Key Points: 

• Nestlé Nutrition has exercised its option to negotiate a commercial agreement to use Phosphagenics’ Phospha-E® as a nutritient in medical foods for treating and preventing metabolic syndrome.

• The terms of the option agreement include the following.

  a)      The payment by Nestlé Nutrition of an option fee to Phosphagenics.

  b)      One or both parties will conduct human clinical trials to enable health claims for the treatment and prevention of metabolic syndrome.

  c)       Nestlé Nutrition will launch a product for metabolic syndrome within 12 months of regulatory approval.

  d)      Phosphagenics will manufacture and sell Phospha-E® to Nestlé Nutrition.

  e)      Phosphagenics will grant Nestlé Nutrition a worldwide exclusive licence for the use of Phospha-E® as a nutrient in foods for the treatment and prevention of metabolic syndrome.

Phosphagenics Limited (“Phosphagenics”) (ASX: POH) (AIM: PSG) announced today further details of its option agreement with Nestlé Nutrition which grants the Nestlé speciality nutrition business the right to negotiate, on an exclusive worldwide basis, a commercial agreement to use Phosphagenics’ Phospha-E® product for the treatment and prevention of metabolic syndrome. These announcements follow on from the successful completion of a series of full dose-response pre-clinical studies on Phospha-E® previously announced to the market in December, 2006.

Under the terms of the option agreement, Nestlé Nutrition will pay Phosphagenics an option fee, and the parties will commence human clinical trials with Phospha-E® to provide science-based evidence that Phospha-E® is beneficial in the treatment and prevention of metabolic syndrome.

The option agreement requires Nestlé Nutrition to launch a product within 12 months of regulatory approval. Also, under the agreement, Phosphagenics will be responsible for the manufacture and sales of Phospha-E® to Nestlé Nutrition.

Mr Harry Rosen, Managing Director of Phosphagenics said: "Phosphagenics is delighted that our nutraceutical division has reached this stage of commercial development for Phospha-E® with the speciality nutrition business of the world’s largest food company.”

“It is very exciting that we have been able to partner with, in my view, the world’s most progressive specialised nutrition company. Phosphagenics is looking forward to working closely with Nestlé Nutrition to bring Phospha-E® to market for this indication as quickly as possible.”

The final results of the two pre-clinical multi-dose response trials announced to the market on December 14th, 2006, confirmed that when given orally, Phospha-E® significantly reduced many of the key biomarkers associated with metabolic syndrome, inflammation and cardiovascular disease. Additionally, the most appropriate dosage required to commence human clinical trials was also determined.

In these trials, animals treated with varying doses of Phospha-E® were shown to have statistically significant reductions in key parameters such as plaque formation, aortic vascular dysfunction, cholesterol, triglycerides and LDL-C (so-called bad cholesterol).

ENDS...

APPENDIX AND NOTES TO EDITORS

About Phosphagenics Limited

Phosphagenics is a Melbourne-based, globally driven biotechnology company focused on the discovery of new and cost effective ways to enhance the bioavailability, activity, safety and delivery of proven pharmaceutical and nutraceutical products.

Phosphagenics’ core technology is built around the science and application of phosphorylation, a process where the addition of a phosphate group has been found to enhance the bioavailability, activity and safety of existing pharmaceuticals and nutraceuticals, as well as to assist in the production of drug delivery platforms.

Phosphagenics’ shares are listed on the Australian Stock Exchange (POH) and the London Stock Exchange's Alternative Investment Market (PSG). An ADR – Level 1 program has been established in the US with the Bank of New York (PPGNY) for US investors to trade in Phosphagenics’ stock on the ‘over-the-counter’ market.

For more information, please visit Phosphagenics’ web site at www.phosphagenics.com

About Nestlé Nutrition
Nestlé Nutrition is an autonomous business within Nestlé managing and developing the group's speciality nutrition brands. Through science-based nutrition products and services, Nestlé Nutrition helps enhance the quality of people’s lives by supporting health and providing care for specific consumer groups with special nutrition needs at every stage of life.

About 16 500 employees in more than 100 countries are part of Nestlé Nutrition. Its product portfolio – covering infant nutrition, healthcare nutrition, performance nutrition and weight management – includes such trusted and well-recognised brands as: Nestlé (comprising product brands Nan, Lactogen, Neslac, Cerelac…), Nutren, Peptamen, PowerBar, Musashi and Jenny Craig. More information at: www.nestlenutrition.com.

About Metabolic Syndrome

Metabolic syndrome is a multifactorial risk factor for cardiovascular disease and diabetes. The root causes of metabolic syndrome are overweight/obesity, physical inactivity, and genetic factors. It is estimated that about 27% of adults in the US have metabolic syndrome and that one in three overweight or obese people in the US have this condition. The condition is being diagnosed with increasing frequency.

About Phospha-E®

Phospha-E® is a patented derivative of vitamin E that has superior properties compared to its parent molecule. For example, Phospha-E® has been shown to be better absorbed than vitamin E, both orally and through the skin, to lower cholesterol and triglycerides, prevent the formation of plaque in heart arteries, as well as having unique anti-inflammatory properties.

Phospha E® has applications across all three nutraceutical market segments, and is currently sold internationally as a dietary supplement by Zila Nutraceuticals Inc (under the name of Ester-ETM) and is marketed worldwide in the personal care market as Vital ETTM by ISP Corporation.

Contact details:

Mr Harry Rosen

Managing Director

Phosphagenics Ltd

+61 3 9605 5900 or +61 (0)421 322 757