Interleukin Genetics, Inc. has acquired the assets and business of Alan James Group, LLC., a privately held, healthcare-focused consumer products company, in a cash and stock transaction.

The combination will create a diversified, fully integrated provider of products and services in the consumer and professional healthcare marketplace. Interleukin and Alan James have complementary capabilities in genetic testing services and preventive healthcare products distribution. By combining these capabilities, the company will be well positioned to expand its science-based solutions portfolio, rapidly commercialize its products and services and offer a broad selection of innovative, preventive, and personalized therapeutics to its customers, a company release stated.

Under the terms of the purchase agreement, Interleukin made an upfront payment to Alan James of $7 million in cash and $0.5 million in newly issued stock, based on the volume-weighted average closing stock price for the 20 consecutive trading days ending August 15, 2006 of $5.68 per share. In addition, if certain earnings milestones are achieved by the Alan James subsidiary from 2007 through 2009, up to $1.5 million in cash and up to approximately 1.6 million shares of stock representing a value of $9.25 million based on the same volume-weighted average price of $5.68 per share, will be paid as additional consideration.

In connection with the transaction, Alticor, Inc., which owns a majority interest in Interleukin, will provide $30 million in financing in the form of a $15.6 million private placement with Alticor, Inc., and a new $14.4 million credit facility. The amount available under the credit facility will be reduced by the amount of any proceeds received by Interleukin from a planned rights offering of $14.4 million of common stock to existing Interleukin common stockholders at a price of $5.68 per share, to be commenced as soon as practicable.

With the close of the transaction, Tim Richerson, previously president of Alan James Group, LLC. has been named chief executive officer of Interleukin Genetics, Inc. Dr. Kenneth Kornman, previously president and chief executive officer of Interleukin, maintains the roles of president and chief scientific officer, and has been appointed as a director on the Interleukin board. Dr. Philip Reilly has stepped down as director and chairman of the Interleukin board and will continue to serve as a strategic advisor to the company. Current Interleukin director Thomas Curran has been named chairman of the Interleukin board.

“This acquisition provides Interleukin with new products and sales and marketing leadership in the rapidly expanding consumer health segment,” said Dr. Kenneth Kornman, president and chief scientific officer of Interleukin Genetics. “Alan James has a strong track record of innovation and marketing in the area of preventive therapeutics. With Alan James' experienced product commercialization team and the strong financial support provided by Alticor, Interleukin is well positioned to effectively commercialize our science-based products and services. By creating a diversified, fully integrated provider of products and genetics tests, we believe this combination will create significant business growth opportunities to the benefit of our shareholders, customers, employees and partners.”

“The combination of Interleukin and Alan James will create an innovative company with leading genetics research that is able to deliver science-based products and services in a rapidly expanding marketplace,” said Tim Richerson, chief executive officer of Interleukin Genetics. “The complementary combination of Alan James' existing brands, product pipeline and channel development capabilities with Interleukin's genetics expertise and scientific capabilities positions the company to realize its vision to be a leading genetics-focused, personalized health company. We anticipate integrating our companies to realize the strategic, scientific and financial benefits of this transaction quickly and efficiently.”

Alan James has commercialized products that include recognizable consumer brands such as Ginkoba, Ginsana, and Venastat, and Interleukin currently markets genetic tests for cardiovascular disease risk assessment and general nutrition assessment, both sold under the Gensona brand through Alticor's Quixtar division, and PST periodontal disease risk assessment.

Interleukin will continue to distribute products and services through Alticor's direct sales channels. The company anticipates new opportunities to enhance this channel in connection with the transaction.

Alan James will continue to do business under the name Alan James Group as a wholly owned subsidiary of Interleukin Genetics, Inc.

The combination is expected to allow the company to accelerate its development of a predictive and preventive product portfolio, expand its presence in the personalized health and wellness marketplace, and broaden its revenue base to include consumer, commercial and professional healthcare channels. This strategic combination presents Interleukin with a unique opportunity to take advantage of the fast-growing $40 billion OTC and nutraceuticals markets in the US, and the rapidly emerging molecular diagnostics marketplace, currently representing over $2 billion in the US and growing at 15 to 20 per cent per year.

In connection with the close of this transaction, Interleukin now expects total revenues of $5.5 million to $7 million in 2006.