Paradigm Genetics, Inc. (Nasdaq: PDGM), today reported financial results for the quarter ended June 30, 2004.
 
Paradigm Genetics' transition to a leading systems biology company continues to drive its revenue growth.  For the second quarter of 2004, overall revenues increased by 12% to $6.3 million as compared to $5.6 million in the second quarter of 2003.  Revenue for the six months ended June 30, 2004 increased nearly 15% to $11.1 million as compared to $9.7 million in the same period in 2003.  About 30 customers utilize the Company's technology platform, reflecting significant growth in the  customer base compared to the two customers the Company had two years earlier.
 
Systems biology is the simultaneous study of complex interactions of multiple levels of biological information including DNA, RNA, proteins, tissue pathology and biochemicals.  It enables the Company to provide value added products and services to our customers through the application of multiple analytical systems, alone or using the full combination of the Company's technology: gene expression profiling (transcriptomics), biochemical profiling (metabolomics), tissue profiling (pathology) and phenotypic analysis (phenomics).  In addition, the Company expects to use this systematic approach to more efficiently develop proprietary products for the Company's development portfolio.
 
"We are excited about the successes we are seeing as we build our expertise in systems biology and expand our offerings to a diverse customer portfolio of both human health and agriculture companies.  Many of first time Paradigm Array Labs (PAL) customers have seen the value of the gene expression profiling component of our systems biology platform and become repeat
 customers.  Other customers are currently assessing how our technology can best complement their internal R&D efforts.  We expect that these assessments will lead to more and larger long-term collaborations.  These new collaborations would build upon our existing  $140+ million in revenue generating contracts, of which $65 million remains to be recognized," said Heinrich Gugger, Ph.D., President and CEO of Paradigm Genetics.
 
"Our transformation from a functional genomics company to a true systems biology company has reached a meaningful inflection point.  As a result, on August 17, 2004, we will unveil a new corporate identity for the Company that reflects this evolution and our strategic direction," added Dr. Gugger.
 
Total operating expenses for the second quarter 2004 increased to $9.8 million, or 10%, compared to $9.0 million in the second quarter 2003. For the six months ended June 30, 2004, total operating expenses increased to $18.3 million, or 8%, as compared to $17.0 million in the same period in 2003. These operating expenses reflect the first full quarter of costs related to
 our acquisition of TissueInformatics.Inc on March 11, 2004.  The increases in operating costs for both the quarter and six month period ended June 30, 2004 were due primarily to materials costs associated with higher NIEHS and PAL services revenues, continued growth of our research and development programs, additional sales and marketing costs as we expand our offerings, certain one-time costs and amortization of intangible assets associated with the TissueInformatics.Inc acquisition.

Paradigm reported a second quarter 2004 net loss of $3.6 million, or $0.10 per common share, in-line with the second quarter 2003 net loss of $3.6 million, or $0.11 per common share.  For the six months ended June 30, 2004, Paradigm reported a net loss of $7.3 million, or $0.21 per common share, an improvement on the prior period net loss of $7.7 million, or $0.24 per
 common share.

As of June 30, 2004, the Company reported unrestricted cash, cash equivalents and short-term investments in the amount of $10.7 million.
 
Excluding the payoff of the $1.5 million balance of the line of credit with Silicon Valley Bank, the net decrease in cash, cash equivalents and investments ("cash burn") for the second quarter 2004 was $3.0 million, as compared with $1.7 million during the same period in 2003.  The second quarter of 2004 cash burn consisted of $1.9 million from operating activities, $0.3 million for capital expenditures and acquisition costs and $0.7 million for recurring term debt and capital lease obligations.  In July 2004, Silicon Valley Bank renewed the Company's $2.5 million line of credit for another year under the same favorable terms.
 
 
Paradigm's Significant Second Quarter Accomplishments:
The Company has previously announced:

• Paradigm Genetics expanded its liver toxicity collaboration with the National Institute of Environmental Health Sciences to include the study of four to six additional known liver toxicants.

• Paradigm Genetics expanded the technology focus of its toxicogenomics research programs with the NIEHS to include additional work using small interfering ribonucleic acid (siRNA) technology.

• Paradigm Genetics was awarded a Fast Track Small Business InnovationResearch Phase I/II contract from the National Institute of Environmental Health Sciences, National Institutes of Health, for biomarkers that predict the early onset of drug-induced liver injury.

• Paradigm Genetics was awarded a second Fast Track Small Business Innovation Research Phase I/II contract from the National Institutes of Health for Biomarker research in alcohol induced liver and brain injury.

• Pharmaceutical Executive Peter G. Tombros, current Chairman and CEO of VivoQuest, and former President and CEO of Enzon, Inc. and senior executive of Pfizer, Inc. joined Paradigm's Board of Directors during the second quarter.

Paradigm Genetics is a biotechnology company applying its proprietary systems biology platform to the discovery of safer, more effective drugs and agrochemicals.  Paradigm Genetics has major collaborations with the National Institute of Environmental Health Sciences, Bayer CropScience, the Monsanto Company, Pioneer Hi-Bred International, the National Institute of Standards & Technology's Advanced Technology Program, and L'Oreal Inc.