Cell Pathways, Inc. Reports Second Quarter 2002 Financial Results.

Business Editors & Health/Medical Writers

BIOWIRE2K

HORSHAM, Pa.--(BW HealthWire)--July 30, 2002

Cell Pathways, Inc. (Nasdaq:CLPA) today reported financial results for the second quarter ended June 30, 2002.

The net loss for the second quarter was $1.8 million, or $0.05 per share. In the second quarter of 2002, the company recorded a non-cash reduction of litigation settlement expense of $4.4 million, or $0.13 per share, related to the company's previously reported agreement to settle its securities class action litigation. This adjustment to the amount previously recorded by the company during 2001 represents the change in the fair value of the company's common stock issued in escrow in connection with the settlement. The company will continue to make adjustments to this amount based on the fair value of the stock until the settlement is final. Excluding the non-cash reduction of litigation settlement expense of $4.4 million, the net loss for the second quarter was $6.2 million, or $0.19 per share, an increase of $1.3 million or $0.03 per share compared to the same period in 2001.

For the six months ended June 30, 2002, the net loss was $7.4 million, or $0.23 per share. Excluding the non-cash reduction of litigation settlement expense of $5.3 million, the net loss for the first half of 2002 was $12.7 million, or $0.39 per share, an increase of $3.1 million, or $0.08 per share compared to the same period in 2001. The Company ended the quarter with $18.6 million in cash, cash equivalents and short-term investments.

Revenues related to the marketing of Nilandron(R) (nilutamide) were $304,000 in the second quarter and six months ended June 30, 2002, an increase of $304,000 and a decrease of $13,000, respectively, from the same periods of 2001. In the first quarter of 2002, the company licensed the rights to distribute Gelclair(TM) Concentrated Oral Gel in the United States. Gelclair(TM) is used in inflammation and ulceration of the mouth caused by chemotherapy or radiotherapy. The company began shipping Gelclair(TM) to its wholesale customers in May 2002. Under the company's revenue recognition policy, product revenue related to shipments of Gelclair(TM) in the second quarter have been fully reserved due to the company's lack of history with this product and the uncertainties of returns, reorders, collections and acceptance in the marketplace. Additionally, due to the newness of Gelclair(TM), prescription data from independent sources is limited or, as yet, not available to form a basis for recognition of revenue at this time. The company shipped $1.7 million of Gelclair(TM) to its wholesale customers in the second quarter of 2002.

Robert J. Towarnicki, Cell Pathways' chairman and chief executive officer, commented, "We were pleased with the launch of Gelclair(TM) in June, with $1.7 million of Gelclair(TM) shipped to wholesalers in the quarter. We have been encouraged by the volume of sample requests for Gelclair(TM). Sampling is a key component of our commercialization strategy. We are also encouraged by several other marketing initiatives undertaken to support this product. In particular, we:

-- Data showing Cell Pathway's CP248 fights cancer through multiple independent mechanisms of action was published as the cover article in the April issue of Molecular Cancer Therapeutics, the publication of the American Association of Cancer Research (AACR) whose annual meeting was in April 2002.

-- During the American Society of Clinical Oncology (ASCO) annual meeting in May 2002, Cell Pathways reported on five studies:

-- Phase I study of Aptosyn(R) in combination with docetaxel/carboplatin in patients with non-small cell lung cancer (NSCLC)

-- Long-term use of Aptosyn(R) in men with prostate cancer following radical prostatectomy

-- Phase I/II study of Aptosyn(R) and gemcitabine in patients with recurrent advanced non-small cell lung cancer (NSCLC)

-- Aptosyn(R) plus docetaxel for hormone-refractory prostate cancer (HRPC)

-- Phase I/II study of Aptosyn(R), carboplatin and paclitaxel as first-line treatment for stage IIIb/IV non-small cell lung cancer (NSCLC)

-- Results of a 12-month clinical extension study presented at American Urological Association (AUA) annual meeting in May 2002 showed long-term use of Aptosyn(R) continues to slow prostate specific antigen (PSA) rise in men at high risk of prostate cancer recurrence.

-- Positive results of Phase II study of Aptosyn(R) in the treatment of sporadic adenomatous colon polyps were presented at the American Gastroenterology Association (AGA) annual meeting in May 2002.

-- Data showing that CP461 markedly reduces disease activity in canine model of refractory inflammatory bowel disease (IBD) was presented at American Gastroenterology Association (AGA) meeting in May 2002."

Research and development ("R&D") expenses were $4.1 million for the second quarter of 2002, an increase of $0.7 million or 20.5% from the same period in 2001. For the first six months of 2002, R&D expenses were $8.4 million, an increase of $1.2 million or 17.1% from the same period in 2001. Both period increases in R&D expenses in 2002 were primarily due to clinical activities related to the company's development of Aptosyn(R) (exisulind) in non-small cell lung cancer and the development of CP461 in chronic lymphocytic leukemia, hormone-refractory prostate cancer and renal (kidney) cell carcinoma.

Selling, general and administrative ("SG&A") expenses were $2.5 million for the second quarter of 2002, an increase of $593,000 or 30.9% from the same period in 2001. For the first six months of 2002, SG&A expenses were $4.8 million, an increase of $910,000 or 23.6% from the same period in 2001. SG&A expenses for both the second quarter and six months ended June 30, 2002 increased from the comparable periods in 2001 primarily due to marketing and promotion expenses for Gelclair(TM).

Interest income, net of expense, was $102,000 and $191,000 for the three months and six months ended June 30, 2002, respectively, representing decreases of $357,000 and $909,000, respectively, due primarily to lower average cash balances and lower average interest rates.

Rifat Pamukcu, M.D., Cell Pathways' chief scientific officer, stated, "Second quarter 2002 was an exciting quarter for Cell Pathways. In addition to launching Gelclair(TM) to the oncology market, the company strengthened its scientific body of knowledge and further validated the mechanism of action for the company's drugs with a number of podium and poster presentations of positive clinical data at many of this spring's prestigious medical meetings, including:

-- Data showing Cell Pathway's CP248 fights cancer through multiple independent mechanisms of action was published as the cover article in the April issue of Molecular Cancer Therapeutics, the publication of the American Association of Cancer Research (AACR) whose annual meeting was in April 2002.

-- During the American Society of Clinical Oncology (ASCO) annual meeting in May 2002, Cell Pathways reported on five studies:

-- Phase I study of Aptosyn(R) in combination with docetaxel/carboplatin in patients with non-small cell lung cancer (NSCLC)

-- Long-term use of Aptosyn(R) in men with prostate cancer following radical prostatectomy

-- Phase I/II study of Aptosyn(R) and gemcitabine in patients with recurrent advanced non-small cell lung cancer (NSCLC)

-- Aptosyn(R) plus docetaxel for hormone-refractory prostate cancer (HRPC)

-- Phase I/II study of Aptosyn(R), carboplatin and paclitaxel as first-line treatment for stage IIIb/IV non-small cell lung cancer (NSCLC)

-- Results of a 12-month clinical extension study presented at American Urological Association (AUA) annual meeting in May 2002 showed long-term use of Aptosyn(R) continues to slow prostate specific antigen (PSA) rise in men at high risk of prostate cancer recurrence.

-- Positive results of Phase II study of Aptosyn(R) in the treatment of sporadic adenomatous colon polyps were presented at the American Gastroenterology Association (AGA) annual meeting in May 2002.

-- Data showing that CP461 markedly reduces disease activity in canine model of refractory inflammatory bowel disease (IBD) was presented at American Gastroenterology Association (AGA) meeting in May 2002."

Dr. Pamukcu continued, "We continue to advance the clinical activities of our Phase III trial of Aptosyn(R) in non-small cell lung cancer, and our pilot Phase II trials of CP461 in chronic lymphocytic leukemia, hormone-refractory prostate cancer and renal cell carcinoma. In addition, we recently announced the initiation of an open-label, multi-centered Phase II clinical trial of CP461 as a potential treatment for Crohn's disease."

Mr. Towarnicki concluded, "We continue to pursue a variety of options that will most favorably position and fund the development of our SAANDs technologies and product candidates. These include but are not limited to marketing partnerships and co-promotions, research collaborations, the additional in-license of niche products for the oncology market, as well as traditional equity financing options."

The company will host a teleconference and simultaneous webcast today to discuss this information beginning at 8:30 a.m. Eastern Time (5:30 a.m. Pacific Time). The webcast will be accessible through the company web site at www.cellpathways.com. The dial-in number within the U.S. is 888/532-5130 and outside the U.S. is 904/779-4755. The replay number within the U.S. is 800/252-6030 and outside the U.S. is 402/220-2491. The reference number for the call is 13062334. Both the webcast and replay will be available for 48 hours.

Cell Pathways, Inc., headquartered in Horsham, Pa., is a development stage pharmaceutical company focused on the research and development of products to treat and prevent cancer, the commercialization of such products, and the marketing and selling of oncology-related products made by others. For additional information on Cell Pathways, Inc., visit the Company's web site at http://www.cellpathways.com.

Note to Editors: Aptosyn(R) is a registered trademark of Cell Pathways, Inc., Nilandron(R) is a registered trademark of Aventis Pharmaceuticals Inc., Gelclair(TM) is a trademark of Sinclair Pharmaceuticals Ltd.

Certain statements herein, and oral statements made in respect hereof, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are those which express plan, anticipation, intent, contingency or future development and/or otherwise are not statements of historical fact. These statements are subject to risks and uncertainties, known and unknown, which could cause actual results and developments to differ materially from those expressed or implied in such statements. Statements of historic fact must also be understood in the context of, and subject to, these risks. Such risks and uncertainties relate to, among other factors: early stage of development; absence of approved products; history of operating losses; the need for further financing; dependence on the development, regulatory approval and market acceptance of one or more of our product candidates for one or more significant disease indications; the costs, delays and uncertainties inherent in scientific research, basic pharmaceutical research, drug development, clinical trials and the regulatory approval process, with respect to both our current product candidates and our future product candidates, if any; the risks that CP461 will not exhibit safety and efficacy in its current and future clinical trials in cancer indications, in Crohn's disease or in any other disease indication; the risks that accrual of our Phase III trial of Aptosyn(R) and Taxotere(R) is not completed by year-end and that safety and efficacy are not demonstrated by this combination therapy in this trial; limitations on, or absence of, the predictive value of data obtained in laboratory tests, animal models and human clinical trials when planning additional steps in product development; uncertainty that additional studies, if any, of Aptosyn(R), CP461 or any other compound may not be positive; uncertainty of obtaining regulatory approval of any compound for any disease indication whether due to adequacy of the development program, changing regulatory requirements or otherwise; the risk that the Company does not conduct the clinical studies it may have planned to conduct or does not pursue development plans it may have planned to pursue; the risk that the U.S. Food and Drug Administration may stop or delay any clinical study for reasons of safety or otherwise; the risk that a registration strategy for CP461 in cancer is not fully developed by year-end, whether due to the nature or timing of further clinical results or otherwise; the risk that clinical studies do not result in the safety and efficacy necessary to obtain regulatory approvals; the risks of conducting clinical trials, including the risk of conducting clinical trials of our drugs in combination with other drug therapies; the commercial risk and risk of liability in marketing and selling Gelclair(TM) Concentrated Oral Gel, including the risk that the prescribers do not prescribe the product and sales do not materialize, the risk that the Company does not achieve an arrangement for distribution of Gelclair(TM) into the dental market, the risk that the market opportunity available to Gelclair(TM) is smaller than estimated, due to inaccurate assumptions, competition or other factors, the risks associated with the product launch, manufacturing and marketing risks, and the risk that the Company's sales of Gelclair(TM) are less than the Company's minimum purchase obligations; the commercial risk and risk of liability in providing marketing services promoting Nilandron(R) (nilutamide) manufactured by Aventis Pharmaceuticals, Inc., including the risk that Aventis' sales of Nilandron(R) do not exceed the threshold entitling the Company to a percentage of gross margin; the risk that the Company may enter into, or may fail to enter into, licensing, partnership or collaborative arrangements or strategic alliances which accord to other companies rights with respect to one or more Company compounds, technologies or programs in exchange for financing and operational assistance, or in which the Company acquires rights and obligations; the volatility of the market price of our Common Stock; our ability to sell securities registered under the shelf registration statement or otherwise; the risk of dilution through the effects of further financings or strategic alliances; acceptance of any product candidates by physicians and providers of healthcare reimbursement; the actions of competitors; the pace of technological changes in the biopharmaceutical industry; dependence upon third parties; the validity, scope and enforceability of patents; the risk of pending or future class action securities litigation; potential product liability claims; and availability and adequacy of insurance. These and other risks are detailed in our reports filed from time to time under the Securities Act and/or the Securities Exchange Act, including the sections entitled "Business," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Other Events" in our annual reports on Form 10-K, quarterly reports on Form 10-Q and periodic reports on Form 8-K and in such registration statements on Form S-3 as we may file from time to time. You are encouraged to read these filings as they are made. They are available over the Internet from the SEC in its EDGAR database at http://www.sec.gov and from the Company. Given the uncertainties affecting pharmaceutical companies in the development stage, you are cautioned not to place undue reliance on any such forward-looking statements, any of which may turn out to be wrong due to inaccurate assumptions, unknown risks, uncertainties or other factors. No forward-looking statement can be guaranteed; actual future results may vary materially. Both forward-looking statements and statements of historic fact must be understood in the context of, and subject to, the risks referred to above which characterize our development stage business. We undertake no obligation to update or revise the statements made herein or the risk factors that may relate thereto.

Financial Tables Follow.

                          CELL PATHWAYS, INC.
                     (A development stage company)
                 CONDENSED CONSOLIDATED BALANCE SHEETS
                              (Unaudited)

                                       June 30, 2002    Dec. 31, 2001
                                       -------------    -------------
                  ASSETS
CURRENT ASSETS
  Cash, cash equivalents
   and short-term investments          $  18,630,135    $  27,713,915
  Accounts receivable                      2,029,097          318,450
  Other current assets                     2,819,656        1,130,971
  Due from insurance company               2,000,000        2,000,000
                                       -------------    -------------
      Total current assets                25,478,888       31,163,336

OTHER ASSETS                               3,495,341        2,458,152
                                       -------------    -------------
                                       $  28,974,229    $  33,621,488
                                       =============    =============

  LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES                    $   7,942,998    $   7,845,497
                                       -------------    -------------

LONG TERM LIABILITIES                         92,493          242,350
                                       -------------    -------------

STOCKHOLDERS' EQUITY
  Common Stock                               352,602          311,482
  Additional paid-in capital             151,356,619      148,631,231
  Stock subscription receivable
   from issuance of Common Stock                  --          (50,683)
  Deferred Compensation                      (66,162)         (73,652)
  Deficit accumulated during the
   development stage                    (130,704,321)    (123,284,737)
                                       -------------    -------------
      Total stockholders' equity          20,938,738       25,533,641
                                       -------------    -------------
                                       $  28,974,229    $  33,621,488
                                       =============    =============

            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                              (Unaudited)

                   Three Months Ended            Six Months Ended
                       June 30,                      June 30,
               --------------------------  --------------------------
                   2002          2001          2002          2001
               ------------  ------------  ------------  ------------
REVENUES:      $    303,578  $         --  $    303,578  $    316,973

EXPENSES:
 Research and
  development     4,116,395     3,415,882     8,427,641     7,198,096
 Selling,
  general and
  administrative  2,513,794     1,920,761     4,773,270     3,863,393
 Litigation
  settlement
  and expense    (4,437,000)           --    (5,287,000)           --
               ------------  ------------  ------------  ------------
    Operating
     Loss        (1,889,611)   (5,336,643)   (7,610,333)  (10,744,516)

INTEREST
 INCOME, net        101,928       459,129       190,749     1,100,135
               ------------  ------------  ------------  ------------

NET LOSS       $ (1,787,683) $ (4,877,514) $ (7,419,584) $ (9,644,381)
               ============  ============  ============  ============

Basic and
 diluted net
 loss per
 Common share  $      (0.05) $      (0.16) $      (0.23) $      (0.31)
               ============  ============  ============  ============

Shares used
 in computing
 basic and
 diluted net
 loss per
 Common share    33,560,273    31,100,945    32,447,420    31,095,422
               ============  ============  ============  ============

(1) Reduction of expense amount was recorded to adjust the 2001 recorded preliminary securities class action settlement amount to equal the fair value of the 1.7 million shares of Common Stock as of June 30, 2002. These shares were issued into escrow on June 28, 2002 but are not included in the shares used in computing basic and diluted net loss per Common share until such time as the settlement is finalized. Until such time as the settlement is approved by the court, the company will adjust the value of these shares based on their current fair value. Such adjustments will result in non-cash income or expense in subsequent periods.