Inflazyme Pharmaceuticals Announces Re-Aligned R&D Strategy Undertaking Restructuring to Focus Resources.

VANCOUVER, British Columbia -- Inflazyme Pharmaceuticals Ltd. (TSX: IZP) announced today that it is implementing a plan to re-focus its Research and Development efforts to concentrate primarily on its Complement Inhibition and Prodaptin(TM) technologies.

The Company has undertaken a restructuring, which includes consolidating its facilities and reducing the number of staff positions by 42 (a reduction of approximately 51%) in a move to conserve cash and to provide resources for the development of new clinical programs. This reduction is across the combined operations of the Company and its recent acquisition of Adprotech. The Company will now have 40 staff comprising people from both Inflazyme and Adprotech.

The Company will consolidate its facilities into one site in Vancouver. This involves closing the Adprotech site in the UK and terminating the GlycoDesign property lease in Toronto. The Company has also terminated the thrombosis collaboration with the Henderson Research Group in Hamilton, Ontario.

Inflazyme expects the restructuring to result in net cash savings of approximately $6.0 million over the next two years, and these cash savings will be applied towards advancing the Complement Inhibition and Prodaptin(TM) Technologies. The Company expects to pay severance costs of about $1.3 million during fiscal 2005. As at June 30, 2004 Inflazyme had cash and short term investments of approximately $29.0 million, which the Company expects, against the revised operating plan, to be sufficient to take it into Q2, 2006.

Ian McBeath, President and CEO of Inflazyme, today said: "The disappointing outcome of our recently completed asthma clinical trial with IPL512,602 has caused us to reassess our business and identify how best we can restore and grow value for our shareholders. We believe that, in the near term, we can make the best progress with the technologies recently brought into the Company through our acquisition of Adprotech. Prudence dictates that we reallocate our resources to those technologies that may allow us to reach earlier milestones".

Inflazyme's Revised R&D Strategy

The focus of Inflazyme's new R&D strategy is to advance programs from its Complement Inhibition and Prodaptin(TM) (drug tethering) platform technologies. As part of this strategy, Inflazyme will seek partnerships with biotechnology and pharmaceutical companies to validate both platform technologies and to share in the risk and reward of developing products through to commercialization. In addition, the Company will continue to evaluate suitable M&A and in-licensing opportunities to grow the Company's pipeline.

Complement forms part of the body's natural immune system, the activation of which plays a key role in the normal inflammatory response. Inappropriate or excessive activation may contribute to tissue damage associated with many different acute and chronic auto-immune and inflammatory diseases.

Prodaptin(TM) is a proprietary drug tethering technology that mimics the natural membrane binding mechanism of some intracellular proteins. Prodaptin(TM) can be applied to a wide variety of drug classes to deliver increased potency, duration and specificity. It consists of an engineered peptide sequence coupled to a lipophilic membrane selective anchor that targets particular cells and tissues.

APT070

APT070 is the Company's first Prodaptin(TM) linked molecule to enter clinical trials. It is a truncated form of the human Complement Receptor 1 (CR1) linked to a unique Prodaptin(TM) construct that regulates the over-production of complement at the cell surface, which occurs in inflammation.

Inflazyme's evaluation of this technology indicates that opportunities for it lie in the acute critical care arena for indications such as organ failure associated with trauma or hypovolemic shock. Additional opportunities also exist in auto-immune neuropathies such as Guillain Barre Syndrome (GBS), which is an acute inflammatory disorder of the peripheral nerves. GBS is the most common cause of rapidly acquired paralysis in the United States and at present that are no approved therapies to treat this condition. The Company will seek to file an IND and commence clinical studies in one of these indications in 2005.

APT070 is currently in an early Phase I/II clinical study in patients with Rheumatoid Arthritis (RA). However, the Company will cease recruitment of additional subjects in the RA study. This study was started by Adprotech but the Company believes that the design and protocol of this study will not generate appropriate data to support future clinical plans.

CD59-Prodaptin(TM)

Inflazyme also expects to progress a new complement regulator CD59-Prodaptin(TM) towards clinical development in 2005. In contrast to APT070, which acts early in the complement cascade, CD59-Prodaptin(TM) interrupts the formation of the "membrane attack complex" which is responsible for killing cells. The Company believes that this different complement target affords unique therapeutic opportunities separate to those of APT070, such as paroxysmal nocturnal hemoglobinuria (PNH), a rare blood disorder characterized by the onset of severe anemia, chronic fatigue and intermittent episodes of dark-colored urine. Approximately 50% of the diagnosed patients die within 10 years and at present there are no approved drugs for this disease.

Prodaptin(TM)

The Company believes that the Prodaptin(TM) technology platform offers multiple opportunities with several drug classes in a variety of indications. Inflazyme will seek to apply the Prodaptin(TM) technology to specific molecules outside the complement area with a view to identifying further clinical candidates. Early pre-clinical studies indicate the potential benefit of combining Prodaptin(TM) with a variety of drug classes to enhance activity and specificity and increase duration of action. These drug classes include receptors, hormones, cytokines and growth factors.

Other Inflazyme Technologies

Inflazyme has other technologies which it will only develop in conjunction with pharmaceutical partners. These include ATH, PDE4 inhibitors, and the LSAIDs(TM) (Leukocyte Selective Anti-Inflammatory Drugs).

ATH, an activated form of anti-thrombin, obtained through the acquisition of GlycoDesign, may be developed to minimize the formation of thrombi, which are known to develop during cardiopulmonary bypass surgery. ATH may also be used as an anti-thrombotic coating for certain blood contact devices. Spire Corporation of New York has licensed this technology from Inflazyme for its use in conjunction with certain catheters.

The Company has an ongoing collaboration with Helicon Therapeutics Inc. of New York, who are developing one of Inflazyme's PDE4 inhibitors, IPL455,903, as a potential new agent for the treatment of learning and memory disorders. Helicon has advised Inflazyme that it expects to advance the compound into Phase I clinical trials during Q4, 2004.

As regards the Company's LSAIDs(TM) (technology, no further resources will be directed to this program at this time. The Company's agreement with Aventis is still in effect and further guidance will be provided in due course.

Ian McBeath today also said, "I have every confidence that given our current technologies and our experienced staff, we can rebuild and refocus the Company. Furthermore, Inflazyme will actively pursue business development and suitable M&A opportunities to further grow the company and build shareholder value".

About Inflazyme

Inflazyme Pharmaceuticals is a biopharmaceutical company engaged in the discovery and development of novel therapies to treat auto-immune and other related diseases. For further information please visit the Company's website at www.inflazyme.com.

Conference Call

Inflazyme will host a conference call to discuss this announcement on Wednesday, July 28, 2004 at 1:30 p.m. PDT. To access the call please dial 1-877-295-2825 or 416-405-8532. Audio replay of the conference call will be available until August 27, 2004 by calling 1-800-408-3053 or 416-695-5800 and entering pass code 3086084#.

Statements in this news release other than historical information are forward-looking statements subject to risks and uncertainties. Actual results could differ materially depending on factors such as the availability of resources, the timing and effects of regulatory actions, the strength of competition, the outcome of litigation and the effectiveness of patent protection. Additional information regarding risks and uncertainties is set forth in the current Annual Information Form for Inflazyme on file with the Canadian Securities Commissions.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this information.