MacroPore Biosurgery Announces Second Quarter 2004 Financial Results.

SAN DIEGO -- MacroPore Biosurgery, Inc. (Frankfurt:XMP) today announced financial results for the quarter ended June 30, 2004.

Total revenues for the three months ended June 30, 2004 were $1.5 million compared to $2.9 million for the same period in 2003. In the second quarter of 2004, spine and orthopedic implants accounted for $0.9 million in revenue, compared to $2.0 million for the same period in 2003. Total revenues for the six months ended June 30, 2004 were $3.9 million compared to $4.8 million for the same period in 2003. In the first half of 2004, spine and orthopedic implants accounted for $2.5 million in revenue, compared to $3.0 million for the same period in 2003. Net loss for the three months ended June 30, 2004 was $3.8 million compared to a net loss of $2.1 million for the same period in 2003. Net loss for the six months ended June 30, 2004 was $2.3 million, after a $5.0 million gain related to the completion of the clinical research regarding Faster Resorbing Polymers, compared to $5.3 million for the same period in 2003.

MacroPore Biosurgery ended the second quarter of 2004 with $18.0 million in cash and cash equivalents and short term investments, which includes the $7.0 million initial thin film product line sale payment received in May 2004 from MAST Biosurgery. Since the end of the quarter, MacroPore Biosurgery received $1.5 million from Senko Medical Trading Co. (Senko) as a fee for distribution rights for thin films products in Japan. Additionally, MacroPore Biosurgery was awarded a grant for the second phase of its National Institutes of Health (NIH) Small Business Innovation Research study. Phase II of the reimbursement was subsequently increased by the NIH to up to $850,000, subject to availability of funds and satisfactory progress. The funding from the NIH will be received during 2004 and 2005. In the second half of 2004, MacroPore Biosurgery expects to receive a $1.25 million milestone from Senko for submitting a thin film regulatory application in Japan and a $1.0 to $2.0 million milestone payment from Medtronic Inc. related to the transfer of know-how in connection with the 2002 sale of the craniomaxillofacial product line.

"As previously disclosed, the time frame to achieve broad market adoption for our new class of spine and orthopedic products has been difficult to predict," said Christopher J. Calhoun, Chief Executive Officer of MacroPore Biosurgery. "However, our commitment to this product line is demonstrated by the recent regulatory milestones, which include a CE Mark for the first minimally invasive resorbable lumbar interbody fusion device in Europe, a CE Mark for the first resorbable cervical interbody device in Europe, and an FDA Clearance for the first resorbable spinal plate and screw system with radiographic visualization properties. These clearances provide additional rationale for physician adoption of the HYDROSORB(TM) family of products. Simultaneously, we have continued to make progress within our regenerative cell technology program. Since the close of the quarter, we received notice of award of the second phase of our NIH grant to study the potential role of adipose-derived regenerative cells in treating heart attack and expect to release the results of two pre-clinical trials later this year."

Conference call information

The management of MacroPore Biosurgery will host a conference call today at 4:30 pm Central Eastern Summer Time (CEST) or 10:30 a.m. Eastern Daylight Time (EDT) to discuss the quarterly results. This conference call may be accessed from the investor relations section of the Company's website, www.macropore.com. An archived version of the webcast will be available on the same website 60 minutes after the call. The audio replay will be archived for 24 hours following the call and may be accessed by dialing [phone] (PIN: 132681#) or 303-590-3000 (PIN: 11005031#).

About MacroPore Biosurgery, Inc.

MacroPore Biosurgery (Frankfurt:XMP) is focused on the discovery, development and commercialization of regenerative medicine technologies. We have two technology platforms, bioresorbable technology and regenerative cell technology. Our surgical implants, derived from our bioresorbable technology, represent one of the latest advancements in spine and orthopedic medicine. They are manufactured by us and distributed exclusively through Medtronic Sofamor Danek. Within our regenerative cell technology program, we are developing a system to isolate autologous, homologous-use, regenerative cells. Simultaneously, we are generating scientific knowledge through internal research to support the clinical use of these cells. Our most advanced research and development program is in the repair of cardiovascular tissues that are damaged after a heart attack. We are also researching applications in bone repair, spinal disc regeneration, and cosmetic and reconstructive surgery. For further information please visit our web site http://www.macropore.com.

Cautionary Statement Regarding Forward-Looking Statements

This press release may include forward-looking statements regarding events and trends which may affect MacroPore Biosurgery's future operating results and financial position. Such statements are subject to risks and uncertainties that could cause MacroPore Biosurgery's actual results and financial position to differ materially. Some of these risks and uncertainties are described (under the heading "Risk Factors") in our 2003 Form 10-K annual report for the year ended December 31, 2003, which is available on our web site. MacroPore Biosurgery assumes no responsibility to update any revision of forward-looking statements to reflect events, trends or circumstances after the date they are made.

Consolidated Condensed Balance Sheets

                                      As of June 30,    As of Dec. 31
                                                2004         2003
                                            ------------ ------------
                                            (Unaudited)

Assets
Current assets:
  Cash and cash equivalents                 $ 2,093,000  $ 2,820,000
  Short-term investments, available-for-
   sale                                      15,940,000   11,448,000
  Accounts receivable, net of allowance for
   doubtful accounts of $32,000 and $62,000
   in 2004 and 2003, respectively             1,457,000    1,291,000
  Inventories                                   463,000      831,000
  Other current assets                          605,000      526,000
                                            ------------ ------------

     Total current assets                    20,558,000   16,916,000

Property and equipment, net                   3,554,000    3,822,000
Other assets                                    209,000      332,000
Intangibles, net                              2,257,000    2,392,000
Goodwill                                      4,387,000    4,627,000
                                            ------------ ------------

     Total assets                           $30,965,000  $28,089,000
                                            ============ ============

Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable and accrued expenses     $ 2,427,000  $ 3,767,000
  Current portion of long-term obligations      886,000      717,000
                                            ------------ ------------

     Total current liabilities                3,313,000    4,484,000

Deferred gain on sale of assets, related
 party                                        7,383,000    7,539,000
Deferred gain on sale of assets               6,266,000           --
Deferred income.                                 58,000           --
Long-term obligations, less current portion   1,328,000    1,157,000
                                            ------------ ------------

     Total liabilities                       18,348,000   13,180,000

Stockholders' equity:
  Preferred stock, $0.001 par value;
   5,000,000 shares authorized; -0- shares
   issued and outstanding in 2004 and 2003           --           --
  Common stock, $0.001 par value;
   95,000,000 shares authorized; 16,800,018
   and 16,777,644 shares issued and
   13,930,834 and 14,195,062 shares
   outstanding in 2004 and 2003,
   respectively                                  17,000       17,000
  Additional paid-in capital                 74,734,000   74,698,000
  Unearned compensation                              --     (109,000 )
  Accumulated deficit                       (51,705,000 )(49,385,000 )
  Treasury stock, at cost                   (10,405,000 ) (9,362,000 )
  Treasury stock receivable                          --     (976,000 )
  Accumulated other comprehensive income
   (loss)                                       (24,000 )     26,000
                                            ------------ ------------

     Total stockholders' equity              12,617,000   14,909,000
                                            ------------ ------------

     Total liabilities and stockholders'
      equity                                $30,965,000  $28,089,000
                                            ============ ============

Consolidated Condensed Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

For the Three Months       For the Six Months
                       Ended June 30,            Ended June 30,
                  ------------------------- -------------------------
                         2004         2003         2004         2003
                  ------------ ------------ ------------ ------------

Revenues:
Sales to related
party             $   894,000  $ 2,585,000  $ 2,815,000  $ 4,191,000
Sales to third
parties               636,000      318,000      977,000      641,000
 Research grant        10,000           --      100,000           --
                  ------------ ------------ ------------ ------------

                    1,540,000    2,903,000    3,892,000    4,832,000
Cost of
 revenues:
Cost of revenues
(including stockbased
compensation expense of
$1,000 and $3,000 for
the three months ended
June 30, 2004
and 2003; $3,000
and $6,000 for
the six months
ended June 30,
2004 and 2003,
 respectively)        314,000      787,000    1,191,000    1,426,000
Inventory
 provision                 --           --      242,000           --
                  ------------ ------------ ------------ ------------

 Gross profit       1,226,000    2,116,000    2,459,000    3,406,000
                  ------------ ------------ ------------ ------------

Operating expenses:
 Research and
 development,
 excluding stock
 based compensation
 expense of $32,000
 and $20,000 for
 the three months
 ended June 30,
 2004 and 2003,
 respectively;
 $32,000 and
 $39,000 for
 the six months
 ended June 30,
 2004 and 2003,
  respectively      2,668,000    2,107,000    5,175,000    4,258,000
Sales and marketing,
 excluding stock
 based compensation
 expense of
 $11,000 and $18,000
 for the three months
 ended June 30,
 2004 and 2003,
  respectively;
$22,000 and
$36,000 for
the six months
 ended June 30,
 2004 and 2003,
  respectively        654,000    1,004,000    1,612,000    2,299,000
General and
 administrative,
 excluding stock
based compensation
expense of $36,000
and $174,000
for the three
months ended
June 30, 2004
and 2003,
 respectively;
$71,000 and
$350,000 for
the six months
ended June 30,
2004 and 2003,
 respectively       1,575,000      951,000    2,801,000    1,999,000
Stock based
 compensation
(excluding cost of
revenues stock based
compensation)          79,000      212,000      125,000      425,000
Restructuring
charge                 70,000           --       70,000           --
                  ------------ ------------ ------------ ------------

Total operating
 expenses           5,046,000    4,274,000    9,783,000    8,981,000
                  ------------ ------------ ------------ ------------

Other income (expense):
Gain on the
sale of assets,
 related party                               5,000,000
Interest income        57,000      105,000      112,000      247,000
Interest and
 other (expenses),
   net                (47,000 )     (6,000 )   (108,000 )    (11,000 )
                  ------------ ------------ ------------ ------------

Net loss           (3,810,000 ) (2,059,000 ) (2,320,000 ) (5,339,000 )
                  ------------ ------------ ------------ ------------

Other comprehensive
 loss:
 unrealized
 holding loss         (41,000 )    (11,000 )    (50,000 )    (52,000 )
                  ------------ ------------ ------------ ------------

Comprehensive
loss              $(3,851,000 )$(2,070,000 )$(2,370,000 )$(5,391,000 )
                  ============ ============ ============ ============

Basic and
diluted net
loss per share    $     (0.27 )$     (0.14 )$     (0.17 )$     (0.37 )
                  ============ ============ ============ ============

Shares used in
 calculating
basic and
diluted net
loss per share     13,920,186   14,540,734   13,933,111   14,532,716
                  ============ ============ ============ ============