Cygnus Reports First Quarter Financial Results

Quarter's Highlights Include FDA Approval of the GlucoWatch(R)

Biographer and $5 Million in Milestone Revenue



Apr 26, 2001, 01:00 ET from Cygnus, Inc.

    REDWOOD CITY, Calif., April 26 /PRNewswire/ -- Cygnus, Inc. (Nasdaq:   CYGN)
 today reported total revenue of $5.0 million for the quarter ended March 31,
 2001, compared to $1.0 million for the quarter ended March 31, 2000. Cygnus
 posted a net loss of $4.9 million ($0.18/share) for the quarter ended March
 31, 2001, compared to a net loss of $5.1 million ($0.20/share) for the quarter
 ended March 31, 2000.
     The quarter was highlighted by the United States Food and Drug
 Administration (FDA) granting Cygnus approval to market its GlucoWatch(R)
 Biographer on March 22, 2001.  "Receiving FDA approval was a monumental event
 in Cygnus' history. We received outstanding media coverage that led to tens of
 thousands of people visiting our new web site (www.glucowatch.com) to learn
 more about the GlucoWatch Biographer," stated John C Hodgman, Chairman, Chief
 Executive Officer and President. The medical journal Diabetes Care published
 research demonstrating the effectiveness of the Biographer in detecting
 hypoglycemia (low blood glucose levels) in the May 2001 issue. "We believe the
 GlucoWatch Biographer is a unique device that can make significant
 contributions toward improving diabetes management. We plan to build on this
 momentum as we prepare to commercialize this revolutionary product in the U.S.
 and other countries."
     Contract revenues for the quarter ended March 31, 2001 are primarily due
 to milestone revenue related to the FDA approval of the GlucoWatch Biographer.
 Contract revenues for the quarter ended March 31, 2000 consisted primarily of
 the amortization of a milestone payment received in 1999 associated with the
 GlucoWatch Biographer. Research and development costs were $6.8 million for
 the quarter ended March 31, 2001, compared to $3.8 million for the quarter
 ended March 31, 2000. This increase is primarily due to an increase in
 expenses incurred to develop and test high-capacity manufacturing processes.
 Marketing, general and administrative expenses for the quarter ended March 31,
 2001 were $3.1 million, compared to $1.9 million for the quarter ended March
 31, 2000.  This increase is primarily due to marketing efforts to support the
 launch in the United Kingdom and in preparation for the U.S. pilot marketing
 program and this increase included expenses related to product packaging,
 training materials, customer service, advertising and sales materials, as well
 as the development and launch of Cygnus' glucowatch.com web site.
     The provision for taxes relates to foreign tax withholding applicable to
 the milestone revenue recorded in this quarter and in the first quarter of
 2000.
     Cash and investments totaled $16.0 million as of March 31, 2001. In the
 first week of April 2001, Cygnus collected the $4.5 million (net of tax)
 receivable for the contract revenue recognized in the first quarter 2001.
     Cygnus also announced today that it has begun its U.S. pilot marketing
 program. "Fifteen geographically dispersed sites have been identified and site
 training and recruiting of patients is underway," noted Craig W. Carlson,
 Chief Operating Officer and Chief Financial Officer of Cygnus, Inc. "In
 addition, our controlled launch plan in the United Kingdom, which includes
 three stages, is right on track. During the first quarter, we successfully
 completed the first stage, which was to hire and train field representatives,
 to fine-tune logistics and customer service functions and to begin training a
 limited number of diabetes clinics in order to evaluate the effectiveness of
 our programs. The focus of the second stage, which has already begun, is to
 expand significantly on the number of diabetes clinics trained. The third
 stage, anticipated to begin in the second half of 2001, will emphasize
 generating awareness and sales among people with diabetes. Our experiences
 with health care professionals in the United Kingdom have been very positive
 and we look forward to expanding our launch later in 2001."
     The company's results of operations and level of revenues may vary
 significantly from period to period and are not necessarily indicative of
 expected results of operations or revenues in future periods.
     Cygnus, Inc., headquartered in Redwood City, California, develops and
 manufactures non-invasive diagnostic medical devices, utilizing proprietary
 biosensor technologies to satisfy unmet medical needs cost-effectively. The
 company's current efforts are focused on a frequent, automatic, and
 non-invasive glucose monitoring device (the GlucoWatch Biographer) and
 enhancements thereto.
     This news release contains forward-looking statements regarding future
 events and the future performance of the Company that involve risks and
 uncertainties that may cause the Company's actual results to differ
 materially. There can be no assurance that unforeseen problems will not occur
 in product manufacturing and commercial scale-up or marketing or product
 distribution of the GlucoWatch Biographer or that regulatory approval will be
 received for large-scale manufacturing processes. Any such occurrence could
 significantly delay the commercialization of the GlucoWatch Biographer system
 or prevent its market introduction entirely. Further, there can be no
 assurance that the Company will be able to enter into a commercialization
 alliance or alliances or that the Company will be able to outsource certain
 commercialization capabilities for launch without a worldwide
 commercialization alliance in place. There also can be no assurance that the
 product can be successfully manufactured in commercial quantities at a
 reasonable cost, be marketed successfully or achieve market acceptance.
 Furthermore, as the Company seeks regulatory approval for enhancements and
 possible manufacturing changes through the pre-market approval (PMA)
 supplement process, there can be no assurance that such supplements will be
 approved or that one or more new PMAs will not need to be filed. The Company
 refers you to the documents the Company files from time to time with the
 Securities and Exchange Commission, including the Company's Annual Report on
 Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K,
 which contain descriptions of certain factors that could cause the Company's
 actual results to differ from the Company's current expectations and any
 forward-looking statements contained in this news release. "GlucoWatch" is a
 registered trademark of Cygnus, Inc.
 
                                    CYGNUS, INC.
                  Consolidated Condensed Statements of Operations
                       (In thousands, except per share data)
                                    (unaudited)
 
                                                         Three months ended
                                                              March 31,
                                                         2001           2000
 
     Contract revenues                                 $5,033         $1,038
 
     Costs and expenses:
       Research and development                         6,755          3,829
       Marketing, general and administrative            3,147          1,908
         Total costs and expenses                       9,902          5,737
 
     Loss from operations                             (4,869)        (4,699)
 
     Other income and (expense)                           422          (316)
 
     Loss from operations before income tax           (4,447)        (5,015)
 
     Provision for taxes                                (500)          (100)
 
     Net loss                                        $(4,947)       $(5,115)
 
     Net loss per share, basic and diluted            $(0.18)        $(0.20)
 
     Shares used in computation of net
      loss per share, basic and diluted                27,715         25,527
 
                  Summary Consolidated Condensed Balance Sheet
                                 (In thousands)
                                  (unaudited)
 
                                                     March 31,
                                                        2001
 
     Current assets                                   $22,437
     Equipment and improvements, net                    6,597
     Other assets                                         606
 
         Total assets                                 $29,640
 
     Current liabilities                               15,663
     Long-term obligations                             30,915
     Stockholders' equity
      (net capital deficiency)                       (16,938)
 
         Total liabilities &
          stockholders' net capital deficiency        $29,640
 
 

SOURCE Cygnus, Inc.
    REDWOOD CITY, Calif., April 26 /PRNewswire/ -- Cygnus, Inc. (Nasdaq:   CYGN)
 today reported total revenue of $5.0 million for the quarter ended March 31,
 2001, compared to $1.0 million for the quarter ended March 31, 2000. Cygnus
 posted a net loss of $4.9 million ($0.18/share) for the quarter ended March
 31, 2001, compared to a net loss of $5.1 million ($0.20/share) for the quarter
 ended March 31, 2000.
     The quarter was highlighted by the United States Food and Drug
 Administration (FDA) granting Cygnus approval to market its GlucoWatch(R)
 Biographer on March 22, 2001.  "Receiving FDA approval was a monumental event
 in Cygnus' history. We received outstanding media coverage that led to tens of
 thousands of people visiting our new web site (www.glucowatch.com) to learn
 more about the GlucoWatch Biographer," stated John C Hodgman, Chairman, Chief
 Executive Officer and President. The medical journal Diabetes Care published
 research demonstrating the effectiveness of the Biographer in detecting
 hypoglycemia (low blood glucose levels) in the May 2001 issue. "We believe the
 GlucoWatch Biographer is a unique device that can make significant
 contributions toward improving diabetes management. We plan to build on this
 momentum as we prepare to commercialize this revolutionary product in the U.S.
 and other countries."
     Contract revenues for the quarter ended March 31, 2001 are primarily due
 to milestone revenue related to the FDA approval of the GlucoWatch Biographer.
 Contract revenues for the quarter ended March 31, 2000 consisted primarily of
 the amortization of a milestone payment received in 1999 associated with the
 GlucoWatch Biographer. Research and development costs were $6.8 million for
 the quarter ended March 31, 2001, compared to $3.8 million for the quarter
 ended March 31, 2000. This increase is primarily due to an increase in
 expenses incurred to develop and test high-capacity manufacturing processes.
 Marketing, general and administrative expenses for the quarter ended March 31,
 2001 were $3.1 million, compared to $1.9 million for the quarter ended March
 31, 2000.  This increase is primarily due to marketing efforts to support the
 launch in the United Kingdom and in preparation for the U.S. pilot marketing
 program and this increase included expenses related to product packaging,
 training materials, customer service, advertising and sales materials, as well
 as the development and launch of Cygnus' glucowatch.com web site.
     The provision for taxes relates to foreign tax withholding applicable to
 the milestone revenue recorded in this quarter and in the first quarter of
 2000.
     Cash and investments totaled $16.0 million as of March 31, 2001. In the
 first week of April 2001, Cygnus collected the $4.5 million (net of tax)
 receivable for the contract revenue recognized in the first quarter 2001.
     Cygnus also announced today that it has begun its U.S. pilot marketing
 program. "Fifteen geographically dispersed sites have been identified and site
 training and recruiting of patients is underway," noted Craig W. Carlson,
 Chief Operating Officer and Chief Financial Officer of Cygnus, Inc. "In
 addition, our controlled launch plan in the United Kingdom, which includes
 three stages, is right on track. During the first quarter, we successfully
 completed the first stage, which was to hire and train field representatives,
 to fine-tune logistics and customer service functions and to begin training a
 limited number of diabetes clinics in order to evaluate the effectiveness of
 our programs. The focus of the second stage, which has already begun, is to
 expand significantly on the number of diabetes clinics trained. The third
 stage, anticipated to begin in the second half of 2001, will emphasize
 generating awareness and sales among people with diabetes. Our experiences
 with health care professionals in the United Kingdom have been very positive
 and we look forward to expanding our launch later in 2001."
     The company's results of operations and level of revenues may vary
 significantly from period to period and are not necessarily indicative of
 expected results of operations or revenues in future periods.
     Cygnus, Inc., headquartered in Redwood City, California, develops and
 manufactures non-invasive diagnostic medical devices, utilizing proprietary
 biosensor technologies to satisfy unmet medical needs cost-effectively. The
 company's current efforts are focused on a frequent, automatic, and
 non-invasive glucose monitoring device (the GlucoWatch Biographer) and
 enhancements thereto.
     This news release contains forward-looking statements regarding future
 events and the future performance of the Company that involve risks and
 uncertainties that may cause the Company's actual results to differ
 materially. There can be no assurance that unforeseen problems will not occur
 in product manufacturing and commercial scale-up or marketing or product
 distribution of the GlucoWatch Biographer or that regulatory approval will be
 received for large-scale manufacturing processes. Any such occurrence could
 significantly delay the commercialization of the GlucoWatch Biographer system
 or prevent its market introduction entirely. Further, there can be no
 assurance that the Company will be able to enter into a commercialization
 alliance or alliances or that the Company will be able to outsource certain
 commercialization capabilities for launch without a worldwide
 commercialization alliance in place. There also can be no assurance that the
 product can be successfully manufactured in commercial quantities at a
 reasonable cost, be marketed successfully or achieve market acceptance.
 Furthermore, as the Company seeks regulatory approval for enhancements and
 possible manufacturing changes through the pre-market approval (PMA)
 supplement process, there can be no assurance that such supplements will be
 approved or that one or more new PMAs will not need to be filed. The Company
 refers you to the documents the Company files from time to time with the
 Securities and Exchange Commission, including the Company's Annual Report on
 Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K,
 which contain descriptions of certain factors that could cause the Company's
 actual results to differ from the Company's current expectations and any
 forward-looking statements contained in this news release. "GlucoWatch" is a
 registered trademark of Cygnus, Inc.
 
                                    CYGNUS, INC.
                  Consolidated Condensed Statements of Operations
                       (In thousands, except per share data)
                                    (unaudited)
 
                                                         Three months ended
                                                              March 31,
                                                         2001           2000
 
     Contract revenues                                 $5,033         $1,038
 
     Costs and expenses:
       Research and development                         6,755          3,829
       Marketing, general and administrative            3,147          1,908
         Total costs and expenses                       9,902          5,737
 
     Loss from operations                             (4,869)        (4,699)
 
     Other income and (expense)                           422          (316)
 
     Loss from operations before income tax           (4,447)        (5,015)
 
     Provision for taxes                                (500)          (100)
 
     Net loss                                        $(4,947)       $(5,115)
 
     Net loss per share, basic and diluted            $(0.18)        $(0.20)
 
     Shares used in computation of net
      loss per share, basic and diluted                27,715         25,527
 
                  Summary Consolidated Condensed Balance Sheet
                                 (In thousands)
                                  (unaudited)
 
                                                     March 31,
                                                        2001
 
     Current assets                                   $22,437
     Equipment and improvements, net                    6,597
     Other assets                                         606
 
         Total assets                                 $29,640
 
     Current liabilities                               15,663
     Long-term obligations                             30,915
     Stockholders' equity
      (net capital deficiency)                       (16,938)
 
         Total liabilities &
          stockholders' net capital deficiency        $29,640
 
 SOURCE  Cygnus, Inc.