Paradigm Genetics, Inc. (Nasdaq: PDGM), a functional genomics company, today reported financial results for the second quarter ended June 30, 2001.

For the three months ended June 30, 2001 total revenues increased 257% to $6.1 million, compared to $1.7 million for the same period in 2000. For the six months ended June 30, 2001 total revenues increased 403% to $11.5 million compared to $2.3 million for the same period in 2000. The increase in revenue was due to higher throughput from Paradigm’s GeneFunction Factory™ relating to the company's commercial partnerships with Bayer AG and Monsanto Company.

Total operating expenses for the three months ended June 30, 2001 increased 54% to $10.5 million compared to $6.8 million for the same period in 2000. Total operating expenses for the six months ended June 30, 2001 increased 65% to $20.1 million compared to $12.2 million for the same period in 2000. Second quarter operating expenses included a one-time charge of $0.9 million relating to an acquisition that the company is no longer pursuing. The remainder of the increase in operating expenses resulted from the company's acceleration of its metabolic profiling research, investments in informatics-based technologies, and variable costs associated with higher throughput in the GeneFunction Factory™. Between June 30, 2000 and June 30, 2001, the company added 81 research and development employees and three non-research and development employees.

Including non-cash compensation charges of $0.3 million, the company reported a second-quarter 2001 net loss attributable to common stockholders of $4.3 million, or $0.16 per common share. This was $0.01 better than the consensus earnings estimate reported by First Call. This compares to a net loss of $4.8 million, or $0.27 per common share for the same period in 2000. For the six months ended June 30, 2001, the company reported a second-quarter 2001 net loss attributable to common stockholders of $8.3 million, or $0.32 per common share. This included non-cash compensation charges of $0.6 million. This compares to a net loss of $21.6 million, or $1.95 per common share for the same period in 2000. Excluding one-time charges, the net loss for the three months and six months ended June 30, 2001 would have been $3.4 million, or $0.13 per common share and $7.4 million, or $0.28 per common share, respectively.

"We are delighted with Bayer's decision in the second quarter to not only extend, but also to expand by up to $15 million, our existing herbicide discovery partnership," said John A. Ryals, Ph.D., President and Chief Executive Officer of Paradigm Genetics. "We continue to make tremendous progress in the rate at which we determine the function of genes in our GeneFunction Factory™. Comparing our second quarter with a year earlier, the revenues from the GeneFunction Factory™ have nearly quadrupled while our factory costs have less than doubled."

Dr. Ryals added, "We are continuing to partner and invest heavily in informatics because we believe that the interpretation of our gene function data is key to long-term industry leadership. We are also continuing to increase our investment in the area of metabolomics, or the global analysis of all classes of cellular metabolites, an area that we have pioneered. This technology offers very exciting potential across all of our market areas."

Highlights

• Paradigm's commercial partnership with Bayer for herbicide discovery and development was extended for up to an additional five years, consisting of an initial term of three years that ends September 2004, plus an additional two years at the option of Bayer. Potential revenues increased by up to $15 million.
• Paradigm appointed Susan Harlander, Ph.D., to the Board of Directors. Harlander is currently president of BIOrational Consultants, Inc., a consulting firm specializing in food and biotechnology issues facing all aspects of the food supply chain.
• Craig Liddell, Ph.D., Vice President of Informatics, was named to the scientific advisory board of the North Carolina State University Bioinformatics Research Center.
• Paradigm exceeded the scheduled milestone deliverables in its commercial partnership with Monsanto, resulting in an accelerated milestone payment.

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