Paradigm Genetics, Inc. (Nasdaq: PDGM), a leader in functional genomics, today reported financial results for the fourth quarter and year ended December 31, 2001.

For the three months ended December 31, 2001 total revenues increased 49% to $6.7 million, compared to $4.5 million for the same period in 2000. For the year ended December 31, 2001, total revenues increased 137% to $24.5 million, compared to $10.3 million for the year ended December 31, 2000. Higher throughput from Paradigm's Gene Function Factory(TM), and the delivery of assays to Bayer AG accounted for the increase in revenues.

Total operating expenses for the three months ended December 31, 2001 increased 14% to $10.3 million compared to $9.1 million for the same period in 2000. Total operating expenses for the twelve months ended December 31, 2001 increased 40% to $40.6 million compared to $29.1 million for the same period in 2000. The increase in operating expenses resulted from investments in healthcare technologies related to the development of our metabolomics platform, MetaVantage(TM), as well as costs associated with the higher throughput in the GeneFunction Factory(TM).

The company reported a fourth quarter 2001 net loss attributable to common stockholders of $3.7 million, or $0.12 per common share. This was $0.01 better than the First Call quarterly consensus earnings estimate. This included non-cash compensation charges of $0.2 million. This compares to a net loss attributable to common stockholders of $4.2 million, or $0.16 per common share for the same period in 2000. For the twelve months ended December 31, 2001, the company reported a net loss attributable to common stockholders of $16.0 million, or $0.59 per common share. This included non-cash compensation charges of $1.1 million. This compares to a net loss attributable to common stockholders of $29.7 million, or $1.61 per common share for the same period in 2000.

Ian A. W. Howes, the company's chief financial officer, commented, "We are very pleased that, despite the challenge of meeting our revenue projections in a sluggish agricultural climate, we exceeded our consensus fourth quarter earnings expectations as reported by First Call. Our year end cash position is strong, and we are working aggressively to manage our cash going forward in order to continue moving our programs forward."

"Even though we are expanding into healthcare, we are not abandoning our agricultural roots, where the revenues remain strong and will continue to drive the revenues of the company for the near term," said John E. Hamer, Ph.D., Acting CEO and President. "To better capitalize on existing market opportunities, we are optimizing our assets to shift from a platform technology approach to a more fully integrated and flexible research entity focused on delivering products and new revenues in human health and agriculture.

In 2001 we made strategic investments to further develop our metabolomics platform, MetaVantage(TM), and to adapt it to drug discovery and development, which has already yielded good results, as evidenced by our recent announcements with Duke University Medical Center and VDDI. By pursuing this strategy we are building greater shareholder value for the long term."

Fourth Quarter 2001 Highlights

• Paradigm closed its direct offering of 5.1 million shares for aggregate gross proceeds of $28.0 million (at a price of $5.50 per share) to selected institutional investors.
• Paradigm announced important strategic partnerships with Thermo Electron Corporation and with Lion Biosciences to gain early access to state-of-the-art systems to process and analyze critical data for human health programs.
• Paradigm signed a research collaboration with StemCo BioMedical, Inc. for the biochemical profiling of adult human stem cells.
• Paradigm acquired Celera's AgGen plant genomics and genotyping business.
• Paradigm signed a multi-year collaboration with Agilent Technologies Inc. to commercialize the first whole Arabidopsis thaliana genome microarray for use in gene expression studies.
• Paradigm successfully delivered to Bayer AG a package of assays for use in its high-throughput screening platform for the identification of new and potentially better herbicides.
• Paradigm received United States Patent 6,303,365, titled "Method of determining activity of 1-deoxy-D-xylulose-5-phosphate reductoisomerase and 1-deoxy-D-xylulose-5-phosphate synthase." The issued patent is for a gene that produces a protein that is a potential herbicide target. Paradigm also received United States Patents 6,326,164; and 6,331,663, and filed 120 patent applications.
• Paradigm appointed Jin Sun Kim, JD, to the newly created position of Vice President, Healthcare and Gary A. Miller, Ph.D., to the newly created position of Vice President, Nutrition.

Other Highlights

• In 2001, Paradigm named Susan Harlander and Mark Skaletsky to its Board of Directors. Harlander is currently president of BIOrational Consultants, Inc., a consulting firm specializing in food and biotechnology issues facing all aspects of the food supply chain. Skaletsky is chairman and chief executive officer of Waltham, Massachusetts-based Essential Therapeutics, Inc., a drug discovery and development company. Skaletsky was the former Chairman of the Biotechnology Industry Organization (BIO) and is ex-President and Chief Executive Officer of GelTex Pharmaceuticals Inc. as well as ex-President and Chief Operating Officer of Biogen, Inc. In 2002, Leroy E. Hood, M.D., Ph.D., was also appointed to the Board of Directors. Hood is president and director of the Institute for Systems Biology in Seattle Washington, an organization he founded in 1999 to pioneer systems approaches to biology and medicine.

Outlook

The following statements are based on current expectations. These statements are forward-looking, and actual results may differ materially. These statements do not include the potential impact of any mergers, acquisitions or other business combinations that may be closed or entered into after December 31, 2001. Paradigm anticipates that revenues for the year ending December 31, 2002 will be between $22 Million and $24 Million, and that it has sufficient cash and investments to continue operations for at least the next two years.

Paradigm's 2002 strategy will focus on the following:

Agriculture

• Continue to deliver on existing commercial partnerships.
• Pursue new partnerships in fields such as crop biotechnology as well as fungicides, fine chemicals production and nutrition.
• Discover gene functions and develop associated intellectual property on genes of commercial interest.
• Capitalize on the customer base resulting from the acquisition of ParaGen, and expand it.

Healthcare

• Expand the MetaVantage(TM) metabolomics platform and continue to build in-house expertise in drug discovery.
• Leverage the MetaVantage(TM) metabolomics platform to generate revenue-producing commercial partnerships.
• Pursue key strategic alliances with pharmaceutical and biotechnology companies to augment our move into healthcare.

Paradigm Genetics, Inc. (Nasdaq: PDGM), headquartered in Research Triangle Park, NC, is an integrated life sciences company developing novel technologies to speed the discovery of products for the advancement of agriculture and human health. In agriculture, Paradigm has unlocked the potential of functional genomics through its industrialized technology platform, GeneFunction Factory(TM), which links gene expression profiling, biochemical profiling, and phenotypic profiling to create industry-leading genomic knowledge and intellectual property advantages. ParaGen, a division of Paradigm Genetics, Inc., offers gene sequencing, genotyping, and other genomic technology services to plant- and microbial-based product development customers.

In human health, Paradigm seeks to use its proprietary metabolomics technology platform, MetaVantage(TM), to transform drug discovery and development by significantly enhancing the study of drug targets, lead compounds, and predictive medicine. MetaVantage(TM) elucidates the metabolic profile of a human cell, tissue, or fluid, and integrates this information with data from other genomics analyses using its proprietary comprehensive informatics system. By globally interrogating biochemistry, MetaVantage(TM) extends traditional genomic technologies to reveal the next level of cellular information.