Nephros Inc. Provides Corporate Update

RIVER EDGE, N.J., March 11, 2014 /PRNewswire/ -- Nephros, Inc. (OTCQB:NEPH), a commercial stage medical device company that develops and sells high performance liquid purification ultrafilters and a Hemodiafiltration system for the treatment of chronic renal failure patients today provided an update on its operations and strategy.

Recent Highlights

• Daron Evans appointed to Board of Directors
• Launched NanoGuard-D and NanoGuard-S ultrafilters for filtration of water for washing and drinking
• Initiated $2.75 million Shareholder Rights Offering
• Extended and expanded Bellco S.r.l. license agreement
• Received first additional payment of 225,000 from Bellco S.r.l.
• Executed a distributor agreement with Mar Cor Purification

Dialysis water and bicarbonate concentrate DSU and SSU ultrafilters

As announced separately today, we have signed a non-exclusive distributor agreement with Mar Cor Purification to distribute Nephros’s dialysis ultrafilters to U.S. and Canadian dialysis clinics.

We believe that more stringent standards for dialysis water, bundling of dialysis reimbursement payments, and the Affordable Care Act initiatives can provide positive momentum for increased adoption of Nephros ultrafiltration products.

European Hemodiafiltration MD220 Dialyzer

In February, we signed an amendment to our current license agreement with Bellco to extend and expand the existing license agreement. The amendment extends the agreement by five years through 2021 and expands the exclusive territories covered by Bellco to include Sweden, Denmark, Norway, Finland and the non-exclusive territories to include Korea, Mexico, Brazil, China and the Netherlands and grants Bellco a right of first offer in connection with a proposed sale of the Nephros patent licensed to Bellco under the agreement. In return, Nephros will receive 450,000: 225,000 has been paid and the remaining 225,000 is payable on March 31, 2014. Nephros also agreed to reduce the fixed royalty payment in return for an increase in the minimum sales volumes required to retain exclusivity. The royalty period begins on January 1, 2015 and extends through December 31, 2021.

Recent studies have confirmed the reduction of patient mortality of on-line HDF compared with standard treatments. The Bellco amendment will provide further geographic distribution and availability of the MD220 dialyzer.

U.S. On-line Mid-dilution Hemodiafiltration Nephros HDF System

The OLpur H2H HDF Module and OLpur MD 220 Hemodiafilter is cleared by the U.S. Food and Drug Administration (FDA) to market for use with a UF controlled hemodialysis machine that provides ultrapure dialysate in accordance with current ANSI/AAMI/ISO standards, for the treatment of patients with chronic renal failure in the United States. Our on-line mid-dilution HDF system is the only on-line mid-dilution HDF system of its kind to be cleared by the FDA to date.

We have completed preparation of our OLpur H2H HDF Modules and have manufactured initial lots of our OLpur MD220 Hemodiafilters, H2H Substitution filters and H2H water filters. We have finalized our service contract and are in the process of finalizing site selection in anticipation of market release. We have experienced delays with the approval process at our initial placement site in the U.S. but expect to place our on-line mid-dilution HDF system in a U.S. dialysis clinic in the second quarter of 2014. We have not begun to broadly market our on-line mid-dilution HDF system and are actively seeking a commercialization partner in the U.S.

Military and Outdoor Recreation water applications Individual Water Purification Device (IWPD)

In response to a Special Notice Announcement from the U.S. Army, Nephros submitted its (IWPD) containing the Nephros proprietary ultrafilter technology for consideration as part of a standard issue personal hydration pack for soldiers in the field. Nephros has been informed by the Military Government Review Agency that its IWPD has been validated to meet the military’s NSF P248 standard as a microbiological water treatment device for military operations. In February 2013, Nephros submitted its response to a U.S. Army request for proposal (RFP) relating to IWPDs. In March 2013, we received notification from the U.S. Army that the Government has completed the initial evaluation of our proposal and found Nephros to be within the competitive range to commence negotiations. We also received a request for 180 of our IWPDs to be used as test assets during the Limited User Evaluation (LUE) phase of the source selection. As of March 2014, we have confirmed with the U.S. Army that the RFP LUE period was still ongoing. The U.S. Army may award several, one or no contracts as a result of this solicitation. The maximum quantity of all contracts combined is not to exceed 450,000 units or $45,000,000 over a 3 year period.

In addition to the RFP, we continue to make our IWPD available to the U.S. military. During 2013, we signed distributor agreements with W.S. Darley & Company, Source One Distribution Inc. and Atlantic Diving Supply, Inc. The UF40L and 30L recently were listed on the Darley website.

In September 2013, we were awarded the contract for 30 UF-40L units in response to RFI Solicitation Number: M67854-13-I-7310 from the U.S. Marine Corp Warfighting Laboratory. We are currently waiting for final feedback from this testing.

Hospital and Other Commercial Facilities water filtration NanoGuard-D and NanoGuard-S ultrafilters

In October 2013, Nephros announced the voluntary recalls of its point of use (POU) and DSU in-line ultrafilters used in hospital water treatment applications. As a result, the company recalled all production lots of its POU filters, and also requested that customers remove and discard certain labeling/promotional materials for the products. In addition, the company also requested, for the DSU in-line ultrafilter, that customers remove and discard certain labeling/promotional materials for the product. These voluntary recalls did not affect the company’s dialysis products. The company is working towards a resolution of the issues raised by the FDA. The company is unable to predict at this time what additional effect this recall might have on its business, financial condition, future prospects or reputation or whether the company may be subject to future actions from the FDA.

We have launched our NanoGuard-D and NanoGuard-S in-line ultrafilters for the filtration of water which is to be used for drinking and washing. The NanoGuard-D and NanoGuard-S trap particulates greater than 5nm in size and the water permeability (the ease at which water can pass through a membrane at a given pressure) of the membrane is higher than membranes with a similar pore size. This provides improved flow performance relative to the physical size of the filter. We anticipate that the filters will be used as a component of a facility water treatment system and also for filtering water to be used in ice machines.

This press release does not constitute an offer to sell or a solicitation of an offer to buy securities of the company, nor shall there be any sale of such securities, in any jurisdiction in which such an offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any jurisdiction.

About Nephros, Inc.

Nephros is a commercial stage medical device company that develops and sells high performance liquid purification filters. Our filters, which we call ultrafilters, are primarily used in dialysis centers for the removal of biological contaminants from water, bicarbonate concentrate and/or blood.

We were founded in 1997 by healthcare professionals affiliated with Columbia University Medical Center/New York-Presbyterian Hospital to develop and commercialize an alternative method to hemodialysis (HD). We have extended our filtration technologies to meet the demand for liquid purification in other areas, in particular water purification.

Presently, we offer ultrafilters for sale to customers in four markets:

• Dialysis Centers - Water/Bicarbonate: Filtration of water or bicarbonate concentrate used in hemodialysis devices
• Dialysis Centers - Blood: Clearance of toxins from blood using an alternative method to HD in patients with chronic renal failure
• Military and Outdoor Recreation: Highly compact, individual water purification devices used by soldiers to produce drinking water in the field
• Hospitals and Other Commercial Facilities: Filtration of water for drinking and washing

For more information about Nephros, please visit the company’s website at www.nephros.com.

Forward-Looking Statements
Certain statements in this press release constitute “forward-looking statements”. Such statements include statements regarding the efficacy and intended use of our technologies under development, the timelines for bringing such products to market and the availability of funding sources for continued development of such products and other statements that are not historical facts, including statements which may be preceded by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential” or similar words. Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond our control. Actual results may differ materially from the expectations contained in the forward looking statements. Factors that may cause such differences include, but are not limited to, the risks that:

• we may not be able to continue as a going concern;
• a default under the terms of the secured note with Lambda Investors LLC would result in the lender foreclosing upon substantially all of our assets and could result in our inability to continue business operations;
• we may not be able to complete the contemplated rights offering which could impair our ability to continue business operations;
• even if we are able to complete the rights offering, we may not have sufficient capital to successfully implement our business plan;
• restrictions in the secured note and related security agreement which require the prior consent of the lender may restrict our ability to operate our business, sell the company or sell our assets;
• the voluntary recalls of point of use and DSU in-line ultrafilters used in hospital water treatment applications announced on October 30, 2013 and the related circumstances could subject us to claims or proceedings by consumers, the FDA or other regulatory authorities which may adversely impact our sales and revenues;
• we face significant challenges in obtaining market acceptance of our products, which could adversely affect our potential sales and revenues;
• there are product-related deaths or serious injuries or product malfunctions, which could trigger recalls, class action lawsuits and other events that could cause us to incur expenses and may also limit our ability to generate revenues from such products;
• we face potential liability associated with the production, marketing and sale of our products, and/or the expense of defending against claims of product liability, could materially deplete our assets and generate negative publicity which could impair our reputation;
• to the extent our products or marketing materials are found to violate any provisions of the FDC Act or any other statutes or regulations then we could be subject to enforcement actions by the FDA or other governmental agencies;
• we may not be able to obtain funding if and when needed or on terms favorable to us in order to continue operations;
• we may not have sufficient capital to successfully implement our business plan;
• we may not be able to effectively market our products;
• we may not be able to sell our water filtration products or chronic renal failure therapy products at competitive prices or profitably;
• we may encounter problems with our suppliers, manufacturers and distributors;
• we may encounter unanticipated internal control deficiencies or weaknesses or ineffective disclosure controls and procedures;
• we may not obtain appropriate or necessary regulatory approvals to achieve our business plan;
• products that appeared promising to us in research or clinical trials may not demonstrate anticipated efficacy, safety or cost savings in subsequent pre-clinical or clinical trials;
• we may not be able to secure or enforce adequate legal protection, including patent protection, for our products; and
• we may not be able to achieve sales growth in key geographic markets.

More detailed information about the company and the risk factors that may affect the realization of forward-looking statements, including the forward-looking statements in this press release, is set forth in our filings with the SEC, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 and our other periodic reports filed with the SEC. We urge you to read those documents free of charge at the SEC’s web site at www.sec.gov. We do not undertake to publicly update or revise our forward-looking statements as a result of new information, future events or otherwise, except as required by law.

SOURCE Nephros, Inc.

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