Midatech Pharma PLC Proposed Acquisition of DARA BioSciences, Inc.

---

---

Midatech (AIM: MTPH), the international specialty pharmaceutical company with a diversified portfolio of high-value products in development, today announces the proposed acquisition of DARA BioSciences, Inc. ("DARA") (NASDAQ: DARA), an oncology supportive care pharmaceutical company (the "Acquisition"). Midatech will issue approximately 5.4 million new ordinary shares in exchange for the outstanding shares of DARA, representing an initial consideration of approximately US$24.0 million (£15.8 million) based on a Midatech share price of 291 pence, subject to certain adjustments. In addition, DARA shareholders will receive contingent value rights ("CVRs") to conditional cash payments of a maximum of US$5.7 million (£3.8 million) in aggregate based on the performance of certain DARA products, representing a total consideration of up to approximately US$29.7 million (£19.5 million). 
 
Acquisition Highlights:

 - Excellent strategic fit; strengthens Midatech's franchise in oncology with immediate access to revenue generating product portfolio in cancer supportive care with multiple growth catalysts
 - Provides Midatech with an established commercial platform in the US, which will enable the Group to distribute, market and sell its self-developed products, including Q-Octreo, in the world's largest and most profitable pharmaceutical market
 - Accelerates the transition towards a leading specialty pharmaceutical company
 - Acquisition expected to generate positive cash flows from early 2018
 - Completion anticipated in H2 2015
 - Conference call for investors and analysts today (full details below).
 
Principal Terms of the Acquisition

Pursuant to the terms of an acquisition agreement and plan of merger subject to the laws of the State of Delaware (the "Acquisition Agreement"), unanimously approved by each party's Board of Directors, each share of DARA issued and held as at the date immediately prior to the Acquisition becoming effective will be converted into the right to receive: (i) the equivalent of 0.272 new shares of Midatech (subject to certain adjustments described in more detail below); and (ii) one CVR.
 
At the current exchange ratio, Midatech will issue approximately 5.4 million new ordinary shares of 0.005 pence each in the share capital of Midatech ("Ordinary Shares") via American Depositary Receipts ("ADR"s) and current DARA shareholders would own approximately 16 per cent of the enlarged group following completion of the Acquisition. This represents approximately $1.20 per DARA share, a premium of 50.8% over the DARA closing price of $0.796 per share on 3 June 2015 and a premium of 55.6% over the last 30 day volume weighted average DARA closing price of $0.771 per share.

Each DARA shareholder will receive one CVR per share of DARA common stock held, representing a right to additional contingent cash payments in the event that certain sales milestones with respect to DARA products Gelclair® and Oravig® are met. A maximum aggregate value of US$5.7 million (£3.8 million) in cash will become due and payable to the CVR holders over the DARA financial periods arising in 2017 and 2018 if such milestones are met, and which shall be financed from the gross profits of DARA in respect of such sales.
 
The share exchange ratio is subject to adjustment, and will be determined based on the volume-weighted average price of the Ordinary Shares on the AIM Market of the London Stock Exchange ("AIM") over the 15 day period ending on the business day immediately prior to the Acquisition becoming effective. The exchange ratio is subject to an implied acquisition price range of $1.08 to $1.32 per DARA share and will be adjusted for movements outside this range, subject to a maximum exchange ratio of 0.306 and a minimum of 0.249.

Option holders who do not exercise their securities prior to the closing and warrant holders are expected to receive options and warrants in Midatech shares in due course, subject to the terms of the Acquisition Agreement and relevant plans or agreements.  In addition, warrant holders will receive a CVR if and when exercised.
 
Application is expected to be made at the time of completion of the Acquisition to the London Stock Exchange for the new Ordinary Shares in respect of the Acquisition to be admitted to trading on AIM and which are to be issued to DARA shareholders by means of the issue of a proportionate number of ADRs expected to be admitted to trading on the NASDAQ Stock Market LLC trading platform ("NASDAQ"). The new Ordinary Shares will rank pari passu with the existing Ordinary Shares.
 
The Acquisition is subject to customary closing conditions including, among other things, approval of the transaction by stockholders of DARA and the listing of Midatech's ADRs on NASDAQ. The Acquisition is expected to close in the second half of 2015.

Strategic Rationale for the Acquisition

The Acquisition accelerates Midatech's transition to an oncology-focused specialty pharma company and is in line with its strategy, as outlined at the time of its initial public offering on AIM in December 2014, of generating growth through strategic acquisitions of complementary products and preparing for product launches out of its core nanotechnologies.
 
Through the Acquisition, Midatech acquires a commercial foothold with a national field sales organisation, a managed markets presence, an integrated and national distribution network and established marketing capabilities to leverage the attractive U.S. market.  The Acquisition internationally diversifies Midatech's business into the US by adding a differentiated and attractive portfolio of oncology supportive care products, including:

 - Gelclair®, an oral gel indicated for the management and relief of pain due to oral mucositis and other oral lesions that can occur with common cancer treatments;
 - Oravig®, an orally-dissolving buccal tablet indicated for the local treatment of oropharyngeal candidiasis in adults scheduled for launch in Q4 2015;
 - Soltamox®,  the only liquid form of tamoxifen, is indicated for the treatment of metastatic breast cancer, the adjuvant treatment of node-positive breast cancer in premenopausal women, the reduction in risk of invasive breast cancer in women with ductal carcinoma in situ (DCIS), and for the reduction of the incidence of breast cancer in women at high risk for breast cancer; and
 - Co-marketed products with Mission Pharmacal: Ferralet® 90 (for anaemia), and Aquoral® (for chemotherapy/radiation therapy-induced dry mouth).
 
The combination of Midatech and DARA (the "Enlarged Group") will be under the leadership of the existing Midatech management team and Board of Directors, who have excellent senior executive track records in the global pharmaceutical and biotech industry. DARA's management team, including Chris Clement, current President and Chief Executive Officer of DARA, will continue with the surviving corporation to ensure the continued success of the Enlarged Group.
 
Commenting on the announcement, Midatech's Chief Executive Officer, Dr. Jim Phillips, said: "The acquisition of DARA provides Midatech with access to an impressive portfolio of products and the potential for a fast-growth revenue stream in our target therapeutic area of oncology. This acquisition also provides us with a commercial footprint in the US, from which we can launch our own products and thus retain more value. I am pleased to be delivering such scale and growth catalysts to Midatech as defined in the strategy at the time of our IPO in December. I look forward to working with our expanded team as we welcome DARA staff to Midatech."