Altus Pharmaceuticals Reports Third Quarter Financial Results.

Altus To Be Added To NASDAQ Biotechnology Index

CAMBRIDGE, Mass. -- Altus Pharmaceuticals Inc. (NASDAQ: ALTU), a biopharmaceutical company focused on oral and injectable protein therapeutics for gastrointestinal and metabolic disorders, today reported financial results for the quarter ended September 30, 2006. In addition, Altus Pharmaceuticals announced that its common stock was selected to be added to the NASDAQ Biotechnology Index (NBI) effective at the beginning of trading on Monday, November 20, 2006.

In a separate news release today, Altus Pharmaceuticals announced that it plans to initiate its ALTU-135 Phase III clinical trial in the second quarter of 2007. In addition, the Company provided an update on its ALTU-238 program.

"During the quarter, the Altus team focused its efforts and energies on advancing the Company's two lead development programs," stated Sheldon Berkle, President and Chief Executive Officer of Altus Pharmaceuticals. "I am pleased that we have now established and demonstrated consistent production and processes to support our ALTU-135 Phase III trial. Our goal is to initiate this trial in the second quarter of 2007. Regarding the ALTU-238 program, we believe it is back on track. The completion of the equipment fabrication is expected to occur in December of this year. Following the qualification of this new equipment and processes, we will provide future guidance as to the anticipated ALTU-238 clinical program timeline."

Third Quarter Results

For the third quarter of 2006, the Company reported a net loss attributable to common stockholders of $16.0 million, or $0.71 per share, compared to a net loss attributable to common stockholders of $6.9 million, or $4.01 per share, in the third quarter of 2005. Cash and cash equivalents and short-term investment balances at September 30, 2006, totaled $97.7 million.

In the third quarter of 2006, the Company reported negative revenue of $2.0 million, compared to positive revenue of $4.1 million in the third quarter of 2005. The Company's third quarter revenue was negatively affected as a result of an increase in the total estimated development costs related to the ALTU-135 program. With respect to ALTU-135, the Company recognizes revenue earned under collaboration agreements using the proportional performance method of revenue recognition. During the three months ended September 30, 2006, and in connection with the investigation into the manufacturing issues of ALTU-135 that were announced in July, the Company reviewed the planned development program for ALTU-135 and increased the total estimated development costs relating to ALTU-135 from $118.0 million to $137.5 million. The effect of increasing total estimated development costs, using the proportional performance method of revenue recognition, resulted in a cumulative negative revenue adjustment through September 30, 2006, of $3.7 million, which resulted in the Company reporting net negative revenue of $2.0 million in the third quarter of 2006.

Research and development expenses totaled $10.9 million in the third quarter of 2006, compared to $6.1 million in the third quarter of 2005. The increase in research and development expenses is primarily due to an increase in costs relating to preparations for Phase III studies for ALTU-135, ALTU-238 and the development of our pre-clinical product candidates and the investigation of the ALTU-135 manufacturing issues.

General and administrative expenses were $4.2 million in the third quarter of 2006, compared to $2.2 million in the third quarter of 2005. The increase in 2006 general and administrative expenses was primarily attributable to additional investments in corporate infrastructure to support the Company's growth and public company reporting requirements.

2006 Financial Guidance

Based on current operating plans and the expected timing of product development programs, Altus reiterates its previous guidance that net cash used in operating activities will be between $55 million and $65 million in 2006.

About Altus Pharmaceuticals Inc.

Altus Pharmaceuticals is a biopharmaceutical company focused on the development and commercialization of oral and injectable protein therapeutics for patients with gastrointestinal and metabolic disorders. The Company's website is http://www.altus.com.

Safe Harbor Statement

Certain statements in this news release concerning Altus' business are considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, those relating to the anticipated net cash to be used in operating activities by the Company in 2006, the timing for planned initiation of Phase III clinical trials for ALTU-135, and the timing for completion of equipment fabrication for ALTU-238. Any or all of the forward-looking statements in this press release may turn out to be wrong. They can be affected by inaccurate assumptions Altus might make or by known or unknown risks and uncertainties, including, but not limited to uncertainties as to the future success of ongoing and planned clinical trials; and the unproven safety and efficacy of products under development. Consequently, no forward-looking statement can be guaranteed, and actual results may vary materially. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in Altus' reports to the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2005. However, Altus undertakes no obligation to publicly update forward-looking statements, whether because of new information, future events or otherwise.

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