Cytel Corporation Announces 1998 Financial Results.

SAN DIEGO--(BW HealthWire)--Feb. 5, 1999--Cytel Corporation (NASDAQ: CYTL) today announced financial results for the fourth quarter and year ended December 31, 1998.

For the three month period ended December 31, 1998, Cytel reported a net loss of $4.6 million, or $0.92 per share, on revenues of $0.9 million. This compares with a net loss of $4.0 million, or $1.04 per share, on revenues of $1.2 million in the fourth quarter of 1997. Cytel reported revenues for the year ended December 31, 1998 of $3.7 million and a net loss of $18.4 million, or $3.83 per share. These results compare with revenues of $5.1 million and a net loss of $14.4 million, or $3.92 per share, for the same period in 1997.

Research and development revenue for the fourth quarter of 1998 includes a payment from Baxter Healthcare Corporation's Nextran unit upon exercise of an option to enter into a second exclusive supply agreement with the Company.

As of December 31, 1998, Cytel had consolidated cash, cash equivalents, restricted cash, and short-term investment of $12.3 million and 4,987,453 shares of common stock outstanding.

Cytel, Excluding Its Subsidiary, Epimmune Inc.

Cytel's non-Epimmune business includes Cylexin(tm), a novel carbohydrate therapeutic currently in advanced clinical development, other cell adhesion inhibitors for treatment of acute and chronic inflammtion, and the Glytec(tm) carbohydrate manufacturing business. Cytel's ongoing Phase II/III clinical trial of Cylexin for preventing reperfusion injury in infants is currently being conducted at 11 of the leading pediatric centers in the United States and Canada, including the Children's Hospitals in Boston, Los Angeles, Philadelphia and Cincinnati. "Results from an open label Phase II study conducted at Children's Hospital, Boston in babies undergoing cardiopulmonary bypass during open heart surgery showed that Cylexin was well tolerated and that it improved postoperative recovery", said Virgil Thompson, CEO of Cytel. "Based on these results, we began our clinical trials program to support registration of Cylexin ", he added. "Cytel anticipates announcing results from the ongoing study by the end of the first quarter 1999."

Excluding, Epimmune, as of January 31, 1999, Cytel had $1.4 million of cash available to fund its operations, and will need to raise substantial additional funds soon to continue its current operations and to conduct clinical trials and other clinical development activities. Cytel has signed a letter of intent involving the license of its proprietary carbohydrate synthesis and manufacturing technology for exclusive use in a limited field. Cytel received a $0.5 million upfront payment at the time the letter of intent was signed and would be entitled to receive an additional $3.5 million upon completion of the proposed transaction.

"We believe Cytel has a strong asset base, with Cylexin in clinical registration studies, an 87% equity ownership of Epimmune, and carbohydrate manufacturing technology", said Virgil Thompson. "We have made the strategic decision to further focus our non-Epimmune business on development of Cylexin, and we are therefore actively pursuing discussions with multiple parties concerning the sale of some or all of our Glytec carbohydrate synthesis and manufacturing assets."

Epimmune

Epimmune Inc., established in October 1997, is a majority-owned (87%) subsidiary of Cytel Corporation, operating under separate management and financing. Epimmune is developing novel vaccines which stimulate the body's immune system to treat and prevent infectious diseases and cancer. In collaboration with G.D. Searle & Co., a wholly-owned subsidiary of Monsanto Co., Epimmune is developing immune stimulating products for the treatment of cancer. Independently, Epimmune's product targets include prophylactic vaccines for hepatitis C, HIV and malaria and therapeutic vaccines for hepatitis B, hepatitis C and HIV.

For the year ended December 31, 1998, Epimmune reported a net loss of $3.2 million (net of minority interest of $0.4 million) on revenues of $1.7 million. As of December 31, 1998, Epimmune had $11.1 million in cash, cash equivalents, restricted cash and short-term investments.

Epimmune's cash position is sufficient to fund operations for at least the next two years.

"Epimmune had a very successful first year," said Deborah Schueren, President of Epimmune. "We established a cancer collaboration with G.D. Searle, potentially worth more than $100 million plus royalties. We successfully recruited key management, established collaborations with a number of leading investigators and furthered our preclinical development of EpiGene(tm) vaccines for hepatitis C, hepatitis B, HIV and malaria."

This press release includes forward-looking statements that reflect management's current views of future events. Actual results may differ materially from the above forward-looking statements due to a number of important factors. With regard to the proposed transaction under the letter of intent described above, the closing of the transaction is subject to satisfaction of a number of conditions, including the negotiation and signature of definitive agreements, completion of a due diligence review and the absence of changes in the parties' businesses that would have a material adverse effect on the proposed transaction. If any of these conditions are not satisfied, the transaction may not be completed and Cytel would not receive the payment described above. Other factors that may have an effect on actual results include, without limitation: the risk that Cytel may not be able to obtain additional funding through equity or debt financing, the sale or license of certain of its technologies or other assets or collaborative research and development relationships with corporate partners on favorable terms, if at all; the risk that, if additional funds are not available, Cytel will be required to delay, scale back or eliminate one or more of its drug discovery or development programs; obtain funds through arrangements with collaborative partners or others that may require the Company to relinquish rights to or sell certain of its technologies, product candidates or products that the Company would not otherwise relinquish or sell; sell itself or certain of its technologies or other assets to a third party, cease operations or declare bankruptcy; the risks associated with successfully negotiating and completing definitive agreements for any sale or license of certain of its technologies or other assets or collaborative research and development relationships with corporate partners; and the risks, timing and costs associated with conducting human clinical trials and the regulatory approval process. These factors and other risk factors are more fully discussed in Cytel's most recent Forms 10-K and 10-Q and other documents filed with the Securities and Exchange Commission.

-see the following table-

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                          Cytel Corporation

            Condensed Consolidated Statements of Operations
                            (in thousands)

           Three months ended Dec. 31,    Twelve months ended Dec. 31,
                   1998        1997             1998           1997
           --------------------------     ----------------------------
Revenues:
 Research
  and
  development   $   542     $   678       $    1,929     $    3,428
 Research
  grants and
  other income      404         492            1,768          1,623

Total revenues      946       1,170            3,697          5,051

Operating expenses:
 Research and
  development     4,260       4,232           18,352         16,537
 General and
  administrative  1,338       1,158            4,835          3,735


Total expenses    5,598       5,390           23,187         20,272

Minority interest
 in net loss of
 consolidated
 subsidiary (1)     160          --              441             --


Interest income,
 net                (86)        210              666            825


Net loss        $(4,578)    $(4,010)      $  (18,383)    $  (14,396)


Net loss
 per share
 (Basic and
 Diluted)       $ (0.92)    $ (1.04)      $    (3.83)    $    (3.92)


Average common
 shares
 outstanding
 (Basic and
 Diluted)         4,987       3,861            4,802          3,668



                 Condensed Consolidated Balance Sheets
                            (in thousands)

                                         December 31,     December 31,
                                            1998              1997

Assets
Current assets:
 Cash, cash equivalents and
 short-term investments                   $   12,283     $   17,803
       Other current assets                    1,658          1,687


Total current assets                          13,941         19,490

Property and equipment, net                    2,879          1,704
Other assets                                   7,363          6,953


Total assets                              $   24,183     $   28,147


Liabilities and stockholders' equity
Current liabilities                       $    3,715     $    1,711
Other liabilities                              1,606          2,044
Minority interest in consolidated
 subsidiary (1)                                1,735             --
Stockholders' equity                          17,127         24,392


Total liabilities and stockholders'
 equity                                   $   24,183     $   28,147

(1) The minority interest calculation is based on G.D. Searle's actual ownership percentage in Epimmune of 13.4%. The calculation does not include the potential additional ownership interest that would result from the conversion of G. D. Searle's investment in Cytel's preferred stock which is convertible into Epimmune common stock.

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