Welcome To Pharmos Corp

Pharmos Agrees to Acquire Vela Pharmaceuticals Inc.

Expands Pipeline with Later-Stage Clinical Drug Candidates Including R-tofisopam, a Drug with Positive Phase 2 Data for the Treatment of Diarrhea-Predominant and Alternating-Type IBS

Broadens Management Team and Board with Accomplished Industry Leaders

Iselin, NJ, March 15, 2006 – Pharmos Corporation (Nasdaq: PARS) announced today that it has entered into a definitive agreement to acquire Vela Pharmaceuticals Inc., a venture-capital backed, privately owned company specializing in the development of medicines related to diseases of the nervous system including disorders of the “brain-gut axis.” The transaction includes an initial payment of $5.0 million in cash and the issuance of 11.5 million shares of Pharmos common stock for a combined value of approximately $29.7 million (based on Pharmos’ recent $2.15 per share closing stock price). The transaction also includes the issuance of up to 8.0 million additional Pharmos shares contingent on achieving specific clinical milestones.

Pharmos discovers and develops novel therapeutics to treat a range of indications including neurological and inflammatory disorders. The Company’s core proprietary technology platform focuses on discovery and development of synthetic cannabinoid compounds. Cannabinor, the lead CB2-selective receptor agonist candidate, is scheduled for Phase II testing in pain indications during 2006. Other compounds from Pharmos’ proprietary synthetic cannabinoid library are in pre-clinical studies targeting pain, multiple sclerosis, rheumatoid arthritis and other disorders.

Dexanabinol

Dexanabinol is Pharmos’ first neuroprotective agent. Dexanabinol does not bind to either of the known cannabinoid receptors. Its pharmacological activity is related to its ability to inhibit NMDA receptors and to block COX-2, cytokines and chemokine activation thereby acting as an anti-inflammatory and neuroprotective agent.

Coronary artery bypass graft (CABG) surgery is the most common major medical procedure performed in the U.S. with approximately 600,000 procedures performed annually. Research has shown that over 40 percent of patients suffer a substantial cognitive decline immediately after this procedure and that this deficit may persist for up to five years after surgery.

In November 2004, Pharmos announced the results of its double-blind, placebo controlled Phase IIa trial of dexanabinol as a preventive agent against cognitive impairment following CABG surgery (news announcement). In this study, 202 patients aged 60 years or older with no clinical evidence of neurological or psychiatric symptoms and with no evidence of existing dementia undergoing elective CABG surgery were enrolled at six medical centers. Patients were given a single dose of either 150 mg dexanabinol or placebo just before surgery. Primary and secondary efficacy parameters were assessed for each patient at six weeks and three months post-surgery and compared to baseline pre-surgery scores. The primary endpoint was the effect of dexanabinol compared to placebo on reduction of post-CABG cognitive impairment as measured by the Stroop Color Word (Stroop) test that measures executive function and a battery of five computerized neuropsychological tests that measures other domains of cognition. Data were analyzed by multiple analysis of variance (MANOVA).

In a univariate analysis of the primary efficacy end point, a trend toward significance was found in the Stroop test results at three months. Further analysis using all available data revealed that at three months the Stroop test achieved a statistically and clinically relevant difference in the mean change from baseline between the dexanabinol and the placebo treated groups (p=0.01 ) when compared to placebo. This test showed that dexanabinol preserved higher integrative decision-making function when compared to placebo at three months post-surgery. The Stroop test is a test of selective attention and interference susceptibility. These skills have implications for the performance of everyday tasks that involve focused attention, cognitive impulse control, and decision-making. Improvements in the Stroop test may reflect a preservation of the brain’s higher cognitive functions and learning mechanisms that can be vulnerable to effects from surgery.

The data also showed dexanabinol to be safe and well tolerated in this study.

Pharmos would like to out-license the product for further development and commercialization.

For additional information please contact: Business.development@pharmos.com

Development Plan

Pharmos’ proprietary technology platforms focus on unique structural and pharmacological properties of cannabinoid compounds and on the emerging recognition of the importance of cannabinoid receptor signaling pathways in human health and disease. The Company is developing two distinct families of synthetic cannabinoid compounds. CB2-selective compounds are cannabinoid receptor agonists that bind preferentially to CB2 receptors, primarily found on peripheral immune cells. By minimizing residual CB1 activity, the cannabinoid psychotropic and cardiovascular effects are minimized while the compounds retain anti-inflammatory and immunomodulatory activity. Compounds in these classes are being developed for the treatment of pain and immunologic dysfunction.

By contrast, the dextrocannabinoid family of compounds do not bind appreciably to cannabinoid receptors, and their pharmacological activity is independent of cannabinoid receptor-mediated signaling pathways. Drugs in this family are being developed as neuroprotectants.