(July 31, 2006, London) -- Napo Pharmaceuticals, Inc., (LSE: NAPL) today announced it is joining the main market of the London Stock Exchange, with an initial offering of circa. 14.3 million shares raising circa. £11.9 million. Its stock began trading today.

The IPO makes Napo the first U.S. corporation ever to obtain a primary listing on the main market of the London Stock Exchange. The California-based company, which is incorporated in Delaware, and has a subsidiary in India, develops proprietary pharmaceutical products for commercialization in the global market. 

Napo is represented in the matter by Donald C. Reinke, San Francisco, and Giles W. Beale, London, both partners at top 20 international law firm Reed Smith. Nomura Code Securities Limited is the sponsor, financial adviser and underwriter to the listing.

According to Mr. Reinke, Napo has a compelling rationale for choosing to list on the London Exchange’s Main Market rather than the junior AIM market of the Exchange.  “Many potential institutional investors are not able to invest in new companies listing on AIM unless they sell their existing investments in AIM-listed companies because their funds allocated for AIM are already fully invested.  Such investors typically continue to have funds available for investments in fully listed companies without the need to liquidate existing investments.”

Mr. Beale points out that the Life Science/Pharmaceutical sector of which Napo is a part currently has a strong following in Europe. “Continental investors tend to have a greater interest in fully listed companies because they are subject to a greater degree of regulation and are typically viewed as  adhering to higher standards of corporate governance than companies listed on the more lightly regulated AIM market,” he said.  Mr Beale also noted that a main market listing was only possible for those companies that were able to meet the required eligibility criteria under the UK Listing Authorities’ Listing Rules.  For a number of early stage companies listing on AIM this would not be possible. As a ‘scientific research company’ Napo needed to satisfy, amongst others, the following criteria:

• Its ability to attract funds from sophisticated investors.
• An intention to raise at least £10 million at the time of listing.
• A capitalisation, before the fund raising of at least £20 million (excluding any securities issued in the six months prior to the listing).
• That its primary reason for listing was to raise finance to bring identified products to a stage where they can raise significant revenues.
• A three year track record of operations in laboratory research and development including details of patents granted or details of progress of patent applications and the successful completion of, or the successful progression of, significant testing of the effectiveness of its products.

According to Lisa Conte, Chief Executive Officer of Napo Pharmaceuticals Inc, “We have a strong and late-stage pipeline and will use the proceeds of this placing to develop our products which will address large and profitable western indications as well as global health needs afflicting huge populations in emerging and developing economies.  These activities will generate multiple revenue streams from around the world.”

Napo’s decision reflects the increasing internationalization of principal capital markets in recent years as well as the dramatic increase in U.S .companies accessing capital on the London Stock Exchange’s equity markets.  Napo’s strategic relationships outside the United States were also factors that influenced Napo’s decision to list on the London Stock Exchange.

Although not Napo’s impetus for listing in London, an ancillary benefit of going public on the LSE is the reduced ongoing regulatory costs as opposed to listing on the US markets, including the administrative burden and the cost of compliance with Sarbanes- Oxley,” Mr. Reinke said.  “US regulatory burdens for smaller companies are often perceived as being disproportionate to the amount of capital that can be raised, ” he added.

Company highlights for Napo:

• The company’s late stage proprietary gastro-intestinal compound, crofelemer, is in various stages of clinical development for four distinct product indications.
• The company has one product in Phase 3, two in Phase 2 and one in Phase 1 clinical trials
• Four indications – AIDS diarrhea, Irritable Bowel Syndrome (IBS), acute infectious diarrhoea (traveller’s diarrhoea and cholera) and pediatric diarrhea
• FDA fast-track status for CRO-HIV and CRO-IBS products
• Extensive safety data on more than 1500 patients across all indications
• Global business model with local global partnering strategy
• Focus on profitability in Western markets and emerging economy populations for large product volume and financial return
• Strong management and Board experience with drug regulatory approvals

Placing highlights:

• Admission to trading on the main market of the London Stock Exchange
• Placing and Subscription proceeds of circa. £11.9 M before expenses
• Placing price 83 pence per share
• The market capitalisation at the placing price will be circa. £ 35.8M
• Proceeds of the placing will be used to continue to progress the Company’s pipeline including product registration and launches
• First day of trading will be 31 July 2006

Disclaimer:  The Shares referenced in this announcement are not for distribution, directly or indirectly, in or into the United States or to any US person as defined in Regulation S under the US Securities Act of 1933, as amended ("Regulation S"). This announcement is not an offer of securities for sale into the United States or elsewhere. The Shares described above have not been registered under the US Securities Act of 1933, as amended (the "Securities Act") and may not be offered or sold in the United States or to, or for the account or benefit of, US persons (as such term is defined in Regulation S) unless they are registered under the Securities Act or they are exempt from registration under the Securities Act. No offer or sale of Regulation S securities has been made or will be made in the United States.  Hedging transactions involving these securities may not be conducted unless in compliance with the Securities Act.