Baxter Healthcare Corporation announced a licensing agreement with Innocoll Pharmaceuticals Ltd, a division of Innocoll, Inc., granting Baxter exclusive rights to market and distribute the company's gentamicin surgical implant in the United States.

The gentamicin surgical implant will be the first and only biodegradable, leave-behind antibiotic surgical sponge used as an adjunct (add-on) therapy for prevention and treatment of surgical site infections (SSIs) in the United States. This agreement is expected to add to Baxter's biosurgical portfolio by giving surgeons an innovative option to help reduce risk of post-operative complications of SSIs during surgery.

The collagen-based implant is saturated with a high concentration of an antibiotic, gentamicin, designed to deliver the antibiotic directly to the target tissue while maintaining low levels of the drug in order to potentially reduce infection during and after surgery. The gentamicin surgical implant is fully biodegradable and can be left in the body after surgery. According to the Centers for Disease Control and Prevention, SSIs remain an ongoing problem for surgeons and are a burden on patients and the healthcare system, affecting more that 500,000 patients a year in the United States.

The product was developed using Innocoll's proprietary, collagen-based drug delivery technology, CollaRx, and is indicated outside of the United States as an adjunct to systemic antibiotic therapy for the treatment of localized, deep tissue infections and the prevention of SSIs in both hard and soft tissues.

The implant is approved in 49 countries spanning Europe, Latin America, the Middle East, Africa and Asia. It is currently in two Phase III clinical trials in the United States to support a planned 2009 New Drug Application for U.S. regulatory approval.

Baxter is a global, diversified healthcare company with many specialty biologic products used in surgical settings for hemostasis, tissue sealing, tissue fixation and adhesion reduction. Innocoll, a privately held biopharmaceutical company, focuses on targeted biodegradable surgical implants and topical products to reduce infection.

Under the terms of the agreement, Baxter will pay a license fee and will make contingent clinical, regulatory and commercial milestone payments. Baxter will also contribute to the Phase III clinical costs and a portion of the registration fees. Innocoll will be responsible for the continued management of the clinical programs and the regulatory filing. Innocoll will manufacture and supply product to Baxter. In accordance with generally accepted accounting principles, Baxter expects to record a pre-tax charge of approximately $12 million for in-process research and development associated with this transaction in the third quarter of 2008.

About Innocoll, Inc.

Innocoll is a privately held, biopharmaceutical company focused on biodegradable surgical implants and topically applied healthcare products. It develops and manufactures a range of pharmaceutical products and medical devices using its proprietary collagen-based technologies, CollaRx® and Liquicoll®. Innocoll's lead product, Gentamicin Surgical Implant for the treatment and prevention of SSIs, is approved for sale in 49 countries in Europe, Latin America, the Middle East, Africa and Asia. The gentamicin surgical implant is currently in Phase III development in the United States for the prevention of SSIs. Other late stage pharmaceutical products in Innocoll's development pipeline include CollaRx Gentamicin Topical for the treatment and prevention of infected diabetic foot ulcers and CollaRx Bupivacaine Implant for the management of post-operative pain, both of which are currently in Phase II development. For more information, please visit http://www.innocollinc.com.