Advanced Tissue Sciences Awarded $1.4 Million to Develop Tissue-Engineered Cartilage; Tissue Growth Process to Simulate Real-World Conditions, Create Stronger Cartilage.

Business Editors & Health/Medical Writers

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LA JOLLA, Calif.--(BW HealthWire)--Oct. 31, 2001

Advanced Tissue Sciences Inc. (Nasdaq:ATIS) today announced that it has been awarded a $1.4 million Small Business Innovation Research grant from the National Institute of Health (NIH), National Institute of Arthritis and Musculoskeletal and Skin Diseases. The three-year grant is to develop tissue-engineered articular cartilage designed to better withstand the extreme forces experienced in the human body (in vivo).

As part of the grant, Advanced Tissue Sciences intends to further develop its patented bioreactor technology to grow cartilage using stresses, including compression and fluid flow, that mimic the forces cartilage is naturally exposed to in the body. The company expects that the resulting tissue-engineered cartilage will be similar to native cartilage. The grant also covers pre-clinical trials, during which Advanced Tissue Sciences intends to determine the tissue-engineered cartilage's ability to repair articular defects. It is anticipated that the outcome may result in improved performance and clinical success, as well as increasing the number of applications for tissue-engineered cartilage.

Focal articular defects are small, finite wounds in the cartilage, often caused by a traumatic injury. These types of injuries affect more than 500,000 people per year, many of which are knee-related. Using tissue-engineered cartilage to repair these defects before they worsen may significantly reduce the number of knee replacements or other invasive procedures currently used to address joint degeneration. Currently, nearly 250,000 knee replacements are performed annually.

According to Anthony Ratcliffe, Ph.D., Advanced Tissue Sciences' vice president of research, the grant further validates the company's core technology while affirming its innovative approach to creating a tissue-engineered product that resembles native cartilage. "Tissue-engineered cartilage produced by conventional methods has been shown to have limited ability to function successfully in the body. We anticipate that our patented cell scaffold-based tissue engineering process, in combination with our unique cartilage bio-reactors, will greatly enhance our ability to repair articular damage and speed patient rehabilitation," he said. "Building on this research, our goal is to be able to repair small and large articular defects within damaged and degenerative joints."

"We are deeply gratified by this grant from the NIH, which will help to support our industry-leading research and development efforts," said Gail K. Naughton, Ph.D., president of Advanced Tissue Sciences. "Cartilage repair is yet another promising application of our core technology that may potentially improve millions of lives. We look forward to filling this pressing, unmet clinical need while continuing to broaden our portfolio of products."

Advanced Tissue Sciences is redefining tissue repair and transplantation with human-based products developed and derived from its patented tissue-engineering technology. It is the only company to have gained FDA approval for a tissue-engineered, living dermal substitute that is human-based, mass-produced and frozen for an extended shelf life.

The company's efforts are concentrated in four therapeutic areas where the body cannot heal itself: wound care; aesthetic and reconstructive; cardiovascular; and orthopedic. Four products are currently generating revenue for the company: TransCyte(R), a temporary covering for second and third degree burns; Dermagraft(R), for the treatment of diabetic foot ulcers; tissue-engineered, human-based collagen for wrinkle injections; and NouriCel(TM) for skincare and cosmetic markets. Other products are in clinical or pre-clinical stages.

The company has developed strategic alliances designed to unlock longer term product opportunities. These include two joint ventures with Smith & Nephew, a strategic alliance with Inamed Corporation and a collaboration with Medtronic, Inc. More information on Advanced Tissue Sciences is available at www.advancedtissue.com.

The discussions contained in this press release that are not strictly historical may be "forward-looking" statements which involve risks and uncertainties, including but not limited to statements relating to research, development, or commercialization of the company's products. Funding provided in subsequent years over the term of the three-year grant is contingent on the availability of funds from Congress, subject to satisfactory performance by the company, and will be at the sole discretion of NIH. The company may not successfully be able to obtain continued funding when needed, develop any such products, complete pre-clinical or clinical trials, obtain regulatory approvals (or obtain any such approvals on a timely basis), manufacture or successfully commercialize any such products. These and other risks are detailed in the company's publicly available filings with the Securities and Exchange Commission including, but without limitation, Advanced Tissue Sciences' Annual Report on Form 10-K for the year ended December 31, 2000 and the company's quarterly reports on Form 10-Q for the periods ended March 31, 2001 and June 30, 2001. The company undertakes no obligation to release publicly the results of any revision to these forward-looking statements to reflect events or circumstances arising after the date hereof.