Forbes Medi-Tech Announces FY08 Q3 Results

Forbes Medi-Tech Inc. (TSX:FMI)(NASDAQ:FMTI) ("Forbes" or "Company") today announced its results for the third quarter ended September 30, 2008. The comparative period for these statements is the three- and nine-month periods ended September 30, 2007. All amounts are in Canadian Dollars unless otherwise noted.

"The Company continues to be focused on developing its nutraceutical business, pursuing potential M&A transactions, and seeking additional funding from other sources. Looking at this past quarter, we successfully divested our pharmaceutical business unit and assets in California, and decreased expenses overall," said Charles Butt, President and CEO of Forbes Medi-Tech Inc.

Third Quarter Overview:

- Forbes completed the sale of its pharmaceutical business unit and assets based in San Diego, California in August 2008. Terms of the sale included an upfront payment of US $1 million in cash paid at closing along with potential future payments of up to US $6 million, in cash or shares of Transition Therapeutics Inc., based upon Transition reaching certain developmental and regulatory milestones as outlined in the sale agreement.

- Phytosterol revenues for the three months ended September 30, 2008 totaled $1.80 million ($2.06 million for the three months ended September 30, 2007) and $6.03 million for the nine months ended September 30, 2008 ($5.40 million for the nine months ended September 30, 2007).

- Reported net loss was $0.13 per share for the three months ended September 30, 2008 compared with a net loss per share of $0.65 for same period last year.

- The Company continued its expansion of the Reducol(TM) product portfolio, including launching a processed cheese slice in Finland and a new yogurt drink in Uruguay, as well as showcasing an innovative frozen fudge bar novelty at trade shows in the U.S.

Revenue Outlook

Forbes previously provided revenue guidance based on contracted and forecasted tonnage for Reducol(TM) and other value added products for sale in the functional foods and dietary supplement market. The Company is currently working with certain accounts to create higher value products, which has resulted in a transition period during which it is anticipated that sales of existing products for these accounts will be below the level previously forecasted for this year. In addition, forecasted sales of excess inventories have been below expectations, and the Company is uncertain whether this trend will continue through to the end of the year. Given the uncertainty around the achievement of forecasted sales before year-end, the Company is withdrawing its revenue guidance for 2008.

Cost of Sales

Cost of sales for the three months ended September 30, 2008 totaled $1.70 million on phytosterol revenues of $1.93 million, or 88% of phytosterol revenues, versus $2.83 million on phytosterol revenues of $2.30 million for the three months ended September 30, 2007, or 123% of phytosterol revenues.
In the three months ended September 30, 2008, we recognized $0.14 million (September 30, 2007 - $0.49 million) of inventory reserves on excess inventories and recognized $0.04 million (September 30, 2007 - $0.44
million) relating to allowances for losses on future year purchase commitments, which is included in cost of sales. Prior to the impact of the valuation allowance in the three months ended September 30, 2008 and the three months ended September 30, 2007, cost of sales as a percentage of phytosterol revenues was 79% compared to 83% respectively.

Cost of sales for the nine months ended September 30, 2008 totaled
$5.44 million on phytosterol revenues of $6.65 million, or 82% of phytosterol revenues, versus $6.44 million on phytosterol revenues of
$6.34 million for the nine months ended September 30, 2007, or 102% of phytosterol revenues. In the nine months ended September 30, 2008 we recognized $0.17 million (September 30, 2007 - $0.96 million) of inventory reserves on excess inventories and reversed $0.10 million (September 30,
2007 - $0.44 million) relating to allowances for losses on future year purchase commitments, which is included in cost of sales. Prior to the impact of the valuation allowance in the nine months ended September 30,
2008 and the nine months ended September 30, 2007, cost of sales as a percentage of phytosterol revenues was 81% compared to 79% respectively.
Fluctuations in cost of sales as a percentage of phytosterol revenue are attributable to the mix of product sold in a period, varying contractual sales terms, lower margins realized on the sales of finished goods sold through Forbes-Fayrefield and inventory valuation adjustments.

Sale of Pharmaceutical Assets and Business Unit

In May 2008, the Company announced its decision to discontinue its pharmaceutical research and development programs and to focus on its nutraceutical operations. In August 2008, the Company completed the sale of its pharmaceutical assets and business unit based in San Diego, California to Transition Therapeutics Inc. (Transition). Terms of the sale included an upfront payment of $1.06 million (US $1.00 million) in cash paid at closing to us, along with potential future payments of up to US $6 million, in cash or Transition shares, based upon Transition reaching certain developmental and regulatory milestones as outlined in the agreement.

The proceeds from sale included $0.96 million (US $0.91 million) for intellectual property less payments to former shareholders of TheraPei Pharmaceuticals Inc. (TPP), of $0.19 million (US $0.18 million) which comprised of 168,322 Forbes' common shares valued at $0.15 million (US
$0.15 million) and cash of $0.04 million (US $0.04 million) for a gain of
$0.77 million (US $0.73 million). Under the terms of the agreement with the former TPP shareholders, the value of the 168,322 common shares issued was determined based on the average of the NASDAQ stock exchange high and low trading price of Forbes common shares on the closing date. Also, the proceeds of sale included $0.10 million (US
$0.09 million) for capital assets, which resulted in an insignificant loss.
Under the terms of the agreement with the former TPP shareholders, 20% of future payments received, as noted above, will be paid to the former TPP shareholders on a basis of 80% Forbes' shares and 20% cash.

Liquidity and Capital Resources

As of September 30, 2008, the Company's net cash and cash equivalents were
$2.66 million compared with $5.23 million as at December 31, 2007.
The Company's working capital at September 30, 2008 was $5.32 million compared with $9.67 million at December 31, 2007. The decrease in cash and working capital for the nine months ended September 30, 2008 was mainly attributable to funding the loss from operations, offset by the proceeds of the non-dilutive financing and proceeds from sale of the discontinued operations.

As previously stated, the Company anticipates that capital resources will be sufficient to finance operations into the fourth quarter of 2009. This view is based on a number of factors and assumptions, some of which have been updated, including: the assumption that expenditures will not exceed those currently planned, the Company will receive the $800,000 Additional Funding as anticipated, and revenues for the balance of 2008 and 2009 will meet or exceed its revised expectations.
These expectations include an increase in 2009 revenues and margins based on the expected change to higher value products by certain accounts. The Company will, however, need to secure additional funding in the near term in order to be able to continue with its existing business plan, and is pursuing various sources of potential funding, including potential M&A transactions. However, the market for funding is challenging, and there can be no assurance that additional funding will be obtained.

The Company's ability to continue as a going concern assumes the realization of assets and liquidation of liabilities in the normal course of business, and is dependant on the Company's ability to achieve the assumptions stated above respecting sufficiency of its capital resources.

Third Quarter Report

This news release includes by reference the Company's unaudited financial statements for the third quarter ended September 30, 2008 and the Management Discussion & Analysis (MD&A). More detailed information can be found in the MD&A and financial statements, which are being filed with applicable Canadian and U.S. regulatory authorities.

About Forbes Medi-Tech Inc.

Forbes Medi-Tech Inc. (TSX:FMI)(NASDAQ:FMTI) is a life sciences company focused on evidence-based nutritional solutions. A leader in nutraceutical technology, Forbes is a provider of value-added products and cholesterol-lowering ingredients for use in functional foods and dietary supplements. Forbes successfully developed and commercialized its
Reducol(TM) plant sterol blend, which has undergone clinical trials in various matrices and has been shown to lower "LDL" cholesterol levels safely and naturally. Building upon established partnerships with leading retailers and manufacturers across the globe, Forbes helps its customers to develop private label and branded products. For more information, please visit www.forbesmedi.com.

This News Release contains forward-looking statements and forward-looking information concerning anticipated developments in the Company's business including projected sales and revenues, sufficiency of its capital resources, its expected receipt of an additional $800,000 in connection with its non-dilutive financing with a private investor, and other information in future periods. Forward-looking statements and information can be identified by forward-looking terminology such as "continues", "developing", "pursuing", "seeking", "expected", "expectations", "anticipated", "2009", "potential", "revenue guidance", "will", and similar expressions or variations thereon.
Forward-looking statements and information are about the future and are inherently uncertain, and actual results may differ materially from those reflected in the forward-looking statements and information due to a variety of risks, uncertainties and other factors, including, without limitation, the Company's need for additional future capital, which may not be available in a timely manner or at all and which, if not obtained, would have a material adverse effect on the Company and its ability to continue as a going concern; the risk that the Company may not secure any M&A transaction; the risk of unanticipated expenses and inability to control certain costs; uncertainty whether the Company will realize its expected sales of excess inventories at currently projected prices; the risk that the Company may not receive the additional $800,000 in connection with its non-dilutive financing; the risk that certain accounts will not change over to the higher value product being developed by the Company; uncertainty whether the Company will realize the revenues currently contracted and forecasted and will realize its revised 2008 and 2009 revenue expectations; the Company's need for additional customers and the Company's reliance on its existing customers, including Fayrefield Foods and Pharmavite LLC, for performance; the effect of competition; the need for future regulatory approvals, which are not assured; product liability, intellectual property and insurance risks; manufacturing risks and the Company's dependency on Phyto-Source LP, its manufacturer of Reducol(TM); exchange rate fluctuations; uncertainty whether the Company's shares will remain listed on NASDAQ or the TSX, the need to regain compliance with NASDAQ's minimum bid price rule, and the possibility of a TSX remedial review respecting the market value of our common shares, which is currently below $3 million; and other risks and uncertainties affecting the Company and its business, as contained in its latest Annual Information Form / Form 20-F and other documents filed with Canadian and U.S. securities regulatory authorities at www.sedar.com and www.sec.gov, any of which could cause actual results to vary materially from current results or the Company's anticipated future results. Forward-looking statements and information are based on the beliefs, assumptions, and expectations of the Company's management at the time they are made, and the Company does not assume any obligation, except as required by law, to update its forward-looking statements or information if those beliefs, assumptions, or expectations or other circumstances should change.

Reducol(TM) is a trademark of Forbes Medi-Tech Inc.

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