Genaissance Pharmaceuticals Reports 2004 Results

Genaissance Pharmaceuticals Reports 2004 Results
Revenue Up 67 Percent; FAMILION(TM) Test Posts Strong Performance; New Gene
Markers Discovered; New Collaborations Continue; First Portfolio Drug Product
Acquired; 'Going Concern' Opinion Anticipated 


NEW HAVEN, Conn., Feb. 10  /PRNewswire-FirstCall/ -- Genaissance
Pharmaceuticals, Inc. (NASDAQ:GNSC) reported unaudited financial results for
the year ended December 31, 2004, which include the results of Lark
Technologies, Inc. and DNA Sciences since being acquired on April 1, 2004, and
May 15, 2003, respectively.

Revenue in 2004 increased 67 percent to $20.9 million, compared to $12.5
million for 2003, primarily due to the Lark acquisition and the inclusion of
DNA Sciences for a full year.  Operating expenses in 2004 were $40.3 million,
compared to $31.0 in the year ago period.  The increase was primarily
attributable to the Lark acquisition, inclusion of DNA Sciences for a full
year, and fees associated with the acquisition of a Phase II anti-depressant
drug candidate from Merck KGaA.  The net loss attributable to common
stockholders for the year ended December 31, 2004, was $22.7 million, or 78
cents per share, compared to a net loss of $20.8 million, or 91 cents per share
a year ago.

As of December 31, 2004, Genaissance had cash and cash equivalents totaling
$9.4 million.  The company expects to report audited results the third week of
March. The Company and its independent public accountants are completing their
procedures as required under Section 404 of the Sarbanes- Oxley Act.

"In 2004 we built our core businesses in DNA testing and clinical services and
embarked on the development of our own drug that we believe will benefit from
commercial application of our pharmacogenomic technology," said Kevin Rakin,
President and Chief Executive Officer of Genaissance.  "We currently expect
revenue to grow in 2005, bringing us closer to operating self sufficiency."

On a broader note, Mr. Rakin added, "The anticipated issuance by the U.S. FDA
of guidelines for incorporating genetic markers into clinical development
programs of new drugs should bode well for our strategy and programs.  We are
in the business of commercializing technology to make drugs safer and more
effective, and we believe that the FDA's endorsement of pharmacogenomics should
stimulate broader adoption of our technologies."

For the three months ended December 31, 2004, revenue increased to $6.2 million
from $4.7 million in 2003's fourth quarter, mainly due to the Lark acquisition.
 Operating expenses for the three-month period were $10.0 million compared to
$8.5 million a year ago.  The increase was primarily attributable to the Lark
acquisition.  The net loss for the fourth quarter, attributable to common
stockholders, was $4.1 million, or 13 cents per share, compared to a net loss
of $6.5 million, or 28 cents per share, in the year ago fourth quarter.

The Company believes that it is likely to receive an opinion from its
independent public accountants on its financial statements for the year ended
December 31, 2004, stating that there is substantial doubt about the Company's
ability to remain as a going concern.  As previously disclosed, the Company is
taking steps to reduce its operating expenses and increase its revenues while
at the same time reviewing opportunities such as reorganizing the Company,
disposing of some assets and other strategic alternatives; however, there is no
assurance that these measures will be successful.

2004 Highlights

Test Sales Gained Momentum -- Since its launch in late spring 2004, the
FAMILION(TM) Test has quickly gained acceptance with over 130 patient referrals
made by nearly 50 pediatric and adult cardiologists and electro-physiologists. 
Costs of the tests, which are performed in the Company's CLIA-certified
facility in New Haven, are reimbursed by Medicare and a significant number of
major insurance companies.  Specialists utilize the test as a vital component
in their evaluation and management of patients with inherited Long QT Syndrome
and other ion channel abnormalities which, if left undetected, can cause sudden
cardiac death.

New Gene Markers Discovered -- Genaissance's CARING (Clozapine and
Agranulocytosis Relationships Investigated by Genetics) study discovered
genetic markers the Company believes predict who is at risk of developing
clozapine-induced agranulocytosis, a life-threatening decrease of white blood
cells that requires frequent blood testing of patients.  The Company said the
findings might apply to other drugs that also affect white blood cell counts.

Additional New Collaborations -- Genaissance signed a co-marketing agreement
with privately-held Ipsogen, under which the companies will jointly offer an
integrated package of gene expression and genotyping technologies to developers
and marketers of cancer drugs.  The offering will include each company's
respective technologies, services and diagnostic capabilities.

Genaissance signed a research agreement with Sygen International plc (London
Stock Exchange: SNI.L).  Under the terms of the agreement, Sygen, a world
leader in applying quantitative genetics and biotechnology to animal breeding,
is collaborating with Genaissance and will use its high-throughput genotyping
capabilities to accelerate Sygen's genetic discoveries in three meat animal
species.

Patent Portfolio Expanded -- Genaissance received three issued patents and
three notices of allowance from the U.S. Patent and Trademark Office for
patents claiming methods for identifying correlations between the safety and
efficacy of drugs and patients' unique genetic signatures.  One of the allowed
patents protects key proprietary technology within the DecoGen(R) Informatics
System.  DecoGen(R) was developed with the goal of reducing adverse events and
increasing positive outcomes of broadly-used medicines through more informed
prescribing decisions.  The allowed patent claims specifically cover novel
haplotype correlation methods for identifying drug safety and efficacy markers
as well as disease susceptibility markers.

Therapeutic Product Acquired -- In 2004, Genaissance implemented a strategy of
acquiring drugs that had failed to meet their broad endpoints in Phase II
testing, but which were successful for one or more subgroups of the tested
populations.  The Company licensed vilazodone, a dual-action antidepressant
that affects the serotonin pathway with promising clinical utility, from Merck
KGaA in late 2004.  The Company's goal is to apply its genotyping technology to
identify Phase II clinical trial subjects who are likely to be responsive to
vilazodone, substantially increasing the likelihood of a positive outcome in
pivotal Phase III trials.

Genetic Markers -- Genaissance's STRENGTH (Statin Response Examined by Genetic
Haplotype Markers) study of 674 subjects suggests that women with a genetic
predisposition to protective levels of C-reactive protein (CRP) lose that
benefit when taking hormone replacement therapy (HRT).  The study, a pioneering
look at how genetic markers might be responsible for differential response to
statin drugs for lowering cholesterol, found that women who were on HRT lost
the protective benefits of certain genetic variants that would normally
predispose them to lower levels of CRP, an established marker for fatal
coronary disease.  These results were published in the December 2004 issue of
the journal Atherosclerosis.

Cash Reserves -- In 2004, Genaissance entered into agreements with
institutional investors and other accredited investors with respect to the
private placement of 3.55 million shares of newly-issued common stock, together
with warrants to purchase 3.55 million shares of common stock, for a total
purchase price of approximately $6 million.  The net proceeds of $5.4 million
from the private placement are expected to be used for general corporate
purposes, including repayment of debt.

Outlook -- For the fiscal year 2005, Genaissance issues the following
standalone guidance:

  -- Revenues in the range of $26 to $27 million;

  -- Operating expenses of approximately $34 million, including
     approximately $3.9 million of non-cash expenses; and

  -- Net loss between $8 and $9 million, including total non-cash charges of
     $4.2 million.



Genaissance will host a conference call and audio web cast to discuss events
disclosed in this press release.  The previously announced call is scheduled
for today at 11:30 a.m., Eastern Time.  To participate in this conference call,
dial 913-981-5510, confirmation code 2415972, shortly before 11:30 a.m. ET.  A
replay of the call will be available from 2:30 p.m. ET through midnight
Wednesday, February 16, 2005.  The replay number is 719-457-0820, confirmation
code 2415972.  The web cast can be accessed at http://www.genaissance.com/.

About Genaissance

Genaissance Pharmaceuticals, Inc. is developing innovative products based on
its proprietary pharmacogenomic technology and has a revenue-generating
business in DNA and pharmacogenomic products and services.  Genaissance also
markets its proprietary FAMILION(TM) Test, designed to detect mutations
responsible for causing Familial Long QT and Brugada Syndromes, two causes of
sudden cardiac death.  The Company's product development strategy is focused on
drug candidates with promising clinical profiles and finding genetic markers to
identify a responsive patient population.  This strategy enables Genaissance to
leverage existing clinical data and, thus, reduce the costs and risks
associated with traditional drug development and increase the probability of
clinical success and commercialization.  The Company's lead therapeutic
product, vilazodone for depression, is in Phase II of development. For more
information on Genaissance, visit our website at: http://www.genaissance.com/.

This press release contains forward-looking statements that involve a number of
risks and uncertainties. For this purpose, any forward-looking statements
contained in this press release that are not statements of historical fact may
be deemed forward-looking statements, including, without limitation, statements
about its base services business, its pharmacogenomic product pipeline, its
first marketed molecular test, the FAMILION(TM) Test, the expected timing of
clinical trials studying vilazodone, the potential clinical benefits of
vilazodone and the growth and development of Genaissance's business and market
opportunities.  Important factors that could cause actual results, events and
performance to differ materially from those referred to in such statements,
include, but are not limited to, whether we will be able to continue as a going
concern and secure additional sources of capital, including amounts necessary
to comply with our agreement with Merck KGaA and to execute our business
strategy with respect to vilazodone, whether the U. S. FDA's guidelines will
stimulate broader adoption of our technologies, whether vilazodone will advance
in the clinical trials process, including the timing of such clinical trials;
whether clinical trials will warrant continued product development; whether and
when, if at all, vilazodone will receive approval from the U.S. Food and Drug
Administration or equivalent regulatory agencies, and for which indications;
the extent to which genetic markers (haplotypes) are predictive of clinical
outcomes and drug efficacy and safety; whether vilazodone will be successfully
marketed; whether Genaissance will be able to develop or acquire additional
products; the attraction of new business and strategic partners; the adoption
of our technologies by the pharmaceutical industry; competition from
pharmaceutical, biotechnology and diagnostics companies; the strength of our
intellectual property rights and those risks identified in our Quarterly Report
on Form 10-Q filed with the Securities and Exchange Commission on November 15,
2004, and in other filings we make with the Securities and Exchange Commission
from time to time. The forward-looking statements contained herein represent
the judgment of Genaissance as of the date of this release. Genaissance
disclaims any obligation to update any forward-looking statement.

                    GENAISSANCE PHARMACEUTICALS, INC.
                         Statements of Operations
                               (Unaudited)
                  (In thousands, except per share data)

                          Three Months Ended            Year Ended
                              December 31,              December 31,
                           2004          2003        2004          2003

  Revenues:
    License and service   $3,043       $3,575      $11,304      $10,386
    Laboratory service     3,164        1,121        9,613        2,133

  Total revenue            6,207        4,696       20,917       12,519

  Operating Expenses:
    Cost of laboratory
     services              2,303          844        7,190        1,877
    Research and
     development           3,968        5,195       19,831       20,054
    General and
     administrative        3,745        2,506       13,291        8,706
    Loss on leased
     equipment                --           --           --          368

    Total operating
     expenses             10,016        8,545       40,312       31,005

    Loss from operations  (3,809)      (3,849)     (19,395)     (18,486)

  Other income (expense)     (41)          44           82          320
  Interest expense          (157)        (358)        (680)        (872)
  Write down of investment
   and loss in equity of
   affiliate                  --         (100)      (1,453)        (100)
  Income tax benefit          24           60           84          580

  Net loss                (3,983)      (4,203)     (21,362)     (18,558)

  Warrant issuance expense    --           --         (833)          --
  Preferred stock dividends
   and accretion            (135)         (74)        (490)         (74)
  Beneficial conversion
   feature of preferred
   stock                      --       (2,204)         (46)      (2,204)

  Net loss attributable to
   common stockholders   $(4,118)     $(6,481)    $(22,731)    $(20,836)

  Net loss per common
   share, basic and
   diluted                $(0.13)      $(0.28)      $(0.78)      $(0.91)

  Weighted average shares
   used in computing
    net loss per
     common share         32,645       23,063       29,177       22,969


                            Balance Sheet Data
                              (in thousands)
                               (unaudited)

                                                   Dec. 31,       Dec. 31,
                                                     2004           2003

  Cash, cash equivalents and marketable securities  $9,387        $16,804
  Working capital                                    4,818         14,195
  Total assets                                      49,550         35,589
  Capital leases and current portion long-term debt  3,648          2,088
  Long-term debt                                     3,692          7,030
  Stockholders' equity                              19,102          8,397


DATASOURCE: Genaissance Pharmaceuticals, Inc.



CONTACT:  Kevin Rakin, President & Chief Executive Officer of Genaissance

Pharmaceuticals, Inc., [phone], ; or Rhonda

Chiger (investors) of Rx Communications, [phone], , or

Tom Redington (media) of Redington, Inc., [phone],





Web site:  http://www.genaissance.com/ 

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