Grifols, a global healthcare company, and Aradigm, an emerging specialty pharmaceutical company focused severe respiratory diseases, have signed an exclusive worldwide license for Aradigm's proprietary formulations of inhaled ciprofloxacin (Pulmaquin and Lipoquin) for the treatment of severe respiratory diseases, including non-cystic fibrosis bronchiectasis (BE). Aradigm has completed phase IIb clinical trials in BE patients with Pulmaquin and Lipoquin.

BE is a chronic condition that affects about 110,000 people in the U.S. and many more in other countries and is characterized by abnormal dilatation of the bronchi and bronchioles associated with chronic respiratory infections. Aradigm has been granted orphan drug designation for BE in the U.S. and there is currently no drug specifically approved for the treatment of this condition.

The parties have agreed to advance Aradigm's proprietary inhaled ciprofloxacin formulations into phase III clinical trials in BE. Grifols will be responsible for all development and clinical expenses up to a maximum of $65 million for the BE indication. Aradigm is entitled to receive cash payments of up to $25 million upon achievement of development milestones. In addition, Grifols is responsible for all commercialization activities and will pay Aradigm tiered royalties on worldwide sales of products utilizing Aradigm's proprietary inhaled ciprofloxacin formulations. Grifols will also be granted an option to license Aradigm's AERx pulmonary drug delivery platform for use with another molecule.

In conjunction with the licensing agreement, Grifols will (upon receipt of Aradigm shareholders' approval) acquire 35% of Aradigm's common stock on a fully diluted basis at a price per share of $0.124 for a total investment of approximately $26 million.

Existing Aradigm shareholders, including Tavistock Life Sciences and accounts managed by First Eagle Investment Management, and new investors Great Point Partners, will co-invest in the stock purchase transaction and purchase an additional approximately $15.4 million in Aradigm common stock.

The transaction is subject to certain closing conditions and is expected to close in the second half of 2013. At that point, Grifols will be entitled to designate two directors to serve on the Aradigm board of directors.