Orphan Medical News Updates

Minneapolis, MN - July 19, 2001

Orphan Medical, Inc., a specialty pharmaceutical company dedicated to patients with uncommon and inadequately treated diseases, this week made several announcements, including second quarter financial performance, the addition of two key staff members, and a brief update on the status of the company's Narcolepsy drug, Xyrem.

Adds Key Staff Members

Orphan Medical has hired David Fuller, M.D., B.Pharm, to join its staff as Director of Medical Affairs and Judy Kelloway, Ph.D., as Director of Patient and Professional Affairs.

Dr. Fuller will assist in the ongoing management of clinical development projects and work closely with the Chief Medical Officer in the day-to-day management of the clinical development function, medical aspects of marketed products and assessing new clinical opportunities.

Dr. Fuller began his pharmaceutical industry career after graduating from Sydney University with a degree in pharmacy. He then chose to broaden his career potential by obtaining his medical degree, again at Sydney University. After he gained initial clinical experience, he returned to the pharmaceutical industry to apply both his pharmaceutical experience and his medical education.

He has since held multiple positions with CeNeS Drug Delivery in the United Kingdom and most recently worked as the Director of Medical and Regulatory Affairs. Dr. Fuller also brings past experience with numerous clinical research organizations, pharmacies, and pharmaceutical companies such as Spectrum Pharmaceuticals, Bayer Australia and Roche Products.

Dr. Kelloway ensures that all customer and health care provider product information requests are addressed in a professional and accurate fashion and directs the Medical Education and Professional Relations areas of Orphan Medical.

Prior to joining Orphan Medical, Dr. Kelloway was the Vice President of MedAdvisor, Inc., a subsidiary of Schering-Plough, and was responsible for intervention design and product development. Other past positions have included serving as Research Director at Park Nicollet Clinic's Asthma and Allergy Research Center and previous experience as a clinical research scientist at the UpJohn Company. Dr. Kelloway has published more than 20 articles in professional journals covering a wide range of therapeutic areas and serves as a Clinical Assistant Professor at the University of Minnesota.

Xyrem® (Sodium Oxybate) Oral Solution Update

On July 3, 2001, the Company announced that it had received an Approvable Letter from the U.S. Food and Drug Administration (FDA) in response to the Company's New Drug Application (NDA) for Xyrem. An Approvable Letter defines the FDA requirements of approval. The Company is in discussions with the FDA to fully define the issues in the FDA's Approvable Letter.

The Company believes that all components of the Approvable Letter can be addressed by year-end. Items to be addressed include a safety update of on-going clinical trials and an additional acute exposure trial in respiratory compromised patients. Final product labeling and modifications to the Company's proposed risk management program must also be negotiated. The manufacturer must also undergo a successful re-inspection for current Good Manufacturing Practices (GMP) as well as a pre-approval inspection relating to Xyrem. By regulation, the FDA has up to six months to review a response to the Approvable Letter.

Xyrem has been developed as a potential treatment for narcolepsy, particularly the debilitating symptom of cataplexy. Narcolepsy is a chronic neurological disorder affecting an estimated 100,000 to 125,000 Americans, whose main symptoms are excessive daytime sleepiness and cataplexy. Cataplexy is a debilitating symptom characterized by loss of muscle control in response to strong emotions such as laughter, anger, or surprise. In its most severe form, cataplexy can cause a person to collapse during waking hours. Based on these and other assumptions, the U.S. cataplexy market is estimated in the range of $50 million to $100 million annually. The total narcolepsy market is estimated in the $100 to $200 million range annually in the United States.

Xyrem's approval was expected to generate sales in the second half of 2001, said John Bullion, Orphan Medical's Chief Executive Officer. We now believe Xyrem may be approved in the spring of 2002.

Sales and marketing expenditures should be consistent with the second quarter during the next couple of quarters and begin to increase late in 2001 or early 2002 to support the new timeline for the expected launch of Xyrem. Additional costs to address issues raised by the FDA's Approvable letter are expected to be less than $1 million. Spending on the ongoing Phase III(b) trial will continue and we will adjust our infrastructure as needed to support Xyrem and other opportunities under evaluation, said Bullion.

Financial Performance

Orphan reported second quarter (ending June 30, 2001) revenues of $2.4 million, a 19.9 % decrease from the $3.0 million reported in the second quarter of 2000. The Company also reported a net loss to common shareholders of $1.9 million or $0.22 per diluted share, compared to the net loss of $1.2 million or $0.15 per diluted share in the second quarter of 2000.

For the six months ended June 30, 2001, the Company reported $4.8 million of revenue, a 17.4 % decrease from the $5.8 million for the six months ended June 30, 2000. The Company reported a net loss to common shareholders of $3.5 million or $0.42 per share for the six months ended June 30, 2001, compared to a net loss of $2.3 million or $0.30 per share. Due to product mix, gross margins for the quarter decreased slightly compared to the first quarter of 2001 and to prior year. Year to date gross margins are comparable to the same period the prior year.

Orphan Medical acquires, develops, and markets pharmaceuticals of high medical value for inadequately treated and uncommon diseases. The Company serves three strategic therapeutic market segments that are characterized by well-defined patient populations and served by physician specialists: oncology support, antidotes and sleep disorders.

Sales of Antizol® (fomepizole) Injection decreased compared to the prior year since wholesale distributors have reduced stocking levels of Antizol to reflect hospital ordering. While Busulfex® (busulfan) Injection continues to be used in an increasing number of transplant centers, sales are slightly behind 2000 sales for the same period since wholesaler stocking is lower than last year. This decline also reflects the recent clinical trials and subsequent approval of a new treatment for chronic myelogenous leukemia (CML) in May. Busulfex is approved in the United States as part of conditioning regimens prior to bone marrow or hematopoietic progenitor cell transplantation for CML. In Canada and Israel, Busulfex is approved for regimens associated with a broader range of indications. A Busulfex regimen provides an alternative to oral busulfan and total body irradiation regimens.