PROTEIN POLYMER TECHNOLOGIES REPORTS SECOND QUARTER 2004 FINANCIAL RESULTS

 

SAN DIEGO, August 17, 2004 -- Protein Polymer Technologies, Inc. (OTC Bulletin Board: PPTI), announced today financial results for the second quarter and the six months ended June 30, 2004.

The net loss for the quarter ended June 30, 2004 was $858,000 ($0.02 per share), compared to a net loss of $437,000 ($0.01 per share), for the same period in 2003. The net loss for the six months ended June 30, 2004 was $1,778,000 ($0.05 per share), compared to a net loss of $2,180,000 ($0.07 per share), for the six months ended June 30, 2003. The net loss and the net loss per share amounts for both the 2003 and 2004 periods include accumulated dividends related to the Company’s preferred stock, and “imputed dividend” charges pertaining to its sale of Series I Convertible Preferred Stock during the second quarter of 2003.

Total revenue was $200,000 for the quarter ended June 30, 2004, compared to $752,000 for the same period in 2003. Total revenue was $391,000 for the six months ended June 30, 2004, compared to $1,205,000 for the same period in 2003. The contract and licensing revenue primarily represents research and development payments and receivables from Spine Wave, Inc. for the development of an injectable spinal disc repair product for the treatment of lower back pain. The decrease in contract revenue in 2004, particularly during the three months ended June 30, 2004 as compared to the same period in 2003, is due to the completion of the majority of work, including preclinical testing, required to support Spine Wave’s initiation of human clinical testing of the injectable spinal disc nucleus product.

Operating expenses for the quarter were $989,000, as compared to $1,051,000 for the same period in 2003, and $2,031,000 for the six months ended June 30, 2004 as compared to $1,874,000 for the six months ended 2003. When additional capital becomes available, expenses are expected to rise in subsequent quarters due to the increased expenditures for expanded human clinical testing and patient follow-up of the Company’s lead product candidates currently in development.

As of June 30, 2004, PPTI had a negative working capital of $363,000 compared to $1,192,000 as of December 31, 2003. PPTI’s cash as of June 30, 2004 was $69,000, compared to $1,085,000 on December 31, 2003. Since the end of June, the Company has received $900,000 in cash and cash commitments in return for short term promissory notes and warrants. In combination with anticipated additional contract and license payments, and revenue projected for the delivery of clinical testing materials, the Company’s cash as of August 17, 2004 is expected to meet the Company’s anticipated capital requirements until October 2004.

“ We are currently in discussions with potential sources of additional equity and convertible debt funding, although there can be no assurance that these discussions will result in additional funding.” said J. Thomas Parmeter, Chairman and Chief Executive Officer of Protein Polymer Technologies. “Substantial additional capital resources will be required to fund future expenditures related to our research, development, clinical trials, and product marketing activities. If adequate funds are not available, we will be required to significantly curtail our operating plans and may have to sell or license out significant portions of our technology or potential products, or cease operations.”

“Conversely, if we resolve our liquidity problems,” Dr. Parmeter commented further, “I view PPTI’s future optimistically. With the recent appointment of Dr. Donald Kaplan as President and Chief Operating Officer, we are aggressively pursuing new ways to capitalize on our large intellectual property portfolio. Dr. Kaplan, previously Senior Vice President, Operations and Technology at U.S. Surgical Corporation and a recognized leader in research, development and commercialization of surgery and wound closure devices, is uniquely qualified to lead this effort. For example, we are leveraging the development of our adhesives technology for the injectable spinal disc repair product towards application as high strength surgical sealants. Such sealants are designed to stop air and fluid leaks associated with the use of sutures and staples in a variety of surgical procedures. In addition, we continue to focus on the clinical trials of our urethral bulking agent for treatment of female stress urinary incontinence and our injectable hydrogel for treatment of dermal contour defects such as scars, wrinkles and lines. Finally, with Spine Wave beginning clinical trials of the injectable disc nucleus product (IDN) for the treatment of lower back pain, we have begun discussions with Spine Wave regarding the commercial manufacture of the IDN product.”

Financial Data Follows

Protein Polymer Technologies, Inc.
Condensed Financial Statements
(unaudited)
				Three months ended				Six months ended
				June 30,				June 30,
				2004		2003		2004		2003
SUMMARY OF OPERATIONS
Contract revenue				Ý$ 199,366		Ý$ 742,696		$ 388,416		$ 1,193,679
Interest income				866		9,263		2,824		10,847
Product and other income				0		0		6		0
ÝÝ Total revenues				200,232		751,959		391,246		1,204,526
Total expenses				988,799		1,051,491		2,031,200		1,873,779
Net loss				$ (788,567)		$Ý(299,532)		Ý$Ý(1,639,954)		Ý$Ý(669,253)
Undeclared and/or paid
ÝÝ dividends on Preferred Stock				69,220		137,082		137,678		1,510,925
Net loss applicable to common
ÝÝ shareholders				Ý$ (857,787)		Ý$ (436,614)		Ý$Ý(1,777,632)		$Ý(2,180,178)
Net loss per common share -
ÝÝ basic and diluted				Ý$ (0.02)Ý		Ý$ (0.01)Ý		Ý$ (0.05)Ý		Ý$ (0.07)Ý
Shares used in computing net loss per share -
ÝÝbasic and diluted				38,091,587		34,037,634		37,702,398		31,926,744
						As of		As of
				June 30, 2004				Dec. 31, 2003
BALANCE SHEET INFORMATION
Cash and cash equivalents						$ 69,000		$1,085,000
Working capital						(363,000)		1,192,000
Total assets						414,000		1,692,000
Total capital invested						49,010,000		48,809,000
Accumulated deficit				$ (49,113,000)				$ (47,473,000)
*ÝÝÝÝ *ÝÝÝÝ *

Contacts:

J. Thomas Parmeter, Ph.D. Chairman jtp@ppti.com Janis Y. Neves Director of Finance jneves@ppti.com Protein Polymer Technologies (858) 558-6064

About PPTI and Protein Polymers

Protein Polymer Technologies, Inc., is a San Diego-based company focused on developing bioactive products to improve medical and surgical outcomes. From its inception in 1988, PPTI has been a pioneer in protein design and synthesis, developing an extensive portfolio of proprietary biomaterials. These genetically engineered biomaterials are high molecular weight proteins, processed into products with physical and biological characteristics tailored to specific clinical performance requirements. Targeted products include urethral bulking agents for the treatment of stress urinary incontinence, dermal augmentation products for cosmetic and reconstructive surgery, surgical adhesives and sealants, scaffolds for wound healing and tissue engineering, and depots for local drug delivery. To date, PPTI has been issued twenty-five U.S. Patents on its core technology with corresponding issued and pending patents in key international markets.

Safe Harbor

This press release contains forward-looking statements that are based on management’s views and expectations. Actual results could differ materially from those expressed here; further, the Company is not obligated to comment specifically on those differences. Risks associated with the Company’s activities include scientific and product development uncertainties, competitive products and approaches, continuing collaborative partnership interest and funding, regulatory testing and approvals, and manufacturing scale-up. The reader is encouraged to refer to the Company’s 2003 Annual Report on Form 10-KSB, its 2004 quarterly filings on form 10QSB and other recent filings with the Securities and Exchange Commission, copies of which are available from the Company, to further ascertain the risks associated with the above statements.