August 23, 2004

APAX Partners form Aerovance, Inc.
Through Spin Oout of Bayer Biotecholgy Respiratory Projects
New Company Raises $32 Million in Series B Financing Led By Apax Partners
Company Focused on Developing and Commercializing Respiratory Therapies

Menlo Park, CA, August 23, 2004 — Funds advised by Apax Partners today announced the formation of Aerovance, Inc., a new, independent company dedicated exclusively to developing and commercializing biologic products for respiratory diseases. Aerovance has raised $32 million through a Series B financing led by Apax Partners. Additional investors include Lehman Brothers, NGN Capital and Burrill & Co.

The agreement marries Bayer technology and expertise with the entrepreneurial spirit inherent in a biotech spin out. Under the terms of the agreement, in exchange for a minority equity stake in Aerovance, Bayer Pharmaceuticals Corporation has spun out the rights to two lead products to Aerovance: an IL4/13 receptor antagonist (AER-001) for severe asthma entering Phase II studies and Bikunin (AER-002), a recombinant therapeutic protein for cystic fibrosis and chronic obstructive pulmonary disease (COPD) on track for the filing of an investigational new drug (IND) application. Bayer also spun out additional research-stage and preclinical programs in respiratory disease to Aerovance.

Wolf-Dieter Busse, Ph.D., formerly Senior Vice President of Biotechnology, Bayer Pharmaceuticals, will serve as Chief Executive Officer of Aerovance, leading an experienced team of former Bayer Pharmaceuticals Biotechnology scientific and business professionals. The new company will be based in Berkeley, Calif.

"Over the next 18 months, Aerovance will focus on demonstrating proof of concept for our two lead product candidates which target novel, validated pathways in the respiratory system," said Dr. Busse. "Our strong portfolio will be advanced by a seasoned management team of leading experts in respiratory drug development and protein manufacturing."

"This innovative agreement with Apax Partners supports the continued development of some promising respiratory compounds identified in our former biotechnology research unit, while enabling Bayer Pharmaceuticals to continue to focus on our core therapeutic areas," said Dr. Wolfgang Plischke, President and General Manager, Bayer Pharmaceuticals. "We are pleased that Aerovance will continue to develop these promising compounds."

"The success of novel respiratory therapeutics launched in recent years underscores the unmet medical need for safer and more effective products," said Dr. Lori Rafield, Partner, who heads Apax Partners' U.S. Healthcare investment team. "The formation of Aerovance is a great example of Apax Partner's ability to create solutions that provide strategic alternatives to the healthcare industry and identify attractive new opportunities in drug development."

Founding Board Members board of Aerovance will include Drs. Busse and Rafield as well as Drs. Eliot Charles, also of Apax Partners, and Hingge Hsu of Lehman Brothers. The company will seek three additional Board Members from other healthcare and biotechnology organizations to fill the remaining seats. In addition to Dr. Busse, the management team will include Robert Kuhn, Ph.D., Senior Vice President and Chief Technical Officer, and Rick Fuller, M.D., Senior Vice President and Chief Medical Officer.

The Centers for Disease Control and Prevention estimates that roughly 16 million people in the United States suffer from some form of asthma. The U.S. market for asthma therapies is estimated at $9 billion, with severe asthma accounting for $2 billion–$4 billion in the United States. Cystic fibrosis (CF) is a life-threatening, inherited disease that affects around 70,000 people worldwide. The average life expectancy of a CF patient is 31 years. The current market for all CF therapies is approximately $800 million.

About Apax Partners
Apax Partners is one of the world's leading private equity investment groups, operating across the United States, Europe, Israel and Japan. With over 30 years of direct investing experience, Apax Partners' Funds provides long-term equity financing to entrepreneurs to build and strengthen world-class companies. It pursues a balanced equity portfolio strategy, investing in companies at all stages of development from early stage to buy-out. Apax Partners' Funds invests in companies across its six chosen global sectors of: healthcare; information technology; telecommunications; media; financial services; retail and consumer. Some of Apax Partners Funds' healthcare investments include Zymogenetics, Affymax, Novacea, ESP Pharmaceuticals, and Skinmedica.

Apax Partners manages and advises over $12 billion on behalf of leading institutional investors around the world. For more information, please visit www.apax.com.

About Aerovance, Inc
Aerovance is a privately held biopharmaceutical company focused exclusively on the development and commercialization of biologics for severe respiratory and inflammatory diseases such as asthma, cystic fibrosis (CF) and chronic obstructive pulmonary disease (COPD). The company's two lead products are an IL4/13 receptor antagonist (AER-001) for severe asthma entering Phase II studies and Bikunin (AER-002), a recombinant protein for CF and COPD on track for the filing of an IND. In addition to these lead product programs, Aerovance has several preclinical programs in respiratory disease. Aerovance was spun off from Bayer Pharmaceuticals' biotechnology unit in August 2004. Investors include Apax Partners, Lehman Brothers, NGN Capital and Burrill & Co.

About Bayer Pharmaceuticals Corporation
Bayer Pharmaceuticals Corporation is part of the worldwide operations of Bayer HealthCare, a subgroup of Bayer AG. Bayer HealthCare is one of the world's leading innovators in the health care and medical products industry.

Bayer HealthCare combines the global activities of the business groups of Bayer AG in the fields of Animal Health, Biological Products, Consumer Care, Diagnostics and Pharmaceuticals.

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