Forbes Medi-Tech Announces Third Quarter Results, Improves Financial Position and Outlook

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

Forbes' Third Quarter Highlights

- Together with the Phyto-Source joint venture, secured sterols supply agreements for up to $40 million over two years
- Completed sale of the Amqui pilot plant for staged payments of $1.6 million
- Received approval to initiate Phase II clinical trial on the Company's cholesterol-lowering pharmaceutical FM-VP4
- Completed $1.2 million in equity financings
- Improved the Company's working capital position

"This has been a very important quarter for Forbes as we have successfully completed not just one, but four major milestones", says Charles Butt, President and CEO of Forbes Medi-Tech Inc. "The Company's cholesterol-lowering pharmaceutical FM-VP4 has been approved to initiate Phase II in its clinical trials, sales contracts for cholesterol-lowering sterols have exceeded our expectations, and we have improved the Company's working capital position through initial payments on the sale of our Amqui pilot plant and completion of some modest equity financings. "

Outlook

The Company maintains its revenue guidance for 2002 at $8 million (US$5 million), of which direct sales and royalties will be approximately $7 million (US$4.5 million). Sales volumes of phytosterols for calendar 2002 for the Company and the Phyto-Source joint venture are anticipated to be 350 tonnes (net 220 tonnes to the Company) compared with 180 tonnes (net 130 tonnes to the Company) in calendar 2001.

Based on existing sales contracts, and assuming that forecasted supply requirements will be ordered, the Company is projecting its share of revenue from sterol sales for 2003 of $12 million. This figure represents the Company's share of the $20 million projected revenue of the combined sales contracts of the Company and the Phyto-Source joint venture. The Company is in discussions with several other companies regarding possible new major sterol contracts.

Based on existing and projected sales contracts, projected expenditure levels, and planned divestiture of the Company's AD/ADD business, Forbes believes it will have sufficient capital to operate and fund its core development projects through the end of 2003. The Company, however, is continuing to look at various financing opportunities to further develop its pipeline of products.

Results

For the nine months ended September 30, 2002, the Company reported a net loss of $1.0 million ($0.05 per share) compared with a net loss of $8.4 million ($0.40 per share) for the nine months ended October 31, 2001. The significant improvement resulted primarily from a one-time $6.1 million gain realized in the second quarter of 2002 on the purchase of Reducol(tm) rights (as discussed in the Company's 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.

The Company reports record phytosterol revenues of $6.3 million for the nine months ended September 30, 2002 compared with $5.6 million in the nine months ended October 31, 2001. Included in these amounts are direct product sales and royalties of $5.3 million for the nine months ended September 30, 2002 compared with $4.2 million in the nine months ended October 31, 2001. The $1.1 million increase in sales in the nine months resulted primarily from sales of non-food grade sterols from the Company's share of the Phyto-Source joint venture.

For the three months ended September 30, 2002, the Company had a net loss of $1.9 million ($0.09 per share), compared to a net loss of $1.8 million ($0.09 per share) for the three-month period ended October 31, 2001. The Company continued to significantly reduce G&A and R&D expenditures but this was offset by reductions in revenues during the quarter ended September 30, 2002 as discussed below.

Phytosterol revenues were $1.3 million for the three months ended September 30, 2002 made up entirely of direct product sales and royalties. No licensing amortization is recognized in revenues in the quarter as a result of the elimination of deferred revenue on the buy-back of the Reducol(tm) rights. The reduced direct sales occurred in the third quarter 2002 partly because of the transition between the completion of a major one-year sterols sales purchase agreement on June 30, 2002 and the commencement late in the fourth quarter of 2002 of significant revenues from the previously announced sterols supply agreements, including those with the Phyto-Source joint venture, totaling up to $40 million over two years. As previously announced, the Company anticipates revenues will increase steadily over the three quarters starting in the fourth quarter 2002, as a result of its new contracts.

Expenses

The Company's net R&D expenditures totaled $2.7 million in the first nine months of 2002, compared to $4.3 million in the nine-month period ended October 31, 2001. G&A costs were down to $3.5 million for the first nine months of 2002, compared with $4.8 million for the nine months ended October 31, 2001. Cost of sales increased by $0.7 million from the nine months ended October 31, 2001 to the nine months ended September 30, 2002 consistent with the increase in sales of $1.1 million over the same periods.

The Company's net R&D expenditures totaled $0.7 million in the third quarter of 2002, compared to $1.2 million in the three-month period ended October 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 $0.8 million for the third quarter 2002, compared with $1.0 million for the three months ended October 31, 2001. Cost of sales decreased by $0.7 million, consistent with the $0.7 million decrease in sales. The Company continues to reduce discretionary expenditures.

Liquidity & Capital Resources

The Company's working capital improved from a working capital deficiency of $0.7 million at June 30, 2002, to a positive working capital of approximately $0.1 million at September 30, 2002, which is calculated after deducting $2.6 million of royalties projected to be payable to Novartis by September 30, 2003. Excluding such royalties, the Company's working capital was $2.7 million at September 30, 2002. The Company's cash and cash equivalents increased from $0.3 million at June 30, 2002 to $1.2 million at September 30, 2002.

During the three months ended September 30, 2002, the Company used $1.8 million in operating activities compared with $7.0 million in the three-month period ended October 31, 2001. Investing activities during the quarter ended September 30, 2002, generated cash of $1.7 million mainly related to the disposal of the Amqui pilot plant and compared with $5.5 million generated in the quarter ended October 31, 2001 which related to transfers out of short-term investments. At June 30, 2002 the Company was committed to investing an additional $2.0 million (US$1.35 million) in the Phyto-Source joint venture, which is 50%-owned by the Company. The joint venture has agreed to offset this amount against amounts owed by the joint venture to the Company and as a result the Company's current receivables and current payables decreased by $1.0 million.

During the nine months ended September 30, 2002, the Company used $6.0 million in operating activities compared with $10.4 million in the nine-month period ended October 31, 2001. Investing activities during the first nine months of 2002 generated cash of $2.1 million compared with $4.6 million in the nine months ended October 31, 2001. During the first nine months of 2002 the Company expended $0.6 million on capital assets, compared with $9.6 million in the nine months ended October 31, 2001. Financing activities during the three months ended September 30, 2002 generated cash of $1.1 million primarily as a result of the completion of two equity financings. For the first nine months of 2002, such activities used cash of $0.6 million, mainly related to the payment, in the quarter ended June 30, 2002, of demand loans, compared with generating cash of $1.4 million in the nine months ended October 31, 2001 mainly due to the assumption of the demand loans. ubsequent to September 30, 2002 the Phyto-Source joint venture has negotiated and drawn down a US$0.7 million credit facility for use by the joint venture. The facility is guaranteed by Forbes (USA) Inc., a wholly-owned subsidiary of the Company, and by the Company's joint venture partner, Chusei (USA) Inc.

Conference Call

A conference call and webcast to discuss these financial results will be held on November 26, 2002 at 1:30 p.m. PST. (4:30 p.m. EST). To participate in the conference call, please dial 416-695-5259 or 1-877-461-2816. 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 December 21, 2002 by calling
416-695-9731 or 1-888-509-0081. The webcast link will be archived on the Forbes website

Third Quarter Report

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

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.


For more information, please contact:

Darren Seed Manager, Investor Relations
Telephone: (604) 681-8976
E-mail: mailto:[email protected]
RJ (Don) MacDonald
Chief Financial Officer
Telephone: (604) 689-5899
E-mail: mailto:[email protected]

This press release contains forward-looking statements concerning anticipated developments in the Company's business and projected sales volumes, revenues, capital, and other information in future periods. Forward-looking statements are frequently, but not always, identified by words such as "revenue guidance", "anticipates," "believes," "projects", "possible", "expects", "intends," "estimates," "potential", and similar expressions or variations thereon, 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 heading "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, uncertainty as to whether the Company's anticipated sales volumes, revenues, expenditure levels and divestiture of the AD/ADD business will be achieved as currently anticipated or at all; uncertainty that the Phyto-Source joint venture manufacturing facility will function as planned; the need for continued cooperation and performance by the Company's joint venture partner; uncertainty as to whether the Company will be able to complete any new major 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 prod ct prices; uncertainty as to whether product volumes will be ordered by customers as forecasted or at all; 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; uncertainty as to whether the balance of payments due as a result of the sale of the Amqui property will be made on a timely basis or at all; the fact that additional funding may not be available to the Company on acceptable terms or at all; 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 statement contained herein.


Full News Release and Corresponding Tables also available in PDF Format:

Associated File:
http://www.forbesmedi.com/i/pdf/NR-ThirdQ.pdf
309 KB in size, approx. 2 minutes, 29 seconds to download at 28.8Kbps

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