Healthcare Industry News:  Diabetic Foot Ulcer 

Biopharmaceuticals Mergers & Acquisitions

 News Release - February 24, 2006

OrthoLogic Announces Acquisition of New Class of Molecules, ICARMs(TM)

Company Expands and Diversifies Product Portfolio

TEMPE, Ariz., Feb. 24 (HSMN NewsFeed) -- OrthoLogic Corp. (Nasdaq: OLGC ) announced today it has agreed to acquire certain assets and assume certain liabilities of AzERx Inc. (AzERx) for $390,000 cash and the issuance of 1,355,000 shares of OrthoLogic common stock valued at approximately $7.7 million, based on the closing share price of $5.67 on February 23, 2006.

The acquisition provides the Company with a new technology platform that diversifies the portfolio and may provide more than one potential product. AzERx's lead compound is AZX100, a 24-amino acid peptide. AZX100 is currently being investigated for medically and commercially significant applications, such as the treatment of vasospasm associated with subarachnoid hemorrhage, the prevention of keloid scarring, and the treatment of asthma. Preclinical and human in vitro studies have shown that this novel compound has the ability to relax smooth muscle in multiple tissue types.

"We are encouraged by the early work completed by the AzERx team and are looking forward to advancing AZX100 toward the clinic. This compound and its related technology have the potential to treat several diseases with significant unmet medical need," stated James Pusey, MD, President and Chief Executive Officer of OrthoLogic. "In addition, through this transaction we have the opportunity to broaden and strengthen our product pipeline and intellectual property portfolio, while maintaining our strong financial position."

Under the terms of the transaction, OrthoLogic is acquiring an exclusive license for the core intellectual property relating to AZX100 and will continue to develop the new class of compounds in the field of smooth muscle relaxation, called Intracellular Actin Relaxing Molecules, or ICARMs(TM), based on the unique technology invented by AzERx.

Other assets acquired and liabilities assumed in the transaction are not material. The transaction is expected to close during the first quarter of 2006 and is subject to customary closing conditions.

Conference Call

The Company will host a live conference call and webcast today at 9:00 am EST to discuss the transaction. The conference call may be accessed by dialing 800-361-0912 for domestic callers, and 913-981-5559 for international callers, and providing the passcode 9943930. The webcast may be accessed by visiting the Investor Relations section of the Company's website, www.orthologic.com, and will be available for 30 days.

A replay of the call will be available beginning February 24, 2006, at 12:00 pm EST until March 10, 2006. To access the replay, please dial 888-203- 1112 for domestic callers and 719-457-0820 for international callers and provide the passcode 9943930.

About AzERx

Founded at Arizona State University, AzERx is developing peptide drugs for disorders involving smooth muscle. The company's founders have conducted innovative research on the function of the crucial intracellular protein at the end of the natural smooth muscle relaxation cascade. The company has an exclusive license to AZX100, a 24-amino acid biomimetic peptide in preclinical development whose efficacy has been demonstrated in multiple animal studies and human in vitro smooth muscle experiments. Potential applications for the lead molecule include the treatment of vasospasm associated with subarachnoid hemorrhage, the prevention of keloid scarring, and the treatment of asthma. Valley Ventures III, L.P., an investment fund affiliated with the Chairman of the OrthoLogic Board of Directors, John M. Holliman, III, is a minority stockholder of AzERx. Mr. Holliman did not participate in the evaluation or approval of this transaction on behalf of OrthoLogic.

About OrthoLogic

OrthoLogic is a biotechnology company focused on the development and commercialization of the novel synthetic peptide Chrysalin® (TP508) in two lead indications, both of which represent areas of significant unmet medical need - fracture repair and Diabetic Foot Ulcer healing. Based on the Company's pioneering scientific research of the natural healing cascade, OrthoLogic has become a leading company focused on tissue and bone repair. OrthoLogic is committed to developing a pipeline of novel peptides and other molecules aimed at helping patients with equally under-served conditions. The Company owns exclusive worldwide rights for Chrysalin. OrthoLogic's corporate headquarters are in Tempe, Arizona. For more information, please visit the company's Web site: www.orthologic.com.

Statements in this press release or otherwise attributable to OrthoLogic regarding our business that are not historical facts are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which include the timing and acceptability of FDA filings and the efficacy and marketability of potential products, involve risks and uncertainties that could cause actual results to differ materially from predicted results. These risks include: delays in obtaining or inability to obtain FDA, institutional review board or other regulatory approvals of preclinical or clinical testing; unfavorable outcomes in our preclinical and clinical testing; the development by others of competing technologies and therapeutics that may have greater efficacy or lower cost; delays in obtaining or inability to obtain FDA or other necessary regulatory approval of our products; our inability to successfully and cost effectively develop or outsource manufacturing and marketing of any products we are able to bring to market; changes in FDA or other regulations that affect our ability to obtain regulatory approval of our products, increase our manufacturing costs or limit our ability to market our products; our possible need for additional capital in the future to fund the continued development of our product candidates; and other factors discussed in our Form 10-K for the fiscal year ended December 31, 2004 our Form 10-Q for the quarter ended September 30, 2005, and other documents we file with the Securities and Exchange Commission.


Source: OrthoLogic

Issuer of this News Release is solely responsible for its content.
Please address inquiries directly to the issuing company.



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