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Pharmos Issues Letter to Shareholders
Date:9/10/2007

obtained several pipeline assets that were either in, or ready to start, clinical trials. The lead drug, dextofisopam, is being developed as a treatment for irritable bowel syndrome (IBS), which remains a dramatically underserved treatment market in the U.S. and abroad. In June 2007, we commenced a Phase 2b study of dextofisopam, which is expected to enroll approximately 480 female patients with diarrhea- predominant or alternating IBS. The new study follows a successful Phase 2a study in 141 IBS patients in which dextofisopam demonstrated a statistically significant improvement over placebo on the primary endpoint of adequate overall relief. Affecting 10-15% of US adults, IBS is a large market with significant direct and indirect costs, and limited treatment options. We are enthusiastic about the opportunity dextofisopam presents to deliver a new medication to the IBS patient segment, since it involves a totally new mechanism of action in this space and appears to offer a safer and more balanced treatment than is currently available.

The Phase 2 study of our proprietary NanoEmulsion (NE) drug delivery technology formulated with 3% diclofenac in patients with osteoarthritic knee pain continues to recruit patients at the anticipated pace. We plan to enroll 126 patients in the study with data expected by the middle of 2008. Strategically, the NE program broadens our development pipeline and carries with it a reduced technical risk for products having significant market potential. Osteoarthritis affects roughly 12% of U.S. adults, many of whom do not receive pharmacological treatment due to side effects associated with the commonly used oral medicines. Diclofenac is an approved and widely used generic non-steroidal anti-inflammatory drug (NSAID). However, oral administration of NSAIDs results in higher systemic drug exposure, which may lead to serious adverse effects as compared to topical application.

Our expertise continues to grow in our core proprietary
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SOURCE Pharmos Corporation
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