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Napo Obtains Special Protocol Assessment Agreement from FDA for Crofelemer in HIV/AIDS Diarrhea Assessment

South San Francisco, California, July 3, 2007 - Napo Pharmaceuticals, Inc., (LSE: NAPL) which focuses on the development and commercialisation of proprietary pharmaceuticals for the global marketplace in collaboration with local partners, is pleased to announce today that under the Special Protocol Assessment (SPA) process it has obtained agreement with the United States Food and Drug Administration (FDA) for the design of its pivotal study protocol for crofelemer for the treatment of chronic diarrhea in people with HIV/AIDS (CRO-HIV).

The study, also referred to as the ADVENT trial, will be carried out under an FDA Fast Track designation. On 16 January 2007 Napo met with FDA under the Special Protocol Assessment Process on this adaptive design of its ADVENT trial. On 14 March 2007 Napo announced it had received approval from the principal independent review board "IRB" overseeing the ADVENT trial.

The ADVENT trial - (Anti-Diarrhea therapy in HIV disease-Emerging treatmeNT concepts) is 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 ("p.o.b.i.d") for the treatment of HIV-Associated diarrhea.

The 'adaptive design' of the ADVENT trial - Adaptive trial design has been advocated by the FDA to improve efficiency of clinical trials*. 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) will be assessed in Stage I. When 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. The primary study analysis is planned after all subjects complete the 28-day efficacy period. A full study analysis and final study report will be prepared at that time that will form the basis of a subsequent New Drug Application (NDA) filing to FDA. Subjects who complete the efficacy part of the study will be allowed to continue into an open-label 5 month extension. The purpose of the extension is to provide additional safety and tolerability information about crofelemer in longer tem use.

Commenting on this announcement, Lisa Conte, Chief Executive Officer of Napo Pharmaceuticals, said: "The SPA agreement is an important milestone for Napo, allowing us to address and mitigate regulatory uncertainty prior to the completion of our final Phase 3 trial in support of the Company's first NDA filing, targeted for early 2008."

Dr. Scott Harris, Vice President, Clinical Affairs, and Chief Medical Officer, said: "Napo has taken every effort to design and execute a Phase 3 program with the highest possible probability of success, incorporating experience from approximately 1500 patients studied in clinical trials involving crofelemer. Fifty five patients have already enrolled in a previously conducted Feasibility Study of CRO-HIV. We expect these patients to be immediately eligible for enrolment for the ADVENT study."

About Special Protocol Assessment

The FDA's SPA process was implemented under the Prescription Drug User Fee Act (PDUFA) in November 1997. The SPA process provides for review and agreement on the design of protocols for Phase 3 trials whose data will form the primary basis for an efficacy claim. To use this process, companies planning clinical trials submit a study protocol with related questions. The FDA may then review and agree to the protocol design, execution and analyses and issue a special protocol letter to that effect. Once the FDA agrees in writing to a protocol reviewed under this process, the assessment should be considered binding on the review division of the FDA as long as the protocol is followed, unless substantial scientific issues essential to determining the safety or efficacy of the drug are being identified after the testing has begun.

References:

*Scott Gottlieb, MD, 2006 Conference on Adaptive Trial Design, July 10, 2006, http://www.fda.gov/oc/speeches/2006/trialdesign0710.html.

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
020 7466 5000
Tim Anderson, Mary-Jane Johnson

Nomura Code Securities Limited
020 7776 1205
Clare Terlouw

About Napo Pharmaceuticals, Inc.

Napo Pharmaceuticals, Inc. focuses on the development and commercialisation 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.

Napos 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 paediatric diarrhea, Phase 1

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

Crofelemer, a proprietary patented agent, is extracted from Croton lechleri, a medicinal plant which can be sustainably harvested from several countries in South America. 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). Napo also has a plant library of approximately 2,300 medicinal plants from tropical regions, and Napo has entered two screening relationship 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 Trine Pharmaceuticals, Inc. of the United States of America; Glenmark Pharmaceuticals Limited of India; and AsiaPharm Group Ltd. of China. For more information please visit www.napopharma.com.

About Crofelemer

Crofelemer, a proprietary patented agent, is extracted from Croton lechleri, a medicinal plant which can be sustainably harvested from several countries in South America. Crofelemer is in various stages of clinical development for four distinct product indications, one in Phase 3, two in Phase 2 and one in Phase 1.

Crofelemer has been tested in trials involving approximately 1500 patients in double-blind placebo-controlled, published trials of AIDS diarrhea, diarrhea-predominant IBS, and acute infectious diarrhea. It is generally well tolerated and has shown significant anti-diarrheal activities and improvement in gastrointestinal symptoms. Crofelemer produces several effects when administered orally providing for activity in several disease indications. Crofelemers anti-secretory mechanism reduces excess fluid secreted into the gastro-intestinal tract, while its anti-inflammatory and analgesic activity may provide the rationale for its significant benefit in abdominal pain. Crofelemer acts locally in the intestines, with limited systemic exposure.

CRO-HIV is being developed to address chronic diarrhea in people living with HIV/AIDS. Based on epidemiological data1, access to medication2 and evidence on the incidence of chronic diarrhea in patients with HIV/AIDS3, the Directors of Napo estimate that peak sales of crofelemer for HIV/AIDS-related chronic diarrhea could exceed US$300 million in the US.

At the end of 2003, there were approximately 1,000,000 HIV/AIDS patients under care in the US4. The post-HAART highly active ARVs HIV AIDS population shows incidence of diarrhea ranging from 6-19 per cent with 15 per cent managing diarrhea chronically, and 50 per cent refractory to currently available alternatives. At the end of 2005, there were approximately 720,000 HIV/AIDS patients in Europe.

The cause of diarrhea is often unknown, as causative infectious agents are rarely discovered: in as many as 50 per cent of HIV-infected patients with diarrhea, no pathogen can be identified and HIV itself may be the cause5. However, in 2003, there were 37,000 ARV drug switches in US HIV/AIDS patients due to diarrhea, the second most common reason for switching ARV drugs6. In some cases, there can be a negative reaction in connection with some medications used to manage diarrhea and this is thought to be caused by certain ARV regimes

AIDS patients on ARV therapy with unmanaged diarrhea have been shown to be non-compliant with HIV medications. Non-compliance is a major cause of the emergence of resistant HIV viral strains, providing a strong medical rationale for treatment on a global basis.

References:

1. UNAIDS/WHO - World Health Organisation. Progress on global access to HIV antiretroviral therapy (2005)

2. Screening for HIV for the US Preventative Services Task Force, An Intern Med 2005: 14 3:55-73

3. S. A. Call et al American Journal of Gastroentoology, Vol. 95 Page 3142

4. Glynn M. Rhodes P. Estimate HIV prevalence in the United States at the end of 2003. National HIV prevention conference; June 2005; Atlanta. Abstract 595, abs CDC basic facts