ANNAPOLIS, Md., July 27 /PRNewswire-FirstCall/ -- PharmAthene, Inc. (NYSE Amex: PIP), a biodefense company developing medical countermeasures against biological and chemical threats, today announced that it has signed definitive agreements for the issuance of 2-year, 10% unsecured senior convertible notes ("Notes") and common stock purchase warrants ("Warrants") in a private placement of approximately $19.3 million.

In connection with the Private Placement, the Company will receive gross cash proceeds of approximately $10.5 million from new investors, including an aggregate of approximately $8.5 million from unaffiliated investors, and will exchange approximately $8.8 million in outstanding principal and unpaid accrued interest under the Company's 8% senior unsecured convertible notes originally issued in August 3, 2007 and due August 3, 2009 (the "Old Notes"). The Company expects to close the transaction as expeditiously as possible, subject to satisfaction of customary closing conditions, including certain regulatory clearance.

Cash proceeds from the sale of the Notes and Warrants will be used (i) to repay approximately $5.7 million in principal and unpaid accrued interest due to holders of the Old Notes that have not elected to participate in this financing transaction, (ii) to repay all remaining amounts (approximately $2.7 million), including certain prepayment fees, due and owing under the Company's outstanding secured credit facility, and (iii) for other working capital purposes.

Interest on the Notes will accrue at a rate of ten percent (10%) per year. The Notes are convertible by the holders thereof at any time after the closing into shares of PharmAthene's common stock at a conversion price of $2.541667/share, which represents the closing price of the common stock on the NYSE Amex on July 24, 2009 plus $0.041667. Principal and interest are due at maturity two years from the closing of the private placement.

In connection with the transaction, the Company will also issue Warrants to purchase up to 2.6 million shares of PharmAthene common stock at $2.50 per share, the closing price of PharmAthene's common stock on the NYSE Amex on July 24, 2009. The Warrants will be exercisable for a period of five years beginning six months after the closing of the private placement. The Company did not engage a placement agent in connection with this transaction.

The Company also confirmed the pending expiration at 5:00 PM today of its publicly-traded warrants to acquire shares of its common stock at an exercise price of $6.00, which warrants were originally issued in connection with the Company's initial public offering in 2005.

About the Securities

The securities that are being sold in the transaction have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. PharmAthene has agreed to file a registration statement under the Securities Act to register the shares of common stock issuable upon conversion of the notes and upon any exercise of the warrants for public resale from time to time in the future. There can be no assurances that the registration statement will be declared effective. The information contained in this press release does not constitute an offer for the sale of any securities.

About PharmAthene, Inc.

PharmAthene was formed to meet the critical needs of the United States and its allies by developing and commercializing medical countermeasures against biological and chemical weapons. PharmAthene's lead product development programs include:

• SparVax^™ - a second generation recombinant protective antigen (rPA) anthrax vaccine
  
  
• Third generation rPA anthrax vaccine
  
  
• Valortim - a fully human monoclonal antibody for the prevention and treatment of anthrax infection
  
  
• Protexia - a novel bioscavenger for the prevention and treatment of morbidity and mortality associated with exposure to chemical nerve agents
  
  
• RypVax^™ - a recombinant dual antigen vaccine for plague

For more information about PharmAthene, please visit www.PharmAthene.com.

Statement on Cautionary Factors

Except for the historical information presented herein, matters discussed may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Statements that are not historical facts, including statements preceded by, followed by, or that include the words "potential"; "believe"; "anticipate"; "intend"; "plan"; "expect"; "estimate"; "could"; "may"; "should"; or similar statements are forward-looking statements. PharmAthene disclaims, however, any intent or obligation to update these forward-looking statements. Risks and uncertainties include risk associated with the reliability of the results of the studies relating to human safety and possible adverse effects resulting from the administration of the Company's product candidates, unexpected funding delays and/or reductions or elimination of U.S. government funding for one or more of the Company's development programs, including without limitation our bid related to SparVax^™ under the HHS Request for Proposals for an Anthrax Recombinant Protective Antigen (rPA) Vaccine for the Strategic National Stockpile, the award of government contracts to our competitors, unforeseen safety issues, challenges related to the development, scale-up, and/or process validation of manufacturing processes for our product candidates, unexpected determinations that these product candidates prove not to be effective and/or capable of being marketed as products, as well as risks detailed from time to time in PharmAthene's Forms 10-K and 10-Q under the caption "Risk Factors" and in its other reports filed with the U.S. Securities and Exchange Commission (the "SEC").

Copies of PharmAthene's public disclosure filings are available from its investor relations department and our website under the investor relations tab at www.PharmAthene.com.

SOURCE: PharmAthene, Inc.

CONTACT:
Stacey Jurchison of PharmAthene, Inc.
+1-410-269-2610
Stacey.Jurchison@PharmAthene.com

Web Site:
http://www.pharmathene.com