AVI BioPharma Announces 2002 Fourth Quarter and Full Year Financial Results.

Business Editors/Health/Medical Writers

PORTLAND, Ore.--(BUSINESS WIRE)--March 11, 2003

AVI BioPharma, Inc. (Nasdaq:AVII) (Nasdaq:AVIIW) (Nasdaq:AVIIZ), a biopharmaceutical company developing treatments for life-threatening diseases based on antisense and cancer immunotherapy technologies, today reported financial results for the three and 12 months ended December 31, 2002.

For the fourth quarter of 2002, AVI reported a net loss of $4.0 million, or $0.15 per share, compared with a net loss of $4.6 million, or $0.20 per share, for the fourth quarter of 2001. Revenues for the 2002 fourth quarter were $169,206, compared with $295,309 for the 2001 fourth quarter. Research and development expenses during the fourth quarter of 2002 decreased to $3.5 million from $4.2 million for the comparable prior-year quarter, and general and administrative expenses decreased to $774,417 from $806,544 last year. The decrease in research and development was primarily due to lower expenses associated with the company's clinical development efforts, partially offset by increases in outside collaborations and regulatory affairs costs, and additional preclinical and clinical testing of the company's products.

For the year 2002, the Company recorded a net loss of $29.4 million, or $1.14 per share, compared with a net loss of $26.9 million, or $1.20 per share, reported in 2001. The 2002 and 2001 net losses included non-cash write-downs of short-term securities -- available-for-sale for an other-than-temporary impairment of an equity investment in accordance with generally accepted accounting principles of $4.5 million and $12.5 million, respectively. The net losses for 2002 and 2001 excluding these non-cash write-downs were $24.9 million, or $0.97 per share, and $14.4 million, or $0.64 per share, respectively.

Revenues for the year 2002 were $836,784, compared with $706,102 in 2001. Research and development expenses during 2002 were $22.4 million, compared with $12.8 million in 2001, and general and administrative expenses were $3.8 million, compared with $3.4 million last year. These increases were primarily due to additional expenses associated with outside collaborations, expansion of the company's clinical development and regulatory affairs efforts, and additional preclinical and clinical testing of the company's products.

The company had cash, cash equivalents and short-term securities of $19.3 million as of December 31, 2002, a decrease of $6.3 million from December 31, 2001. This decrease was due primarily to $20.3 million used in operations and $3.2 million used for capital expenditures and patent-related costs, and a net $4.8 million decline in the value of the Company's short-term securities, offset by the receipt of $21.3 million in net proceeds from a private equity financing with several institutional investors.

"During the past year, we completed six clinical studies with our NEUGENE(R) technology platform and successfully moved forward with clinical trials in multiple applications, including cancer, drug metabolism, polycystic kidney disease and cardiovascular restenosis," commented Denis R. Burger, Ph.D., chief executive officer of AVI. "As of today, we've treated more than 250 patients with no serious drug-related adverse events. Additionally, preclinical trials indicate that NEUGENE has the potential to treat both systemic and dermal diseases through topical application, and has demonstrated bioavailability when administered orally.

"We continued to report significant clinical progress during the fourth quarter," said Dr. Burger. "We announced the completion of two Phase I studies with our NEUGENE antisense drug AVI-4557 for drug metabolism, which together with an initial clinical trial also completed last year demonstrates that AVI's antisense drug can block cytochrome P450, a liver enzyme responsible for metabolism of more than 50 percent of currently marketed drugs. Additionally, we reported promising results from preclinical studies targeting single-stranded RNA viruses, particularly with one family of viruses that includes West Nile virus, hepatitis C virus (HCV) and Calicivirus.

"Our plans for the current year include initiating pivotal testing with our AVICINE(R) technology platform for pancreatic cancer, moving forward with additional metabolic redirection trials, and initiating clinical trials with NEUGENES for cholesterol lowering, prostate cancer and hepatitis C," added Dr. Burger.

Product Pipeline Update

Antisense

NEUGENE

Antisense compounds are designed to bind to specific disease-causing gene sequences to disable or inactivate the disease process. AVI has developed proprietary third-generation antisense compounds, called NEUGENES, which are characterized by a fully synthetic backbone, instead of the natural or modified backbones of competing technologies. This chemistry allows NEUGENE antisense agents to be more stable, specific, efficacious and safer than second-generation antisense compounds in clinical development by others.

Resten-NG

Resten-NG is a NEUGENE compound for treating cardiovascular restenosis, or the re-narrowing of an artery following balloon angioplasty. Resten-NG targets a transcription factor, and upon entering arterial cells, it blocks the underlying cause of the disease: smooth muscle cell activation and proliferation. A global license has been granted to Medtronic, Inc. for AVI's antisense compounds deployed on stents or other devices for treating restenosis. At the September 2002 Transcatheter Cardiovascular Therapeutics (TCT) conference, AVI announced Phase II clinical trial data showing that Resten-NG delivered via catheter during balloon angioplasty procedures resulted in an approximate 80% reduction in the restenosis rate. In November 2002 American Heart Association meetings, AVI presented two independent studies that demonstrate the feasibility of treating cardiovascular restenosis using the company's proprietary microbubble delivery technology to balloon injured coronary arteries, foregoing the need to use special drug delivery catheters or drug coated stents.

Cancer

AVI is conducting a Phase I/II clinical study with its NEUGENE antisense technology in patients with solid tumors. The Company expects to complete this study and to report preliminary results in the first half of 2003. Previous studies have shown that this antiproliferative antisense drug is both safe and effective at shutting down cell division, a hallmark of cancer progression.

Prostate Cancer

In August 2001, AVI announced the initiation of a study in prostate cancer funded by the Department of Defense. In September 2001 data was presented showing that AVI's antisense compounds inhibit cancer cell growth and cause cell death in prostate tumors. In December 2001, AVI was awarded a Department of Defense Prostate Cancer Research Program grant to pursue development of therapeutics to fight both the initial stages and the incurable metastatic forms of prostate cancer using AVI's NEUGENES. Also in December, AVI presented preclinical study results at the 10th International Conference on Gene Therapy of Cancer. In April and June 2002, the Company presented research showing that NEUGENES directed against the c-myc gene caused cell growth inhibition and cell death in human prostate cancer cells. In January 2003, the Company received a $350,000 grant from the National Cancer Institute to target prostate cancer. AVI plans to initiate human testing in prostate cancer during 2003.

Liver Enzyme Modification

AVI successfully completed a clinical trial demonstrating that the Company's antisense drug improves the pharmacokinetic profile of a test drug in modifying the function of a liver enzyme that is critical to the body's processing of many drugs. The study is based on the results of preclinical studies using AVI's NEUGENE antisense technology targeting liver cytochrome enzymes, which control the metabolism of most drugs. The Company announced that its clinical study of NEUGENES pharmacokinetic analyses of data from the liver enzyme study completed earlier this year showed that the subcutaneous route of administration resulted in dose-dependent elevations in blood concentrations of NEUGENES. Also, in October 2002 AVI announced that animal studies indicated that the topical application of NEUGENE produced systemic changes in gene expression in the liver. Two Phase I clinical studies completed in late 2002 -- one consisting of treatment with a single intravenous injection of 300 mg of AVI-4557, and the other consisting of treatment with five consecutive daily intravenous injections of 90 mg of AVI-4557 -- showed that AVI-4557 had a dramatic effect on down-regulating a targeted liver enzyme in healthy volunteers.

Polycystic Kidney Disease

Following preclinical studies that demonstrated the effectiveness of AVI-4126 in preventing some of the clinical manifestations of polycystic kidney disease (PKD), AVI initiated clinical trials in December 2001 to evaluate the safety and pharmacokinetics of three doses of AVI-4126 in patients with PKD and with varying degrees of compromised kidney function. Results of the Phase Ib study showed an excellent safety profile and no adverse effect on kidney function. Phase Ib study results are crucial in designing Phase II studies, which will test AVI-4126's effectiveness and further define its safety profile.

Cancer Immunotherapy

AVICINE

AVICINE is a therapeutic cancer vaccine designed to elicit an immune response to a well-characterized, tumor-associated antigen, human chorionic gonadotropin (hCG). The hCG hormone is naturally produced during pregnancy and is believed to stimulate growth and shield the embryo from immune system attack. The hCG hormone is expressed in most, if not all, cancers as a membrane-associated tumor marker, and is believed to promote tumor growth and vascularization, and to render patients immunologically unresponsive to the tumor. The role of hCG in cancer and pregnancy is widely believed to be analogous. Thus, AVICINE stimulates the immune system to mount an attack against cancer cells expressing this hormone.

Pancreatic Cancer

In December 2001, AVI reported Phase II data demonstrating that AVICINE provided substantial survival benefit to patients with pancreatic cancer. In this study, patients were treated with AVICINE alone, or with AVICINE in combination with the chemotherapy agent Gemzar(R). Those treated with AVICINE reported one-year survival data similar to historical results for those treated with Gemzar, without the chemotherapy-related side effects often associated with Gemzar. A one-year survival rate of 30% was reported for patients treated with AVICINE plus Gemzar, which is approximately double the survival rate for either treatment alone. In May 2002, AVI presented complete survival data from the Phase II pancreatic cancer study at the American Society of Clinical Oncology (ASCO) meeting. The Company plans to begin a Phase III clinical program with AVICINE for treating pancreatic cancer during 2003.

AVI BioPharma has scheduled an investor conference call regarding this announcement to be held today, beginning at 11:00 a.m. Eastern Time. Those interested in listening to the conference call live via the Internet may do so by visiting the Company's Web site at www.avibio.com. A replay will be available on the site for 14 days. A telephone replay will be available for 48 hours following the conclusion of the call by dialing [phone] and entering reservation number 8044882.

About AVI BioPharma

AVI BioPharma develops therapeutic products for the treatment of life-threatening diseases using two technology platforms: NEUGENE antisense drugs and cancer immunotherapy. Its lead cancer agent, AVICINE, a therapeutic cancer vaccine, has completed three Phase II trials in colorectal and pancreatic cancer and is entering a Phase III pivotal trial in pancreatic cancer, with a supporting study in colorectal cancer. The first application of its NEUGENE compounds, Resten-NG(TM), is designed to treat cancer, cardiovascular restenosis and other cell proliferation disorders by inhibiting the production of a cellular transcription factor, the oncogene c-myc. It is currently in Phase II trials for restenosis and in a Phase I/II trial for cancer. AVI has completed three Phase I NEUGENE antisense studies that successfully down-regulated the liver enzyme cytochrome P-450 and modified drug metabolism, and a Phase Ib trial in polycystic kidney disease. More information about AVI is available on the Company's Web site at www.avibio.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The statements that are not historical facts contained in this press release are forward-looking statements that involve risks and uncertainties including, but not limited to, the results of research and development efforts; the results of preclinical and clinical testing; the effect of regulation by the FDA and other agencies; the impact of competitive products, product development, commercialization and technological difficulties; and other risks detailed in the company's Securities and Exchange Commission filings.

                          AVI BioPharma, Inc.
                     (A Development-Stage Company)
                       STATEMENTS OF OPERATIONS

                   Three Months Ended               Year Ended
                      December 31,                  December 31,
                      (unaudited)
                  2002           2001           2002           2001
Revenues from
 license fees,
 grants &
 research
 contracts      $ 169,206     $ 295,309      $ 836,784      $ 706,102

Operating expenses:
Research
 & development  3,546,654     4,220,640     22,413,892     12,750,901
General &
 administrative   774,417       806,544      3,763,941      3,357,817
                4,321,071     5,027,184     26,177,833     16,108,718

Other income (loss):
Interest income,
 net              158,031       127,620        460,258      1,000,530
Write-down of
 short-term
 securities
 -- available-
 for-sale               -             -     (4,478,260)   (12,523,088)

Net loss     $ (3,993,834) $ (4,604,255)  $(29,359,051)  $(26,925,174)
Net loss per
 share, basic
 and diluted     $ (0.15)      $ (0.20)       $ (1.14)       $ (1.20)
Shares used
 in per share
 calculations  26,485,626    23,186,945     25,691,549     22,399,001


                       BALANCE SHEET HIGHLIGHTS

                                        December 31,     December 31,
                                            2002             2001
Cash, cash equivalents and short-term
 securities                             $ 19,293,645     $ 25,597,121
Total current assets                      20,401,988       27,511,076
Total assets                              28,603,757       33,815,113
Total current liabilities                  5,122,134        3,281,066
Total shareholders' equity               $23,481,623      $30,534,047