TWST: We'd like to begin with a brief historical sketch of NexMed and a picture of the things you're doing at the present time.

Ms. Liu: NexMed has been in existence since the end of 1995. We are a drug development company focusing on the development of a broad portfolio of innovative topical products that incorporate FDA-approved drugs with our proprietary NexACT technology. We have targeted our development programs on indications that would make a lot of sense to be treated topically, in order to minimize or even avoid completely undesirable systemic side-effect profiles. The differentiating factor of NexMed is our proprietary NexACT technology, which I would be happy to discuss further. NexACT technology is a series of patented permeation enhancers that significantly improve the delivery of drugs through various membranes such as the skin and the nails, and other parts of the body. The platform technology is patented and can be incorporated with a wide-range of drugs into dosage forms such as creams, patches, lotions. Our lead products include topical treatments for male and female sexual dysfunction and for onychomycosis, or commonly known as nail fungus, which we licensed to Novartis in 2005. When you look at the characteristics of these products, it makes a lot of sense that the treatments are delivered topically. Right now, these diseases may be treated orally which may have systemic side effects, via injection, or some other undesirable delivery method. It makes a lot of sense to improve the delivery through a topical delivery.

TWST: What stage are you at with each of these? Also, what is the market size potential in each case?

Ms. Liu: We have focused our development program on potentially multibillion- dollar markets. Novartis licensed our onychomycosis product for their next- generation Lamisil program. You may recall the Lamisil ads that feature "Digger," the undesirable fungus that lives under your nail, in the nail bed. Lamisil is an effective oral product but causes severe systemic side effects in a small number of patients, so all patients taking oral Lamisil are required to have liver function tests every three months. Lamisil generates over $1 billion in annual sales for Novartis and its patent coverage expires this year. Right now, they are conducting two Phase III trials in the US and Europe, and we anticipate that this product may be in the marketplace as early as 2009. For our topical treatment for erectile dysfunction, we completed our Phase III testing a while ago, and have been busy preparing for filing the marketing application in the US, Europe and Canada in the very near future. The product is intended for those patients who cannot or prefer not to take the oral treatments such as Viagra due to its side effects. Although very efficacious, the oral treatments are not for everyone. Also on the market are less patient friendly treatments such as injections or intra-urethal pellets. Although very efficacious if applied properly, these products are limited in sales because of the way they're applied. The approximately $2 billion worldwide ED treatment market is dominated by three oral treatments. In terms of our female sexual arousal disorder product, we are in early Phase II development in the US. This is potentially, a very large and untapped market that many industry experts project to be the size, if not larger than, the ED market. We are in active discussions with potential co-development partners to take this product forward.

TWST: I understand that female dysfunction is something that hasn't been addressed as much as the erectile problem for men.

Ms. Liu: That's 100% correct. First of all, female sexual dysfunction is much more complex in diagnosis as compared to erectile dysfunction. There are basically four sub-categories of female sexual dysfunction: disorders associated with libido, arousal, pain and orgasm. We are focusing our efforts specifically on arousal, which we believe can be treated with a topical alprostadil. There is no product approved for treating arousal. When you hear about some female products that have been approved, they are hormonal products related to improving the libido. Recently, P&G was trying to get approval for Intrinsa. Unfortunately, the FDA denied it based on insufficient safety data, but the product is now being approved and introduced in Europe.

TWST: Looking ahead regarding each of your three products, what challenges could arise for you over the next few years?

Ms. Liu: Certainly for product development, you're always concerned about the regulatory climate and whether the agencies will provide the necessary guidance to help you develop your product development program, as well as approval issues. We're also very concerned about clinical challenges. Very often, you have drugs that look good in the early stages, but when you test it in a larger patient population, the results aren't as promising as you first thought they would be. So those are the two primary concerns that we will have. What is always important for small companies like us is financial considerations in terms of having sufficient cash to drive our product development program.

TWST: What is your cash situation like and what is your burn rate like?

Ms. Liu: Our cash position is quite good. We're currently operating at a monthly burn of about $450,000 and, as of March 31, we have about $10.6 million in cash. That gives us close to two years of cash in the bank, and that is not including the anticipated milestone payments that we will be receiving from Novartis. Our agreement with Novartis provides for $51 million in milestone payments. We've already received $4 million, and we anticipate that we'll receive an additional $5 million during the next six to nine months. The rest of the payments will hopefully take place in the next two years when the product is approved, and after that, we will receive a royalty from Novartis.

TWST: Is there anything that you would like to add regarding your strategic agenda for the next few years?

Ms. Liu: We have a very compelling story. We have a very unique platform technology, meaning multiple products can be developed from this platform. The technology is an acute transdermal delivery. So if you're looking to develop products that require fast and efficient penetration and a very large quantity of drugs through the various membranes, this is a great technology. During the next six to eight years, it's widely agreed that 150 billion drugs are going to be coming off patent, so the opportunity for drug delivery companies like NexMed is very significant. We would be able to develop new innovative treatments based on drugs that have known safety and efficacy profiles. Also, you hear about companies pursuing the 505(b)(2) regulatory strategy, which, if successfully pursued, enables the company to significantly reduce time and resources. This is something that we have effectively achieved. Under our Novartis program, we developed and implemented a 505(b)(2) strategy that enabled Novartis to take the product from Phase I directly into pivotal Phase III clinical testing. So we're hoping to repeat our success story. Strategically, in three to five years, there is potentially significant upside potential for NexMed.

TWST: What might be some year-by-year milestones for investors to watch?

Ms. Liu: In two or three years, I would be looking for the progress on the ED product which will be the regulatory filings and obviously approval in the US, Canada and Europe. I would also be looking for related commercialization partnerships, whether it were a global licensing arrangement and/or regional partnerships. For the agreement with Novartis, there is an additional $47 million of milestone payments that are anticipated during the 2007 to 2009 time frame, followed by royalties that potentially translate into somewhere between $25 and $50 million annually for the company. For our female sexual arousal product, look for NexMed to enter into some type of co-development partnership. We haven't even had a chance to talk about some of the other earlier stage products that we have in our pipeline. We will turn our resources to them once we have completed the regulatory filings for our ED product.

TWST: Would you give us a few hints about those?

Ms. Liu: They're all topical treatments that are intended for unmet medical needs. One opportunity is a treatment for premature ejaculation. It makes a lot of sense to consider a topical approach to treating the condition. There is really no effective treatment on the market. J&J unsuccessfully tried to go for an oral treatment. Another interesting product that we are considering is a topical treatment for Raynaud's disease. That is the numbness in the extremities such as the fingertips and the toes. For a lot of patients, that may just be an inconvenience, but you do have a significant number of patients where the numbness becomes painful and debilitating. If the condition gets very serious, they need to go to the hospital for injections. So, once again, a topical treatment for a patient to self apply makes a lot of sense. Hopefully, this gives you an idea of some of the areas that we're looking at and exploring.

TWST: Would you tell us about the backgrounds and the expertise of several of the key members of the management team, yourself included?

Ms. Liu: I've been with the company since its inception. I'm one of its Founders. My background is in finance and I served as the company's CFO for an extended period of time. Last year, I was promoted to Executive Vice President and Chief Operating Officer for the company. Being with the company from its inception, I know this company very well and look forward to contributing to its growth. Our CFO is Mark Westgate. He has been in the pharmaceutical business for the past 10 or 12 years. Prior to that, he was in public accounting, so he is well versed in the pharmaceutical business. Our Chief Scientists are Dr. Pfister and Mr. Frank. They've been with the company pretty much since its inception as well. We also have a very seasoned development team that's familiar with our NexACT technology and has been able to make some technical breakthroughs. We also utilize the services of renowned consultants who work very closely with us. Being a small company, we don't have all the expertise in-house, but we have some consultants of long standing especially in the clinical and regulatory areas.

TWST: As Founder, former CFO and current COO, what occupies your own attention most, day by day?

Ms. Liu: It's definitely our regulatory filings for our ED product program. Those filings are going to take place in the US, Europe and Canada. We are in that last stretch, so we hope to be there very soon. I'm also very much involved and active in our investor relations program. This calls for a lot of my attention to communicate our story to the investor community.

TWST: What is your investor base like right now?

Ms. Liu: Our investor base is maybe 65% institutional holders. Our larger shareholder is Southpoint Capital, and our second largest now is Fidelity.

TWST: How many employees does the company have?

Ms. Liu: We currently have 18, and we have six additional temporary employees.

TWST: Would you have to add many people as the company grows?

Ms. Liu: Our focus for the next year or two is on our earlier stage development programs, and our current staff is sufficient for that. We have no immediate plans to increase our burn rate or our headcount. In fact, our pledge to our investors is that we will hold to our current burn rate.

TWST: What would be the two or three best reasons for the long-term investor to look very closely at NexMed?

Ms. Liu: The antifungal program that we have with Novartis is a very compelling story. If you look at all the clinical work we've done, our investors are very confident and are betting that Novartis, the marketer of Lamisil, will be able to take our product forward, get it approved and make it into a blockbuster drug. Novartis is a phenomenal marketer. We couldn't have partnered better. What's also going to be a very exciting play is the NexACT technology. We have a technical validation from Novartis that the technology works. We're looking to deliver additional success stories about our technology and products under development to our investors. There are very few drug delivery technologies out there that can claim to have the scope of safety and efficacy databases that we have. The opportunity for additional product development in a much shorter period of time, with less investment, and yet having great new products coming out of the pipeline is an extremely exciting opportunity for the company. That's where the upside potential will be.

TWST: How much of an issue has Sarbanes-Oxley been for you?

Ms. Liu: Sarbanes-Oxley has been challenging for all small companies. Our current net market cap is over $100 million, and we were among the first group to meet the 404 requirement. Our CFO, Mark Westgate, did a fine job. We passed the test, and we were 404-compliant. It was a very expensive exercise for small companies like us. I certainly look forward to the SEC giving more reprieves to smaller companies. It is very costly for us to run our business with all the rules and regulations that are imposed upon us. At the end of the day, we're not a large company like GE, where transactions are much more complicated.

TWST: Is there anything that you would like to add, especially regarding strategies and long-term objectives?

Ms. Liu: We have a very exciting and compelling story. We have a unique drug delivery system that has multi-product potential, and we are pursuing a reduced risk regulatory strategy which is something that we have demonstrated through our Novartis agreement that we can do, and we will be able to do again. The company in the last 18 months has transformed itself. So I very much look forward to being part of the team that will take the company to the next level. In another 18 months from now, I anticipate we're going to be an even more different company, and we are all optimistic that it's going to be for the better.

TWST: Would you tell us about this transformation that has occurred?

Ms. Liu: One of the Founders and the former CEO of the company left at the end of 2005. At that time, we were operating at over $1 million a month in burn rate. We had 45 employees spread out in three different facilities, and had three months of cash left in the bank. So the challenge was to keep the company afloat, restructure it, refocus it, reposition it, significantly reduce its cash burn, improve its cash position and also keep it focused. I think we've accomplished all of our goals, and we're a better, stronger company today as a result of it.

TWST: Is there anything you would like to add?

Ms. Liu: I certainly invite anyone who has additional questions to call us. We'd be happy to share our story. We have an exciting story and we are very proud to tell it to whoever is interested.

TWST: Thank you. (MC)

VIVIAN LIU EVP & COO NexMed, Inc. 89 Twin Rivers Drive East Windsor, NJ 08520 (609) 371-8123 (609) 426-9116 FAX www.nexmed.com