AVI BioPharma Announces First Quarter Financial Results

    Business Editors/Health/Medical Writers

    PORTLAND, Ore.--(BUSINESS WIRE)--May 9, 2005--AVI BioPharma, Inc. (Nasdaq:AVII) today reported financial results for the three months ended March 31, 2005.
    For the first quarter of 2005, AVI reported a net loss of $5.5 million, or $0.13 per share, compared with a net loss of $7.5 million, or $0.21 per share, for the first quarter of 2004. Revenues for the first quarter of 2005 were $45,192, compared with $99,451 for the first quarter of 2004. This decrease was due primarily to lower research contracts revenues, partially offset by increases in grant revenues.
    Research and development (R&D) expenses decreased to $4.1 million in the first quarter of 2005, compared with $6.6 million in the first quarter of 2004. Approximately $2.4 million of this R&D decrease was due to lower contracting costs for the production of GMP subunits. General and administrative expenses increased to $1.4 million from $1.2 million in the first quarter of 2005, compared with the first quarter of 2004.
    AVI had cash, cash equivalents and short-term securities of $37.2 million as of March 31, 2005, an increase of $17.7 million from December 31, 2004. This increase was due primarily to the receipt of $22.3 million in net proceeds from a private equity financing with several institutional investors completed in January 2005, offset by $4.4 million used in operations and $388,430 used for purchases of property and equipment and patent related costs.
    The company was informed in 2004 that it had been allocated $5 million in government funding for the 2005 fiscal year for work on two viral disease research projects. These funds have not yet been received and are not reflected in the financial statements.
    "During the past several months, favorable data from studies based on our third-generation NEUGENE(R) antisense technology, including antiviral programs conducted in collaboration with Centers for Disease Control and Prevention (CDC) and the U.S. Army Medical Research Institute of Infectious Diseases (USAMRIID), have been presented at respected scientific conferences and in peer-reviewed journal articles," said Denis R. Burger, Ph.D., chief executive officer of AVI. "We believe these presentations further increase the visibility and recognition of our NEUGENE technology's potential within the scientific community and support additional collaborative and partnering opportunities with scientists, institutions and government agencies. Our strategy is to enhance shareholder value by focusing internal resources on drug candidates that show the most promise for accelerated introduction to large market opportunities, while seeking collaborative relationships to advance programs that address longer-term opportunities."
    "We expect 2005 to be active in terms of AVI's clinical milestones," commented Dr. Burger. "In the area of cardiovascular disease, we plan to begin European trials using our Resten-MP micro-particle technology with bare metal stents for the treatment of restenosis by mid-year and to initiate late-stage trials with Resten-NG(R) drug-eluting stents (DES) for the same indication by year end. We also expect to submit an investigational new drug (IND) application around mid-year to initiate a clinical program to treat hepatitis C (HCV), a market that we estimate to be between $10 and $20 billion worldwide. Further, we hope to fully enroll our West Nile virus clinical trial this West Nile season. Our plan for our oncology program is to begin a safety and efficacy trial in bladder cancer in the second half of this year."

    Product Pipeline Update

    Technology Overview

    AVI is developing products principally based on its NEUGENE antisense technology. Antisense compounds are designed to bind to specific disease-causing gene sequences to disable or inactivate the disease process. AVI has developed proprietary third-generation antisense compounds, called NEUGENES, which are characterized by a novel synthetic backbone, instead of the modified backbones of competing technologies. AVI believes that this chemistry allows NEUGENE antisense agents to be more stable, specific, efficacious and safer than second-generation antisense compounds in clinical development by others. NEUGENE technology is the only third-generation antisense drug technology in mid- to late-stage clinical trials.
    AVI focuses on three program areas, including infectious disease, cardiovascular disease and oncology. In addition, AVI applies its technology to certain other clinical applications that are particularly amenable to antisense drug development.

    Infectious Disease Program

    AVI's infectious disease program is extensive, encompassing research on 45 different viruses representing 17 viral families and involving collaborations with approximately 50 different scientific investigators worldwide. The results from these studies have enhanced AVI's capability in designing effective agents for both emerging and engineered pathogens. AVI's antiviral research program has produced antisense drugs shown to be active against a range of single-stranded RNA viruses, including HCV, West Nile virus (WNV), dengue virus, SARS coronavirus, influenza virus and Ebola virus in preclinical studies. AVI plans to focus its antiviral drug development program on infectious diseases with large markets, the first of which is expected to be HCV, with dengue fever/dengue hemorrhagic fever (DF/DHF) expected to follow. The company expects to submit an IND application with the U.S. Food and Drug Administration (FDA) and initiate clinical trials in HCV by year end.
    In its WNV program, the company filed an IND application with the FDA in June 2003 and in September 2003 initiated a Phase Ib clinical trial with its drug candidate, AVI-4020, to treat WNV. This trial met its primary safety endpoint and also demonstrated a favorable pharmacokinetic profile with drug detected in cerebrospinal fluid. In August 2004, the company initiated a clinical trial with AVI-4020 for the treatment of patients with acute WNV disease who have serious neurological impairment. This trial remains open for enrollment for the 2005 WNV season and is referenced on the CDC and National Institute of Allergy and Infectious Diseases (NIAID) Web sites.

    Cardiovascular Disease Program

    Resten-NG (AVI-4126) is a NEUGENE antisense drug for treating cardiovascular restenosis, or the re-narrowing of a coronary artery following angioplasty. Resten-NG inhibits the expression of the c-myc gene, which plays a key role in the development of the pathology leading to restenosis. In a Phase II study, AVI demonstrated that Resten-NG delivered by a catheter into the site of balloon angioplasty demonstrated statistically significant efficacy in preventing restenosis as measured by angiography and intravascular ultrasound at six months. Based on these findings, AVI has acquired expertise in the cardiovascular device field, including DES, and plans to initiate studies leading to marketing approval in Europe with a DES incorporating the advantageous characteristics of AVI-4126. AVI is also using a proprietary micro-particle formulation in clinical studies of AVI-4126 delivered systemically after angioplasty, which may ultimately be used with all types of bare metal and drug-eluting stents. Additional trials with the micro-particle formulation are expected to begin in Europe later this year.

    Oncology Program

    AVI has completed a Phase Ib clinical trial with its NEUGENE drug candidate AVI-4126, which demonstrated the effectiveness of systemic delivery into solid tumor tissues for both breast and prostate cancer patients. AVI-4126 targets the oncogene c-myc. The over-expression of c-myc has been described in many types of cancers. AVI plans to initiate a Phase II bladder cancer study later in 2005.

    Conference Call

    AVI BioPharma has scheduled an investor conference call regarding this announcement, and its current and planned business activities, to be held today, beginning at 11:00 a.m. Eastern Time.
    Individuals interested in listening to the conference call may do so by dialing (888) 803-8271 toll free within the U.S. and Canada, or (706) 634-2467 for international callers. A telephone replay of the conference call will be available for 48 hours beginning May 9 within two hours after the conclusion of the call, by dialing (800) 642-1687 domestically, or (706) 645-9291 internationally and entering reservation number 5580782.
    The live conference call will also be available to private investors via the Internet at www.avibio.com. A replay of the call will be available on the company's Web site for 14 days following the completion of the call.

    About AVI BioPharma

    AVI BioPharma develops therapeutic products for the treatment of life-threatening diseases using third-generation NEUGENE antisense drugs. AVI's lead NEUGENE antisense compound is designed to target cell proliferation disorders, including cardiovascular restenosis, cancer and polycystic kidney disease. In addition to targeting specific genes in the body, AVI's antiviral program uses NEUGENE antisense compounds to combat disease by targeting single-stranded RNA viruses, including West Nile virus, hepatitis C virus, dengue virus and Ebola virus. More information about AVI is available on the company's Web site at http://www.avibio.com.

    "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The statements that are not historical facts contained in this release are forward-looking statements that involve risks and uncertainties, including, but not limited to, the results of research and development efforts, the results of preclinical and clinical testing, the effect of regulation by the FDA and other agencies, the impact of competitive products, product development, commercialization and technological difficulties, and other risks detailed in the company's Securities and Exchange Commission filings.

AVI BIOPHARMA, INC. (A Development-Stage Company)

STATEMENTS OF OPERATIONS (unaudited)

Three months ended March 31, 2005 2004 ----------- ----------- Revenues from license fees, grants and research contracts $ 45,192 $ 99,451 Operating expenses: Research and development 4,141,904 6,613,988 General and administrative 1,448,530 1,238,201 ----------- ----------- 5,590,434 7,852,189 Other income: Interest income, net 46,063 220,226 ----------- -----------

Net loss $(5,499,179) $(7,532,512) =========== ===========

Net loss per share - basic and diluted $ (0.13) $ (0.21) =========== ===========

Shares used in per share calculations 42,455,512 35,610,687 =========== ===========

BALANCE SHEET HIGHLIGHTS (unaudited)

March 31, December 31, 2005 2004 -------------- ------------- Cash, cash equivalents and short-term securities $ 37,191,492 $ 19,515,316 Total current assets 37,474,609 20,198,391 Total assets 45,698,213 28,518,631 Total current liabilities 2,277,914 2,249,598 Total shareholders' equity $ 43,420,299 $ 26,269,033

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CONTACT: AVI BioPharma, Inc. Michael Hubbard, 503-227-0554 hubbard@avibio.com or Investor Contacts: Lippert/Heilshorn & Associates, Inc. Bruce Voss (bvoss@lhai.com) Jody Cain (jcain@lhai.com) 310-691-7100 or Press Contact: Waggener Edstrom Bioscience Wendy Carhart, 503-443-7000 wendyc@wagged.com

KEYWORD: OREGON INDUSTRY KEYWORD: PHARMACEUTICAL MEDICAL EARNINGS CONFERENCE CALLS SOURCE: AVI BioPharma, Inc.

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