Fundraising & Acquisition

    CRNS Number:2929L
Norwood Immunology Ld
31 October 2006


FOR IMMEDIATE RELEASE                                           31 OCTOBER 2006







                           NORWOOD IMMUNOLOGY LIMITED



           PROPOSED FUNDRAISING AND ACQUISITION PLUS AGREED EXTENSION

                            TO SECURED LOAN FACILITY



Norwood Immunology Limited ('Norwood Immunology' or 'the Company') (AIM:NIM),
the company focused on the rejuvenation of the immune system, today announces it
is proposing to raise #6.6 million (approximately #6.2 million net of expenses)
pursuant to a placement of 55,000,000 ordinary shares in the Company ("Placement
Shares") at an issue price of #0.12 per share ("Placement").  In addition, the
Company is proposing to issue 48,014,489 ordinary shares in the Company ("
Acquisition Shares") as part consideration for a proposed acquisition ("
Acquisition") of all of the issued shares of Bestewil Holding B.V. ("Bestewil")
and its 100% subsidiary Virosome Biologicals B.V. ("Virosome Biologicals"). The
Company is also announcing that it has agreed an extension to the A$1 million
secured facility agreement (the "Loan") with Indus Opportunity Master Fund, Ltd
('Indus') to increase the total loan facility to up to A$2 million and to extend
repayment terms to not later than 30 June 2008.  Indus has also been granted the
option to convert any or all of the outstanding loan balance in ordinary shares
at an issue price of #0.12 per share.



The funds raised under the Placement will assist the funding of research and
development and clinical trial costs associated with advancing both the Norwood
Immunology's and Virosome Biologicals' product pipeline, as well as partially
funding the Acquisition (the Acquisition being funded from the issue of the
Placement Shares and the issue of the Acquisition Shares).



Approval of the Company's shareholders is required in order to complete the
issue of the Placement Shares and Acquisition Shares.   Accordingly, notice has
been sent today with respect to calling an Extraordinary General Meeting of
Norwood Immunology Limited, to be held at the offices of Minter Ellison, Level
23, 525 Collins Street, Melbourne 3000 at 9.00am Melbourne time on 27 November
2006 (the "EGM"), to approve (in accordance with the Company's constitution) the
issue of 55,000,000 Placement Shares at the Placement price and 48,014,489
Acquisition Shares.



Further to the issue of the Acquisition Shares and the Placement Shares, the
Company in due course proposes to issue 1,315,435 ordinary shares ("Third Party
Shares") in the Company as part payment for professional services provided by
third parties in relation to the Acquisition.  Shareholder approval for the
issue of the Third Party Shares is not being sought as the issue of these shares
will fall under the Company's general to authority under its constitution to
issue shares representing not more than 10% of its share capital.



The Acquisition



In January 2006, Norwood Immunology entered into a call option ("the Option") to
acquire all the share capital of Bestewil (the holding company of Virosome
Biologicals). On 10 October 2006 the Company announced that it had allowed the
Option to lapse.  Having considered the merits of the acquisition on the terms
set out in the Option ("Terms"), in consultation with certain key shareholders
and potential funders, the Board concluded that the exercise of the Option, and
the dilution to existing shareholders that would result, made the acquisition on
the Terms not in the best interests of the Company's shareholders.   To date, in
total Euro725,000 had been paid under the Option.



However, revised terms for the proposed Acquisition of all of the issued shares
of Bestewil and its 100% subsidiary Virosome Biologicals have now been agreed.
Under the revised terms of the Acquisition, the agreed consideration is paid by
the issue of 48,014,489 Acquisition Shares (which is equivalent to approximately
21% of the enlarged issued share capital of the Company after completion of the
Acquisition and the Placement) and Euro3.5 million being paid in cash (Euro3 million
of which is payable on completion and Euro0.5 million being deferred until 18
months after completion with rolled up interest payable on the deferred amount
at 6% per annum).  Based on the Company's closing mid market share price of
#0.20 on 26 October 2006, and a 0.67 Euro/#1 exchange rate this is equivalent to a
total consideration of #11.9 million.



The Acquisition Shares are subject to lock-in restrictions which expire in
relation to one third of the shares 6 months after completion on 28 May 2007, in
relation to a further one third of the shares on 28 November 2007 and in the
relation to the remaining one third of the shares on 28 May 2008.   An orderly
market provision shall apply throughout the lock-in period and for a further 6
months thereafter.



Bestewil and its 100% subsidiary Virosome Biologicals are both incorporated and
based in the Netherlands. In the 12 months to 31 December 2004 the unaudited
proforma consolidated accounts for Bestewil reported turnover of Euro498,736 and a
loss before taxation of Euro5,776.  As at 31 December 2004 Bestewil had unaudited
proforma consolidated net assets of Euro10,155, including Euro446,209 of cash.  In the
6 months to 30 June 2005, the unaudited proforma consolidated accounts for
Bestewil reported turnover of Euro210,000 and a profit before taxation of Euro18,009.
As at 30 June 2005 Bestewil had unaudited proforma consolidated net assets of
Euro28,164, including Euro338,011 of cash.   The terms of the Share Purchase Agreement
include a warranty for there to be positive net assets (excluding the first
Euro500,000 of cash) on completion and, in addition, at least Euro500,000 of cash.



Bestewil's wholly owned subsidiary Virosome Biologicals is developing and
commercialising a proprietary platform enabling technology for vaccines and is
currently undertaking a Phase II trial in intranasal influenza in partnership
with Solvay Pharmaceuticals, having successfully completed phase I trial in May
2006.  The technology - which is based upon the combination of an adjuvant with
virosomes - achieves an enhanced immune response to an antigen challenge.  The
adjuvant specifically interacts with Toll-like Receptors ("TLRs").



Virosome Biologicals owns intellectual property concerning the combination of an
adjuvant (immune response stimulator) in the membrane that targets the virosomes
specifically to antigen presenting cells or B cells.  The adjuvant also leads to
the release of a chemical signal inside these cells to trigger enhanced immune
responses.  B cells then start to produce antibodies that have a rapid and major
role in protecting against new and ongoing infections. The antigen presenting
cells also activate a "killer" T-cell response to potentially eliminate virus
infected cells or cancer cells.   Virosome Biologicals has also developed a
proprietary method of producing virosomes, which is both more efficient and
results in excellent membrane fusion activity (which is a key component of the
initial stimulation of the immune system).



Virosome Biologicals' adjuvanted virosome technology is licensed to Solvay
Pharmaceuticals B.V. (Solvay) specifically in the field of intranasal influenza
vaccines, with milestones and royalties payable to Virosome Biologicals as the
clinical development and commercialisation programme progresses.   Solvay is
responsible for clinical trials and development and commercialising of the
vaccine and it has successfully concluded a Phase I clinical trial with the
intranasal influenza vaccine, triggering a milestone payment to Virosome
Biologicals. The vaccine was found to be safe and well tolerated. Solvay is
continuing to test the vaccine in Phase II clinical trials.



Virosome Biologicals predict significant commercial potential for the "
Adjuvanted Virosome Technology".  In particular, there is significant
opportunity to increase the number of potential commercial licensing
arrangements such as in the field of influenza and mass vaccination campaigns,
where the possible emergence of pandemic strains of flu and the threat of
bio-terrorism are major public concerns at the present time.    Virosome
Biologicals' technology is seen as complementary to the Company's core
technology for rejuvenation of the adult immune system and may be applicable to
a wide range of vaccine applications.  Post acquisition, the enlarged group will
have combined research capabilities, a joint intellectual property portfolio and
a suite of clinical trials all of which we believe will have a range of
opportunities for commercial development in the field of immunology.




The Placement and Extension to Secured Loan Facility



As previously announced, the Company has been seeking to raise new capital to
fund the development and commercialisation of its current technology and
potentially to progress merger and acquisition opportunities.



In September 2006, the Company entered into a Loan with Indus for A$1 million.
The Loan was a draw down facility for up to A$1 million repayable within 12
months of the first drawing of funds and bearing monthly interest.  To date
A$960,000 has been drawn down against that facility.    On 27 October 2006 the
facility was extended to up to A$2 million and repayment extended to not later
than 30 June 2008. At the time the facility was extended, Indus was also granted
the option to convert any or all of the outstanding balance in ordinary shares
at an issue price of #0.12 per share.



As the outcome of the Placement and Acquisition is subject to shareholder
approval at the EGM, the Loan provided by Indus will in the interim period
provide short term working capital funding.



To fund the Acquisition and to provide additional working capital, KBC Peel Hunt
Ltd, as agent for the Company has conditionally placed 35,833,333 new ordinary
shares with institutional investors and the Company has conditionally placed
19,166,667 new ordinary shares with US placees, at a placing price of #0.12 per
ordinary share. The Placement Shares represent approximately 24% of the enlarged
issued share capital of the Company. The placing price represents a discount of
approximately 40 % below the closing mid-market price on 26 October 2006.



Application will be made (conditional on approval at the EGM) for admission of
new ordinary shares (comprising 55,000,000 Placement Shares, 48,014,489
Acquisition Shares and 1,315,435 Third Party Shares as part payment for services
provided by third parties in relation to the Acquisition) (together the "New
Ordinary Shares") to the AIM market of London Stock Exchange plc and dealings
are expected to commence on 28 November 2006 in relation to the Acquisition
Shares and Placing Shares and on 29 November in relation to the Third Party
Shares issued as part payment for services provided by third parties in relation
to the Acquisition. The New Ordinary Shares will rank pari passu in all respects
with the existing ordinary shares of the Company.



Following completion of the Acquisition and Placement, Norwood Abbey Limited,
Indus and the shareholders of Bestewil will have an interest in 48,958,227,
46,526,925 and 48,014,489 ordinary shares respectively (representing 21.5%,
20.4% and 21.0% respectively of the Company's enlarged issued share capital).


Richard Williams, CEO of Norwood Immunology commented: 'The last 12 months have
been a challenging period for the Company, as we have sought to complete
fundraising activities and progress the acquisition of Bestewil. We believe the
combination of the Company and Bestewil with its ongoing research programs,
intellectual property portfolio and a range clinical trials in phase II, will
create exciting opportunities for commercial development in the field of
immunology. We will be reporting further on our progress with our preliminary
results which are due for release this week and which will, in accordance with
permissible accounting standards for AIM, be prepared under Australian IFRS for
the first time.'



For further information contact:



Richard Williams, Chief Executive Officer, Norwood Immunology Limited

www.norwoodimmunology.com

+44 (0)7860 295153



Buchanan Communications - Lisa Baderoon, Mark Court, Mary-Jane Johnson,

+44 (0)207 466 5000



KBC Peel Hunt Ltd - Capel Irwin, Megan MacIntyre

+44 (0) 20 7418 8900


                      This information is provided by RNS
            The company news service from the London Stock Exchange
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