Napo Pharmaceuticals

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US$2.1 MILLION FUNDRAISING AND UPDATE ON PARTNERSHIP DISCUSSIONS

South San Francisco, California, 23 June, 2008 - Napo Pharmaceuticals, Inc., (LSE: NAPL and NAPU), is pleased to announce that, as part of its ongoing fundraising activities, the Company has raised approximately US$2.1 million gross (US$2.0 million net) (approximately GBP1.1 million gross (GBP1.0 million net)) through the issue of:

approximately US$1.98 million (approximately GBP1.0 million) of convertible debt (the "Notes"); and

approximately US$.01 million (approximately GBP0.05 million) through the issuance of Common Shares at 9.85 pence (the "Subscription", together with the Notes, the "Fundraising").

The Notes are repayable on the first anniversary of their issue and bear interest at 8% per annum, payable in cash or the Company's common shares of US$0.0001 each ("Common Shares"). In most circumstances, the Notes are convertible after 90 days at the option of the holders into Common Shares, at 9.85 pence per Common Shares, being the average of the mid market closing price of the Common Shares quoted in the Official List published by the UK Listing Authority over the 10 trading days prior to the date of issue, (the "Conversion Price"). No warrants will be issued as part of the Fundraising.

The maximum number of Common Shares that may be issued under a conversion at the Conversion Price is 10,189,366 Common Shares (the "Conversion Shares"), representing approximately 18.8 per cent of the issued share capital of the Company as enlarged by the Subscription Shares.

Any issue of Conversion Shares pursuant to conversion of the Notes is subject to the approval by the Company's shareholders. A circular convening a meeting of the Company's shareholders seeking such approval is expected to be published shortly. If required, application for the Conversion Shares to be admitted to listing on the Official List and to trading on the London Stock Exchange's Main Market will be made at the relevant time. The issue of the Notes is not conditional on shareholder approval.

Pursuant to the Subscription 507,614 Common Shares (the "Subscription Shares") are being issued, representing 0.9 per cent of the Company's current issued share capital. Application for the Subscription Shares to be admitted to listing on the Official List and to trading on the London Stock Exchange's Main Market ("Admission") will be made and Admission is expected to take place on or around 27 June 2008.

The net proceeds of the Fundraising (the "Net Funds") are not sufficient to complete the Phase 3 adaptive design trial for CRO-HIV. The Company expects that the Net Funds to provide the Company with funds into August 2008. The Net Funds, together with existing resources and other funds which the Directors expect to raise through 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), will be used primarily for working capital purposes and to continue to finance the costs of the CRO-HIV Phase 3 US trial. 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.

Update on Ongoing Partnership Discussions

Napo's goal is to obtain commercial partners for the Company's western rights to crofelemer, and in particular the first expected indication to market in the US, crofelemer for chronic diarrhea in people living with HIV/AIDS (CRO-HIV). The New Drug Application ("NDA") for this indication is expected to be filed in mid-2009.

The directors are confident that the Company will be able to secure a partnership for the commercial rights to crofelemer which will provide sufficient resources to the Company to fund the development of CRO-HIV through to FDA approval.

The Company has now progressed commercial license discussions with at least two potential partners, with customary commercial pharmaceutical license provisions including development costs, milestones, and royalty payments. Any license agreement will be subject to mutual diligence and a definitive agreement.

The Company expects to sign definitive agreement(s) in Q3, 2008.

Lisa Conte, Napo's CEO commented: "We are pleased to announce this fundraising and the financial strength it provides Napo to complete our corporate licensing discussions while continuing with the progress of our final Phase 3 clinical trial for CRO-HIV and all NDA related activities. These on-going activities are the nearest term value recognized by our potential commercial partner(s)."

For more information please contact:

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

Charles Thompson, Chief Financial Officer
+001 (650) 616-1902

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.

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.

For more information please visit www.napopharma.com.

This announcement contains forward-looking statements relating to Napo Pharmaceuticals and its products that involve risks and uncertainties, including statements regarding future products and developments that are not historical facts. Such statements are only predictions and the company's actual results may differ materially from those anticipated in these forward-looking statements. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should,'' "could," "project," "plan,'' "seek," "intend,'' or "anticipate'' or the negative thereof or comparable terminology and statements about industry trends and Napo's future performance, operations and products.