Napo Pharmaceuticals

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Issue of Convertible Promissory Notes

South San Francisco, California, 7 January 2008 - South San Francisco, California, Napo Pharmaceuticals, Inc., (LSE: NAPL), which focuses on the development and commercialization of proprietary pharmaceuticals for the global marketplace in collaboration with local partners, is pleased to announce that, as part of its ongoing fundraising activities, the Company has raised US$1.475 million (approximately GBP 0.749 million) gross (US $1.35 million (approximately GBP 0.685 million) net) by way of an issuance of convertible promissory notes (the "Notes").

The Notes will be for a term of three years ending 28 December 2010 and bear simple interest on the unpaid principal balance at 8.0 per cent until the Notes are paid.

Subject to the holder of the Notes electing to convert, Napo shall be entitled to prepay the Notes following the first anniversary of the Notes.

The Notes may not convert into common shares of the Company before an equity financing of $10 million gross or more (the "Equity Financing") or 1 July 2008, whichever is first, except in relation to a reorganization of the Company. Only the principal due under the Notes is convertible into common shares of the Company.

If the Company has entered into an Equity Fundraising prior to 1 July 2008, holders of the Notes may elect at any time over the remaining period of the term to convert the principal due under the Notes into equity at the same price, terms and conditions sold to the investors in the Equity Financing.

If no Equity Fundraising is entered into before 1 July 2008, holders of the Notes may elect to convert the principal outstanding under the Notes at anytime whilst the Notes remain outstanding at a share price equal to the ten day average mid-market price per share as traded on the London Stock Exchange immediately prior to the election to convert provided that this price shall not be less than US$0.38 (or its sterling equivalent) per share.

The maximum number of common shares that would be issued under a conversion where no Equity Fundraising has been entered into before 1 July 2008 is 3,881,578, being approximately 7.3 per cent of the current issued share capital of the Company.

The net proceeds of Notes, together with existing resources and other funds which the Directors expect to raise through other fundraising activities such as debt and equity finance and business development activities, will be used primarily to finance costs of the US CRO-HIV Phase 3 Two Stage Adaptive Design clinical trial.

For more information please contact:

Napo Pharmaceuticals, Inc.
Lisa Conte, Chief Executive Officer
+1 (650) 616-1902

Charles Thompson, Chief Financial Officer
+1 (650) 616-1902

Buchanan Communications
+ 44 (0)20 7466 5000
Mary-Jane Johnson