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Large Scale Biology Reports Q2 Earnings, Strategy for Replacing Dow Partnership

NEW YORK, July 25 - In Large Scale Biology's last full quarter in its collaboration with Dow, the company reported revenues of $5.9 million for the second quarter, a slight increase from the $5.3 million the company earned during the same period last year.

The company's research and development expenses rose by 40 percent, however, to $5.8 million, because of increased spending on the development of its protein biochip, Human Protein Index (HPI), and its phase I trials of a vaccine for non-Hodgkins lymphoma.

With 89 percent of the company's revenues stemming from a research contract with Dow Chemical and Dow Agrosciences in the area of plant genomics, company executives said in a conference call they are hoping to cement additional partnerships once the Dow deal expires August 31.

In June, the company hired two new business development executives, and said it was pursuing a number of leads for new partnerships. In a conference call Wednesday, Robert Irwin, CEO of LSBC, said the new team "has hit the ground running and is already involved in discussions and in some cases, negotiations with interested potential collaborators. 

"Over the last several months, several of our shareholders have asked when our deal activity would increase," Irwin added. "I'd like to assure that you that we continue to expect to enter one or more significant commercial agreements in late 2001 or early 2002. "

As evidence of LSBC's attractiveness to partners, Irwin said that Dow's exclusive license to LSBC's Geneware technology for plant functional genomics would expire September 1, freeing the company to pursue other relationships with the technology. In addition, both small and large pharmaceutical and biotechnology companies and have shown interest in the HPI for studying certain diseases or drug families, he said.

Irwin said LSBC does not plan to sell subscriptions to the HPI, but as a tool for acquiring corporate partners, and as a source of proteins for the company's protein biochip alliance with Biosite, an antibody manufacturer based in San Diego. These biochips, or protein microarrays, will be commercially available in the second half of 2002, Irwin said.

Developing the company's proteomics facility--used for identifying proteins for inclusion in the HPI--also contributed to a sharp rise in general, administrative, and marketing expenses, the company said. These costs rose from $1.9 million in the second quarter of 2000 to $3.5 million during the most recent quarter. Irwin said the facility has the potential to run continuously, but that it is not yet justified to do so.

During the quarter, the Vacaville, Calif.-based company said it spent $4.5 million in operating expenses, and $3.1 million in property and equipment expenses, primarily at its proteomics facility in Gaithersburg, Md., and its Owensboro, Ken., manufacturing plant. As of June 30, the company had $66.6 million in cash, down from $75 million at the end of the first quarter.

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