NeoPharm, Inc. Announces Third Quarter 2009 Financial Results and Clinical Trials Update

NeoPharm, Inc. (Other OTC: NEOL.PK), today announced its third quarter 2009 financial results.

For the third quarter ended September 30, 2009, NeoPharm reported a net loss of $1.8 million, or ($0.06) per basic and diluted share, as compared to a net loss of $2.4 million, or ($0.08) per share, for the same period last year. For the nine months ended September 30, 2009, NeoPharm reported a net loss of $6.0 million, or ($0.21) per basic and diluted share, compared to a net loss of $6.0 million, or ($0.21) per share, for the same period last year.

Research and development expenses increased to $3.4 million for the nine months ended September 30, 2009, from $3.3 million for the same period last year as the Company continued to progress its current drug compounds to their next stages of development. NeoPharm’s general and administrative expenses decreased by $1.0 million to $2.6 million for the nine months ended September 30, 2009, in comparison to $3.6 million for the same period last year. The decrease in general and administrative expenses is primarily attributable to reductions in accounting, legal and other public company costs in connection with the Company’s voluntary decision to delist and deregister its common stock in January 2009 and opt-out of SEC reporting requirements. The decrease in general and administrative expenses was partially offset by a decrease in the Company’s net interest income and a decrease in gains on sales of equipment and furniture.

During the third quarter, the Company held its cash consumption to a level consistent with the prior quarter allocating $1.8 million in cash to its operations versus $1.9 million in the second quarter of 2009. NeoPharm anticipates future cash consumption levels to increase in-line with the advancement and progression of its clinical trials and preclinical development activities. The Company has borrowed $14.4 million under the terms of a loan agreement with UBS Bank USA and UBS Financial Services Inc. that provides NeoPharm with a credit line (the "Credit Line”), which is secured by the Company’s auction rate securities ("ARS”). The Company also has an agreement with UBS whereby the Company has the right to require UBS to repurchase at par value all of NeoPharm’s ARS at any time during the period from June 30, 2010 through July 2, 2012, with all proceeds being used to repay all borrowings from UBS. The Company expects to exercise that right on June 30, 2010, and therefore has classified its investment in ARS and its borrowing from UBS as a current asset and a current liability, respectively, as of September 30, 2009. With $6.7 million in cash and cash equivalents at the end of the third quarter 2009, the Company estimates that it has adequate resources to fund its operations into mid-2010.

"We continue to make solid progress in our efforts to progress our drug candidates through the development cycle, as we expect to release preliminary findings for our Phase I LE-DT trial in the fourth quarter of 2009. Additionally, IND filings for IL-13 for Idiopathic Pulmonary Fibrosis and LE-rafAON Pancreatic Cancer with Gemcitabine are anticipated towards the end of 2009 and early 2010,” commented Mr. Laurence Birch, President and Chief Executive Officer of NeoPharm, Inc. "The NeoPharm team remains dedicated to leveraging our intellectual property assets, while concurrently maximizing our resources to drive long-term value for our current shareholders.”

Drug Candidate Pipeline Update

LEP-ETU, Liposomal Encapsulated Paclitaxel

In the first quarter of 2009, the Company completed the targeted enrollment of 35 patients for the first part of its Phase II open-label, multicenter outpatient study in India for LEP-ETU, a novel, proprietary liposomal delivery system of paclitaxel, the active ingredient of Taxol®, designed to evaluate the anti-tumor effect and safety/tolerability of LEP-ETU in metastatic breast cancer. Based on the encouraging results of the preliminary data in terms of tumor response and protection from toxicities related to free Paclitaxel, the Company submitted a request to the Directorate General of Health Services – Office of Drugs Controller General (India) ("DCGI”) in February 2009 to expand the targeted enrollment to 70 patients with recurrent breast cancer.

In the third quarter of 2009, the Company received notification from DCGI that its request to expand the Phase II study to an additional 35 patients had been approved, and patient enrollment is expected to be completed by early 2010. In June 2009, the Company engaged an independent clinical trial firm in India to audit the results of the 35 patients enrolled in the first part of this Phase II study. All of the patients in the first part of the study have received a dose of 275 mg/m2 every three weeks without the detection of any significant infusion related problems or unexpected toxicities with positive response rate.

LE-DT, Liposomal Encapsulated Docetaxel

Based upon the preliminary results from its Phase I trial for LE-DT, a novel, proprietary liposomal delivery system of docetaxel, the active ingredient of Taxotere®, for the treatment of patients with metastatic solid tumors, the Company is planning a Phase II study of LE-DT in hormone refractory metastatic prostate cancer patients. This open-label, Phase II study will be designed to determine the antitumor effect as defined by the serum Prostate Specific Antigen (PSA) levels, disease response, progression free survival, and quality of life in patients with metastatic prostate cancer. The Company anticipates that enrollment of 40 to 50 patients in this Phase II trial will begin at three locations in the United States once all regulatory approvals are obtained. NeoPharm is also developing a two-arm protocol, subject to regulatory approval, for advanced pancreatic cancer patients to compare the clinical effectiveness of LE-DT against 5FU or Xeloda.

The Phase I study was designed to more accurately define the maximum tolerated dose (MTD) and is being conducted at The Lombardi Comprehensive Cancer Center at Georgetown University and at TGen Clinical Research Services at Scottsdale Healthcare.

LE-rafAON for Pancreatic Cancer with Gemcitabine

All preclinical studies related to the IND submission have been completed, and the preclinical data is positive. NeoPharm is developing clinical protocols for Phase I and II studies of pancreatic cancer with LE-rafAON in combination with the drug gemcitabine. The Company anticipates filing an IND for LE-rafAON in early 2010.

Cintredekin Besudotox, IL-13, for Glioblastoma Multiforme (GBM)

Patient enrollment is expected to begin in the fourth quarter of 2009 in a Phase I clinical trial to be conducted by the National Institutes of Health ("NIH”) in connection with the Company’s Cooperative Research and Development Agreement ("CRADA") with the National Institute of Neurological Diseases and Stroke ("NINDS”), a part of the NIH, for research on a therapeutic agent for untreatable brain diseases in humans. Under the terms of the CRADA, NINDS will deliver IL-13, in conjunction with a surrogate marker via NINDS' patented methodology of Convection Enhanced Delivery ("CED”), which was previously licensed to NeoPharm. The Company will provide its proprietary drug and technical resources to study its effects in various brain cancers in humans. NINDS Institutional Review Board ("IRB”) has approved the protocol and NeoPharm has granted NINDS authorization to cross-reference its prior IL-13 IND for the treatment of GBM.

Cintredekin Besudotox, IL-13, for Idiopathic Pulmonary Fibrosis (IPF)

In September 2009, NeoPharm signed a letter of intent to enter into a clinical research agreement with Duke University, a nonprofit educational and health care institution acting for and on behalf of its Duke Clinical Research Institute ("Duke”), regarding potential clinical trials with IL13-PE38 in patients with idiopathic pulmonary fibrosis (IPF). The Company previously completed a two week inhalation toxicology study in non-human primates performed by the Lovelace Respiratory Research Institute. This study was designed to provide a detailed safety evaluation of the product in non-human primates through nebulization and to characterize the distribution in the lungs and other tissues and to identify any toxicity related to any organ with IL-13 inhalation. The physio-chemical properties of the nebulized product are extensively studied to predict its distribution into the lungs. Based upon the initial results from this study, and other preclinical studies, the Company anticipates filing an IND related to IL-13 for IPF in the fourth quarter of 2009.

Previously, NeoPharm licensed IL-13 from NIH, FDA, and The University of Michigan as a potential therapeutic agent for the treatment of pulmonary fibrosis and asthma, and has completed extensive preclinical studies in animal models to evaluate the control and reversal of pulmonary fibrosis with this agent.

About NeoPharm, Inc.

NeoPharm, Inc., based in Lake Bluff, Illinois, is a publicly traded biopharmaceutical company dedicated to the research, development and commercialization of new and innovative cancer and other drugs for therapeutic applications. Additional information can be obtained by visiting NeoPharm’s web site at www.neopharm.com.

Forward Looking Statements - This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Company has tried to identify such forward-looking statements by use of such words as "expects," "intends," "hopes," "anticipates," "believes," "could," "may," "evidences" and "estimates," and other similar expressions, but these words are not the exclusive means of identifying such statements. Such statements include, but are not limited to, any statements relating to the Company’s strategic review of projects and operations, the Company's drug development programs, the initiation, progress and outcomes of clinical trials of the Company's drug product candidates, projections regarding cash used in operations, financial projections, and any other statements that are not historical facts. Such statements involve risks and uncertainties, including, but not limited to, those risks and uncertainties relating to difficulties or delays in financing, development, testing, regulatory approval, production, and marketing of the Company's drug compounds including, but not limited to, the Company's ability to fund and pursue additional testing of Cintredekin Besudotox and its NeoLipid drug product candidates, uncertainty regarding the outcomes of ongoing or potential clinical studies, the Company's financial guidance and projection, including but not limited to, the fact that the Company’s financial statements have not been subjected to a review by the Company’s independent registered accounting firm in accordance with Statement of Auditing Standards No. 100, the Company's ability to evaluate the strategic alternatives available to the Company and to cut back on its funding of certain of its development projects in order to conserve its cash resources, the ability of the Company to procure additional future sources of financing, unexpected adverse side effects or inadequate therapeutic efficacy of the Company's drug compounds, including, but not limited to, Cintredekin Besudotox and its NeoLipid drug product candidates, that could slow or prevent products coming to market, uncertainty regarding the Company's ability to market its drug products, including, but not limited to Cintredekin Besudotox and its NeoLipid drug product candidates, the uncertainty of patent protection for the Company's intellectual property or trade secrets, and other risks of the type previously detailed in filings the Company formerly made with the Securities and Exchange Commission ("SEC”). Such statements are based on management's current expectations, but actual results may differ materially due to various factors, including those risks and uncertainties mentioned or referred to in this press release. At the Company’s request, the Company’s obligation to file reports with the SEC was suspended effective February 12, 2009. For the foregoing reasons, you should not rely on these forward-looking statements or on previously filed SEC reports as a prediction of actual future results.