PharmaGap announces conditional approval to license its lead drug and related intellectual property

OTTAWA, May 24, 2012 /CNW/ - PharmaGap Inc. (TSXV: GAP) (OTC.BB: PHRGF) ("PharmaGap" or "the Company") today announces conditional approval by its Board of Directors of an offer to license its cancer drug GAP-107B8 and related patents and intellectual property (IP) to Clinical Value Corporation ("CVC") of Ottawa, Canada ("the "Offer").  Final approval of the Offer is subject to final documentation, a fairness opinion, and approval by the majority of disinterested shareholders of PharmaGap.  An Independent Committee of the Board of Directors has been constituted and will pursue completion of these conditions with the intent of concluding the transaction as early as practical, with a target date of July 31, 2012.

Key provisions of the Offer are:

• Worldwide exclusive license rights to CVC;
• Assumption by CVC of PharmaGap trade payables and accrued liabilities up to $500,000;
• Assumption by CVC of all obligations for amounts owing to SC Stormont Holdings Inc. and SC Stormont Inc. in the total amount of $1,673,247, plus any additional amounts that may be advanced or accrued prior to closing;
• Monthly payment by CVC to PharmaGap commencing at the date of closing of up to $40,000, plus provision of management services by CVC to PharmaGap, for a period of three years to support product pipeline development and preclinical testing by PharmaGap; and
• Sharing of revenue from licensing or sale of the lead drug or related IP, net of an amount equal to two times of all funds paid by CVC to or on behalf of PharmaGap, together with all amounts paid by CVC for direct or indirect costs for development, testing and/or clinical trials associated with the IP.  Amounts up to $100 million after provision for these costs will be shared 50/50 between CVC and PharmaGap.  Amounts above $100 million will be shared 2/3 to CVC and 1/3 to PharmaGap.

The Executive leadership of PharmaGap will be employed by CVC, together with staff and consultants engaged in final preclinical testing and clinical trials. Scientific leadership and staff of PharmaGap engaged in pipeline development and testing will remain with PharmaGap.

Clinical Value Corporation is wholly owned by SC Stormont Holdings Inc., which is majority owned and controlled by Roderick M. Bryden, the Chairman of the Board of Directors of PharmaGap.

About PharmaGap Inc.

PharmaGap Inc. (TSX-V: GAP), based in Ottawa, ON, is a biotechnology company with a core focus on developing novel peptide therapeutics for the treatment of cancer. PharmaGap's GAP-107B8 is a novel peptide drug that has been shown to be effective in numerous cancer types, including chemo-resistant cancers, in vitro. For more information on PharmaGap please visit the Company's website at www.pharmagap.com.

Forward Looking Statements

This news release contains certain statements that constitute forward-looking statements as they relate to the Company and its management. Forward-looking statements are not historical facts but represent management's current expectations of future events, and can be identified by words such as "believe", "expects", "will", "intends", "plans", "projects", "anticipates", "estimates", "continues", and similar expressions. Although management believes that expectations represented in such forward-looking statements are reasonable, there can be no assurance that they will prove to be correct.

By their nature, forward-looking statements include assumptions and are subject to inherent risks and uncertainties that could cause actual future results, conditions, actions or events to differ materially from those in the forward-looking statements. If and when forward-looking statements are set out in this news release, PharmaGap will also set out the material risk factors or assumptions used to develop the forward-looking statements. Except as expressly required by applicable securities laws, the Company assumes no obligation to update or revise any forward-looking statements. The future outcomes that relate to forward-looking statements may be influenced by many factors, including, but not limited to: results of ongoing product testing and development; regulatory approvals required to complete development of products; ability to manufacture product at quality and scale for human use on an economically sound basis; patient reimbursement by private and public health insurance programs; unintended side effects of products; competitive products; product liability; intellectual property; reliance on key personnel; risks of future legal proceedings; income tax matters; availability and terms of financing; distribution of securities; effect of market interest rates on price of securities, and potential dilution.

Note: Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. No Securities Commission or other regulatory authority having jurisdiction over PharmaGap has approved or disapproved of the information contained herein.  This release contains forward looking statements that may not occur or may change materially. 

Sharilyn McNaughton
613-287-3124