Concerned Bioniche Shareholders Comment on Distressed Financing

Court Action Launched to Compel a Special Meeting of Shareholders

TORONTO, June 10, 2013 /CNW/ - Today the group of concerned shareholders of Bioniche Life Sciences Inc. ("Bioniche") led by William (Bill) M. Wells, former Chief Executive Officer of Biovail Corporation, and Greg Gubitz, former General Counsel and Senior Vice President of Corporate Development at Biovail Corporation (the "Concerned Shareholders"), commented on the recently announced Bioniche distressed financing.

The management and board of Bioniche have once again entered into an expensive, value eroding, short term financing. This money will be used to fund the company's cash burn for just a few months while they seek to sell the Animal Health business, the only revenue producing asset. This is further evidence that management and the board have run out of ideas. They continue to entrench themselves while denying shareholders their legal right to be heard at a special meeting to replace them.

On June 5, 2013, Bioniche announced that it had entered into an agreement with Paladin Labs Inc. ("Paladin") to restructure the $20 million Capital Royalty Partners II L.P. ("Capital Royalty") debt facility that Paladin had just acquired. Paladin agreed to advance $5 million on closing, with a potential further $3 million contingent on Bioniche raising more financing. This only represents approximately three and a half months of non-contingent financing at Bioniche's previously disclosed average monthly burn rate for fiscal 2013 of $1.4 million per month.

In return for this marginal benefit, the transaction will increase the debt level on an already over-indebted company; on very expensive terms. The face interest rate is 13.25% p.a. plus a 2% royalty payable to Capital Royalty on all product sales. Paladin will be issued 2,000,000 warrants to acquire common shares of Bioniche at various prices, and Bioniche has an obligation to repay the entire loan to Paladin, with a 5% premium, upon the sale of the Animal Health business. The entire loan is repayable in approximately one year. It is difficult to estimate the true cost of this financing due to the convoluted structure, but under any scenario Bioniche has increased the cost from 15% p.a. on the original Capital Royalty financing to 18.25% p.a. on this new transaction. The cost is likely to be considerably higher depending on the cost of the warrants which are difficult to value.

In conjunction with the restructured debt, Bioniche also granted Paladin the Canadian, South African and Mexican commercialization rights to Urocidin™ for no additional consideration other than future contingent payments based on undisclosed milestones. The Bioniche board and management gave the rights away without any benefit to shareholders in a meaningful timeframe. Adding insult to injury, despite giving away commercialization rights, Bioniche retained the obligation to fund the ongoing development and manufacturing costs for this drug out of its own rapidly depleting cash reserves. To date, Urocidin has not been approved for sale in any jurisdiction.

The company's current management has been unable to address its deteriorating financial situation other than by entering into a distressed financing on extremely unfavorable terms and by trying to sell the only part of the business that generates revenue and cash flows.

The announced plan to sell the Animal Health business will fundamentally change Bioniche. The company will cease to have sales revenue and cash flow. It will have been converted into a pre-revenue stage biotech company with substantial ongoing operating costs, limited capital reserves and an extended time before any meaningful revenues can be generated.

In accordance with our requisition to replace the Bioniche board, shareholders have a right to hear and vote upon all alternatives before the value destroying actions of the current directors and management become irreversible. If the shareholders' meeting is delayed until November (which is the obstructionist approach of Bioniche's board) it will be too late. Consequently, we, the Concerned Shareholders, have initiated legal action against Bioniche and its directors to defend the rights of all shareholders and, in accordance with our requisition, will ask the court to compel a special shareholders meeting as soon as possible. A hearing on the matter has been scheduled for July 18, 2013.

This press release is not, and does not constitute, a solicitation of proxies.

SOURCE: William (Bill) M. Wells and Greg Gubitz

Greg Gubitz
416.624.6568
[email protected]

Bill Wells
[email protected]