Albany Molecular Research, Inc. Posts Double-Digit Gains in Contract Revenue, Net Income in Second Quarter.

Business Editors

ALBANY, N.Y.--(BUSINESS WIRE)--Aug. 8, 2002

Albany Molecular Research, Inc. (Nasdaq: AMRI) today reported financial results for the quarter and six-month period ending June 30, 2002.

Total revenue for the second quarter of 2002 increased to $31.8 million, a 25% increase over the same period in 2001. Contract revenue for the second quarter of 2002 increased to $17.8 million, representing a 21% growth compared to contract revenue of $14.7 million during the second quarter of last year. Recurring royalties for the second quarter of 2002 were $14.1 million, a 32% increase over recurring royalties of $10.6 million in the second quarter of 2001. AMRI earns royalties from worldwide sales of the non-sedating antihistamine Allegra(R) (Telfast(R) outside the United States) for patents relating to the active ingredient in Allegra.

Net income for the second quarter of 2002 increased to $10.6 million, or $0.32 per share on a diluted basis, an increase of 19% compared to net income for the second quarter of 2001 of $8.9 million, or $0.26 per share on a diluted basis.

"AMRI's strong performance in a difficult environment is a source of great satisfaction," said Chairman and Chief Executive Officer Thomas E. D'Ambra, Ph.D. "Contract revenue growth continued at a greater than 20% rate over 2001. Royalty revenue continues to exceed analyst expectations. During the quarter, we developed and recently rolled out new service offerings. We increased strategic R&D spending and continue to make progress on technology that we hope will lead to additional milestone and royalty opportunities. And importantly, net income growth over the second quarter of 2001 is up 19%."

Dr. D'Ambra continued, "AMRI's strategy of leveraging a sustainable platform business of high-value contracts and services to sustain longer-term technology and R&D investments continues to work. At a time of financial challenge in the prescription drug and biotech R&D universe, the dedication, high standards and strong work ethic of AMRI's scientific and support staff is the reason we are continuing to enjoy success today, and the reason why I am confident of continued success ahead."

Year-to-Date

Total revenue for the six-month period ending June 30, 2002 increased to $59.2 million, an increase of $11.8 million, or 25%, compared to total revenue of $47.4 million during the same period in 2001. Contract revenue for the first six months of 2002 increased 23% to $34.4 million, compared to contract revenue of $28.0 million for the comparable period in 2001. Recurring royalty revenue for the first half of 2002 increased by 28% to $24.8 million, compared to recurring royalty revenue of $19.4 million during the first six months of 2001.

Net income for the six-month period ending June 30, 2002 was $19.3 million, or $0.58 per share on a diluted basis, representing a 16% increase compared to net income during the first half of 2001. Net income for the comparable period in 2001 was $16.7 million, or $0.49 per share on a diluted basis.

During the second quarter of 2002, AMRI added nine new customers, renewed or expanded an additional 10 contracts, and added a net of 14 scientists. In addition, 32 scientists have accepted positions and will begin employment during the remainder of 2002. The total number of employees at AMRI's five locations at the end of June 2002 was 547, including 380 scientists.

At June 30, 2002, AMRI had cash, cash equivalents and investments of $114.5 million, compared to $125.8 million at March 31, 2002. The net decrease of $11.3 million in cash, cash equivalents and investments in the second quarter of 2002 was due primarily to the repurchase of 470,337 shares of AMRI stock at a cost of $10.1 million and $3.7 million in purchases of property plant and equipment, offset by $3.1 million in cash generated from operations. Total common shares outstanding at June 30, 2002 were 32,459,260.

Organichem

Total revenue at Organichem Corporation, an unconsolidated affiliate of AMRI, was $23.8 million in the second quarter of 2002, a 28% increase compared to the second quarter of 2001. Total revenue at Organichem for the six-month period ending June 30, 2002 was $46.8 million, a 34% increase over the same period in 2001. Net income at Organichem increased 21% to $2.1 million in the second quarter of 2002, and increased 30% to $3.6 million for the six-month period ending June 30, 2002. In its current status as a minority shareholder, AMRI does not include these revenues in its total revenues stated above. AMRI includes its proportionate share of Organichem's net income in its income statement as equity in income of unconsolidated affiliates.

Earnings Guidance

AMRI Chief Financial Officer David P. Waldek provided updated guidance and earnings per share (EPS) estimates for the full-year 2002 and initial guidance for the full-year 2003. Said Mr. Waldek, "We remain comfortable with the analyst consensus estimates for the remainder of 2002, which would result in diluted EPS of $1.22 per share for the full year. This would represent a strong 21% growth in diluted EPS compared to 2001."

Mr. Waldek remarked, "We look forward to continued business growth in 2003 and to the potential benefits resulting from the full ownership of Organichem. Under our December 1999 investment agreement with Organichem, AMRI has the option to purchase the remaining Organichem shares in early 2003, subsequent to the completion of Organichem's 2002 audited financial statements. The purchase price is to be determined based on Organichem's financial performance in the year 2002. At this time it is estimated that the purchase price would be $30 million. Currently, we are continuing to conduct due diligence related to the acquisition and its related financial impact and benefits."

"Assuming that we complete the full merger with Organichem late in the first quarter of 2003, we estimate that diluted EPS for the full-year 2003 will range from $1.42 to $1.51 per share, resulting in diluted EPS growth of 16% to 24% compared to 2002. The financial guidance is based upon contract revenue growth in the range of 15% to 20% in 2003 for both AMRI and Organichem, and royalty revenue growth from worldwide sales of Allegra to range from 5% to 10%."

Other Highlights

Other noteworthy items and company announcements during the second quarter of 2002 include the following:

- The repurchase by AMRI of 470,337 shares of its common stock under the Stock Repurchase Program approved by the board of directors in September 2001. AMRI has now repurchased a cumulative total of 968,727 shares of its stock under its Stock Repurchase Program.

- A new three-year medicinal chemistry drug discovery research agreement with Merck & Co., Inc (NYSE: MRK). AMRI will perform medicinal chemistry research and lead optimization and will receive fees based on the number of AMRI research scientists working on Merck-specified projects. In addition, AMRI will receive success milestone payments for any compound that achieves specific clinical and regulatory benchmarks. Success fees paid to AMRI, if realized, would be paid on compounds for which AMRI scientists are designated as inventors and could be in the multimillion dollar range per compound. In the first phase of the collaboration, AMRI and Merck will work jointly to identify and develop small molecule drug candidates for a proprietary Merck target.

- A drug discovery collaboration with Genzyme Corp in which the two companies will seek to identify important new drugs using novel biological targets from Genzyme and natural products technology and drug discovery chemistry from AMRI. Initially, AMRI will provide libraries of natural products extracts to Genzyme for biological screening against a number of therapeutic targets. If the two companies jointly determine that any identified compounds have the potential for advanced preclinical development, Genzyme may either extend the research collaboration with AMRI, or negotiate with AMRI for an exclusive worldwide license to develop and commercialize the compound(s) on its own.

- The election of Paul S. Anderson, Ph.D., a 38-year veteran of drug discovery, to the company's Board of Directors. Dr. Anderson is currently vice president of drug discovery at Bristol-Myers Squibb Company. During his pharmaceutical industry career, he has held senior-level research positions at both Merck and DuPont Pharmaceuticals, and has been significantly involved in developing FDA-approved drugs to treat AIDS, high cholesterol, coronary heart disease and glaucoma.

- The funding by AMRI of one postdoctoral position each at the University at Albany, part of the State University of New York, and Rensselaer Polytechnic Institute. AMRI is providing a total of $100,000 per year in unrestricted funds for research in any area of organic or medicinal chemistry by scientists with a completed doctoral degree. The funding has been awarded to chemistry professors Frank M. Hauser, Ph.D. at the University at Albany and Mark P. Wentland, Ph.D. at Rensselaer Polytechnic Institute. The awards recognize support that the company received from each institution during its startup phase.

- AMRI publicly unveiled and dedicated its new 28,000 square foot Syracuse Research Center, a state-of-the-art pharmaceutical research and development facility. Scientists at the facility conduct small-scale custom chemical synthesis to support early stage drug discovery and larger, kilogram-scale chemical development to produce drug candidates and intermediates for use in preclinical or clinical studies. New York State Lieutenant Governor Mary O. Donohue dedicated the Syracuse Research Center by starting a representative experiment.

In addition, AMRI announced earlier this week that it has begun offering a series of unique small molecule, synthetic combinatorial chemistry libraries that will be available semi-exclusively for drug discovery purposes to a limited number of subscribers. The company also announced the addition of drug metabolism screening, metabolite profiling and scale-up capabilities to its integrated drug discovery and development platform of technologies. AMRI's high throughput metabolic screening system provides valuable information about the metabolic properties of lead compounds early in the drug discovery process, when this information can best be used to select molecules for further optimization and development. Both of these announcements were made in conjunction with the 7th Annual Drug Discovery Technology(TM) World Congress held in Boston, MA this week.

Second Quarter Conference Call

The company will hold a conference call at 9:00 a.m. Eastern Time on August 8, 2002 to discuss its quarterly results and business highlights and prospects. Individuals interested in listening to the conference call should dial 800-450-0821 (for domestic calls) or 612-332-0226 (for international calls) at 8:45 a.m. and reference the AMRI Second Quarter 2002 Earnings Release conference call. Replays of the call will be available for seven days following the call beginning at 2:15 p.m. on August 8, 2002. To access the replay by telephone, please call 800-475-6701 (for domestic calls) or 320-365-3844 (for international calls) and use access code #644664.

Albany Molecular Research, Inc. is a leading research, drug discovery and development company built on a chemistry platform of comprehensive and integrated technologies, resources and capabilities. The company conducts pharmaceutical research and development with many leading pharmaceutical and biotechnology companies and for its own internal discovery programs.

Statements in this press release that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. These statements include, but are not limited to, statements regarding the company's estimates of earnings in each quarter of 2002 and earnings guidance for the full year 2002 and full year 2003, statements regarding the company's ability to acquire and develop value-added discovery technologies, statements regarding the company's prospects for the remainder of 2002, 2003 and beyond, statements regarding the development of new technology, statements regarding the company's ability to enter into new contracts, statements regarding the company's ability to achieve milestones and/or royalties under its research collaborative arrangements with Merck and Genzyme, statements regarding the acquisition and expected performance of Organichem Corporation and statements regarding the expansion of the company's facilities. These statements may be identified by forward-looking words such as "may," "could," "should," "would," "will," "intend," "expect," "anticipate," "believe," and "continue" or similar words. Readers should not place undue reliance on our forward-looking statements. The company's actual results may differ materially from such forward-looking statements as a result of numerous factors, some of which the company may not be able to predict and may not be within the company's control. Factors that could cause such differences include, but are not limited to, the company's ability to attract and retain experienced scientists, trends in pharmaceutical and biotechnology companies outsourcing chemical research and development, sales of Allegra (including any deviations in estimates provided by Aventis) and the company's receipt of significant royalties from the Allegra license agreement, the risk that Allegra or a competing drug may be approved for over-the-counter use, the company's ability to enforce its intellectual property and technology, the company's ability to successfully develop novel compounds and lead candidates in its collaborative arrangements with Merck, Genzyme and others, the company's ability to take advantage of proprietary technology and expand the scientific tools available to it, the ability of the company's strategic investments and acquisitions to perform as expected, the company's ability to successfully complete its ongoing expansion projects on schedule and integrate acquired companies, and the company's ability to effectively manage its growth, as well as those discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2001 as filed with the Securities and Exchange Commission on April 1, 2002 and in the company's other SEC filings. Earnings guidance offered by senior management today represents a point-in-time estimate and is based on information as of the date of this press release. Senior management has made numerous assumptions in providing this guidance which, while believed to be reasonable, may not prove to be accurate. In addition, as noted above, there are numerous factors which may cause actual results to differ materially from the guidance provided. The company expressly disclaims any current intention or obligation to update the guidance provided or any other forward-looking statement in this press release to reflect future events or changes in facts assumed for purposes of providing this guidance or otherwise affecting the forward-looking statements contained in this press release.

                    Albany Molecular Research, Inc.
              Condensed Consolidated Statements of Income
                              (unaudited)

             (Dollars in thousands, except per share data)

                                 Three Months Ended  Six Months Ended
                                ------------------- ------------------
                                   June 30, June 30, June 30, June 30,
                                       2002    2001     2002    2001
                                   ---------------- ------------------
Contract revenue                    $17,756 $14,724 $ 34,436 $28,029
Recurring royalties                  14,075  10,648   24,800  19,408
                                   ---------------- ------------------
   Total revenue                     31,831  25,372   59,236  47,437

Cost of contract revenue             10,279   8,631   19,854  16,410
Technology incentive award            1,402   1,065    2,474   1,941
Research and development              2,097   1,008    3,716   1,925
Selling, general and administrative   3,254   2,903    6,311   5,461
                                   ---------------- ------------------
   Total costs and expenses          17,032  13,607   32,355  25,737
                                   ---------------- ------------------

Income from operations               14,799  11,765   26,881  21,700

 Equity in income of unconsolidated
     affiliates                         779     589    1,269     901
 Other income, net                      994   1,712    2,189   3,845
                                   ---------------- ------------------

Income before income tax expense     16,572  14,066   30,339  26,446

Income tax expense                    6,013   5,198   11,012   9,786
                                   ---------------- ------------------

Net income                         $ 10,559  $8,868  $19,327 $16,660
                                   ================ ==================


Basic earnings per share              $0.32   $0.27   $0.59    $0.50
                                   ================ ==================

Diluted earnings per share            $0.32   $0.26   $0.58    $0.49
                                   ================ ==================



                    Albany Molecular Research, Inc.
               Selected Consolidated Balance Sheet Data
                              (Unaudited)
                In thousands
                                               June 30, December 31,
                                                   2002         2001

Cash, Cash Equivalents and Investments         $114,496   $  135,865
Accounts receivable, net                         12,094        9,965
Royalty receivable                               14,017       12,361
Total current assets                            154,880      167,801
Net property, plant and equipment                66,562       59,756
Total assets                                    279,590      284,059

Current liabilities                               8,685       12,525
Long term debt                                    5,455        5,930
Stockholders' equity                            263,600      263,633
Total liabilities and stockholders' equity      279,590      284,059