Pharmagap Releases Third Quarter Results-Announces Encouraging Results for Cancer Drug-Initiates Private Equity Placement.

OTTAWA -- PharmaGap Inc. (TSX-V:GAP) ("PharmaGap" or "the Company") released today its third quarter and nine-month financial results (unaudited) for the period ended September 30, 2004.Losses for the nine months this year were $274,243 ($0.02 per share), compared with a loss of $946,979 ($0.06 per share) for the same period last year.Revenues for the nine months this year were $293,115.No revenues were recorded for the same period in 2003. During the third quarter ended September 30, 2004, the loss was $75,753 ($0.01 per share) on revenues of $90,905, compared with a loss of $255,195 ($0.02 per share) and no revenues for the same quarter last year.As at September 30, 2004, trade and tax credits receivable were $88,054 and cash and cash equivalents were $1,308.

PharmaGap develops novel therapeutic drugs to treat cancer.The Company's lead compound, GLI005, is a selective inhibitor of an important signaling molecule called Protein Kinase C-alpha (PKC-alpha), found in abnormally high levels in many types of cancer.

The Company's core cancer research program has led to a suite of cell-based assays and models generating services contract revenues in fiscal 2004.These innovative and proprietary products meet large unmet needs in growing markets and include:

- Assays to test the disease resistance potential of livestock
  (immune system screening);
- Assays to screen compounds developed for pharmaceutical use
  (ADMET).

Services contract revenues are an important component of the Company's operational strategy of supporting in-part the core cancer drug program through cash flow generated from these growing product lines.

In vitro testing has indicated effectiveness of the Company's lead compound, GLI005, as a selective inhibiter of PKC-alpha, with beneficial effects in treatment of certain solid tumour cancers, including certain breast, lung and prostate and in a lethal child's cancer called neuroblastoma.

PharmaGap is also in the process of testing the effectiveness of the GL1005 compound in reducing or eliminating the development of resistance to drugs utilized in chemotherapy (multi-drug resistance or MDR), potentially improving effectiveness of existing drugs and reducing side effects.PKC-alpha is believed to be strongly associated with MDR.

Dr. Jenny Phipps, PharmaGap's Chief Scientific Officer, sees these developments as potentially very significant."Additional testing is required to establish the basis for Phase I clinical trials of GL1005", Dr. Phipps said. " As these tests progress, we will seek an association with one or more of the major pharmaceutical companies in this field to cooperate with us in bringing this drug to market.In anticipation of these discussions, we expect to file for patent protection early in 2005."

The selective inhibition of intracellular kinase proteins (including the PKC family) is an important area of new drug development.Approximately 25% of major pharma R&D is spent in this area (- 700 kinases identified to-date) and recent blockbuster oncology drugs such as Glivec (Novartis), Herceptin (Genentech), Erbitux (ImClone/Bristol-Myers Squibb) and Iressa (AstraZeneca) are kinase inhibitors.Most major pharma companies have kinase oncology programs and they are actively in-licensing.PharmaGap believes it is well positioned to offer major pharma a novel kinase inhibition technology for drug development.

The Company also announced that it is proceeding with a non-brokered private equity placement of up to $500,000.These funds will be used to:

- accelerate research & development related to GL1005;
- complete patent applications and filings;
- expand the base of assays deliverable by the Company; and
- for general corporate purposes.

Subject to approval by the TSX Venture Exchange (TSX-V), units will be sold comprising one common share at 25 cents per share, and one warrant to buy one common share at 40 cents per share within two years from the effective date of this issue.Subject to TSX-V approval, this issue is expected to close on or before December 20, 2004.

In order to maintain liquidity prior to receipt of the private placement proceeds, the Company has recently executed a short-term funding arrangement with a private third party.

About PharmaGap Inc.

PharmaGap Inc. (TSX-V: GAP), based in Ottawa, ON is a spin-off of the National Research Council of Canada and is a biotechnology company with a core focus developing novel therapeutic compounds to treat cancer.PharmaGap's research platform targets the modulation of gap junction-mediated intercellular communication by signaling pathways such as those controlled by the Protein Kinase C isoforms. Based on its expertise in cell to cell communication the Company has also developed innovative cell-based assays and models designed for compound screening for drug development (ADMET) and for immune-system profiling in animals and humans.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

PHARMAGAP INC. (TSX VENTURE:GAP)