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Norwood Immunology Limited (AIM:NIM), Melbourne, Australia, a subsidiary of Norwood Abbey Ltd. (ASX:NAL) that is focussed on the rejuvenation of the immune system, has has entered into a call option to acquire all the share capital of Netherlands- based Bestewil Holding Limited. Bestewil is the 100% owner of Virosome Biologicals Limited.

Virosome Biologicals is developing and commercializing a proprietary platform enabling technology for vaccines. The technology - which is based upon the combination of an adjuvant with virosomes - achieves a significantly enhanced immune response to an antigen challenge. The adjuvant specifically interacts with Toll-like Receptors (TLRs). Pre-clinical studies undertaken by Virosome Biologicals with their technology have shown an immune response to influenza (flu) vaccines up to 150 times greater than traditional non-adjuvanted virosome delivery technology. Virosome Biologicals' technology is seen as highly complementary to Norwood Immunology's core technology for rejuvenation of the adult immune system and could be applicable to a wide range of vaccine applications.

Virosome Biologicals' adjuvant technology is currently completing a Phase I trial in conjunction with a nasal flu vaccine application, under a license agreement partnership with a major European pharmaceutical company, which will be responsible for the development and commercializing of the vaccine. Further, this license agreement anticipates further milestones and royalties payable to Virosome Biologicals as the clinical development and commercialization program progresses. Unlike certain other nasal flu vaccines, this trial does not use live influenza virus. Norwood Immunology sees very significant commercial potential for the "Adjuvanted Virosome Technology." In particular, there is significant opportunity to increase the number of commercial licensing arrangements - such as in the field of influenza and mass vaccination campaigns, where the possible emergence of pandemic strains of flu and the threat of bio-terrorism are major concerns at the present time.

Potential partners are already in discussion with Virosome Biologicals in relation to several vaccines, such as injectable influenza vaccines, respiratory syncytial virus (RSV) vaccines and pandemic influenza vaccines. In the case of pandemic influenza, the highly potent immune stimulatory ability of the Virosome Biologicals' technology is particularly important because vaccine material is likely to be in short supply. Lower unit doses could therefore be used for each patient treated.

Virosome Biologicals' has proprietary intellectual property concerning the combination of an adjuvant (immune response stimulator) in the membrane that targets the virosomes specifically to antigen presenting cells or B cells. The adjuvant also leads to the release of a chemical signal inside these cells to trigger greatly enhanced immune responses. B cells then start to produce antibodies that have a rapid and major role in protection against new and ongoing infections. The antigen presenting cells also activate a "killer" T-cell response to eliminate virus infected or cancer cells.

Both these and the B cells are made more potent by the adjuvant, stimulating helper T cells which are required for initiation of immune responses and the development of immunological memory for long-term immune protection. Adjuvanted virosomes induce potent immunity for nasal and injected vaccines.

Virosome Biologicals has also developed a proprietary method of producing virosomes, which is both more efficient and results in excellent membrane fusion activity (which is a key component of the initial stimulation of the immune system).

The consideration for the granting of the option is a subscription in newly issued Bestewil Shares of EUR 250,000 on commencement, and up to EUR 700,000 in monthly tranches over the course of 2006. The option is terminable by Norwood Immunology on a monthly basis not later than 31 December 2006.

If the option is called by Norwood Immunology, the agreed consideration for the transaction will be up to EUR 25 million (EUR 20 million in NIM shares and EUR 5 million in cash), subject to achieving certain milestones.

The issue of shares for the acquisition if the option is called will be subject to shareholder approval through an extraordinary general meeting at that time.

Norwood Immunology was advised in this transaction by Europa Partners Limited (Corporate Finance) and Dutch lawyers, Loyens & Loeff. Richard Williams, CEO of Norwood Immunology, commented: "Given the potential role of virosomes in prophylactic and therapeutic vaccines, and their ability to achieve enhanced immune responses, we believe that the potential applications for this technology are significant. There is now global awareness of the potential dangers of pandemic infections with current technology unable to sustain appropriate immune defences. We believe Virosome Biologicals' proprietary technology could therefore be a vitally important part of many vaccine programmes. Furthermore, we see significant synergies between Virosome Biologicals and Norwood Immunology given our company's core technology, which induces a more potent immune system by stimulating regrowth of the thymus and production of new T cells, and also improves bone marrow function to enhance B cell production.

"Entering into this option agreement is a significant step toward the first acquisition in Norwood Immunology's strategic development plans. Prior to completing any acquisition during 2006, we have successfully secured the opportunity to work closely with Virosome Biologicals through the option period whilst their lead trial progresses."

Hans van Berkum, CEO of Virosome Biologicals, commented: "We are very pleased with the initial investments by Norwood Immunology. Not only is there an excellent synergy between the technologies of the companies but we can benefit from their expertise in the immunology field. During the option period Virosome Biologicals will continue to further develop and commercialise its products particularly in the field of pandemic influenza and RSV."

About Virosomes

Virosomes are reconstituted virus membranes, in this case influenza (flu) containing the viral membrane protein, hemagglutinin. This protein induces membrane fusion, activating a strong immune response against antigens contained within the virosomes. Thus, virosomes are ideal vaccines either not only for the influenza virus itself, but also as carriers for vaccines against other viral diseases and cancer. Virosomes do not contain the genetic material of influenza virus, and therefore are not infectious.

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Publication:Worldwide Biotech
Date:Mar 1, 2006

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