Forbes Medi-Tech Announces Record Second Quarter Revenues

Vancouver, British Columbia - August 29, 2002 - Forbes Medi Tech Inc. (TSE:FMI and NASDAQ:FMTI) today announced its financial results for the three and six-month periods ended June 30, 2002. In 2001 the Company changed its year-end from July 31 to December 31, so the comparative period for this quarter and half year is the three and six months ended July 31, 2001. All amounts, unless otherwise specified, are in Canadian Dollars.

Results and Revenues

The Company is pleased to report record phytosterol revenues of $2.6 million for the three months ended June 30, 2002 and $5.0 million for the six months ended June 30, 2002. Included in these amounts are record direct product sales and royalties of $2.1 million and $4.0 million, respectively. The increased sales resulted primarily from sales of non-food grade sterols from the Company's share of the Phyto-Source joint venture.

For the second quarter of fiscal 2002, net income was $3 million ($0.14 per share), compared to a net loss of $3.6 million ($0.17 per share) for the three-month period ended July 31, 2001. For the six months ended June 30, 2002, the Company had a net income of $0.9 million ($0.04 per share) compared with a net loss of $6.6 million ($0.31 per share) for the six months ended July 31, 2001. These significant improvements, from a net loss to a net profit in both the three and six month periods, resulted primarily from a one-time $6.1 million gain realized on the purchase of Reducol(tm) rights (as discussed in June 25, 2002 news release) for an amount significantly below the deferred revenue liability on the Company's financial statements. Reductions in general and administrative (G&A) expenses and research and development (R&D) expenses also contributed to the improvement.

Expenses

The Company's net R&D expenditures totaled $0.9 million in the second quarter of 2002, compared to $1.2 million in the three-month period ended July 31, 2001. The reduction in R&D is attributed to a decrease in non-core expenditures outside the FM-VP4 development program. G&A costs were down to $1.6 million for the first quarter 2002, compared with $2.2 million for the three months ended July 31, 2001. Included in G&A expenses for the second quarter 2002 are $0.25 million related to foreign exchange and $0.2 million related to financing from 2001. Cost of sales increased by $0.2 million, consistent with the $0.3 million increase in sales. Included in product development and marketing costs for the second quarter 2002 is $0.5 million related to fine chemicals costs prepaid in 2001. Subsequent to June 30, 2002 the Company has continued to reduce discretionary expenditures.

The Company's net R&D expenditures totaled $2.0 million in the first half of 2002, compared to $3.2 million in the six-month period ended July 31, 2001. G&A costs were down to $2.7 million for the first half of 2002, compared with $3.6 million for the three months ended July 31, 2001. Cost of sales increased by $1.5 million from the six months ended July 31, 2001 to the six months ended June 30, 2002 consistent with the increase in sales of $1.9 million over the same periods.

Liquidity & Capital Resources

The Company's working capital decreased from $3.6 million at March 31, 2002, to a working capital deficiency of $0.7 million at June 30, 2002, which is calculated after deducting $2.3 million of royalties payable to Novartis by June 30, 2003. Excluding such royalties, the Company's working capital was $1.6 million at June 30, 2002. The Company's cash and cash equivalents reduced from $1.5 million at March 31, 2002 to $0.3 million at June 30, 2002. Subsequent to June 30, 2002 the Company received $0.9 million related to other receivables and the sale of its Amqui pilot plant in Quebec. Working capital increased by $0.75 million as a result of the Amqui plant sale. As of August 29, 2002 the Company has $0.45 million in cash and approximately $2.5 million in receivables.

During the three months ended June 30, 2002, the Company used $0.3 million in operating activities compared with $1.8 million in the three-month period ended July 31, 2001. Investing activities during the quarter ended June 30, 2002, used cash of $0.1 million compared with generating cash of $3.0 million in the quarter ended July 31, 2001. At June 30, 2002 the Company was committed to investing an additional $2.0 million (US$1.35 million) in Phyto-Source LP, which is 50%-owned by the Company. It is anticipated that this funding may be made by an offset against amounts owed by the joint venture to Forbes. The net effect of this would be to reduce current receivables and current payables by $1.0 million.

During the six months ended June 30, 2002, the Company used $4.2 million in operating activities compared with $8.2 million in the six-month period ended July 31, 2001. Investing activities during the first half of 2002 generated cash of $0.4 million compared with $6.4 million in the six months ended July 31, 2001. During the first half of 2002 the Company expended $0.7 million on capital assets, compared with $2.7 million in the six months ended July 31, 2001. Financing activities during the first half of 2002, used cash of $1.7 million, mainly related to the payment of demand loans using proceeds from the sale of phytosterols, compared with $1.0 million in the six months ended July 31, 2001 primarily used to repay notes payable.

Financing

The Company recently announced it is undertaking a non-brokered private placement at a price of $0.65 per unit, each unit consisting of one common share plus .08 of a common share purchase warrant. At the same time, the Company announced it was undertaking two concurrent offerings through brokerage firms in Toronto and New York, independent of the non-brokered private placement. All offerings are subject to regulatory approval.

The Company has previously announced the requirement to seek additional debt or equity financing by September 30, 2002 to meet its planned expenditures. Based on existing sales contracts and financing commitments received to date, the Company believes it will have the necessary capital to operate beyond September 30, 2002. The Company will provide updates if and when further sterols sales contracts are entered into and financings are closed.

Outlook

Based on existing contracts alone, at August 29, 2002, the Company is anticipating that its share of phytosterol sales for calendar 2002 will be a minimum of approximately $7 million (US$5 million), compared with approximately $5 million (US$3 million) for calendar 2001. Sales volumes of phytosterols for calendar 2002 for the Company and the Phyto-Source joint venture, based on existing contracts alone, are anticipated to be a minimum of 300 tonnes (net 200 tonnes to the Company) compared with 180 tonnes (net 130 tonnes to the Company) in calendar 2001.

Conference Call

A conference call and webcast to discuss these financial results will be held on September 4, 2002 at 1 p.m. PST. (4:00 p.m. EST). To participate in the conference call, please dial 416-695-9753 or 1-877-461-2814. For those investors unable to participate in the call, the live webcast can be accessed through the Company's website at www.forbesmedi.com. The call will also be available for replay until September 30, 2002 by calling 416-695-9731 or 1-888-509-0081.

Second Quarter Report

This news release includes by reference the Company's Second Quarter Report, including the full Management Discussion & Analysis (MD&A) as well as the complete second quarter 2002 financial statements. The MD&A and financial statements are being filed with applicable Canadian and U.S. regulatory authorities.

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About Forbes Medi-Tech Inc.

Forbes Medi-Tech Inc. is a biopharmaceutical company dedicated to the research, development and commercialization of innovative pharmaceuticals and nutraceutical products for the prevention and treatment of cardiovascular and related diseases. By extracting plant sterols from wood pulping by-products, Forbes has developed cholesterol-lowering agents to be used as pharmaceutical therapeutics, dietary supplements and functional food ingredients.

The NASDAQ National Market and the Toronto Stock Exchange have not reviewed and do not accept responsibility for the adequacy or accuracy of the content of this News Release. This Press Release contains forward-looking statements concerning anticipated revenues, expenditures and financing needs of the Company and other information in future periods. Forward-looking statements are frequently, but not always, identified by words such as "expects," "anticipates," "believes," "intends," "estimates," "potential", "projects", "plans", "possible" and similar expressions, or statements that events, conditions or results "will," "may," "could" or "should" occur or be achieved. These forward-looking statements are set forth principally under the headings "Financing" and "Outlook", but occur elsewhere in this Press Release as well. Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of the Company and other results and occurrences may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, the Company's need for additional funding, which may not be available to the Company on acceptable terms or at all; uncertainty as to whether the Company's current equity offerings will be successful or if successful, that the amount raised will be sufficient to sustain the Company's operations; uncertainty that the Phyto-Source LP manufacturing facility will function as planned; uncertainty as to whether the Company will be able to complete any new major long-term sterol contracts; the need to control costs and the possibility of unanticipated expenses; uncertainty as to the Company's ability to generate projected sales volumes and product prices; uncertainty as to the successful conclusion of sales discussions currently underway, and of those anticipated, with third-party purchasers; the need for performance of contract obligations by buyers of products; and other risks and uncertainties identified in this Press Release. The Company's forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made, and the Company does not assume any obligation to update forward-looking statements if circumstances or management's beliefs, expectations or opinions should change. For the reasons set forth above, investors should not place undue reliance on forward-looking statements. See also the Company's reports filed with the Toronto Stock Exchange, the Ontario and B.C. Securities Commissions, and the U.S. Securities and Exchange Commission from time to time for other cautionary statements identifying important factors with respect to such forward-looking statements. The Company does not assume any obligation to update any forward-looking statements contained herein.

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