Axcan Pharma Inc and Merz Pharmaceuticals GmbH have signed an agreement under which Axcan acquires an exclusive license to use, develop and submit for approval injectable and oral granule formulations containing L-ornithine and L- aspartate for the treatment of hepatic encephalopathy associated with early to late-stage liver cirrhosis. Under the license agreement Axcan also has the right to develop the product for additional indications. This product, once approved, will be distributed in the United States Canada, France and Italy. Prevalence of hepatic encephalopathy in the United States is estimated by the US Center for Disease Control at between 60,000 to 100,000 patients. This drug is currently marketed in Germany and several other countries under the name Hepa-Merz. Terms of the agreement were not disclosed.

"We are very happy to partner with Merz, an innovative privately owned pharmaceutical company that developed Hepa-Merz," commented Leon F. Gosselin, President and Chief Executive Officer of Axcan. "We expect to quickly initiate and conduct two controlled Phase III studies in North America and complete them in 2004. This would allow Axcan to launch the injectable form as soon as possible thereafter," he concluded.

"We firmly believe that the treatment of liver diseases will see a future-oriented demand for new medications. Ornithine-Aspartate will be one of the promising options and we are looking forward to working with Axcan to make the product Hepa-Merz a success," said Dr. Jochen Huckmann, Chief Executive Officer of Merz in Germany.

Hepatic encephalopathy (HE) is characterized by the development of impaired neurological and mental functions, which can occur with various degrees of severity (e.g. abnormalities of consciousness, personality, behavioral and/or intellectual function to deep coma) secondarily to liver diseases such as liver cirrhosis. HE is caused by a metabolic disturbance and is therefore potentially reversible.