Protein Sciences Responds to Emergent BioSolutions Lawsuit

    MERIDAN, Conn., July 10 /PRNewswire/ -- Emergent BioSolutions, Inc.
 (NYSE:   EBS) has instituted a lawsuit related to its funding of Protein
 Sciences Corporation (PSC) and EBS's proposed transaction to acquire PSC's
 business. This lawsuit is nothing more than an attempt to destroy and
 discredit PSC and its senior management team in order to allow EBS to avoid
 
 

     -- its contractual commitment to fund PSC;
     -- a vote by PSC's shareholders on the transaction;
     -- EBS's agreement to allow PSC to have until December 31, 2008 to repay a
        $10,000,000 loan; and
     -- payment by EBS of a reverse break-up fee of $1,500,000.
 
     PSC and its senior management team vehemently and categorically deny
 any substantive wrongdoing and will vigorously defend this lawsuit.
 
     In connection with the proposed transaction to acquire PSC's business,
 EBS agreed to make loans to PSC in order to fund PSC's operations until the
 closing of that transaction. This funding was an integral part of the
 proposed transaction as PSC advised EBS that PSC would need between
 $15,000,000 and $18,000,000 of funding through June 30,2008 as PSC had
 incurred and would continue to incur significant financial obligations
 related to its now pending Biologics Licensing Application (BLA) with the
 US Food and Drug Administration (FDA) and PSC's proposal for significant
 federal funding related to development work for a vaccine to respond to a
 flu pandemic. Despite this knowledge, EBS provided PSC with the bare
 minimum of funding and almost always provided less than 60% of each of
 PSC's funding requests. EBS has only loaned PSC a total of $10,000,000 and
 has made no loans to PSC since June 16, 2008. In order to assert additional
 financial pressure on PSC, almost immediately prior to a scheduled meeting
 of PSC's shareholders to vote on the transaction, EBS alleged that PSC had
 defaulted under the loan. This allegation of default was made after EBS had
 learned that PSC's shareholders were unlikely to approve the proposed
 transaction. While PSC disputes the existence of such loan default, PSC
 nevertheless cured such alleged default within the allowed time period and
 in the exact way that EBS had told PSC that it could cure the alleged
 default.
 
     Because one of the conditions to closing of the transaction was the
 approval by PSC shareholders, PSC notified its shareholders of the proposed
 transaction and scheduled a shareholders' meeting to vote on the
 transaction and other related matters. So that PSC's shareholders could
 make an informed decision when they voted, PSC issued a Proxy Statement
 that made a full and fair disclosure of the material facts related to the
 proposed transaction and the status of PSC's business. The Proxy Statement
 included information about two very material items: the status of PSC's BLA
 and its pending request for significant federal funding. EBS was well aware
 of the status of these items and knew that PSC had already received, and
 might receive additional, positive material information about either or
 both of these items after the Proxy Statement was issued and pressed PSC to
 include in the Proxy Statement additional negative and potentially
 misleading information about these items. During the proxy process, PSC
 kept EBS fully informed about the status of the shareholder voting on the
 transaction and PSC's supplemental efforts to generate support for the
 transaction. EBS was also informed about various communications that PSC
 had received from some material and diverse PSC shareholders who were
 against the proposed transaction with EBS. Those shareholders believed the
 transaction significantly undervalued PSC. EBS knew that PSC was short more
 than 10,000,000 votes necessary to approve the transaction and that more
 than 42% of PSC's shares were prepared to vote against the transaction and
 that less than 34% of PSC's shares had indicated a willingness to vote in
 favor of the transaction. Ultimately and after consultation with EBS and
 their acquiescence, PSC decided to delay the shareholder meeting instead of
 forcing a vote on the transaction.
 
     Following the delayed shareholder meeting, PSC's board of directors
 re-affirmed that it remained committed to trying to complete a transaction
 with EBS. In a meeting following the delayed shareholder meeting, EBS now
 complained to PSC that the Proxy Statement was "ingeniously crafted" to not
 get the approval of PSC's shareholders. However, EBS also indicated that it
 remained committed to trying to complete a transaction and requested PSC to
 canvass its shareholder as to how the proposed acquisition by EBS might be
 restructured to obtain requisite shareholder approval. PSC did such
 canvassing and presented two different proposals to EBS that PSC believed
 could get approved by a majority of PSC shares. EBS rejected both such
 proposals. Following the second proposal, EBS instead suggested that PSC
 circumvent its shareholders by filing for bankruptcy protection. As part of
 its bankruptcy strategy, EBS indicated that it was prepared to enter into a
 sweetened transaction with PSC but essentially at the same purchase price
 and on the other economic terms as the proposed transaction and have PSC
 present such sweetened transaction for bankruptcy court approval instead of
 seeking shareholder approval. If PSC agreed to file for bankruptcy and
 conduct an auction of its business under an accelerated time frame under
 the bankruptcy court rules, EBS would agree to resume funding PSC.
 
     After due consideration by PSC's board of directors, EBS's bankruptcy
 strategy was unanimously rejected as unnecessary and not being in the best
 interests of PSC. During a conference call with EBS on Tuesday July 8,
 2008, PSC informed EBS of PSC's rejection of the bankruptcy strategy and
 indicated that PSC saw three possible paths forward: hold a shareholders
 meeting and present the original transaction for a vote of PSC's
 shareholders, continue discussions with EBS about restructuring the
 transaction to increase the likelihood of obtaining PSC's shareholder
 approval or discuss an amicable unwinding of the proposed transaction. The
 prior day EBS was also informed that, as permitted by its the agreement
 with EBS, PSC was in advanced discussions to secure additional financing
 that might close as early as July 11, 2008 and that PSC had received a
 proposal regarding a potential transaction that might be competitive with a
 transaction between EBS and PSC. EBS filed its lawsuit on July 9th without
 response to PSC's possible path forward or prior notice to PSC. The lawsuit
 was filed after PSC had notified EBS of the cure of the alleged loan
 default.
 
     The reason for, and timing of, EBS's lawsuit and its refusal to honor
 its agreement to adequately fund PSC are manifest. EBS is determined to try
 to destroy the value of PSC and force PSC into bankruptcy. Part of EBS's
 strategy is a concerted campaign to release PSC's confidential information
 and spread false allegations through the media. EBS has even contacted the
 FDA and the federal government in its attempt to discredit PSC and its
 senior management team. This behavior is objectionable on the sole basis
 that EBS claims are without substantive merit. However, EBS knows that the
 BLA has been accepted for substantive review by the FDA and PSC is today in
 the middle of its pre-approval inspection by the FDA and that PSC expects
 to hear shortly on its proposal for a very significant federal funding.
 EBS's attempt to destroy and discredit PSC and its senior management team
 is particularly reprehensible given that PSC's lead product, FluBlok, has
 the potential to save significant lives and may be a primary weapon in
 responding to any flu pandemic.
 
     About PSC
 
     PSC is a privately held biotechnology company that uses proprietary
 recombinant DNA technology to manufacture human and animal vaccines,
 therapeutics and diagnostics. Our lead product is a human seasonal flu
 vaccine - FluBlok(R). This product is currently in Phase III clinical
 trials with the FDA and our BLA for FluBlok has been accepted by the FDA
 for substantive review on an accelerated basis with an FDA action date of
 October 18, 2008. FluBlok may have important advantages over the existing
 flu vaccines and we are well situated to develop a vaccine if an influenza
 pandemic occurs. Our underlying technology is a viable alternative
 production platform to the egg-based production methods that currently
 dominate vaccine production and our 2007 revenues were in excess of
 $6,000,000, primarily from our GeneXpress and research antigen business.
 
 
 

SOURCE Protein Sciences Corporation