Release issued 13th December 2004

HAYWARD, Calif., Dec 13, 2004 Aradigm Corporation (Nasdaq: ARDM) today announced that it has entered into an agreement with Defence R&D Canada for the aerosolized delivery of liposomal-encapsulated ciprofloxacin to develop a treatment and prophylaxis for serious respiratory infections, including, but not limited to, bioterror-related inhalation anthrax. The drug will be delivered by Aradigm's AERx(R) technology platform.

Under the terms of the contract, Defence R&D Canada (DRDC) is funding Aradigm's product and formulation development work and initial pre-clinical studies, with work scheduled to begin in January 2005. Stemming from this agreement, Aradigm will hold the intellectual property associated with the inhalation of liposomal ciprofloxacin, an anti-infective agent used in multiple disease states.

"We are pleased to be in partnership with DRDC and that they recognize the delivery benefits of the AERx System in this area of great international importance," said Dr. Bryan Lawlis, President and Chief Executive Officer of Aradigm. "This agreement is intended to build upon the proof- of-principle work already completed successfully by DRDC. The goal of DRDC and Aradigm is to complete pre-clinical studies next year and move as rapidly as possible into human safety studies. With these agreements, Aradigm now owns a proprietary and potentially efficacious formulation of an anti-infective for the treatment of a wide range of respiratory diseases with significant commercial potential."

In addition to the DRDC contract, Aradigm has been granted an exclusive worldwide license by Inex Pharmaceuticals Corporation to their intellectual property relating to the manufacturing of liposomal ciprofloxacin.

"Encapsulation of ciprofloxacin in liposomes results in a liquid formulation that can be readily aerosolized and delivered efficiently to the lung as well as dramatically increasing the residence time of the ciprofloxacin within the lung," said Dr. Stephen Farr, Aradigm's Chief Scientific Officer. "For local infections of the lung, our goal is to develop liposomes that release the ciprofloxacin at a sustained rate to enhance the killing of pathogens. Beyond the initial technical development, the contract enables Aradigm to evaluate the efficacy of inhaled liposomal ciprofloxacin in established animal models of respiratory infections. Data from these studies may provide the opportunity to proceed into human studies for the treatment of respiratory infections such as those prevalent in patients with cystic fibrosis."

Aradigm develops non-invasive delivery systems to enable patients to comfortably self-administer biopharmaceuticals and small molecules that would otherwise be given by injection. The company's advanced AERx(R) pulmonary and Intraject(R) needle-free delivery technologies offer rapid delivery solutions for liquid drug formulations. Current development programs focus on neurological disorders, heart disease, respiratory conditions and cancer. More information about Aradigm can be found at http://www.aradigm.com .

DRDC is an agency of the Canadian Department of National Defence responding to the scientific and technological needs of the Canadian Forces. Its mission is to ensure that the CF remains scientifically and operationally relevant. The agency is made up of six research centres located across Canada with a corporate office in Ottawa. DRDC has an annual budget of $250 million and employs 1400 people. With a broad scientific program, DRDC actively collaborates with industry, international allies, academia, other government departments and the national security community. More information about DRDC can be found at http://www.drdc- rddc.gc.ca .

Except for the historical information contained herein, this news release contains forward-looking statements that involve risk and uncertainties, including clinical results, the timely availability and acceptance of new products, the impact of competitive products and pricing, and the management of growth, as well as the other risks detailed from time to time in Aradigm Corporation's Securities and Exchange Commission (SEC) Filings, including the company's Annual Report on Form 10-K, and quarterly reports on Form 10-Q.

AERx and Intraject are registered trademarks of Aradigm.

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