Pharmos Commences Phase 2a Trial of Topical Diclofenac NanoEmulsion Cream

Proof-of-Concept Study to Evaluate Safety and Analgesic Efficacy in Osteoarthritis Pain

Iselin NJ, June 27, 2007 – Pharmos Corporation (Nasdaq: PARS) announced today that patient screening has commenced in its Phase 2a clinical trial of its topical NanoEmulsion (NE) drug delivery technology formulated with 3% diclofenac. The trial will compare the safety and analgesic efficacy of the diclofenac NE cream with placebo in approximately 126 subjects with knee osteoarthritis (OA). OA affects approximately 12% of U.S. adults, a significant portion of whom are not treated pharmacologically due to side effects associated with the commonly used oral treatments. A site-specific, topical diclofenac product that could deliver a high drug concentration to the affected joint with minimal systemic exposure could reduce the risk of treatment-limiting side effects while maintaining the analgesic effect.

Up to eight sites in Israel will participate in the double-blind, randomized, placebo-controlled, parallel group study. Patients will apply the 3% diclofenac NE cream or placebo cream three times daily for 28 days. The analgesic effect of the 3% diclofenac NE cream will be evaluated using the Western Ontario and McMaster (WOMAC) Index pain subscale and through assessment of pain resulting from daily activities. The WOMAC Index, which is widely used in the evaluation of knee and hip OA, is self-administered and measures pain, disability and joint stiffness. The estimated duration of the enrollment period for this study is 9 months.

Diclofenac is an approved and widely used generic non-steroidal anti-inflammatory drug (NSAID). Due to their analgesic and anti-inflammatory properties, NSAIDs, including diclofenac, are commonly used for the pharmacological management of OA, especially in patients that have moderate or severe degrees of pain. However, oral administration of NSAIDs results in higher systemic drug exposure, which may lead to gastrointestinal, renal and cardiovascular toxicity, especially in the elderly population. In contrast, topical drug administration results in low systemic drug exposure and completely avoids direct exposure to the gastrointestinal tract. Applying an analgesic medication directly to the affected area also improves patient compliance, and enables a more controlled delivery of drugs with shorter half-lives and/or narrower therapeutic windows compared to oral administration.

About NanoEmulsion Topical Drug Delivery
Pharmos’ NE drug delivery system consists of an efficient solvent-free topical vehicle based on drug entrapment in stable, submicron particles of oil-in-water emulsions with a mean droplet size between 100 and 200 nm that are uniformly dispersed in an aqueous phase. One of the unique characteristics of the NE technology is the relatively high percentage of total particle volume occupied by the internal hydrophobic oil core of the droplets. This provides high solubilization capacity for lipophilic compounds compared to other lipoidal vehicles such as liposomes. Viscosity-imparting agents are used for NE thickening to produce creams with the desired semisolid consistency for application to the skin. Another unique characteristic of Pharmos’ NE technology is that it does not employ the chemical penetration enhancers commonly used in other topical drug delivery vehicles, which may cause skin irritation and sensitization. Pharmos’ NE cream is composed of natural lipids and oils designed to minimize irritation.

Pharmos’ NE cream formulated with diclofenac has completed two Phase 1 studies in healthy volunteers. The first study was a 48-hour human patch test in 25 volunteers for evaluation of the irritation potential of 1% diclofenac NE cream. No irritation or allergic responses were observed after topical application. The second Phase 1 study was a 14-day, open label study in 16 volunteers to investigate the pharmacokinetics, safety and tolerability of 3% diclofenac NE cream. The 3% diclofenac NE cream was found to be safe and well tolerated with no signs of skin irritation at the site of application of the cream and no severe or serious adverse events; subject compliance with the 14-day treatment period was excellent. The pharmacokinetic analysis demonstrated low systemic exposure of diclofenac with no drug accumulation following repeated daily administrations.

Data from preclinical studies undertaken by Pharmos with diclofenac encapsulated in NE cream in a paw edema animal model showed enhanced anti-inflammatory activity compared to commercial formulation. Pharmacokinetic studies using NE creams containing radiolabeled diclofenac were performed to assess drug penetration through skin and to determine local tissue (muscle and joint) and plasma levels of drugs following topical administration. Compared to oral administration, diclofenac administered via NE topical cream demonstrated 4-6 fold lower drug concentration in plasma, 60-80 fold more drug in muscle tissue, and about 9 fold more drug in joints.

The skin penetrative properties of the solvent-free NE delivery technology and its low irritancy make this novel topical nanovehicle a promising candidate for effective transcutaneous delivery of lipophilic drugs. Pharmos owns a family of patents covering novel NE formulations as vehicles for localized delivery of lipophilic drugs. The NE technology is also potentially applicable for topical delivery of the Company’s proprietary library of CB2 receptor selective agonists for pain indications.

About Osteoarthritis
OA is a chronic condition involving degeneration of cartilage within the joints. It is the most common form of arthritis and is associated with pain, substantial disability, and reduced quality of life. There are about 30 million patients with diagnosed OA in the U.S. Of U.S. adults aged 30 years and older, approximately six percent have symptomatic OA of the knee and approximately three percent have symptomatic OA of the hip. OA increases with age: the incidence and prevalence increase by two- to ten-fold from age 30 to 65 and continues to increase after age 65. With the increasing age of the population, the number of patients suffering from OA is expected to increase.

About Pharmos Corporation
Pharmos discovers and develops novel therapeutics to treat a range of indications including specific diseases of the nervous system such as disorders of the brain-gut axis (GI/IBS), pain/inflammation, and autoimmune disorders. The Company’s lead product in development, dextofisopam, is undergoing Phase 2b testing in IBS patients. Dextofisopam has completed a Phase 2a IBS study in which it demonstrated a statistically significant effect compared to placebo on the primary efficacy endpoint of adequate relief (n=141, p=0.033). The Company’s core proprietary technology platform focuses on discovery and development of synthetic cannabinoid compounds with a focus on CB2 receptor selective agonists. Cannabinor, the initial CB2-selective agonist candidate, has completed two Phase 2a i.v. pain studies in which analgesic properties were observed. Other compounds in Pharmos’ pipeline are in preclinical studies targeting pain, multiple sclerosis, rheumatoid arthritis and other disorders.

Safe Harbor Statement
Statements made in this press release related to the business outlook and future financial performance of Pharmos, to the prospective market penetration of its drug products, to the development and commercialization of its pipeline products and to its expectations in connection with any future event, condition, performance or other matter, are forward-looking and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause results to differ materially from those set forth in these statements. Additional economic, competitive, governmental, technological, marketing and other factors identified in Pharmos’ filings with the Securities and Exchange Commission could affect such results.