On April 10, 2006, AlphaRx Inc. entered into a License Agreement ("Agreement") with Proprius Pharmaceuticals, Inc. ("Proprius") based in San Diego, California.

Under the Agreement, we granted Proprius the exclusive world wide rights (except for Asia and Mexico) to develop and commercialize our topical Non-steroidal anti inflammatory drug (NSAID), Indaflex (™) and other related and successor topical NSAID's. (collectively the "Licensed Products")

Consideration includes an upfront license fee of $1 million. Additional consideration for the Agreement includes US$15 million clinical milestone payments and US$101 million sales milestone payments for each Licensed Product if the Licensed Product is developed and commercialized directly by Proprius or any of its affiliates. We will also receive a royalty payment of between 10% and 13% of net sales in accordance with US GAAP.

The Agreement will commence as of April 10, 2006 and will expire upon the expiration of the patent for all Licensed Products on a country-by-country basis. After termination of the royalty period for a particular product, Proprius will have an exclusive, perpetual and fully paid-up license with respect to such product. Proprius may terminate the Agreement at any time under certain circumstances under the Agreement. Either party may terminate the Agreement in the event of a material breach or default by the other party that has not been cured or in the event of the other party's insolvency.

A copy of the press release we issued in connection with this Agreement is attached as Exhibit 99.1 to this current report on Form 8-K and is incorporated herein by reference.