well as shorter
          rehabilitation and shorter hospital stay.  Phase 2 clinical trials
          are currently underway for post-surgical pain following a variety of
          surgeries including bunionectomies, total knee replacements and
          various abdominal surgeries.  Additional Phase 2 trials are underway
          for Morton's neuroma and tendonitis.  Its advantages over currently
          available therapies are that it is non-opioid based and it is
          long-acting, providing pain relief to many patients for weeks or
          months after a single treatment.  ALGRX 4975 is a C-neuron
          anesthetic, based on capsaicin.  The product is administered locally
          at the site of pain and selectively reduces pain in nerve endings.
 
      --  NF-kappaB Decoy is currently being evaluated in Phase 1/2 clinical
          trials for the inflammatory skin condition, eczema.  Two multi-center
          trials are currently underway -- one in the United States and the
          other in Australia and Switzerland -- evaluating the company's
          NF-kappaB Decoy across nearly 200 patients.  Clinical data are
          expected to be presented in the first quarter of 2006.  NF-kappaB
          Decoy is a highly selective and potent inhibitor of the NF-kappaB
          transcription factor, which is implicated in inflammatory diseases
          such as eczema, asthma and inflammatory bowel disease.
 
      --  ALGRX 1207 is a new class of anesthetic that is undergoing
          preclinical development as a topical local anesthetic.  This product
          is expected to enter clinical trials for cutaneous neuropathic pain,
          such as chemotherapy-induced neuropathy, in 2006.  This product
          candidate acts by binding to the fast sodium channel and may have a
          faster onset and longer duration of action as well as improved
          penetration when compared with products currently on the market.
 
     Leadership and Organizational Structure
     Pending stockholder approval of the merger, the board of directors of the
 combined company will be comprised of Richard B. Brewer, Dr. Charles M. Cohen,
 Thomas J. Colligan, Carter H. Eckert, Dr. Rodney A. Ferguson, John P.
 McLaughlin, Dr. Arnold L. Oronsky and Dr. Michael F. Powell.  The management
 team of the combined company will be led by John McLaughlin as chief executive
 officer.  Dr. Ronald Burch will serve as vice president of development, and
 Richard P. Powers will serve as chief financial officer.  Both the Corgentech
 and AlgoRx facilities are expected to be retained with Corgentech's South San
 Francisco facility becoming the company's headquarters.  Corgentech and AlgoRx
 currently have approximately 95 total employees, and the combined management
 team will work to integrate the two companies as well as to identify synergies
 and redundancies across the combined organization.
 
     Election of James Huang to President
     James Z. Huang, Corgentech's senior vice president of business development
 and commercial operations, has been elected to the position of president.  Mr.
 Huang has been with Corgentech for three years and will have responsibility
 for commercial and other operations within the company.  In addition, he will
 coordinate integration relating to the merger announced today.  Mr. Huang has
 successfully negotiated multiple collaborations for the company, two of which
 include this merger agreement and the company's former worldwide partnership
 with Bristol-Myers Squibb.  He was with Tularik prior to Corgentech and prior
 to that held various positions with Alza Corporation, Bristol-Myers Squibb and
 SmithKline Beecham PLC (now GlaxoSmithKline) where he launched several
 products including the billion dollar product, Avandia.
 
     Deal Timeline
     The companies expect to file an S-4 and related joint proxy statement with
 the Securities and Exchange Commission and any other necessary government
 filings in the coming weeks.  Depending upon the review process of the
 agencies, the companies would expect the stockholder vote to occur in late
 December or early January.  Lazard Freres & Co. LLC served as financial
 advisor and Heller Ehrman LLP as legal advisor to AlgoRx.  Houlihan Lokey
 Howard & Zukin provided a fairness opinion to the M&A Committee of the AlgoRx
 board of directors.  Piper Jaffray & Co. acted as financial advisor, and
 Cooley Godward LLP served as legal advisor to Corgentech.
 
     Financial Guidance
     As a result of this deal, Corgentech is withdrawing its 2005 financial
 guidance provided earlier this year and plans to offer updated financial
 guidance after the deal closes.
 
     About AlgoRx
     AlgoRx is a private, emerging pharmaceutical company focused on developing
 and commercializing a diversified portfolio of pharmaceutical product
 candidates to address pain, a large and under-served market.  AlgoRx is based
 in Secaucus, NJ.  For more information on the company and its technologies,
 please visit www.algorx.com.
 
     About Corgentech
     Corgentech is a biopharmaceutical company focused on the development and
 commercialization of novel therapeutics for significant unmet medical needs.
 Corgentech is based in South San Francisco, CA.  For more information on the
 company and its technologies, please visit www.corgentech.com.
 
     Webcast Conference Call Details
     Corgentech will conduct a webcast conference call with the investment
 community at 8:30 a.m. EDT / 5:30 a.m. PDT, today, September 26, 2005 to
 discuss the proposed merger.  The call will be available via live audio
 broadcast over the Internet on the Corgentech website at www.corgentech.com.
 For those unable to participate via the Internet, a 24-hour replay will be
 available for seven days after the call by calling 800-642-1687 (international
 dial:  706-645-9291) and giving the following pass code: 9837942.
 
     Forward Looking Statements
     This press release includes "forward-looking statements" within the
 meaning of the safe harbor provisions of the United States Private Securities
 Litigation Reform Act of 1995. Words such as "expect," "estimate," "project,"
 "budget," "forecast," "anticipate," "intend," "plan," "may," "will," "could,"
 "should," "believes," "predicts," "potential," "continue," and similar
 expressions are intended to identify such forward-looking statements. Forward-
 looking statements in this press release include, without limitation,
 forecasts of product development, FDA filings, benefits of the proposed
 merger, and other matters that involve known and unknown risks, uncertainties
 and other factors that may cause actual results, levels of activity,
 performance or achievements to differ materially from results expressed or
 implied by this press release. Such risk factors include, among others:
 difficulties encountered in integrating merged businesses; uncertainties as to
 the timing of the merger; approval of the transaction by the stockholders of
 the companies; the satisfaction of closing conditions to the transaction,
 including the receipt of regulatory approvals; whether certain market segments
 grow as anticipated; the competitive environment in the biotechnology
 industry; and whether the companies can successfully develop new products and
 the degree to which these gain market acceptance. Actual results may differ
 materially from those contained in the forward-looking statements in this
 press release. Additional information concerning these and other risk factors
 is contained in Corgentech's Form 10-K/A for the year ended December 31, 2004
 and most recently filed Form10-Q.
     Corgentech and AlgoRx undertake no obligation and do not intend to update
 these forward-looking statements to reflect events or circumstances occurring
 after this press release. You are cautioned not to place undue reliance on
 these forward-looking statements, which speak only as of the date of this
 press release. All forward-looking statements are qualified in their entirety
 by this cautionary statement.
 
     Additional Information and Where to Find It
 Corgentech Inc. intends to file a registration statement on Form S-4, and
 Corgentech and AlgoRx Pharmaceuticals, Inc. intend to file a related joint
 proxy statement/prospectus, in connection with the merger transaction
 involving Corgentech and AlgoRx. Investors and security holders are urged to
 read the registration statement on Form S-4 and the related joint
 proxy/prospectus when they become available because they will contain
 important information about the merger transaction. Investors and security
 holders may obtain free copies of these documents (when they are available)
 and other documents filed with the SEC at the SEC's web site at www.sec.gov.
 In addition, investors and security holders may obtain free copies of the
 documents filed with the SEC by contacting Corgentech Investor Relations at
 the email address:  investors@corgentech.com.
     Corgentech, AlgoRx and their directors and executive officers may be
 deemed to be participants in the solicitation of proxies from the stockholders
 of Corgentech and AlgoRx in connection with the merger transaction.
 Information regarding the special interests of these directors and executive
 officers in the merger transaction will be included in the joint proxy
 statement/prospectus of AlgoRx and Corgentech described above. Additional
 information regarding the directors and executive officers of Corgentech is
 also included in Corgentech's proxy statement for its 2005 Annual Meeting of
 Stockholders, which was filed with the SEC on April 27, 2005.  This document
 is available free of charge at the SEC's web site at www.sec.gov and from
 Investor Relations at Corgentech as described above.
 
 

SOURCE  Corgentech Inc.