Letter From Alliqua, Inc. (Formerly known as HepaLife Technologies Inc.) CEO, Dave Johnston, to Shareholders

NEW YORK, March 7, 2013 /PRNewswire/ -- Alliqua, Inc. (OTCQB: ALQA)

Dear Stockholders,

Two thousand twelve was a year of significant change at Alliqua change that I firmly believe will set the stage for future growth and success. It was this vision of the future that energized me to join the board of directors and more recently assume the responsibilities as chief executive officer. What I saw was a company with all the necessary building blocks of success:

• motivated and seasoned management,
• a proven technology,
• commercialized and reimbursed products,
• a U.S. manufacturing facility that can operate at low costs,
• and a vision to expand into the $20+ billion dollar drug delivery market.

I believe Alliqua has a compelling story that has yet to be told one that I personally find very exciting. Let's review our 2012 achievements and discuss our plans for future growth.

2012 Achievements: Establishing Strong Leadership and Product Awareness

In the latter part of 2012, we began the first phase of change at Alliqua by bolstering the corporate and medical expertise on our already experienced board of directors through the appointment of Dr. Jerry Zeldis as Chairman. Jerry continues to serve as the chief medical officer of Celgene where, over a 15-year period, he helped build one of the world's most successful publicly traded biotech companies with a current market capitalization in excess of $40 billion. At the same time, I joined the board of directors and then took over as CEO in February of 2013, after having spent the last 25 years operating medical device and wound-care companies. Most recently, I served as the CEO of Convatec Inc., where our team worked to triple overall sales to $1.7 billion, with a large part of those sales derived from the wound care marketplace. In addition, we added James Sapirstein to the Alliqua team, who now serves as the head of our Alliqua Biomedical division where he intends to bring our drug delivery vision to a reality. James has had executive experience at both large and small companies, including Bristol Myers Squibb, Tobira and Gilead, which should provide us with valuable insights as we seek to leverage our proprietary hydrogel in the pharmaceutical and biotechnology sectors.

In 2012 Alliqua also worked diligently to advance our products through scientific studies and opening new marketing channels. A post operative study of SilverSeal® in patients who had foot and ankle surgery was conducted in 2012.

These interim results, which were presented at a major medical meeting, were very encouraging, demonstrating reduction in scarring and incidence of infection compared to traditional dressings. Importantly, this mirrored many of the anecdotal comments that our current customers have been providing us.

We pursued and achieved formulary status for both our SilverSeal® and HyDress® products with the U.S. Department of Veterans Affairs, which serves over 5 million patients. This contract is expected to open up a new channel to market our products, and provide an important wound-healing solution to inactive military personnel.

We also made the decision to consolidate our offices in Langhorne, PA, the current site of our manufacturing facility. I am particularly excited about our relocation, as it will enable our entire team for the first time to work together under one roof, allowing us to build a high-performance winning culture. In addition, it allows us to re-allocate certain G&A expenses to revenue generating activities.

We accomplished a lot in 2012 in this first phase of change for our company. It can best be described as a year of building building the resources, staff, and clinical evidence behind our products, as well as the strategic plan necessary to propel our company into a new phase of expansion for 2013 and beyond.

Moving Alliqua Forward in 2013: Increasing Revenues and Expanding the Product Portfolio

Our hydrogel technology the same technology that gave us our marketed surgical dressings, SilverSeal® and HyDress® is the backbone of our company and represents an enormous opportunity for growth in many ways. In 2013 we intend to roll out a strategy to leverage this technology platform.

First, we are in the process of hiring a select group of senior, proven, sales and marketing managers who, together with our existing talent, will strive to increase revenues from our marketed products: Together, we intend to:

a) open up new distribution channels

b) drive demand in our current channels including the VA

c) leverage the strong clinical data

Through these and the existing educational and marketing efforts that are already underway, we expect to see SilverSeal® and HyDress® revenues start to increase in the Q2-Q4 timeframe.

Second, we plan to utilize business development opportunities to expand our product offerings. Namely, we intend to:

a) focus on in-licensing marketed transdermal products to fulfill our vision around leveraging the hydrogel in transdermal drug delivery use. Initially, we intend to focus on wound healing associated with pain, dermatology, infection and cancer

b) expand our portfolio beyond products with potential hydrogel application by endeavoring to in-license or acquire additional wound-care products

This 2013 direction is intended to provide some early wins, while building for sustained growth in the future.

Capital Conservation and Growth

We recently completed a round of financing by our insiders which I believe demonstrates the confidence we have in our ability to build Alliqua for the future. These funds are expected to be allocated toward the revenue-generating efforts I described earlier. While funding is vital to any company, success is driven by more than just capital. I believe the changes we made in 2012, including the strategic differentiation of our Alliqua Biomedical and AquaMed Technologies divisions, provides Alliqua with the foundation necessary to achieve our vision to become a world-class wound-care and topical drug delivery business.

In conclusion, I would like to thank our stockholders, advisors and colleagues who believe in this company and remain committed to its success. I look forward to continuing our work together in 2013 as we strive to execute on our plans, increase revenue and create outstanding returns for our company and its stockholders for years to come. I wish you all well and look forward to updating you on our accomplishments throughout the year.

Warm Regards,

Dave Johnson
CEO
Alliqua, Inc.

About Alliqua, Inc.

Alliqua, Inc. (ALQA) ("Alliqua") is a biopharmaceutical company focused on the development, manufacturing, and distribution of proprietary transdermal wound care and drug delivery technologies. Alliqua's leading technology platform produces hydrogels, a 3-dimensional cross-linked network of water soluble polymers capable of numerous chemical configurations.

Alliqua currently markets its new line of 510K FDA-approved hydrogel products for wound care under the SilverSeal^® brand. Alliqua's electron beam production process, located at its 16,000 square foot GMP manufacturing facility in Langhorne PA, allows Alliqua to aggressively develop and custom manufacture a wide variety of hydrogels. Alliqua's hydrogels can be customized for various transdermal applications to address market opportunities in the treatment of wounds as well as the delivery of numerous drugs or other agents for pharmaceutical and cosmetic industries. Additionally, Alliqua's drug delivery platform, in combination with certain active pharmaceutical ingredients, can provide pharmaceutical companies with a transdermal technology to enhance patient compliance and potentially extend the patent life of valuable drug franchises. Additionally, our subsidiary, HepaLife Biosystems, Inc., focuses on the development of a cell-based bioartificial liver system, known as HepaMate.

For additional information, please visit www.alliqua.com. To receive future press releases via email, please visit: http://alliqua.com/contacts.

Any statements contained in this press release regarding our ongoing research and development and the results attained by us to-date have not been evaluated by the Food and Drug Administration.

Legal Notice Regarding Forward-Looking Statements

This release contains forward-looking statements. Forward-looking statements are generally identifiable by the use of words like "may," "will," "should," "could," "expect," "anticipate," "estimate," "believe," "intend," or "project" or the negative of these words or other variations on these words or comparable terminology. The reader is cautioned not to put undue reliance on these forward-looking statements, as these statements are subject to numerous factors and uncertainties outside of the our control that can make such statements untrue, including, but not limited to, inadequate capital, adverse economic conditions, intense competition, lack of meaningful research results, entry of new competitors and products, adverse federal, state and local government regulation, termination of contracts or agreements, technological obsolescence of our products, technical problems with our research and products, price increases for supplies and components, inability to carry out research, development and commercialization plans, loss or retirement of key executives and research scientists and other specific risks. We currently have no commercial products intended to diagnose, treat, prevent or cure any disease. The statements contained in this press release regarding our ongoing research and development and the results attained by us to-date have not been evaluated by the Food and Drug Administration. There can be no assurance that further research and development, and/or whether clinical trial results, if any, will validate and support the results of our preliminary research and studies.

Further, there can be no assurance that the necessary regulatory approvals will be obtained or that we will be able to develop new products on the basis of our technologies. In addition, other factors that could cause actual results to differ materially are discussed in our Annual Report on Form 10-K filed with the SEC on March 29, 2012 and our most recent Form 10-Q filings with the SEC. Investors and security holders are urged to read these documents free of charge on the SEC's web site at www.sec.gov. We undertake no obligation to publicly update or revise our forward- looking statements as a result of new information, future events or otherwise.

Contacts for Alliqua, Inc.

Steven Berger
Chief Financial Officer
646-218-1450
info@alliqua.com

SOURCE Alliqua, Inc.