CORRECTING and REPLACING NEOPHARM Announces Second Quarter 2006 Financial Results

NEOPHARM ANNOUNCES SECOND QUARTER 2006 FINANCIAL RESULTS

NEOPHARM, Inc. (Nasdaq:NEOL) today announced a second quarter 2006net loss of approximately $9.8 million, or $0.35 per basic and dilutedshare, and a first half 2006 net loss of approximately $17.5 million,or $0.63 per basic and diluted share.

Second Quarter 2006 Results

The second quarter 2006 net loss of approximately $9.8 million, or$0.35 per basic and diluted share, represents a $2.1 million increasecompared to the $7.7 million net loss, or $0.32 per basic and dilutedshare, in the second quarter of 2005. The second quarter 2005 resultsinclude the effect of the receipt of $2.5 million in settlement of anote receivable previously deemed impaired.

As of June 30, 2006, the Company had cash, cash equivalents, andshort-term investments on hand of $50.6 million, compared to cash,cash equivalents and short-term investments on hand of $59.8 millionas of March 31, 2006. Net cash used in the second quarter of $9.2million was $0.1 million, or 1.0%, lower than the $9.3 million used inthe first quarter of 2006.

Six Months Ended June 30, 2006 Results

Net loss for the six months ended June 30, 2006 of approximately$17.5 million, or $0.63 per basic and diluted share, represents animprovement of approximately $1.0 million compared to the $18.5million net loss, or $0.79 per basic and diluted share in the sixmonth period ended June 30, 2005. The first half 2005 results includethe effect of the receipt of $2.5 million in settlement of a notereceivable previously deemed impaired.

"We continue to make positive progress on the execution of ourcommercial, regulatory and financial strategy," said Guillermo A.Herrera, NEOPHARM's President and CEO. "In June, the PRECISE Trialindependent Data Monitoring Committee recommended that we proceed tothe final efficacy analysis at 215 deaths, and we continue our work toprepare for a potential BLA submission and commercial launch ofCINTREDEKIN BESUDOTOX in the event that we are successful in meetingour endpoint in PRECISE. Additionally, two key executives were hired,Ronald Pauli as our Chief Financial Officer, and Jack Waterman as ourVP of Regulatory Affairs and Quality Assurance. These appointmentsreflect our commitment to align our talent needs with our strategicneeds. We began a Phase II trial for LE-SN38 and are planning for aPhase III LEP-ETU trial. Furthermore, we expect our financial resultsto continue to improve in the second half of this year as we realizethe effects of the previously announced cost reduction actions weimplemented during the second quarter. The second quarter 2006 resultshave begun to reflect our transition into a fully integratedbiopharmaceutical company in the process of preparing for thepotential commercial launch of its first product."

Key Milestones

Key milestones achieved by the Company since the end of the firstquarter of 2006 include:

-- Completion of the interim efficacy analysis in the PRECISE trial,

-- Initiation of a Phase II clinical trial for LE-SN38,

-- Addition of Ron Pauli as the Company's new Executive VP, CFO and Corporate Secretary,

-- Addition of Jack Waterman as the Company's new VP of Regulatory Affairs and Quality Assurance, and

-- Assignment of unique CPT and ICD-9 procedure codes by The American Medical Association (AMA) and the Centers for Medicare and Medicaid Services (CMS), respectively, for Convection Enhanced Delivery (CED) catheter implantation, a novel drug delivery technique used to administer CINTREDEKIN BESUDOTOX directly into the brain.

PRECISE Update

Enrollment in the PRECISE Trial for CINTREDEKIN BESUDOTOX wascompleted in December 2005. In June 2006, after conducting the trial'sinterim efficacy analysis, the independent Data Monitoring Committee(DMC) recommended that the PRECISE Trial continue as planned under theapproved protocol. The DMC observed no treatment or catheter placementrelated adverse or serious adverse events that differed from thoseseen in the Phase I/II trials, and observed that, consistent with theprevious report after 100 patient deaths, compliance with catheterplacement guidelines was over 80%. The final efficacy analysis,triggered at 215 deaths, is currently expected to occur in the firstquarter of 2007. The PRECISE protocol does not require CINTREDEKINBESUDOTOX to show a predetermined improvement in median survival overGliadel Wafer(R). Rather, the endpoint of the trial is to provideevidence of a statistically significant improvement in overallsurvival for CINTREDEKIN BESUDOTOX versus Gliadel Wafer, with asecondary endpoint of overall product safety.

NeoLipid(R) Platform Update

In April 2006, the Company announced a reprioritization of theNeoLipid(R) platform. As the Company continues its transition fromresearch to development and commercialization of its products, it hasstreamlined its operations to focus development on its two mostpromising NeoLipid(R) drug product candidates, LE-SN38 and LEP-ETU.The Company has initiated a Phase II clinical trial for LE-SN38 beingconducted by Cancer and Leukemia Group B (CALGB), an oncology clinicalresearch group sponsored by the National Cancer Institute (NCI).Further, the Company is moving ahead with plans to initiate a PhaseIII clinical trial for LEP-ETU which is intended to demonstratenon-inferiority with superiority advantage over Taxol.

Financial Projections

The Company currently projects a net loss range for 2006 ofapproximately $36 million to $38 million, or approximately $1.30 to$1.37 per share. The Company also currently estimates that the 2006projected net loss will result in cash used in operations of less than$34 million. These estimates reflect the effects of the reduction inworkforce completed in the second quarter of 2006. NEOPHARM believesthat the cash and short-term marketable securities as of June 30,2006, can support the Company's activities into 2008 at current andprojected levels of development and general corporate activity.

Conference Call

NEOPHARM will host a conference call to discuss these financialresults on:
Wednesday, August 9, 2006 at 11:00 a.m. Eastern/8:00 a.m. Pacific
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Domestic: 866-510-0676, passcode 92520350
International: 617-597-5361, passcode 92520350

Audio replays will be available through August 16, 2006.
Domestic: 888-286-8010, passcode 71266312
International: 617-801-6888, passcode 71266312

The live call and replay will also be available via webcast atwww.neopharm.com.

About Glioblastoma Multiforme

Glioblastoma multiforme (GBM) is the most common type of malignantprimary brain tumor in adults. According to the Central Brain TumorRegistry of the United States (www.cbtrus.org), GBM tumors usuallyaffect men more commonly than women, particularly men between the agesof 60 and 85 years. According to the CBTRUS, approximately 10,000people are diagnosed annually with malignant glioma (GBM andanaplastic astrocytoma) and this disease is eventually fatal for mostpatients. Survival time for GBM patients ranges from six months forrecurrent disease to 12 months with newly diagnosed disease despiteaggressive treatments including surgery, radiation therapy andchemotherapy.

GBM tumors mainly arise in the cerebral hemispheres (the mainportions of the brain), but they can also occur in the brainstem,cerebellum, or spinal cord. Symptoms of a GBM can include headachesthat are caused by increased intracranial pressure, neurologicaldeficits such as weakness, sensory loss, coordination difficulties,visual impairment, cognitive impairment affecting memory and language,seizures, and personality changes.

About CINTREDEKIN BESUDOTOX

CINTREDEKIN BESUDOTOX is a recombinant protein consisting of asingle molecule composed of two parts: a tumor-targeting molecule(Interleukin-13 or IL13) and a cytotoxic agent (Pseudomonas Exotoxin,or PE38). IL13 receptors are present in appreciable numbers onmalignant glioma cells, but only to a minimal amount if at all onhealthy brain cells. The IL13 portion is designed to bind to receptorson tumor cells like a key fits into a lock. The cancer cell appears tolatch onto and absorb the IL13 and the attached PE38, causingdestruction of the cancer cell. Healthy brain cells appear to beunharmed because they do not internalize the PE.

The drug is delivered via Convection Enhanced Delivery (CED), anovel drug delivery system using catheters placed following tumorresection (removal), in areas with microscopic tumor spread or at riskof tumor spread around the tumor resection cavity.

CINTREDEKIN BESUDOTOX has received Orphan Drug designation andFast Track designation from the U.S. Food and Drug Administration(FDA). CINTREDEKIN BESUDOTOX was also accepted into FDA's Pilot 2Program for continuous marketing applications. CINTREDEKIN BESUDOTOXhas also received Orphan Drug designation in Europe.

Promising data for this potential therapeutic advance in thetreatment of GBM has been observed in Phase I/II trials, the resultsof which have been previously reported by the Company. In addition,the importance of adequate catheter positioning in order to achieveeffective distribution of CINTREDEKIN BESUDOTOX in brain tissue wasassessed in these Phase I/II trials, leading to specific guidelinesfor catheter positioning and deferred catheter placement used in theCompany's ongoing Phase III PRECISE Trial. Improved catheter placementtranslated into a better patient outcome for the 45 (complete PhaseI/II patient set) recurrent GBM patients treated post-tumor resectionin the Phase I/II trials, with an overall median survival of 44.0weeks (95% Confidence Interval (CI): 36.1-55.6) including 42 percentof patients with less than 2 optimally positioned catheters, whilepatients with greater than or equal to 2 catheters optimallypositioned surviving with a median of 53.6 weeks (95% CI: 36.1-70.3).Separately, one-year and two-year survival rates for recurrent GBMpatients were 40 percent and 13 percent respectively.

Pivotal Phase III Trial - PRECISE

PRECISE, an acronym for Phase III Randomized Evaluation ofConvection Enhanced Delivery of IL13-PE38QQR with Survival Endpoint,www.precisetrial.com, is a randomized, controlled Phase III clinicaltrial. It was designed to enroll up to 300 patients in order to obtain270 patients with confirmed GBM at first recurrence at study entrysurgical resection for the intent-to-treat patient population, andcompare overall survival, drug safety and quality of life of patientsreceiving CINTREDEKIN BESUDOTOX with patients receiving Gliadel Waferin the treatment of first recurrent GBM following surgical tumorresection.

PRECISE achieved the 270 patient intent-to-treat milestone (276intent-to-treat) in early December after enrolling 294 patients.Patients were randomized so that 2 patients received CINTREDEKINBESUDOTOX via CED for every 1 patient that received Gliadel Waferplaced in the resection cavity at the time of resection. The primaryefficacy analysis of the trial will be based on the comparison of theoverall patient survival curves of the two treatment groups.

In June 2006, after conducing the trial's interim efficacyanalysis after 160 patient deaths, the DMC recommended that thePRECISE Trial continue as planned under the approved protocol. The DMCreported no treatment related adverse or serious adverse events thatdiffered from previous reports and those normally associated with GBMand reported that compliance in terms of catheter placement guidelineswas over 80%. The final efficacy analysis is currently expected tooccur in the first quarter of 2007.

NEOPHARM's Commitment to Oncology

NEOPHARM employees share a common goal: bringing hope to cancerpatients and their families through the research and development ofnew cancer drugs and therapies. The Company's oncology portfolio isbuilt on two novel, proprietary platforms: a tumor-targeting platform,and the NeoLipid(R) Liposomal Drug Delivery platform. Through itsresearch and clinical studies, as well as its work with physicians,scientists, and advocacy groups, NEOPHARM is helping to enhance thelives of cancer patients.

About NEOPHARM, Inc.

NEOPHARM, Inc., based in Waukegan, Illinois, is a publicly tradedbiopharmaceutical company dedicated to the research, development andcommercialization of new and innovative cancer drugs for therapeuticapplications. Additional information, including ongoing clinicaltrials, can be obtained by visiting NEOPHARM's Web site atwww.neopharm.com.

Forward Looking Statements - This press release contains"forward-looking statements" within the meaning of Section 27A of theSecurities Act of 1933 and Section 21E of the Securities Exchange Actof 1934. The Company has tried to identify such forward-lookingstatements by use of such words as "expects," "intends," "hopes,""anticipates," "believes," "could," "may," "evidences" and"estimates," and other similar expressions, but these words are notthe exclusive means of identifying such statements. Such statementsinclude, but are not limited to, any statements relating to theCompany's drug development program, including, to the Company'sability to make a BLA submission, the initiation, progress andoutcomes of clinical trials of the Company's drug product candidates,including, but not limited to, the PRECISE trial,, projectionsregarding cash used in operations, financial projections, and anyother statements that are not historical facts. Such statementsinvolve risks and uncertainties, including, but not limited to, thoserisks and uncertainties relating to difficulties or delays infinancing, development, testing, regulatory approval, production, andmarketing of the Company's drug and non-drug compounds including, butnot limited to the Company's ability to develop a program forcommercializing CINTREDEKIN BESUDOTOX and the liposomal technologydrug product candidates, uncertainty regarding the outcomes of ongoingor proposed FDA studies, uncertainty regarding the availability ofthird party production capacity, the Company's financial guidance andprojections, the Company's ability to cut back on its funding ofcertain of its development projects in order to conserve its cashresources, the ability of the Company to procure additional futuresources of financing, unexpected adverse side effects or inadequatetherapeutic efficacy of the Company's drug and non-drug compounds,including, but not limited to, CINTREDEKIN BESUDOTOX and the liposomaltechnology drug product candidates, that could slow or preventproducts coming to market, uncertainty regarding the Company's abilityto market its drug and non-drug products, including, but not limitedto, CINTREDEKIN BESUDOTOX and the liposomal technology drug productcandidates, directly or through independent distributors, theuncertainty of patent protection for the Company's intellectualproperty or trade secrets, and other risks detailed from time to timein filings the Company makes with the Securities and ExchangeCommission including its annual reports on Form 10-K and quarterlyreports on Forms 10-Q. Such statements are based on management'scurrent expectations, but actual results may differ materially due tovarious factors, including those risks and uncertainties mentioned orreferred to in this press release. Accordingly, you should not rely onthese forward-looking statements as a prediction of actual futureresults.
NEOPHARM, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)

Three-Months Ended Six-Months Ended
June 30 June 30
------------------------- ---------------------------

2006 2005 2006 2005
------------ ------------ ------------- -------------

Revenues $8,670 $454,600 $10,280 $525,900

Expenses:
Cost of
revenues 657 1,060 727 1,350
Research and
development 6,037,143 7,960,917 11,880,902 16,034,678
Selling,
general, and
administrative 4,495,843 3,051,288 7,541,399 6,284,597
Change in fair
value of
derivative
financial
instruments (627,545) - (1,170,673) -
Employee
termination
costs 570,253 - 570,253 -
Recovery of
note
receivable - (2,500,000) - (2,500,000)
------------ ------------ ------------- -------------
Total
expenses 10,476,351 8,513,265 18,822,608 19,820,625

Loss from
operations (10,467,681) (8,058,665) (18,812,328) (19,294,725)

Interest income,
net 676,284 401,364 1,341,970 773,151
------------ ------------ ------------- -------------

Net loss $(9,791,397) $(7,657,301) $(17,470,358) $(18,521,574)
============ ============ ============= =============

Net loss per
share-basic and
diluted $(0.35) $(0.32) $(0.63) $(0.79)
============ ============ ============= =============

Shares used in
computation of
net loss per
share:
Basic and
diluted 27,798,475 23,561,539 27,559,480 23,515,755
============ ============ ============= =============


Balance Sheet Data:
(Unaudited)

June 30, December 31,
2006 2005
-------------- --------------
Cash and cash equivalents $3,140,021 $1,486,172
Short-term investments $47,441,193 $28,776,020
Total assets $52,966,083 $33,369,985
Current liabilities $7,495,501 $9,388,474
Accumulated deficit $(245,495,073) $(228,024,715)
Total stockholders equity $42,844,091 $21,945,324