Epix Pharmaceuticals, Inc.and Predix Pharmaceuticals Holdings, Inc. have signed a definitive merger agreement whereby Epix will acquire Predix in a transaction valued at approximately $90 million, including the assumption of net debt at closing.

In addition, Predix shareholders will be paid a possible milestone payment of $35 million in cash, stock or a combination of both based on the achievement of certain clinical or strategic milestones within a specified period of time, the companies said in a joint press statement.
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Epix is a developer of innovative pharmaceuticals for magnetic resonance imaging (MRI), and Predix is positioned itself as a privately-held pharmaceutical company focused on the discovery and development of novel, highly selective, small-molecule drugs that target G-Protein Coupled Receptors (GPCRs) and ion channels.

The combined company would have a broad pipeline of product candidates, an experienced management team and approximately $125 million in cash and marketable securities at the end of the first quarter.

In addition to Vasovist, Epix's novel blood pool imaging agent, which is expected to be marketed in Europe by Schering AG and is the subject of ongoing discussions with the FDA regarding its path forward in the United States, the combined company will have:

-- PRX-00023 in phase III for anxiety, and expected to enter phase II for depression in 2007;

-- EP-2104R in phase II for imaging arterial and venous blood clots;

-- PRX-03140 which has completed Phase Ib trials and is expected to enter Phase II for Alzheimer's disease later this year;

-- PRX-08066 in phase Ib development for pulmonary arterial hypertension; and

-- a portfolio of several pre-clinical product candidates.

The intention of the combined company is to license its later-stage products to larger pharmaceutical or biotechnology companies at a point where it can maximize the value of these products; discussions regarding these potential partnerships have been initiated and are ongoing.

Under the terms of the agreement, which has been approved by the Boards of Directors of both Epix and Predix, upon completion of the merger EPIX will issue to Predix stockholders shares of Epix common stock such that Predix stockholders will own approximately 47% of the combined company's shares outstanding, and Epix stockholders will own approximately 53%.

Predix options and warrants outstanding at closing will also be assumed by Epix. Predix's stockholders and option and warrant holders will be entitled to a milestone payment of $35 million upon Predix's achievement of certain clinical or strategic milestones. At the option of the directors of Epix, the milestone payment may be paid in cash, stock or a combination of both, although in no circumstance will the total amount of Epix shares to be issued in the transaction, including upon the exercise of all assumed Predix options and warrants, exceed 49.99% of the combined company's outstanding shares.

The transaction will be structured as a tax-free exchange. The merger is subject to approval by both Epix's and Predix's stockholders, regulatory approval and other closing conditions, and is expected to close in June or July of 2006. Predix stockholders holding approximately 40% of Predix's voting shares have agreed to vote their shares in favor of the merger.

Upon closing, Predix stockholders will have the right to receive 1.248509 shares of Epix stock for each share of Predix common stock held by them at the closing of the transaction. In connection with the transaction, Epix will issue approximately 23.275 million shares, including shares underlying Predix's outstanding options and warrants. In addition, Epix expects to assume approximately $7.8 million in net debt at the closing of the transaction. Upon the consummation of the transaction, Epix will have approximately 43.5 million common shares outstanding and it is expected that Epix's common stock will continue to trade on the NASDAQ National Market System under the symbol "EPIX".