Manhattan Pharmaceuticals and Nordic Biotech form JV

The total deal, valued at up to $9.65 million, provides for the formation of a 50/50 joint venture entity that will own, develop and secure a commercialization partner for Hedrin. Under terms of the agreement, the Nordic Biotech Venture Fund II K/S will invest up to $5 million in the joint venture in exchange for a 50% ownership interest, and Manhattan Pharmaceuticals will assign and transfer its North American rights to Hedrin to the joint venture in exchange for a 50% ownership interest valued at up to $5 million plus up to $3.65 million in cash and payments.

Manhattan Pharmaceuticals will receive an up front payment from the joint venture consisting of $2 million in cash plus $2.5 million equity in the joint venture. Upon receiving medical device designation for Hedrin by the FDA, Manhattan Pharmaceuticals will receive an additional $1.5 million in cash plus an additional $2.5 million equity in the joint venture. The joint venture will be responsible for the development and commercialization of Hedrin in North America and all costs associated with the project including any necessary US clinical trials, patent costs, and future milestones owed to the original licensor, Thornton & Ross Limited.

In accordance with a milestone expected to be achieved on April 30, 2008, Nordic has the right to receive, on such date, a warrant to purchase 7.1 million shares of Manhattan Pharmaceuticals common stock at $0.14 per share. If fully exercised, this warrant will yield an additional $1 million of capital for the company. In addition to the investment in the joint venture noted above, Nordic will make an upfront payment of $150,000 to the company. Nordic has an option to put its interest in the joint venture to Manhattan Pharmaceuticals in exchange for shares of Manhattan Pharmaceuticals common stock, and under certain conditions, Manhattan Pharmaceuticals has the option to call Nordic’s interest in the joint venture in exchange for Manhattan Pharmaceuticals common stock.