CombiChem Reports Third Quarter 1998 Financial Results.

SAN DIEGO--(BW HealthWire)--Oct. 20, 1998--CombiChem, Inc. (Nasdaq/NMS:CCHM) today reported financial results for the quarter ended Sept. 30, 1998.

During the quarter, the company reported revenues of $3,892,000, up from $3,278,000 for the same period in 1997. The company reported a net loss for the quarter of $643,000, or $0.05 per share, compared to a net loss of $337,000, or $0.37 per share, in 1997(1).

Revenues for the nine months ended Sept. 30, 1998 were $10,896,000, up from $4,599,000 in the first nine months of 1997. For the nine months ended Sept. 30, 1998, the company had a net loss of $2,375,000, or $0.30 per share, compared to a net loss of $3,669,000, or $12.55 per share, for the same period in 1997(1).

"During the third quarter, we achieved yet another discovery milestone, bringing our total to four milestones achieved in 1998. We are very pleased to report our year-to-date financial results which reflect our milestone successes, and initiation of two new collaboration projects, one with Novartis Crop Protection AG, our first discovery collaboration in the agrochemical field, and one with ICOS Corporation," stated Vicente Anido, Jr., Ph.D., CombiChem's president and chief executive officer.

Results for the nine months reflect the receipt of collaboration initiation fees from Novartis Crop Protection AG and ICOS Corporation, as well as revenues associated with the achievement of four milestones under three separate projects. Future financial results may fluctuate as the result of timing of such one-time payments from existing and future collaborators.

CombiChem completed its initial public offering in May 1998, raising gross proceeds of $18,876,000 (including over-allotment proceeds). As of Sept. 30, 1998, Combichem had cash, cash equivalents, short-term investments and amounts due from collaborators of $32,538,000.

CombiChem, Inc., based in San Diego, Calif., is a computational drug discovery company that is applying its proprietary design technology and rapid synthesis capabilities to accelerate the discovery process for new drugs. The company believes its approach offers pharmaceutical, biotechnology and agrochemical companies the opportunity to conduct their discovery efforts in a more productive and cost effective manner.

Using its proprietary Discovery Engine(TM) process, the company focuses on the generation, evolution, and optimization of new lead candidates for its collaborative partners, who will then develop, manufacture, market, and sell the resulting products.

CombiChem has established collaborative agreements with Athena Neuroscience, Inc., a wholly owned subsidiary of Elan Corporation, plc., ICOS Corporation, ImClone Systems Incorporated, Novartis Crop Protection AG, Roche Bioscience, Sumitomo Pharmaceuticals Co., Ltd., and Teijin Limited.

Except for the historical and financial information contained herein, the matters discussed in this news release may contain forward-looking statements which involve risks and uncertainties, including significant fluctuations in quarterly financial performance depending on factors such as timing of revenues recognized and achievement of milestones, a dependence on the efforts of third parties, a new and uncertain technology employed by CombiChem, dependence on intellectual property rights, the competitive nature of the company's industry and risks of obsolescence of certain technology. Actual results may differ materially from those projected. Forward-looking statements represent the judgment of the company as of the date of this release. CombiChem disclaims, however, any intent or obligation to update any forward-looking statements.

CombiChem's releases are on the web at www.combichem.com.

(1) See footnote to financial table -0-

                            COMBICHEM, INC.
                       STATEMENTS OF OPERATIONS
                  (In Thousands, Except Per Share Data)

                          Three Months Ended      Nine Months Ended
                               Sept. 30,               Sept. 30,
                          1998         1997        1998        1997

Revenue:
 Project initiation
  fees and milestone
   payments              $  1,850    $  2,000    $  4,900    $  2,000
 Research and
  development funding       2,042       1,278       5,996       2,599
     Total revenue          3,892       3,278      10,896       4,599
Expenses:
 Research and
  development
   Collaborative            2,424       1,392       6,674       2,631
   Proprietary              1,449       1,052       4,164       3,354
                          --------    --------    --------    --------
                            3,873       2,444      10,838       5,985
 General and

  administrative            1,011       1,071       3,020       2,356
     Total operating
      expenses              4,884       3,515      13,858       8,341
Loss from
 operations                  (992)       (237)     (2,962)     (3,742)
Interest income               479         128       1,004         438
Interest expense             (130)        (28)       (387)       (165)
Foreign tax expense           --         (200)        (30)       (200)

Net loss                 $   (643)   $   (337)   $ (2,375)   $ (3,669)

Pro forma net
 loss per share(1)       $  (0.05)   $  (0.37)   $  (0.30)   $ (12.55)
Shares used in
 calculating pro
  forma net loss
   per share(1)          $ 12,758    $    909    $  7,870    $    292


                  SELECTED BALANCE SHEET INFORMATION
                            (In Thousands)
                                             1998         1997
Cash, cash equivalent
  and short-term investments                 31,663       16,921
Amounts due from
 collaborators                                  875          250
Working capital                              26,168       12,896
Total assets                                 41,796       25,526
Redeemable convertible
 preferred stock                                  0       23,130
Stockholders' equity                         31,079       (6,299)

(1)  Recent interpretations by the Securities and Exchange Commission
     have altered the treatment of preferred stock previously included
     in computing certain loss per share data. The company previously
     considered redeemable convertible preferred stock, which
     converted in conjunction with the company's initial public
     offering (IPO), as outstanding in pre-IPO periods from the date
     of original issuance ("as if converted method"). To conform with
     the recent interpretations, the company has revised its
     calculation of loss per share for all pre-IPO periods to exclude
     the impact of redeemable convertible preferred shares. For
     comparison purposes, if redeemable convertible preferred stock
     were included as outstanding during the three and nine months
     ended Sept. 30, 1997, using the as if converted method, basic
     loss per share would have been ($.04) and ($.46) respectively.