Toyama Chemical Co. Ltd. and Schering Corporation, a unit of Schering-Plough Corporation, announced that they have entered into a letter of intent regarding garenoxacin (Code No. T-3811), Toyama's proprietary quinolone antibacterial agent. Under the proposed transaction, Toyama will grant to Schering-Plough exclusive rights to develop, use and sell garenoxacin worldwide, excluding Japan, Korea and China. The parties hope to negotiate and execute definitive agreements regarding the transaction within the next few months.

"Schering-Plough looks forward to working with Toyama to conclude this agreement and making this new antibiotic available to medical practitioners in many major world markets," said Fred Hassan, Schering-Plough chairman and chief executive officer. "The addition of this therapy would serve to broaden the anti-infective portfolio we are developing, which includes Noxafil (posaconazole), an antifungal agent in development for serious fungal infections. This planned agreement is in line with our strategy to build strength in our global franchises through internal development and fiscally sound licensing, key elements in our five-stage Action Agenda to transform Schering-Plough."

Katsuhiko Nakano, president and CEO of Toyama Chemical, stated, "Toyama's original compound, T-3811, is a potent drug, having shown favorable efficacy and safety properties compared to other antibiotic agents in its Phase III clinical trials. Garenoxacin is one of the main pillars that will support the future of Toyama, and we are very pleased to enter into this letter of intent with Schering-Plough. Toyama has research efforts in the antifungal and antiviral fields, and we wish to continue our good relationship with Schering-Plough hereafter. Through our collaboration with Schering-Plough we feel that we are able to come closer to fulfilling our goal 'to support health and contribute to an active life in good health for all.'"

Under the terms contemplated by the letter of intent, Toyama would receive a payment from Schering-Plough of $80 million upon definitive agreements being reached and becoming effective. Schering-Plough would expense this amount at that time, which the company expects to occur in the second quarter of 2004. Toyama could also receive additional milestone payments totaling up to $245 million based on the approval, further development and commercialization of garenoxacin. The substantial majority of such milestones will be based on the achievement of certain sales levels for garenoxacin. In addition, Toyama would also receive royalty payments on net sales of garenoxacin by Schering-Plough in its territories. The closing of the definitive agreements will be subject to the satisfaction of certain conditions.

Originally discovered by Toyama, garenoxacin is a novel quinolone antibacterial agent that has completed Phase III development. It has shown potent activity against a wide range of Gram-positive and Gram-negative bacterial pathogens, including anaerobic organisms, and resistant strains such as penicillin-resistant Streptococcus pneumoniae. Garenoxacin may offer a significant advance in its treatment category, with the potential to address bacterial strains resistant to other antibiotics with a favorable side effect profile. Toyama had previously licensed garenoxacin on a worldwide basis, excluding Japan, to Bristol-Myers Squibb. On October 16, 2003, Toyama reacquired all rights pertaining to garenoxacin from Bristol-Myers Squibb.

Toyama Chemical, having its priority in adopting new drug discovery technologies, specializes in research and development. Toyama Chemical aims to become a pharmaceutical company needed by people all around the world, by concentrating its efforts in creating novel drugs.