LYCOS RETRIEVER 
Cellegy Pharmaceuticals: Prostrakan Group
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Family Health International and Cellegy Pharmaceuticals announced today that they plan to stop the HIV prevention trial of Savvy being conducted by FHI in Ghana. This decision followed a recommendation of the study's external, independent Data Monitoring Committee (DMC). The DMC reviewed the study data to date and concluded that, while there is no evidence of safety concerns based on the comparative HIV infection rates in the Savvy and placebo groups, the Ghana study would be unable to evaluate the effectiveness of the product.
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Cellegy's Biosyn subsidiary is conducting two Phase 3 HIV prevention trials in Africa (Ghana and Nigeria). The trials are placebo controlled double blind studies that compare Savvy with a placebo gel in women using the gels for 12 months. Women in both groups are strongly cautioned on safe sex practices and encouraged to have their partners use condoms. The primary endpoint of the studies is a 50% reduction in the rate of transmission of HIV in the Savvy group compared with the control. In addition to the two trials taking place in Africa, a Phase 3 contraceptive trial is underway in the United States with over 500 subjects enrolled to date -- approximately one-third of the projected enrollment. A second Phase 3 contraception trial is planned in order to meet the requirements of the United States Food and Drug Administration (FDA) for consideration by the agency of approval of Savvy as a contraceptive.
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Cellegy, of Quakertown, has sought a merger since selling most of its assets in 2006 for $9 million to ProStrakan Group P.L.C. of Scotland. Cellegy has one potential product, a microbicide gel, Savvy, that is in Phase 3 clinical studies in the U.S. as a contraceptive. Earlier Savvy studies for preventing HIV infection were stopped because of lack of evidence that the gel worked.
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In two other transactions, Cellegy has renegotiated its obligations to Neptune Pharmaceutical Corporation and PDI, Inc., effective upon the closing of the transaction with ProStrakan. As Cellegy has previously reported, Cellegy's previous agreements with Neptune including included certain product development milestone payment obligations relating to the products being sold to ProStrakan, and Cellegy is a party to two promissory notes and related agreements with PDI relating to the settlement of past litigation. The cash payments to be made to these two parties in connection with the signing and the closing of the transaction with ProStrakan total $3,250,000, in full satisfaction of obligations under the previous agreements. The obligations to the two parties, including the potential milestone payments, totaled in excess of $9.5 million prior to the renegotiation.
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In November 2005, Cellegy renegotiated its marketing agreement with ProStrakan. Under the terms of the amended agreement, ProStrakan agreed to assume responsibility for all manufacturing and other product support functions and agreed to purchase the product directly from the manufacturer rather than from Cellegy. In connection with its revised marketing agreement, Cellegy received a payment of $2.0 million.
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ProStrakan has agreed to pay to Cellegy $9 million dollars in cash. The transaction will be submitted to Cellegy's stockholders for approval at a special meeting of Cellegy stockholders. Cellegy anticipates preparing and filing preliminary proxy materials relating to the special meeting in the near future. No approval by ProStrakan's shareholders is required to complete the transaction. Cellegy anticipates that absent unforeseen developments, the transaction will be completed during the fourth quarter of 2006.
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