Entelos, Inc. (LSE: ENTL) announces that it has entered into a debt financing agreement with Imperium Master Fund, LTD (“Imperium”) in which Imperium will provide $6.5 million in total cash loan proceeds to the Company. Entelos intends to use $1.5 million of the proceeds to repay certain debt of Iconix Biosciences resulting from the acquisition by Entelos of Iconix, and $5 million as long-term working capital.

Transaction details

The financing provides for Imperium to provide Entelos with $1.5 million under a secured bridge note and $5 million under secured convertible debentures. At the closing of the financing on December 21, 2007, the bridge note and the initial debenture, and warrant, each described below, were issued by Entelos to Imperium, and Entelos received a total of $4,423,887.90, representing the $4.5 million total proceeds from the bridge note and the initial debenture less certain expenses of Imperium agreed to be paid by Entelos in connection with the transaction.

The bridge note will mature 15 months from issuance. The principal amount of the bridge note will accrete and compound each month at the rate of 0.833% per month, such that the principal amount at maturity will be $1,698,843. The bridge note may be repaid by the Company at any time at 101% of the outstanding principal amount, including accreted principal, upon 30 days notice.

In connection with the bridge note, Entelos issued to Imperium a five year-term warrant to purchase up to 943,576 shares of Entelos common stock at an exercise price per share of $0.4501073 per share.

The convertible debenture totaling $5 million is available in two separate tranches. At the closing, Imperium purchased the initial convertible debenture from Entelos for an issuance purchase price of $3 million in principal amount, which debenture will have a repayment amount of $3,314,139. On or before 9 April 2008, Imperium will purchase a $2 million principal amount convertible debenture from Entelos, which will have a repayment amount of $2,209,426. The initial principal amounts of the debentures will accrete and compound each month at the rate of 0.833% per month for 12 months from their respective dates of issuance. After one year, the outstanding principal amounts will accrue interest at 8% per annum.

The initial and deferred convertible debentures will be identical In all respects other than the issue and amortization dates, and will each mature 5 years from their respective issuance dates. They will amortize in 24 equal monthly payments beginning 3 years from the date of their respective issuance. If the debentures are partially converted, the monthly amortization payments will be reduced proportionately. Entelos will not have the ability to redeem or call either debenture prior to its maturity.

Imperium may call the debentures upon a change of control of Entelos, including a sale of 50% or more of its assets or a merger in which the pre-merger Entelos stockholders do not hold at least 75% of the surviving entity, and certain other mergers of Entelos, or an event of default by Entelos under the debentures. In the event of such a call, Entelos would be required to repay to Imperium the greater of (a) 120% of the unpaid principal amount of the debentures being redeemed plus all accrued and unpaid interest thereon, or (b) an amount calculated pursuant a formula based upon Entelos’ stock price at the time of such call. Imperium also may call the bridge note upon a change of control of Entelos or an event of default by Entelos; in such case Entelos would be required to repay 101% of the then-outstanding principal plus accrued interest and default interest, under the bridge note.

Payment of the note and the debentures is secured by a security interest in the assets of Entelos, except for certain excluded intellectual property assets.

The principal of the initial and deferred convertible debentures will be convertible at any time at the option of the holder into common stock of Entelos at a price per share of $0.4688618 per share, a price which was set by the parties at the time of signing of the financing agreements. Entelos will not have the ability to require or force Imperium to convert either debenture, provide that the holder will not convert if such conversion would result in the holder holding more than 9.9% of Entelos’ then-outstanding shares of common stock.

Entelos is obligated to use its commercially reasonable best efforts to cause the shares issued on any conversion of the debentures and upon any exercise of the warrant to be admitted to trading on AIM as soon as practicable, but in no event more than ten (10) days after the issuance of the relevant shares.

All of the shares to be issued under any conversion of the debentures and any exercise of the warrant will be subject to an orderly market agreement to be executed by Imperium upon issuance of such shares, which provides that, subject to certain limited exemptions, the new shares cannot be disposed of except through the Company’s broker and nominated advisor, so as to ensure an orderly market for the issued share capital of the Company.

For further information please contact:

Entelos, Inc.

Alan Blazei, CFO

Jill Fujisaki, VP, Investor Relations
Tel: +1 650 572 5400


Evolution Securities


Tim Worlledge, Director
Tel +44 (0) 20 7071 4300

Bobbie Hilliam, Associate Director
Buchanan Communications

Lisa Baderoon

Mary-Jane Johnson
Tel +44 (0) 20 7466 5000

Notes for Editors

About Entelos

Entelos, Inc. (www.entelos.com) is a US-based life sciences company applying next-generation predictive technologies to revolutionize the way medicines are discovered, developed, and utilized. The Company leverages its proprietary in silico disease models, “virtual patients”, and toxicology reference systems to develop safer and more effective drugs and support pharmaceutical R&D and commercialization. In addition to internal drug programs in rheumatoid arthritis and women's health, Entelos provides customized technology and research services to global pharmaceutical and health-care companies in cardiovascular diseases, asthma, obesity, diabetes, hematopoeisis (anemia), cholesterol metabolism, and skin sensitization. The company is also developing a model in oncology and is collaborating with the FDA to build a model of drug-induced liver toxicity. Entelos also offers cost-effective drug development capabilities through its strategic alliance with India-based Jubilant Biosys.


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