Nephros granted rights to market products based on Medica's Medisulfone ultrafiltration technology

Nephros, Inc. (OTC Bulletin Board: NEPH), a medical device company developing and marketing filtration products for therapeutic applications, infection control, and advanced water purification solutions, today announced that the company has entered into a strategic license and supply agreement with Medica S.p.A.  That agreement, which is effective April 23, 2012, grants Nephros exclusive global rights, with specific exceptions, to market products based on Medica's proprietary Medisulfone ultrafiltration technology.

MEDICA S.p.A is located in Medolla, Italy, the largest European center for developing and manufacturing of medical products.  MEDICA manufactures and sells a complete range of medical devices in the areas of Chronic and Acute Dialysis, Gastroenterology, Urology, Oncology, Cardiology and microbiological water purification for use in the hospital sector.  The Medica Water Division, based in Iglesias, Italy, manufactures a proprietary hollow fiber polysulfone synthetic membrane for blood and water purification in medical and industrial applications.  For more information about MEDICA, please visit www.medicasrl.com

"Medica and Nephros have a long history of collaboration, and I am pleased to formalize our relationship via today's agreement which positively addresses the interests of both companies," said Luciano Fecondini, CEO of Medica.

"We are excited to solidify our relationship with Medica through this agreement," said Dr. Paul Mieyal. "The Medisulfone technology is a differentiated component of ultrafiltration applications. This agreement consolidates the ultrafiltration products and intellectual property of Nephros and Medica into a comprehensive product line and enables Nephros to market these products on an exclusive basis globally."

Summary of Terms

Under the terms of the agreement, Medica will provide an exclusive license to Nephros for its ultrafiltration technology on a worldwide basis for the period April 23, 2012 to December 31, 2022.  Medica will retain certain product and marketing rights for Italy for the period from April 23, 2012 to April 23, 2015, at which time Nephros will have the option to transition Italy into the global exclusive license for no additional consideration. In exchange for the license, Nephros will pay to Medica 1.5 million euro in two installments: 500,000 euro on April 23, 2012 and 1,000,000 euro on January 25, 2013.  As part of the agreement, Nephros has granted to Medica 300,000 options to purchase Nephros common stock which will vest over the first three years of the agreement.  For the period April 23, 2014 through December 31, 2022, Nephros will pay to Medica a royalty of 3% of net sales.

Nephros Ultrafiltration Products

The Association for the Advancement of Medical Instruments' (AAMI) adoption of more stringent water purity standards for dialysis applications combined with significant observational studies showing a substantial reduction in required erythropoietin dosing when the Nephros DSU is utilized during dialysis therapy has led to significantly increased interest in Nephros ultrafiltration products. In addition to the DSU, Nephros has received FDA 510(k) clearance for its SSU and MSU filters to enable these additional ultrafiltration products to be used in dialysis applications.

Nephros has introduced product line extensions for the hospital infection control market which include a more durable filter design to withstand the higher pressures of hospital plumbing, filter covers to improve the aesthetics of the finished installations in hospital showers, and the SafeSpout as an effective, longer lasting, point of use filter to address acute outbreak scenarios.  In a study involving two major U.S. hospitals, the Nephros DSU system was shown to be effective in reducing waterborne Legionella bacteria to undetectable levels, an effect which was sustained for the 3-month study period.

Nephros has an ongoing collaboration agreement with STERIS Corp. related to its ultrafiltration technology.

In response to a Request For Information (RFI) from the U.S. Army, Nephros submitted its UF-40 ultrafilter for consideration as part of the standard issue hydration pack for soldiers in the field.  Nephros has been informed by the U.S. Army Public Health Command that its UF-40 filter has been validated to meet the military's NSF P248 standard for emergency military operations as a microbiological water purifier.  Nephros believes that its UF-40 filter is the only stand-alone filter to date to have met the performance criteria of the NSF P248 standard without secondary disinfection steps.  The Army has not to date issued a Request For Proposal (RFP), and Nephros has no information regarding when or if an RFP applicable to the UF-40 ultrafilter may be put forth by the U.S. Army.