Strides Arcolab agreement with Genepharm Australasia

Strides Arcolab Ltd on February 08, 2008 has announced that it has entered into the following transactions:

1. Strides has entered into a Heads of Agreement with Genepharm Australasia Ltd
("Genepharm") under which Strides will vend its Australian and Asian business in
exchange for the issue of shares in Genepharm, subject to approval by Genepharm
shareholders ("Genepharm Transaction").

2. Strides has acquired a relevant interest over 17.7% of the issued shares in ASX-listed
Genepharm under a share acquisition agreement with a group of Genepharm shareholders based in Cyprus that are associated with Genepharm's largest shareholder, Genepharm Asia Pacific Enterprises Ltd ("GAPE Transaction"). When added to the existing 2.1% of Genepharm shares over which Strides currently has a relevant interest, the GAPE Transaction takes Strides' total relevant interest in Genepharm issued shares to approximately 19.8%.

3. On successful completion of the Genepharm Transaction, Strides may emerge with a
shareholding of approximately 55% of the expanded capital base of Genepharm.

4. The combined regional businesses are expected to have revenues of approximately
A$100 million on closing of the Genepharm Transaction.

In a press release issued at the occasion of the announcement.

Arun Kumar, Vice Chairman and Managing Director of Strides said:

"The Strides business model is based on the philosophy of 'Leadership By Partnering'. We are delighted to have found in Genepharm the ideal partner with which to build an even stronger business across Australia and the Asian region."

"Over the last few years, Genepharm has established itself as one of the leading generic pharmaceutical companies in Australia. Its focus on serving its customers has enabled it to capture significant market share within a relatively short period of time."

"We expect that Genepharm's sales and marketing expertise will help accelerate the growth of the Australian and Asian businesses. Combined with Strides' manufacturing strength and product offering, we are confident that this will prove to be a successful partnership that will create value for the shareholders in both companies."

Background

Vending in Strides' Australian and Asian businesses

Strides' businesses in Australia and Asia are involved in the manufacture and distribution of pharmaceutical prescription and over the counter ("OTC") products across the region, with sales in Singapore, Malaysia, Thailand, Vietnam, Hong Kong and Australia. For the year ending June 30, 2008, these businesses are forecast to generate revenue of A$32.5 million and earnings before interest, tax, depreciation and amortisation ("EBITDA") of AS7.4 million. For the purpose of this transaction, these businesses are being valued at approximately A$65 million.

The businesses in Asia includes Drug Houses of Australia (Asia) Pte Ltd ("DHA"), which consists of regional sales and marketing capability as well as a manufacturing facility in Jurong, Singapore. DHA is the leading local generic pharmaceutical company in Singapore. This will become the Asian hub for Genepharm's Asian operation.

Genepharm's Australia Business

Genepharm's business in Australia is involved in the sales and distribution of a broad range of pharmaceutical and OTC products in the Australian market. Genepharm services pharmacies, hospitals, medical centres and wholesalers. It has an estimated market share of 11% in the markets in which it operates and for the financial year ended June 2007 reported revenues of A$55 million and an underlying EBITDA of A$5 million. The Company expects strong growth for the year ending June 30, 2008.

Key areas Strides is focusing on:

- Regional leadership in selected territories

- Creating value partnership models with key global pharmaceutical companies through
equity partnerships, JVs and key accounts to maximize stake holder valuation.

Rationale For The Transaction

- Strides' business model is based on the philosophy "Leadership By Partnering" and to
build strong and sustainable regional leadership in selected territories.

- Asia and Australia is a key focus market for Strides and is amongst the faster growing regions for the Company.

- Genepharm's strength as a leading Generic Company in the competitive Australian market, with strong OTC market capabilities, makes Genepharm a natural partner to grow the emerging Australasian markets and leverage its strong development pipeline.

- Recent discussions with Genepharm resulted in the opportunity for the two Companies to form a broader alliance that offers synergies and future growth opportunities and form the future basis of a strong regional partnership.

Conditions Precedent

The Genepharm Transaction is subject to a number of conditions, including finalisation of due diligence by both Genepharm and Strides and following which definitive agreements are expected to be executed during late March 2008.

Completion of the Genepharm Transaction will also be subject to a number of conditions, including Genepharm obtaining shareholder approval and obtaining an opinion from an independent expert that the transaction is fair and reasonable to non-associated shareholders. The Board of Genepharm has appointed KPMG to provide an independent expert's report in this regard. Genepharm shareholders will be asked to approve the acquisition at an Extraordinary General Meeting ("EGM") expected to be held in early May 2008.

Proposed Shareholding

A. Strides has acquired a relevant interest over 17.7% of the issued shares in Genepharm under the GAPE Transaction. When added to the existing 2.1% of Genepharm shares over which Strides currently has a relevant interest, the GAPE Transaction takes Strides' total relevant interest in Genepharm issued shares to approximately 19.8%.

B. The vending in of the Strides Asian business under the Genepharm Transaction will
result in Strides acquiring an additional 44% of the expanded capital in Genepharm.

C. On successful completion of the Genepharm Transaction, Strides may emerge with a shareholding of approximately 55% of the expanded capital base of Genepharm.

Strides Preferred Supply Agreement

Contemporaneously with completion of the Genepharm Transaction, it is proposed that the companies enter into a 5 year Strides Preferred Supply Agreement, under which Genepharm, subject to any existing Strides supply arrangements in the region, will have the first right of refusal to distribute all existing and future Strides' products (other than products for treatment of AIDS, Tuberculosis and Malaria) into Australia, New Zealand and the Asian regions, excluding Japan and China, where Genepharm will have the nonexclusive right to supply Strides' products.

Similarly, Genepharm will give Strides the first right to supply products manufactured by Strides in the region as its preferred supplier. However, if for any reason the parties do not reach an agreement on the terms for the sale and distribution of any of the Strides' products in the region, Genepharm retains flexibility to source products from alternative suppliers.

Other key elements of the regional partnership

In recognition of Strides' shareholding in Genepharm and the supply relationship between the two companies, it is proposed that Strides will nominate two non-executive directors to the Board of Genepharm. Accordingly, at the time of completion of the Genepharm Transaction, there will be six directors, comprising the two Strides nominees, the Managing Director, Dennis Bastas, together with three independent non-executive directors (including the Chairman, Torn O'Brien).

Other key terms of the Genepharm Transaction

Under the Genepharm Transaction, Genepharm and Strides have agreed to an exclusivity period until 30 April 2008, although this is subject to the fiduciary duties of the respective Boards of Genepharm and Strides.

Genepharm and Strides have also agreed to the payment of a A$500,000 break fee by the relevant party in the event that the Genepharm Transaction does not complete because of the occurrence of certain events, including the recommendation by either the Strides or the Genepharm Board of a competing proposal. No break fee is payable if the acquisition does not complete due to, amongst other things, the Directors of either Genepharm or Strides resolving not to approve execution of the relevant transaction documents, Strides not obtaining FIRB approval, or Genepharm not obtaining shareholder approval or not obtaining an opinion from an independent expert that the Genepharm Transaction is fair and reasonable.