Napo Pharmaceuticals

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Interim Management Statement

South San Francisco, California, 21 April 2008 Napo Pharmaceuticals, Inc., (LSE: NAPL and NAPU) is today issuing its Interim Management Statement ("IMS"). This IMS relates to the three month period from 1 January 2008 to 31 March 2008 and contains information up to the publication of this IMS ("the period").

Material Events

CRO-ID Phase 2a Infectious Diarrhoea Trial

Statistically significant Phase 2a trial for CRO-ID (crofelemer for the treatment of acute adult infectious diarrhoea) conducted by Napo's partner, Glenmark Pharmaceuticals Limited. The results were based on an observed case analysis. Further analysis is ongoing, as per the protocol and ITT analysis will be published as and when it is available.

CRO-HIV Phase 3 Trial

The CRO-HIV ADVENT trial is a multicenter US trial and enrolment into the trial is directed towards showing clinical benefit of the drug in the patients who have consistent significant watery diarrhoea, which is a subset of the larger number of HIV patients who meet the criteria of having chronic diarrhoea. The Company adopted this strict requirement of the study protocol to minimise the variability in the study results and increase the power of the study. Since commencement of enrolment, over 200 patients have presented with chronic diarrhoea for evaluation for study participation, however, less than 50% have met the strict criteria for watery diarrhoea for study enrolment. Accordingly, Napo now anticipates that the Stage I interim results will be available from the CRO-HIV trial in the second half of this year and that the final results and a NDA filing will occur in the first half of 2009; this is subject to further funding.

CRO-ID Phase 2 Cholera Trial

Napo is testing lower doses and different formulations in the continuation of the cholera trial (See May 21, 2007 press release "Ethics Committee Approval Granted for MultipleDose Continuation of Phase 2 Clinical Trial of Crofelemer for Treatment of Secretory Diarrhoea Associated with Cholera Infection"). This trial is ongoing and Napo anticipates results from the trial in Q2 2008.

CRO-IBS Phase 2b Trial

This trial was conducted by Napo's former licensee, Trine Pharmaceuticals Inc ("Trine"). On 11 February 2008 Napo announced Trine's disclosure to Napo of Trine's review of preliminary data of the Phase 2b study conducted by Trine for the treatment of diarrhoea-predominant irritable bowel syndrome ("D-IBS") with crofelemer ("CRO-IBS"). Napo was informed by Trine that they have determined that: i) the primary clinical endpoint of pain was not achieved; and ii) that there were no drug related adverse events. Napo and Trine have mutually terminated the license of crofelemer to Trine. The Company recently received the data package from the trial and is evaluating the data.

Strengthened intellectual property position

In the US, Napo received a composition of matter patent and a use patent for "enteric formulations of proanthocyanidin polymer anti-diarrhoeal compositions" which expire in 2017 and 2018, respectively. Napo reached agreement with the University of Iowa Research Foundation to obtain the non exclusive, royalty free license of United States Patent No. 5,234,922, and titled "Use of Sulfonylureas and Other Potassium Channel Regulators to Treat Secretory Diarrhoea", and in the inventions described and claimed therein.

Cash Position

Napo had cash and cash equivalents plus short term investments as at 31 March 2008 of US$5.1 million. Napo expects that this level of cash and cash equivalents plus short term investments will last into July 2008.

Financing

In March 2008, Napo entered into note and warrant purchase agreements for the issuance of convertible promissory notes that bear interest at a rate of 3.2 per cent for a total of US$2,250,000 ("2008 Notes"). Up to 25 per cent of the principal amount of the 2008 Notes are convertible into shares of Napo common stock at a price of 27.9 pence per share. If the maximum conversion takes place, the Company would issue 1,016,655 shares of Napo common stock. The remaining 75 per cent of the 2008 Notes are repayable in cash on 31 July 2008. Holders of the 2008 Notes were also issued warrants to purchase 3,049,965 common shares of Napo common stock exercisable at any time from 31 July 2008 until 3 March 2013 at the conversion price of 27.9 pence per share.

In March 2008, coincident with the 2008 Notes Napo issued 600,000 shares of common stock to an investor at 25 pence per share. Approximately 1,084,432 warrants to purchase Napo common stock were issued to a group of trade contractors exercisable at $0.55 per share.

Outlook

Napo received a "going concern" opinion from its US auditors, BDO Seidman LLP for the year ended 31 December 2007. The opinion states that the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern.

Management have plans to raise additional funds, which include: the out-license of certain rights to crofelemer including the indications of CRO-HIV, CRO-IBS, CRO-ID and CRO-PED in the United States and other western territories; as well as certain rights to NP-500, in exchange for a licensing fee(s). Such licensing fees may need to be supplemented with debt or equity issuances in order for Napo to have sufficient funds to complete the CRO-HIV Phase 3 clinical trial. If Napo is unable to attract such funding through a combination of licensing fees and equity or debt issuances, it may be forced to curtail sharply its operations including discontinuing the CRO-HIV trial.

Sir William Young, Chairman of the Board of Napo commented:"While Napo needs to bring in funds from corporate partnering and other activities in order to complete its Phase 3 trial, the board feels the recent stock price drop dramatically undervalues the company."

Lisa A. Conte CEO of Napo Pharmaceuticals, Inc. commented:"It is my firm belief that, the fall in the Company's share price places an unrealistic value on Napo and disregards the recently announced trial results."

The statistically significant results on crofelemer in the treatment of acute infectious diarrhoea have infused our on-going corporate partner and grant discussions with the opportunity to represent a potential dual indication approach to filings for regulatory approvals for crofelemer next yearchronic diarrhoea in people living with HIV/AIDS and acute infectious diarrhoea. This approach may potentially increase the likelihood of regulatory approval for at least one indication of crofelemer, it may also expand the available patient populations that might benefit from crofelemer, as well as increasing the target market size."

For more information please contact:

Napo Pharmaceuticals, Inc.
Lisa Conte, Chief Executive Officer
+001 (650) 616-1902

Charles Thompson, Chief Financial Officer
+001 (650) 616-1903

Buchanan Communications
+ 44 (0)20 7466 5000
Tim Anderson, Mary-Jane Johnson, Catherine Breen

About Napo Pharmaceuticals, Inc.

Napo Pharmaceuticals, Inc. focuses on the development and commericalization of proprietary pharmaceuticals for the global marketplace in collaboration with local partners. Napo was founded in November 2001, and is based in California, USA with a subsidiary in Mumbai, India.

Napo's late-stage proprietary gastro-intestinal compound, crofelemer, is in various stages of clinical development for four distinct product indications, including a late-stage Phase 3 program:

• CRO-HIV for AIDS diarrhea, Phase 3
• CRO-IBS for diarrhea irritable bowel syndrome (D-IBS), Phase 2
• CRO-ID for acute infectious diarrhea (including cholera), Phase 2
• CRO-PED for pediatric diarrhea, Phase 1

The FDA has granted fast-track status to CRO-IBS and CRO-HIV.

CRO-HIV is being evaluated in a randomised, double-blind, parallel-group, placebo-controlled, two-stage, adaptive design study to assess the efficacy and safety of crofelemer at 125mg, 250 mg, and 500 mg oral doses twice daily ("po BID") for the treatment of chronic diarrhoea in people living with HIV/AIDS (the "ADVENT" trial). The ADVENT trial will be executed in two stages. Stage I represents a dose selection stage and Stage II a dose assessment stage. Four dose groups (placebo, 125 mg, 250 mg, and 500 mg) are being assessed in Stage I. When approximately 50 subjects per group complete the initial efficacy dosing period (28 days), an interim analysis will be conducted to select an optimal single dose of crofelemer for Stage II. Stage II will continue until an additional 75 subjects are randomised both to this dose of crofelemer and the placebo, providing for 125 patients on placebo and 125 patients the selected crofelemer dose.

Crofelemer, a proprietary patented first in class agent, is extracted from Croton lechleri, a medicinal plant which can be sustainably harvested from several countries in South America. Napo has exclusive worldwide rights to synthetic compounds in pre-clinical development which act by the same mechanism of action. Napo also plans to develop an early clinical stage product, NP-500, for the treatment of insulin resistant diseases of Type II diabetes and metabolic syndrome (Syndrome X; pre-diabetic syndrome) and has 4 issued patents for anti-cancer agents in pre-clinical development. Napo has a plant library of approximately 2,300 medicinal plants from tropical regions and Napo has entered two screening relationships associated with this collection. Currently, products are based on the chemical and biological diversity derived from plants with medicinal properties, but future products may be in-licensed from other sources.

Napo has partnerships with Glenmark Pharmaceuticals Limited of India and AsiaPharm Group Ltd. of China.

For more information please visit www.napopharma.com.

Disclaimer The Shares referenced in this announcement are not for distribution, directly or indirectly, in or into the United States or to any US person as defined in Regulation S under the US Securities Act of 1933, as amended ("Regulation S") except in compliance with the Securities Act of 1933, as amended (the "Securities Act"). This announcement is not an offer of securities for sale into the United States or elsewhere. The Shares described above have not been registered under the Securities Act and may not be offered or sold in the United States or to, or for the account or benefit of, US persons (as such term is defined in Regulation S) unless they are registered under the Securities Act or they are exempt from registration under the Securities Act. No offer or sale of Regulation S securities has been made or will be made in the United States. Hedging transactions involving these securities may not be conducted unless in compliance with the Securities Act.

This release contains certain statements, statistics and projections that are or may be forward-looking. These statements are based on the current expectations or beliefs of Napo's. management and are subject to a number of factors and uncertainties (including the "Risk Factors" identified in Napo's Prospectus issued on 28 September 2007) and the outcome of these events may differ materially from those described in the forward-looking statements. The accuracy and completeness of all such statements, including, without limitation, statements regarding the future financial position, strategy, projected costs, plans and objectives for the management of future operations of Napo and its subsidiaries is not warranted or guaranteed. These statements typically contain words such as "intends", "expects", "anticipates", "estimates" and words of similar import. By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Although Napo believes that the expectations reflected in such statements are reasonable, no assurance can be given that such expectations will prove to be correct. There are a number of factors, which may be beyond the control of Napo, which could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. Other than as required by applicable law or the applicable rules of any exchange on which our securities may be listed, Napo has no intention or obligation to update forward-looking statements contained herein. You should not place undue reliance on forward looking statements, which speak only as at the date of this announcement.