Schedule 13D Amendment No. 1

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VUfNtmQeaLVSf5qIXk932UWMtgsyTjuxahu3piphymluRMy6HIPICAvFfqj4P96d bqN4NxOahpUZEQzowD7Wtw== 0001193125-06-177781.txt : 20060822 0001193125-06-177781.hdr.sgml : 20060822 20060822170306 ACCESSION NUMBER: 0001193125-06-177781 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20060822 DATE AS OF CHANGE: 20060822 GROUP MEMBERS: ARGERIS KARABELAS GROUP MEMBERS: CDC OPERATING LLC GROUP MEMBERS: DAVID R. RAMSAY GROUP MEMBERS: JAN LESCHLY SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BIODELIVERY SCIENCES INTERNATIONAL INC CENTRAL INDEX KEY: 0001103021 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 352089858 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-57907 FILM NUMBER: 061049221 BUSINESS ADDRESS: STREET 1: 2501 AERIAL CENTER PARKWAY STREET 2: SUITE 205 CITY: MORRISVILLE STATE: NC ZIP: 27560 BUSINESS PHONE: 919-653-5160 MAIL ADDRESS: STREET 1: 2501 AERIAL CENTER PARKWAY STREET 2: SUITE 205 CITY: MORRISVILLE STATE: NC ZIP: 27560 FORMER COMPANY: FORMER CONFORMED NAME: MAS ACQUISITION XXIII CORP DATE OF NAME CHANGE: 20000111 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CDC IV LLC CENTRAL INDEX KEY: 0001365385 IRS NUMBER: 204153867 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 47 HULFISH STREET STREET 2: SUITE 310 CITY: PRINCETON STATE: NJ ZIP: 08542 BUSINESS PHONE: 609-683-8300 MAIL ADDRESS: STREET 1: 47 HULFISH STREET STREET 2: SUITE 310 CITY: PRINCETON STATE: NJ ZIP: 08542 SC 13D/A 1 dsc13da.htm SCHEDULE 13D AMENDMENT NO. 1 Schedule 13D Amendment No. 1


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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under The Securities Exchange Act of 1934

(Amendment No. 1)¹

BIODELIVERY SCIENCES INTERNATIONAL, INC.

(Name of Issuer)

Common Stock, $0.001 par value per share

(Title of Class of Securities)

09060J106

(CUSIP Number)

David R. Ramsay

CDC IV, LLC

47 Hulfish Street, Suite 310

Princeton, New Jersey 08542

609-683-8300

(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

August 15, 2006

(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. ¨

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

¹	The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).


CUSIP No. 09060J106		13D		Page 2 of 7 Pages


1	NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

	CDC IV, LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
	(a) ¨
	(b) x
3	SEC USE ONLY

4	SOURCE OF FUNDS* (SEE INSTRUCTIONS)

	AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)	¨

6	CITIZENSHIP OR PLACE OF ORGANIZATION

	State of Delaware


NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7 SOLE VOTING POWER

		0
		8 SHARED VOTING POWER

		3,541,120
		9 SOLE DISPOSITIVE POWER

		0
		10 SHARED DISPOSITIVE POWER

		3,541,120


11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

	3,541,120 shares of common stock comprised of: (i) a warrant to purchase 601,120 shares of the Issuer’s common stock, issued in February 2006; and (ii) 2,000,000 shares of the Issuer’s common stock and a warrant to purchase 940,000 shares of the Issuer’s common stock, issued in May, 2006.
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)*	¨

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

	26.3%
14	TYPE OF REPORTING PERSON*

	OO


CUSIP No. 09060J106		13D		Page 3 of 7 Pages


1	NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

	CDC Operating LLC
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
	(a) ¨
	(b) x
3	SEC USE ONLY

4	SOURCE OF FUNDS* (SEE INSTRUCTIONS)

	AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)	¨

6	CITIZENSHIP OR PLACE OF ORGANIZATION

	State of Delaware


NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7 SOLE VOTING POWER

		0
		8 SHARED VOTING POWER

		3,541,120
		9 SOLE DISPOSITIVE POWER

		0
		10 SHARED DISPOSITIVE POWER

		3,541,120


11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

	3,541,120 shares of common stock comprised of: (i) a warrant to purchase 601,120 shares of the Issuer’s common stock, issued in February 2006; and (ii) 2,000,000 shares of the Issuer’s common stock and a warrant to purchase 940,000 shares of the Issuer’s common stock, issued in May, 2006.
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)*	¨

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

	26.3%
14	TYPE OF REPORTING PERSON*

	OO


CUSIP No. 09060J106		13D		Page 4 of 7 Pages


1	NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

	David R. Ramsay
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
	(a) ¨
	(b) x
3	SEC USE ONLY

4	SOURCE OF FUNDS* (SEE INSTRUCTIONS)

	AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)	¨

6	CITIZENSHIP OR PLACE OF ORGANIZATION

	United States of America


NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7 SOLE VOTING POWER

		0
		8 SHARED VOTING POWER

		3,541,120
		9 SOLE DISPOSITIVE POWER

		0
		10 SHARED DISPOSITIVE POWER

		3,541,120


11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

	3,541,120 shares of common stock comprised of: (i) a warrant to purchase 601,120 shares of the Issuer’s common stock, issued in February 2006; and (ii) 2,000,000 shares of the Issuer’s common stock and a warrant to purchase 940,000 shares of the Issuer’s common stock, issued in May, 2006.
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)*	¨

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

	26.3%
14	TYPE OF REPORTING PERSON*

	IN


CUSIP No. 09060J106		13D		Page 5 of 7 Pages


1	NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)

	Argeris Karabelas
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
	(a) ¨
	(b) x
3	SEC USE ONLY

4	SOURCE OF FUNDS* (SEE INSTRUCTIONS)

	AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)	¨

6	CITIZENSHIP OR PLACE OF ORGANIZATION

	United States of America


NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7 SOLE VOTING POWER

		0
		8 SHARED VOTING POWER

		3,541,120
		9 SOLE DISPOSITIVE POWER

		0
		10 SHARED DISPOSITIVE POWER

		3,541,120


11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

	3,541,120 shares of common stock comprised of: (i) a warrant to purchase 601,120 shares of the Issuer’s common stock, issued in February 2006; and (ii) 2,000,000 shares of the Issuer’s common stock and a warrant to purchase 940,000 shares of the Issuer’s common stock, issued in May, 2006.
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)*	¨

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

	26.3%
14	TYPE OF REPORTING PERSON*

	IN


CUSIP No. 09060J106		13D		Page 6 of 7 Pages


1	NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY).

	Jan Leschly
2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
	(a) ¨
	(b) x
3	SEC USE ONLY

4	SOURCE OF FUNDS* (SEE INSTRUCTIONS)

	AF
5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)	¨

6	CITIZENSHIP OR PLACE OF ORGANIZATION

	United States of America


NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH		7 SOLE VOTING POWER

		0
		8 SHARED VOTING POWER

		3,541,120
		9 SOLE DISPOSITIVE POWER

		0
		10 SHARED DISPOSITIVE POWER

		3,541,120


11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

	3,541,120 shares of common stock comprised of: (i) a warrant to purchase 601,120 shares of the Issuer’s common stock, issued in February 2006; and (ii) 2,000,000 shares of the Issuer’s common stock and a warrant to purchase 940,000 shares of the Issuer’s common stock, issued in May, 2006.
12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)*	¨

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

	26.3%
14	TYPE OF REPORTING PERSON*

	IN

EXPLANATORY NOTE

This Amendment No. 1 to the Schedule 13D amends and supplements Items 2, 4 and 7 of the Schedule 13D, filed June 12, 2006, by CDC IV, LLC, a Delaware limited liability company (“CDC IV, LLC”) relating to the Common Stock, $0.001 par value per share, of BioDelivery Sciences International, Inc., a Delaware corporation (the “Issuer”).

Item 2. Identity and Background

Based upon the developments discussed below, Elliott Associates, L.P., and persons associated with it, may be deemed to be participating in a group with CDC IV, CDC Operations, David R. Ramsay, Argeris Karabelas and Jan Leschly (the “Reporting Persons”) with respect to the Common Stock of the Issuer. The address of Elliott Associates is 712 Fifth Avenue, 36th Floor, New York, New York 10019.

Elliott Associates, L.P. has informed the Reporting Persons that it intends to file a Schedule 13D separately on its behalf and on behalf of persons associated with it to report its possible membership in a group. The Reporting Persons expressly disclaim membership in a group with Elliott Associates, L.P. and its affiliates.

Item 4. Purpose of Transaction

On August 15, 2006, CDC IV sent Issuer a non-binding letter of intent (the “LOI”) proposing certain amendments to the Clinical Development and License Agreement, by and among Issuer, CDC IV, as successor in interest to Clinical Development Capital LLC and Arius Pharmaceuticals, Inc. (the “Clinical Development and License Agreement”). The LOI proposes that CDC IV will provide Issuer will additional funding for clinical development of BEMA™ Fentanyl and receive, in return for such additional funding, increased fees and royalties under the Clinical Development and License Agreement, as well as a warrant to purchase additional shares of the Issuer’s common stock. Additionally, as a condition to amending the Clinical Development and License Agreement, CDC IV has requested that Issuer replace its current management and that CDC IV shall also receive a seat on Issuer’s Board of Directors. On August 18, 2006, Issuer rejected the LOI.

On August 21, 2006, CDC IV and Elliott Associates, L.P. sent a letter to Issuer expressing dissatisfaction with current operations and management. A copy of this letter is attached hereto as exhibit F.

Item 7. Material to Be Filed as Exhibits


Exhibit		Name
E†		Letter of Intent from CDC IV, LLC to BioDelivery Sciences International, Inc., dated as of August 15, 2006.

F		Letter from CDC IV, LLC and Elliott Associates, L.P. to BioDelivery Sciences International, Inc., dated as of August 21, 2006.

†	Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

Page 7 of 7

SIGNATURE

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. The undersigned hereby express our agreement that this Schedule 13D/A is filed on behalf of each of us pursuant to Rule 13d-1(k) under the Securities Exchange Act.


Dated: August 22, 2006	CDC IV, LLC

	By:	/s/ David R. Ramsay
	Name:	David R. Ramsay
	Title:	Authorized Signatory

Dated: August 22, 2006	CDC OPERATING LLC

	By:	/s/ David R. Ramsay
	Name:	David R. Ramsay
	Title:	Authorized Signatory

Dated: August 22, 2006	/s/ David R. Ramsay
	David R. Ramsay

Dated: August 22, 2006	/s/ Argeris Karabelas
	Argeris Karabelas

Dated: August 22, 2006	/s/ Jan Leschly
	Jan Leschly

Attention: Intentional misstatements or omissions of fact constitute Federal criminal violations

(See 18 U.S.C. 1001)

EX-99.E 2 dex99e.htm LETTER OF INTENT FROM CDC IV, LLC TO BIODELIVERY SCIENCES INTERNATIONAL INC Letter of intent from CDC IV, LLC to Biodelivery Sciences International Inc

Exhibit E

Highly Confidential

Confidential Summary of Proposed Amended Terms

Between BioDelivery Systems International and

Clinical Development Capital LLC

FOR DISCUSSION PURPOSES ONLY

DRAFT

This Confidential Summary of Proposed Amended Terms sets forth a preliminary proposal to amend the Clinical Development and License Agreement between BioDelivery Systems International (“BDSI”) and Clinical Development Capital LLC (“CDC”) related to BDSI’s BEMA formulation of fentanyl (the “Product”) entered into by the parties on July 15, 2005 (as amended, the “Development Agreement”). Except for provisions set out under the headings “Confidentiality” and “Exclusivity” below, this Confidential Summary of Proposed Terms is non-binding. The obligations of BDSI and CDC are subject to the parties entering into mutually acceptable definitive agreements, and subject to the completion of full due diligence and satisfaction of other conditions set forth herein.


Parties		BioDelivery Systems International (“BDSI”), a public company headquartered in Newark, NJ Clinical Development Capital LLC (“CDC”), a limited liability company headquartered in Princeton, NJ

Development Agreement		BDSI and CDC will amend the Development Agreement to include the following: • CDC will provide additional funding for the Program (as detailed in “Funding” and “Funded Costs” below); • Qualified Collaboration Partner shall mean a pharmaceutical firm approved by CDC; • Definition of “Development Program” to be clarified so that all protocols, studies and other details of the Development Program are subject to Development Committee review and are otherwise subject to the terms and conditions related to the Development Program as set forth in the Development Agreement.

Funding		CDC will provide a total of *** (the “Commitment”) for expenses related to the Program (as detailed in “Use of Proceeds” below), as follows: • CDC will pay BDSI * upon signing of definitive documents pertaining to this agreement • CDC will pay BDSI * upon the completion of two events: ***.

*****

Portion for which confidential treatment requested

Highly Confidential


		In connection with the foregoing, provisions similar to the previously deleted provisions contained in Sections 6.4.1(b), 6.4.5, 6.4.6, 6.5 and portions of 6.11 (in addition to other applicable provisions) shall be added back into the Development Agreement, as applicable.

Use of Proceeds		With respect to the *** contemplated in this amendment, the funds can be used for expenses related to the program and for general corporate overhead, as described below. Expenses related to the Program shall include any *, including, but not limited to *. Expenses shall also include * by CDC pursuant to * and may be * (and to the extent *). A cap on such amounts will be determined prior to definitive documentation. General corporate overhead shall include * *. BDSI is prohibited from using the funds on ***. Under no circumstances will CDC be required to fund any Expenses or other amounts in excess of the Commitment.

Right to Terminate Funding		In addition to other rights to terminate funding as set forth in the Development Agreement, upon breach of any representation, warranties or covenants in the Agreement by BDSI, CDC shall have the right, in addition to all other rights and remedies, to cease funding any additional amounts under the Development Agreement.

BDSI License		As described in the Development Agreement, upon approval of the Product by the FDA and payment of any and all milestones payable by BDSI to CDC, CDC will grant BDSI a perpetual, exclusive license to all of CDC’s rights to the clinical data related to the Program (the “BDSI License”). This Agreement will be amended to include the following payment terms (which amounts

***** Portion for which confidential treatment requested

Highly Confidential


		shall be in addition to any and all amounts (including existing royalties) payable pursuant to the existing Development Agreement): • CDC will receive from BDSI an additional *** within 30 days of receipt of approval for the Product from any applicable governmental or regulatory authority anywhere in the world; plus, • CDC will receive from BDSI an additional royalty, payable quarterly in arrears, equal to *. • This additional royalty will have the same provisions for adjustments as the original royalty. • The trigger for the minimum royalty payment which was previously based upon NDA approval shall be revised to be based upon *. This trigger shall apply to ***. For purposes of clarity, the other existing triggers for minimum royalties (based, among other things, on first commercial sale of the Product) shall remain in the Development Agreement and be applicable for all royalties as well.

Consequences of Unsuccessful Development		No changes to the Development Agreement.

Warrants		Upon execution of the definitive agreements for the proposed transaction CDC will receive an additional *** warrants for unrestricted and registered common shares of BDSI (the “Warrants”), with the following terms • The Warrants will be exercisable at *** per share • The Warrants will be exercisable, in whole or in part, on a cash or cashless basis, at any time up to the second anniversary after the Approval of the Product • The Warrants will be protected from dilution on a full-ratchet basis • If CDC fails to fund a portion of the Commitment without cause, a portion of the Warrants representing the pro rata amount of such failed funding will be forfeited by CDC • The Warrants will have appropriate registration rights

***** Portion for which confidential treatment requested

Highly Confidential


Change of control of BDSI		No changes to the Development Agreement.

Development Program		*****

Reporting/ Disclosure		Any press releases or other public communications by the parties regarding this transaction will be mutually agreed in writing.

Documentation		The transaction will be entered into by execution of definitive agreements containing, among other things, appropriate representations and warranties of BDSI (including with respect to pre-clinical and clinical data, regulatory issues, intellectual property and corporate authorization, among other things) and covenants of BDSI and CDC reflecting the provisions set forth herein.

Indemnification		CDC will be indemnified by BDSI to the full extent permitted by applicable law for all liabilities arising out of CDC’s participation in the Program including their representation on the Program Committee, and subsequent sales of the Product, except to the extent of willful misconduct or gross negligence by CDC or its Program Committee representative.

Confidentiality		Except as already disclosed or as required by applicable law, neither party hereto shall make any public disclosure concerning the existence of this term sheet, its contents or the status of the negotiations between BDSI and CDC with respect to the proposed transaction without obtaining the prior consent of the other party.

Exclusivity		Until 90 days from the signing of this term sheet, unless CDC earlier terminates its consideration of the proposed transaction, BDSI will not, and will ensure that its affiliates and representatives will not, without the prior approval of CDC, solicit the interest of, encourage, facilitate or enter into or conduct any discussions with, negotiate with, or enter into any agreement with any other persons or companies regarding a transaction similar to the proposed transaction.

Governing Law		All documents related to the transactions contemplated hereby shall be governed and construed in accordance with the laws of New York. The parties will agree to submit all claims related to this Summary of Terms and any definitive agreements to arbitration.

***** Portion for which confidential treatment requested

Board Seat; Change in Management as Condition to Execution of Definitive Documents

• Prior to executing definitive agreements for the matters contemplated herein, the management of BDSI (and its subsidiaries, as applicable) shall be replaced with new management acceptable to CDC. In addition, prior to executing definitive agreements, and thereof xxx CDC shall have the right to appoint a director to the Board of Directors of BDSI (and its subsidiaries, as applicable).

Additional Conditions to Execution of Definitive

Documents

• Satisfactory completion of due diligence by CDC;

• Completion of legal documentation satisfactory to BDSI and CDC;

• Approval by the Boards of Directors of BDSI and CDC of the terms of the transaction and the documents related thereto;

• Consent and/or waiver by applicable third parties;

• Compliance with all applicable federal and state securities laws, and stock exchange rules.

If BDSI is in agreement with the foregoing please so indicate by signing this Summary of Terms in the space below.


On behalf of BDSI,		On behalf of CDC,


Name:		Name:
Title:	Authorized Officer	Title:	Authorized Officer
Date:		Date:

***** Portion for which confidential treatment requested

EX-99.F 3 dex99f.htm LETTER OF INTENT FROM CDC IV, LLC TO BIODELIVERY SCIENCES INTERNATIONAL INC Letter of intent from CDC IV, LLC to Biodelivery Sciences International Inc

Exhibit F


				CDC IV, LLC
				47 Hulfish Street, Suite 310
				Princeton, New Jersey 08542

				August 21, 2006

Via Email and Facsimile

The Board of Directors

BioDelivery Sciences International, Inc.

2501 Aerial Center Parkway, Suite 205

Morrisville, NC 27560

Dear Members of the Board of Directors:

We are writing to you on behalf of CDC IV LLC, which is the beneficial owner of 26.1% of the currently outstanding shares of BioDelivery Sciences International, Inc. (“BDSI” or the “Company”). Over the past several months we have expressed to your management team and your Chairman our increasing level of concern related to the Company’s execution of development activities and its financial strategy. We have now reached a point where we are convinced, based on the factors outlined below, that the management and the Board are not fulfilling their fiduciary obligation to act in the best interests of the Company’s shareholders and that unless an immediate and significant change is made in the management of the Company, BDSI faces significantly increased operating and financial risk.

We have communicated our concerns to you several times. On June 14, 2006, representatives of Elliott Associates met with BDSI’s Chairman, Dr. Francis E. O’Donnell, and brought to his attention several urgent matters. After acknowledging our concerns, Dr. O’Donnell encouraged us to use our resources to identify new management for BDSI.

Over the subsequent weeks we became increasingly alarmed by the Company’s activities and on July 14 we wrote an urgent letter to the Board requesting attention to various matters. On August 9, we met again with Dr. O’Donnell, accompanied by certain of our consultants. In this meeting we presented our grave concerns regarding senior management’s operating and financial strategy. As Dr. O’Donnell had requested, we also introduced a potential CEO candidate who we believe would be far better suited to manage the Company’s activities. During this discussion, Dr. O’Donnell also requested that we provide a financing proposal to address the Company’s imminent shortage of funds. On August 15, we submitted such a proposal, a condition of which was that BDSI’s Board replace the Company’s CEO. On August 18, we were informed by Dr. O’Donnell that our term sheet was rejected and that our request for a Board meeting to present our concerns was denied.

While we have been growing increasingly concerned about our investment and the Company’s future, the Board has taken no action. Exacerbating these concerns is the fact that the Company is rapidly running out of cash. As of June 30 the Company’s cash balance was $5.2 million. Based on the Company’s historical overhead and cash burn rate, it is clear that the Company is either rapidly approaching, or has reached, the zone of insolvency. In the face of this crisis, rather than conserve cash, management appears to be spending precious time and cash on non-core activities. As demonstrated by the numerous press releases issued by the Company, BDSI is continuing to invest resources on programs that appear to be peripheral to the advancement of the Company’s lead program. It is our firm belief, which we have emphatically and repeatedly stated to management and Dr. O’Donnell, that the only opportunity to raise further capital on attractive terms to the current shareholders would be based on successful results from the BEMA™ Fentanyl program. Every dollar of cash wasted prior to achieving these results would

result in the requirement to raise further funds to reach these results on excessively dilutive terms. We find this particularly distressing because we believe that BEMA™ Fentanyl is a very attractive asset with both a relatively low risk profile and the capacity to provide significant and concrete financial value to shareholders in the very near term. Success in this program would result in either liquidity from a partnering transaction or the ability to raise public equity capital at a significantly higher stock price.

Based on these facts, we can only conclude that management and the Board are recklessly spending the Company’s limited remaining financial resources and that management is indifferent to the significant dilution which will be suffered by existing shareholders in the event of a financing of the Company prior to the achievement of significant results in the BEMA™ Fentanyl program.

To address this financial crisis we expect that BDSI will draw down on the remainder of its $2.55 million committed equity line with Hopkins Capital Group, as these shares convert at $4.25, a significant premium to today’s stock price. Given the relatively attractive terms of this commitment, the Board of BDSI has a clear fiduciary obligation to use this capital before engaging in a more costly and dilutive financing transaction. Nevertheless, it is unclear that even with these funds, BDSI will be sufficiently funded to achieve meaningful results from its fentanyl program.

We believe we have been constructive and helpful in working with management in the development of BEMA™ Fentanyl in accordance with the Clinical Development and License Agreement (dated July 15, 2005 and amended May 16, 2006). We remind the board that we have significant contractual rights in this agreement that relate to our control over the execution of the BEMA™ Fentanyl program which to date have not been fully and correctly observed by management. The Board should be aware that we fully intend to exercise and protect these rights.

As outlined above, we are extremely concerned about the Company’s current situation and we believe that all shareholders of BDSI would be far better served with new senior management. We regret the medium and manner in which we have been forced to bring this discourse, however, we can no longer stand idly by as our promising investment is irreversibly bungled. As we have always been, we continue to be available to discuss with the management and the Board the most effective ways to move forward.

On behalf of CDC IV,

/s/ David R. Ramsay

David R. Ramsay

On behalf of CDC Operating LLC, managing

member of CDC IV LLC

/s/ Jesse A. Cohn

Jesse A. Cohn

On behalf of Elliott Associates

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