Mr. Anthony Giovinazzo reports

SUNOVION PHARMACEUTICALS TO ACQUIRE CYNAPSUS THERAPEUTICS

Sunovion Pharmaceuticals Inc. and Cynapsus Therapeutics Inc. have signed a definitive agreement under which Sunovion will acquire Cynapsus for $40.50 (U.S.) per share in cash. The transaction has received unanimous approval by the boards of directors of both companies and values Cynapsus at approximately $624-million (U.S.) (or approximately $820-million). The acquisition will be financed with cash on hand. The transaction is expected to close in the fourth quarter of 2016 (the third quarter of Sunovion's fiscal year). This agreement reflects Sunovion's global strategy to expand and diversify its portfolio in key therapeutic areas, including neurology.

Through this transaction, Sunovion would acquire Cynapsus's product candidate, APL-130277, which is designed to be a fast-acting, easy-to-use, on-demand treatment option for managing off episodes associated with Parkinson's disease (PD).

"Parkinson's disease is a chronic, progressive neurodegenerative disease that affects more than four million people around the world, and there is a significant need for new options to treat the off episodes associated with it," said Nobuhiko Tamura, chairman and chief executive officer, Sunovion. "We believe that APL-130277 is a novel late-stage candidate with the potential to make a real difference for patients and their families.

"The acquisition of Cynapsus is well aligned with Sunovion's focus on the innovative application of science and medicine to help people with serious medical conditions and complements our robust product pipeline," added Mr. Tamura. "We have high regard for the Cynapsus team and their work with the APL-130277 program."

"With its leadership in therapies for central nervous system disorders and commercial experience specific to neurology, we believe Sunovion is best suited to advance APL-130277 in the United States and other key markets," said Anthony J. Giovinazzo, president and CEO, Cynapsus. "This transaction culminates years of dedicated work by the Cynapsus team and represents significant value creation for our securityholders."

The board of directors of Cynapsus, after consultation with its financial and legal advisers and based, in part, upon the unanimous recommendation of an independent special committee of the board of directors, has determined that the arrangement is in the best interest of Cynapsus and the consideration to be received by shareholders of Cynapsus is fair to such shareholders. The board of directors unanimously recommends that Cynapsus shareholders and warrantholders vote in favour of the transaction at a special meeting expected to be held on or about Oct. 13, 2016.

The proposed sale of Cynapsus follows a full consideration of alternatives aimed at optimizing shareholder value for the company. "We believe that the proposed transaction with Sunovion results in the best outcome for our shareholders," said Rochelle Stenzler, chair of the board of Cynapsus. "The transaction with Sunovion represents a significant premium to the current share price, and we are recommending that our shareholders and warrantholders vote in favour of the transaction."

Pursuant to the terms of the definitive agreement, upon the closing of the proposed transaction, shareholders of Cynapsus will receive $40.50 (U.S.) per common share in cash, and holders of warrants and stock options will receive a cash payment equal to the difference between $40.50 (U.S.) and the exercise price of such warrant or stock option. The offer of $40.50 (U.S.) per common share in cash represents a premium of 123 per cent based on the volume-weighted average closing price of Cynapsus's common shares on the Nasdaq Global Market for the last 20 trading days. The companies expect to close the transaction following required securityholder, court and regulatory approvals and satisfaction of certain other customary closing conditions.

The transaction will be completed by way of a plan of arrangement under the Canada Business Corporations Act. The arrangement will require approval of at least two-thirds of the votes cast by Cynapsus shareholders and warrantholders voting together as a single class at a special meeting of such securityholders of Cynapsus. Voting and support agreements in support of the transaction have been signed by all directors and officers of Cynapsus and the company's largest shareholder, representing, in total, approximately 18.33 per cent of the Cynapsus securities entitled to vote to approve the transaction.

Full details of the transaction will be included in the management information circular to be filed with the applicable securities regulatory authorities and mailed to Cynapsus shareholders and warrantholders within approximately two weeks. Assuming receipt of all required regulatory approvals, the parties expect to close the arrangement in the fourth quarter of 2016.

Bank of America Merrill Lynch serves as financial adviser and Borden Ladner Gervais LLP and Troutman Sanders LLP serve as legal advisers to Cynapsus. Stifel, Nicolaus & Co. Inc. serves as financial adviser and Fasken Martineau DuMoulin LLP serves as a legal adviser to the special committee of Cynapsus. Nomura Securities International Inc. serves as exclusive financial adviser and Goodmans LLP, Reed Smith LLP and Gibbons PC serve as legal advisers to Sunovion.

Adagio amending agreement

Cynapsus and the former shareholders of Adagio Pharmaceuticals Ltd. entered into a share purchase agreement dated as of Dec. 22, 2011, as subsequently amended as of Jan. 28, 2015, pursuant to which Cynapsus acquired Adagio.

Cynapsus and the former shareholders of Adagio have amended the share purchase agreement to provide, among other things, that if a change of control of Cynapsus, which would include the transaction with Sunovion, occurs before the successful completion and the first public announcement of the top-line data of the final safety study (as defined in the share purchase agreement), the $2.5-million of the purchase price still potentially payable to the former shareholders of Adagio shall be paid in cash (not common shares, as was originally contemplated in the share purchase agreement) by Cynapsus on the date on which the change-of-control transaction is completed.

As Mr. Giovinazzo, president and CEO of Cynapsus, is also a director, officer and majority shareholder of Adagio, the amendment of the share purchase agreement constitutes a related party transaction pursuant to Multilateral Instrument 61-101 and the policies of the Toronto Stock Exchange. The amendment was necessary, and appropriate, as it ensures that if Sunovion acquires all of the common shares of Cynapsus, it would not have an obligation to potentially issue shares to the former Adagio shareholders postclosing of such acquisition. The amendment was entered into at the same time as the arrangement agreement with Sunovion and therefore was not announced more than 21 days before its execution.

About APL-130277

APL-130277, a novel formulation of apomorphine, a dopamine agonist, is being developed as a fast-acting, easy-to-use, sublingual thin film for the on-demand management of debilitating off episodes associated with Parkinson's disease (PD). Apomorphine is the only molecule approved for acute, intermittent treatment of off episodes for advanced PD patients, but is currently only approved as a subcutaneous injection in the United States. APL-130277 is designed to rapidly, safely and reliably convert a PD patient from the off to the on state while avoiding many of the issues associated with subcutaneous delivery of apomorphine. It has been studied in all types of off episodes, including morning off episodes. APL-130277 is in phase 3 clinical trials and has not been approved by the U.S. Food and Drug Administration (FDA).

In the continuing phase 3 trial, CTH-300, the blinded safety data were corroborated by the DSMB (data safety and monitoring board) findings, which were announced in the press release dated Aug. 15, 2016. If the continuing pivotal phase 3 clinical trials are successful, it is expected that a new drug application (NDA) for APL-130277 will be submitted to the FDA during the first half of 2017 under the abbreviated Section 505(b)(2) regulatory pathway. A pivotal European clinical program evaluating the safety and efficacy of APL-130277 in PD patients is expected to be initiated in the fourth quarter of 2016.

About PD and off episodes

More than one million people in the United States and an estimated four million to six million people worldwide suffer from PD. The European Parkinson's Disease Association estimates that 1.2 million people have PD in the European Union. PD is a chronic, progressive neurodegenerative disease characterized by motor symptoms, including tremor at rest, rigidity and impaired movement, as well as significant non-motor symptoms, including cognitive impairment and mood disorders. It is the second most common neurodegenerative disease behind Alzheimer's disease, and PD's prevalence is increasing with the aging of the population. Off episodes are a complication of the disease. Up to 40 per cent of all people with PD whose symptoms are otherwise managed with continuing drug therapy experience off episodes at least once daily and up to six times daily, with each episode typically lasting between 30 and 120 minutes.(1)(2)

About Sunovion

Sunovion is a global biopharmaceutical company focused on the innovative application of science and medicine to help people with serious medical conditions. Sunovion's spirit of innovation is driven by the conviction that scientific excellence, paired with meaningful advocacy and relevant education, can improve lives. The company has charted new paths to life-transforming treatments that reflect continuing investments in research and development and an unwavering commitment to support people with psychiatric, neurological and respiratory conditions. Sunovion's record of discovery, development and commercialization of important therapies has included Brovana (arformoterol tartrate), Latuda (lurasidone HCI) and most recently Aptiom (eslicarbazepine acetate).

Headquartered in Marlborough, Mass., Sunovion is an indirect, wholly owned subsidiary of Sumitomo Dainippon Pharma Co. Ltd. Sunovion Pharmaceuticals Europe Ltd., based in London, England, and Sunovion Pharmaceuticals Canada Inc., based in Mississauga, Ont., are wholly owned direct subsidiaries of Sunovion Pharmaceuticals Inc.

About Sumitomo Dainippon Pharma Co. Ltd.

Sumitomo Dainippon Pharma is among the top 10 listed pharmaceutical companies in Japan, operating globally in major pharmaceutical markets, including Japan, the United States, China and the European Union. Sumitomo Dainippon Pharma aims to create innovative pharmaceutical products in the psychiatry and neurology areas and the oncology area, which have been designated the focus therapeutic areas. Sumitomo Dainippon Pharma is based on the merger in 2005 between Dainippon Pharmaceutical Co. Ltd. and Sumitomo Pharmaceuticals Co. Ltd. Today, Sumitomo Dainippon Pharma has about 7,000 employees worldwide.

Brovana is a registered trademark of Sunovion Pharmaceuticals Inc.

Latuda is a registered trademark of Sumitomo Dainippon Pharma Co. Ltd.

Aptiom is used under licence from Bial.

Sunovion Pharmaceuticals Inc. is a U.S. subsidiary of Sumitomo Dainippon Pharma Co. Ltd.

Additional information and where to find it

Further information regarding the transaction will be contained in an information circular that Cynapsus will prepare and mail to its shareholders and warrantholders in connection with the Cynapsus shareholder and warrantholder meeting, with closing expected to occur in the fourth quarter of 2016. Cynapsus securityholders are urged to read the information circular once it becomes available, as it will contain important information concerning the proposed transaction. Cynapsus securityholders may obtain a copy of the arrangement agreement, information circular and other meeting materials when they become available on the U.S. Securities and Exchange Commission website and on SEDAR.

Notes:

1. Denny, 1999, Journal of the Neurological Sciences, Volume 165, pages 18 to 23, third table;
2. Schrag, 2000, Brain, Volume 123, pages 2297 to 2305.

We seek Safe Harbor.