LETTER TO SHAREHOLDERS

Dear Shareholder:

I’m pleased to report on NitroMed’s progress during 2006, and our start into 2007.  Though we began last year with a sales growth goal for BiDil® (isosorbide dinitrate/hydralazine hydrochloride) -- it became clear early in the year that we weren’t effectively reaching potential prescribers.  As you know, BiDil is the important heart failure treatment option approved in 2005 by the U.S. Food and Drug Administration (FDA) for the treatment of self-identified black patients with heart failure.  Promptly upon observing the sluggish sales performance, we took action by dramatically revising our marketing and sales strategy and managing all activities to conserve cash.

And so the year was highlighted by a significant transformation of the company.  To focus all resources and energies on converting NitroMed to a commercially focused organization from our historic research-orientation, we changed organizational structures and personnel over the course of the year.  Our dissatisfaction with the early sales performance demanded dramatic adjustments.  And the continuing examination of the operations also demanded the courage to keep making adjustments until we could execute on the correct strategy.  To be sure, much of it was painful.  I am, however, pleased to say that we are beginning to execute well and early results are encouraging, and suggest that we are on the right track.

A year ago, insured patients effectively did not have functional access to BiDil; it was not widely available on either commercial or Medicare Part D formularies.  With the majority of African-Americans with heart failure insured through managed care providers, working with these providers to implement lower co-pays for BiDil was the central priority for NitroMed.  BiDil is today available at affordable co-payments to most patients with public and private insurance coverage.  Indeed, 7 of the top 10 Medicare Part D plans now have BiDil on formulary at reasonable co-payments.  In addition to removing the primary reimbursement obstacles to BiDil sales, we restructured our field sales effort late in the year by upgrading the role of our field organization and adding key hospitals to their call plans.  We believe that their sophistication and experience, coupled with solid management, establishment of accountability and common goals can enhance productivity.  We continue to explore partnering and/or co-promotion opportunities that can expand BiDil’s marketing reach. 

There was no shortage of challenges in 2006 but many pivotal events occurred:
Highlights

• We raised $58.6 million net of expenses in a registered direct offering in January.
  
  
• R&D activities were scaled back in March 2006, preserving only those projects determined to be core to the growth and sustainability of the BiDil-based franchise.
  
• The FDA confirmed in a May, 2006 letter that there is no substitutable drug or any product therapeutically equivalent to BiDil.
  
  
• The Heart Failure Society of America issued its 2006 Comprehensive Heart Failure Practice Guideline, which states that, “A strong recommendation now exists for the addition of the fixed combination of isosorbide dinitrate and hydralazine to the standard medical regimen for African Americans with heart failure.”  BiDil is the only fixed-dose combination of those agents available.
  
  
• The development program for the extended release formulation of BiDil—BiDil XR™ progressed in the fourth quarter.  Human clinical testing was initiated with the goal of developing a formulation that enhances patient convenience and compliance via once- daily dosing.
  
  
• New clinical data from the African American Heart Failure Trial (A-HeFT) were presented at the major cardiovascular medical meetings, the annual meetings of the American College of Cardiology in March, the Heart Failure Society of America in September, and the American Heart Association in November.  The findings presented included but were not limited to:
  • Data demonstrating that BiDil’s clinical benefits are independent of its blood pressure lowering effect.
    
    
  • Data demonstrating that BiDil is clinically beneficial in both women and men; notably, A-HeFT set a record for the largest proportion of women studied in a clinical trial of patients with heart failure.  Of the 1,050 patients, nearly 40% were black women with heart failure .
    
    
  • Data from the Company’s ongoing pharmacogenomics Genetic Risk Assessment in Heart Failure sub-studies identifying genotypes that are important in cardiovascular diseases and are associated with a positive clinical effect of BiDil in A-HeFT, suggesting there may be genetic markers in heart failure patients that affect their response to BiDil.
    
  • Data from an extension trial (X-A-HeFT) that demonstrated a high level of compliance, a duplication of the low mortality, and an improvement in the safety and tolerability of treatment with BiDil, previously seen in A-HeFT.

Turning to financials, with execution of our new strategy underway, we are not as yet in a position to project revenue. Anticipating a revenue contribution, however, we are projecting expenses for the year 2007 of approximately $55 million (including expenses related to stock option expensing per SFAS 123 R, but excluding cost of products.)  With respect to the Company’s cash position, as of December 31, 2006, our cash, cash equivalents and marketable securities totaled $42 million.  Our attention to NitroMed’s financial health is unwavering and its present condition allows us to focus on operations to maintain prescriptions and deliver on our objective of developing an extended release formulation.  We believe the cash is sufficient to maintain operations during the calendar year but we remain vigilant.

The clinical benefits of BiDil are unequivocally profound and all of us share a sense of our duty to patients to ensure access and utilization.  Approximately 84,000 cumulative BiDil prescriptions were recorded in 2006, written by nearly 12,000 physicians, by year-end.  It’s an improvement—and we are heartened that African American heart failure patients and their families have increased access to BiDil and an opportunity to benefit from this proven treatment.  But there is so much more work to do.  A remarkable group of people comprise NitroMed.  They are highly educated, experienced and energetic.  We all know what we need to do to succeed and we are committed to generating the value that BiDil represents for physicians, patients and their families and shareholders.  We are grateful for your support.

Sincerely,

KENNETH M. BATE
President and Chief Executive Officer
March 27, 2007