Epigenomics AG Reports Third Quarter 2007 Results

Key Figures (in EUR thousand) - Revenue: 466 in Q3 2007, down by 61% (Q3 2006: 1,203) - EBIT: -3,229 in Q3 2007, improved by 15% (Q3 2006: -3,790) - Net loss: -3,139 in Q3 2007, improved by 16% (Q3 2006: -3,740) - Liquid assets: 13,024 as of 30/09/2007 (31/12/2006: 17,341) Highlights of the Third Quarter 2007 - Strategic in-vitro diagnostics partnership with Abbott Molecular signed - Continued successful execution of revised strategy - Medical Advisory Board for colorectal cancer screening development program established - Numerous new candidate biomarkers within prostate cancer screening program identified - All development programs on track and in line with expectations - Key patents for early cancer detection technology granted - Biomarker R&D partnership with pharmaceutical partner expanded - All key financials for first nine months 2007 within expectations: Operating costs reduced, EBIT improved Berlin, Germany and Seattle, WA, USA, October 31 2007 - Epigenomics AG (Frankfurt, Prime Standard: ECX), a cancer molecular diagnostics company developing tests based on DNA methylation, today reported financial results for the third quarter of 2007, which ended September 30, 2007. Geert Nygaard, CEO of Epigenomics AG, commented: "The third quarter has seen Epigenomics delivering on one of its major promises for the year 2007: The conclusion of a first non-exclusive IVD collaboration and licensing agreement with Abbott Molecular. This agreement is an important step towards the commercialization of our key value driver, the blood-based early colon cancer detection test based on our proprietary biomarker Septin 9. With an anticipated launch date of a test kit in Europe in 2009, followed by regulatory filing for U.S. approval in 2010, we now see a clear path towards commercialization of our leading product as well as a validation of its clinical utility and commercial attractiveness. During the past three months, we have also delivered successfully on our other goals: to execute our realigned strategy, to advance IVD partnering discussions and negotiations, to keep our financial discipline and to progress on all of our development projects in the pipeline." Third Quarter 2007 - Financial Review Overall, key financials for the reporting period were in line with expectations. Revenue in Q3 2007 decreased to EUR 466 thousand from EUR 1,203 thousand in the comparable period of 2006 due to omission of revenue recognition from the collaboration with Roche Diagnostics in previous year's comparison period. The Clinical Solutions business contributed EUR 185 thousand to overall Q3 2007 revenue (Q3 2006: EUR 162 thousand) with the remainder of EUR 281 thousand coming from licensing deals (Q3 2006: EUR 30 thousand). Overall revenue in 9M 2007 decreased to EUR 1.8 million from EUR 2.3 million over the same period of 2006. R&D costs increased from EUR 2.2 million in the third quarter of 2006 to EUR 2.4 million in Q3 2007. At the same time, the cost of sales dropped from EUR 1.3 million in Q3 2006 to EUR 0.2 million in the same period of 2007 due to lower revenue from partnered R&D programs. Thus, overall costs for R&D operating activities in Q3 2007 dropped by 26% compared to Q3 2006. In Q3 2007, EBIT amounted to EUR -3.2 million, improved by almost 15% against Q3 2006 EBIT of EUR -3.8 million. The full effect of the restructuring process begun in fall of 2006 has become visible after the first quarter of 2007. The overall operating cost base in 9M 2007 at EUR 12.9 million was significantly below 9M 2006 operating costs of EUR 15.7 million, i.e. year-on-year savings of around EUR 2.8 million for the fist nine months of 2007 were achieved. Net loss for Q3 2007 improved by 16% from Q3 2006 (EUR 3.7 million) to EUR 3.1 million in the reporting period. The difference is almost completely accounted for by the reduction of the operating cost base. Epigenomics's balance sheet total decreased from EUR 30.1 million as of December 31, 2006, to a total of EUR 25.6 million as of September 30, 2007. Key driver was again the net consumption of liquidity by operations partly compensated by the successful PIPE financing transaction and partnering deals as mitigating factors. Epigenomics's cash flow and financial position in 9M 2007 were mainly affected by the continued net cash consumption by operations. Overall, the financial position has developed according to expectations with liquid assets amounting to EUR 13.0 million as of September 30, 2007, compared to EUR 17.3 million as of December 31, 2006. Total net cash flow (currency-adjusted) for 9M 2007 was negative at EUR -3.0 million. Cash outflow from operating activities in 9M 2007 amounted to EUR 8.7 million. Cash inflow from investing activities amounted to EUR 1.1 million, primarily driven by the sale of marketable securities. Cash flow from financing activities was positive at EUR 4.6 million, mainly due to the issue of new shares. Third Quarter 2007 - Operational review and highlights The third quarter of 2007 was characterized by the continued execution on the revised strategy of focusing on the development of the colorectal cancer screening program and nonexclusive partnering deals. Following an intense process of identifying a suitable IVD partner as the first nonexclusive licensee for the colorectal cancer blood test, Epigenomics won Abbott Molecular Inc. in the third quarter 2007. Abbott obtained worldwide non-exclusive rights to the proprietary Septin 9 methylation biomarker for blood-based colorectal cancer testing. Both partners anticipate launching a CE-marked test on Abbott's automated m2000 instrument platform in Europe in 2009 followed by regulatory filing for U.S. approval in 2010. In addition to the collaboration with Abbott, Epigenomics has several ongoing IVD partnering discussions and negotiations for its colorectal cancer screening test and progress during the third quarter of 2007 has been fully in line with expectations. In order to support a fast clinical development and commercialization of its lead product, Epigenomics has recently formed a Medical Advisory Board for Colorectal Screening. Within its prostate cancer program, Epigenomics has identified dozens of novel candidate biomarkers which may help to better distinguish between prostate cancer and benign prostate conditions, a shortfall of current prostate cancer tests. In addition, data showing the feasibility of Epigenomics' urine-based prostate cancer test were presented at major cancer conferences in Q3 2007. Other operational key events since beginning of Q3 2007 included the granting of key patents for the company's technology for the sensitive detection of methylated DNA, HeavyMethyl®. Together with further key patents already issued, the granted patents complete the patent protection of the entire workflows for Epigenomics' diagnostic tests on body fluids and tissue in a wide range of market regions including the U.S. and Europe. Further, Epigenomics could expand the biomarker R&D collaboration with one of its pharmaceutical partners. Outlook After concluding a first non-exclusive collaboration and licensing agreement with Abbott Molecular Inc., Epigenomics is presently in discussions and negotiations with several further potential IVD partners. The discussions cover all of the company's current cancer screening programs and the management expects to close at least one additional IVD deal for its proprietary colorectal cancer biomarker Septin 9 in 2008. For early market introduction of the Septin 9 biomarker as a centralized testing service in the US in 2008, Epigenomics further expects to partner with a US reference laboratory in due course. Management expects full year revenue to be somewhat below 2006 revenue. However, EBIT for full year 2007 is expected to be somewhat better than EBIT for 2006. Given the deal structure of the collaboration and licensing agreement with Abbott, Epigenomics anticipates approximately EUR 12 million to EUR 13 million cash consumption by operating activities in 2007. Further Information The full 9-Month Report 2007 can be obtained from Epigenomics' website at: http://www.epigenomics.com/en/investor_relations/Financial_Information/ About Epigenomics AG Epigenomics is a molecular diagnostics company with a focus on the development of novel products for cancer. Using DNA methylation biomarkers, Epigenomics' tests can potentially diagnose cancer at an early stage and help guide physicians to select an appropriate therapy. Epigenomics' defined business strategy covers two complementary core business areas: The company develops diagnostic screening tests for the early detection of cancer. Based on body fluid samples (e.g. blood and urine), these tests are aimed at finding cancer at an early stage before symptoms occur. Epigenomics' product pipeline contains a validated biomarker panel for the early detection of colorectal cancer in blood plasma, and further proprietary DNA methylation biomarkers at various stages of development for prostate and lung cancer detection in body fluids. Epigenomics aims at giving patients and doctors early access to these biomarkers through reference laboratory testing services. For development and global commercialization as in vitro diagnostic test kits, Epigenomics pursues a non-exclusive partnering strategy with diagnostics industry players. As a first strategic partner, Abbott Molecular licensed the worldwide non-exclusive rights to Epigenomics' proprietary Septin 9 biomarker for colorectal cancer. As a second core business area, Epigenomics develops specialty diagnostics for individuals at high risk for cancer and cancer patients. These tests include surveillance applications of our colorectal cancer biomarkers and a tissue-based prognostic cancer molecular classification test for prostate cancer patients. Our tissue-based prostate cancer application is developed in strategic partnerships with Qiagen (pre-analytics) and Affymetrix (diagnostic device platform). The biomarkers for cancer specialty diagnostic applications will be made available through testing services in centralized reference laboratories. Epigenomics retains the flexibility to decide on further commercialization as in vitro diagnostic test kits in Europe. Pharma, diagnostics and biotech partners can access Epigenomics' portfolio of proprietary DNA methylation technologies and biomarkers protected by more than 190 patent families (granted patents and patent applications) through Biomarker Services, IVD Development Collaborations, and Licensing. The company is headquartered in Berlin, Germany, and has a wholly owned subsidiary in Seattle, WA, USA. For more information, please visit Epigenomics' website at www.epigenomics.com. ### Epigenomics' Disclaimer This communication expressly or implicitly contains certain forward-looking statements concerning Epigenomics AG and its business. Such statements involve certain known and unknown risks, uncertainties and other factors which could cause the actual results, financial condition, performance or achievements of Epigenomics AG to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Epigenomics AG is providing this communication as of this date and does not undertake to update any forward-looking statements contained herein as a result of new information, future events or otherwise. Contact: Epigenomics AG Dr. Achim Plum VP Corporate Communications +49 (0) 30-24345-368 achim.plum@epigenomics.com