Protein Polymer Technologies Reports Second Quarter Financial Results

    SAN DIEGO, Aug. 4, 1998 -- Protein Polymer Technologies, Inc. (Nasdaq: PPTI), reports today its financial results for the second quarter ended June 30, 1998.
   As recently required by the Securities and Exchange Commission, the Company is obligated to include one-time, non-cash "imputed dividends" of $3,266,000 from the sale and issuance of the Company's Series E Preferred stock in April and May, which raised approximately $5.4 million. Including this extraordinary expense, the Company had a net quarterly loss applicable to common shareholders of $4,786,000 ($.46 a share), versus a net loss of $1,303,000 ($.14 a share) for the comparable period in 1997.  For the six months ended June 30, 1998, the Company had a net loss applicable to common shareholders of $6,133,000 ($.59 a share), versus a net loss of $2,302,000 ($.25 a share) for the same period in 1997.  Excluding the effect of the imputed dividends, the net loss applicable to common shareholders would have been $1,520,000 ($.15 per share) for the quarter ended June 30, 1998, and $2,867,000 ($.27 per share) for the six months ended June 30, 1998.
   Operating expenses for the quarter were $1,496,000, as compared to $1,351,000 for the same period in 1997.  For the six months ended June 30, 1998, operating expenses totaled $2,860,000, compared to $2,447,000 for the same period in 1997. The increased expenditures were due to increased regulatory activity and preclinical testing in preparation for clinical testing of the Company's soft tissue augmentation products. Contract revenues, interest and product income totaled $45,000 for the quarter, compared to $170,000 for the same period in 1997.  For the six months ended June 30, 1998, these revenues totaled $133,000, compared to $389,000 for the same period in 1997.  The decreases were due to reduced contract revenues and interest income.  As a result of the sale of preferred stock during April and May, the cash balance was $3,992,000 as of June 30, 1998, compared to $1,300,000 as of December 31, 1997.
   "Our financial results for the quarter reflect our expanding commitment to the development and registration of our stress urinary incontinence (SUI) program," said J. Thomas Parmeter, PPTI's President and Chief Executive Officer.  "We expect to continue to spend at this level or higher, to the extent capital is available, as we prepare to file an Investigational Device Exemptions (IDE) with the U.S. Food and Drug Administration (FDA) and begin human clinical studies for both the female stress urinary incontinence indication and for cosmetic applications.  Both of the IDE filings are anticipated to occur within the next six months."
    "Our strategy is to develop our potential products in-house until sufficient shareholder value can be obtained from a strategic partnering relationship.  We are currently in discussions with a number of potential partners regarding our product opportunities."
   Protein Polymer Technologies, Inc., a San Diego-based company, develops high performance biomaterials designed to improve medical and surgical outcomes.  From its inception in 1988, PPTI has been a pioneer in protein design and synthesis, and as a result has achieved an exceptional proprietary position in protein-based materials technology.  PPTI's biocompatible polymers have been genetically engineered to enable cell growth, promote the regeneration of tissue, bond to natural and synthetic surfaces, and resorb into tissue at controlled rates.  Targeted applications include soft tissue augmentation, tissue adhesives and sealants, tissue engineering and wound healing, and localized drug delivery.
   This press release may contain forward-looking statements that are based on management's expectations.  Actual results could differ materially from those expressed here; further, the Company is not obligated to comment specifically on those differences.  Risks associated with the Company's activities include scientific and product development uncertainties, competitive products and approaches, continuing collaborative partnership interest and funding, regulatory testing and approvals, and manufacturing scale-up.  The reader is encouraged to refer to the Company's 1997 Annual Report and 10-KSB, and recent filings with the Securities and Exchange Commission, copies of which are available from the Company, to further ascertain the risks associated with the above statements.