The companies formed the agreement following successful completion of pre-clinical feasibility studies for rhGH with Emisphere's eligen^® technology. Emisphere has identified delivery agents that can deliver therapeutically sufficient levels of rhGH to the blood stream when administered orally.

Under the terms of the agreement, Emisphere will work with Novartis to initiate clinical trials of a convenient, oral growth hormone product using its eligen^® technology. Novartis will fully fund the program including clinical studies. Emisphere will receive up to $34 million during the course of product development, and a royalty increasing to double-digit rates based upon sales. During the first year, Emisphere could receive up to $6 million.

In May 2006, Novartis Pharma AG has notified Emisphere that Novartis Pharma AG will initiate the development of an oral human growth hormone (rhGH) product using Emisphere's eligen^® delivery technology. Emisphere is entitled to a $5 million development commencement milestone payment as a result of the Novartis Pharma AG decision to proceed with product development.

Novartis Pharma AG notified Emisphere that it had initiated a multidose study in growth hormone-deficient adults with the oral formulation of rhGH in Q1 this year. Once finished, the results of the trial will be communicated in an appropriate and timely manner.