SAN DIEGO, Apr 23, 2002 /PRNewswire-FirstCall via COMTEX/ -- Discovery Partners International, Inc. (Nasdaq: DPII) today reported financial results for the first quarter ended March 31, 2002. In the first quarter 2002, revenues were $10.0 million, compared to $9.5 million in the first quarter 2001. Net loss was $763,628 or $0.03 per share, in line with analyst consensus earnings expectations, compared to a net loss of $2.2 million (which includes amortization of goodwill prior to the adoption of FAS 142), or $0.09 per share, in the first quarter 2001.
In the first quarter 2002, gross margin was $4.1 million, or 41% of sales, compared to $5.1 million, or 53% of sales in the same period of 2001. The reduction in gross margin for the first quarter 2002 reflects previously anticipated changes in the product and services mix, which resulted in a redeployment of company funded research and development efforts to direct revenue generating activities. As a result, expenditures on research and development were $1.9 million, compared to $3.9 million in the same period of 2001, a decrease of 50%. In the first quarter 2002, selling, general and administrative expenses were $3.3 million, compared to $2.8 million in the first quarter 2001.

As of March 31, 2002, Discovery Partners had approximately $77.4 million in cash, cash equivalents, and short-term investments. Discovery Partners expects to remain cash flow neutral for 2002, excluding minor fluctuations in working capital and the impact, if any, of acquisitions or stock repurchases under the Company's stock repurchase program.

"During the first quarter 2002, Discovery Partners' gross margin began to reflect the previously disclosed impact of the Pfizer contract, signed in the fourth quarter 2001," said Riccardo Pigliucci, Chief Executive Officer and President of Discovery Partners. "As we progress through the year, we expect this trend of offsetting impact on cost of revenues and research and development expenditures to continue. We continue to expect to see the greatest contribution to revenues from the Pfizer contract in the second half of 2002."

"During the quarter, we signed a significant drug discovery collaboration agreement with Xenon Genetics, Inc. to provide lead optimization services in addition to the two separate high throughput screening and computational chemistry agreements we signed with Xenon last year," added Pigliucci. "Since the beginning of 2002, Discovery Partners has continued to conclude collaboration agreements and has added new names to its customers list. However, at this time, the level of shippable backlog for the second quarter is lower than anticipated. We are therefore cautious regarding our short term financial outlook. For the full year, however, we reiterate our 2002 financial guidance of revenue growth in the 20 to 25 percent range over 2001, with earnings per share in the range of $0.02 to $0.05 per share."

A conference call discussing first quarter 2002 financial results as well as financial guidance for the remainder of fiscal 2002 will be publicly available via the Company's website, www.discoverypartners.com . The live webcast will begin at 11:00 a.m. Eastern Time, on Tuesday, April 23, 2002. In addition to the live webcast, replays will be available to the public on Discovery Partners' website and by calling 800-428-6051 (domestic) and 973-709-2089 (international), access code: 238602 through Tuesday, April 30, 2002.

About Discovery Partners

Discovery Partners International, Inc. has become a leader in drug discovery collaborations by offering integrated services and products that span the drug discovery continuum including target characterization, high throughput screening, lead generation, lead optimization, high throughput synthesis automation, and gene expression analysis. Discovery Partners is headquartered in San Diego, California and has operations in the United States and Europe. For more information on Discovery Partners International, Inc., please visit the Company's website at http://www.discoverypartners.com .

Statements in this press release that are not strictly historical are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a high degree of risk and uncertainty. Discovery Partners' actual results may differ materially from those projected in the forward looking statements due to risks and uncertainties that exist in Discovery Partners' operations, development efforts and business environment, including integration of acquired businesses, the trend toward consolidation of the pharmaceutical industry, quarterly sales variability, technological advances by competitors, and other risks and uncertainties more fully described in Discovery Partners' annual report on Form 10-K for the year ended December 31, 2001 as filed with the Securities and Exchange Commission and Discovery Partners' other SEC reports.

                      DISCOVERY PARTNERS INTERNATIONAL, INC.
                       SELECTED CONSOLIDATED FINANCIAL DATA
                (Unaudited, in thousands except per share amounts)

                                                Three months ended March 31,
    Summary Statement of Operations:                  2002            2001

    Revenue                                          $10,020         $9,524
    Cost of revenue                                    5,921          4,464
    Gross margin                                       4,099          5,060
    Operating expenses:
       Research and development                        1,942          3,893
       Selling, general and administrative             3,268          2,797
       Amortization of stock-based compensation          198            324
       Amortization of goodwill                           --          1,500
    Total operating expenses                           5,408          8,514
    Loss from operations                              (1,309)        (3,454)
    Interest and other income, net                       545          1,253
    Net loss                                           $(764)       $(2,201)

    Net loss per share, basic and diluted             $(0.03)        $(0.09)
    Weighted average shares outstanding,
     basic and diluted                                24,281         23,775


    Summary Balance Sheet:                           March 31,  December 31,
                                                       2002          2001

     Cash and cash equivalents and
      short-term investments                         $77,410        $77,265
     Accounts receivable, net                          9,140         10,144
     Other current assets, net                         9,983          9,577
    Total current assets                              96,533         96,986
     Property and equipment, net                      10,687         10,642
     Patent, license rights and other
      intangible assets, net                           6,168          6,400
     Goodwill, net                                    50,918         50,918
     Other long term assets, net                       2,016          2,076
    Total assets                                    $166,322       $167,022

     Accounts payable and accrued expenses            $3,569         $3,816
     Short term debt                                   1,819            738
     Deferred revenue                                  3,520          3,881
     Total current liabilities                         8,908          8,435
     Other liabilities                                   764          1,177
     Minority interest                                   296            368
     Stockholders' equity                            156,354        157,042
    Total liabilities and stockholders' equity      $166,322       $167,022

CONTACT:
Riccardo Pigliucci, Chief Executive Officer of Discovery Partners International, Inc., +1-858-552-3639, ir@discoverypartners.com

URL:
http://www.discoverypartners.com

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