Gliatech to Raise Up To $15-30 million from Paul Capital Partners in A Staged Financing

- Initial investment of $5 million, $10 million based on achievement of

Milestones, Option to bring in $15 million additional on certain conditions -



Apr 26, 2001, 01:00 ET from Gliatech Inc.

    CLEVELAND, April 26 /PRNewswire/ -- Gliatech Inc. (Nasdaq:   GLIA) announced
 today that the Company has entered into an agreement with Paul Capital Royalty
 Acquisition Fund, L.P. ("PCRAF") for up to $15 million to be invested in
 stages, with a future option for up to $15 million of additional funds.  The
 Company has received an initial $5 million cash infusion under this agreement.
 The Company's agreement further provides that the Company will receive an
 additional $2.5 million from PCRAF upon satisfaction of certain conditions,
 including the commercial relaunch of ADCON(R)-L outside of the U.S. and an
 additional $7.5 million upon satisfaction of certain conditions, including the
 commercial relaunch of ADCON(R)-L in the U.S.
     In consideration for the first $15 million, PCRAF will receive royalties
 on ADCON(R) products equal to the greater of i) approximately 2.5% of net
 sales or ii) certain guaranteed minimum annual royalty payments beginning in
 2003 at a rate of $1.6 million annually and increasing in future years until
 December 31, 2012.  The percentage of net sales and guaranteed minimum royalty
 payment amounts are subject to modification under certain conditions.  In
 addition, PCRAF will receive a warrant to purchase 300,000 shares of common
 stock of Gliatech at $2.00 per share.  Gliatech will have the option for the
 12 months following the commercial relaunch of ADCON(R)-L in the U.S., to
 obtain, subject to the satisfaction of certain other conditions, an additional
 $15 million from PCRAF on the same general economic terms.  Gliatech also has
 the option to repurchase PCRAF's royalty interest beginning in 2003.
     With the immediate infusion of $5.0 million, Gliatech will have
 approximately $13 million in cash and short-term investments.  As previously
 stated, Gliatech anticipates commercial relaunch of ADCON(R)-L outside the
 U.S. in June 2001.  This relaunch, along with the satisfaction of certain
 milestones, will trigger PCRAF's $2.5 million investment.  Gliatech is also
 working to develop the data necessary to support a submission to the Food and
 Drug Administration ("FDA") seeking reintroduction of ADCON(R)-L in the U.S,
 which, together with satisfaction of certain conditions, will trigger PCRAF's
 additional $7.5 million investment. A relaunch in the U.S. is subject to the
 adequacy of the data developed by Gliatech and approval by the FDA under the
 AIP guidelines.
     "We are pleased that Paul Capital shares Gliatech's vision of becoming a
 worldwide leader in adhesion prevention, and we appreciate their vote of
 confidence in our ability to grow the ADCON(R) business," said Steven L.
 Basta, President of Gliatech.  "This financing arrangement offers significant
 strategic benefits to the Company.  The first $5.0 million will support
 activities required in the near-term for our submission to the FDA to relaunch
 ADCON(R)-L in the U.S., and the future $10.0 million in milestone funding is
 expected to support an aggressive relaunch of ADCON(R)-L and additional
 clinical trials for the ADCON(R) product pipeline.  These are key steps toward
 our goal of winning the adhesion prevention market."
     "We believe the structure of the financing is of benefit to our current
 stockholders and provides strategic advantages.  The dilution to current
 stockholders is minimal and the royalty structure and availability of
 additional capital allows us to gain operating momentum in the short-term to
 rapidly grow both the ADCON(R) gel and ADCON(R) solution products toward
 creating a successful adhesion prevention business," continued Mr. Basta.
     Gliatech Inc. is engaged in the discovery and development of biosurgery
 and pharmaceutical products.  The biosurgery products include ADCON(R) gel and
 ADCON(R) solution, which are proprietary, resorbable, carbohydrate polymer
 medical devices designed to inhibit scarring and adhesions following surgery.
 Gliatech's pharmaceutical product candidates include small molecule drugs to
 modulate the cognitive state of the nervous system and proprietary monoclonal
 antibodies designed to treat inflammatory disorders.
     Paul Capital Partners is one of the leading purchasers of private equity
 in the secondary market. The Paul Capital Royalty Acquisition Fund provides
 liquidity to owners of life sciences royalty interests.  Since 1998 Paul
 Capital Partners and its affiliated entities have invested in or structured
 more than $250 million in royalty transactions.  For company information,
 visit Paul Capital Partners on the World Wide Web at
 http://www.paulcapital.com
     Certain statements in this press release constitute "forward-looking
 statements" that are subject to risks and uncertainties which may cause the
 actual results of Gliatech to be different from expectations express or
 implied by such forward-looking statements. Such factors include, but are not
 limited to, uncertainty of market acceptance of Gliatech's products, the
 uncertainty of expenses associated with clinical trials and research efforts
 which may affect the profitability of Gliatech, the impact of future events on
 the adequacy of Gliatech's cash position, the ability of Gliatech to obtain an
 adequate supply of the materials used in the manufacture of its ADCON(R)
 products, the uncertainty regarding the relaunch of Gliatech's products,
 including the timing thereof, uncertainty of regulatory approvals, the status
 of the Company with respect to AIP, the timing and content of decisions
 including review of data by the FDA, including the decisions with respect to
 sale of ADCON(R)-L, product recalls and the inspectional observations by the
 FDA, the uncertainty of market conditions, the uncertainty of Gliatech's
 ability to satisfy the conditions required for the additional investment by
 PCRAF  and other risk factors detailed in Gliatech's SEC filings.
 
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SOURCE Gliatech Inc.
    CLEVELAND, April 26 /PRNewswire/ -- Gliatech Inc. (Nasdaq:   GLIA) announced
 today that the Company has entered into an agreement with Paul Capital Royalty
 Acquisition Fund, L.P. ("PCRAF") for up to $15 million to be invested in
 stages, with a future option for up to $15 million of additional funds.  The
 Company has received an initial $5 million cash infusion under this agreement.
 The Company's agreement further provides that the Company will receive an
 additional $2.5 million from PCRAF upon satisfaction of certain conditions,
 including the commercial relaunch of ADCON(R)-L outside of the U.S. and an
 additional $7.5 million upon satisfaction of certain conditions, including the
 commercial relaunch of ADCON(R)-L in the U.S.
     In consideration for the first $15 million, PCRAF will receive royalties
 on ADCON(R) products equal to the greater of i) approximately 2.5% of net
 sales or ii) certain guaranteed minimum annual royalty payments beginning in
 2003 at a rate of $1.6 million annually and increasing in future years until
 December 31, 2012.  The percentage of net sales and guaranteed minimum royalty
 payment amounts are subject to modification under certain conditions.  In
 addition, PCRAF will receive a warrant to purchase 300,000 shares of common
 stock of Gliatech at $2.00 per share.  Gliatech will have the option for the
 12 months following the commercial relaunch of ADCON(R)-L in the U.S., to
 obtain, subject to the satisfaction of certain other conditions, an additional
 $15 million from PCRAF on the same general economic terms.  Gliatech also has
 the option to repurchase PCRAF's royalty interest beginning in 2003.
     With the immediate infusion of $5.0 million, Gliatech will have
 approximately $13 million in cash and short-term investments.  As previously
 stated, Gliatech anticipates commercial relaunch of ADCON(R)-L outside the
 U.S. in June 2001.  This relaunch, along with the satisfaction of certain
 milestones, will trigger PCRAF's $2.5 million investment.  Gliatech is also
 working to develop the data necessary to support a submission to the Food and
 Drug Administration ("FDA") seeking reintroduction of ADCON(R)-L in the U.S,
 which, together with satisfaction of certain conditions, will trigger PCRAF's
 additional $7.5 million investment. A relaunch in the U.S. is subject to the
 adequacy of the data developed by Gliatech and approval by the FDA under the
 AIP guidelines.
     "We are pleased that Paul Capital shares Gliatech's vision of becoming a
 worldwide leader in adhesion prevention, and we appreciate their vote of
 confidence in our ability to grow the ADCON(R) business," said Steven L.
 Basta, President of Gliatech.  "This financing arrangement offers significant
 strategic benefits to the Company.  The first $5.0 million will support
 activities required in the near-term for our submission to the FDA to relaunch
 ADCON(R)-L in the U.S., and the future $10.0 million in milestone funding is
 expected to support an aggressive relaunch of ADCON(R)-L and additional
 clinical trials for the ADCON(R) product pipeline.  These are key steps toward
 our goal of winning the adhesion prevention market."
     "We believe the structure of the financing is of benefit to our current
 stockholders and provides strategic advantages.  The dilution to current
 stockholders is minimal and the royalty structure and availability of
 additional capital allows us to gain operating momentum in the short-term to
 rapidly grow both the ADCON(R) gel and ADCON(R) solution products toward
 creating a successful adhesion prevention business," continued Mr. Basta.
     Gliatech Inc. is engaged in the discovery and development of biosurgery
 and pharmaceutical products.  The biosurgery products include ADCON(R) gel and
 ADCON(R) solution, which are proprietary, resorbable, carbohydrate polymer
 medical devices designed to inhibit scarring and adhesions following surgery.
 Gliatech's pharmaceutical product candidates include small molecule drugs to
 modulate the cognitive state of the nervous system and proprietary monoclonal
 antibodies designed to treat inflammatory disorders.
     Paul Capital Partners is one of the leading purchasers of private equity
 in the secondary market. The Paul Capital Royalty Acquisition Fund provides
 liquidity to owners of life sciences royalty interests.  Since 1998 Paul
 Capital Partners and its affiliated entities have invested in or structured
 more than $250 million in royalty transactions.  For company information,
 visit Paul Capital Partners on the World Wide Web at
 http://www.paulcapital.com
     Certain statements in this press release constitute "forward-looking
 statements" that are subject to risks and uncertainties which may cause the
 actual results of Gliatech to be different from expectations express or
 implied by such forward-looking statements. Such factors include, but are not
 limited to, uncertainty of market acceptance of Gliatech's products, the
 uncertainty of expenses associated with clinical trials and research efforts
 which may affect the profitability of Gliatech, the impact of future events on
 the adequacy of Gliatech's cash position, the ability of Gliatech to obtain an
 adequate supply of the materials used in the manufacture of its ADCON(R)
 products, the uncertainty regarding the relaunch of Gliatech's products,
 including the timing thereof, uncertainty of regulatory approvals, the status
 of the Company with respect to AIP, the timing and content of decisions
 including review of data by the FDA, including the decisions with respect to
 sale of ADCON(R)-L, product recalls and the inspectional observations by the
 FDA, the uncertainty of market conditions, the uncertainty of Gliatech's
 ability to satisfy the conditions required for the additional investment by
 PCRAF  and other risk factors detailed in Gliatech's SEC filings.
 
                      MAKE YOUR OPINION COUNT - Click Here
                http://tbutton.prnewswire.com/prn/11690X43914407
 
 SOURCE  Gliatech Inc.