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Advanced Polymer Systems Reports Fourth Quarter And Full-Year 2000 Results

REDWOOD CITY, Calif. (March 13, 2001) – Advanced Polymer Systems (NasdaqNM: APOS), an innovator in polymer-based drug delivery systems, today reported its fourth quarter and full-year 2000 results.

Total revenues from continuing operations for the year ended December 31, 2000 were $3,366,000, compared with $4,697,000 for 1999, a decrease of $1,331,000, due mainly to the absence of the one-time sale of a proprietary product line in the prior year. Net loss from continuing operations for the full-year 2000 was $3,758,000, compared with $2,138,000 for the same period in the prior year. Net income for full-year 2000 was $8,552,000, or $0.42 per share, compared with $2,372,000, or $0.12 per share, in the prior year. Net income for 2000 included a gain of $11.1 million, or $0.55 per share, from the sale in July 2000 of the Company's cosmeceutical product line and certain technology rights for topical pharmaceuticals, net of costs and taxes associated with the disposal.

Research and development expense for the full year was $3,713,000, compared with
$2,471,000 in 1999, an increase of $1,242,000, due mainly to the cost of materials for pre-clinical studies and the initiation of preliminary toxicology studies on the company's bioerodible polymer systems.

Total revenues from continuing operations for the fourth quarter ended December 31, 2000 were $880,000, compared with $951,000 for the same period in 1999. Net loss from continuing operations for the fourth quarter was $1,336,000, compared with

$777,000 for the same period in the prior year. Net loss for the fourth quarter 2000 was $1,592,000, or $0.08 per share, compared with net income of $720,000, or $0.04 per share, for the same period in the prior year. Due to the initiation of preliminary toxicology studies on the Company's bioerodible polymer systems, research and development expense for the fourth quarter of 2000 was $1,518,000, compared with $626,000 for the same period in 1999, an increase of $892,000.

Year 2000 highlights include:

Ø $22.5 million cash at year-end
Ø Successful sale of non-prescription skincare product lines to R.P. Scherer for $25 million, with the potential of an additional $26.5 million over the next three years in performance milestones
Ø Refocus of the company on development and commercialization of bioerodible drug delivery technologies for prescription pharmaceuticals
Ø Leadership changes; Paul Goddard appointed Chairman, Michael O'Connell assumes President/CEO position, Gordon Sangster appointed CFO and John Barr appointed VP of R&D
Ø Development agreement with Fujisawa Pharmaceutical
Ø FDA marketing clearance for Advanced Polymer Systems' patented Microsponge® drug delivery technology to be used in new drug product (Caracä) for actinic keratoses

Michael O'Connell, president and CEO, commented, “We are optimistic about a number of feasibility studies utilizing our technology, currently underway with a variety of large and small pharmaceutical companies. We are also looking forward to the public launch in early April 2001 of Carac™, our Microsponge-based formulation containing 5-fluorouracil for the treatment of actinic keratoses, by our partner Dermik Laboratories, an Aventis company. Actinic keratoses are pre-cancerous skin lesions affecting an estimated five million Americans, with an annual market opportunity believed to be $250 million to $300 million. Furthermore, our Retin-A® Micro™ family of products will continue to provide us with a growing royalty stream, which we can reinvest in our technology and product-development programs.”

“Last year marked a turning point for the Company as we strategically refocused our business. With the mid-year divestiture of our cosmeceuticals business, we are now positioned to further develop our platform of drug delivery technologies designed for the pharmaceutical industry. Our primary focus is the development and commercialization of our bioerodible injectable and implantable polymer systems under the trade name Biochronomer™. We have initiated GMP manufacturing of our new Biochronomer systems, as well as in vivo toxicology and pharmacology studies. These studies will provide key data to facilitate partnership arrangements and to bring innovative new pharmaceutical products to market. We are confident that our Biochronomer polymers will open up exciting opportunities for us, not only for pharmaceutical products but also for medical devices,” concluded Mr. O'Connell.

Advanced Polymer Systems is an innovator in polymer-based drug delivery systems and related technologies with a broad proprietary and intellectual property platform. The Company is committed to the identification, development and commercialization of proprietary polymer-based drug delivery systems for the pharmaceutical industry.
Working in collaboration with academic researchers, corporate partners and licensees, the Company is developing and providing specialized proprietary delivery systems for use in an increasing number of ethical pharmaceutical applications.

Forward-looking Statements
Except for historical information, this news release contains certain forward-looking statements that involve risks and uncertainties, including among others, uncertainty associated with timely development, approval, launch and acceptance of new products, establishment of new corporate alliances and progress in research and development programs. Other risks and uncertainties associated with the Company's business and prospects are identified in the Company's filings with the Securities and Exchange Commission. The Company does not undertake to revise these forward-looking statements to reflect events or circumstances occurring in the future.

Advanced Polymer Systems
Income Statement Highlights
(in thousands, except per share data)
(Unaudited)







Three Months Ended Twelve Months Ended
December 31 December 31 December31 December 31
2000 1999 2000 1999

Royalties
$486
$365
$2,081
$2,025
License, R&D and Option Fees
122
299
122
1,462
Product Revenues
272
287
1,163
1,210
Total Revenues
880
951
3,366
4,697
Cost of Sales
192
124
497
533
Operating Expenses:
Research & Development
1,518
626
3,713
2,471
Selling, General & Administrative
923
914
3,463
3,442
Total Operating Expenses
2,441
1,540
7,176
5,913
Operating Loss
(1,753)
(713)
(4,307)
(1,749)
Interest Income (Expense), Net
395
(63)
523
(385)
Other, Net
22
(1)
26
(4)
Loss from Continuing Operatons
(1,336)
(777)
(3,758)
(2,138)
(Loss)/Income from Discontinued Operations,
net of taxes
(218)
1,497
1,163
4,510
(Loss)/Gain on Disposal of Discontinued
Operations, net of taxes
(38)
0
11,147
0
Net (Loss)/Income
($1,592)
$720
$8,552
$2,372

Basic (Loss)/Earnings Per Common Share:
Loss from Continuing Operations
(0.07)
(0.04)
(0.19)
(0.11)
Net (Loss)/Income
(0.08)
0.04
0.42
0.12
Diluted (Loss)/Earnings Per Common Share
Loss from Continuing Operations
(0.07)
(0.04)
(0.19)
(0.11)
Net (Loss)/Income
(0.08)
0.04
0.42
0.12

Advanced Polymer Systems
Balance Sheet Highlights
(in thousands)
(Unaudited)







Assets

Cash, Cash Equivalents and Marketable Securities

$22,523

$3,705
Accounts Receivable, Net
1,691
5,073
Inventory
71
61
Other Current Assets
765
403
Assets Held For Sale
0
7,722

Total Current Assets

25,050

16,964

Property, Plant & Equipment, Net

1,795

1,991
Other Non-Current Assets
151
342
Total Assets
$26,996
$19,297

Liabilities and Shareholders' Equity

Current Liabilities

$4,963

$3,772
Long-Term Deferred Revenues
874
1,080
Long-Term Debt
0
2,409
Shareholders' Equity
21,159
12,036

Total Liabilities and Shareholders' Equity

$26,996

$19,297