Highlights & Recent Developments

INCREASED REVENUE AND ROYALTY INCOME

• Licensing agreements provide for minimum royalties and consulting fees to reach approximately $2 million per annum over the next several years for North America only.
• Expansion to international markets and development of new pharmaceuticals could increase these royalties several fold. At the present time Apollo Pharmaceutical Inc is close to completing negotiations for the sub-licensing of its Intellectual Property in New Zealand, Australia, South Africa and the UK.

• Completion of a 200 patient double blind clinical trial with excellent results has now positioned Prime's psoriasis treatment Relieva as a major new psoriasis treatment with distinct competitive advantages over traditional treatments including the world's leading product with estimated sales of $300 million US and gross margins of approximately $200 million.

• Apollo US initiated a program to license Relieva on a world wide basis with initial indications of interest from companies in New Zealand, Australia, India, China and others.
• Apollo US is expanding the base of Prime's intellectual property through research to create new pharmaceutical treatments for which Prime will receive royalties.

In addition to the financing transaction, Prime and Apollo US have agreed that Prime's 5% royalties relating to sales of certain products within Canada will be increased to 5.5%.

Apollo U.S. funded a new clinical trial with leading dermatologists from across North America. Based on the results of this 200 patient placebo based double blind controlled clinical trial, Reliéva™ can become a leading treatment for psoriasis. This trial was conducted by Global Clinical Research Inc. in multiple centres in Canada and the USA. Global Clinical Research Inc is based in Los Angeles and their website is www.globalclinicals.com .

The license and distribution agreements between Prime Pharmaceutical Corporation and Apollo Group were amended as of Dec 29, 2005. The new agreements provided that the Apollo Group would be responsible for all costs of patent applications and filings in various countries around the world. However all patent applications and filings will be in the name of Prime and owned by Prime. Furthermore the Apollo Group will be responsible for registration of all trademarks and foreign jurisdictions and these trademarks will be owned by the Apollo Group. However, the trademarks will be subject to an Intellectual Property security agreement that provides that the trademarks will revert to Prime ownership if there is a breach or termination of existing licensing agreements.

The Apollo Group is in the process of negotiations and discussions to sublicense the right to Prime's IP and these agreements are necessary to clarify the responsibility for the costs of the new trademarks and patents as well as the cost of defending any lawsuits concerning infringements of the patents and trademarks.

The new agreements put Prime in a position of not having any financial exposure in regard to the costs associated with the expansion of marketing its IP

Apollo Pharmaceutical Inc (Apollo U.S.) has initiated a program to license the rights to Relieva in countries outside North America. There have been strong indications of interest from companies in Australia, New Zealand and India.

These new potential licensing agreements could provide increased royalties and revenues for Prime. In addition, they would also increase the value of Prime's equity interest in Apollo U.S.

Apollo U.S. has spent substantial funds to further develop the value of Prime's intellectual property. Their programs and research are aimed at developing new pharmaceuticals based upon Prime's proprietary extract Psorberine. Prime will benefit from additional royalties based upon development of its intellectual property.

The refinancing of Apollo Pharmaceutical (Canada) Inc, and the successful clinical trial represent significant progress for Prime. Management believes that the Apollo Group will expand sales on a world-wide basis as well as develop significant new pharmaceuticals utilizing Prime's proprietary extract and intellectual property.

Prime has substantial equity interests in Apollo Canada and Apollo US, two well funded dermatology corporations and royalty interests and consulting fees based on its licensing agreements. In addition, Primes partners are spending substantial funds to develop and increase the value of Primes I.P.

These recent developments will enable Prime to seek a strategic partner for merger or acquisition, or the necessary sponsorship to become a public company.

Prime Pharmaceutical Corporation would like to thank each and everyone of its shareholders for the support that you have provided over the last several years.

Yours very truly,

David Solomon
President