Pittsburgh
January 29, 2002

- Reduces operating costs and will focus on co-development and licensing
- Company has four excellent drug candidates in pipeline

Demegen, Inc. (OTC Bulletin Board: DBOT), a biopharmaceutical company specializing in the development of peptides for the treatment of infectious diseases, announced today that it is significantly reducing operating costs to conserve cash until new funding is obtained from investors, licensing or development partners.

Richard Ekstrom, Chairman and Chief Executive Officer said: "Demegen has four very promising drug candidates in the pipeline and is shifting its focus from research on new drugs to the development of existing drug candidates and strategic partnerships designed to speed up their development. Now that new drug candidates have been identified, the thrust of the Company shifts from discovery to development and partnering. This means different skills and needs and Demegen is adjusting accordingly. Such a shift is not unusual. Indeed, some biotechnology companies function solely by `licensing in' molecules for clinical development and do not conduct any discovery research.

"Our plans for continuing operations and product development include: Focusing efforts on best near term opportunities and reducing non-critical employees and overhead costs. Actions taken thus far reduce operating costs by nearly $1 million annually. We believe we have an adequate core of experienced employees that will be supplemented by consultants or part-time employees.

"Dr. David Rothstein, Ph.D. has been promoted to Director of Research. Dr. Rothstein has more than twenty years experience in directing antibacterial and antifungal research programs. He was a key factor in obtaining grants from the Cystic Fibrosis Foundation. Prior to Demegen, Dr. Rothstein worked for Periodontix, Millennium Pharmaceuticals, Lederle Laboratories and Biogen. He obtained his Ph.D. from Tufts University School of Medicine in Microbiology and Molecular biology. He has authored more than forty-five papers and is a holder of several patents. Dr. Philip Friden, formerly Vice President of Research and Development for Demegen and Periodontix, and currently Vice President for Scion Pharma, will join Demegen's Scientific Advisory Board. Dr. Friden was a key person in setting up the clinical trials for the P113 compound. Robert Fatora, the Company's Chief Operating Officer, has resigned. John Bridwell and Dr. Jesse Jaynes have retired from the Board of Directors. Dr. Jaynes will no longer be an employee of Demegen, but will retain the title of Chief Scientist Emeritus and the Company expects to maintain a consulting arrangement with him.

"Demegen will actively seek co-development partners. We expect to announce a development partnership for the D2A21 infected burn/wound gel in the near future. Preclinical research for Demegen's vaginal microbicide continues to be funded by the National Institutes of Health. We believe funding will continue to be available as research progresses. And we will continue to focus efforts on the candidiasis, mucositis, and Cystic Fibrosis products.

"The technologies acquired from Periodontix last year continue to demonstrate excellent promise. This acquisition allowed us to diffuse risk, strengthen people talent, and obtain products further along in clinical development. In addition, several companies have expressed interest in rights for the P113 compound.

"The strategy for co-developing pharmaceutical products has already been put in place for agricultural technologies. Three such partnerships for specific crops have been effected in the last three months. The partners provide the development funding. We expect more partnerships to be achieved in the forthcoming months. Dr. Paul Zorner, Ph.D., formerly Vice President for Mycogen, is assisting us in these efforts. The recent agreement with Farmacule and Queensland University, announced last December, is the result of Dr. Zorner's efforts.

"Until additional funding is secured, the clinical programs will proceed slowly. While seeking new equity investors, the Company believes that additional grants and other sources will enable the Company to sustain operations."