LE-SN38 is NeoPharm's NeoLipid® liposomal formulation of SN-38, the active metabolite of Camptosar® (Pfizer Inc.), a chemotherapeutic pro-drug, which is used as a first-line and second-line colorectal cancer treatment. At the present time, without the NeoLipid® system, SN-38 is insoluble and can only be used to treat cancer by administering the pro-drug Camptosar®. A pro-drug is a compound that is converted into the active drug in the body. However, Camptosar® is converted into SN-38 in the liver at different rates by different patients, and this variability in conversion rates can result in suboptimal dosing and adverse side effects, such as severe diarrhea. We hope to show that our proprietary NeoLipid® technology permits delivery of SN-38 to the tumor cells without the need for conversion, therefore minimizing variability and optimizing dose with minimal side effects.

Results from our 2004 Phase I clinical trial provided evidence of the safety and tolerability of LE-SN38 and established a maximum tolerated dose (MTD) of 35 mg/m2 for all but a small subset of patients who metabolize SN-38 slowly. Pharmacokinetic analysis of blood samples from patients treated with LE-SN38 showed that blood levels and systemic drug exposure to SN-38 were comparable to or greater than that expected from the marketed Camptosar® dose based on previously published studies.

During the second quarter of 2006, in conjunction with the Cancer and Leukemia Group B, or CALGB, NeoPharm initiated enrollment in a Phase II clinical trial with LE-SN38 in metastatic colorectal cancer patients, and completed enrollment of the 21st patient in December, 2006.

In March 2007, the Company announced that the interim analysis of data following the completion of treatment of the first 21 patients demonstrated disease stabilization, but the study did not achieve the primary tumor response endpoint. The Company is reviewing the data and, in particular, examining the patients' demography, prior chemotherapy exposure, advanced stage of the disease, and other related factors. It is possible that patients who were enrolled in this trial were exposed to other chemotherapy regimens prior to enrolling and that this prior exposure may be the reason the study did not achieve its primary endpoint. The Company is also assessing the potential next steps for this project which may include additional data analyses and the possibility of other studies related to lung cancer and breast cancer with LE-SN38.